Do we need more planning, or fewer restrictions on where and how we build?
The housing market is imploding while home insurance costs explode. High-density, multi-use developments are everywhere but affordable housing is scarce. Do we need more planning, or fewer restrictions on where and how we build?
* Milton Bailey, LA Housing Finance Agency
* Gwen Hamilton, BR Area Foundation
* Phil Hoffman, incoming VP, LA Home Builders Association
* Sean Reilly, Blueprint Louisiana
For information on decent, safe and affordable housing opportunities for low and moderate income Louisianians, go to the Louisiana Housing Finance Agency site. http://www.lhfa.state.la.us/about.php
One of the primary goals of every society is decent shelter for its citizens. For the most part, securing housing in the US is the individual’s responsibility, but government at all levels play a role in trying to ensure universal access to adequate, affordable housing. The US Department of Housing and Urban Development [HUD] assists those who cannot afford decent housing in the private market through federal subsidized housing programs.
HUD defines affordable housing as housing that is priced 30% or less than a household’s monthly income. This includes rent and utilities for renters and mortgage payments, insurance premiums and property taxes for homeowners. The two basic types of housing are rental and owner-occupied.
For some, the holy grail of housing is home ownership. But it wasn’t until the 1950s that home ownership in Louisiana – and the nation - went above 50 percent. In 2005, Louisiana’s home ownership rate was 72 and a half percent – exceeding the US rate of 69%. Despite being one of the poorest states in the nation, Louisiana’s low property taxes and generous homestead exemptions have helped keep the overall rate of home ownership high.
Nationally, minority home ownership rates have improved in recent years, but in 2005, less than half of African-American and Hispanic households owned their own homes. This was the case in predominantly Black New Orleans prior to Katrina, where the home ownership rate was only 46.5%, according to the 2000 Census. Some urban neighborhoods in Louisiana have home ownership rates as low as 20%.
This is cause for concern for some. Vision 2020 – created by the Louisiana Economic Development Council is a master plan for Louisiana's future. It touts home ownership as providing, " … an asset that allows stability, fosters long-term thinking, and builds both financial equity and commitment to a neighborhood." The Vision 2020 plan has targeted 80% homeownership by the year 2023.
A number of studies have linked home ownership with everything from higher educational achievement1 to being better able to adjust to lay-offs2 Some connections are more apparent. Even a 5% drop in the price of a $209,000 home [median national home price, 2005] would result in a loss of $10,000 for a typical homeowner. There are obvious financial incentives not only to maintain the property, but to be more engaged in the civic and political life of the community.
Given the many individual and societal benefits of home ownership, federal, state and local governments have created programs –supported by bonds, government-backed low-cost loans, tax credits, and other means – to assist 1st time buyers in securing funds needed to purchase a home. These include FHA, Fannie Mae, Freddie Mac and VA loans, in addition to local bond money.
Often, however, it’s not the financing that’s the main problem. Availability of affordable housing is a major concern according to Mark Goodson, planner with the Center for Planning Excellence [CPEX] in Baton Rouge. Goodson says, "Statewide, I think the biggest housing issues are lack of affordable housing especially in New Orleans where so much of it was destroyed. But it's really a problem from New Orleans to Shreveport; there’s just not enough - especially of high quality affordable housing."
CPEX is working with GMSF Lending, other non-profits and the East Baton Rouge Parish government to encourage inner-city development. Plans include “infill” projects that utilize space in existing neighborhoods.
J. Terrell Brown heads GMSF Lending. Brown says, "If you ride in old South BR or Mid City you’ll see a number of old homes have been torn down and there are a lot of vacant lots. If you stop and think about it, you've got the infrastructure already in place: police, fire, schools, transportation, and you know these neighborhoods just need a breath of fresh air - home ownership. And that will do a lot of things for the community. It will help on the crime rate. And it will help the property values." Part of his plan is to bring in low-cost, high-quality factory-built homes to place on lots, to keep costs down to $85 -$95 per square foot.
Even though only about 30 % of Louisianans rent, the real housing crisis is in rentals. About a third [34%] of Louisiana renters pays 35% or more of their income on housing. By HUD’s definition, these households are not living in affordable housing. The lack of low and moderately-priced rental property, already severe prior to 2005, only became worse after the storms of that year.
According the Louisiana Housing Finance Agency website, the hurricanes of 2005 destroyed more than 200,000 homes, instantly exacerbating Louisiana’s preexisting housing crisis. Of those 200,000 homes, roughly 80,000 were rental units, and of those 80,000, 46,000 rented at prices affordable to low-income (less than 80% of the Area Median Income) households. In order to recover just 75 percent of those units affordable to low-income renters, 35,000 rental units will need to be built – with 33,000 in the New Orleans metro area alone. This measure does not account for the loss and shrinking supply of low-cost rental units precipitated by the displacement of higher-income homeowners having moved into rental housing, and the increased land, construction, environmental remediation and operating costs since the hurricanes. As a result of increased prices, roughly 10,000 households that rented their homes affordably on the private market before the storm can no longer do so.
The pressure from hurricane evacuees is still being felt in places like Lafayette, according to Lafayette Housing Authority Executive Director Walter Guillory. He says, "Since the hurricane it’s just been an influx of people. The rental properties are at capacity and it’s hard because people that are out there - particularly people from low to moderate income who don't have the money to pay five, six or seven hundred dollars a month - are finding themselves struggling." Lafayette apartments are at 95% occupancy. Most of the permits for apartment houses granted since 2004 in Lafayette Parish have been for up-scale or luxury units.
The economic impact of a lack of affordable rental housing was a cause for concern even before the storms. In St. Tammany Parish, the shortage of affordable housing was cited as one the parish's chief economic weaknesses, according to a 2003 report. Economic growth in the seven-parish New Orleans metro area slowed down recently, in part because of a shortage of affordable housing. The lack of housing has led to a labor shortage and higher wages for low-skilled workers, according to a recently released UNO report.
The role that shortages in affordable housing play in Louisiana’s homelessness problem should not be overlooked. A January, 2007 survey estimated that 37, 514 men and women, and children were serviced by homeless shelters throughout the state over the previous twelve months. According to annual surveys among emergency shelter and transitional housing provider agencies compiled by the state office of community services, a severe lack of affordable housing was the primary reason for the increase in the number of homeless persons served.
Public Housing Programs
The HOPE VI program from HUD replaces public housing projects with mixed-income housing and housing vouchers to enable some of the original residents to rent apartments in the private market. Low Income Housing Tax Credits, issues by the Louisiana Housing Finance Agency, are given to developers to encourage construction of affordable low-income housing, often as part of a mixed-income development.
These efforts sometimes encounter resistance from residents who live near proposed developments. This is sometimes referred to as the NIMBY reaction –Not In My Back Yard. It may be rooted in fear of adverse effects on property values, anti-poor sentiment, racial bias or other factors. NIMBY can be a major obstacle in overcoming affordable housing shortages.
Land use planning and community acceptance of affordable housing are closely linked. In Montgomery County, Maryland has an Affordable Dwelling Unit ordinance which requires developers to plan subdivisions where at least 12.5% of the units are affordable to families below 65% of the Area Median Income. This zoning requirement is credited for achieving acceptance of affordable housing throughout the county – which has some of the highest property prices in the nation.
Land use planning and zoning are novel ideas for many Louisiana localities. But growth pressures have forced some parishes to begin thinking about such matters. In September, the East Feliciana Police Jury appointed a seven member zoning commission.
Housing Market Downturn
Foreclosures in the second quarter were at an all-time high, nationally. Louisiana, with 1.65% of its housing loans in foreclosure, ranked 10th highest. The state is 4th highest in past-due loans, at 7.29%. For those with poor credit, stricter lending policies will make it harder to borrow for home purchases.
1. Haurin, Donald R., Toby L. Parcel and R. Jean Haurin 2001. “The Impact of Homeownership on Child Outcomes.” Low-Income Homeownership Working Paper Series LIHO-01.14, Joint Center for Housing Studies of Harvard University
2. Page-Adams, D., and N. Vosler. 1997 Homeownership and Well-Being Among Blue-Collar Workers, Washington University, School of Social Work.