It was recently reported in My Edmonds News that Edmonds has organized a “Housing Strategy Task Force” to address the issue of “affordable” housing in Edmonds. That organization is charged with providing recommendations to the city to develop strategies to increase “affordable” housing options for the city.
If greater than 30 percent of monthly income is applied to housing costs by individuals, those individuals are labeled residentially “cost burdened.” Thirty percent is the “go to” default statistic that is cited by housing advocates at the federal, state and local levels when advocating for some sort of government-sponsored “affordable” housing program. When “affordable” housing is discussed, “cost burdened” will always be cited as a reason to do something, anything.
The statistics cited below have been primarily gleaned from the “Background Documents” that are provided on the Housing Strategy Task Force’s website.
The Housing Profile, City of Edmonds dated May 2015 on page 3 asserts that:
“Currently, 38% of Edmonds households are estimated to be cost burdened, meaning that they spend more than 30% of their monthly income on rent or home ownership costs.”
Edmonds, a city of roughly 17,396 households, contains 6,672 households that are officially labeled as residentially “cost burdened.” With the dramatic increases of property taxes as a result of Sound Transit 3 and the fallout from the McCleary decision, as well as escalating utility rates, the percentage of “cost-burdened” households (especially for those on fixed incomes) in Edmonds will undoubtedly increase when these statistics are updated.
The large percentage of “cost-burdened” population in Edmonds isn’t as a result of an excessive number of subsidized housing recipients that skew the housing statistics. The Housing Profile, City of Edmonds reveals that 195 households receive section 8 vouchers, 125 obtain other subsidized housing, 16 are residing in transitional units, and 201 households are residing in subsidized workforce units, for a total of 537. A mere 8 percent of all “cost burdened” households in Edmonds are receiving some sort of housing subsidies. That means that 92 percent of “cost burdened” households are addressing financial issues on their own as self-sustaining adults without receiving what amounts to long-term subsidies from any governmental or quasi-governmental agency.
Any Edmonds effort to provide “affordable housing” for the vast majority of “cost burdened” residents will have minimal impact. Seattle recently voted to significantly increase their property taxes to generate $100 million to create “affordable housing units”. One hundred million dollars will generate less than 1,000 subsidized low-income residences. If Edmonds matched Seattle’s extensive and expensive program as a percentage of its population, Edmonds would create less than 60 new subsidized residences for “cost-burdened” individuals. There is no guarantee that those units would be available exclusively for Edmonds residents. Most Edmonds residents who are truly residentially “cost burdened” would be negatively impacted by increased taxes required to pay for these programs without obtaining any benefits from the program.
Is there a significant problem of affordable housing for 40 percent of Edmonds households? Not exactly. The “cost-burdened” statistic cited by housing advocates everywhere without detailed analysis, presents a problem greater in scope than it actually is. Rahm Emanuel famously once stated in part to “never let a serious crisis go to waste.” The greater the problem, the bigger the governmental solution, with increased tax revenues controlled by politicians, as well as increased funding for government agencies and non-profits that are tasked with resolving the issue at hand.
Many individuals will voluntarily allocate significant resources to reside in Edmonds. They willingly accept the burdens of being residentially “cost burdened,” as the sacrifice they must undertake to reside in this area. Many others are in financial situations that invalidate the 30 percent “cost burden” blanket application. Thus, a closer analysis of declaring anyone spending more than 30 percent of their income on housing expenses as residentially “cost burdened” reveals that it is not the overriding issue that it appears to be.
Although in no way in any economic distress, the following first three examples are residents that are labeled residentially “cost burdened” within the current operational definition. Ironically, the fourth example is of a couple not “cost burdened” but in a more precarious financial situation than the others provided in the examples. While hypothetical, these examples actually represent the current financial situation for many Edmonds residents.
Widow A leases a condominium in a desirable downtown Edmonds location. Her monthly rental expenses total $2,000 per month. Widow A receives $1,000 a month from Social Security, and $2,500 a month from dividends generated from a CD ladder. Her residential expenses are approximately 57 percent of her total income. By applying the operational definition of residential “cost burdened,” widow A has at first blush significant financial issues. Widow A is dutifully added to the statistics of those who are significantly residentially “cost burdened.” But is Widow A actually in an economically dire circumstance such that she is transformed into part of an unfortunate statistic? The $30,000 of interest dividends from her CDs are generated from over $1 million that is invested. But as it is only monthly income, not net worth, or any other assets that are applied to the operational definition of “cost burdened,” Widow A is included in the statistics of those who are at financial risk, although she clearly has significant assets that can be applied to her living requirements.
Widow B resides in her Edmonds residence, having purchased her residence 23 years ago. The residence is a large detached house with an expansive unimpeded view of Puget Sound. Widow B is no longer working, and receives income from Social Security plus a pension that generates $3,500 a month. Due to financial reversals, Widow B has minimal savings at her disposal. Widow B has seven years of mortgage payments remaining, thus her principal payment, interest, taxes and all other related housing expenses are $2,000 a month. Widow B presently applies more than 57 percent of her annual monthly income toward her housing costs, and thus is listed as “cost burdened.” Certainly a potential problem, especially if there are any major residential repairs that are required, or unanticipated medical costs that need to be addressed. While there may not be immediate liquid cash assets available, the equity in her home has increased dramatically over the ensuing decades. There could be up to three quarters of a million dollars in equity in Widow B’s residence that can be tapped for expenses, through either a mortgage refinance, a home equity loan, or a reverse mortgage. Widow B can sell her property and purchase a less expensive residence in the area, or relocate to a less expensive location of the country as millions of retirees do each year without receiving government subsidies as “cost-burdened” individuals.
Couple C are an average middle class working couple who generate monthly income of $10,000. They have leased a beautiful residence with a view of Puget Sound for a total housing expense of $4,000 a month. The residence is located in an upscale Edmonds neighborhood rather than a less-desirable residence in an adjacent city that would cost $2,500 a month. As they dedicate approximately 40 percent of their pre-tax income to housing expenses, Couple C is officially residentially “cost burdened” for statistical purposes, although approximately $4,000 a month after tax deductions and housing costs is at their disposal. Furthermore, it is their choice to reside in their expensive rental, and they do have the option of relocating to a more modest abode if they so desire to not be residentially “cost burdened.”
Couple D earn $4,000 a month. They reside in a modest basement studio apartment, and their housing expenses total $1,000 a month. Their housing expenses equal 25 percent of their income, 5 percent below the threshold of those who are considered to be residentially “cost burdened.” Unlike Couple C,who are included in the alarming statistics, couple D for statistical purposes are doing just fine. But all things being equal, most financially prudent individuals would conclude that the “cost-burdened” Couple C are significantly financially advantaged over Couple D, who only have $3,000 a month at their disposal after housing expenses with minimal housing choices in the area.
Other cities in Snohomish County have housing affordability issues when applying the “cost-burdened” analysis. The following is an example of a nearby city that may wish to confront their serious issue of housing affordability according to the “cost burdened” doctrine.
The Alliance for Housing Affordability (a member of the Edmonds Housing Strategy Task Force) reports that over 30 percent of property owners of one particular city in Snohomish County are “cost burdened.” In addition, this city’s residential renters appear to be in financial distress — an astounding 68 percent of its entire rental population is what the alliance has determined to be “cost burdened.” With three out of 10 homeowners and close to seven out of 10 renters experiencing “cost-burdened” issues, one would assume that measures should be implemented to address the financial concerns, starting by organizing their own Housing Strategy Task Force.
What is the name of that town?
For the uninitiated, Woodway has been constantly ranked as one of the wealthiest jurisdictions in the Northwest. Woodway is a wealthy enclave of beautiful stately mansions and fine homes, many overlooking Puget Sound. The latest alliance statistics (2015) places the median home value in Woodway at $936,872, and values have dramatically increased since that time. The median household income in Woodway was $148,333. A survey that ranked Edmonds 51st of 585 towns as per-mean residential values in the state of Washington ranked Woodway as number 6.
But yet, over one third of all Woodway residents are considered residentially “cost burdened.”
Does this situation require a major effort to resolve the issue of “affordable housing” for the residents of Woodway?
Of course not. The statistics indicating widespread residential “cost burdened” issues for residents of Woodway undoubtedly reflects the following:
In a wealthy community such as Woodway, wealthy households can readily dedicate 40, 50, or even 60 percent of their monthly income to housing without financial discomfort And if there is individual economic stresses created as a result of excessive housing expenses, it is a self-imposed choice, which can be easily resolved by relocating what for a Woodway resident would be a less affluent community with more modest housing, such as Edmonds.
A closer review of the rental statistics for Woodway provided by alliance reveals interesting trends. In the year 2000, Woodway registered no “cost-burdened” renters. Ten years later, that number expanded to an astounding 90 percent. In the last reported year, the percent of “cost-burdened” Woodway renters was reduced to a still-excessive rate of over 68 percent.
What happened? Did a vast majority of renters in Woodway suffer significant financial reversals that they all were magically transformed into “cost-burdened” renters? Highly unlikely. Although impossible to determine from the data, what probably transpired is that rental housing was developed in the interim, and most of the new renters determined that residing in Woodway was so desirable that they were willing to apply more than 30 percent of their monthly income towards their housing expenses. And as it has been demonstrated previously, wealthy individuals in Woodway (as well as Edmonds) can allocate significantly more than 30 percent of their income to housing costs without financial difficulty. As this commentator could discover no evidence of any government-assisted housing in Woodway, all who reside in Woodway not only do so voluntarily regardless of any “cost burdens,” but can easily relocate to adjoining lower cost residential areas if financially required to do so.
Various advocacy groups apply alarming if not near apocryphal statistics such as “cost burdened” to highlight alleged societal problems that are often presented as much more severe than they actually are. This is accomplished in part to attempt to mobilize an increasingly skeptical voting public as to the importance of their particular cause that can only be resolved by increased funding through yet another taxpayer-funded program. As a result, real people who are truly in financial distress are lost in the cacophony of the “all emergencies all the time” era that we live in. More often than not, nothing is accomplished because an increasingly cynical tax-paying public has concluded that all these social emergencies are just smoke screens to extract even more tax dollars from them, and many individuals have simply concluded that they have no more to give.
When developing social policy that will ultimately be borne by taxpayers, it is imperative that not only appropriate data be evaluated, but the “root causes” of any issue be accurately determined so that fiscally responsible and effective strategies can be implemented. The true resolution of any “housing crisis” will primarily be resolved through the unleashing of market forces, as well as a reduction of taxes, unnecessary government programs and burdensome irrelevant and often misguided regulations with their accompanying unanticipated consequences that dramatically increase the cost of all housing.
It is more than a bit ironic that a greater number of financially marginal homeowners and renters who are excluded from the chosen lucky subsidized few will be placed in greater financial peril as a result of yet another tax-funded government program to provide “affordable housing solutions.” The end result may be that more people are hurt than helped by any “affordable” tax supported housing endeavor.
This issue, as with an increasing number of social policy issues, is presented as an impending emergency that must be immediately addressed. Only proposed dynamic government intervention can prevent economic catastrophe for numerous residents. At the same time, considerable energy will be expended “informing” the public by various “experts” as to the appropriate “consensus” and “solutions” that should be reached. The preferred resolution will undoubtedly be some sort of governmental intervention to develop some type of affordable housing program.
Policies that advocate for the actual decrease of the cost of all housing, such as eliminating expensive and burdensome regulations that provide little or no benefit, the elimination of taxing real estate for various non-housing endeavors, the prevention of and the elimination of irrelevant government programs that provide minimal benefit as compared to costs, as well as encouraging the state to revisit the Urban Growth Management Act (actions that will actually benefit residents of Edmonds) will be automatically rejected as irrelevant.