The Future for Housing Affordability OR “Who can afford a crystal ball?!” Paul Henkel Asst. Director for Research, Planning and Technical Services

Misconceptions about affordable housing NIMBY, “Not In My Back Yard” Is Unattractive Drives down property values Attracts only undesirable tenants Only an urban/central city problem MISCONCEPTIONS

Affordable Housing is Unattractive Efficient planning and design can actually lower both construction and maintenance costs. Quality design helps affordable housing to fit its context. City Design Center, APA Website MISCONCEPTION #1

Affordable housing drives down property values Among working communities, the average value of owner-occupied houses is highest in those that have the most apartments. *, ** *“The Vitality of America's Working Communities”, Harvard University’s Joint Center for Housing Studies, **A working community is defined by having an average household income between 60% and 100% of AMI) MISCONCEPTION #2

Affordable housing drives down property values Tax Credit properties do not have a negative impact on property values, as long as there is a dispersal rather than concentration of properties.* * “Low Income Housing Tax Credit Housing Developments And Property Values”, The Center for Urban Land Economics Research, Univ. of Wisconsin, MISCONCEPTION #2

Affordable housing drives down property values The impacts of federally assisted housing on area property values depend largely upon*: 1. Characteristics of the neighborhood 2. Concentration of assisted housing units 3. Scale of the assisted housing facility. * “A Review of Existing Research on Effects of Federally Assisted Housing Programs on Neighboring Property Values”, College of Urban, Labor and Metropolitan Affairs, Wayne State University, MISCONCEPTION #2

Affordable housing attracts unwanted tenants MISCONCEPTION #3

The shortage of affordable housing may be greatest in cities, because populations are larger and often more evident. But rural and suburban areas also have a great need for affordable housing. MISCONCEPTION #4 Affordable housing is an Urban Problem

Rural Counties (random) Homeownership Rate % of Low Income Owner Households with Cost-Burden % of Renter Households with Cost-Burden % of Median Renter Income Needed to Afford 2-BR at FMR Bledsoe81.7%45.30%27.8%77.0% Clay80.0%49.20%22.8%106.0% Crockett74.9%51.70%32.7%67.0% Decatur80.1%41.80%29.0%80.0% Fentress79.1%51.90%31.1%104.0% Hancock78.7%37.50%24.6%170.0% Houston77.0%62.20%26.1%96.0% Jackson80.8%50.30%20.8%97.0% Lake60.0%62.20%29.7%114.0% Moore83.7%44.50%21.0%71.0% MISCONCEPTION #4 Affordable housing is an Urban Problem

What does do we mean by “affordable housing”? It means housing available to low and moderate income people at a monthly cost that does not exceed 30% of their gross income.

It means housing available to the local workforce. What does do we mean by “affordable housing”?

It means closing the gap between local wages and salaries and the going rate for a decent home. What does do we mean by “affordable housing”?

It means strengthening the community by building a strong and diverse economic and social base. What does do we mean by “affordable housing”?

It means improving the quality of life for all members of the community. What does do we mean by “affordable housing”?

General Population Patterns

Population of Tennessee by County, ,000 – 910, ,000 – 299,999 50,000 – 99,999 20,000 – 49,999 0 – 19,999

Projected Population and Housing Stock in Tennessee, persons per housing unit in persons per housing unit in 2026 Population Housing Stock

Counties with Slow Growth or Population Decline, % to -9.0% Decline 0.0% to 4.9% Growth 5.0% Growth or greater

Counties with Moderate to High Population Growth, % to 42.0% Growth 5.0% to 14.9% Growth Lower than 5.0% Growth

Metro and non-Metro Areas by Projected Population Change % to 18.0% Growth 10.0% to 14.9% Growth 5.0% to 9.9% Growth Lower than 5.0% Growth

Populations are listed as total # of people Metro Area Population Change,

non-Metro Population Change,

Changes $ Allocation based upon population Changes weight of political pull

Components of Population Change

Components of Population Growth in Tennessee,

Impact of Recent Movers by County, Out-flow of Recent Movers 0.0% - 2.9% Recent Movers 3.0% - 5.9% Recent Movers 6.0% or greater Recent Movers

Impact of Recent Movers by Metro and non-Metro Areas, Out-flow of Recent Movers 0.0% - 1.9% Recent Movers 2.0% - 3.9% Recent Movers 4.0% or greater Recent Movers

Tennessee's Population in 2005 by Race-Ethnicity

One Scenario for Population Growth by Race-Ethnicity in Tennessee

African American Population of Tennessee by Age and Sex, Future Elderly Housing Need

Hispanic Population of Tennessee by Age and Sex, New Household Formation Population Growth

Trends in 1-person Owner Households in Tennessee,

Trends in 1-person Renter Households in Tennessee,

Median Household Income by County, 2005 $55,000 or higher $50,000 - $54,999 $45,000 - $49,999 $ $44,999

Projected Household Income Change by County, % to +93.9% +35.0% to +49.9% +20.0% to +34.9% - 5.0% to +19.9%

Median Home Sales Price, 2005 $125,000 or higher $100,000 - $124,999 $75,000 - $99,999 $50,700 - $74,999

Median Home Sales Price Average Annual Rate of Increase, % or greater 6.0% to 7.9% 4.0% to 5.9% 0.0% to 3.9%

Projected Median Home Sales Price Change, % to % % to % +75.0% to +99.9% 0.0% to +74.9%

What makes housing affordable? When the monthly mortgage (principle, interest, tax & insurance) or rent payment plus utilities comprise less than 30% of the household gross income.

What makes housing affordable? If a household’s monthly rent or mortgage payment comprises 30% or more of the household income, the household is considered to be “cost burdened”.

What makes housing affordable? Strictly limiting monthly mortgage or rent payments to less than 30% of income does not necessarily mean that the remaining income is sufficient to meet an individual family’s needs.

A Look at Income Sufficiency Using Montgomery County Information on the chart to follow shows the income sufficiency of average annual salaries of various professions in Montgomery County.

Key to Understanding The professions’ salaries shown would be single income households, and do not represent the innumerable variations in household earning and financial coping strategies. A Look at Income Sufficiency Using Montgomery County

Another Key to Understanding While homes in more outlying areas (relative to a city center) are initially more affordable, monthly commuting expenses, both in money and time, can quickly reduce the relative “affordability” of these homes. A Look at Income Sufficiency Using Montgomery County

Median Price Existing Home $95,200 Median Price New Home $129, Affordable Home Price Affordability of a Median-priced Home in Clarksville, TN

Median-priced, New Home in Montgomery Co. $130,500, 3br/2ba, 1607 ft 2 What constitutes an affordable home in Montgomery Co.? Hairdresser$42,099 Cashier$44,782 Preschool Teacher$47,273 Retail Salesperson$56,383 EMT$59,272 Nurse Aide$62,397 Medical Assistant$64,378 Construction Laborer$69,651 Social Worker$71,529 Bus Drivers$79,958 Army Enlisted$86,611 Carpenter$87,410 Police Officer$92,954 Electrician$96,860 Real Estate Broker$103,726 Teachers$121,034 Army NCO$125,790 Accountant$126,983 Army Officer$127,296 Median-priced, Existing Home in Montgomery Co. $94,500, 3br/2ba, 1780 ft 2 Police Officer $92,954 Hairdresser $42,099 Medical Assistant $64,378 Accountant $126,983 Existing Home affordable at <30% cost burden $64,900, 3br/1ba, 1464 ft 2 $42,000, 3br/2ba, 891 ft2 Existing Home affordable at <30% cost burden Max. Affordable

What about affordable rental property? In Montgomery County, in 2004, 3,257 renters earn 50% or less than area median income.

Maximum monthly housing cost for a family at 50% of median income. Anything more is cost burden. What about affordable rental property?

Fair Market Rent is not always fair Estimated Percent of Renters Unable to Afford Two-Bedroom FMR

Where do cost-burdened renters reside? All Renter Households % Cost Burdened Number ≤80% AMI % Cost Burdened ≤80% AMI MONTGOMERY17, %8, % Bradley10, %6, % Knox52, %33, % Rutherford20, %13, % Washington14, %8, % Everywhere.

Percent of County Renters at 30-80% MFI by Race/Ethnic Group WhiteBlackHispanic MONTGOMERY Co.33.7%36.4%42.4% Bradley County39.7%44.9%45.6% Knox County37.9%36.4%41.3% Rutherford County41.4%46.5%47.2% Washington County37.2%35.4%64.0% Does cost burden discriminate? Nope.

Is need in all areas identical? Renters with cost burden (≤80% AMI)% White % African American% Hispanic % Other Minority MONTGOMERY5, %33.1%6.4%4.5% Bradley3, %7.4%3.3%2.2% Knox18, %16.0%1.7%4.2% Rutherford7, %14.1%5.0%3.2% Washington4, %6.2%2.5%2.2% Not at all.

Is cost burden the only problem? Percent of those Renters at 30-80% MFI with Housing Problems, Crowding and/or Cost-burden WhiteBlackHispanic MONTGOMERY Co.54.8%58.5%63.0% Bradley County44.8%50.0%41.9% Knox County48.5%40.8%59.4% Rutherford County52.5%44.9%56.6% Washington County49.8%50.0%51.4% No. Multiple problem issues are common.

Do home owners fare any better? Percent of County Home Owners at 30-80% MFI by Race/Ethnic Group WhiteBlackHispanic MONTGOMERY Co.17.7%22.8%19.1% Bradley County23.5%33.7%43.9% Knox County22.2%24.1%30.8% Rutherford County21.0%23.9%29.6% Washington County22.3%20.0%16.2% Yes. But they have some of the same, and some different difficulties.

How are they different? Percent of those Home Owners at 30-80% MFI with Housing Problems, Crowding and/or Cost-burden by Race/Ethnic Group WhiteBlackHispanic MONTGOMERY Co.51.2%63.8%47.2% Bradley County37.5%50.0%33.3% Knox County39.7%55.3%40.6% Rutherford County45.4%57.2%47.8% Washington County40.6%67.2%86.2%

Who is affected by “Affordability”? The common perception is that only poor, unemployed, or part-time workers cannot “afford” housing. Yes, it is true that these groups are most severely impacted. But housing affordability is not just a problem of lower-income groups.

Who is affected by “Affordability”? A wide variety of residents are in need of affordable housing including: municipal employees: teachers and police officers service-industry labor force: hairdressers, shop clerks, travel agents; …All of whom may be working full time but whose income is not sufficient to afford quality housing in the local area.

Who is affected by “Affordability”? Local businesses and employers are also affected by a lack of affordable housing which can cause an unstable, constantly shifting local labor force.

Cost burden significantly impacts the elderly Housing affordability is a problem that does not discriminate based on age. Many elderly households in Tennessee have income levels that are lower than 30% of median family income.

Percent of Elderly Households with Incomes less than 30% of the Area Median Income Cost burden significantly impacts the elderly

Low-income Households in Montgomery Co. RENTERS Percent <50%MFI OWNERS Percent <50%MFI Ft. Campbell

Knowing what we now know, how might the following impact Tennesseans?

Median Rent versus Median Income Tennessee Median Rent Tennessee Median Income

Median Home Value versus Median Income Tennessee Median Home Value Tennessee Median Income

250.0% or greater 200.0% to 249.9% 175.0% to 199.9% 130.0% to 174.9% Cost of a Median-Priced Home for a Median Income Family, 2005

Cost of a Median-Priced Home for a Median Income Family, % or greater 200.0% to 249.9% 175.0% to 199.9% 130.0% to 174.9%

A note about predicting the future We cannot predict the future. We can only project a possible future based on what we know about the past and present.

A note about predicting the future It is certain that the affordability of housing is an issue of significant importance today. Evidence points to the fact that it will become more, rather than less significant for the average family in Tennessee in the immediate future.

If you have any questions after the presentation, feel free to contact me: Paul Henkel, M.Soc.Sc., A.B.D. Asst. Director for Research, Planning and Technical Services Tennessee Housing Development Agency 404 James Robertson Parkway, Suite 1114 Nashville, Tennessee (615) Thank you very much for your attention.