C is for Clarifying the Calculation, Part II: Reality Check
In our last article we looked at the AMI, Area Median Income, and learned that the AMI for Lake County is $62,900 ($30.24/hour based on 40 hours/week, 52 paid weeks/year). Pop quiz: what does ‘median’ mean? It’s not the average; it means that half make more, half make less.
Median income drives the entire conversation on affordable housing. Pop quiz: What does the term ‘affordable housing’ mean? It means that no more than 30% of gross household income is spent on rent/utilities or, in the case of home ownership, PITI (principle, interest, taxes, and insurance). Why? Because everyone needs room in their budget to pay for other expenses.
Using the chart below, we see that someone earning the median income for Lake County would be able to afford the Fair Market Rent (FMR) for housing. What about those earning less than the median? Let’s walk through those numbers. The chart is based on the following details:
- Florida’s 2019 minimum wage is $8.46
- The Fair Market Rent (FMR) is from the National Low Income Housing Coalition’s (NLIHC) annual Out of Reach data for housing costs in zip code 32757 (at the site, click on the zip code for detailed information)
- The 1 BR and 2 BR columns show the difference between the affordable, 30% housing number (what you’d ideally pay) and the actual Fair Market Rent
- Income is pre-tax, based on 52 paid weeks/year at 40 hours/week, no overtime
How does paying more than 30% affect the rest of someone’s finances? Let’s look at three theoretical budgets for a single person renting a one bedroom home. We’re using percentage allocations commonly recommended by professional planners. Are you ready to see what those earning less than the median income are dealing with?
Any conversation about affordable housing must begin with AMI, Area Median Income. In this article we’ll explore this term in more detail to make sure we’re all on the same page. In Part II, we’ll look at a sample budget to illustrate the impact of housing expense on various income levels. Ready to dive in?
By ‘Area,’ we mean the MSA, or Metropolitan Statistical Area. The MSA is quite useful. It captures all manner of data for a given geography so anyone—employer, government agency, job candidate, hospital, etc.—can compare apples and apples. (Or, since this is Florida, oranges to oranges.) For example, economic development groups, transportation analyses, labor market studies, and of course, the housing industry will all be working from the same information to write policy, design long-term plans, public works projects, and so on.
Here’s a great definition of the MSA from Investopedia.com: “Metropolitan statistical areas usually consist of a core city with a large population and its surrounding region, which may include several adjacent counties. The area defined by the MSA is typically marked by significant social and economic interaction. People living in outlying rural areas, for example, may commute considerable distances to work, shop, or attend social activities in the urban center.
There are almost 400 metropolitan statistical areas in the United States. In contrast to micropolitan statistical areas, which center on towns and smaller communities with populations below 10,000, metropolitan statistical areas must include a city with a population of at least 50,000.”
Our local Habitat for Humanity affiliate is covered by two MSA’s: Lake County is part of the Orlando-Kissimmee-Sanford MSA, while Sumter County is in The Villages’ MSA. The MSA data drives the income calculations for any affordable housing program.
‘Median’ isn’t the same thing as ‘average.’ Here’s how the Census Bureau defines it: “Median income is the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount.” So, for your area (MSA) of interest, imagine lining up every household, from poorest to richest. The household in the exact middle would represent the median for that MSA—half make less, half make more.
In the very simple example below, the total household income for the area is $394,850. With just 7 homes, that means the average income is $56,407. However, the median, or the point at which half make more, half make less, is $62,900.
|One home at each income||Total Income|
And how is an area’s income figured out to begin with? It starts with the Census Bureau; each year they contact “over 3.5 million households
across the country to participate in the American Community Survey. When you respond to the survey, you are doing your part to ensure decisions about your community can be made using the best data available.” (Learn more about the ACS here). The ACS includes income data.
Once that data is available, HUD gets to work. They use the data to calculate the median income for each geographic area based on how strong the data is. If it’s deemed statistically reliable, they can run with that for the year; if it’s not statistically reliable, for whatever reason, they’ll work on a combination of surveys and formulas…and it gets complicated. To see the process in detail for Lake County, Florida, check out their calculation process here.
From this process, HUD announces the AMI for a given area. That number will then be used for different types of affordable housing programs (rentals and purchases) across the country. Our Habitat affiliate generally uses the USDA’s mortgage program for eligible home owners, so we use their AMI charts. The chart below is what Habitat would look at. (This data is extrapolated from the USDA’s site for 2018.) Remember, the median means half the residents earn less, half earn more.
If you’re fact-checking the calculations, you’ll see they don’t match up exactly. For example, using Lake County’s AMI, you’d do this: $62,900 x .50 = $31,450, whereas the USDA lists $31,950. These slight variations are likely due to USDA including non-wage sources of income in the household, such as child support, SSI, or alimony. The income numbers represent the maximum allowable to qualify for each category. Therefore, a Lake County household of 2 with an income of $31,900 would qualify for Very Low Income programs; however, if the income were $32,000, they’d be in the range for Low Income programs.
|Lake County||Number in the household|
|50% AMI (Very Low Income)||$ 31,950||$ 42,200|
|80% AMI (Low Income)||$ 51,100||$ 67,450|
|Sumter County||Number in the household|
|50% AMI (Very Low)||$ 33,400||$ 44,100|
|80% AMI (Low)||$ 53,450||$ 70,550|
Many myths abound regarding what ‘affordable’ means for housing and who qualifies for such programs. It’s no exaggeration to say that every legitimate program that strives to help people keep their housing cost affordable (paying no more than 30% of their income for housing) is using the same foundation: the AMI.
In our next installment, we’ll put a few sample budgets to the test. We’ll take various monthly incomes at different hourly wage rates, and we’ll allocate the money to expenses using generally-accepted financial advisor recommendations. In doing so, we’ll see what percent of the typical income goes to housing versus the recommended 30% figure. And we’ll be able to answer the question: at what income is housing affordable for Lake and Sumter Counties?
Your turn: How does your income, or that of your employees, compare to the AMI for Lake or Sumter counties? How do you think this affects the amount of money left, after housing is paid, to cover all other living expenses? –> Respond to us on facebook with your thoughts to continue the conversation
Article By: Lee Owen, Habitat Volunteer
The holidays are times when traditions are born, when gathering together holds more sentiment and when houses become homes. Whether your welcoming in generations of family and friends, or your traveling hundreds of miles to spend time with your loved ones, the phrase “Home for the Holidays” stirs emotions in all of us. However, for those dealing with the chaos caused by a sudden change in their living situation, the holidays are often accompanied by constant reminders that their sense of home has been washed away.
Surviving the utter destruction that swept through Puerto Rico with Hurricane Maria was just the beginning of an arduous journey that led Yolanda and Osvaldo to Central Florida and ultimately to Habitat for Humanity. “The experience was horribly devastating,” says Yolanda. “We lost our electricity, we lost food and there was no water. A lot of lives were lost on the island.” In fact, nearly 3,000 deaths we’re caused by the hurricane.
With the help of a church located in the states, the couple fled their home in Puerto Rico, destined for Sanford, Florida, with only the belongings they could carry in two suitcases. After spending their first month in a hotel in Sanford, they were able to find an apartment in Casselberry. However, after their first year in the apartment, the rent was set to increase to a point that would challenge their means.
“I started searching in August for other options, rental opportunities, but none suited our economic abilities,” said Yolanda. “I turned on the news and an interview that mentioned a community being developed by Habitat for Humanity caught my attention.”
The community was Habitat for Humanity’s Veteran’s Village in Umatilla, Florida. Veteran’s Village is a collaborative project that provides access to affordable quality housing and holistic wraparound services through a partnership with Combat Veterans to Careers.
“There’s our House!” Yolanda remembers saying to her husband. What she didn’t remember was hearing any contact information. A week went by and, while in prayer and searching the internet, Yolanda found the information she was looking for and, after confirming her husband Osvaldo was a Veteran of the Vietnam war, they began the process.
The couple celebrated their first Christmas in their new home with their children who traveled to spend the holidays with them. “Our new home was full of joy, many emotions and gratitude,” said Yolanda. They also brought with them the tradition of “Three Kings Day,” a Latin-American celebration akin to the “Feast of the Epiphany,” along with songs from the island and traditional holiday cuisine.
“In Puerto Rico, everything is decorated with lights during the Christmas season and that’s exactly what we did here,” said Yolanda. “We decorated the outside of our house as well as the inside with our Christmas Tree.”
The couple says the warmth of their new community has contributed to them feeling at home. They’ve developed “marvelous friendships,” sharing meals and great conversations with their new neighbors.
Having a “home” again was more than just finding an affordable place to live for Yolanda as Osvaldo. “In this stage of our lives, my husband and I are enjoying the peace and tranquility which God has gifted us through our new house,” she said. “And a house becomes a home by the love that is shared in it.”
Maybe you aren’t cost-burdened. You don’t have to decide between paying the light bill or buying food. And neither do your friends or neighbors. Maybe you’re thinking this whole issue of affordable housing doesn’t affect you.
A 2014 report by Enterprise Community Partners (here) should make us all pause and reconsider. The lack of affordable housing has measurable impacts on families, communities, and society overall. The report on housing instability, including homelessness, presents their findings by major issues; below is an excerpt of just three of these issues we can all relate to:
• Education — Housing instability/homelessness (HI/H) jeopardizes children’s performance and success in school and contributes to long-lasting achievement gaps. The stress of HI/H makes learning difficult; in addition, it disrupts school attendance, lowering students’ overall academic performance. Long-term academic success is directly impacted by housing stability.
• Health — HI/H has serious negative impacts on the health of children and adults. Problems include asthma, being underweight, developmental delays, and increases the risk of depression, to name a few. Affordable housing provides stability, freeing up resources for nutritious food and health care.
• Neighborhood Quality — The report states that “A number of national and regional studies have found that investments in affordable housing produce benefits in the form of jobs, local income, sales, increased property values and property tax revenues…” and “…Numerous studies show that affordable housing has a neutral or positive effect on surrounding property values…”
Let’s bring this closer to home. In October 2017 the Orlando Sentinel published the results of a study done by the Shimberg Center for Housing Studies at the University of Florida and Miami Homes for All, a South Florida nonprofit. The research focused on student homelessness; the Sentinel’s article (“Central Florida’s Homeless Students Top 14,000”) can be found here. According to the study, “…only 24 percent to 27 percent of homeless students passed assessment tests, while 40 percent to 48 percent of other students did.” They had higher rates of truancy and suspension, and “Even compared with students who live in poverty but are not homeless, the students whose families stay in shelters, cars, doubled up with another family or in extended-stay hotels fared significantly worse…” The Sentinel quotes Christina Savino, Orange County Public Schools senior administrator for homeless and migrant education: “…that lack of a stable home still really makes a difference.”
The lack of affordable, stable housing eventually ripples through all aspects of the local community and economy. While you might not be cost-burdened based on your income, your larger community, including the central Florida region as a whole, suffers when families are priced out of a stable place to call home.
Your turn: Contact a local food pantry, teacher, community police officer, or health clinic and discuss the issues they see related to housing instability/homelessness. For example, ask the food pantry how hunger affects their clients’ choices on other critical needs; ask a teacher how hunger affects a student’s classroom behavior and academic progress; ask a local police officer how the lack of affordable housing affects crime; ask a health clinic about the impact of delayed medical attention on children and families. Who else might you discuss the topic with? Share your experiences with us!
Affordable Housing Part I: The A, B, Cs
A is Also for Affordable Alternatives
Housing burdened. That’s the diagnosis if you’re paying more than 30% of your household income in rent/utilities. If you’re paying 50% or more, then you’re extremely housing burdened, but you probably already knew that! Whether you’re renting or trying to buy a house, are there options for finding something that fits your budget?
The good news? Yes, many programs help with renting or buying, based on location, income, family size, and other criteria. Their goal is to keep you at/under that 30% benchmark. Habitat for Humanity Lake Sumter is one of them, though we’re a small non-profit rather than a government-funded agency. If you’re hoping to buy a home in Lake or Sumter County, FL, consider starting with us. Review our Home-Ownership Qualification Criteria here: https://habitatls.org/programs/apply/.
For more comprehensive options, explore what’s offered by the Federal government, as noted in the links below; we’re sharing content from these websites as well.
The bad news? Finding the right one takes a lot of time and effort, and there’s often a long waiting list to access these programs.
Renters: The U.S. Department of Housing and Urban Development (HUD) is the mothership of programs and information. Start here https://www.hud.gov/topics/rental_assistance and use their links:
- Privately owned subsidized housing – HUD helps apartment owners offer reduced rents to low-income tenants. Search for an apartment and apply directly at the management office.
- Public Housing – affordable apartments for low-income families, the elderly, and persons with disabilities. To apply, contact a public housing agency (PHA).
- Housing Choice Voucher Program (Section 8) – find your own place and use the voucher to pay for all or part of the rent. To apply, contact a public housing agency.
- HUD Resource Locator – search for HUD field and regional offices, local PHAs, Multifamily and Public Housing locations, homeless coordinated entry system points of contacts, and USDA (Department of Agriculture), which focuses strictly on rural housing
Were you surprised to see the USDA listed? Their programs cover rentals, home purchases, and even repair grants. https://www.usda.gov/topics/rural/housing-assistance
- USDA Rentals: Click on the state and keep going as prompted. https://rdmfhrentals.sc.egov.usda.gov/RDMFHRentals/select_state.jsp
Home Buying: Both HUD and the USDA are good sources for home buying information, guidelines, and financial input. Check these links to learn more:
- HUD: https://www.hud.gov/topics/buying_a_home
- HUD: Housing counseling agencies throughout the USA offer advice on buying or renting, credit issues, and more. https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
- USDA: Home buying loans for low and very low income people in qualified rural areas: https://www.rd.usda.gov/programs-services/single-family-housing-direct-home-loans
Your turn: Find an affordable apartment for a) your elderly uncle (monthly income $960) or your cousin (a single mom with a pre-schooler, earning $15/hour working 40 hours/week). Rent + utilities cannot exceed 30% of the total monthly income. Using the resources above, find what programs are offered in your area; are they in a city or a rural area? What restrictions apply? Is there a wait list? How long? You have one week to find it…GO! Don’t forget to share what you learned in this process on our FB page, https://www.facebook.com/habitatls/
A is for Affordable…
“Can we afford it?”
This is one of the first questions any renter or home buyer should be asking. But what, exactly, does ‘affordable’ mean? What’s affordable to you might not be to me. Is this just a philosophy about how to handle money or is this something more concrete and measurable?
It’s actually very straight-forward. The term ‘affordable housing’ means that the household spends no more than 30% of their total household income on rent plus utilities.
Because households need money left over to pay for things like food, transportation, and healthcare—known as non-discretionary spending (these are ‘needs’ not ‘wants’).
“Housing expenditures that exceed 30 percent of household income have historically been viewed as an indicator of a housing affordability problem. The conventional 30 percent of household income that a household can devote to housing costs before the household is said to be “burdened” evolved from the United States National Housing Act of 1937” (1).
The Housing Act created the nation’s public housing program to serve families with the very lowest incomes. Since then, a variety of definitions were used to establish what was considered ‘affordable’ for public housing rents. By 1981, the 30% benchmark was put into place and has remained the standard.
This benchmark eventually became part of the home-buying process when lenders began using it as part of their evaluation of a buyer’s ability to repay the loan, especially if the borrower had other debts to pay. However, in mortgage-lending land, “rent plus utilities” was replaced by the PITI factor: this is the combined total of the loan’s Principle, Interest, Taxes, and Insurance. “Through the mid 1990s, underwriting standards reflected the lender’s perception of loan risk. That is, a household could afford to spend nearly 30 percent of income for servicing housing debt and another 12 percent to service consumer debt. Above these thresholds, a household could not afford the home” and the lender wouldn’t take the risk of the buyer defaulting (1).
This benchmark helps families and landlords or lenders objectively gauge the household’s ability to handle the financial burden of the monthly housing payment. Whether it’s a rental or a purchase, then, it’s a very helpful tool and one we’ll come back to later in this series. The big question now is: based on this definition of ‘affordable’ what are my options if I can’t find a place I can afford?
If that’s the case, then it’s time to look at the variety of programs in place to help make housing affordable, whether it’s a rental or a home purchase. We’ll look at some of those next time and also consider why affordable housing is important…not just for a family but also for the entire community.
Your turn: Calculate what percent of your household income is used to pay for your housing (rent + utilities, or mortgage PITI). Next, ask others you know to do the same. Consider asking employees, young singles or marrieds, etc. Discuss how your and their situations would look if 50% or more of your total household income went to pay for housing. What other expenses would be affected?
UMATILLA, Fla. — Habitat for Humanity of Lake-Sumter is done building homes in a Lake County neighborhood.
- Habitat for Humanity builds homes for ‘Veterans Village’
- Affordable homes meant for veterans, active military
The 13 affordable homes are for veterans, activity military and spouses of those who have served.
It’s called the Veterans Village and it’s located in Umatilla.
Shawn Unger moved into the development at the end of June.
“(I) wanted to get out of the apartment living and into a home. I do have two small children in the house, so a little more wholesome living than that of the apartment,” said Unger.
Unger says he went into the Air Force when he was 17 years old after graduating from high school.
“My parents had to give me permission to do so and sign a form, and then I reported to Lackland Air Force base in 1985,” he said.
Unger’s house is one of 13 Habitat for Humanity of Lake-Sumter started building in 2016.
Through his time in the United States Air Force and his various career tracks post-service, Shawn Unger has travelled across most of the North American continent. Born and raised in West Virginia, Shawn enlisted right after graduating high school in 1985 and spent a full year in Mississippi learning to be a radar technician. He was initially slated to head to Europe for his duty station, but it was then changed last minute to South Dakota.
Once he left the Air Force, he began working for SAIC, a major IT support company, and transitioned from there to Sprint where he worked up to a position as Network Service Manager for the AOL account. After a talk with his father one day at a NASCAR race, he decided to try out the trucking world, and drove big rigs all over the US and Canada; his last employer, out of Tampa, is what led him to make Florida his home.
He left the trucking industry to work for the Department of Homeland Security for a short while before returning to an IT position with Convergys in Lake Mary, Florida. He now lives with his two young sons, Phoenix and Caleb, while his eldest son Timmy lives in New Hampshire. Shawn is looking forward to his wedding later this year to his fiancée, Rowena, who is from the Philippines.
We knew when we built the Veterans Village that we would meet some people with remarkable backgrounds and unique experiences. After all, serving in the military is essentially a guarantee of at least a few good stories. However, among all of our homeowners in the Veterans Village, none stand out as defiantly and inspirational as Ike Fretz. Our most recent resident to move into the Village, Ike’s history of service is impressive, but it’s what he’s done – and continues to do – post-service that really galvanizes the warrior spirit.
Ike served in the United States Army from 1989 through 1994 and was on active duty for Desert Storm. During that conflict, he sustained an injury while working as part of a two-man evacuation team. His actions earned him several commendations but they also left him permanently injured and wheelchair-bound. It was several years into his recovery and adaptation process that a recreational therapist introduced him to adaptive sports, and it was the beginning of a brand new outlook.
Since then, Ike has won multiple gold medals in the National Veterans Wheelchair Games events, including power lifting, basketball, bowling, and hand-cycling, which he took to the extreme with a Washington-State-to-Washington-DC cycle in 2012. Ike says that when he competes in these games, he does so to honor other veterans that he holds dear, whether living or passed, and uses his actions in spite of adversities to inspire other veterans to keep fighting.
Because of his profound story, dedication, and impact, an anonymous donor took note of Ike’s placement into a Veterans Village home and decided to pay off Ike’s mortgage, in full, as a way of honoring how he served our country and continues to serve other veterans. We were able to surprise Ike and his caretaker, Sherrie, with the news on May 23, and have an opportunity for the donor to meet Ike and thank him in person. It was a truly moving experience and added yet another momentous chapter to Ike’s already extraordinary story.