Tag Archives: medical care

The Missing Piece in The Affordable Housing Puzzle

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The National Low Income Housing Coalition has posted The Gap: A Shortage of Affordable Homes. The report opens,

One of the biggest barriers to economic stability for families in the United States struggling to make ends meet is the severe shortage of affordable rental homes. The housing crisis is most severe for extremely low income renters, whose household incomes are at or below the poverty level or 30% of their area median income (see Box 1). Facing a shortage of more than 7.2 million affordable and available rental homes, extremely low income households account for nearly 73% of the nation’s severely cost-burdened renters, who spend more than half of their income on housing.

Even with these housing challenges, three out of four low income households in need of housing assistance are denied federal help with their housing due to chronic underfunding. Over half a million people were homeless on a single night in 2017 and many more millions of families without assistance face difficult choices between spending their limited incomes on rent or taking care of other necessities like food and medical care. Despite the serious lack of affordable housing, President Trump proposes further reducing federal housing assistance for the lowest income households through budget cuts, increased rents and work requirements.

Based on the American Community Survey (ACS), this report presents data on the affordable housing supply, housing cost burdens, and the demographics of severely impacted renters. The data clearly illustrate a chronic and severe shortage of affordable homes for the lowest income renters who would be harmed even more by budget cuts  and other restrictions in federal housing programs. (2, citations omitted)

The report’s key findings include,

  • The nation’s 11.2 million extremely low income renter households account for 25.7% of all renter households and 9.5% of all households in the United States.
  • The U.S. has a shortage of more than 7.2 million rental homes affordable and available to extremely low income renter households. Only 35 affordable and available rental homes exist for every 100 extremely low income renter households.
  • Seventy-one percent of extremely low income renter households are severely cost-burdened, spending more than half of their incomes on rent and utilities. They account for 72.7% of all severely cost-burdened renter households in the United States.
  • Thirty-two percent of very low income, 8% of low income, and 2.3% of middle income renter households are severely cost-burdened.
  • Of the eight million severely cost-burdened extremely low income renter households, 84% are seniors, persons with disabilities, or are in the labor force. Many others are enrolled in school or are single adults caring for a young child or a person with a disability. (2, citations omitted)

While the report does show how wrongheaded the Trump Administration’s proposed cuts to housing subsidies are, I was surprised that it did not address at all the impact of local zoning policies on housing affordability. There is no way that we are going to address the chronic shortage in affordable housing by subsidies alone.

The federal government will need to disincentivize local governments from implementing land use policies that keep affordable housing from being built in communities that have too little housing. These rules make single family homes too expensive by requiring large lots and make it too difficult to build multifamily housing. We cannot seriously tackle the affordability problem without addressing restrictive local land use policies.

Using Home Equity Responsibly

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photo by Scott Lewis

Chase.com quoted me in How a Home Equity Line of Credit Can Help Your Family. It reads,

If you’re a homeowner, you could qualify for a unique financial product: the Home Equity Line of Credit (HELOC). HELOCs allow you to borrow money against the equity you have in your home and similar to a credit card, they offer a revolving credit line that you can tap into as needed.

“Equity is the market value of your home less what you owe on your mortgage balance,” explains David Lopez, a Philadelphia-based member of the American Institute of Certified Public Accountant’s Financial Literacy Commission.

With home values on the rise and interest rates historically low, HELOCs are an attractive option right now. Plus, according to Lopez, for most borrowers, there’s the added benefit of a potential tax deduction on the interest you pay back.

However, since your home is on the hook if you can’t meet your debt obligations, you’ll have to be cautious, explains David Reiss, a professor at Brooklyn Law School and editor of REFinblog, which covers the real estate industry.

So, what are the most common reasons you might consider leveraging this tool? According to the Novantas 2015 Home Equity Survey, 50 percent of people said they opened a HELOC to finance home renovations, upgrades and repairs.

That was the case for Laura Beck, who along with her husband, used their equity to fund a substantial home renovation that doubled their square footage and home’s value.”The HELOC let us do a full renovation right down to re-landscaping the yard without being nervous about every penny spent,” she says.

Interested? Here are a few of the most common reasons people leverage a HELOC:

Home improvement expenses

Upgrades to your home can increase the market value and not to mention, allow you to enjoy a house that is customized to fit your family’s needs.

Pro Tip: Some improvements and energy efficient upgrades, such as solar panels or new windows may also score you a bonus tax credit, says Lopez.

Debt Consolidation

Exchanging high interest debt (like credit cards) for a lower interest rate makes sense, especially since interest payments on your HELOC are usually tax deductible, says Lopez.

Pro Tip: Reiss stresses how important it is to “be cautious about converting unsecured personal debt into secured home equity debt unless you are fully committed to not running up new balances.”

Surprise expenses

When faced with a situation in which money is the only thing preventing you from getting the best medical care, a HELOC can be a literal life saver, Reiss explains.

Pro Tip: If you need to pay an existing medical bill, however, try negotiating with the health care provider rather than use your equity, says Reiss. Often, they are willing to work something out with you, and you won’t have to risk your house.

College expenses

Reiss explains how a good education can improve one’s career outlook, increase earnings, and has the potential of offering a strong return on your investment.

Pro Tip: Before turning to your equity for education costs, try to maximize other forms of financial aid like scholarships, grants, and subsidized loans.

No matter your reason for considering a HELOC, if used responsibly it can be a great tool, says Reiss. For information on how to qualify, speak to a banking professional to see if this is a good option for you.

Seniors Selling Their Homes

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AARP Magazine quoted me in Selling Your Home. It reads, in part,

Judy and Joe Powell recently faced a decision most of us will eventually have to make: Should we sell our home and downsize to save money and effort, or hang on to the homestead because it’s familiar and full of fond memories?

After mulling the choice for a couple of years, the Texas couple decided to sell their 20-acre cattle ranch to move to a nearby college town.

“We are the sole caretakers of this property. It’s 24/7,” says Judy, 69, who mows the pastures with a John Deere tractor while her husband, 71, tends the cattle. “Basically, we don’t want to have to work this hard. We want time to play.”

The Powells now have their sights set on a single-story house in nearby College Station, where, for a monthly fee, someone else will maintain the yard. What’s more, they will be 30 minutes to an hour closer to their friends and doctors. The savings on gas alone will be more than a thousand dollars a year, Judy says.

Most of us aren’t dealing with the rigors of running a ranch. But, like the Powells, many of us will discover at some point that our homes, though we love them, no longer suit our lifestyles, or that they are becoming labor-intensive money pits.

A recent Merrill Lynch survey of people’s home choices in retirement found that a little more than half downsized and, like the Powells, were motivated by the reduction in monthly living costs and by shedding the burden of maintaining a larger home and property. Still, moving is not a decision easily made.

“The tie to one’s home is the hardest thing to understand from the outside. It’s a very personal decision,” says Rodney Harrell, a housing expert with the AARP Public Policy Institute.

Some people may be reluctant to move from a house where they raised children and created decades of memories, he says. On the other hand, the cul-de-sac that provided a safe place for kids may be isolating if driving becomes a challenge.

A good way to begin the process of figuring out what’s best for you is to “recognize the trade-offs,” Harrell says. First, consider the house itself. Is it suitable for your needs, and will it allow you to age in place? Most homes can be easily modified to address safety and access issues, but location is also critical.

“How close are health facilities?” asks Geoff Sanzenbacher, a research economist with the Center for Retirement Research at Boston College. “Are things nearby, or do you have to drive?”

Even if your current home meets these age-friendly criteria, you need to consider whether it is eating up money that could be spent in better ways to meet your changing needs.

For example, the financial cushion provided by not having a mortgage can be quickly erased by rising utility costs, property taxes and homeowner’s insurance. There is also the looming uncertainty of major repairs, which can cost thousands of dollars, such as a new roof and gutters, furnace or central air conditioner. A useful budgeting guide is to avoid spending more than 30 percent of your gross income on housing costs, says David Reiss, a professor at Brooklyn Law School who specializes in real estate finance.

“This isn’t a hard-and-fast rule, but it does give a sense of how much money you need for other necessities of life, such as food, clothing and medical care, as well as for the aspects of life that give it pleasure and meaning — entertainment, travel and hobbies,” Reiss says.

So if your housing expenses are higher than a third of your income or you’re pouring your retirement income into your house with little money left to enjoy life, consider selling and moving to a smaller, less costly place.

Just as important, once you’ve made the decision, don’t dawdle, Sanzenbacher says. The quicker you move, the faster you can invest the proceeds of the sale and start saving money on maintenance, insurance and taxes.

Take this example from BC’s Center for Retirement Research: A homeowner sells her $250,000 house and buys a smaller one for $150,000. Annual expenses, such as utilities, taxes and insurance, typically amount to 3.25 percent of a home’s value, so the move to the smaller home saves $3,250 a year right off the bat.

Moving and other associated costs would eat up an estimated $25,000 of profit from the sale, leaving $75,000 to be invested and tapped for income each year.

If all of this sounds good, your next decision is where to move. Your new location depends on any number of personal factors: climate; proximity to family and friends; preference for an urban, suburban or rural setting; tax rates; and access to medical care, among other considerations.

“You want to take an inventory of your desires and start to think, ‘Do I have the resources to make that happen?’ ” Reiss says.