URBS 350Housing Related TrendsHousing Related TrendsDimensions of Housing NeedHousing Cost BurdenHousing TodaySlide Number 7Cost BurdenCost BurdenSome TermsHomeownership Real-estate related tax benefitsBuying stuff w/ your house Housing Types (US) 2006Housing (2010)Owners, Renters and Housing Types, 2006Estimated HH and Pop GrowthProperty RightsLand rightsReal PropertyImportance of Property RightsBuying your own home (US)Some quick homebuying calculationsUsing Excel for calculating Mortgage Payment Principal and InterestForeclosures..Slide Number 27Impact of Foreclosures Housing AffordabilitySlide Number 30Slide Number 31Secondary Housing MarketsFannie Mae and Freddie MacFannie Mae and Freddie MacHomeownershipTouted Benefits of HomeownershipWhat does the research showHome EquityExtracting EquityHOUSING NEEDHousing Need Housing NeedSlide Number 43Housing ShortfallsHousing ShortfallsAffordable Housing PoliciesSlide Number 47The Public Housing Solution--Pruitt Igoe Pruitt Igoe – when it was builtPruitt Igoe – a few years later Photo by RamrothPublic HousingHistorical trends contributing to “ghettoes”Housing Markets and Housing Finance in Developing CountriesHousing Finance in Developing CountriesHousing Finance in Developing CountriesHousing Market – Developing Countries1990 – Owner Occupied, Unauthorized, Squatter Housing by a Country’s Development StatusInformal housingInformal housingSlumsIndia - CalcuttaIndiaIndiaHong KongPhilippinesBrazilKenyaSouth AfricaSlums and the LandlessSlumsSlumsHowever….Why do Slums Exist? Why do Slums exist?Why do Slums exist?Owners / Managers of slum housingWhat can government/policy do?What can government/policy do?Housing – Factors to considerSolutionsSolutionsLand Bank Question to considerAmerican Suburbs – the Next SlumsURBS 350 Prof. Abhishek Tiwari HousingHousing Related Trends • Declining home prices • Declining new home construction • Reduction in property taxes • Slow or no growth and, in some cases, decline in real-estate, housing related jobs • Reduction in Household formation ratesHousing Related Trends • In March 2011: – 2 million home loans were 90 days delinquent – 2.2 million properties were undergoing foreclosure (2/3 of these owners had not maid payments in more than 1 year, 31% had not made a payment in 2 years) – 5% of census tracts accounted for more than 1/3 of the homes lost to forecloseDimensions of Housing Need • Housing affordability > those spending 30% - 50% of gross income are cost burdened > 50% severely burdened • Crowding – >1 to 1.5 persons per room • Housing quality (See HUD:2005 – Moderate to severe physical problems) – Measures of housing quality typically include an assessment of the age of structure, condition of common areas, adequacy of the kitchen, availability of proper sewage systems, structural problems and code violations, plumbing problems and neighborhood qualityHousing Cost Burden • If a household makes the AMI for Los Angeles (~$45-50,000), what is the most it can spend on housing without being considered cost burdened? • If a household is spending $1500 per month on rent, how much should it make annually to not be considered housing cost burdened?Housing Today • In 2009, 19.4 million households paid more than ½ of their gross income on housing – 9.3 million were homeowners – 10.1 million were renters • Home equity declined from $14.9 trillion at the peak of the housing bubble to $6.3 trillion by the end of 2010 – $10.1 trillion was the mortgage debt – As a whole the nation’s housing market is upside downCost Burden • 39% of renter households spend more than 35% of their income on gross housing expenses. Typical renter spends just over ¼ (26%) of his/her income on housing. • 1/3 of all households spend more than 30% of their income on housing; 1/7 spend more than 50%, i.e. the severely cost burdened. • In 2005, those earning below $24,000 accounted for almost 8 in 10 cost burdened households. Nearly half of low-income households – 8.2 million renters and 5 million homeowners– have sever burdens. 1.9 million low-income households were added to the ‘severely cost – burdened’ pool between 2001-05Cost Burden • In 2001, 7.3 million homeowners reported spending more than ½ of their incomes on housing, a 25% increase from 1997. • In 2004, 15.8 million households spent more than 50% of their income on housing. • In 2005, the number of households paying more than 30% of their income to housing costs increased by 2.3 million to 37.3 million and the number spending more than 50% increased by 1.2 million to 17 million • Also by 2005, the number with ‘worst case housing needs’ had increased to 5.99 million, a 16% increase representing 817,000 householdsSome Terms • Housing unit – any residential dwelling • Occupied Unit = Housing unit with someone living in it – Avg HH size = population/occupied units • Year around unit • Seasonal unit – usually vacation homes • Single Family, detached (SFR) – predominant housing type in the US • Single family, attached (typical suburban tract housing) • Multifamily – apartments • ManufacturedHomeownership • Any occupied housing units that is occupied by someone who owns the house is considered owner occupied • The unit of analysis for homeownership (i.e. homeownership rate) is the home and not the individual • For example, the US has a homeownership rate of 67%, which means roughly 2/3 of housing units are owner occupied. This is not the same thing as saying 2/3 of those in the US are homeowners.Real-estate related tax benefits • Mortgage interest • Property Taxes • LOC payments • Depreciation • No imputation of rental income • Rental expenses, including insurance, repairs, driving, etcBuying stuff w/ your house • $50,000 LOC – use it buy a car (current rates average around 3-5%) • Car Price - $30,000 • Monthly payment - $450 principal + interest (3%) • Payments would start at $523 and decline to $453 (over 66 months, though you could extend the payment horizon) • Total interest Paid - $2540 (of this you would get back 20-25% depending on your income tax rate)Housing Types (US) 2006 Type Number Occupancy Status Number Single family, detached 77.7 million Occupied 108.8 million (70 million SFR) Single family, attached 7 million Vacant 11.7 million Multifamily 31 million Seasonal 3.8 million