Solving Affordability Requires Understanding It

One of the reasons why so many cities struggle with achieving affordability a poor understanding of what constitutes affordability. This is why Housing Now has spent so much time on the The Family Housing Cost Model (FHCM).  This cost model is an important starting point for the policy discussion in Seattle and beyond. We've been hard at work on this and hope to release a public "beta" of the model by the end of June.

The cost model itself is derived from an approach pioneered in this article by Stone, Burke, and Ralson from 2011. The "Residual Income Approach" they describe has three great advantages:

1. By looking at the actual costs that different families face, we can more realistically define what families can afford to pay for housing. Example: A family with one adult and three kids has much different costs and resources than a family with two adults and one kid.

2. Many government programs provide services to people at discounted rates. Examples include Washington Apple Care (Medicaid), The Washington State Childcare Subsidy Program, the Seattle Preschool Action Plan, and the Metro Low Income Fare Program. These reduced price services are a defacto income supplement but they don't appear in people's gross income. The commonly used Housing and Urban Development (HUD) 30% of income standard doesn't take these resources into account. When we add these to the equation we achieve a more holistic look at affordability.

3. When we require buildings to meet certain affordability requirements to be funded, it's a double edged sword. On the one hand, we're keeping the price down, but on the other hand, when we refuse to go above a certain price we're limiting the supply of buildings we can provide. As such we need to be extremely deliberate in our setting of price targets for affordable housing. If we aim too low, then a lot of "affordable enough" buildings will simply never get built. This is even more true in the case of the publicly financed, unsubsidized approach we're working on. On the flip side, some families may have costs that preclude them from spending even just 30% of their income on housing. In acknowledging their needs we can start to address them.

For all these reasons the cost modeling we're doing will help us build a variety of different housing types at price points that are both practical and fair.

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