Affordable housing, workforce housing, housing crisis, and so many more terms are being thrown around lately. With all this talk, it can be difficult to keep track of what everything means. Beyond the definitions, it can be even harder to understand how these terms are applied to your community. In the next two blog posts we’ll take a look at what the terms “affordable housing” and “workforce housing” actually mean.

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Affordable Housing

Definition:

Affordable housing typically refers to access to some kind of long-term residence that doesn’t cost more than 30% of the household’s total income. If there is more than one person bringing home income per household, take that into account. Rental housing cost is defined as rent plus utilities. Ownership housing cost is defined as monthly principal, interest, taxes, and insurance. Individuals whose housing costs are above this 30% threshold are considered to be “cost burdened.”

Explanation:

“Affordable housing” is a term that comes up frequently. It sounds like it should be tied to a qualifying program – such as subsidized housing that is reserved for individuals whose income is below a predefined level – but affordable housing is a much looser term.  Here are some examples:

Someone who is making $100,000 per year, should have to spend no more than $30,000 per year, or $2,500 per month on housing costs.

If someone else is making $50,000 per year, affordable housing for them would be $15,000 per year, so their monthly housing expenses should be no more than $1,250.

Affordable housing for someone who makes $35,000 per year costs no more than $875 per month ($10,500 per year).

 Just to emphasize how relative the “affordable housing” term is, let’s look at someone who brings in one million dollars per year. Thirty percent of $1,000,000 is $300,000, which, divided by 12 months in a year, results in a housing budget of $25,000 per month. The affordable housing budget for a millionaire is certainly not the same budget as mine!

As you can see, “affordable housing” is relative, which is why assistance programs don’t tie it to a fixed figure. If you would like to calculate what affordable housing is for your income, here’s an easy formula.

 All you need are two numbers: your yearly income and your monthly housing costs (usually rent + utilities; or mortgage + utilities + insurance).

• Step 1. Get your calculator out and plug in your yearly income.
• Step 2. Multiply that number by 0.3. This gets us to what 30% of your income is.
• Step 3. Divide that number by 12, because there are 12 months in a year.

This final answer is what “affordable housing” means for your yearly income.

Now take this number and compare it to your total monthly housing cost. Are they about the same?

If not, you’re not alone!

SWRPC conducted a household survey in 2022. Results indicated that 51% of self-reporting Monadnock Region renters and homeowners pay over 30% of their income on housing. The 2020 Census reported that almost a third of all Monadnock Region households were cost burdened. Though these figures are not the same, they both illustrate the strain households feel regarding housing costs. This trend is easing up among owners and renters under the age of 65, but for a growing group of retirees and senior citizens, housing costs consume a disproportionate chunk of their budget.

In an ideal world of rainbows and unicorns, actual housing costs would perfectly match every individual’s affordability threshold. Unfortunately, that is not reality, especially not with the inflated prices we see now. One reason that current housing costs are so high is because there isn’t enough housing. There is simply not enough supply for the demand, so landlords and sellers of owner-occupied housing can charge more money. People who can pay those higher rates outcompete those who cannot, oftentimes leaving low- and moderate-income individuals stranded.

There are many reasons that this squeeze is happening, but two big factors stand out: lack of new housing stock and aging workers opting to stay in their single-family-homes into retirement. We can see the Regional decrease in new housing stock built after the Great Recession (yellow bars).

Now look at this line graph. The orange line represents the number of workers in the Monadnock Region from 2000 to 2021. Note how the graph has dropped in the past decade. Less new housing and fewer workers suggest that there is a natural alignment with no cause for concern. But there is something else interesting that’s going on.

This third graph shows the cross-County movement of people. Here we see that some groups within the age range of 25 to 79 have grown and some have stayed the same. One, this could mean that a large number of people in this age group are entering retirement and opting to age in place in Cheshire County, staying longer than if they were to downsize and move. Two, if they are moving away, then people the same age are replacing them in similar numbers (if your grandma moves out of her house to a senior care facility but then another grandma moves in). 

New Hampshire is often cited as a good place to retire, so this makes sense. Incoming retirees often have a financial advantage that the housing market favors over people just starting their careers, mortgages, and/or families. Much of the housing stock, therefore, is not necessarily becoming available to younger individuals who could enter the regional workforce.

So, in essence, workers retiring = job openings = new workers

EXCEPT

retiree-occupied single-family homes = not enough family-appropriate homes = clogged housing market = people can’t find a place to live = people can’t move here = not enough workers = labor shortage or shrinking economy.

Remember that retirees are also having a difficult time finding appropriate housing for a variety of reasons. This is complicated stuff, and it’s not only happening in the Monadnock Region, but across the State and the Nation. It’s a big issue and local, county, and state governments, housing developers and banks, and organizations are working hard to ease the housing market – after all, they live here too!

Some efforts include promoting Accessory Dwelling Units (ADU), building new mixed-use housing, and changing zoning ordinances to allow for more starter and rental type housing. Take a look at Peterborough’s ADU ordinance changes, Keene’s Co-op project that turned a brownfield site into affordable housing, or Jaffrey’s vote to permit more senior/workforce housing. Local and regional planning is informed by you, so if you have something to say, contact your town’s Planning Board or attend a meeting (they are always public and dates/times are posted on the town’s website).

Stay tuned for Housing Terms Part 2: Workforce Housing.

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Sources: Southwest New Hampshire Regional Housing Needs Assessment

NH BEA State, County, and Municipal Population Projections: 2020-2050