Insight News

Wednesday
Nov 26th

Shortage of income, not housing

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I came across an article in the St. Paul paper last week that brought a different perspective to the issue of “affordable” housing. Editorial writer, D. J. Tice, was commenting on..... I came across an article in the St. Paul paper last week that brought a different perspective to the issue of “affordable” housing. Editorial writer, D. J. Tice, was commenting on a paper published by Ron Feldman, an analyst with the Federal Reserve Bank of Minneapolis. In the paper, Feldman concludes that, rather than a shortage of housing, “a shortage of income is largely behind the housing affordability problem.”

Feldman contends that it is not possible to reduce the cost of building new rental housing to the point where low-income people have enough money to pay the rent. In 2002, the cost of materials and labor coupled with housing codes and building regulations make it impossible to reduce costs. In 1960, 23 percent of rental units did not have complete plumbing and 10 percent allowed occupancy beyond one person per room. Although rents were cheaper then, no one recommends returning to the days of substandard housing. But that leaves us with the problem of seemingly irreducible high costs.

The standard ratio used for housing affordability is: if your rent is more than 30 percent of your income, you are in over your head i.e. the rent is not affordable for you. When you have very little income, even 30 percent is probably way too high. People at the bottom end of the median income chart use up a greater proportion of their money on food, utilities, medicine, and clothes, and other necessities than high-income people do. Percentages probably don’t mean anything at that level.

Feldman’s answer to the housing problem is not to set a goal of building “affordable” housing. His solution is to build market rate residences for people with higher incomes. This will induce high-income people to leave their old homes and move into newly constructed buildings. The houses/apartments they leave behind can be purchased, at a cost far lower than new construction, for use by low-income people.

It’s an interesting twist on the affordable housing crisis beliefs. Whether it was Feldman’s intention or not, the point it brings home to me is that we too readily accept the fact that nearly 200,000 renting households in the Twin Cities make less than half of the median income for the metro area.

I agree that cheaper rent won’t move them closer to the median income. They need to make more money. Education, job training, safe daycare, reliable transportation, and an employer willing to take a chance on them have a greater pay-off, in the long run, than subsidized rent.

These fundamental shortcomings in our system constitute a greater crisis than the one in affordable housing. Yet, in the near-term, we have people who have nowhere to live. Although the Minneapolis Urban League tries to work on all fronts – education, employment, health, crime prevention, social services – we, too, are compelled to try to help with housing. We have plans to work with the Minneapolis Public Housing Authority to build up to 31 rental townhomes for large families with little income. Six are already underway in South Minneapolis.

We realize that our efforts are small in comparison to the magnitude of the problem. Nevertheless, until the social fabric is strong enough to support all of our poor people in moving up the income ladder, we have an obligation to provide adequate housing.

Sources:
“It’s not a housing shortage – it’s an income shortage”, D.J. Tice, St. Paul Pioneer Press, November 27, 2002
The Affordable Housing Shortage: Considering the Problem, Causes and Solutions, by Ron Feldman, August 2002
 

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