Frequently Asked Questions
Want to know more about long-term affordable housing? Check out our three-minute animated short:
Q: What makes a home "affordable"?
A: Whether you rent or own, the federal government considers your rent or mortgage “affordable” if it consumes no more than 30 percent of your gross monthly income. Up to 30 percent, you can make ends meet. You will still have enough left over for other basic expenses: food, transportation, clothing, medical expenses and the like. You might even save a little toward a child’s college education or retirement.
But in Rhode Island the “American Dream” of a decent home in a good neighborhood has slipped further out of reach for more working families each year. The reason? For much of the last decade, Rhode Island experienced double-digit increases in real estate values that pushed rents and mortgage payments way beyond the 30 percent limit. And incomes didn’t keep up.
According to the most recent data from the U.S. Census Bureau’s American Community Survey, the 2008 median household income of workers in the Ocean State, estimated at $55,701, is far below what is needed to afford a place to call home. In fact, 46.5 percent of Rhode Island renters are paying 30 percent or more of their income on household expenses. For households with a mortgage, that number is 42.2 percent.
Q. Who really benefits from affordable housing programs?
A: We’re surrounded by Rhode Islanders who need a chance for better housing, and they’re not just those suffering from chronic homelessness. They also include the hair stylist who cuts your hair, the teacher’s aide who helps your child learn to read, the teller at your local bank branch, the waitress who brings you a coffee refill, the assembly worker in a local factory, the sales clerk who helps you pick a pair of shoes.
How do wages in Rhode Island's top jobs compare to rental costs? For workers in the top ten occupations in Rhode Island today and the ten occupations that are projected to have the largest growth in the state through 2014, only two could afford the average two-bedroom apartment with the median salary.
Q: Why do people need subsidized housing? I didn't get any help.
A: Are you sure? Government housing subsidies take various forms, some indirect. For example: If you’re a homeowner and deduct your mortgage interest payments and real estate taxes at tax time, then you, in effect, live in government-subsidized housing. The government says, “We can tax your income. But if you’re using that income to own a home, we’ll give you a break and forgo a portion of the taxes due us.”
Another form of housing subsidy – a provision in the 1944 GI Bill of Rights – changed the face of America. The bill guaranteed low-interest loans (without down payments) for cash-strapped veterans just starting out. Over the years, the GI Bill’s home-loan program helped transform the majority of Americans from renters to homeowners. Between the end of World War II and 1966, one-fifth of all single-family residences built were financed by the GI Bill. The home loan program, in fact, is the only provision of the original GI Bill that is still in force. It has brought the “American Dream” within reach for millions.
Q: Does a new affordable home pay less in taxes?
A: No, it doesn’t. In that regard, a new “affordable” house is exactly like any other house: it is taxed on its full assessed market value. There is no such thing as “affordable” taxation.
Q: I hear a lot about Section 8 housing. Is that the same as affordable housing?
A: No. Section 8 is a federal (HUD) program typically used to help low-income households afford decent rentals, although Section 8 vouchers can also be used for homeownership. Currently, over 8,000 Rhode Island households hold Section 8 vouchers. They use the vouchers to rent apartments from private landlords in the community.
Q: All I hear about is housing prices coming down, so do we even have a shortage of affordable homes in Rhode Island?
A: Despite some easing in real estate prices, the gap between wages and income needed to afford a median-priced home in Rhode Island still persists, even for skilled labor. For year-end 2009, the household income needed to afford the median selling price of a single-family home ($199,900) was $56,207. The average monthly rent for a two-bedroom apartment was $1,232, requiring an income of $49,280.
Providing affordable housing opportunities to our state’s workforce is an important step toward ensuring that Rhode Island remains a competitive place to live and work. All business sectors need clerical and office workers, entry-level workers, young professionals. These are all populations that are affected by the lack of affordable homes – both rental and home ownership.