What is “Affordable Housing”
We often hear the term “affordable” tossed around in relationship to homes in our community and region but what is “affordable.” In my opinion, affordable varies greatly and depends on where you put value in priorities in your life. Do you have that new IPhone 15 and 7 new Stanley cups? If so, then your priority isn’t affordable housing because you just spent that money on luxuries. The definition of affordable has changed greatly over the last 10 years, but one of the biggest culprits have been increased wage rates. Yep, when people take home more, the business that pay those people have to charge more for the products they produce or sell. This leaves a greater hourly wage which everyone clamors for but leaves no one any better off financially, it just shifts the definition of affordable. What many of us think of as affordable in say the $150,000 range of home no longer exists and likely never will again based on the cost of construction. As long as the cost of wages and raw materials remain the same, there is no feasible way to build cheaper and if there were, would you want to live there? What we consider not affordable locally seems to considered very affordable in other parts of the country based on the number of newly constructed homes and prices paid in our area. I hate to use the word spoiled, but I have kids, so I will, but we have become spoiled in local pricing that was far below the national norms and even now, we are still below those price levels. There are a few solutions which no one will likely find attractive-1. Save money. Never a popular solution because…you know….Starbucks addiction, but home ownership will now require a greater down payment than ever for an affordable payment. 2. Prioritize your lifestyle. There is nothing wrong with being a lifetime renter if you aren’t the type that enjoys yard work, unexpected repairs and other items that ownership requires. 3. Exhibiting patience. The market will change, that is a guarantee. The other likely guarantee is that it won’t ever sink to what we were accustomed to but it will change. You have to decide if the risk of ownership is worth it, but there are very few things in the world that continue to appreciate for years on end except for real estate. There are very few examples in the world of anyone just creating more of it…
Now, upon further review, the ladies in the office say I’m mean. Possibly true, but I’d call it more brutally honest. Lets dive deeper and share the math of everything discussed above. In sharing the math, I’m hoping it can help you as business owners and leaders in understanding wages and their effects in the community. There also has to be an understanding that NOT ALL JOBS ARE MEANT TO BE LIVING WAGE JOBS. There, I said it. Some jobs are entry level, experience gaining or not meant to base a career on and that is ok. If more people started at the bottom and understood an entire field, we may not be having this discussion.
At $20 per hour, that equates to about $41,600 per year. Most definitions say that “affordable housing” is con-suming no more than 30% of a household income including utilities. Using this number, this would allow a single individual to pay about $1,040 for these housing costs. If you are in a 2 person household, this would suggest you could reach this number by 2 people making $10 per hour. We all know finding housing at $1,040 a month is tough as cost to construct has increased tremendously, but this exercise could be helpful to you as you are hiring to explain the value of having a 2 person household (another article in its own…) When we double that number to 2 people making $20 per hour and we have a spending availability of $2080 per month, you can see it becomes much more reasonable to reach those ownership goals. As a business owner, your role may be changing to help employees see the value in strong financial planning and how some of the luxuries they enjoy may be stripping their ability or goals in home ownership.