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Housing Affordability | The Federal Government’s Role Across the nation this month, elected officials, mortgage companies, banking associations, federal, state, county and city governments, non-profit organizations and real estate agencies are working in partnership to help make homeownership accessible to all members of our community. Mel Martinez, secretary of the U.S. Department of Housing and Urban Development (HUD), has declared June “National Homeownership Month,” recognizing the important role housing and homeownership play in the lives of all Americans. This year, Secretary Martinez has expanded what began as one week dedicated to promoting the benefits of homeownership to one month highlighting the work of mayors, governors and elected officials, and community-based and faith-based organizations. Homeownership has always been an integral element of any community’s landscape, a link to the American Dream even in impoverished neighborhoods. While homeownership rates in America are at an all-time high (68 percent), minority homeownership rates are 30 percent lower than the overall national rate. Housing is a significant contributor to our economy. Construction of 1000 single-family homes generates 2488 jobs in construction and construction-related industries, approximately $79.4 million in wages and more than $42.5 million in federal, state, and local tax revenues and fees.
In many areas, housing has become more expensive than working Americans can afford. A 1999 Census Bureau report found that 44 percent of American families could not afford to purchase a home – an increase from 40 percent in 1988. While the national home ownership rate is 68 percent, only 52 percent of families with incomes below the area median income level own a home. To put this in perspective, in many areas of the country, households dependent on one teacher’s or one police officer’s salary alone cannot afford to buy a median priced home. The problem is particularly severe in California, and especially in the Bay Area, where a family dependent on the salaries of two teachers or two police officers cannot even afford to buy a median priced home. The San Francisco Chronicle reported on May 21, 2002 that the median home price in California was $258,000, as compared to $144,000 nationwide. In the Bay Area, the price median price skyrocketed to $402,000 in April 2002, a new record high. This hasn’t driven buyers away, however, as home sales jumped 80.9 percent in Santa Clara County in April 2002. Some observers say such figures don't bode well for the long-term quality of life in the Bay Area. "This is a huge red flag," according to Stephen Levy, Director Center for Continuing Study of the California Economy in Palo Alto. "Every time the Bay Area sets a new home price or volume record in the middle of a recession, it tells us the demand far exceeds our ability to build homes." "We're not getting it," Levy added. "We only see it from the perspective of the homeowners; we don't see it from the perspective of nurses, teachers and firefighters who are being pushed farther and farther out." The low rate of affordable housing availability is also driving up rental prices. According to the National Low Income Housing Coalition, an extremely low income household in California (earning $18,240, 30% of the Area Median Income of $60,800) can afford monthly rent of no more than $456, while the Fair Market Rent (FMR) for a two bedroom unit is $957. A minimum wage earner (earning $6.25 per hour) can afford monthly rent of no more than $325. In California, a worker earning the Minimum Wage ($6.25 per hour) must work 118 hours per week in order to afford a two-bedroom unit at the area's FMR. For a worker to be able to afford a two-bedroom unit at the FMR while working 40 hours a week and spending no more than 30 percent of their income on housing, that worker would need to earn a wage of $18.40 per hour (the Housing Wage). This is 294% of the present minimum wage ($6.25 per hour). The problem is even worse in the San Jose Metropolitan Area, where the two bedroom housing wage is an incredible $30.62. This is a whopping 490% of the present minimum wage and requires a minimum wage worker to work 196 hours per week in order to pay rent while not spending more than 30% of income on housing costs. A two bedroom apartment at FMR is $1,592. Private developers can easily build quality homes for families with high incomes, but developing housing for those with low and moderate incomes often requires partnering with non-profit groups and relying on subsidies. Without support from the community, it is very difficult for private developers to make an affordable housing development financially feasible. It is clear that something must be done to meet the housing demand. Working individuals and families should not be faced with housing shortages or be forced to live in dilapidated homes. As past-HUD Secretary Andrew Cuomo observed, “there are many good $6 an hour jobs in today’s economy, but not much $6 an hour housing….The federal government must significantly enhance its efforts to create more affordable housing opportunities.” To address this problem, I have cosponsored, H.R. 2349, The National Affordable Housing Trust Fund Act. This legislation would use a portion of the Federal Housing Administration’s profits to create a trust fund from which states and non-profits could draw to build affordable housing rental units in mixed income locations, to construct affordable homes for low to middle income citizens, and provide rental subsidies to low-income individuals. This bill would extend nationwide a program that builds upon the successful model of the Housing Trust of Santa Clara County, which has assisted Santa Clara County residents in securing affordable housing. I’m proud to say that last year I was able to help the Housing Trust of Santa Clara County secure $100,000 in federal funding through the Department of Housing and Urban Development’s Economic Development Initiative. This federal investment helps to solidify the Housing Trust’s public/private partnership, which is dedicated to building and sustaining a revolving loan fund and grant-making program that will complement and leverage other housing resources throughout Silicon Valley. I have also cosponsored H.R. 674, The Homeownership Opportunities for Uniformed Services and Educators Act. This bill will provide for one percent down payments for Federal Housing Administration mortgage loans for qualified elementary and secondary school teachers and administrators and non-Federal public safety officers to purchase homes within the jurisdictions of their employing agencies. It is vital that we be able to attract and retain citizens who work in these professions, and helping them find affordable housing is an important part of the process. Other strategies to address our need for affordable housing are laid out in the recently released report of the Millennial Housing Commission. I anticipate that many of these suggestions will be taken up by Congress in the near future.
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