Sunday, October 15, 2023

Affordable Housing

Affordable housing is a more complicated issue than the mainline media suggests. Other options besides local housing projects are needed. 

One thing is the homelessness problem. Most of these people, contrary to some myths, fall into three general categories. The first would be the group that isn't housed primarily due to the fact that there isn't more affordable housing. The second would be people with mental problems to varying extents. The third would be people with serious drug problems.

Then, there are a lot of people who are very unhappy with their housing situations. Living with roommates, for example, when someone is young, is one thing. Living this way as one gets older can be miserable.

There's also the issue of upward mobility. Someone wishing to, and with sufficient income to buy a house, needs to save up for a down payment.

There's been a large shift from having a large middle class which could afford houses, to a large class of service and retail workers. Most of these workers, if single, barely make enough to pay for a room.

Institutional investments in affordable housing should be limited.

Back to homelessness. A substantial portion of the first group would be off the street or out of shelters if they had better alternatives. These people may have physical problems preventing them from working full time, low social security (retired or disabled), bad rental histories/evictions, or low wages.

If this first group was housed, that would leave a huge amount of resources to deal with the other two groups. For example, some of the people with mental problems might just need meds. Some of them might be employable to varying extents if they received this. Some of the people with serious drug problems might see opportunity and this would motivate them to get sober.

Some of the people in the first group have difficulty finding decent jobs, and can't access public housing because they have criminal records. These barriers should be reduced for those that don't present a threat to society, such as those with low-level drug offenses (i.e. possession and street dealing). 

Some images courtesy of Pixabay.

Wednesday, October 11, 2023

Financing Affordable Housing

The process whereby affordable rental housing development is financed is based (about 90% according to my research) on the Low-Income Housing Tax Credit program. This is an extremely complicated process and doesn't seem like an efficient option.

This video should serve as a taster for what all is involved with financing a project this way.

Basically, an investor puts up money for the project, excluding land costs, maintenance costs and a few other things, and then they get this amount taken out of their taxes vs. a write off. They get the credit over a ten year period, so it's not all at once.

With this system, there's all kinds of costs, paperwork and organizations involved. There's consultants, CPAs, the builder/owners, developers, partnerships, lawyers, hefty applications, tricky financing, architects, etc.

First of all, there shouldn't be much spent on architects. These designs can be used across projects, and affordable blueprints are available. 

One thing with this is the tax credits mean less money for the government, so how any of these programs can work and how they effect that is another topic.

These projects involve state or local governments, so they can have union or prevailing wage requirements, which adds to the costs. These undertakings are often very expensive, and are cost prohibitive for smaller projects (i.e. a single, new construction 10 unit apartment building).

One thing worth noting is the total for the credits could be given all at once. Whether it's over time or at once, it's the same amount that is reduced revenue.

It seems like a more efficient way to do this would be to give the funding directly to legit nonprofits (the keyword here is legit), and let them handle the entire project with the funds including the land or not. They could always raise funds for the land and upkeep costs. These nonprofits can always be audited as well. 

This way, the investors just give the money to a nonprofit developer, and then they get the money back from the IRS. Another idea would be to allow individuals to get these types of credits, as the primary source of charitable giving is individuals.

Monday, September 4, 2023

Owner Built Homes

One of the driving factors in the rising costs of housing is labor costs. Millennials building. What's wrong with this picture? Together with unprofessionalism in many of the building trades, it aint gonna happen. 

What to do about those issues is anybody's guess. Residential construction is a sketchy business. Like this guy says, unless you're an electrician or plumber or something, there's a lot of drawbacks with many of the trades.

One idea to increase the supply of affordable housing is as follows: There's all of these weekend warrior generation Xers with all kinds of tools. Put them to work. 

There are plenty of vacant residential lots in many urban areas. With a little incentive, these people could build owner built homes on some of these lots. The thing preventing this from happening is probably the difficulty with getting loans for this type of project. 

A lot of generation Xers have a lot of resources, but not enough cash to throw up a house. People usually need a contractors license or documented experience to get an owner builder loan. The FHA could help with this by having a program (a program with benefits) whereby builders with enough collateral could get an insured loan. They're not going to bail on a house if they have, say 30-40% of the cost vested in the property.

These loans should be conditional based on the size and scope of the project. They would need to be in urban areas where revitalization is needed. A maximum size of 1500 square feet would be good. Zoning for ADUs would be a plus. They could build these later, or have someone else build them.

Social Security isn't keeping up with housing costs. Generation Xers could use the ADUs to house their older relatives, or rent them out, this being another incentive. 

This would have many benefits to society, including increasing urban density, as opposed to increasing the supply of single family suburban homes.