Housing costs put strain on middle income families, panel says

One in seven American families spends more than half of its income on housing, and the imbalance between income and housing costs is growing, according to participants in a work-force housing panel at the Urban Land Institute's annual fall meeting in San Francisco.

The panelists pointed out that the housing crisis no longer affects just low-income families. Middle-class families are also feeling the pinch, as incomes remain flat and housing prices continue to escalate, they said. For instance, homeowners in the suburbs account for 44 percent of families who spend more than half of their income on housing, according to research from the National Housing Conference.

Tim O'Connell, president of the California Housing Finance Agency, who presented the data, said most housing programs focus on low-income and very low-income families, leaving out those who earn too much to qualify for assistance, yet earn too little to buy market-rate housing that is close to where they work. Among the occupations critical to the work force, but most often priced out of the housing market, are teachers, police officers, firefighters, nurses and clerical workers, he said in a Nov. 12 news release.

For instance, the median price of a home in California has risen 13 percent since 2001, with some of the highest priced markets posting much higher increases, O'Connell said.

"It's only a matter of time before all the states are in this position (of having a severe shortage of work-force housing)," he said.

Panel moderator John McIlwain, senior resident fellow for housing at ULI, said that in the last few years, middle-income families "have seen their incomes decrease while housing costs continue to increase." However, he noted that while work-force housing is a major issue at the local level, "nationally, it's not on the radar screen." As part of its research on housing issues, ULI is focusing on the pressing housing needs of moderate-income people, McIlwain said.

The challenges of building workforce housing were discussed by several panelists. Egbert L.J. Perry, chairman and CEO of The Integral Group LLC in Atlanta, said his company focuses on mixed-income projects and is building in 25 cities, including Baltimore, Washington, D.C., and Richmond, Va. He highlighted Centennial Place, a $160 million project on 60 acres in the center of Atlanta, a mixed-income community involving the federal Hope VI housing program. The project generated $800 million worth of development within four blocks, Perry said.

The challenges of building work-force housing include the scarcity and increased cost of land, a severe lack of public funding for infrastructure, and construction costs, Perry said. Other challenges involve overcoming neighborhood resistance, historic preservation, urban design, the political environment and the permitting process.

Carole Galante, president of Bridge Housing Corp. in San Francisco, described the company as the "largest producer of work-force housing in California," pointing out that it has built 10,000 units of affordable housing in its history.

The question should not be "Where will the work force live?" but, rather, "Where do we want them (the workers) to live?" Galante said. Her answer: "Close to jobs and transit and not in the outer suburbs."

First and foremost, said Galante, is the need for additional housing supply. "Without that, there is no availability." She cited a number of impediments to building work-force housing, such as the fact that the housing costs more to build than the work force can afford. Other barriers include land costs, construction labor, construction materials, fees, and the scarcity of subsidies to make up the difference between cost and affordability.

Galante offered several solutions to overcome barriers to work-force housing construction: 1) get in early and purchase land that is not yet entitled; 2) work with private developers on the production of market-rate homes; 3) support enactment of an inclusionary zoning ordinance that requires a percentage of the units be sold to people at a variety of income levels; 4) check availability of philanthropic lending; and 5) consider nonprofit partners.

"We need massive amounts of new housing," Galante said. "The big issue is getting through the approval process."

Urban Land Institute is a nonprofit education and research institute supported by its members. Its mission is to provide responsible leadership in the use of land in order to enhance the total environment.