What “affordable housing” means and why we need more
Sometimes when people say “affordable housing” in the context of a town’s housing stock they are referring to income-restricted rental housing, meaning you must earn less than a certain amount to live there.
As an example, “The Calvin” at 420 Harvard Street, Brookline is a 25 unit development. In order to be built under 40B to overcome zoning restrictions, part of the project, 4 units and 1 more nearby were set aside for households with income at or below 50% of the Area Median Income. The affordable units included one studio, one 1-bedroom, two 2-bedrooms, and one 3-bedroom.1
The restrictions on those units include: A family of three’s total income had to be less than $53,350 per year to qualify. Also, they must be able to afford the rent, which was $1,167 for one of the 2-bedrooms, meaning they needed minimum income of ~$41,700 to qualify, according to guidelines from the leasing office. (So they have to earn between $41,700 and $53,350 to even apply). After move-in, they must leave if their income increases above 140% of the then current Area Medium Income for their household size.
Unsurprisingly, the project received well over 1000 applications for those 5 spots, necessitating a lottery.2 Each applicant had less than half a percent chance of securing an affordable unit. It’s easy to conclude Brookline is generally unaffordable to those earning less than 50% of Area Median Income, and almost any amount of affordable housing built for the 50% of Area Median Income would be insufficient. (Not a reason not to build more.)
Is even 200% of Area Median Income enough?
There is a big gap, however, between the earnings maximum to qualify for those affordable housing units, and the minimum needed to qualify for market rate units. Even people earning substantial income well above area medians, which historically would have been sufficient for Brookline, often cannot afford the housing option they would prefer.
For example, a family with annual household income of $200,000 (approximately 200% AMI for a family of three to four3) might consider $900,000 to $1,000,000 to be the upper limit of what they can afford.4 If they desire a three to four bedroom condo in move-in condition with 1 ½ or more bathrooms, a deeded parking spot, central air conditioning, in-unit laundry, 1500 square feet, and walkable to the T, shops, and parks, they may very well conclude that north Brookline lacks affordable options. 69 units matching that description sold on the MLS in 2019 for an average of $1,659,378, and ranged from $1,075,000 to $2,767,500.
The point is not to “feel sorry” for a family earning $200,000 a year; they certainly have more options than most. Rather, consider what change that will wrought on who can live here and what it will mean for Brookline if the people who dedicate their lives to serving others (from teachers and firefighters to doctors and lawyers) cannot afford to live here.
In conclusion, we need more housing at all price points.
- Assuming a 20% down payment and 3.825% interest on a 30-year fixed mortgage, $8000/ year in property tax, $500/month condo fee, and $1200 per year for insurance, their monthly payment would be approximately $4632 on a $900,000 condo purchase, representing 27.8% of their pre-tax income. A typical lender would likely approve the person for a higher monthly housing cost, perhaps as high as 48% of income (i.e. 48% debt to income ratio), but many people would be uncomfortable/unable taking on that level of debt, especially given other rapidly increasing costs such as childcare, healthcare, and eldercare.
Questions? Email me and let's set up a time to discuss your real estate needs.
AVI KAUFMAN is a top broker who lives in Brookline, Massachusetts and works there and surrounding communities, assisting buyers and sellers of residential property. He is building a unique practice dedicated to serving the best interest of his clients - see how he's different.