Affordable Housing in a Tough Market

Ann Arbor, Michigan bought a former YMCA building to serve as affordable housing. Four years later, it sits empty, a piece of the difficult housing puzzle. 'Given the environment now, it would be tough,' says one planner about the site.

"Ann Arbor's history with housing at the old YMCA on Fifth Avenue and William Street is long and complicated.

Two decades ago, city officials promoted an expansion of the Y's dormitory-style residence to 100 units - a move that led to financial failure.

More recently, the city bought the property when the Y relocated to new quarters. The goal was to ensure that the 100 single-room-occupancy units were preserved and ultimately replaced.

But four years after the $3.5 million purchase, there's a parking lot on the corner instead of housing. And city officials are still looking for other locations for at least some of that very low-income housing."

Full Story: Housing may go off Y site



Housing = Investment

How can you make an investment affordable? That's like saying even though Google stock is $500 a share, there should be some kind of controlled "affordable" share that us colloquial folks can buy. For housing to become affordable incomes must increase at higher rates than the appreciation of an investment. If that were the case, it would make for a bad investment (like today, housing is a bad investment at the moment because it is depreciating in value faster than other types of investments). Thus, being the bad investment that it is, demand leaves the market and prices come down until the masses see value and probable asset appreciation. Affordable Housing should be controlled by the government and separate from the housing market, it's the only logistical way it would work.

On the other hand, fees for development are also a big factor in unaffordability. . . for instance this excerpt, "The infrastructure burden on developers, including fees, has ballooned to $70,000 to $100,000 for the average-size house in Sacramento. The fees are so nebulous that local government and property developers each employ their own consultants to calculate and compare them," from . Add that to the cost of materials and labor and the $150k house is unrealistic (at least in the Sacramento Region it seems). Unless housing prices return to the value that one sees in the house instead of the artificially inflated "ideal" price, the housing market will decline. Gone are the days (without being in the 50% tax bracket)where a young couple could purchase a LOT, contract the labor, and build a house with their own hands.

I like the 3x multiple that the author stated and think that it's a good general rule of thumb. Though I tend to think it's unreasonable in most semi-urban regions.

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