Affordable Housing Part 2
By Timothy Bristol
https://www.linkedin.com/in/tim-bristol/
Last week I spoke to Professor Wharton (Dr. Jonathan Wharton, a Professor of Political Science at Southern Connecticut State University. Dr. Wharton has focused on policy towards Planning and Urban development). I spoke with him about his take on Affordable Housing.about the basics of what affordable housing is, and its Pros and Cons.
This week I would like to take a deep dive into the housing market and why affordable housing is needed. According to the Pew Research center in 2021, about half of all Americans surveyed said that home affordability was a major problem where they live. The group most affected by this is younger Americans who say that they have a harder time buying a home than their parents did.
There is a variety of factors that have created this situation including wage stagnation, inflation in home prices, a slowdown in new home construction, the Covid pandemic, and a surge in home buying. I know here in Stratford and all over Fairfield County, we have seen the increased sales of homes from those looking to leave New York City. This has driven up home prices in the area. Nationally this kind of home buying has driven the median home price to about 408,000 dollars nationwide, which is a 25% jump from the median home price in 2019 of 327,000 dollars. [1]
Another factor in the affordability of homes is the availability of homes for sale. There has been a 60% decrease in listings of homes for sale since 2019. This decrease is partly because of the increase in home sales but also due to a decrease in new home construction early in the pandemic. New home construction was ground to a halt, and high building cost material has kept new home building from reaching its previous pace. [1]
Of course, the other option for housing is to rent. Renters have seen an 18% increase in rent over the last 5 years. This has outpaced the rate of inflation. According to the Pew Research Center, about half of all renters spend 30% or more of their income on housing.
The thinking on affordability and housing policy had been that 30% of income is the most a family should spend on housing and still be able to save money. However, the thinking on this policy is changing due to the inflation of rental costs.
Harvard University has proposed a new affordable housing policy known as the Residual Income Approach, which estimates the cost of necessities such as food, health care, transportation, and childcare. Those expenses are subtracted from a household’s income. This calculation produces the amount and share of income that the household members can spend on housing and still have enough left over to cover other necessities. If households spend more on housing than the residual income approach indicates is feasible, they presumably cut back spending on other essential items. [2]
The idea is that his new calculation could help renters and potential homeowners determine what is affordable to them, compared to just using the flat 30% of income calculation. This idea is just one of many affordable housing policy ideas that are being researched to help those who are being pushed out of the housing market or cannot afford the rising rent costs.
[1] Pew Research, Key Facts about housing affordability in the U.S., 2022
[2] Chris Herbert, et al. “Is There a Better Way to Measure Housing Affordability?” Is There a Better Way to Measure Housing Affordability? | Joint Center for Housing Studies, 26 Sept. 2018
