by NH State Rep Mike Sylvia |
We hear a lot lately about the need for affordable housing. Depending upon the context and the perspective, affordable housing can mean different things to different people.
Often people will go a step further and speak of quality affordable housing; this may offer a clue as to their particular perspective. Generally, I think people are talking more about home ownership as opposed to rentals.
I’ll briefly speak to rental housing. The current rental market has a relatively high occupancy rate, so market conditions in part drive a slightly higher premium for landlords. The landlord-tenant laws in New Hampshire highly favor tenants over landlords. That drives up the costs to landlords for evictions, when necessary, and forces landlords to use extreme care in vetting new tenants. The situation is very similar to raising minimum wages; those starting out looking for their first apartment with no track record will get the worst apartment and pay a premium to get it. There is no incentive for investment in affordable rental housing in the private sector.
Looking at homeownership, we should start with some idea of what affordable means. We certainly can’t rationally talk about a new high school graduate seeking to buy their own home. It’s common these days to see in the lower end of the market, home prices in the range of $150,000 to $200,000. Almost all of those homes are previously loved, as only a small modular on its own land would squeeze into that price range. If we look at the costs of owning such a home, we will put down $15,000-$20,000; have a mortgage payment of ~$850/month, property tax ~$250/month, insurance and maintenance ~$150/month, giving us a total of ~$1,250/month. Such homes regularly sell in the area and must, therefore, be affordable. A similar house would rent for ~$1,400/month. A family would need an income of at least $45,000/year to afford this typical area home.
Belknap County residents have a median income of ~$65,000/year. It is clear, and the market confirms, that we have affordable housing, even for those with significantly below-median incomes. How then is it that we have all this chatter about the lack of affordable housing? That comes by adding the ‘quality’ to the affordable. The only way to combine the ‘quality’ and the ‘affordable’ is to add a subsidy, to which many people have become accustomed. Then the “affordable” is made possible by transferring the cost onto some other party.
One of the significant barriers to more affordable housing is zoning. Arbitrary lot size and setback requirements dictated by planning bureaucrats remove build-able land from the market. Further, burdensome building codes and regulations unnecessarily drive up the cost of housing. This is not to say people be allowed to harm their neighbors by installing a ghetto next door, but rather that neighbors work out what is best in their area.
The central planners have decided that they will deliver quality affordable housing in the form of ‘workforce housing.’ They will choose where zoning can be altered to allow these monstrous, subsidize units to be built and who will be allowed to live there. These unit are reserved for those with low incomes. History clearly shows the outcome of clustering people into this type of housing. It’s not good for those who accept the subsidy nor those forced to pay for it.
If you missed it above; please note that 1/5 of your housing cost, whether owned or rented, goes to property taxes. The best solutions to more affordable housing will not be the product of more government involvement.