It’s all the buzz these days to talk about affordable housing. But what does that term actually mean?
I believe most people would think it means housing that most people can afford; that’s a pretty broad definition. But at what cost? How exactly do you build affordable housing? In reality, the term means housing that people at 60% of the median income level can afford to rent.
A recent article (Nov. 25, “Corvallis loans $500K to housing project”) announced 174 units of affordable housing being built in Corvallis off Highway 99W at Wake Robin Avenue. The article quoted a price of $50 million dollars for the project. Simple math says each apartment unit would cost $287,356. Does that sound affordable?
The article also goes on to explain that a $500,000 zero-interest loan from the city of Corvallis will be given to the project from the affordable housing construction excise tax. This is where it gets interesting. The article says that other developers pay this tax to help fund affordable housing projects. In reality, homeowners and businesses pay this fee.
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As a contractor, I can tell you that any and all fees or permits or system development charges are passed straight through to the client. Your contractor has no control over these government-imposed charges.
The irony here is that this affordable housing construction excise tax actually increases the cost of the addition, accessory dwelling unit or house being constructed for the homeowner — making their project less affordable. The tax does not purchase any materials or labor for their project. On a current project I’m working, the affordable housing construction excise tax was over $900.
Think Robin Hood. Take from the rich to give to the poor. The city of Corvallis has effectively stolen $2.4 million under this scheme. And this money does not make the other project being built (affordable housing) truly affordable, but what it does is subsidize the cost of the housing. And then there are property tax exemptions that also subsidize the cost of the housing by not charging property taxes for 30 years.
But none of this really addresses the true cost to build housing. Housing consists of the Five L’s: labor, lumber, lending, lots and laws. If government was truly interested in reducing the cost of housing, it could start by reducing the costs it imposes on housing.
One could argue that the cost of gasoline has recently become unaffordable for many. Should the government charge an extra fee per gallon to all drivers to provide a reduced gasoline cost to those who can’t afford it?
All public transportation is subsidized. The small cost paid by the transit rider does not begin to cover the actual cost of the transportation. And yet we don’t call it “affordable transportation,” so let’s stop calling it “affordable housing.”
It’s subsidized housing: housing built with the forced contributions of other people’s money to reduce the cost of housing for a selected class of people. And when you factor in the 30-year property tax break, the costs of schools, police, fire, roads and government all increase for all the rest of the property-tax-paying citizens. Besides homeowners and businesses, those renting nonsubsidized housing also indirectly pay property taxes.
But those renting the subsidized housing are not paying for those city services they receive. This really is a scam with wide-reaching consequences. The loss of property tax revenue over a 30-year period can be upwards of $10 million to $15 million dollars per project.
However you may feel about it, can we just be honest and call it what it is: subsidized housing?
Albany businessman John Robinson is a general contractor involved in residential remodeling and building activities.
