The basic reason why there just isn’t enough decent housing for the poor

By Emily Badger July 26, the Washington Post

At the very bottom of the housing market, where families live on a fraction of what the typical American household makes, the math simply doesn’t add up. The market can serve up old homes, mobile homes, homes that are cheap because they’re rundown.


But the private market can’t, on any meaningful scale, create new affordable housing for the very low-income from scratch.

Such properties, as developers put it, don’t pencil out. The costs of building them outstrip what the people who may live in them could afford to pay in rent. And this is broadly true in expensive coastal cities and cheaper Midwestern ones alike.

To illustrate the fundamental math problem here — and the solution it points to — the Urban Institute and National Housing Conference recently looked at the financials from a number of housing projects in Denver that sought affordable housing fund loans and tax credits last year. Denver is a relatively good national case study: It doesn’t have a white-hot housing market like Washington, but new housing construction there is healthier than in many places, and it’s not overly regulated. Denver is like Minneapolis or Charlotte.

There, the researchers posed this common question about housing for the relative poor: “Why is it that the private market just can’t build housing at a cost people can afford?” asked Erika Poethig of the Urban Institute.

For renters who make 30 percent of the local median income, or even 60 percent, new multifamily buildings were simply impossible to build without public help once you factor in the costs of acquiring land, paying designers, constructing buildings, maintaining them and servicing loans. The Urban Institute has built a revealing interactive — based on composites of all of those real Denver deals — that lets you adjust the details to try to make the math work.

Nudge down the design and development fees, pay the construction workers less, drop the interest rate as low as it will go, spend nothing on maintenance, even assume that someone gave the land for free — and the buildings still aren’t feasible. A 50-unit apartment is still millions short.

“Even if you try to tweak a lot,” Poethig says, “for people of extremely low incomes, there’s just going to be this gap to the cost of development and production of housing.”

Even if you could build an entire property for free, an apartment meant for extremely low-income renters (those making 30 percent of area median income or less) probably wouldn’t work at the end of the day. Those apartments could still cost more to maintain over time than the families living in them would yield in rent. That’s basically the story of what’s broken with public housing today.

In the Urban Institute’s model, there are really only three ways to solve the equation. You can demand renters pay more than what’s considered affordable to them, or 30 percent of their income in rent. Push that assumption closer to 100 percent — assuming the poor don’t need much for groceries, or bus tickets, or school clothes or prescriptions — and you may get there. Or you can push the target income for the renters higher, designing a building for families at 80 or 120 percent of the median income — and that may do the trick, too. But then you’re not really building affordable housing for the poor.

Or you can bridge the gap with public subsidies. That’s the bottom line.

“Building affordable housing is truly a public-private partnership,” Poethig says, “and the private only takes you so far.”

Most of these properties will require some kind of aid for both the renter and the developer.

To the extent that government should step in when the private market can’t, affordable housing is a prime example. The larger problem, though, is that we hardly devote the kind of public resources to this market failure that it demands.

Developers often say the same of luxury housing like much of what’s rising right now in Washington — that they can’t make any other kind of project pencil out. And where that’s true, cities are starting to ponder this same calculation for the middle class. But the low-income math that the Urban Institute illustrates applies effectively everywhere. Even the cheaper cost of land or labor — or low regulations — won’t save a community from this problem.

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White House to boost low-income solar movement

The Hartford Business Journal, July 21, 2016

President Obama has taken a liking to financing programs to provide solar panels to low and moderate-income homeowners – a movement that’s been spreading across Connecticut.Obama’s so-called Clean Energy Savings for All Americans program, announced this week, aims to increase by tenfold the amount of solar panels on those homes across the country, to one gigawatt.The new program relies in part on financing models similar to the Connecticut Green Bank’s Commercial Property Assessed Clean Energy (C-PACE) program, but for residences.


C-PACE allows commercial property owners to pay back the costs of installing energy-efficient upgrades over time through their property tax bills.Growth of residential versions of those programs, known as R-PACE, has been stymied by the federal overseer of mortgage lenders Fannie Mae and Freddie Mac. In 2010, the Federal Housing Administration barred the two lenders from purchasing mortgages with PACE liens on them, saying they presented risks to the secondary mortgage markets.Connecticut lawmakers authorized an R-PACE program in 2011.The president’s new program clarifies FHA policies to state that PACE assessments do not take first lien position ahead of the mortgage, and also that the assessment will transfer from one owner to the next in the event of a sale or foreclosure.Gov.

Dannel Malloy, who last year lobbied the federal government to clarify PACE rules, released a statement this week hailing the announcement.”I look forward to working with our federal counterparts to utilize these opportunities and increase the use of solar electricity generation to keep Connecticut at the forefront of these issues,” Malloy said.Other elements of the multi-pronged Clean Energy Savings for All include:

  • A community solar challenge with competitive grants of up to $100,000;
  • Allowing recipients of low-income energy assistance to use up to 25 percent of the funds for to deploy renewable energy;
  • The Department of Energy will convene a summit of local and regional banks in an attempt to expand access to community solar financing;
  • DOE will launch a solar training network;
  • $287 million worth of commitments from more than 120 private, public and philanthropic partners to support solar deployment. Among those 120 entities is Norwalk-based U.S. Solar Corp.;
  • 25 members of the administration’s National Community Solar Partnership have committed to deploying nearly 145 megawatts of community solar, for including low and moderate-income households. Among the 25 is a solar crowdfunding group of college students called RE-volv that includes UConn and eight other colleges.
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Remodeling Spending Near 2006 Peak

Home owners are realizing the amount of equity they’ve accrued, and they’re looking to spend it on remodeling projects.


Annual spending for home improvement projects is expected to bloom to $321 billion by the middle of next year, which is just shy of the previous peak set in 2006 (adjusting for inflation), notes Abbe Will, research analyst in the remodeling futures program at Harvard University’s Joint Center for Housing.

Want more remodeling info?Our Remodeling Impact Reportexamines resale value and customer satisfaction of 12 interior and eight exterior projects.

“By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record,” Will says.

The rise of home equity and low mortgage rates have played a big role in the rebound, the Joint Center for Housing notes. That is enticing owners to refinance and take cash out of their homes for remodel projects.

In the first quarter of this year, home owners accrued a total of $260 billion in additional home equity. What’s more, 38 million borrowers now have at least 20 percent equity in their homes, according to data from Black Knight Financial Services.

“I call it ‘nesting is investing,’” Brad Hunter, chief economist with HomeAdvisor, told CNBC. “People are saying I want to do something that adds to the value of my house, and I’m just going to fortify the castle.”

Kitchen and bath remodels are garnering most of those home improvement expenditures, but Hunter also notes an uptick in adding insulation. Also, more clients are showing willingness to take on multiple projects simultaneously, according to a remodeling report released this week by Houzz.

“As more home owners are enticed to list their properties, we can expect increased remodeling and repair in preparation for sales, coupled with spending by the new owners who are looking to customize their homes to fit their needs,” Chris Herbert, managing director of Harvard’s Joint Center, told CNBC.

Source: “‘Nesting Is Investing’ as Home Improvement Spending Set to Hit $321 Billion,” CNBC (July 21, 2016)

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Connecticut Home Sales Rise in June

Connecticut REALTORS® reports that single-family residential home sales in Connecticut increased 7.4 percent comparing June 2016 to June 2015. The median sales price of $275,000 reflects a 0 percent change from this period last year. Median indicates that half the homes sold for more and half for less. Total units of homes sold were 4,098 in June 2016 and 3,815 in June 2015.


Townhouses and condominium sales in Connecticut increased 6.2 percent comparing June 2016 to June 2015; with a median sales price of $170,000 representing a 2.3 percent increase from $166,125 in that same time period in 2015. Total units sold were 913 in June 2016 and 860 in June 2015.

Statistics released by the National Association of REALTORS® indicate total home sales nationwide (includes single-family homes, townhomes, condominiums and co-ops) increased 3.0 percent comparing June 2016 to June 2015; and the median national home sales price is $247,700.  Regionally, Northeast home sales increased 5.6 percent in that same time period; with a median sales price of $284,800.

Comparing statewide figures, Eastern Connecticut fared exceptionally well with 498 single family units sold in June, amounting to a 28% increase in volume over the same period last year.  The median sales price in Windham and New London Counties is $210,000, representing a 4.48% increase over June, 2015.

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Norm Krayem -REALTOR Emeritus

Norm Krayem of BHHS New England properties is celebrating his 43rd year as a Real Estate Broker-Associate and 40 years as a member of the Eastern CT Association of REALTORS® (formerly The New London Board of REALTORS®). Currently, Norm serves on the ECAR Board of Directors and is Chairman of the Commercial Committee.

This year Norm was honored with the status of REALTOR® Emeritus for his 40 years of service as a member of National Association, Connecticut Association and Eastern Connecticut Association of REALTORS®. This honor is presented to those REALTORS® who have served a minimum of one year of service at the Local, State and or National level.

Norm served as ECAR President in 2001 and ECRIS (Eastern CT REALTORS® Information Service) President in 2003. Norms leadership didn’t stop there. From 2000 to 2004 he was president of the State CID (Commercial Investment Division) and in 2007, Norm served as president for the CT Association of REALTORS®. In addition Norm is one of the 15 founding Directors for the CT Statewide Multiple Listing Service. He also serves as a permanent Director on the CT Association of REALTORS® Board of Directors.

Norm was a member of the Mystic Rotary club for 6 years and was co-chair of the Ledyard Economic Development commission for 3 years. Norm is fully involved with both his Residential and Commercial clients as well as his continuing involvement with ECAR and CTR. Norm has always believed that personal involvement with the local association opens the door to better understanding of the continually changing issues. It further rewards you with lifelong friends and the satisfaction that one had a hand in making everything better for all.

Norm lives in Ledyard with his wife Maureen (a successful and well known real estate agent of 35 years).

(L-R: Norm is the second one in the photo)

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Affordability, Student Debt Causing Chasm About Buying Between Homeowners, Renters

WASHINGTON (July 13, 2016) — Despite lackluster economic growth and stark home-price appreciation in several parts of the country in recent months, roughly three-quarters of surveyed households still believe now is a good time to buy a home, but there’s a considerable gap in morale between homeowners and renters, according to the latest installment of the National Association of Realtors® Housing Opportunities and Market Experience (HOME) survey1. The survey also found that roughly half of young adults with student debt are uncomfortable about taking on a mortgage.


In NAR’s second quarter HOME consumer survey, respondents were asked about their confidence in the U.S. economy and various questions about their housing expectations, including questions on if carrying student debt is tempering their ability and appetite to take on mortgage debt.

Through the first half of the year, NAR’s survey found that the share of homeowners and renters who believe now is a good time to buy a home is mostly holding steady, with 80 percent of homeowners (82 percent in March) and 62 percent of renters (unchanged from last quarter) saying it’s a good time to buy. However, the share of renters who think so is down from 68 percent in December 2015, and those under 35 were the least confident that now is a good time to buy.

Lawrence Yun, NAR chief economist, says the survey brings to focus the ongoing disparity in buyer confidence between current homeowners and renters. “Existing-home prices surpassed their all-time peak this spring2 and have climbed on average over 5 percent nationally through the first five months of the year and even faster in areas with severe supply shortages,” he said. “Most homeowners appear to realize that if they’re ready to sell, they’ll likely find a buyer rather quickly and be able to use the sizeable equity they’ve accumulated in recent years towards their next home purchase. Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes.”

Adds Yun, “Given these affordability pressures, it’s no surprise respondents earning over $100,000 and those living in the Midwest — the most affordable region of the country — are the most optimistic about buying right now.”

This quarter’s HOME survey also revealed that carrying student debt is causing many to be uneasy about taking on additional debt. According to the survey, roughly two-thirds of non-homeowners and half of respondents under 35 with student debt said they aren’t comfortable also having a mortgage. Furthermore, of those with student debt, non-homeowners and younger adults were less likely to believe they’d be able to qualify for a mortgage if they applied.

“It’s becoming very evident from this survey and our research released last month that the financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” adds Yun. “At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide.”

Mostly unchanged attitudes about direction of U.S. economy, personal financial outlook

A tick under half of all households in the survey believe the economy is improving (49 percent), which is mostly unchanged since the inaugural HOME survey in December 2015. Renters, respondents living in urban areas, and those in the West were the most optimistic. On the other hand, nearly two-thirds of those living in rural areas don’t believe the economy is improving.

Reflecting somewhat lessening confidence that respondents’ financial situation will be better in six months, the HOME survey’s monthly Personal Financial Outlook Index3 of all households slightly decreased (to 57.7 in June) since March (58.1), but is unchanged from June 2015.

Expanding belief that now is a good time to sell

With strong price growth prevalent in most of the country and homes selling at a quickened pace, more current homeowners (61 percent) believe it is a good time to sell compared to the first quarter of this year (56 percent). Respondents in the West were once again the most likely to think now is a good time to sell, while also being the least likely to think now is a good time to buy.

“More homeowners acknowledging this pent-up demand may perhaps mean we begin to see more supply come online in the near future,” adds Yun.

When asked about their outlook for home prices in their community in the next six months, almost all believe that prices will stay the same or rise (93 percent), which is consistent with last quarter (91 percent). Respondents from the West, those living in urban areas and renters are most likely to believe prices will go up in their communities.

About NAR’s HOME survey

In April through early June 2016, a sample of U.S. households was surveyed via random-digit dial, including half via cell phones and the other half via land lines. The survey was conducted by an established survey research firm, TechnoMetrica Market Intelligence. Each month approximately 900 qualified households responded to the survey. The data was compiled for this report and a total of 2,714 household responses are represented.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing over 1.1 million members involved in all aspects of the residential and commercial real estate industries.


# # #

1 NAR’s Housing Opportunities and Market Experience (HOME) survey tracks topical real estate trends, including current renters and homeowners’ views and aspirations regarding homeownership, whether or not it’s a good time to buy or sell a home, and expectations and experiences in the mortgage market. New questions are added to the survey each quarter to reflect timely topics impacting real estate.

HOME survey data is collected on a monthly basis and will be reported each quarter. New questions will be added to the survey each quarter to reflect timely topics impacting the real estate marketplace. The next release is scheduled for Wednesday, September 14, 2016 at 10:00 a.m. ET.

2 Surpassing the peak median sales price set last June ($236,300), the median existing-home price for all housing types in May was $239,700.

3 Index ranges between 0 and 100: 0 = all respondents believe their personal financial situation will be worse in 6 months; 50 = all respondents believe their personal financial situation will be about the same in 6 months; 100 = all respondents believe their personal situation will be better in 6 months.

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ECAR 2nd Quarter Market Statistics Report Available Now

Eastern CT is seeing positive trends continue in the second quarter of 2016, with a 16% volume increase over this time last year.  The median price of a single family home is up 6% at $201,000, while average days on market decreased from 92 to 85.  The median price of a condo has risen by 4% to $135,500 with a 10% increase in volume.

In Windham County, the single family housing market is soaring with a 31% volume increase, 10.6% median price increase and 12.4% decrease in days on market.

To view the full report,  click here.



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