You Think You're Frustrated about Affordable Housing??? Lemme Tell You....

A cottage court by Jeremy Sommer of Sommer Design Studios

I continue to be amazed at how many well intentioned people want to talk about affordable housing without being willing to put any effort into learning the basic math required to build....well, anything.

Capital "A" Affordable Housing is a term of art, a subspecialty amount real estate development. Affordable Housing is crudely defined and over simplified. I blame Herbert Hoover. His metric of a maximum of 30% of a household’s gross income to be spent on housing metric was apparently set in stone in the 1930's before automobile ownership was common (or required). Federal housing policy still uses that bullshit metric.

As we can see Housing + Transportation Index , the percentage of income you need to spend on transportation has a lot to do with where you rent or buy your home. “Drive ‘til you qualify”.

If 30% of the household's gross income is the key metric that determines if a household is "rent burdened", what happens if the household needs to spend 40% of their gross income on transportation, keeping 2 semi-reliable vehicles on the road?

There are a lot of households that are both rent burdened and transportation burdened.

What happens if the cost to develop and build housing increases year over year and household gross income does not increase to keep up? What happens if wages are stagnant for, say the last 25 years?

If folks are not paid a decent wage, they cannot afford decent housing. Policy and design folks who have avoided basic development math for their entire career try to solve this problem by searching for ways to make housing less expensive somehow. The math is relentless. You can't beat that basic math with off-site fabrication, density bonuses, inclusionary zoning, and financial subsidies, yet we see lots of well-intentioned folks trying to do so over and over...

So here are the overlapping, compounding structural problems I see:

1. We have built in the wrong pattern to provide naturally occurring affordable housing.

2. We are not building enough housing or enough of the right kinds of housing, so the costs continue to outstrip what people can pay.

3. We have defined "Affordability" in epically stupid ways.

4. We have applied Exclusionary Zoning over 70% of most cities and towns and constrained where denser walkable places worth caring about can be built/rebuilt.

5. Typical conventional zoning prohibits proven market rate solutions which need no subsidy, like attached or detached ADU's, dividing a larger house in to two or more smaller dwelling units, SROs and boarding houses.

6. We have created a culture that believes a toxic myth, that people who signed 3/4 of an inch of mortgage paperwork without reading it are somehow morally superior to the unfortunate lower caste of "renters". This pernicious othering becomes the justification for actively excluding rental housing from their neighborhood.

7. We have removed shop classes from most public schools and implemented ridiculous immigration policies which greatly limit the number of people available who know how to build anything. The lack of skilled construction labor has killed our productivity when we do get around to building.

Large scale builders can only deliver affordable units as new construction or substantial renovation with subsidies and tax credits. The amount of subsidies and tax credits available will just not meet the crushing demand we have for housing. Throwing money at overlapping systemic problems which are so poorly defined will not solve them.

So, yes, affordable housing is very difficult to build under the current assumption that people need to buy a house or condo, or they need to rent a house or apartment. In order for large scale projects to provide affordable housing you have to solve or mitigate several of the systemic structural problems described above all at the same time. Large scale affordable housing operators are specialists and have to focus on threading a series of entitlement, design, and finance needles just to stay in business. Too often the results are big lumpy out of scale projects that deliver unfortunate commodity housing. Building the wrong stuff more efficiently is not a virtue, but it is rewarded by the current culture and systems.

Some small scale incremental options which still work. House Hacking -a shared house allows the person with a modest W2 job buying the house on a 0% Down VA or a 3.5% down FHA , Fannie Mae, or Freddie Mac mortgage to live rent free by renting out a couple of rooms.

You can scale that approach up a bit and building/rebuild a duplex, triplex, or four-plex and living in one of the units. This allows the mortgage borrower to claim 75% of the gross rent for the other units toward their income to qualify for the VA, FHA, Fannie Mae, or Freddie Mac mortgages or purchase rehab loan.

And yes, these methods require more pragmatic zoning codes than we see in most places where elected officials wring their hands about the housing crisis. It’s worth taking a little political risk and changing your Exclusionary Zoning. These methods can provide folks living in low status neighborhoods to avoid displacement and build generational wealth.

There are grass roots, bottom up ways to organize and deliver lowercase "a" affordable housing.

I encourage urbanists and neighborhood activists to pay attention to what can be done when you cultivate a local network of small scale developers and clear the administrative underbrush so they can build local solutions.