What is Affordable Housing Anyways?
[1-15-2007] Part of the series of articles regarding affordable housing issues in Rogers Park,
written by Brian White of Lakeside CDC ( website )
Rogers Park is a neighborhood that has witnessed a rapid increase in the value of residential real estate, bringing the topic of affordable housing to the forefront of many community discussions. As with many catch phrases, overuse without definition can sap a term of its meaning. The lack of precision around the term can be more damaging when it leads to misunderstandings or misrepresentations and this is especially true of the term "affordable housing." At the risk of further confusing readers, we are going to take a stab at explaining what affordable housing is and isn’t within this short essay and in doing so, hopefully provide a bit of context for persons interested in engaging this issue.
Affordable housing in the most general sense is a housing unit that its occupant can afford if spending no more than 30 percent of gross monthly income toward housing expenses. The "30 percent of gross income" standard is used by the US Department of Housing and Urban Development (HUD) as a reasonable expense, given other life expenses, that people should have to spend on housing. Under this broad definition, every housing unit is affordable to someone. It simply depends on their incomes.
Most housing programs index affordability to different income groups within a respective housing market. A housing unit is determined to be affordable if a household earning a percentage of the area median income and spending no more than 30 percent of its gross monthly income on housing can afford it (emphasis added). Housing programs typically target households earning less than 100 percent of area median income (AMI). This is because the intention of government housing programs is to compensate for private market failures, as well as to encourage housing opportunities for people of different incomes in different housing markets. Rental assistance programs typically serve households earning 60 percent or less of area median income, while some home ownership programs allow recipients of assistance to earn as high as 120 percent of the area median income and still qualify.
If you are reading carefully and have not glazed over at this point, you will quickly recognize that to have a complete definition, one needs to define the housing market in question. To reverse an old saying, what plays in Peoria may not play in Chicago, or in Rogers Park. In truth, according to the Illinois Housing Development Authority, the median household income for a family of 4 in Chicago was $74,500 in 2006. In Peoria, it was $62,400. Lakeside CDC was not able to secure median household incomes for Rogers Park by household size, but we were able to determine that as of 2000, Rogers Park median household income for all households was 81 percent of the median household income of all households in the City of Chicago. Using that basis, we estimate that the median household income in Rogers Park for a family of 4 is $61,225, only slightly lower than the Peoria average.
While some may wish to debate our methodological purity on this, the larger point is that neighborhood standards matter when it comes to having a meaningful discussion about how to meet the affordable housing needs of local households. An "affordable housing unit" in South Chicago or Rogers Park, where median incomes are below the regional averages, will actually not meet the affordable housing needs of local households, given differences in median incomes.
| Chicago | Rogers Park | |
|---|---|---|
| 80% | $1490 | 1209 |
| 50% | 942 | 765 |
In terms of actual dollars, consider several different 4-person households, each earning either 80 percent or 50 percent of the Chicago median and Rogers Park median incomes. The table shows what they can spend on housing if they do not exceed the HUD standard of 30 percent of their gross income. The Rogers Park household has a lot less to spend, though they are both competing for the same unit. Households earning less, say 30 percent of area median income, are in worse shape respective not only to the households from outside the community, but also to those with higher incomes.
All this academic mumbo jumbo is moot if you can’t find quality units within these price ranges, and that is really the rub for any of us working on affordable housing. Lakeside CDC’s recent Community Housing Audit study showed that Rogers Park has lost many rental units to condominium conversions and is likely to lose a lot more given the age and condition of many of the buildings. The differences between what property owners need to collect in the form of income and what a unit can produce as a rental versus a condominium provides an undeniable force that will keep pressure up to convert units, even if the conversions have prices that are adjusted downward to reflect the softening of the higher-end housing market.
To address the needs of local households, a number of things can be done. One is to try to increase what households have to spend on income, such as through different housing subsidies or through wholesale increases in wages. Another is to try to reduce the cost of housing, by bringing down the expense to property owners through targeted tax reductions, grants for energy modifications, or regulatory relief on things like density, building codes, or other areas. In future posts, Lakeside will offer up ideas on some of these different strategies. We also encourage others interested in this issue to contact us.
To decide which strategies are most appropriate, a community and its civic leadership must first have a set of basic facts on which to operate. We hope this essay provides a practical understanding of what it means to talk about affordable housing, just as we our audit study helped document the threats and opportunities facing Rogers Park households needing affordable housing by inventorying the nature of the rental housing market.
From there, communities like ours depend on the relationships between different players in the housing market, including housing providers, housing consumers, government officials, and nonprofits, to name a few. We are optimistic that Rogers Park can address its housing needs, even given the types of significant structural issues we have identified, through the use of good basic information and the building of strong, intentional, and constructive relationships among t hose of us who have a role to play in helping our community express its best and brightest future.
Brian White
Executive Director
Lakeside Community Development Corporation