C is for Comparing Budgets With an Affordable Habitat Home
In our last article we compared various hourly wages and what they could afford for rental housing based on the 2018 Fair Market Rent (FMR) per month. We learned that it took $18/hour, or $37,440 per year, for a person to afford the 2018 FMR of $840 for a one bedroom home.
But what if you wanted to buy a home? On the traditional market, many of these same wages may face extreme difficulties in obtaining their own home and staying within the envelope of affordability. That’s where affordable housing builders step in – organizations like Habitat for Humanity of Lake-Sumter or Homes In Partnership exist to partner with families who are edged out of the traditional market. These organizations offer opportunities to partner, allowing the financial entry point to homeownership to become more obtainable.
Let’s take a moment to look at a real life scenario – let’s meet Janice and Rose. We’ve used her budget and income to compare her rental reality in a 2BR Fair Market rental prior to her obtaining a 2BR home built in partnership with Habitat for Humanity of Lake-Sumter. Like all of the families who qualify for the Habitat program and are approved for their loan, Janice was able to get into a home with zero down payment, no closing costs, and a monthly mortgage that includes taxes and insurance that they can afford. Now she and her daughter have a safe and secure place to call home.
$12/hour: Annual Gross Income $24,960: Monthly Gross Income $2,080
Janice moved from paying 48% of her gross income for her two bedroom rental (with a negative cash flow of $376) to owning her own home, paying just 23% for housing, with a positive cash flow each month. While these numbers are still based on gross take home, we can see the meaningful shift toward a more realistic budget.
What’s the impact on her health? Her outlook for a future? Her ability to withstand an unexpected expense?
* This number varies based on the qualified candidate, but is reflective of an average mortgage for a 2 BR home with Habitat for Humanity of Lake-Sumter.
Affordable housing is affordable not because it’s of lower quality or built to sub-standard codes. It’s affordable because of the generosity of donors and volunteers who invest in the future of these families. Habitat for Humanity of Lake-Sumter works to build an affordable product, but also works to raise capital through relationships in the community in order to subsidize the homes for these families so they can be sold at a price that is affordable.
Habitat for Humanity of Lake-Sumter firmly believes in providing a pathway out of poverty. According to The U.S. Department of Housing and Urban Development studies have shown that “homeowners accumulate wealth as the investment in their homes grow, enjoy better living conditions, are often more involved in their communities, and have children who tend on average to do better in school and are less likely to become involved with crime.” Because of the stability and financial flexibility that an affordable home offers, higher graduation rates for children of homeowners is 19 percent higher than for renters, and they are twice as likely to acquire some post-secondary education, according to a study in a journal published by the Federal Reserve Bank of New York.
As with many of our families we are looking forward to seeing Janice and her daughter Rose prosper – you never know who Rose will grow up to be, but we are happy to have had a part in providing her the opportunity to thrive.
By Lee Owen