A PLACE FOR US:THE CHALLENGES OF HOUSING IN ATHENS

AND SURROUNDING AREAS

Andy Carswell, Ph.D.Dept. of Housing & Consumer Economics

University of GeorgiaJune 22, 2007

OUTLINE FOR DISCUSSION

• Affordability defined

• How is it measured?

• Some of the culprits behind the problem

• Potential solutions

HOUSING AFFORDABILITY

• Broadly Defined The relation of a consumer’s housing costs to his or her available resources.

• Tightly Defined Usually done through established industry indicators

HOUSING OPPORTUNITY INDEX

• Measures the % share of homes that a median-income household can afford in a city/metro area

• The higher the index value, the greater the degree of affordability that exists within a certain market

• Ranks only the metropolitan areas

Housing Opportunity Index: 4th Quarter 2006By Affordability Rank

  HOI 4th Qtr 2006 2006 4th Qtr 2006 4th Qtr 2006

Metro Area Share of Homes Median Median Affordability

  Affordable for Family Sales Rank

  Median Income Income Price National Regional

    (000s) (000s)    Springfield, OH 90.7 55.4 90 1 1

Davenport-Moline-Rock Island, IA-IL 89.8 60.1 87 2 2

Bay City, MI 89.6 55.8 85 3 3

Mansfield, OH 89.1 52.7 83 4 4

Canton-Massillon, OH 89.0 54.9 93 5 5

Indianapolis, IN 89.0 65.1 113 5 5

Lima, OH 89.0 52.2 81 5 5

Lansing-East Lansing, MI 88.4 64.9 105 8 8

Youngstown-Warren-Boardman, OH-PA 88.0 52.1 83 9 9

Detroit-Livonia-Dearborn, MI ^^^ 87.8 56.7 92 10 10

Battle Creek, MI 86.9 55.2 86 11 11

Flint, MI 86.5 57.8 100 12 12

Saginaw-Saginaw Township North, MI 86.4 53.8 90 13 13

THE AFFORDABILITY “HIGH FLYERS”

 HOI 4th Qtr

2006 20064th Qtr

2006 4th Qtr 2006

Metro AreaShare of

Homes Median Median Affordability

  Affordable for Family Sales Rank

  Median Income Income Price National Regional

    (000s) (000s)    

Atlanta-Sandy Springs-Marietta, GA 68.2 68.1 183 54 13

HOI AFFORDABILITY“THE DIRTY DOZEN”

El Centro, CA 6.8 43.3 280 191 54

Riverside-San Bernardino-Ontario, CA 6.8 57.5 391 191 54

Modesto, CA 6.1 54.4 360 193 56

Santa Barbara-Santa Maria, CA 5.3 65.8 519 194 57

New York-White Plains-Wayne, NY-NJ ^^^ 5.1 59.2 500 195 40

Santa Cruz-Watsonville, CA 5.1 75.1 665 195 58

San Diego-Carlsbad-San Marcos, CA 5.0 64.9 475 197 59

Merced, CA 4.7 46.4 325 198 60

Napa, CA 4.3 75.0 588 199 61

Santa Ana-Anaheim-Irvine, CA ^^^ 4.0 78.3 620 200 62

Salinas, CA 3.7 62.2 580 201 63

Los Angeles-Long Beach-Glendale, CA ^^^ 2.0 56.2 525 202 64

NAR’s AFFORDABILITY INDEX• More established than NAHB index

• Ratio of the median income to the minimum income required to qualify for a conventional loan covering 80% of median existing home price

• Index value of 110 means that a family earning median family income has 110% of income necessary to qualify for an 80% loan

• Only 22 metro areas covered under the index

NLIHC’S “Out of Reach” Index

• Points out that there is an overemphasis on housing prices, not rents.

• Covers every MSA• Calculates the hourly wage a HH must

earn in order to afford a rental unit at the area’s FMR

• Assumes that a HH pays no more than 30% of income for housing costs

RESULTS OF NLIHC’s “OUT OF REACH” INDEX – ATHENS, GA

ATHENS% renter 43%AMI $52,90030% AMI $15,870FMR (2 BR) $ 665Est. Hsg. Wage $

12.79

GEORGIA 33%$58,203$17,461$ 679

$ 13.05

HOUSING AFFORDABILITY

Non-Traditional Methods of Measuring the Affordability Problem

- Mortgage delinquency and foreclosure rates- Rent-burden statistics- Mortgage types originated- Doubling up/overcrowding

- Other home expenses

Athens Living WageHousing $622Food $405Child Care $880Transportation $275Health Care $335Other Necessities $277Taxes $268Monthly Total $3,062Annual Total $36,744% of People in GA living below family budget line

25.6% or 451,000 people

Monthly Expenses for One Parent with Two Children in Athens, GA

Source: Economic Policy Institute; Basic Family Budget Calculator.

Georgia Labor Categories & Earnings

JOB CATEGORY # of Jobs Mean SalaryLocal Government 398,961 $32,864

Accommodations & Food Service

332,887 $14,456

Administrative & Waste Services 281,210 $28,548Retail Trade 460,002 $24,596First Year Teachers 7,500 $30,441

A $30,000 annual salary will qualify an individual for a $90,000 mortgage. From Georgia Employment and Wages 2005, Produced by the GA Dept. of Labor and Georgia Department of Education.

SO, WHO’S TO BLAME FOR THE AFFORDABILITY PROBLEM?

• Land as a finite resource• Government infatuated with homeownership• Liberalized financing of mortgages• Building codes• Mortgage fraud• Suburbanization• Housing norms• Inflexible nature of market rents• Lack of availability of Section 8• Growth of subprimes• The dominance of the “stick-built” market

POSSIBLE SOLUTIONS TO AFORDABILITY PROBLEM

• Solid, yet realistic, homeownership counseling programs

• Reducing the stigma of manufactured housing• Reducing the influence of the sub-prime market• Living wage campaigns• Land trusts• Housing trust funds

The Big Picture: Workforce Housing

1. There is very limited housing choice in rural Georgia and a significant proportion of Georgia’s rural workforce is dissatisfied with their housing situation.

2. Housing construction is virtually nonexistent in nearly one-half of Georgia’s counties. The near absence of housing construction activity contributes to both the lack of choice and to the aging of the existing stick-built housing stock

The Big Picture: Workforce Housing

3. The mix and lack of availability of workforce housing in rural Georgia is influenced by a number of factors including:

• Credit worthiness of potential buyers• Low profit margins in the development of affordable

housing• Relatively small size of local housing markets• Inadequate infrastructure to support housing development• Lack of knowledge about housing assistance program• Lack of available land• Land development codes such as zoning and subdivisions

The Big Picture: Workforce Housing

4. Economic development in rural Georgia is suffering because of the inadequate supply and mix of workforce housing.

5. If workforce housing needs are not addressed, the lack of housing choice combined with an aging housing stock and inadequate infrastructure will virtually preclude many counties from realizing their economic development potential.

The Big Picture: Workforce Housing

6. Existing market incentives alone are insufficient to attract private sector housing builders and developers. In addition, existing publicly financed housing incentives are too limited to adequately address the state’s workforce housing needs.

7. Consumers and employers are generally unaware of existing housing programs and resources. In addition, there is a lack of awareness and replication of successful housing models.

The Big Picture: Workforce Housing

8. Greater understanding and local leadership is needed at the local level to address workforce housing needs.

9. There is insufficient information to address housing related issues, and to identify strategies and initiatives that could expand housing choice, housing quality, and housing affordability in rural Georgia.

10. Current housing programs and funding are insufficient to meet the current and potential demand for workforce housing.