In today’s Friday interview the John Locke Foundation’s Donna Martinez talks to Chris Estes, executive director of the North Carolina Housing Coalition, and Michael Sanera, research director for the John Locke Foundation, about affordable housing. The interview aired on Carolina Journal Radio (click here to find the station near you).
Martinez: Right now downtown Raleigh is teeming once again with legislators and lobbyists and advocacy groups. We are hearing there is a budget surplus — some of us believe that is an overpayment of taxes — in the amount, anywhere around $2 billion. Lots of folks are wanting to try to lobby for those funds. Chris, your group is one of those. Tell us what it is that you would like to see the General Assembly do.
Estes: What we are advocating for is for the General Assembly to increase the amount of money in the North Carolina Housing Trust Fund. The trust fund is the state appropriation or the state vehicle by which dollars are put into the marketplace to produce a supply of housing that’s not produced in the free market economy for people of lower income levels.
Martinez: Tell us exactly how you define affordable housing. What is affordable?
Estes: The way I think most other housing advocates define affordable is generally for those who are at 50 percent and below of area median income, which numbers can change based on wealth in any particular community. Generally, what we focus on is the folks who are at 30 percent and below, defined by HUD, the Federal Housing and Urban Development, as very low-income folks. This is the housing that doesn’t get built in any setting, because there’s really no profit to be made in its development. And it’s typically focused on people with disabilities, very low-income seniors, folks on fixed incomes, as well as people earning very low wages in the work force.
Martinez: Michael Sanera with the Locke Foundation, Chris has told reporters that he believes that there is no free market solution to the question of affordable housing. What’s your reaction?
Sanera: Well, I think that is a problem. The issue, I think, is that on one hand we have government advocates that advocate restricting the supply of housing, which drives the price up. On the other hand, we have advocates that, when that price goes up, are talking about affordable housing. You can’t have it both ways. You have to either end these restrictions, which will bring the price down, so that people will be able to afford housing — that housing will be more affordable. Zoning restrictions — we have a farmland trust that’s spent $26 million to take land out of the hands of developers to build housing. We have greenbelt and open space restrictions. All of these drive the price up. Knightdale, believe it or not, passed an ordinance that a developer cannot build a house in Knightdale unless it costs $185,000. That’s above — $25,000 above — the average price of a house in Wake County.
Martinez: Chris, what about this issue? You’re advocating for funds to address this issue of affordable housing, but Michael brings up, I think, an interesting point about what some people would say are the root causes — government intervention in the first place. Does your organization oppose these land use policies, for example, that would restrict supply and therefore drive up price?
Estes: I viewed two root causes. One is whether the income of certain populations will meet what the cost of the production of housing is. For example, I could give Michael all the money he needs to build — at no charge — to build an affordable rental development for people with disabilities, and he cannot operate it at the income that those folks can afford to pay, because SSI — supplemental security income — is so low. So, there is no land-use option that’s going to address that. On the second point though, we — I think we are in agreement. We generally — and I actually just met with the North Carolina Home Builders to talk about a partnership to work on exclusionary zoning issues where communities have actually zoned out affordable housing by trying to target income levels. They want higher-income housing, or they don’t want any rental housing, or they don’t want higher-density housing. And we see all those as vehicles to get — as barriers to get affordable housing developed in a community. But, ultimately, it’s really about land cost…and so, some communities, for example downtown Raleigh, it’s just sort of a basic supply and demand issue. When there’s a very high demand, that land is going to be very expensive even if you were to release a lot of restrictions on it. In that case, if you want any housing that’s going to be affordable to lower and moderate-income folks, you’re going to have to subsidize the development somehow.
Martinez: Michael?
Sanera: I guess I’m curious. The thing I don’t understand, that I’m curious about — you’re saying building affordable housing. I mean, I was 32 years old before I could purchase my home, and I lived in apartments for this time. And the second thing is, you know, you build something that’s so-called “affordable,” but they are all, you know, previously owned homes that, when people move out that can’t afford a larger home, it leaves a lot of housing stock available, at a much lower price for other people. How do those two things fit in?
Estes: They’re all part of the economic model. Again, it’s all driven by supply and demand. It’s typically not that there is no affordable housing for home ownership, say, in a community. You can find some housing that you might be able to afford. It might be 30, 40, 50, 60 miles away from where you work if you’re in a high-growth area. So, there’s sort of an externality for a community to consider if we want a labor force that provides you some sort of low and moderate-income jobs. The housing that people are sort of moving out of, if they’re still affordable, say $100,000 to $150,000 — you’re not going to find many of those in downtown Raleigh or even outside the beltline of Raleigh. You’re going to find there’s more in Johnston County, Franklin County, which is okay. It’s just an issue of — particularly from my perspective — it’s those very low-income folks whose housing doesn’t get developed for them. And to give you an example, if you were a person on disability income, you can afford $177 a month in rent — if you use sort of 30 percent of your income [that] should go for rent and utilities, which is the generally accepted threshold of affordability.
Martinez: Michael, what about that?
Sanera: Well, I understand that part of the equation. But according to your Web site, most of your clients are — 75 percent — are below the 50 percent median income threshold. Which means 25 percent are above. What I don’t understand — that is assuming one quarter spent on housing — that’s $590 per month that those people could afford [for] an apartment. Why are you subsidizing people? You know, I looked at two-bedroom apartments — $545, $425, $550 — and these people have $590 available for apartments. Why are you subsidizing those?
Estes: Right, we don’t subsidize those folks.
Sanera: Your Web site says you do.
Estes: No, no. We don’t. We’re an advocacy and resource organization. We don’t have any subsidy.
Sanera: Then where’s the $50 million going?
Estes: To the North Carolina Housing Trust Fund, which is administered by the North Carolina Housing Finance Agency for the development.
Sanera: So, the trust fund is subsidizing.
Estes: The trust fund subsidizes the development of that housing by providing it to developers at low-interest loans.
Sanera: So, why aren’t they providing it to people in terms — so they can rent a place rather than own?
Estes: It’s much more expensive.
Sanera: I mean, you talk about housing, assuming that it’s home ownership rather than renting.
Estes: There is a home ownership component. It offers a second mortgage loan to Habitat — folks who buy their homes through the Habitat program — which is about up to $20,000 a year. I mean, for mortgage.