HousingWorksRI: Affordable Housing 101 - Factual Answers to Questions

Factual Answers to the Questions Most Often on a Community's Mind.

Threatened property values and other common fears go unrealized, studies find.

Q: What makes a home "affordable"?
A: Whether you rent or own, the feds consider 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? Double-digit increases in real estate values that push rents and mortgage payments way beyond the 30 percent limit. Incomes can’t keep up.

Right now, more than half of the working households in Rhode Island can no longer afford the average rent for a two-bedroom apartment here. A monthly mortgage payment for these same households is completely out of the question in a state where the median house price reached $282,500 in 2006. For more data on RI's housing crisis, view Statistics.

Q: Has the problem always been this bad?
A: This bad? No.

“The problem began in 1999, when real estate prices started to soar,” says Noreen Shawcross, now chief of the newly created state Office of Housing and Community Development, former executive director of the Rhode Island Coalition for the Homeless.

“By 2000, every homeless shelter in the state was full.”

Meet Rhode Island’s new homeless. They have jobs. They have kids and responsibilities. What they don’t have is a home they can afford. Twenty percent of the adults crowding the state’s homeless shelters are employed, experts note. All these workers require is a chance for decent, affordable housing. And they’re just the tip of the iceberg.

This has become a wake-up call for state and local policymakers, particularly those who worry about the state’s economic development. But Rhode Island’s housing production is down sharply, partly due to “all growth is bad” attitudes, partly due to sky-high land costs.

To have a workforce, you have to house a workforce. “The link between economic growth and housing is not a new concept in Rhode Island,” says Brenda Clement of Rhode Island’s Housing Network, an organization of nonprofit affordable housing developers. “Mill owners understood that.”

The state’s workforce desperately needs more decent apartments and affordable homes for first-time buyers.

back to top

Q: Isn't "affordable housing" just another way of saying "ugly housing" that will pull down property values?
A: Say “affordable housing” and people often imagine a place that looks like Chicago’s notorious Cabrini Green projects (now torn down): “cinderblock dinosaurs,” as CBS News called them, blocks of stark apartment buildings packed with the poorest of the poor. But images like that are decades out of date.

These days, affordable homes, both rental and single family, are likely to be among the best-built, best-maintained properties in a neighborhood. Affordable properties don’t look “low budget” because they aren’t. They’re well designed, constructed of quality materials, energy efficient, and attractively landscaped.

“Lowered property values” is an unrealized fear, studies in the U.S. have found. Adding affordable rentals to a community either leaves property values untouched or, where neighborhoods are revitalized, actually raises the local values. For more on these studies, visit our Resources Library.

Woonsocket’s Constitution Hill is a perfect example. Once a crime-infested, boarded-up area, it is once again an attractive, solid neighborhood, thanks to the development of affordable housing.

Rhode Island’s premier builders of affordable housing are its nonprofit CDCs (community development corporations). Many are recognized nationally for the quality of their apartments and single-family homes, all built for low- and moderate-income budgets.

Seeing is believing, of course. Take a tour! Many CDCs offer tours. Woonsocket Neighborhood Development Corporation, for instance, schedules guided walk-throughs of its award-winning, architect-designed housing. For more information, call Margaux Morrisseau at (401) 762-0993 or email her at mmorisseau@wndc.org.

For information on the award-winning work of other CDCs in Rhode Island, visit the Housing Network online, at www.housingnetworkri.org.

Click here to take a housing tour.

Q. Nobody I know needs affordable housing. Who are these people? Who really benefits?
A: Affordable housing is something of an invisible problem, true.

Until the Providence Journal writes an article about a research associate at URI, a mother of two, who can’t find a decent place in her price range anywhere in South County.
Or until seven Rhode Island bank presidents in 2005 jointly sign an open letter saying a lack of affordable housing is seriously stunting the state’s economic growth.
Or until you learn that 20 percent of the people who stayed at Rhode Island’s homeless shelters have employment but no place they can afford to live.

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 clerk who waits on you, the teacher’s aide who helps your child learn to read, the tellers at your local bank branch, the waitresses who bring you a coffee refill, the assembly workers in local factories, 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. Download a fact sheet with this information.

Rhode Island’s economy hopes to add tens of thousands of jobs by 2010. Where will these workers live?

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: I'm worried that new housing of any kind will hike my tax bill to pay for schooling. What does a new student really cost the taxpayer?
A: Let’s do the math, using Westerly as an example, since it’s in fast-growing Washington County.

The per pupil expenditure in Westerly in 2004 was $11,241. That sounds like a lot, but what does it actually break down to per household? Last time around, the U.S. Census counted 9,402 households in Westerly. To pay a new student’s $11,241 educational bill, therefore, costs each household about $1.20 a year. (And that doesn’t take into account state and federal aid that invests millions annually in the town’s educational budget.)

Keep in mind, too, that new housing doesn’t necessarily mean more kids. Seniors live there, childless couples live there, singles live there. Right now, on average, no more than a third of Westerly’s households send any children to the public schools. Which mirrors the rest of the state, incidentally. In Rhode Island, only 31 percent of households have children under age 18. Affordable housing is not a special case.

And while it might not be the case in every town, generally in Rhode Island school-age populations are declining. They will in Westerly, too. In 2005, the number of children ages 5-19 living in Westerly is an estimated 4,834. A decade from now, in 2015, according to the state’s planning projections, that number will drop to 4,578, a net loss of 256 potential public school students.

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.

For more information on the Section 8 program, visit our Glossary.

Q: What sort of affordable homes do we need more, apartments or houses for first-time buyers?
A: Rhode Island is desperately short of both. Although you might be surprised by which kind of housing has a bigger impact on local tax revenues and the schools.

Apartments in the U.S. tend to pay a higher effective tax rate than single-family homes, a national study found. Moreover, apartments contain fewer children. There are, on average, 64 school-age children for every 100 new owner-occupied single-family houses, but just 21 children for every 100 new apartments, and only an average of 12 children for every 100 apartments in mid-and high-rise buildings (more than four stories).

Sources: 1998 State Property Tax Comparison Study by the Minnesota Taxpayers Association, NMHC tabulations of 1999 American Housing Survey