Affordable Housing

Making Development Match

Need

Miami, Florida 2006

Affordable – What does it mean?
• City of Miami - Least affordable City in
the country

• Miami-Dade County – Least affordable

County in the country for renters.
Affordable – What does it mean?

• Affordability is defined as paying less than

or equal to 30% of your gross income for
housing expenses (including taxes,
utilities,etc.).
Affordable – What does it mean?
• Census looked at all renters households and of the
Counties measured Miami-Dade had the highest
percentage that paid more than 30% of their
income in rent.

• Census looked at all households and of the cities

measured, City of Miami had the highest
percentage that paid more than 30% of their
income in rent.
 Affordability – What does it
mean?

• It is increasingly common to pay over 30% of

your income in rent.
• Extremely high rates of payment – over 50% - is
seen as evidence of extreme unaffordability.
• HUD defines paying over 50% as a “worst case
housing problem.”
 INCOME STRATIFICATION

• Affordability is one way at looking at the

cost of housing – many analyses stop there.

• What is wrong with that?

 INCOME STRATIFICATION

• Household earning $100,000 a year and paying

$40,000 in housing costs is living in unaffordable
housing - just like someone who is making
$10,000 a year and pays $4,000.

• $100,000 family has $60,000 remaining for other

expenses - the $10,000 a year family has only
$6,000.
 INCOME STRATIFICATION
• So income is stratified
• 120% of area median income
• Area median income (ami)
• 80 % of area median income (ami)
• 50% of area median income (ami)
• 30% of area median income (ami)
 INCOME STRATIFICATION
• Definitions “low income” “very low
income” vary from jurisdiction to
jurisdiction, from program to program.
• What is the percentage of AMI?
 INCOME STRATIFICATION
County of Miami
Income Levels Fla StatutesHUD Definition
HUD
24 CDBG
CFR 5.603
City of Miami (family of 4)
30% of Median extremely low extremely low $16,750.00
50% of Median very low very low moderate is low $27,950.00
80% of Median low low >50 & < 80 moderate $44,700.00
Median Income $55,900.00
120% of Medianmoderate moderate middle income $67,080.00
 INCOME STRATIFICATION

• AMI is based on County-wide, SMSA data

• In wealthy counties, 50% of AMI may be
higher than most low wage workers.
• In poor counties, 50% of AMI may be SSI
level income.
 INCOME STRATIFICATION
• Palm Beach County • Hamilton County
– HUD Median Income – HUD Median Income
$62,100 $34,950
– 30% Median Income – 30% Median Income
$18,630 $10,485

Full time salary at $10.00 hour $20,800

Affordability and Income Levels
• What does it mean when we say - housing
in a certain development in Miami is
affordable to families earning less than
30% of median?

• Does it mean that it is affordable to a family

of four making $10,000 a year? (less than
30% of median)
Affordability and Income Levels
• 30% of median income – for a family of four – in
Miami Dade County is $16, 250
• In most housing production programs rents are not
figured on the income of the actual tenant
• “Affordable to 30% of median income in Miami”
normally means that – for a family of four – they
will be paying 30% of their income for rent only if
they make exactly $16,250.
 Important To Remember

• If the rents are figured for a family of four

earning $16,250, it is not “affordable” to a
family earning less than $16,250.
Affordability and Income Levels
• WHY IS IT TRUE THAT THE
INCOME LEVELS ARE SO FIXED?

• It is because of how we develop affordable

rental housing.
 Affordable Housing Development
Readers Digest Version

• Assumptions
• Cost of Developing One Apartment
$100,000
• 100% financing (no developer investment)
• No Developer Return on Investment
 Monthly Operating Budget (1 unit)

• Mortgage • $600

• Taxes, maintenance, reserves • $350

• Total Monthly costs (minimum) • $950

• Minimum Rent • $950

 Little Haiti Project
Affordable to families earning $10 an hour

• Mortgage • $160

• Taxes, maintenance, reserves • $350

• Total Monthly costs (minimum) • $510

• Maximum Rent (30% of income of • $510

full time worker at $10 hr. ($20,800))
 Little Haiti Project
Monthly Operating Budget (1 unit)
• To reduce mortgage payment to $160 the
financing being undertaken by the
developer has to be reduced to $27,000

• If the cost of development is $100,000 and

the maximum conventional loan is $27,000
how do you fill the $73,000 “gap”?
 How to reduce the mortgage
payment – “gap financing”
• One possibility – Gov’t provides second
mortgage of $73,000 with no payments.
• Reduce the interest rate on the entire
mortgage - HUD financing programs
• Increase developer investment (equity) in
the project by $73,000 – Low Income
Housing Tax Credits (LIHTC)
 Affordable Housing Development
Readers Digest Version

• Most current low income housing

production program incorporate several of
these methods of reducing costs
• Results in fixed rents
• Results in “layered” financing
• Is difficult to operate at lowest incomes.
 Overtown Housing Project
Monthly Operating Budget (1 unit)

• Mortgage • 0

• Taxes, maintenance, reserves • $350

• Total Monthly costs (minimum) • $350

• Minimum Wage Rent ( 30% of • $332

income of full time worker at $6.40
an hour)
 Affordable Housing Development
Readers Digest Version

• For very low income households there is

another form of subsidy
• Public Housing and Section 8 - based not
on affordability to an income level but on
what the tenant can pay
• So if a tenant in Overtown can pay only $ 332
and the rent is $1,200 a month then Section
8/Public Housing pays the difference or $868
 Affordable Housing Development
Readers Digest Version

• From the policy side - The problem with

this is you have to pay it forever.

• From the tenant side - there is no new

public housing or Section 8.
 WHERE IS THE NEED?

• There is increasing pressure to subsidize

housing for those earning 100% - 140% of
median income.
• Who is spending over 50% of their income
for housing?
 HOUSING NEED
Household Size 1-2 Miami-Dade County
Household Income Cost Burden 50%+
Percent of Median Income Household Count Percent of Total
<20% 21503 26.9%
20-29.9% 21314 26.7%
30-39.9% 12503 15.6%
40-49.9% 9032 11.3%
50-59.9% 5724 7.2%
60-79.9% 5283 6.6%
80-119.9% 2969 3.7%
120+ % 1627 2.0%
Total 79955 100.0%
 HOUSING NEED
Household Size 3-4 Miami-Dade County
Household Income Cost Burden 50%+
Percent of Median Household Count Percent of Total
<20% 11091 29.1%
20-29.9% 6781 17.8%
30-39.9% 6460 17.0%
40-49.9% 5066 13.3%
50-59.9% 2935 7.7%
60-79.9% 2582 6.8%
80-119.9% 1966 5.2%
120+ % 1197 3.1%
Total 38078 100.0%
Federal Government Funding Policy
Has Decreased Extremely Low
Income Housing
• Congress has reduced the funding for
Section 8 tenant based vouchers.
• There are no new appropriations of project
based Section 8.
• The housing affordable to the lowest
income households is aging.
 How Financing Drives Housing
Policy
Major Sources of Gap Financing
• Federal Government
• Florida
• Local
 Federal Government Policy Has
Decreased Extremely Low Income
Housing

• The number of Public Housing units is

significantly decreased.

• There is no federal production program

targeted at extremely low income
households.
 State of Florida
• Sadowski Act Housing Trust Fund –
Funded by Surtax on each recorded transfer
of property
– Increases as the cost of property increases
– Currently over $900 million in Trust Fund
– 70% to local governments (SHIP)
– 30% to State government (SAIL, etc.)
 State of Florida
• Current governor opposes Trust Fund
• Has been recommending only spending
$243 million of the Trust Fund
• Hurricane Recovery housing boosted
spending to $500 million for the past two
years.
• $243 statutory “cap” to take effect in
FY 07-08.
 STATE FUNDING
• Florida administers State Apartment
Incentive Loan Fund (SAIL) and federal
Low Income Housing Tax Credits.
• State sets qualifying standards
– Amount of subsidy
– Targeted rents
– Single competitive distribution each year.
 State Funding
• Traditionally targeted at 50 – 60% of median
– Required by LIHTC
– Very difficult to target to lower income
– All Rentals targeted to 50 – 60% of median

• After 2004 storms, State hurricane recovery funds

targeting required 15% of units for less than 30%
of median income (but added more “gap” funds).
– All rentals now include 15% of units for less than 30%
of median income.
 Local Funding
• SHIP funds (from Sadowski Trust Fund)
– 60% must be used for home ownership
– up to 30% can be used for rental \

• Miami Dade also has a local Surtax fund

– Spending of these funds were recently criticized by
the Miami Herald article “House of Lies”.
 Local Funding
• Local Funds targeted to Home Ownership.
• Home Ownership subsidized by second
mortgages or grants.
• Home Ownership subsidies increasingly
problematic as price of homes increase.
• More local governments exploring limited
equity forms of ownership (Community
Land Trusts) to preserve affordability.
 The Affordable Housing Crisis
• Greatest Need is lowest income.
• Hardest to develop is lowest income.
• Federal assistance targeted to lowest
income is decreasing or non-existent.
• Existing resources for lowest income are
hardest to obtain.