affordable housing making development match need

8/14/2019 Affordable Housing Making Development Match Need

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Affordable Housing Making Development Match

Need

Miami, Florida 2006


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Affordable What does it mean?

City of Miami - Least affordable City inthe country

Miami-Dade County Least affordableCounty in the country for renters.


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Affordability is defined as paying less than

or equal to 30% of your gross income for housing expenses (including taxes,utilities,etc.).


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Census looked at all renters households and of theCounties measured Miami-Dade had the highest

percentage that paid more than 30% of their income in rent.

Census looked at all households and of the citiesmeasured, City of Miami had the highest

percentage that paid more than 30% of their income in rent.


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Affordability What does it

mean?

It is increasingly common to pay over 30% of your income in rent.

Extremely high rates of payment over 50% - isseen as evidence of extreme unaffordability.

HUD defines paying over 50% as a worst casehousing problem.


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INCOME STRATIFICATION

Affordability is one way at looking at thecost of housing many analyses stop there.

What is wrong with that?


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Household earning $100,000 a year and paying

$40,000 in housing costs is living in unaffordablehousing - just like someone who is making$10,000 a year and pays $4,000.

$100,000 family has $60,000 remaining for other expenses - the $10,000 a year family has only$6,000.


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So income is stratified 120% of area median income Area median income (ami) 80 % of area median income (ami) 50% of area median income (ami)

30% of area median income (ami)


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Definitions low income very lowincome vary from jurisdiction to

jurisdiction, from program to program. What is the percentage of AMI?


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County of MiamiIncome Levels Fla Statute HUD Definiti HUD CDBG City of Miami (family of 4)30% of Median extremely lo extremely low $16,750.0050% of Median very low very low moderate is low $27,950.00

80% of Median low low >50 & < 80 moderate $44,700.00Median Income $55,900.00120% of Media moderate moderate middle income $67,080.00



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AMI is based on County-wide, SMSA data

In wealthy counties, 50% of AMI may behigher than most low wage workers.

In poor counties, 50% of AMI may be SSI

level income.


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Palm Beach County HUD Median Income

$62,100 30% Median Income$18,630

Hamilton County HUD Median Income

$34,950 30% Median Income$10,485

Full time salary at $10.00 hour $20,800


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Affordability and Income Levels

What does it mean when we say - housingin a certain development in Miami is

affordable to families earning less than30% of median?

Does it mean that it is affordable to a familyof four making $10,000 a year? (less than30% of median)


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30% of median income for a family of four inMiami Dade County is $16, 250

In most housing production programs rents are notfigured on the income of the actual tenant

Affordable to 30% of median income in Miaminormally means that for a family of four theywill be paying 30% of their income for rent only if they make exactly $16,250.


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Important To Remember

If the rents are figured for a family of four earning $16,250, it is not affordable to afamily earning less than $16,250.


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WHY IS IT TRUE THAT THEINCOME LEVELS ARE SO FIXED?

It is because of how we develop affordablerental housing.


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Affordable Housing Development

Readers Digest Version

Assumptions Cost of Developing One Apartment

$100,000 100% financing (no developer investment) No Developer Return on Investment


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Monthly Operating Budget (1 unit)

Mortgage

Taxes, maintenance, reserves

Total Monthly costs (minimum)

Minimum Rent

$600

$350

$950

$950


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Little Haiti Project

Affordable to families earning $10 an hour Mortgage



Maximum Rent (30% of income of full time worker at $10 hr. ($20,800))

$160

$350

$510

$510


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Little Haiti Project

Monthly Operating Budget (1 unit) To reduce mortgage payment to $160 the

financing being undertaken by the

developer has to be reduced to $27,000

If the cost of development is $100,000 andthe maximum conventional loan is $27,000how do you fill the $73,000 gap?


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How to reduce the mortgage

payment gap financing One possibility Govt provides second

mortgage of $73,000 with no payments.

Reduce the interest rate on the entiremortgage - HUD financing programs

Increase developer investment (equity) inthe project by $73,000 Low IncomeHousing Tax Credits (LIHTC)


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Affordable Housing Development Readers Digest Version

Most current low income housing

production program incorporate several of these methods of reducing costs Results in fixed rents

Results in layered financing Is difficult to operate at lowest incomes.


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Overtown Housing Project

Monthly Operating Budget (1 unit) Mortgage



Minimum Wage Rent ( 30% of income of full time worker at $6.40an hour)

0

$350

$350

$332


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For very low income households there isanother form of subsidy

Public Housing and Section 8 - based noton affordability to an income level but onwhat the tenant can pay So if a tenant in Overtown can pay only $ 332

and the rent is $1,200 a month then Section8/Public Housing pays the difference or $868


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From the policy side - The problem with

this is you have to pay it forever. From the tenant side - there is no new

public housing or Section 8.


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Household Size 1-2 Miami-Dade CountyHousehold Income Cost Burden 50%+

Percent of Median Income Household Count Percent of Total


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Household Size 3-4 Miami-Dade CountyHousehold Income Cost Burden 50%+

Percent of Median Household Count Percent of Total


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Federal Government Funding PolicyHas Decreased Extremely Low

Income Housing

Congress has reduced the funding for

Section 8 tenant based vouchers. There are no new appropriations of project

based Section 8.

The housing affordable to the lowestincome households is aging.


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How Financing Drives Housing

PolicyMajor Sources of Gap Financing Federal Government Florida Local


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Federal Government Policy HasDecreased Extremely Low Income

Housing

The number of Public Housing units issignificantly decreased.

There is no federal production programtargeted at extremely low incomehouseholds.


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State of Florida

Sadowski Act Housing Trust Fund Funded by Surtax on each recorded transfer

of property Increases as the cost of property increases Currently over $900 million in Trust Fund

70% to local governments (SHIP) 30% to State government (SAIL, etc.)


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State of Florida

Current governor opposes Trust Fund Has been recommending only spending

$243 million of the Trust Fund Hurricane Recovery housing boosted

spending to $500 million for the past twoyears.

$243 statutory cap to take effect inFY 07-08.


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STATE FUNDING

Florida administers State ApartmentIncentive Loan Fund (SAIL) and federal

Low Income Housing Tax Credits. State sets qualifying standards

Amount of subsidy

Targeted rents Single competitive distribution each year.


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State Funding

Traditionally targeted at 50 60% of median Required by LIHTC

Very difficult to target to lower income All Rentals targeted to 50 60% of median

After 2004 storms, State hurricane recovery funds

targeting required 15% of units for less than 30%of median income (but added more gap funds). All rentals now include 15% of units for less than 30%

of median income.


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Local Funding

SHIP funds (from Sadowski Trust Fund) 60% must be used for home ownership

up to 30% can be used for rental \

Miami Dade also has a local Surtax fund

Spending of these funds were recently criticized bythe Miami Herald article House of Lies.


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Local Funding

Local Funds targeted to Home Ownership. Home Ownership subsidized by second

mortgages or grants. Home Ownership subsidies increasingly

problematic as price of homes increase.

More local governments exploring limitedequity forms of ownership (CommunityLand Trusts) to preserve affordability.


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The Affordable Housing Crisis

Greatest Need is lowest income. Hardest to develop is lowest income. Federal assistance targeted to lowest

income is decreasing or non-existent. Existing resources for lowest income are

hardest to obtain.

affordable housing making development match need

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