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America’s Fading Dream: Homeownership for Working People

More Americans can’t afford decent housing

August 22, 2005 | By Charlene Crowell
Great Lakes Bulletin News Service

Habitat for Humanity

Former President Jimmy Carter traveled to Benton Harbot to lead Habitat for Humanity's Michigan "blitz build" in June.

DETROIT — As summer winds down, Tunisia Wilson and her three daughters, who just moved from a crowded rental property on Detroit’s east side, are starting a new life in their own new four-bedroom home on the west side.

A first-time homeowner, Ms. Wilson joined 29 other families who purchased new homes in the same neighborhood. Ms. Wilson is now just seven minutes away from her longtime manufacturing job. She and her family are also, for the first time, right across the street from a park.

Thanks to Habitat for Humanity, the Wilsons and 231 other Michigan families in 61 counties achieved homeownership. In June, the faith-based organization, led by former President Jimmy Carter, used volunteer labor, sweat equity, donated funds, and in-kind services to build 232 energy-efficient, low-cost, well-constructed homes in troubled cities like Detroit and Benton Harbor, and in rural areas like Calumet and Newaygo.

But Habitat’s aggressive efforts — 82 Michigan chapters have built more than 2,400 homes in the state, 56,000 in the United States, and more than 200,000 worldwide — cannot solve either the state’s or America’s growing affordable housing crisis. Even as low interest rates and rising incomes for the wealthiest Americans have pushed new home construction to record levels -- more than 100,000 new homes are built every month across the country; some 3,300 of those in Michigan -- working families and the poor are finding it more difficult to find housing.

The problem is acute and complex. Some 68 percent of American householders own their own homes, a record. Yet the mismatch between rising living costs and stagnant working wages also is pushing homeownership rates down in some states, including Michigan, and contributing to housing shortages. Some 73.8 percent of Michigan householders owned their homes in 2000, according to the U.S. Census, down from a record 74.4 percent in 1970. Michigan is one of 11 states that have seen homeownership rates decline since 1970.

The trend is plainly evident across Michigan's cultural, economic, and natural geography. Many of the new homes are being built, for instance, in the spreading and nearly all-white exurbs of southeast Michigan, a strong market for sales of new homes that cost more than $250,000. Yet home prices are tumbling in the older and slightly more diverse suburbs closer to Detroit, in part because working wages in southeast Michigan, which has the nation's highest unemplyment rate, are not keeping pace with rising energy, transportation, insurance, medical, utility, and other living expenses. Homeownership, as a result, is out of reach for ever more working class families, including those with stable jobs and solid work ethics. Without Habitat, Ms. Wilson would remain a renter despite working 10 hours a day, six days a week for over a decade.

It Just Gets Worse: Studies Find Home Prices Outpace Incomes
According to The State of the Nation’s Housing, a report by the Joint Center for Housing Studies at Harvard University, during the past  20 years average housing prices rose between 30 and 100 percent faster than average incomes in 63 of the 153 metropolitan areas studied. As a result, the report said, more than 28 million people in the lower half of the nation’s workers spend too much of their income — 30 percent or more — on housing. And the number of low-to-middle-income households spending at least half of their income on housing grew by 730,000 between 2000 and 2003.

Meanwhile, approximately 2.5 million people live in badly crowded or structurally unsound housing. “Housing affordability is a chronic problem,” said 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.”

A separate report this year by the Center for Housing Policy, Paycheck to Paycheck, confirms these findings and highlights Michigan’s widespread affordable housing crisis. Nationwide, there is a 5 million unit shortage of affordable rental units, said the Washington-based housing research group.  Michigan's hardworking police officers, firefighters, licensed practical nurses, librarians, school bus drivers, paralegals, and dental technicians in Detroit, Flint, Grand Rapids, Kalamazoo, Lansing, and Saginaw, cannot afford to buy a modest home in the communities they serve.

Michigan Affordability Comparisons

Homeownership– 2005 Median Priced Home

City Home Price Income Needed to Qualify for Mortgage

1.Grand Rapids

$125,000 $39,641
2.Kalamazoo $117,000 $37,104
3.Flint $108,000 $34,250
4.Detroit $105,000 $33,299
5.Lansing $105,000 $33,299
6.Saginaw $88,000 $27,907
2005 Fair Market Rental Rates


1 BR 2 BR
1.Detroit $670 $805
2.Grand Rapids $548 $658
3.Lansing $521 $645
4.Flint $510 $612
5.Kalamazoo $489 $595
6.Saginaw $448 $560

A Michigan Blitz
These statistics explain why Habitat for Humanity has more affiliates in Michigan than in any other state and why the organization brought its annual Jimmy Carter Work Project, which attracted 25,000 volunteers this year, here in June.

That project employed Habitat’s signature “blitz build,” in which volunteers work overtime to complete homes in about three weeks, or 1,500 man-hours for a three- or four-bedroom home. All Habitat houses come with a zero-interest mortgage. For Detroit, those costs come to $545.00 per month for mortgage, insurance, and taxes.

Like other Habitat homeowners, Ms. Wilson submitted a written application and met with a selection committee, which verifies that applicants are suffering from substandard living conditions, unmet handicap requirements, or excessive rent; considers their household needs based on family size and income; and evaluates their credit rating, work history, and ability to perform 300 hours of  “sweat equity,” which consists of homebuilding and/or training in budgeting and home repairs.

The committee rejected Ms. Wilson’s first application due to a low credit rating, then helped her learn to manage money — a big step towards home ownership.

“Habitat referred me to a credit counselor,” Ms. Wilson recalled, “where I learned how to properly budget each month and manage my credit. I also went to a second credit counseling session once a week for four hours for three months and took the home repair training.”

Habitat Helpers
Families moving into Detroit Habitat homes this month receive additional assistance from the Weatherization and Retrofit Maintenance Training Center, a Detroit organization promoting energy-efficient housing. This year, WARM staff certified each home for federal Energy Star efficiency standards for home insulation, lighting, appliances, and furnaces.

WARM’s Doug Black said his organization’s efforts would reduce energy costs by about $720 per year, per home, helping to ensure that families can afford to stay in their new homes.

“With the cost of natural gas going up, it’s one thing for a Habitat homebuyer to afford the mortgage,” Mr. Black remarked, “But if they can’t afford the utilities, it’s a real problem.” 

Another Habitat partner, Whirlpool Corporation, based in Benton Harbor, donates a high-efficiency stove, hood, water heater, refrigerator, washer, and dryer to each new Habitat home. Jeff Terry, Whirlpool’s senior manager for its Habitat for Humanity partnership, said that, since 2000, the company has donated $5 million in appliances every year — for a total of 62,000 appliances for 30,000 U.S. families.

The Limits of Charity
But despite efforts by Habitat for Humanity, WARM, Whirlpool and many others, the country’s affordable housing needs outpace such charitable efforts. Experts say that more federal and state support is essential to solving the affordable housing crisis.

Earlier this year, Congressman Richard Baker (R-Louisiana) introduced the Federal Housing Finance Reform Act (H.R. 1461), which would earmark 5 percent of the profits of two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, for an affordable housing fund. Representative Baker estimated that the program could generate between $400 million and $1 billion annually, doubling or tripling the total amount of government funding, nationwide, for affordable housing. The bill is expected to emerge from the House Committee on the Judiciary in September.

But the U.S. Senate Banking, Urban Affairs, and Housing Committee rejected a similar amendment, offered by Senator Jack Reed (D-RI) to the proposed Federal Housing Enterprise Regulatory Reform Act (S. 190), in a recent party-line vote. The amendment would have established affordable housing goals for Fannie Mae and Freddie Mac. Instead, an alternative amendment offered by Sen. Rick Santorum (R-PA) stated support for affordable housing, but failed to provide any funding.

National affordable housing advocates, such as the Local Initiatives Support Corporation, the Center for Community Change, and the National Low Income Housing Coalition have vowed to fight for a national affordable housing fund this fall.

State budget dilemma prompts local actions
Lawmakers working to solve Michigan’s housing problem face tight budgets. Although the state established an Affordable Housing Trust Fund last year, plans to finance the trust’s first year with unspent dollars from a federal program fell victim to negotiations over closing Michigan’s budget gap, leaving the “fund” penniless.

State Representative Jerry Kooiman (R-Grand Rapids), who sponsored the legislation, said he will keep pushing.

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

But Gary Heidel, a Michigan State Housing Development Authority senior manager, said that current budget discussions exclude money for the trust fund. His agency is developing a five-year affordable housing plan with an array of community-based organizations. 

Meanwhile, Representative Tupac Hunter (D-Detroit) is pursuing a strategy that is less dependent on the state’s emaciated budget. His proposal would establish “inclusionary zoning,” which would generate incentives for developers to include affordable housing in otherwise completely market-driven development. But Mr. Hunter’s legislation has yet to receive a hearing.

Going Local
In one Michigan city, however, affordable housing advocates are pushing ahead without federal or state support. In 2003, the Michigan Organizing Project in Kalamazoo declared its intention to build 1,000 affordable, scattered-site homes by 2010 in their city, which, according to Kalamazoo’s Consolidated Plan, has about 4,000 low-income households that spend at least half of their income on rent.

MOP estimates that the project would cost at least $2 million annually. Last November, the City of Kalamazoo appropriated $250,000 to seed a countywide affordable housing trust fund. Now, Kalamazoo County commissioners are considering a $400,000 renewable appropriation for a trust fund for households earning 30 percent or less of the area’s median income. If they approve it, funding begins 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.

A Good Ministry
Meanwhile, as housing activists look for ways to work around the logjams in Lansing and Washington, D.C., they are also celebrating their successes. At a Habitat Benton Harbor gathering for local blitz volunteers, Mike Green, that chapter's executive director, said he relished the volunteers’ diversity and that he was encouraged by Habitat’s rapid expansion.

“We’ve been doubling our production every year for several years,” Mr. Green said. “It’s a dream come true to see this organization grow and flourish.”

And, in Detroit, Willie Campbell, executive director of Core City Neighborhoods, a west side community organization, agrees.

“Habitat has a good ministry,” said Mr. Campbell. “They are probably the most efficient provider of affordable housing to people. We can’t provide housing at that cost. I have a lot of respect for their organization and efficiency. Nonprofits should emulate their standards.”

But few housing experts believe that non-profits can solve the problem on their own. As Harvard’s State of the Nation’s Housing 2005 says, “At the source of the affordability problem is the structural mismatch between the large number of low-wage jobs that the economy is generating and the high costs of supplying housing. Solutions are therefore hard to come by, requiring the close cooperation of government, business, and nonprofit providers alike.”

Charlene Crowell is the Michigan Land Use Institute’s Lansing policy specialist. You can reach her at charlene@mlui.org.

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