What’s Exactly is “Affordable”?
by Tony Chavira
This Dinosaur Comics strip slices right to the point on a huge problem that a lot of people have when they try to determine what exactly affordable housing is. What does affordable mean for people in the middle class? Does it mean the same thing (or the same kind of space) to someone who's poor? In fact, the term "affordable housing" should really apply even to the very wealthy (despite the fact that pretty much everything is affordable when you're very wealthy). When many people read the words "affordable housing," they think of poor people who can't afford "regular housing"... as if living in an affordable unit is something you should be ashamed of for some reason.
With the idea of euphemizing in mind, the title of this BBC article pretty much cuts the fat off of the argument I want to make here. I've emboldened the core points for your lazy-reading convenience:
London housing crisis: low paid can't afford "affordable" homes
That word "affordable" has always had a weasel quality. How truly "affordable" are a lot of the new "affordable" homes in London and who, exactly, can afford one? Now Shelter has provided some gloomy answers. In a new piece of analysis it finds that the various, government-funded schemes to foster low cost home ownership (LCHO) are of no use to some 220,000 households in the capital, because they simply can't afford them. As a result, they haven't had a hope of moving in to any of the 6,140 LCHO properties built in London during the last financial year.
Shelter's research focuses on a group of London households whose income averages £18,000 [roughly $27,000] a year. These claim no housing benefit and are not eligible for social housing from councils or housing associations either, Shelter says, so they receive no financial help from the government to cope with London's insane housing costs through these avenues. Yet being well off enough to take advantage of the "affordable" financial products on offer means they don't get help that way either. Shelter calls them the capital's "forgotten households".
Who is gaining access to London's LCHO schemes? Shelter says that government figures show that the average income of households entering into the "shared ownership" form of LCHO in London is over £33,000 [roughly $50,000] a year and those entering the "shared equity" form is approximately £40,000 [$60,000] a year. When you consider that the average individual wage in London is £28,000 a year you begin to get a sense of how high cost these low cost schemes can be, even for people or households with quite good incomes.
Essentially, you need to make enough money for something to be affordable. And this isn't a UK phenomenon, but in California we've tried to mandate that a level of affordable housing become available to those who need it. It was developed from what was called an "inclusionary zoning ordinance," or an ordinance that required that developers make some of their spaces affordable (hoping to increase the amount of affordable housing on the whole). Reason.org, however, found some dicey results with this process, reporting that:
1) Inclusionary Zoning Produces Few Units - Median cities only make something like 8 new units per year, which is not even near the level of demand.
2) Inclusionary Zoning Has High Costs - The average government jurisdiction pays about $298 million annually for this program, and the total cost for all inclusionary units in Los Angeles and Orange County to the year 2004 was $3.9 billion.
3) Inclusionary Zoning Makes Market-priced Homes More Expensive - Since almost all of the money to mandate affordable units into new spaces are funded by the government taxing to accommodate for them, the prices of homes and buildings in the area are artificially-inflated to accommodate for that tax.
4) Inclusionary Zoning Restricts the Supply of New Homes - In a nutshell, it drives away builders. Not cool when new ordinances like this need new buildings to put affordable housing into, obviously.
5) Inclusionary Zoning Costs Government Revenue - No building + no increase in population = less tax revenue. That's pretty clear, I think.
6) Price Controls Do Not Address the Cause of the Affordability Problem - The root cause of the problem, as Reason states it, is that the government poses artificial limits to the amount of affordable units you can buy, versus letting developers build like crazy and be forced to sell or rent affordable units out of necessary.
I'd generally agree with all of these points except #6, since obviously overbuilding and selling housing like mad without any government oversight back in 2004 (when this study was conducted) was clearly how we got into this position now with tons of foreclosures and a severe lack of affordable units for those who need them.
What this study does that I like though is point out that setting hard-and-fast laws with good intentions isn't the way to get things done. Worse, it continues to refer to a really narrow definition of what "affordable" means and how the units can be achieved. As the BBC article above shows, we can call anything affordable if someone can afford them. But as the Dinosaur Comics parable above shows, we need to step back for a moment and figure out a smart way to kick developers into high gear by redefining the narrow, economically-separatist view of cheap/crappy housing people get in their heads when they think of "affordable units."
Regardless, we need to start focusing on what people out there who want to live in homes can actually afford.
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