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The making of a narrative – Affordable Housing Hoax (Part 2)

BY LEN CABRERA / JULY 24, 2019

Both the county and city commissions have decided that “affordable housing” sounds well-intentioned enough to justify raising taxes and restricting private property rights. The fact that their policies will do nothing to reduce housing costs is evidence of their lack of knowledge and/or lack of honesty (see Part 1). 

Rather than challenge the commissions, the local paper ran a story on July 7th, pushing the “affordable housing” narrative. The story is based exclusively on a press release from ATTOM Data Solutions, a business that aggregates publicly-available real estate information (taxes, deeds, mortgages, etc.). ATTOM’s June report shows that collecting data isn’t the same as understanding data.

The report claims that the median-priced home is not affordable for “average wage earners” in 74 percent of U.S. housing markets. This outrageous claim ignores a basic result of free markets: products that cost more than consumers can afford simply do not exist. The only exceptions to this rule are markets that are distorted by government involvement, like healthcare and higher education. The ATTOM report is ready-made propaganda for the “affordable housing” narrative, attempting to add a veneer of credibility from “analysts.” 

It doesn’t take long to find holes in ATTOM’s methodology, but first consider The Sun‘s claim that Alachua County housing costs are higher than the national average. It’s hard to see how this could be true, given the data from ATTOM: the median home price nationally is $255,000, versus $181,750 in Alachua County; the national average wage is listed as $57,278, versus $47,476 in Alachua County. Ignoring property taxes, mortgage interest, and insurance, the ratio of home price to income is 4.45 nationally, compared to only 3.83 in Alachua County. In fact, the ATTOM data includes 36 of Florida’s 67 counties. By any measure, housing in Alachua County is more affordable than most of these counties:

  • Ratio of median home price to average income: 32 counties are worse.
  • Percent of annualized average wages required to buy median home: 31 counties are worse.
  • Affordability index: 31 counties are worse.
  • Counties that have higher median home prices AND lower average wages: 18 counties are worse.

In fact, despite calls for “affordable housing” from the city and county commissions, the Gainesville city manager recruitment brochure says “housing prices are reasonable” (p3). Despite City Commissioner Arreola’s claim of no “lucrative private partnership opportunities,” the recruitment brochure says there has been $50 million in private investment to improve the midtown area, including housing (p4).

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Lest we get too comfortable with ATTOM’s numbers, realize they are garbage because the methodology is bad. First, they used a median-priced house, so 50 percent of all houses are cheaper by definition. Also, the study ignored rental properties and apartments, which are typically used by non-family households. Alachua County exceeds the state average in non-family households because of the large student population: 48% of all households are non-family, compared to 35% state-wide. Also, ATTOM’s estimate for housing costs assumed a debt-to-income ratio of 28% (industry standard) but only considered a 3% down payment when calculating the mortgage payments. This low down payment violates the traditional rule of putting 20% down (which also allows homeowners to avoid mortgage insurance), artificially making the monthly costs for the houses appear to be more expensive. 

The average wage data used by ATTOM is also incorrect. It comes from the Bureau of Labor Statistics Quarterly Census of Employment and Wages. It computes “annual wages per employee” by dividing the total wages paid in the entire county by the annual average number of employees. This does not accurately reflect household income, which can include sources of income from outside the county and multiple wage earners within the same household. (Also note that all wage earners in Alachua County do not necessarily live in Alachua County.)

A better estimate of household income comes from the Census Bureau’s American Community Survey (the same source used for the County’s Racial Inequity Report.). Based on the ACS, Alachua County’s average  household income is $66,321, significantly more than the $47,476 in the ATTOM report. More importantly, the average income for “family households” is $89,167, which is more than the state average for family households ($85,154). The “family household” number is probably the best income figure to use when considering the affordability of houses (versus housing in general). Given the large number of college students in Alachua County, the higher proportion of non-family households (compared to the state proportion) makes the county’s overall average income look worse. Since many of these non-family households are not looking to buy houses anyway, it is not appropriate to include their income in the overall average to assess affordability. (Incidentally, the proportion of the population that are students in Alachua County far exceeds the state average: 21.3% compared to 6.8%.)

If the need for “affordable housing” were as dire as the politicians (and reporters) tell us, they would not need to rely on faulty analysis to make their case. They also would not ignore advice and input from experts who actually have knowledge of the housing market. As with most recent initiatives from Alachua County (and the City of Gainesville), this is simply another attempt to increase the power and scope of government while taking more and more income from the citizenry.

Photo credit: Nader Moussa – Myself, CC BY-SA 3.0, https://en.wikipedia.org/w/index.php?curid=5435624

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