Improving Non-Subsidized Affordable Home Ownership

2014-02-22 - Home Affordability

Affordable Housing and Home Ownership   

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IN THE SLOWLY RECEDING WAKE OF FORECLOSURES, AFFORDABLE HOME OWNERSHIP continues to inch along an uneven path. The stubbornly sluggish economy and tighter lending practices have had many opting to rent rather than buy and its a situation that is more than just an interesting phenomenon in housing trends.

Most jurisdictions actively seek substantial levels of home ownership as one significant factor that helps stabilize neighborhoods. In fact, there are numerous benefits to folks owning their homes, not only for society in general but also for the homeowner and the homeowner’s household. In 2012 those benefits were documented through the research and reporting of the National Association of Realtors (http://www.realtor.org/sites/default/files/social-benefits-of-stable-housing-2012-04.pdf).

However, this blog article will not recount all the positive attributes of homeownership. And for now, at least, we’ll avoid any debates about taxpayer dollars subsidizing affordable housing (also known as worker class housing) or the bias some affluent neighborhoods may have against worker class housing. Instead, we’ll focus on and acknowledge the value of home ownership that has been and is formally demonstrated in specialized low-income state loan programs and municipal affordable housing projects that are underwritten with tax money in an effort to extend the American Dream to many folks of modest means.

With home ownership being important enough to warrant such governmental affordable home programs, rather than just relying on tax money, especially during anemic economic times, shouldn’t legislators take actions that better ensure private sector affordability whenever possible? It certainly seems the logical and fiscally prudent way to go. And it would free those funds for other needed purposes. Yet, for whatever reasons, some jurisdictions impose taxes and unique regulations on manufactured housing—a viable form of non-subsidized private sector affordable home ownership currently available (see our January 26, 2014 blog posting entitled Manufactured Housing: A Reputation Revisited). So let’s take a look at this situation in New York, our base state.

Manufactured homes here are technically categorized as personal property (chattel), as opposed to traditional “stick-built” housing being real property. The chattel category includes all personal items such as vehicles, boats, tools and all other objects not deemed real property (real estate, land). As chattel, obtaining long-term manufactured home purchase financing through conventional mortgages is a challenge, if possible at all.

Excluding modular homes from this discussion, the cost for a new manufactured home is often thirty percent (30%) to fifty-five percent (55%) less per square foot than traditional housing (depending on the actual location). Hence, for the most part they are inherently more affordable as a housing purchase option.

But that affordability is undermined. Like other chattel, a new manufactured home is subject to sales tax, but unlike other chattel, once the home is installed it is also subject to real property taxes as well. No other form of housing is known to be subjected to sales and property taxes, a factor that makes such housing less affordable.

Further, municipalities have been known to adopt restrictive zoning codes on manufactured homes that frequently prevent them being placed on private parcels. As a result most are placed in multi-family manufactured home communities, which in most cases yield an arrangement where the individual owns the manufactured home but rents (leases) the site upon which the home rests. Such communities are operated under municipal permits that require periodic renewals, sometimes as often as once per year. Each renewal usually entails payment of a fee. Again, other multi-family residences don’t have this requirement or expense, the cost of which is often proportionately passed along to the homeowner through site rent.

And then the entirety of manufactured home communities are subjected to annual health department inspections in order to obtain the required annual operating permit from that department. This permit is in addition to compliance with whatever conditions the building department  may impose in a particular municipality, it carries its own annual fee and yes, other multi-family properties don’t have this annual health department mandate or expense. This cost is also proportionately paid by the homeowners.

Comparatively, in many municipalities if an inspection is conducted in an apartment building the building department typically does it on a particular unit when a complaint is filed or, depending on the involved municipal code, before a new tenant moves into vacant unit.

In the end, the effect of such regulations and tax further reduce the limited purchasing power of folks with modest incomes thereby preventing or making more difficult their ability to be homeowners. In the case of manufactured housing, what should be a significant resource for non-subsidized private sector affordable housing and home ownership is rendered less so.

Considering the favorable aspects of home ownership, removing or restricting barriers to affordability would be a needed change for the better.

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Need coaching, training or problem troubleshooting regarding the foregoing or other housing issues? Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation.

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32 Responses to “Improving Non-Subsidized Affordable Home Ownership”

  1. Georgia Says:

    sure government policies can affect affordability but so does the landlord’s rent

    • Inhouse Corporation Says:

      Georgia — Yes, rent certainly is a factor. However, the issues noted in the affordable housing post show a couple of the expenses brought about through government policy, which expenses are paid with funds raised through rent. Of course, other costs built into the rent also typically include property taxes, insurance, maintenance, professional services (attorney and accountant) management and similar operational costs.
      While recognizing differences a land-lease arrangement creates, the overall point being conveyed is government can help affordability by treating manufactured housing in a manner that better reflects the type of treatment given other housing forms.

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