[Photo: Real Estate #22, Michael Goodin, Flickr]
The belief that Pittsburgh has an abundance of affordable housing is widespread, bordering on commonplace, especially amongst those I talked to who are not personally affected by whether it’s true or not. I can’t say for certain whether this abundance is based in fact or myth, but I can attempt to clarify where the confusion lies, and why a dose of skepticism is in order.
As described in Part Two of this series, affordable housing is defined as housing costs that represent less than 30% of a household’s income (see sidebar).
The advocacy organization, National Low Income Housing Coalition, wrote in a 2014 study that 30,000 extremely low-income households (73%) in Allegheny County were spending more that 30% of their monthly income towards housing costs, and that 60% of those households were paying more than half. This study was cited in a later Burlington Associates report supporting the case for community land trusts for Pittsburgh and surrounding regions. But as I note throughout this story, this burden is not limited to city residents nor low-income households.
More than half of Pittsburgh’s renters are experiencing a housing cost burden
If the potential bias of an advocacy organization is a concern, we can look at census data. As per 2014 estimates, there are 63,306 rental units in the City of Pittsburgh. In 50.5% of them (roughly 31,500 units), households of all incomes are paying more than 30% on their income on housing. Mayor Peduto and others have stated that Pittsburgh needs to create 21,000 affordable units just to meet the current demand. Waiting lists for public housing and Section 8 housing vouchers are years long, and large numbers of those vouchers are returned unused to the Housing Authority because the recipient couldn’t find an available apartment (they expire if unused after ninety days).
The 30% threshold for affordability is a widely held standard for economists, housing experts and federal guidelines. ‘Affordable housing’ continues to be a slippery term, given that some people can pay this much (or more) and still “afford it” without significant consequence. Most agree, however, that paying more than 30% of one’s income towards housing poses either immediate problems (not having enough money for life’s other expenses) or future ones (not saving for retirement, or paying off student loans or other debt).
If these kinds of numbers are confusing, the bottom line is that more than half of Pittsburgh’s renters are experiencing a housing cost burden. How can all of these factors persist in a region that has an abundance of affordable housing?
Undoubtedly, there are many places where rents and sale prices are below (sometimes far below) market rate, but until we ask a host of other questions, it’s irrelevant. Is that housing rental or for-sale? Does the owner accept Section 8 vouchers? What is the community attitude towards low-income residents? Is public transportation reliable and accessible? What is the denial rate for mortgages in that neighborhood? Is it in move-in condition or has it been ransacked? Is a low-rent unit in an uninsulated house with a $400 gas bill still affordable? Is there lead paint on the windows or asbestos in the walls? Does the lock on the front door work? Is there a sex offender living next door? Does the person have any family or acquaintances anywhere nearby?
To put this in context, for decades the general public showed little concern for these questions, as Pittsburgh always had some out of the way place for poor people and the services they need. This has changed in the past decade because of the emergence of desirable amenities in previously distressed neighborhoods, along with national trends towards urban living. Before Whole Foods even established a foothold in Western Pennsylvania, the company confounded the masses by passing over more affluent urban and suburban options, and chose East Liberty for their first store in the region. East Liberty may have been a poor neighborhood, but the surrounding communities were not. That its location is at the center of the largest concentration of wealth between Philadelphia and Chicago was a fact not lost on Whole Foods’ market researchers.
One possible reason for this belief in abundance might be found in the for-sale housing market. A quick look around any real estate website will turn up a vast number of properties that are, in a word, cheap. Most of us are aware that people from other cities are dumbfounded by how inexpensive Pittsburgh real estate is. Some of us have seen the wide-eyed bargain shoppers at monthly Sheriff Sales that scoop up $8,000 properties with zeal. Perhaps these combined impressions bolster the sense of abundance, if not create it altogether.
Because mortgage payments are often considerably less than rents (for much smaller places with fewer bedrooms), it’s tempting to identify homeownership as the solution to Pittsburgh’s affordability problem. If it’s uncertain that there’s an abundance of affordable housing, it’s certain that there is an abundance of cheap real estate on the market.
Now is a good time to tell the rest of the story in which the man had just jumped into the house through a window. Breen followed him and I followed her, leaping from the sill and landing on a crunchy dead bat. Plundered copper pipes left gaping seams in most of the walls. Drug paraphernalia was buried beneath fallen plaster, and the most prevalent smells were mold and urine. With his hands on his hips the man grinned and said, “We can get this one for twenty grand. Maybe less!”
When you do this kind of work, you see this sort of thing a lot: cheap, unwanted housing confused with affordable housing. “Nevermind the $150,000 in needed renovations,” said local planner, Nicholas Fedorek, “The cost of replacing a water line exceeds the total value of many of these houses.”
Wanting to quickly survey Pittsburgh’s for-sale real estate market, I opted for a highly unscientific approach. I used the real estate site Zillow, mostly because it’s a popular tool used by home seekers who don’t have GIS data at their fingertips. Setting the maximum sales price at $70,000 turned up hundreds of properties that are for sale at this very moment.
For $65,000, a buyer can acquire this well cared for, recently insulated house (pictured) in Observatory Hill, complete with charming stained glass windows and iron railings. Aside from its below average transit score, this comes close to what feels right for (able-bodied) working people living within reach of the median household income. The unofficial crime report for the area that accompanies the listing runs long, with serious incidents reported most days, which makes this house less desirable for vulnerable populations.
But this house was something of an anomaly, and to find it I had to turn over quite a few frightful ones. In Beltzhoover, this 110-year old house (pictured) with a stunning view is listed for $10,000. Clearly unsuitable for people with mobility challenges, the location does boast a reasonably high transit score. A look inside reveals why it has been on the market for two years. While this may seem extreme, such properties turn up regularly when searching with affordability in mind.
Houses selling for $70,000 or less that only need limited improvements do exist in this region. It goes without saying that the barriers to homeownership are high for most everyone, especially moderate- and low-income people. Most available properties on the market that these individuals may be qualified to buy are not in move-in condition. This poses a major obstacle, especially because loans to low-income or first-time buyers (who usually don’t have extra cash on hand) often require that certain repairs be made before closing, and may fall upon the buyer.
Even when repairs can be postponed until after closing, improving the electrical service or repairing a roof likely necessitates taking out a construction loan on top of the new mortgage. Mr. Fedorek pointed out that interest rates are higher for construction loans, and denial rates are much higher. A local program called CARL offers a solution by combining purchase and rehab funds into a single low-interest loan. The program is new and not yet widely known, but is gaining traction.
I talked with Zak Thomas, a community lending officer for the Local Initiatives Support Corporation, about increasing homeownership opportunities for less-affluent people. This is not a new idea, and still holds promise, “so long as it’s not thrust upon individuals who are not in a position to afford it,” he said. Mr. Thomas stressed that even when someone qualifies on paper, the risk is high and the potential consequences are great, especially if “the lender has loose underwriting standards, or the buyer puts their life savings into a down payment, with nothing left for maintenance or other unplanned financial needs.”
As discussed in Part Two of this series, Pittsburgh’s current dynamic involves people paying rents a level or two above what their income allows. When this can no longer be sustained, the results are serious – eviction, negative credit impacts, relocation costs, loss of security deposit, and prepaid ‘last month’s rent.’
Overly-aggressive homeownership efforts – unaccompanied by programming that increases income and teaches budgeting and maintenance skills– would, in effect, double down on the consequences, which Mr. Thomas cautioned are much more serious and potentially permanent to a vulnerable homebuyer. “Homeownership is a a very important part of wealth-building, but is not a one-size fits all solution.”
If ‘abundance’ doesn’t accurately describe our affordable housing market, it describes a supply of housing that ranges from derelict to marginal to needing some significant TLC. Yet, virtually everything in that range is too much for moderate- and low-income buyers to handle on their own.
Craig Stevens, an affordable housing advocate, sees an abundance of something else: untapped opportunity. Mr. Stevens’ notion of opportunity differs from that of the man in the house of dead bats. It’s grounded in a combined affordable housing/workforce development initiative that would provide opportunities for people to acquire hands-on construction skills, or apply those they already have, in service of bringing marginal properties online as affordable homeownership opportunities for low-income families currently priced out of the market.
This idea dovetails with an issue that Mr. Fedorek often returned to, stagnating wages. I’m eminently unqualified to discuss the wage economy, other than to say that housing production is at best only half of the equation. Even if we created 20,000 affordable units overnight, housing cost burdens would begin to grow the very next day, because rising housing costs are significantly outpacing wages. Put simply, in Allegheny County, households with minimum wage earners need to work 84 hours per week to afford a 2-bedroom apartment (NLIHC, Out of Reach 2015). The kind of program Mr. Stevens envisions begins to hit on both sides of the ledger.
Mr. Fedorek noted that there are several programs (detailed in the City’s 5-yr Consolidated Plan, 2015-19) that already do this sort of construction training and rehabilitation, but it’s a question of scale. The impact of existing programs is meaningful, but they compete with countless community initiatives for limited resources, and therefore don’t make much of a dent in the overall problem. In 2015, the City distributed over $15 million (from federal funds, such as Community Development Block Grants) to about 170 projects and organizations. Excluding a handful of high-dollar line items, most of these projects receive less than $15,000.
The impact of these projects is not the issue here, but spreading funding thinly across so many popular projects comes at the expense of a more robust expenditure on something like the large scale rehabilitation program Mr. Stevens described. All of this brings us to another uncertain crossroads – limited opportunities for increasing revenue means having to redistribute what we have – which amounts to politically treacherous waters that would bring about about contentious battles that many say we simply don’t have time for.
Mr. Stevens said that “Instead of spreading CDBG funds out to non- and for-profit development projects and programs, these funds should be targeted towards the preservation and redevelopment of affordable housing and infrastructure in the most under-invested CDBG-eligible census tracts.”
Mayor Peduto made the most of a limo ride to the airport with President Obama by proposing a program that would repurpose federal Section 8 rental funds towards a homeownership initiative. The idea, named Bridges Beyond Blight, not only comes with some of the homeownership risks discussed above, but also consternation from those concerned about depleting the already-insufficient funds for affordable rental housing needed to make it work. Mr. Stevens prefers that the City use the proposed ten million dollar trust fund to finance this idea, instead of depleting funds that already support low-income renters. As it’s currently envisioned, Bridges Beyond Blight would have two major upsides: buyers would continue to pay 30% of their income and build equity in the process, while simultaneously help to eradicate blight. Chris Potter explains it all here.
The difficulty of implementing any large-scale housing program is evident in the Affordable Housing Task Force’s recommendations. The need to “provide resources for the rehabilitation of Pittsburgh’s existing housing stock” is stated in the report, but the “mechanisms for implementation” are largely silent on how to do it. Moreover, as Cindy Daley of the Housing Alliance of Pennsylvania said to City Council, “If the private market could do this alone, we wouldn’t have a crisis. The economics simply don’t add up.”
As far as what to make of this – the layering of housing stock, geography and income – your guess is as good as mine. There’s no denying that the problems that exist are worse in certain places, namely the East End, but less evident is how long they will remain this way.
For one last excursion I returned to Zillow to see what the for-sale housing market looks like at this moment in time. Within a large swath of land that includes East Liberty, and parts of adjacent neighborhoods from Larimer to Lawrenceville, I found 160 properties currently for sale. When I filtered for those under $250,000, the available properties dropped to 76; under $100,000 there were 17.
I’ve cherry-picked a few examples throughout this piece, not to prove any point, but to provide some context to what lies behind houses that appear to be affordable on the surface. With relative ease, anyone could pick a few different properties or geographical areas that paint a different picture. But in doing so, it would become apparent that abundance applies less to our affordable housing supply than to the uncertainty that surrounds it.
Part Five of this series will revisit what many people cite as the origin of East Liberty’s housing crises, the demolition of three high-rise buildings, known as Federal American Properties.