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America’s Vanishing Dream

High prices, low wages making homeownership more difficult for many

November 14, 2005 | By Charlene Crowell
Great Lakes Bulletin News Service


Soaring home prices and lagging wages prevent many working
people from buying houses.

DETROIT — August brought a new way of life to Tunisia Wilson and her three daughters. The four Detroiters moved from a crowded east side rental property to their own new, much roomier, four-bedroom home on the Motor City’s west side. Ms. Wilson is now just seven minutes away from her longtime manufacturing job. She and 29 other families who moved into the new development are also right across the street from a park.

Thanks to Habitat for Humanity, both Ms. Wilson’s family and several hundred others in 61 Michigan counties became homeowners last summer. In June, the faith-based organization, famously fronted by former President Jimmy Carter, used volunteer labor, sweat equity, donations, and in-kind services to build 232 new, energy-efficient, well-constructed homes for those families, who live not only in blighted cities but also in rural areas.

But as sizeable as the Habitat organization is—82 Michigan chapters have built more than 2,400 homes—its aggressive efforts do not solve either the state’s or America’s escalating home affordability dilemma. Without Habitat, Ms. Wilson would remain a renter, despite a decade of working 10 hours a day, six days a week. Tighter and Tighter

The problem is worsening, according to a recent report by the Joint Center for Housing Studies at Harvard University, entitled State of the Nation’s Housing 2005. Housing prices across the nation continue to soar, the report says, and that is squeezing many people hard. During the past 20 years, in 63 of the metropolitan areas considered, housing prices rose between 30 and 100 percent faster than average incomes.

That trend is particularly challenging for low-income working families, according to the study. More than 28 million people, all in the lower half of the nation’s income earners, spend too much of their income — 30 percent or more — on housing.

State of the Nation’s Housing 2005 also says that the lack of affordable housing is accelerating sprawl. Left with few decent, affordable choices in most urban areas, families continue to buy homes in suburbs and exurbs, where land is cheap and development is aided by ambitious road building programs and other subsidies.

“Housing affordability is a chronic problem,” warned Eric Belsky, the Harvard Center’s executive director, “and narrowing the gap between what decent housing costs and what low-wage workers and retirees can afford will remain a national challenge.”

These findings match those of the Center for Housing Policy, the research affiliate of the National Housing Conference. Their updated 2005 study, Paycheck to Paycheck, found a five-million-unit shortage of affordable and available rental units, and confirms Michigan’s widespread affordable housing crisis. In Detroit, Flint, Grand Rapids, Kalamazoo, Lansing, and Saginaw, many blue-collar and licensed professional workers in 64 occupations—including police officers, firefighters, licensed practical nurses, librarians, paralegals, and dental technicians—cannot afford to buy a modest, quality home in the communities where they work.

Big Problem Needs Big Effort
Affordable housing advocates say that these statistics explain why Habitat for Humanity has more affiliates in Michigan than in any other state, why the organization brought its annual Jimmy Carter Work Project here, and why it attracted so many volunteers—an estimated 25,000.

Like other Habitat home purchasers, Ms. Wilson submitted a written application and spoke with a selection committee that verified substandard living conditions. Habitat evaluates an applicant’s unmet handicap requirements, excessive rents, building code violations, household size, income, credit rating, and work history. The committee also considers each applicant’s ability to provide 300 “sweat equity” hours as part of the purchase, including actual homebuilding and/or training programs on household budgets and home repairs. Habitat’s zero-interest mortgage notes are approximately $545 per month.

Ms. Wilson and other Habitat Detroit homesteaders received additional assistance from the Weatherization and Retrofit Maintenance Training Center, a Detroit organization promoting energy-efficient housing. For the blitz, WARM staff certified each home for federal Energy Star efficiency standards for insulation, lighting, appliances, and furnaces. Another long-term Habitat partner, Whirlpool Corporation, based in Benton Harbor, donated a high-efficiency stove, hood, water heater, refrigerator, washer, and dryer to each new Michigan Habitat home.

But despite such efforts, the country’s demand for affordable housing continues to outpace charitable efforts to meet it. Affordable housing experts warn that, until the federal and state governments become more involved, the problem will worsen.

Earlier this year, U.S. Representative Richard Baker (R-LA) introduced the Federal Housing Finance Reform Act of 2005 (H.R. 1461), proposing a 5 percent earmark on profits of two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, for an affordable housing fund.

Advocates estimate that could generate between $400 million and $1 billion annually, which would at least double the national total for government-based affordable housing funding. But a similar measure lost an 11 to 9 party-line vote in the U.S. Senate Banking, Urban Affairs and Housing Committee; an alternative amendment offered by Senator Rick Santorum (R-PA) supporting but not funding affordable housing passed by the same margin.

State’s Dilemma Prompts Local Action
Meanwhile, Michigan is searching for a way to finance its own Affordable Housing Trust Fund, which was enacted last year but remains revenue-free. State Representative Jerry Kooiman (R-Grand Rapids), who sponsored that legislation, said he is not giving up.

“It’s on my to-do list before I leave office to find that funding source,” Representative Kooiman said. “I’m a firm believer in using tax policy to create incentives for things like affordable housing.”    

In one Michigan city, however, housing advocates are pushing ahead on local affordable housing without federal or state action. In 2003, the Michigan Organizing Project in Kalamazoo promised to build at least 1,000 affordable homes by 2010 for low-income residents there. MOP estimates that the annual budget for the project would be at least $2 million. Last November, the City of Kalamazoo appropriated $250,000 as seed money for a countywide affordable housing trust fund; Kalamazoo County commissioners are considering a $400,000 dedicated, automatically renewable appropriation for a local housing trust fund. If the commission approves, the fund will begin operating next year.

“If you’re persistent and you build good relationships with elected officials, citizens can get government to change its priorities,” MOP lead organizer Mike Evans told the Great Lakes Bulletin News Service.

But few housing experts believe that nonprofits can solve the problem on their own. As State of the Nation’s Housing 2005 says, solutions are hard to come by, “requiring the close cooperation of government, business, and nonprofit providers alike.”

Charlene Crowell is the Institute’s State policy director. You can reach her at charlene@mlui.org.  

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