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

The Future for Housing AffordabilityOR

“Who can afford a crystal ball?!”

Paul HenkelAsst. 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

MIS

CONCEPTIONS

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

MIS

CONCEPTION #

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, 2003.

** A working community is defined by having an average household income between 60% and 100% of AMI)

MIS

CONCEPTION #

2


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, 2002.

MIS

CONCEPTION #

2


The impacts of federally assisted housing on area property values depend largely upon*:

1. Characteristics of the neighborhood2. 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, 2002.

MIS

CONCEPTION #

2

Affordable housing attracts unwanted tenants

MIS

CONCEPTION #

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.

MIS

CONCEPTION #

4

Affordable housing is an Urban Problem

RuralCounties(random)

HomeownershipRate

% of Low IncomeOwner Householdswith Cost-Burden

% of Renter Households with

Cost-Burden

% of Median RenterIncome Needed to

Afford 2-BR at FMR

Bledsoe 81.7% 45.30% 27.8% 77.0%

Clay 80.0% 49.20% 22.8% 106.0%

Crockett 74.9% 51.70% 32.7% 67.0%

Decatur 80.1% 41.80% 29.0% 80.0%

Fentress 79.1% 51.90% 31.1% 104.0%

Hancock 78.7% 37.50% 24.6% 170.0%

Houston 77.0% 62.20% 26.1% 96.0%

Jackson 80.8% 50.30% 20.8% 97.0%

Lake 60.0% 62.20% 29.7% 114.0%

Moore 83.7% 44.50% 21.0% 71.0%

MIS

CONCEPTION #

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.


It means closing the gap between local wages and salaries and the going rate for a decent home.


It means strengthening the community by building a strong and diverse economic and social base.


It means improving the quality of life for all members of the community.


General Population Patterns

Population of Tennessee by County, 2005

300,000 – 910,000

100,000 – 299,999

50,000 – 99,999

20,000 – 49,999

0 – 19,999

Projected Population and Housing Stock

in Tennessee, 2006-2026

5,200,000

5,600,000

6,000,000

6,400,000

6,800,000

7,200,000

7,600,000

0

1,000,000

2,000,000

3,000,000

4,000,0002.24 persons per housing unit in 2006

2.00 persons per housing unit in 2026

Population

HousingStock

Counties with Slow Growth or Population Decline, 2005-2015

-1.0% to -9.0% Decline

0.0% to 4.9% Growth

5.0% Growth or greater

Counties with Moderate to High Population Growth, 2005-2015

15.0% to 42.0% Growth

5.0% to 14.9% Growth

Lower than 5.0% Growth

Metro and non-Metro Areas by Projected Population Change

2005-2015

15.0% to 18.0% Growth

10.0% to 14.9% Growth

5.0% to 9.9% Growth

Lower than 5.0% Growth

219,032

124,945

124,646

369,781

219,691

163,428

220,413

1,096,835

832,781

2,006,891

208,912

110,857

108,036

351,383

188,944

130,575

160,171

999,491

655,400

1,422,544

Kingsport-Bristol MSA

Jackson MSA

Cleveland MSA

Chattanooga MSA

Johnson City MSA

Morristown MSA

Clarksville MSA

Memphis MSA

Knoxville MSA

Nashville MSA

2005

2025

Populations are listed as total # of people

Metro Area Population Change, 2005-2025

571,343

640,157

415,146

705,587769,756

416,112

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

East Tennessee

MiddleTennessee

West Tennessee

2005

2025

non-Metro Population Change, 2005-2025

Fatter Cats, 2005-2025

-1.7%

-1.2%-0.8%

-0.5%-0.1%-0.1%

-0.1%-0.1%

0.1%

0.1%0.3%

0.5%3.7%

-5.0% -3.0% -1.0% 1.0% 3.0% 5.0%

Memphis MSA

West TN non-MSA

Chattanooga MSA

Kingsport-Bristol MSA

Middle TN non-MSA

Johnson City MSA

Jackson MSA

Cleveland MSA

Morristown MSA

East TN non-MSA

Clarksville MSA

Knoxville MSA

Nashville MSAChanges $ Allocationbased upon population

Changes weight ofpolitical pull

Components of Population Change

Components of Population Growth in Tennessee, 2001-2005

2001 2002 2003 2004 20050

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000Natural Increase

International Migration

Domestic Migration

Impact of Recent Movers by County, 2001-2005

Out-flow of Recent Movers

0.0% - 2.9% Recent Movers


6.0% or greater Recent Movers

Impact of Recent Movers by Metro and non-Metro Areas, 2001-2005

Out-flow of Recent Movers



4.0% or greater Recent Movers

4,809,644

1,002,636

180,575

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Po

pu

lati

on

White Afr. American Hispanic

Tennessee's Population in 2005 by Race-Ethnicity

5,937,029

5,171,8945,561,427

1,136,690 1,288,668

1,442,746375,277779,913

1,506,508

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

200

52

006

200

72

008

200

92

010

201

12

012

201

32

014

201

52

016

201

72

018

201

92

020

202

12

022

202

32

024

202

52

026

202

72

028

202

92

030

203

12

032

203

32

034

One Scenario for Population Growth by Race-Ethnicity in Tennessee

Males

50,000 40,000 30,000 20,000 10,000 0

Females

0 10,000 20,000 30,000 40,000 50,000

<5

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+

African American Population of Tennessee by Age and Sex, 2000-2005

FutureElderlyHousingNeed

Hispanic Population of Tennesseeby Age and Sex, 2000-2005

Males

20,000 15,000 10,000 5,000 0

Females

0 5,000 10,000 15,000 20,000

<5

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+

NewHouseholdFormation

PopulationGrowth

Trends in 1-person Owner Households in Tennessee, 1960-2000

20.80%18.60%14.90%11.00%7.40%0

200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,0001,800,000

1960 1970 1980 1990 2000

Percent 1-person

Ow

ne

r H

ou

se

ho

lds

Owner-occupied Households1-person Owner-occupied

Trends in 1-person Renter Households in Tennessee, 1960-2000

13.70% 21.20% 32.30% 35.10% 37.60%0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,0001960 1970 1980 1990 2000

Percent 1-person

Ow

ne

r H

ou

se

ho

lds

Renter-Occupied Households1-person Renter-occupied

Median Household Incomeby County, 2005

$55,000 or higher

$50,000 - $54,999

$45,000 - $49,999

$28.700 - $44,999

Projected Household Income Changeby County, 2005-2015

+50.0% 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, 2000-2005

8.0% or greater

6.0% to 7.9%

4.0% to 5.9%

0.0% to 3.9%

Projected Median Home Sales Price Change, 2005-2015

+125.0% to +220.0%

+100.0% to +124.9%

+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.


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”.


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.


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.


Median Price Existing Home

$95,200

Median Price New Home

$129,900

2004

2004

Hai

rdre

sser

Cas

hier

Pres

choo

l Tea

cher

Ret

ail S

ales

pers

on EMT

Nur

se A

ide

Med

ical

Ass

ista

nt

Con

stru

ctio

n La

bore

r

Soci

al W

orke

r

Bus

Driv

ers

Arm

y E-

2 (2

yr s

ervi

ce)

Car

pent

er

Polic

e O

ffice

r

Elec

tric

ian

Rea

l Est

ate

Bro

ker Te

ache

rs

Arm

y E-

5 (8

yr s

ervi

ce)

Acc

ount

ant

Arm

y O

-1 (2

yr s

ervi

ce)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

An

nu

al In

com

e

$0

$30,000

$60,000

$90,000

$120,000

$150,000

$180,000

Affo

rdab

le Ho

me P

rice

Affordability of a Median-priced Homein Clarksville, TN

Median-priced, New Home in Montgomery Co.

$130,500, 3br/2ba, 1607 ft2

What constitutes anaffordable 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 inMontgomery Co.

$94,500, 3br/2ba, 1780 ft2

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 ft2$42,000, 3br/2ba, 891 ft2

Existing Home affordable at <30% cost burden

Max. Affordable

What about affordablerental 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.

$552

$583

$591

$672

$748

$0 $200 $400 $600 $800

Washington

Rutherford

Knox

Bradley

MONTGOMERY

What about affordablerental property?

Fair Market Rent is not always fair

Estimated Percent of Renters Unable to Afford Two-Bedroom FMR

44%

45%

47%

43%

37%

0% 10% 20% 30% 40% 50%

Washington

Rutherford

Knox

Bradley

MONTGOMERY

Where do cost-burdened renters reside?

All RenterHousehold

s% Cost

BurdenedNumber

≤80% AMI

% CostBurdened≤80% AMI

MONTGOMERY 17,645 34.1% 8,495 60.7%

Bradley 10,780 35.2% 6,750 53.1%

Knox 52,280 37.5% 33,985 54.6%

Rutherford 20,035 42.2% 13,250 60.2%

Washington 14,075 36.4% 8,520 55.8%

Everywhere.

Percent of County Renters at 30-80% MFI by Race/Ethnic Group

White Black Hispanic

MONTGOMERY Co. 33.7% 36.4% 42.4%

Bradley County 39.7% 44.9% 45.6%

Knox County 37.9% 36.4% 41.3%

Rutherford County 41.4% 46.5% 47.2%

Washington County 37.2% 35.4% 64.0%

Does cost burden discriminate?

Nope.

Is need in all areas identical?

Renters withcost burden(≤80% AMI) % White

% AfricanAmerican % Hispanic

% OtherMinority

MONTGOMERY 5,154 56.0% 33.1% 6.4% 4.5%

Bradley 3,589 87.1% 7.4% 3.3% 2.2%

Knox 18,555 78.1% 16.0% 1.7% 4.2%

Rutherford 7,962 77.7% 14.1% 5.0% 3.2%

Washington 4,756 89.0% 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


MONTGOMERY Co. 54.8% 58.5% 63.0%


Knox County 48.5% 40.8% 59.4%



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


MONTGOMERY Co. 17.7% 22.8% 19.1%


Knox County 22.2% 24.1% 30.8%



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


MONTGOMERY Co. 51.2% 63.8% 47.2%


Knox County 39.7% 55.3% 40.6%



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.


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.


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 significantlyimpacts 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 withIncomes less than 30% of the Area Median Income

34%

25%

27%

35%

26%

0% 10% 20% 30% 40%

Washington

Rutherford

Knox

Bradley

MONTGOMERY

Cost burden significantlyimpacts the elderly

Low-income Households in Montgomery Co.

RENTERSPercent <50%MFI

OWNERSPercent <50%MFI

Ft. Campbell Ft. Campbell

Knowing what we now know, how might the following impact

Tennesseans?

Median Rent versus Median Income 1970-2020

$0

$13,000

$26,000

$39,000

$52,000

$65,000

Me

dia

n H

ou

se

ho

ld I

nc

om

e

$0

$200

$400

$600

$800

Me

dia

n G

ros

s R

en

t

Tennessee Median Rent

Tennessee Median Income

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Me

dia

n H

om

e V

alu

e

$0

$15,000

$30,000

$45,000

$60,000

$75,000 Me

dia

n H

ou

se

ho

ld In

co

me

Median Home Value versus Median Income 1970-2020

Tennessee MedianHome 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, 2015

250.0% 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 Agency404 James Robertson Parkway, Suite 1114Nashville, Tennessee 37243(615) 741-2400

[email protected] www.tennessee.gov/thda

Thank you very much for your attention.

Documents

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