Depends on whom you ask but the general consensus seems to be that “affordable housing” is a house which falls within a certain price point, let’s say $85,000 to $150,000. Or, affordable housing might be described as housing which a middle class family can afford based on the local standard of living. It is an elusive term, referring to an elusive, unidentified house at some purchase price, also elusive.

Conservative lenders use the general rule that most consumers can afford a monthly housing expense that represents no more than 28% of their gross monthly income (income before taxes). Principal and interest, hazard insurance, real estate taxes, (the real amount which will be due) and private mortgage insurance (if applicable). Conservative, traditional lenders have found that as long as the consumer’s total long-term debt is no more than 36% of their total gross income then there is enough wiggle room to afford other items that constitute a “reasonable” lifestyle. This rule has proven over the years to help people to have medical coverage, some degree of entertainment as well as build a small savings account. Rarely would such a consumer end up in default on their mortgage unless there was a total loss of income.

This then would represent an affordable house payment. Each individual has a unique affordable housing expense amount that would determine what is affordable for this family. I strongly believe it is important to keep home prices as low as possible, to offer a wide range of homes at different price points so that more consumers are able to comfortably afford to own a house and spend less than the 50%+ that many family currently spend to have a roof over their heads. What I have just described is “an affordable house payment” which is the goal for all us.

The American Dream is almost universally described as the desire to own a home. I encourage politicians, housing professionals and the general public to take a fresh look at our current concept of what achieving that dream means. Are we being successful if we provide the dream to people who can acquire but not retain the home for more than a few years? Are we achieving our goal if many of the people we get into new homes are paying so much for that home after interest increases and full tax assessment that 50%-60% of their income is required for basic housing expenses leaving precious little for any of the other necessities of life? Are we really providing affordable housing or housing which appears to be affordable at the beginning because of creative financing ploys that reduce the initial payments by hundreds of dollars per month deluding consumers into believing it is “affordable”. Why are foreclosure rates so high in the FHA arena with many first time buyers? Are the down payment assistance programs leading to more people being home owners (retaining a home for several years) or just a revolving door of more people who build/buy but are back in the rental market within a couple of years?

It is time to raise the difficult questions and look for some honest answers in trying to shape what will be done to improve our housing market. It is important to offer “affordable” housing to help stabilize our communities, to allow more consumers to enjoy both the emotional and financial benefits of home ownership. It is a dream worth working and saving to achieve. It should be more than a fleeting illusion which disappears and leaves in its wake a disillusioned, frustrated consumer who barely comprehends that the beautiful home and future they envisioned was doomed from the beginning.

Affordable housing should be “affordable” for the people who are signing contracts by the thousands in Central Indiana to build dreams that too often become nightmares within 2 ˝ -3 years.

If there is a particular subject you would like to see explored, please contact Ms. Wilkins via email: mildredwilkins@homeownershipmatters.com.