Affordable Housing

I've seen a *ton* of things in the news lately about affordable housing, especially in the context of new urban designs and sustainable housing, and thought I should codify what the general thinking is around how much we're supposed to spend on housing and whether the GaiaShip could be considered 'affordable'.

From the Texas State Web site:

Thousands of working Texans need low-cost homes in the $30,000 to $50,000 range. However, builders find it less profitable on a per-house basis to build very low-cost homes than those that will sell for somewhat higher prices, because builder profits are typically figured as a percentage of the cost of construction of the house. Housing providers told TPR that most builders would have a hard time profitably producing very many houses that cost less than $60,000--the type typically affordable to workers earning $12 to $14 an hour. Unfortunately, even a $60,000 house is too expensive for at least one of every seven Texas workers.

Gross Annual Income	After Tax	Net	Percent For housing		Per month
$30,000	75%	$22,500	30%	$6,750	$563
$40,000	75%	$30,000	30%	$9,000	$750
$50,000	75%	$37,500	30%	$11,250	$938
$60,000	75%	$45,000	30%	$13,500	$1,125
$70,000	75%	$52,500	30%	$15,750	$1,313
$80,000	75%	$60,000	30%	$18,000	$1,500

To dissect this I've looked at the range of incomes that fall into the currently accepted 'norm' for low income housing - yes $80K annuallly is at the upper end of the 'lower income' spectrum given multi income households and isn't that hard to understand given median incomes for some of the urban areas like downtown Austin.

We want 'affordable' housing in dense downtown areas because that's where a significant number of service jobs are as well as mass transit infrastructure that is necessary to maintain a high standard of living for lower and middle income folks. Cars are *expensive* and the more you do to remove that burdon from a lower income family the better.

The usual thinking is that spending approximatly 30% of your budget annually on housing (and related bills) is appropriate. Given that I just went through a refi and was able to get my own housing costs into this range I feel pretty good about my situation - however that's only after *years* of hard work on my credit rating, record low interest rates and nearly 6 years of spending a *much* higher ratio (up to 70% of annual take-home) on housing.

Now, could you own a GaiaShip condo for $560 per month? Rent - sure! But ownership & equity investment would have to come with some kind of supplemental right!? (answer is no). The usual excuse is that "It would just be too hard to get the material costs low enough to support a space of any decent size." Let's really examine this objection.

Some builders say they can cut the cost of construction to as little as $25 to $30 per square foot for traditional construction, lowering the replacement cost of an 800-square-foot house to about $20,000. The Texas Department of Housing and Community Affairs has begun a pilot project using "panelized" construction methods that employ pre-cut wall panels that could cut construction costs while increasing each home's energy efficiency.

(emphasis mine)

So panelized building could bring costs *below* $25 per square foot!?

	Price Per Square Foot
	$25	$30
800 Sq Ft	$20,000 Total Build Cost	$24,000 Total Build Cost
1000	$25,000	$30,000
1200	$30,000	$36,000
1500	$37,000	$45,000
2000	$50,000	$60,000

Something tells me that making this affordable for purchase might not be so hard!. Lets add 20K on top of the cost for actual construction of the home for all the 'extras' and land cost (mitigated somewhat by stacking condos vertically) that people usually like to upgrade from the 'average' quality reflected above and amortise that over a 15 and 30 year period. What's the monthly payment? I'm simplifying from here out to using only 25 per sq foot for expediency.

Assumptions: 8% interest since we're talking slightly higher risk folks here - I can't justify using the epically low rates we see in todays' market.

I'm using the UFCU mortgage calculator though there are lots of good calcs out there online.

Sq Ft	Total Condo Cost	Down Payment (5%)	15 Year Monthly Payment	30 Year Monthly Payment
800	$40,000	$2,000	$363	$279
1000	$45,000	$2,250	$409	$314
1200	$50,000	$2,500	$454	$349
1500	$57,500	$2,875	$522	$401
2000	$70,000	$3,500	$636	$488

Take a look at that - $363 for an 800 sqaure foot place! $636 per month for a 2000 square foot place!!! And that's looking at ownership in 15 years! This means that a person making a mere 30,000 per year with a budget of 1/3 of their income could easily afford a 2000 square foot home. That's larger than my current house right now by the way!!

Affordable housing is the name of this game!! Panelized & Factory built, highly efficient and 'green' components can and *will* drive the price of building a fairly large home down into the usual cost of the standard cinderblock house.

In 1998, Mexico's Corporación Geo, S.A. de C.V., and Beazer Homes USA, Inc., came together to test a Mexican low-cost construction technique in El Paso, with the goal of building concrete block homes selling for $30,000 to $40,000 each... This joint venture plans to keep costs low by erecting on-site concrete-block factories and building one subdivision at a time--and by figuring in large down-payment subsidies financed by the Texas State Affordable Housing Corporation, an arm of TDHCA.

So, you're a wanna be homeowner; building equity in a community and a home. You buy a ultra green condo that saves you vast sums of money in energy costs; has vacation resort levels of amenities; easy access to shopping and nearly eliminates all requriments for vehicle ownership!!

Yeah - I think we got "Affordable Housing" covered. I so enjoy planning to change the world.