Affordability

[This essay is based on part of an introductory talk that I gave at the U.S. Green Building Council’s Earthday program this year.]

In some sense anything that sells has to be affordable to someone, otherwise it wouldn’t sell. But when we talk of affordable housing, then we are usually talking about what is affordable to someone of lower or middle income. The rule of thumb is that housing is affordable if it costs no more than 30% of your yearly gross income, including utilities, upkeep, taxes, insurance and mortgage or rent payments.

That 30% number can change, especially as your income grows. If you have a little money, then you have more choices. You can choose to eat out (more), buy a fancier car, send your children to private school—or buy more house. The less income that you have, then the fewer choices are available to you.

In Dallas 63% of residents make less than $50,000 (All the statistics here are for time periods from 2006 to 2008, the latest I could find, but there isn’t much reason to think the numbers have changed significantly.). If your income is $50,000 per year, then the most expensive home you could normally afford would cost about $120,000.

Only 10% of the homes in Dallas sell for $120,000 or less.

The gap between what people can afford and what a home costs probably explains why only 42% of Dallas residents are homeowners, 25% less than the national average.

Those statistics only begin to tell the story. Another 35% of Dallas residents could not afford to buy a home that costs more than $75,000. Out of all of Dallas’s housing in the southern sector, 42% is substandard and most of those homes are the cheapest—no surprise there.

Building a new three bedroom, two bath house costs a minimum of about $120,000. Community development corporations like Central Dallas CDC knows that it takes a minimum amount of about $30,000 to make those homes affordable to most families. The City of Dallas has about 400,000 households. If we wanted to reach the national average for homeownership, then we would have to help another 100,000 Dallas families become homeowners. At 30,000 in subsidy per home that would cost roughly $3,000,000,000--$3 billion just to get to the national average.

You can probably guess that that’s not going to happen anytime soon. Even in their wildest dreams, community housing organizations have never thought about asking for more than $30 million in city funding, that isn’t likely to happen, and even if it did, and the population didn’t increase, then it would still take 100 years for Dallas to get to the national average for homeownership.

What do all these numbers mean? In the short term they mean that Dallas will remain a city with a very high proportion, probably a majority, of renters. That’s not such a bad thing and we’ll talk about why in another essay.