California, the land of golden opportunities for most Americans has become a nightmare. Unaffordable housing costs are one of California’s most pressing challenges. Undoubtedly, the high housing costs in California are one of the primary drivers of the high poverty rates, ranked first among the 50 states under the Supplemental Poverty Measure, which accounts for the differences in the local cost of living. Heightening the crisis are the recent wildfires, as of the third quarter of 2019, the median price for a house tops $600,000, which is more than twice the national level. California has four of the country’s most expensive residential markets – the Silicon Valley, San Francisco, Orange County, and San Diego. California accounts for almost 12 percent of the United States’ total population, BUT, a quarter this population is homeless.
Lack of affordable housing increases the likelihood of economic insecurity among California families. It also creates challenges for California employers who are striving to retain and recruit workers. When comparing the housing costs with the income, you will realize that housing affordability throughout the state, for a fact most Californians affected by housing affordability are renters with the lowest incomes. Policy solutions that are particularly aimed at those households represent a promising approach to tackling the state’s housing crisis strategically, with a focus on the deeply affected. 2019 saw the most housing legislation being passed in an effort to avert this crisis, but a move by the Department of Housing and Urban Development (HUD) is very encouraging.
HUD announced that it will invest $10 million to develop 538 affordable homes. This announcement comes in an effort to help more working families become homeowners. The $10 million will be awarded in grants to four non-profit housing organizations, which are supposed to create at least 538 affordable homes for low-income families and individuals. HUD’s Self-Help Homeownership Opportunity Program, the grant along with the labor contributions by the homebuyers and volunteers, will lower the cost of construction, which in return makes homeownership a reality for the families who would otherwise not be able to afford a home.
“These non-profits receiving grants are making a positive impact in communities across the country through the strong partnerships they have formed between the public and private sector,” said David Woll, HUD principal deputy assistant secretary for community planning and development. “These grants, in conjunction with volunteer work and private donations, will help make the dream of homeownership a reality for more families.”
Determining housing affordability requires careful consideration of both the housing costs and household incomes, which is something that HUD’s 538 houses should account for. For the renters, housing costs include monthly rental payments, plus the cost of utilities if they are not included in the rent. On the other hand, for the homeowners, the housing costs include monthly mortgage payments, interest payments plus the property tax, property insurance, utilities, and condo or mobile home fees (where applicable). To understand California’s housing affordability veracity, it is very important to consider these housing costs relative to incomes. If the housing costs are matched by the high income, then expensive houses may be affordable to many people. Even the relatively low housing costs may be unaffordable if the local incomes are also low.
The four organizations that will receive the grants are;
Habitat for Humanity International, Inc. The amount that the organization will receive is $5,421,011. This is a private, non-profit, ecumenical Christian organization that over the past assisted Habitat affiliates in building and rehabilitating more than 100,000 self-help homeownership housing units in partnership with low-income people in the U.S. since 1976. Its mission is carried out locally by an approximate 1,251 subordinate self-help homeownership housing organization within a specific geographic service area. The grant it gets will be used to complete a minimum of 289 SHOP units. The completed units will be sold to low-income homebuyers who have contributed a significant amount of sweat equity toward the construction of their homes.
Housing Assistance Council, this organization will receive a total of $1,307,014. The organization is a national NGO self-help housing organization that will use its SHOP grant primarily in rural areas to facilitate and encourage innovative homeownership opportunities through the provision of self-help housing. Local affiliates have to compete for SHOP funding from the HAC. To do this, the affiliate has to come up with a plan that’s flexible design to meet the needs of the community. The grant awarded to HAC will be used to purchase land and make the necessary infrastructural improvements that support the new construction of the SHOP units. This grant is required to complete a minimum of 70 SHOP housing units.
Community Frameworks is another organization said to benefit from the program and will be awarded a total of $1,121,868. The organization is a regional NGO self-help housing organization that serves the states of Idaho, Montana, Oregon and Washington. The organization will make SHOP funds available to 16 affiliates to purchase land and make the necessary infrastructural developments that will support new construction and rehabilitation of the SHOP units. The amount awarded will be used to complete a minimum of 60 SHOP housing units.
Tierra del Sol Housing Corporation will receive a SHOP grant in the amount of $2,150,107. TDS is a regional housing community development corporation with the purpose of improving the quality of life and economic conditions of the low-income persons residing in distressed and underserved communities by providing affordable housing and community development through construction activities, lending, training, and employment opportunities. The grant award will be used to complete a minimum of 119 SHOP units.
But how did we get here?
Simple. Bad government, from outdated zoning laws to the 40-year-old tax provision that only benefits long-time homeowners at the expense of everyone else. These laws have created a severe shortage of houses, while the problem has been cooking for a decade, I think it has reached its boiling point, but I like what HUD is doing. This fall, the President called out Democrats for the situation in California. Like HUD, giant Tech companies like Google, Apple Inc. and Facebook Inc. are throwing billions of dollars at the issue, however, the line has been drawn, it’s not enough!
“Broadly speaking, there is no solution to the California housing crisis without the construction of millions of new houses,” said David Garcia, policy director for the Terner Center for Housing Innovation at the University of California, Berkeley.