Breaking news: Homes in Seattle are expensive.
To be fair, housing in most urban areas with booming populations and flourishing tradable goods industries is costly, but Seattle has become pricey to the point of parody. News reports tell tales of people buying houses they’ve never seen. Buildings so decrepit that buyers must sign waivers to enter sell for hundreds of thousands of dollars.
The Economist newspaper debuted the Big Mac Index to demonstrate purchasing power parity between countries, referenced on one of the most standardized products outside of Budweiser. Millennials now have a new benchmark in the form of the Twitter feed of Mike Rosenberg of The Seattle Times: the Avocado Toast Index, which illustrates the number of toasty treats one would have to give up to make up for rapidly rising home prices.
(Spoiler alert: It’s a lot of toast.)
That’s a problem, and not just because the Norman Rockwell painting of the American Dream involves a green lawn and a white picket fence. Owning a unit of housing, be it a single-family home or a unit in a shared building, is a proven way to build wealth across generations.
The government incentivizes homeownership through the tax structure, providing relief unavailable to renters. More immediately, homeownership shields a household from the vagaries of the market and provides stability.
And that’s why the city of Seattle and nonprofit partners invest in the development and oversight of affordable homes for purchase, not just rental.
The model — used in communities across the country — allows people who normally could not afford to buy a home access to the benefits of homeownership.
It’s not easy, especially in a city like Seattle that, from one month to the next, saw an increase in the average cost of a single-family home rise from $777,000 to $820,000, Rosenberg reported.
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The city funnels millions of Housing Levy, state and federal dollars into affordable-home production and down payment assistance programs that have helped close to 1,000 borrowers and first-time homebuyers. These programs can help cover a substantial amount of the cost of a home that can cost between $350,000 and $500,000 to develop.
“That program was quite successful; quite successful for a number of years,” said Jennifer LaBrecque, in Seattle’s Office of Housing. “As the housing market has gotten more expensive, it’s become a difficult product.”
But a single unit can help between five and seven families over the course of its functional life, making it a good public investment, said Erica Malone, also of the Office of Housing.
“Our focus now is increasing investment in permanently affordable homeownership,” Malone said. “Not just today, but well into the future.”
Habitat for Humanity is one of a handful of nonprofits that creates affordable homes for purchase in Seattle. The group is preparing to build 52 units on the Fort Lawton property adjacent to Discovery Park, should that development get final approval. They’ve also done work in the Central District, Bellevue, Renton and beyond.
Their homes are available to people who earn between 30 and 60 percent of the area median income, said Gail Luxenberg, Habitat for Humanity Seattle King County’s chief executive officer.
The organization does so by controlling the land underneath the home while buyers purchase the “sticks and bricks” of the house. In most cases, Habitat retains a “right of first refusal” when the owner decides to sell, meaning they get the option to buy it back. The homeowner then gets a portion of the appreciation, which is how they benefit from the equity that accrues in the home.
New Habitat for Humanity homeowners also put in “sweat equity,” Luxenberg said, meaning that they contribute time or potentially labor to construct a unit. The owners don’t end up being the poorest and most disadvantaged, because they still have to be able to balance a mortgage and the associated costs.
But it does give people who end up on the lower end of the income spectrum an opportunity to build wealth.
“The divide economically between homeowners and renters makes the difference between people who are able to acquire wealth in our society and those who aren’t,” Luxenberg said.
Guess who that is?
The Urban Institute, a think tank, did a study on affordable home ownership programs in nine different cities throughout the United States. Researchers found that the people who accessed these programs were often women, people of color and folks in jobs that made roughly $41,000 per year. They were educated and many worked full time, but in fields that simply didn’t make a lot of money, such as office work and health care.
Many had a decent financial history, with credit scores of nearly 700 on a scale of 0 to 850.
According to a Time Magazine article from January, the average credit score for folks between ages 30 and 39 — the age most people buy homes — was 671.
Like any housing program in Seattle, programs with affordable homes for purchase have hundreds of people on waiting lists looking to buy into the market at a price they can manage.
“We continue to think that there are many benefits, but it’s just a challenge in this market, which is why we prioritize creating these permanently affordable homes,” LaBrecque said.
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Follow Ashley on Twitter @AshleyA_RC
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