What Is Affordable Housing or Low-Cost Housing? Finding New Terms: “The Under $20,000 House”
This weekend I came back from Arizona for a few days and was so amazed at all Peter had gotten done on the fence, gates, and arbors for our house. That led us to talking about what to call this kind of low cost house, which has become a Home Grown Food Network demonstration house.
All the terms we can think of for what we have done and are going to do that anyone might use to do a Google search have been co-opted. I actually saw an ad yesterday that called a $249,000 house “affordable”—in this market where houses are being auctioned with no reserve and still, since few can actually get a loan, not being sold. A family where two breadwinners make $10 an hour each or one makes that at two jobs or twice that at one job could not qualify for half of the loan on that house, so who is that house “affordable” to?
Loans used to be given, when there was money to loan before it disappeared for reasons I can’t discuss now, at 28-30% of gross income. The gross income from one job at $10 an hour, 40 hours a week, 50 weeks a year, since I’m sure these people I’m referring to get sick or have to take off at least two weeks a year and don’t get paid time off, is $20,000 a year. Multiply that by two for one person working two jobs or two people working one each, or one making twice that much, and that is $40,000 a year. We’re not even going to discuss who raises these people’s children when parents work all the time they aren’t sleeping and somehow keeping themselves together to get dressed, buy and fix enough food for the family, cool the house in insufferable summer weather or heat it in freezing winter cold, and somehow pay for transportation to those jobs, plus everything else they have to pay for? The gross amount of $40,000 they make multiplied by 30% is $12,000 a year, divided by 12 months is $1,000 a month. This is if the entire purchase price were financed, as most of these people could not save for a down payment, with what we all know are costs of living.
With their $40,000 a year gross (which of course they never get, since at their low-wage jobs social security and unemployment insurance taxes—only higher-wage and salaried people can avoid these–are taken out, so they end up seeing $35,000 if they are lucky), they can “afford” to pay $1,000 a month on a mortgage. How much purchase price ends up being $1,000 a month payments? Looking up amortization tables in Google will show if interest rates are 3%, $1,000 a month will pay mortgage payments for 30 years on a loan of less than $238,000. At 5% it will pay on less than $187,000.
When you really figure it out this way, no wonder millions of people now can’t afford payments when adjustable teaser rates they were given two years ago went up to 9% or even higher, on house prices they were told were “affordable” or even higher than $249,000. The payment on $249,000 at 9% is over $2,000 a month for 30 years! The people we’re talking about are lucky if they have net income that high all together. That payment is twice what anyone ever called “affordable.”
Neither are most houses for sale in America now what anyone in right mind could call “low cost.” Lately people on Home and Garden TV call $100 per square foot “low cost.” The $249,000 “affordable” home did make $100 per square foot seem low cost, since that was less than 1500 square feet, so it was over $177 per square foot. However, what is low cost is not relative. We believe it is absolutely not true that a house for a family is low in cost if it is not affordable to 30 million people.
The main reason $100 per square foot is now called “low cost” is people are talking only about purchased houses, not owner-built ones. Even using new materials and paying for building permits and other government taxes like school fees every step of the way, which both are much higher cost than the alternatives of recycled materials and additions or modifications that do not count as permit requiring changes, houses can still be owner-built for half that cost. “Low cost” has to be avoiding the high costs of labor and other people’s profits, so has to be owner-built.
Compared to this, we bought our house for $7,500 and have spent under $1,000 in materials costs on making it the beautiful, almost 1,500 square feet under roof of living space we have now, plus over 1,000 square feet of gardens, gazebo, and courtyard space we live in outdoors under shade, cool and heat our house, and grow food. Our around $5 per square foot has got to be low cost using anyone’s definition. It was also very affordable for us and for most people. Therefore, we were quite in a quandary discussing what we should call it.
The way we paid this cost was $2,000 down and $1,000 a paycheck twice a month until we paid for it, back when we were limousine liberals making lots of money. The materials we have paid for $5-20 at a time as we had it. No one finances such a small amount for 30 years, but just to provide what amortization payments would be if there were financing, to compare to figures I have given above, the payments on $7,500 would be less than $32 a month at 3%, $41 at 5%, and $61 at 9%. With payments like these, the family we are talking about could quit at least one job and maybe have enough time and energy to keep their kids from becoming gang members or committing suicide or taking drugs over not being able to figure out algebra or peer pressure. We certainly don’t want people to get the trivial amounts we are talking about mixed up with what has been called “affordable” or “low cost.”
We also don’t want to get what we are doing mixed up in people’s minds with what other charities do. I am not criticizing them—each has a niche of deserving homeless public to help, and reasons for choosing that niche. For example, looking at their publicity, the way I understand it a Habitat for Humanity house costs a chosen family in our area $80,000 with no interest, materials and labor are all donated, and Habitat for Humanity uses money paid by one family to give a loan to another. This is only $222 per month for 30 years. This really is affordable. So why are there still an estimated 30 million families who want to but never will be able to afford to own their own homes in America? Because, among other less fatal reasons, no matter how many people volunteer for Habitat for Humanity, there never will be enough volunteers to build 30 million homes. The 30 million families have to have a way to each build their own, or they never will own their own homes.
That is why after this discussion last weekend we at Home Grown Food Network have decided to call what we demonstrate the “under $20,000 house.” Ours is not really that cheap, since we pay $300 per month rent for land, and at amortized values, that is the equivalent of payment on a loan of $55,000 for 30 years. However, we didn’t have to qualify for such a loan, and neither does anyone else to do what we’re doing. We all just have to demonstrate we can pay $300 per month rent and whatever small increases rent control allows over the years. Even Social Security or small pensions or disability payments, to say nothing of two jobs per family, can handle that. We also don’t count our very high litigation costs, which by now are over $150,000 in income we have lost by fighting our landlord’s attempts to evict us for doing this. The reason we don’t count that is we figure this is for the 30 million people, not just us, so it is insignificant on a per-house basis.
Therefore, all in all, we figure the cost of this house is like buying a seller-financed $10,000 piece of land out in the country, putting a $1,000 trailer on it to start with (I saw a freestanding old trailer twice as big as this one was when we started for $350 last week, but ours cost more because it was in a park already and ready to move in), putting in solar and wind power and water tank with composting toilet and simple shower, and growing the family’s own food in natural do-nothing gardens, for a total of less than $20,000. This is not only for the home, but also covers the bonus of food-growing gardens.
Besides our house not actually costing as little as it could, houses like it are also not going to house all 30 million families. Some would rather rent what they can and live in a good school district than live out in the country or fight a landlord to do this the only ways we’ve seen it done. Others are disabled and can’t build their own house and/or wouldn’t live in a trailer such as this one was until it was improved. Mostly, it is impossible to recreate what we have done because there are zoning and planning laws almost everywhere that prohibit putting a trailer on unfinished land and living there while you build this kind of house, so you have to do it the way we’ve done it instead, and we were limousine liberals, not poor people. However, we think that by showing how big, beautiful, cool, warm, gracious, and productive we have been able to make this house for less than the equivalent of $20,000 for us, we are contributing something not contributed any other way to discussion of how to provide housing they own to many of those 30 million homeless families.
This discussion needs to be undertaken realistically, without being muddled by wrong thinking demonstrated by current use of “affordable” and “low-cost” for housing that isn’t. We welcome your input.
Brenda Barnes, Home Grown Food Network President
July 22, 2008
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