+++Owner Occupied Housing
Trusts: A Connecticut Solution By David
Carr
This February 2020, Governor
Lamont proposed bonding $300,000,000 for affordable housing construction, (40% was
already approved but never spent). We have
the 5th highest average homeowner expenses and 10th highest renting costs nationwide,
according to the census.
+++My contribution to this problem is the creation of an original
financial management. process I have named the Owner Occupied Housing Trust, a
service delivered by nonprofit trustees on behalf of the owner-occupant. The
owner-occupant will authorize all rent payments to be made to the trustee, who
will disburse the funds according to the agreement, preventing the
owner-occupant from undermining their home equity growth by assuring
responsible use of available financial leverage.
+++After reading the
Wednesday, April 24, 2019 article “Greater New Haven leaders to form regional
affordable housing committee,” real estate professionals can work with other leaders
to deliver the opportunity and reality of homeownership to all who desire, and
are willing to maintain their homestead. REALTORS are called to this duty by
the Code of Ethics Preamble which states
+++ “Under all is the
land. Upon its wise utilization and widely allocated ownership depend the
survival and growth of free institutions and of our civilization. REALTORS®
should recognize that the interests of the nation and its citizens requires the highest and best use of the land and the widest
distribution of land ownership. They require the creation of adequate housing,
the building of functioning cities, the development of productive industries
and farms, and the preservation of a healthful environment.”
+++Connecticut needs more
pathways to make home ownership attainable and sustainable for people who can’t
afford market-rate housing. New Haven had a April 2019 wait list
exceeding 10,000 people for space in its 6,000 units, with about 400 families
(1600 people) leaving each year. 58% of renters pay more than $1,000 a month while
2% pay $750 a month or less (*1). The median 2019 rent in New Haven is $1,090
while the HUD Free Market Rent for 2019 is $1,403 for a two-bedroom apt and
$1,788 for a three bedroom (*2). Where are these 10,000 people on the wait list
living now, and how are they currently paying their expenses? How is the
housing choice program assisting very-low-income families maintain safe, secure
homes, and how are specific neighborhoods improving or reducing their quality
of life?
+++On March 18, 2022 I have an opportunity to add about seven hundred 2 - 3 Bedroom rental usits to our prospective New Haven owner occupants in collaboration with philanthropic investors in our future
+++To make owner-occupied
housing affordable there is a need for Owner Occupied
Housing Trusts, to manage the income from rental parties on behalf of the
owner-occupant.
.
+++For owner-occupied
rental housing to provide enduring value the owner needs to commit to
aggressive financial management of their resources to build confidence for
lenders considering the rental income as a means of loan repayment.
+++ For an owner-occupant
to claim rental income there needs to be a consistent flow of income with
reserves to pay for scheduled maintenance and improvements which may be tax
credits.
+++The owner-occupant
will need reserves for vacancy and unexpected expenses. . Ideally, the
owner-occupant will have 6 months of principal interest tax and insurance
payments in reserve.
+++The successful owner-occupant
also needs to accept the premise of equity in the property as a wealth-building
tool. To assure the security of generational home ownership the owner-occupant must agree to
achieve and maintain 80% free and clear equity. The cushion will prevent foreclosure in the event of sighted refinance cash out that leads to negative equity in a hypothetical cash value adjustment. The owner-occupant will pay a full market rent, investing all the income to accelerate mortgage repayment.
+++Owner Occupied Housing
Trusts will provide a foundation of confidence for owner occupants and the
state of Connecticut to guarantee mortgages Owner Occupied
Housing Trusts can make housing affordable while providing opportunity and
stabilization for a wide rage of neighborhoods in different communities in the
face of upscale rental development.
+++Five variables that
directly influence housing affordability are: 1 -economic opportunity, 2-
personal ability or disability, 3- transportation, 4- food security, and
5-financial dexterity. These systemic variables determine the annual
expenses that must be managed to maintain housing security for any individual
or family. To focus on one variable while ignoring others can create
instability.
+++The
variables of transportation and food
security compound the cost of housing. A person with access to more
efficient transportation and cost-effective food can designate more housing
dollars from the same income base. A person that can walk, bike,
rideshare or ride a bus to work or food shop will have a higher percentage of
spendable income than a car owner who lives in a rural setting driving farther
to work and shop.
+++A
person, family or group who can make food from raw ingredients will have more
servings that are probably healthier than the fast food convenience store
shopper. When residents can make bulk food purchases they can save (earn) even
more money that can be leveraged by preparing high protein low fat entrees
instead of carry out ready to eat choices. We make our own bead, so I can have
100 loaves for about $20 compared to $2-$4/ loaf in the store. I can make two
large pizzas from 1 lb. of Mozzarella
($4-), flour ($0.50), sauce and toppings ($2-$3) or buy two pizzas for
$15-$30. This goes on and on. If you choose to add SNAP or community
farming the matrix shifts again.
+++Lack of Economic Opportunity is the local
inability of an individual to find employment that produces the income
necessary to sustain one’s self and family. To remediate lack of income there
must be more demand for the labor quality and skill sets available from New Haven residents seeking affordable
housing. To suggest an existing business could simply pay more wages can
trigger the economic reaction of relocation, or higher prices since many
economies across the nation are thriving. Another part of my research can be types of income producing opportunity can be added to the job menu here.
+++As
we look around, we see all the once bustling factories turned into offices,
apartments, stores, condos and small work share centers, with less hourly wage
opportunity for shift workers and laborers. A solution is job creation
with wage allocation for housing costs. The CT- DOL recently funded two
regional job-skill development initiatives northwestern and south-central
Connecticut with $5 million, part of $50 million former Gov. Malloy apportioned
to train 10,000 citizens to fill job shortages in manufacturing, health care
and construction. If the jobs were here, could everybody afford to be an owner
occupant? Housing costs as a whole number (Principle, Interest, Tax, Insurance)
remain low in Connecticut cities compared to many national metros.
+++Personal ability or disability, directly affects vocational and housing
security, which is why “affordable” housing is such a difficult problem. For
people seeking subsidized housing, what is unique, critical or common must be
determined about each individual in order to prioritize access. An assessment
of need could be done every year, because getting on a list should not be the
prime reason to get subsidized housing. Many types of disability, which
are not going to be explored here, can prevent a person from being willing and
able while people with disabilities frequently obtain financial assistance.
One person may find a way to earn income with a disability, while another
person may not want to work at all.
+++Other personal ability factors are
not limited to continuing education for skill set development, financial
dexterity, resources, task tolerance and lifestyle choices. A
person can buy a 7" 8GB WiFi Tablet for $77 that can access all kinds of educational
resources today, or something else. My position being that a community
cannot look at a problem from the same place on the circle to see new solutions
unless all the systemic precipitants of the problem are on the table.
+++Financial Dexterity is the unique personal skill set necessary to manage a specific
level of income. We see very wealthy people go bankrupt while other people
maintain their home with a constant supply of minimal food and domestic
necessities. It’s not what you make that makes the difference, it’s what you do
with whatever you have, and how much one can save for a rainy day. Teaching residential
financial dexterity is a complex process involving expectations,
entitlements and desires, all balanced in a competitive, credit based
consumerist culture. For some people, life may be about style and trend chasing
in search of a desired moment. Is identity an acquisition, a cultivated state
of mind, or both?
+++
People are faced with endless choices about what to buy, where to purchase, and
what to expect in a consumerist culture. Making decisions about what we wear,
drive or eat, how much climate control we want at home, or how much
technological entertainment we need are all choices that require thoughtful
consideration as people allocate sometimes scarce resources. Housing may never
be compatible with a choice to overspend, engage in compulsive behavior or
addictions, and is further complicated by the need for medical care.
+++A
family needs about $21,000 Basic Annual Key Money to rent a $1300
two-bedroom apartment in Greater New Haven, CT. comprising $16,000 in rent
payments, $2400 for electric, maybe $2200 for heat (750-gals heating oil
@$3.00) and $200 for renter’s insurance. Then add food, transportation, health
care furnishings and personal needs which I will refrain from estimating in
detail other than a $200/week for ($11,000 per year) for food and a bus pass to
total $32,000 for the household.
T+++he
Housing task force has proposed the creation of accessory dwelling units(*3),
construction of housing on abandoned lots that are now owned by the city, and
that new buildings with 10 units or more provide 10- 20% of the units below
2018 Fair Market (Low= $1258 /3BR)(High=$1630 /3BR) Rent (*4), but who
will make that investment and how will it be returned? None of these solutions
work if an individual does not have consistent means and ability to maintain
financial solvency.
+++People
suggest 50 city-owned lots in residential areas that could support housing if
the lot size were lowered when recently the city was demolishing abandoned
property to create sliver lots shared between neighbors because it was
determined less density increased quality of life and neighborhood value.
+++If a person were to owner occupy a three unit
building and apply a rental value of $800 x 3= $2400 x 12 month =$
28,800/year x .95 vacancy the GRI (gross rental income) would be $27,360.
Expenses include property tax of $8000, Water of $800, Sewer of $600,
Electric of $2400 and Insurance $3000 which totals $14,400 the remainder of
$12,000 divided by 12 leaves about $1000 per month net income for the owner
occupant who has contributed
$800. At 5% over 30 years each $100,000 borrowed costs $537.00 per month, so
$998.82 pays a $186,000 mortgage. If the rent collected changes to $1000 per
month x .95 = $34,200 minus $14,400 expenses there is $19,800 ( $1650/month)
which is enough to pay a $360,000 mortgage ($1933 principle and interest). These
numbers are for discussion and will be different under unique conditions
including tax treatment. That being said, I believe controlling variables in
cash management remains the foundation to successfully maintaining a
residence.
+++As
a local resident and licensed Professional Standards Certified Specialist since
1996, I have experienced a variety of multifamily
properties causing me to become well acquainted with the process of investment,
financing, and challenges faced by property owners and occupants who inhabit
rental housing. These conditions are unique to each property, the
occupants, neighborhood and the owner who controls it
.
+++The answer is more owner occupants, yet were are currently only fourteen (two
family) buildings listed under $200,000 and ten (three family) buildings listed
under $300,000 in my New Haven, Hamden, East Haven & West Haven MLS inventory on Feb. 6, 2020, a total of only
64 units. I have previously identified 91 residential units in various
stages of foreclosure in New Haven on 5/6/19 of which 63 are titled to banks, LLCs
and the City of New Haven, the remaining 28 in the names of individuals, yet I
am not fully researching this now because the data set changes daily. As I
commented in the New Haven Register on 4/24/19, “I help my clients (with good,
slow or no credit) who earn consistent income to afford housing. If you are not
using credit cards you are not building credit. Real Estate is the best
leveraged path to financial independence.”
+++Housing and food security remain critical issues for our communities to resolve. The
Connecticut Coalition to End Homelessness reports 1) 3,383 total
individuals were counted as homeless in Connecticut as of January 2018, a 24%
decrease from 2007, 2) The number of chronically homeless individuals
(experiencing long-term homelessness and living with disabilities) decreased
69% since 2014 in Connecticut; down 15% since 2017. 3) 370 families were
experiencing homelessness in Connecticut as of January 2018, a decrease of 6%
from 2017. 4) 38 vets were found in emergency shelter: an increase of 11.6%
since 2017; yet only 13 Veterans were unsheltered — a decrease of 7.1%
.
+++Other
communities are considering 420-square-foot tiny homes that cost around $60,000
which take 90 days to complete, as well as prefabricated small houses. The
construction standards of travel trailers have been established for decades.
Trailers can build out to a maximum of 400 square feet of floor space like
a 240 square Foot 2019 Coleman 263BH for $18,000 or a 248 sqft 2017 Hartland
M325 for $19,000. A travel trailer could be financed for one year’s rent of
$1400 ($15,800) and installed in a location supported with water, sewer and
electric. Mobile homes are the next step up, where one could buy a 659 sq foot
unit for $49,000 today with no site work needed but water, sewer and electric,
while Tacoma is building tent cities.
.
+++In closing, I desire, and am available, to work
with people who are committed to creating innovative, respectful solutions to make
Greater New Haven a better place to live, work and build community by
developing space, opportunity and ability. Controlling variables in cash
management remains the foundation of successfully maintaining a residence. These
ideas and the content of this letter are my original work as a licensed real
estate professional and independent contractor. My original assessment and
proposal are my own unless affirmed by others. My intent is to do well by doing
good. Contact Me at my office (203) 877-2704 x 400826, follow me on
Twitter @ctrealdavecarr or make an
appointment to stop by and visit me at 54 Broad Street, Milford, CT …. © David
Carr 2020 All Rights Reserved
