Affordable by whom?

“The gap between what people can afford and what it costs to get into housing is getting wider and wider.”

— Kelly Nossiter, Neighborhood Housing Services

Everybody likes the idea of affordable housing when they’re looking for a place to live. But once the focus shifts to things like taxes and public-policy concerns, the consensus tends to splinter.

On the one hand, the term carries the same sort of stigma associated with public housing projects. Neighbors complain about increased crime and a resulting drop in property values. And conservative politicians bemoan the idea of government handouts and/or interfering with the free market.

Man of steel: Steel-frame foundations, like this one at a work-inprogress on Kentucky Avenue in Asheville, allow Aaron Voigt to sell his houses at a lower price. Voigt got into the affordable housing game after a personal plea from Mayor Terry Bellamy. photos by Jonathan Welch

Meanwhile, homebuyers and even renters often expect the kind of upscale amenities that drive up housing costs, and many turn up their noses at mobile homes.

At the same time, however, “affordable housing” also has a certain cachet, evoking high-minded notions of social responsibility. And to some developers, it may simply be a way to get the city to fast-track approval of their projects — even as the cost of those homes spirals ever higher.

“I think [the term] is used very loosely,” says Mayor Terry Bellamy, a staunch advocate of affordable housing who works for the nonprofit Mountain Housing Opportunities. “Some developers use the word as a way to get Council’s positive attention,” she notes.

But the idea that $180,000 or even $200,000 housing is affordable in an area where half the population earns less than $35,000 a year has been known to elicit groans from Council members and the general public alike during City Council meetings.

“What’s affordable in real estate has nothing to do with what’s affordable for your labor force,” emphasizes Kelly Nossiter, loan-program manager for Neighborhood Housing Services. “The gap between what people can afford and what it costs to get into housing is getting wider and wider.”

And though there’s some disagreement over hard numbers, it’s clear that local wages have not kept pace with housing costs, which have increased about 15 percent a year for the past two years, according to Community Development Director Charlotte Caplan. The median home price in Asheville is now $197,500, she reports, and 30 percent of city residents pay more for housing than they can properly afford.

Amid the confusion of conflicting statistics and programs, it’s hard to pin down exactly what constitutes affordable housing. “In the strict [sense], it has no [absolute] meaning,” Caplan proclaims. “How long is a piece of string?”

Income and outgo

Working on a building: Staff members of Mountain Housing Opportunities, a nonprofit that is one of several local groups finding ways to increase affordable housing in Asheville.

Ultimately, affordability is a function of how much money one has. As Asheville attracts ever more national attention, there is a swelling population of new arrivals who’ve sold homes in more expensive markets elsewhere and are increasingly able to pay more for houses here. And if they’re retirees or second-home buyers, they’re not bound by the local wage scale.

In any discussion of affordable housing, the magic number that everything else seems to revolve around is the area’s median income ($35,300 for a single-person household in Buncombe County, according to census data supplied by Mountain Housing Opportunities). It’s also the base-line figure the city uses to determine what’s considered affordable. According to the folks who crunch numbers, that’s enough to pay for a $95,000 home — a nearly extinct species these days.

Affordable-housing programs and projects usually target people earning a specified percentage of that figure, which varies depending on the particular program, nonprofit or builder involved.

Most city programs are aimed at people whose incomes are 60 to 80 percent of the median — roughly $21,000 to $28,000 a year. Mountain Housing Opportunities, one of several local nonprofits working on the problem, serves people earning 40 to 50 percent of the median ($14,000 to $17,000).

Meanwhile, the very lexicon of housing is changing. Perhaps in an effort to battle negative stereotypes, a new term, “work-force housing,” is emerging to distance affordable-housing initiatives from Section 8 public assistance and to clarify that the target population in this case is one that often works in and around downtown.

“I think people who work inside the city should be able to live in the community,” Mayor Bellamy declared during a recent City Council discussion. And that same rallying cry has spilled, almost verbatim, from the lips of various politicians, city staffers and developers interviewed for this story, as it becomes ever more apparent that many people who work downtown every day are getting rapidly priced out of the city by a red-hot real-estate market.

“We’ve got thousands of people that make in the range of $8 to $12 an hour,” notes Vice Mayor Holly Jones. “We need to develop rental housing that they can afford.”

At your service

Cheap rent: The Griffin Apartments, built by Mountain Housing Opportunities on Grove Street in Asheville, will offer rents from as low as $298 a month.

Across the country, cities that have let such problems go unaddressed too long have found themselves facing worker shortages and scrambling to find some way to house the folks who provide basic services to their more prosperous fellow citizens.

About 43 percent of renters here earn between 50 and 80 percent of the area’s median income, Mountain Housing Opportunities reports. That places Asheville neck and neck with Wilmington for the dubious honor of the state’s most unaffordable housing, depending on whose stats you use. And it isn’t just waiters and retail clerks who are getting pushed aside. According to census figures, nurses, secretaries and paralegals are among the many local professionals whose average wage is less than than the $16.20 an hour needed to enable a single person to buy a $120,000 home.

“The city has to have [programs] in place, otherwise you are going to start to have brain drain,” says Nossiter. “Your teachers, your nurses, your police force that can work in other parts of the state and still buy a house aren’t going to stay here.”

“Our police officers should be able to live in our city; our firefighters, any city staff,” argues Bellamy, noting that a shortage of affordable housing has already contributed to recruitment problems for the city schools. Hospitals and other local institutions, she suggests, could partner with the city or with affordable-housing groups to find solutions for their employees.

It’s a complex problem involving many concrete policy issues that city leaders need to revisit, says the mayor. And arguing over semantics merely gets in the way.

During an April work session, for example, Council member Carl Mumpower touched a nerve among some of his colleagues when he declared, “Work-force housing sounds like something out of communist China, not the United States of America.”

But that kind of rhetoric, says Bellamy, hinders substantive debate on the real issues. “It doesn’t matter what we call it,” she asserts. “All I’m thinking about is making sure that [working] people … have an opportunity to live in our community.”

A mathematical question

A genuinely affordable home in Asheville today should cost somewhere in the neighborhood of $70,000 to $110,000, Bellamy has said. And she repeated those figures when Caplan, who helps dole out federal funds to developers building affordable housing, recently came before Council with recommendations from the Housing and Community Development Committee that would have jacked up the maximum allowable price of such subsidized construction.

Under the current rules, developers getting low-interest loans from the city’s Housing Trust Fund (the conduit for federal grant money) can’t charge more than $95,000 for a one-bedroom residence, or $135,000 for a three-bedroom unit. (The same limits apply to the city’s fee-rebate program, which reduces the amounts charged for things like water-tap fees.) The proposal would have increased those price caps to $115,000/$160,000, but Council sent it back to the committee for further work. The amount of these loans varies depending on the size of the project. In recent years, they’ve ranged from $60,000 to $500,000; they are never more than $25,000 unit.

The 6-year-old Housing Trust Fund is one of several incentives the city offers to encourage developers to build affordable housing. There are also fee rebates and technical assistance for developers who want to sell federal tax credits to corporations to help finance projects. In addition, the city uses zoning to encourage higher-density building models: The more units that can be put on one piece of property, the cheaper those homes can be.

Meanwhile, each nonprofit affordable-housing group has its own area of expertise and its own ideas about affordability. Mountain Housing Opportunities specializes in building multiple-unit rental developments using the tax-credit program. Habitat for Humanity, on the other hand, builds subdivisions of single-family homes using volunteer labor and some donated materials, and sells them at no profit. The Affordable Housing Coalition deals with a wide range homes costing up to $160,000, partners with state programs as well as for-profit companies and developers, and also heads up the city’s 10-year-plan to end homelessness. And Neighborhood Housing Services taps into a menu of state and federal financial programs to help homebuyers get the deal done, especially the New Home Loan Pool for new construction.

That money, from the North Carolina Housing Finance Agency, enables lenders (including builders) to offer “soft second” mortgages to offset the cost of a home. The loans, for up to $20,000, are held as 30-year, no-interest mortgages, helping borrowers qualify for a conventional mortgage for the rest.

But whatever approach one takes, says MHO Executive Director Scott Dedman, in the final analysis, affordable housing is “not a political question so much as it’s a mathematical question. When people talk about housing affordability, it’s basically a function of income.”

His group has several projects in the works. A planned apartment complex in the River District is expected to offer rents of $300 to $675 per month, and units in the soon-to-be completed Griffin Apartments on Grove Street in downtown Asheville will rent for $298 to $462 per month.

According to MHO’s formula, people should spend no more than 30 percent of their income on housing. “It is generally a problem of people earning $6 to $15 an hour — but that is a very large part of our working population,” says Dedman.

Catch-22

And while local housing prices have climbed precipitously in recent years, wages have gone up only slightly. In effect, then, real wages and housing costs are moving in opposite directions — further skewing the affordability matrix.

“My income caps are based on what people are really making here. Those didn’t go up last year,” says Nossiter of NHS. “For two years, they remained stagnant. Then this year, for a family of four, they went up about $450 a year.”

Still, the situation is not as extreme as in some places, where service workers are forced to camp, live in their cars, or sleep 10 to a house — or not yet, anyway.

“The price of land is just going up all the time,” says Caplan. “We used to look for lots for $10,000; now it’s hard to find them for $20,000. The need for subsidy is getting greater. To borrow a page from the Red Queen’s book: We run very, very hard to stay in the same place.”

Asheville uses two major sources of federal funds: the HOME Investment Partnerships Program and Community Development Block Grants. And in the early 1990s, when the focus was more on neighborhood revitalization, the city used CDBG funds to buy lots around town, four of which are now being considered as potential sites for affordable-housing development.

Legal restrictions limit what these moneys can be used for, and recent federal budget cuts have trimmed both programs by about 15 percent. Worse yet, CDBG funding could be facing another 25 percent cut in the next federal budget.

“That would devastate the program,” Caplan says flatly.

Many renters could afford mortgage payments if they could get a foot in the door. To this end, Neighborhood Housing Services provides down-payment assistance in the form of loans (ranging from $3,000 to $10,000) to people who don’t make more that 120 percent of the median income.

But even when below-market housing does get built and bought, it often winds up right back in the same inflated market. The original owner turns a tidy profit, but the property is no longer “affordable.”

“If you can buy something for one price and sell it for a higher price, it is your right to do so,” says Caplan. “Trying to put limits on sale is not really a realistic exercise.”

Still, Caplan maintains that the folks who qualify for local affordable-housing programs are the least likely to “flip” their houses to make a quick buck. One reason, she says Caplan, is the soft second mortgage, which discourages homeowners from selling too quickly, because the lender gets the same percentage of the sales price that the loan amount represented in relation to the original purchase price — eating up a good chunk of that theoretical equity.

And one tool for holding down rents is the tax-credit program, which requires that rents in participating projects remain moderate for 15-30 years. “There are major penalties if the development does not stay affordable,” Caplan says.

Waste not, want not

Many local builders maintain that it simply isn’t economically feasible to build genuinely affordable housing in the city. But some are finding ways to produce low-end housing and still turn a profit. Ironically, one key to their ability to do this is the fact that in the current market, lower-priced homes have become a hot commodity.

For example, local builder Kirk Booth, a former president of the Asheville Board of Realtors, says he has no intention of getting involved in a losing proposition. Booth’s speciality is infill housing tucked into existing neighborhoods, rather than whole subdivisions farther out in the county. Typically, these are three-bedroom homes in the $120,000 to $135,000 range. “I do it because I like to help out the community, and I like to offer things that aren’t there. If I build a product that’s not there, it’s going to sell.”

Finding an unaddressed need and supplying it is the very stuff of capitalism, argues Booth, and he finds that there’s no shortage of takers for his wares. “You want the market to come to you,” he says. “There’s a lot of markets [for affordable housing] here: I’ve got the investors, I’ve got the first-time buyers, everybody.”

Although the actual dollar profit on a cheaper home may be smaller, as a percentage of the selling price it’s similar to what you get with larger, more expensive houses, says Booth. And because his houses take less time to build and tend to sell faster, he can complete more projects in a year — and thus turn a profit comparable to what people building pricier houses make. Booth says he averages about 10-15 houses a year, taking advantage of the city’s fee-rebate program to help keep costs down.

Still other local developers see their efforts in a more philanthropic vein. Aaron Voigt, for example, says he got involved with affordable housing after being approached personally by Mayor Bellamy with a challenge.

Voigt’s strategy is to mix in some houses that meet the city’s affordability standards among his higher-priced homes. This, he says, serves two purposes: It reduces the economic segregation often imposed by neighborhoods, and the more expensive houses effectively subsidize the cheaper ones.

“It’s a sacrifice; I’m not going to lie to you,” says Voigt. “I can’t do strictly affordable. It’s going to have to be a balance.”

High-tech housing

In their quest for affordability, developers are increasingly turning to technology to help keep costs (and therefore prices) down. Voigt’s company, Groundstar Development, for example, builds on steeply sloping land that has traditionally been considered too expensive or complicated to use. And rather than carving, grading and pouring, Groundstar has begun using a steel-frame base that allows for quicker construction with less impact on the land.

“The difference is you are not changing the slope at all,” Voigt explains. Six footings are dug for the steel frame, but the ground doesn’t have to be leveled. As a result, there is less sediment runoff and no need to build retaining walls. “It just simplifies [the construction process] tremendously,” he says.

Developer Kevin Crump, who wooed City Council and Haywood Road neighbors with a series of front-end public-input meetings, is pushing another emerging paradigm: employing a high-density mix of office, retail and living space. As property costs continue to rise, making maximum use of each parcel reduces the per-unit cost.

Crump’s development will feature retail, business and restaurant space with several levels of housing behind. Although there will be some upper-priced units, the development will offer nearly 20 units priced at $130,000 to1$50,000.

“I call it ‘affordable’ with quotes,” says Crump. Those prices may not conform to the city’s current definition of affordable, but Crump points out that the threshold has not been updated for several years.

Developer Rod Cagey champions a modular approach, already in use in Australia and Asia but less common in America, which he says cuts material waste by 20 to 30 percent while also saving time. His proposed Coxe Avenue development, now working its way through the city’s review process, calls for building the components of the complex elsewhere and then fitting them into a multistory steel frame on the site (now a vacant lot). The resulting savings, says Cagey, can be passed on to renters. He also plans to renovate an existing structure for use as office, restaurant and live-in artists’ studios.

Both Cagey and Crump emphasize that in the big picture, affordability also includes such things as walkability and energy efficiency, which can affect fuel costs. Crump points out that his project’s where-the-action-is site will enable residents to save money by driving less. “From my standpoint, it creates value,” he says, “Because there are a lot of things you can do right here.”

Cagey agrees, proclaiming, “There has to be an integration of efficiency.” Everything — the design, construction, zoning and financing — has to work together.

“Money costs money every day,” he points out. An extra week can cost a builder a significant amount of money, which is then transferred to the renter/buyer. In a similar vein, the Affordable Housing Coalition holds regular classes and counseling to help clients deal with a sometimes-overwhelming system over the long term.

“Affordable housing is not a place; it’s not a thing,” says Executive Director Philippe Rosse. “It’s more of a process. Everyone has different issues that affect affordability. It is not a homogeneous issue.”

But how affordable is it?

After all the innovation, ingenuity and government support, however, the fact remains that in a free-market economy, efforts to create affordable housing are swimming against the current.

Booth, for example, voices a concern shared by many when he warns that rising land prices threaten to undercut his ability to profitably produce low-end housing in Asheville.

And Asheville developer Jim Ott says he’s used government funding in the past but has become discouraged with what he calls a woefully inefficient system.

The problem, he says, is that government money comes with too much baggage to actually make the housing cost-effective to build. Government involvement creates administrative costs that eat up any profit margin created by the tax credits, Ott maintains.

“It’s just so inefficient when you get so many people involved and they have all of their own personal needs and all of their dramas and power struggles that they’re trying to maintain in their agencies. It all gets in the way of really being able to create affordable housing,” he says.