While the Department of Housing and Urban Development has intimitated that it will seek way to help America’s housing stock “go green,” it is yet to provide concrete results in that direction.

HUD Secretary Shaun Donovan established a new department, known as the Office of Sustainability,” to research how HUD could lower the combined costs of housing.  HUD’s new rubric incorporates both direct housing costs as well as transporation costs.  It notes that the two now consume as much as 60 percent of household income.

This is a good idea.  For years, people have chosen to “drive ’til you qualify.” They have moved out to the suburbs and commuted to their jobs in the city.  It led to sprawl, and it masks the real costs of housing. Those Beazer “homes from the 130s” were located at the end of long commutes. In this framework, low-income households don’t really lower their housing costs so much as they shift housing costs over to transportation costs.

Section 8 does not tap into drive to you qualify, but it does work on some of the same prinicples. In the last entry of BankTalk, I speculated on the current problem: there is no incentive in place to encourage landlords to pay the costs of lowering the utility bills of their Section 8 tenants. It costs a lot of money to put in insulation. It costs a lot of (more…)

News out today shows that our schools are more income-segregated than ever before.  This national trend is only a broader reflection of the same forces that have fostered Wake County, North Carolina’s recent decision to favor “neighborhood schools.”

North Carolina is one of the states with the lowest share of elite schools.  By the measure that drove this study, there were less than 3 percent of students on free-or-reduced lunch in only six schools in North Carolina.  Perhaps that is factored by our states ongoing battle to reverse its high share of poor families, but it also reflects well on decision-making that has avoided narrow zoning to separate elites from the rest of the community.

The location of affordable housing is driven by land-use planning.  My review of some of the schools where elite private-public schools (PPS) have been created suggests that they are most often in white suburbs with very high incomes. Those districts exist even when a larger MSA is well-off.  Certainly, Boston and San Francisco harbor plenty of wealth.  That is why it is so bad that so many of their schools act as filters of opportunity.

The study did not release specific data for any MSA in North Carolina. I’ll offer a more narrow example for Alameda County, California. The largest city in Alameda County is Oakland. Oakland is poor and heavily minority. Its schools are well-known for their efforts to deal with the challenges of poverty.  While Oakland struggles, the community of Piedmont has developed its own “private” school system.  Fewer than 3 percent of its young people live in poverty, compared to more than 28 percent in Oakland.  Median household income in Piedmont is $134,000.  In Oakland, it is just a shade over $40,000.

Without a systematic effort to shape the housing stock in Piedmont, that outcome could not occur.  Only nine percent of households in Piedmont rent, and most rents are greater than $1,500 per month.  There are only 69 multifamily units in the entire city!

Is Wake County near that situation? Certainly there is no Piedmont within its borders.  Yet, it seems all too likely that the County has enough Piedmont-style school zones to bring about some of those same results. I counted 25 census tracts in Wake (in 2000, summary file 3) where less than 3 percent of the residents aged 5 to 17 lived in poverty. In those tracts, there were only 241 school-age children in 2000, compared to more than 10,500 living above the poverty line.  Back in 2000, Wake had about 111,000 school-age students.  Roughly 9.7 percent of them lived in a census tract with fewer than 3 percent of school-age children in poverty. Race is worth mentioning, too: those low-poverty districts have, on average, less than one-third of their share of African-American residents compared to the County as a whole.

Granted, school districts are much larger than census tracts.  Still, elementary schools can sometimes draw from a handful of census tracts.  Some of those tracts overlap. The possibility seems very real that Wake would quickly fall into a new regime where there were a handful of elite schools for the very wealthy.

Affordable Housing is a Determinant of Income Segregation

The Thomas Fordham Institute has published a report entitled America’s Private Public Schools that tracks where public decision-making has led to public schools with few or no poor students. Their indictment is compounded by the perspective of its authors.  Fordham is a conservative research group. Their concern is coincidental to the outcries of groups like the NAACP or Wake parents with a compassionate interest in diversity. Their prescription for this problem is more charter schools, rather than reform through traditional public school systems.

Fordham concluded that New Jersey was the worst offender for income-segregation. That is interesting, as New Jersey was the site for the seminal affordable housing case.  In Southern Burlington County N.A.A.C.P. v. Mount Laurel Township, the NAACP argued that zoning rules conspired to keep affordable housing outside of the municipal boundaries of Mt. Laurel township, thereby excluding low-and-moderate (LMI) residents from obtaining housing in that community. The decision created a new standard for  implementing the goals of affordable housing. Eight years (more…)

A North Carolina city proposes to obstruct a new affordable housing project.  Knightdale, North Carolina opposes the project on the grounds that its location would not adequately meet the needs of potential low-income residents, would place undue burdens on schools, and that the needs of seniors should come first.

Knightdale, intends to turn down an application, set forth by the Evergreen Construction Company, that would allow the developer to break ground on a 92-unit apartment complex.

The project was experiencing trouble getting financing, but now the Wake County Commissioners (more…)

The diagnosis for the affordable housing problem usually focuses on strategies to increase the supply of appropriate properties.  From non-profit groups such as Habitat or community development groups to municipal housing groups and state housing finance agencies, much effort is given to building new properties.  Those efforts are stimulated by the availability of low-income housing tax credits.  The Federal Home Loan Banks provide AHP funds.  On the secondary market, Fannie and Freddie have purchased some of the mortgages that finance these properties.

Yet another conclusion, perhaps well-known but otherwise not linked to the problem, is to recognize the significant portion of our population that earns wages that are really too low to purchase any kind of housing.  UNC-Chapel Hill reports that the top five (by number of employees) jobs in North Carolina all have average wages that fall below $30,000 per year.  After taking out for social security (but not for income taxes), that amounts to $27,900.  Oh, and another 11.2 percent of all workers in the state are currently without a job.

These jobs are necessary in our service economy, but they cannot approach the buying power needed to equal the cost of housing construction.  What kind of jobs are we talking about?  Jobs like nursing assistants, ambulance drivers, teaching assistants, poultry and pork processors, and light manufacturing (fast food, warehouse worker).  If it is bad in North Carolina, check out the situation in some high cost areas such as Palm Beach, Florida.

A conservative estimate would suggest that these employees should be paying no more than  $700 per month on housing costs.   That will pay for a house that costs approximately $100,000, accounting for a little margin to pay taxes and insurance.  Zillow estimates that the average price for a home in the state is $163,000.  In metro areas like Charlotte, it is far higher – over $215,000.

Wages are tied to housing prices.  The effect is not uniform, however.  Even worse, it appears that income inequality, even when mostly a product of steep gains to the highest earners, contributes to increases in the cost of low-income housing.  Yet in recent years, wages and home prices de-linked.   Wages were relatively unchanged, accounting for inflation, but housing went way up.  Affordability has actually been getting better, as housing prices have dropped in the last year. It is a hidden blessing that stagnant wage growth has finally been correlated with home prices, as they are stagnant (or falling) themselves. Still, this blessing could be short-lived, as long-term trends indicate that areas with high levels of highly educated workers will only accelerate in their concentrations, while have-not areas will continue to decline in the share.

Other factors have a role in housing prices.  Some say it is related to restriction in the construction of new homes (a supply issue) because of zoning.

Perhaps a better strategy for states would be to eliminate the silo-like orientation of state policy.  Right now, states have housing agencies designed to meeting housing needs.  They are generally independent from job-driven agencies such as Employment Security Commissions or the Department of Commerce.

If more dollars went to job retraining and workforce education, then perhaps fewer families would be priced out of housing.  Home values would be better supported, and tax revenues from income would be grow.

A New York Times story published this weekend mentions a new problem from the current credit crisis: funds for legal aid.  It turns out that many state bar associations have found resources for legal aid from escrow accounts.  The programs are known as Iolta (Interest on Lawyers Trust Accounts) and they generated $212 million for legal aid across the US in 2007.

If you have ever purchased a home and negotiated for the seller to throw in some dollars to help fix up, say a roof, then you have put funds in escrow.  Those dollars generate interest.  The interest doesn’t go to you, though…and in many (more…)