real estate and poverty follow up

[danaeris]

I guess I should have mentioned that I'm writing a paper on something called inclusionary zoning, which is a planning tools municipalities, states, provinces, etc. can use to require the creation of affordable housing.

That's why I've been looking at definitions of poverty, and why I was talking about buying a home that can only be sold to low-income individuals.

FYI, houses like I describe exist across the U.S. In Canada, however, they may be less practical because we don't get to deduct our mortgage payments the way Americans can.

Here's a few quotes from the application for such housing in West Sacramento.

To qualify to buy:
"To qualify for the purchase of an affordable unit Borrower must be a “low or moderate-income
household.” A household is “low-income” if the combined household income does not exceed eighty
percent (80%) of the Yolo County area median income, adjusted for household size. A household is
“moderate-income” if the combined household income does not exceed one hundred twenty percent
(120%) of the Yolo County area median income, adjusted for household size. The current Yolo
County area median income table is attached. "

To resell:
"This property may only be used as owner-occupied housing and may only be sold to another lower or
moderate-income household at the designated affordable price, as determined by the City. Details
of these restrictions, and certain limited exceptions to them, are contained in the Regulatory (For-
Sale) Agreement recorded against the property."

"These restrictions will be in effect for forty-five (45) years. If you sell the property in violation of
the restrictions, you will be required to pay the City the difference between the appraised value of
the property and the affordable housing price, as determined by the City, at the time of sale, less
your down payment and depreciated capital improvements."

Comments

[velvetpage.livejournal.com]

I've heard of this idea before. It's the idea of building a few subsidized units, a few small single-family units, a few moderate income units, and a few high-income units, all within a small geographical space, and not grouped together substantially. The way it usually works out is you'll have an enclave of twenty or thirty of each type of housing within a relatively small space - say, a kilometre on all four sides, or some such. The kids all mix at the same school and everyone makes use of the same community buildings.

The long-term downside is easily visible in neighbourhoods like the one where my school is. There are too many subsidized housing units for the geographical space, and those units are three-bedroom ones, which means they're occupied by young-ish families. When the kids move out, the parents soon move to an apartment because they no longer qualify for a subsidized townhouse. Meanwhile, the middle-class housing nearby is bought by a family with young children, who grow up and move out - but the parents have by then established a nice vegetable garden, they've installed a new furnace, their kitchen is decent, and their mortgage mostly paid, so they stay. And stay. And stay. Over time, of course, they start to move out, but in the meantime, the ratio of low-income to middle-income to high-income families has changed dramatically from what was originally envisioned for the neighbourhood. More than half the kids in the school come from the subsidized housing, though the SH development represents less than a quarter of the actual living units in the area. The middle-class families that move in look at the school, maybe talk to neighbourhood parents, and then send their kids to the French Immersion school a few blocks away.

Long story short: it doesn't work very well. Ghettos work much worse, mind you - but either the ratios are wrong or the whole concept is problematic.

[awfief.livejournal.com]

*nod* in my town (well, city), there isn't enough of these lower-income housing, which means that any new construction has to have a certain percentage of lower-income housing, which either stops new projects, or has the owners of the construction try to get around using loopholes, and generally creating bad blood.

Also, there are ways around the low-income thing -- for a while my older brother lived in low-income housing by arranging with his boss to be paid less for 1 year, but the company paid for a lot of things -- his car, his meals, etc. my brother's a lawyer; he made a lot of money, and was a slimebag.

[velvetpage.livejournal.com]

I don't think that happens a lot around here - there are interviews and an extensive application for subsidized housing, which includes things like workplace. If he'd been the single father of several children, he might have gotten it. But I can't remember any kids from subsidized housing who didn't strike me as legitimately low-income once I knew the family - though many hid it well.

[nathanjw]

What's the connection to the mortgage deduction? If Canada doesn't have that (and I don't know why they would), then everything should be peachy keen. The only real effect of the mortgage interest tax deduction is to permit well-off buyers to buy even more.

(To be clear, it's only a deduction of the interest part of the mortgage payment, not the whole thing; it's only available if you itemize deductions on your taxes, so it essentially only kicks in if you have large/complicated finances or a large mortgage; and it was never a deliberate act of policy to create it - it was a total accident of tax law that became too much of a subsidy to the sort of people that vote to touch. In a just world, it would die a painful death and go to whatever circle of Hell is reserved for comforting the comfortable while further depriving the needy.)

[awfief.livejournal.com]

A little more explanation -- it's also a tax deduction, not a credit. Most people with low to moderate incomes have enough tax credits and deductions that deducting mortgage interest would be redundant anyway.

(Tax credit = you are owed the money by the government, so if you paid all your taxes exactly right and then had a tax credit you'd get that money. Tax deduction = you can reduce your tax debt to the government, but you don't get it if you have no tax debt. So if you paid all your taxes exactly right and had more in deductions, you wouldn't get that money. For the purposes of this example, "pay your taxes exactly right" means not paying any more than the government requires, as if you got your tax responsibilities exactly right in every paycheck. You can't deduct farther than a certain point, no matter how far you are. Oh, and as a real stinker, you can be taxed on money you receive as a tax return).