Housing Solutions Must Include Ownership Opportunities

Lane County needs more affordable housing, in the same way that Los Angeles needs more freeways. The problem is undeniable, but the solution is not so simple. Each problem gets increasingly difficult and complicated because of one obstacle we can never overcome — people, and their habit of adapting to current conditions.

Maybe we’re solving the wrong problem, devising the wrong solution, involving the government in the wrong places, and expecting the wrong outcomes. In other words, are we shaking the wrong end of the rattle?

The simplest solution is not the best one. We could disband our police forces and stop providing clean water. Once people have to boil their drinking water and put bars on their windows, housing prices will quickly become affordable. Problem solved! The situation sounds less than ludicrous if you live in rural Oregon, where clean water and police protection can no longer be assumed.

By some measures, our housing options are less affordable than almost any other area of the country. We’re not one of the most expensive markets, but we are one of the least affordable, because our median annual income is a paltry $38,460.

The government defines affordable as no more than 30 percent of a person’s income, but it’s not so simple on the ground where people are making their own lifestyle choices. Renters double up to live in a place they really like. They pay more for a location where they won’t need a car. A good garden can reduce grocery expenses. Meeting real needs won’t follow a one-size-fits-all approach.

Here’s an approach we haven’t tried. Instead of reducing a resident’s lodging expense, what if we were able to increase their wealth? Most Americans who own their home have little or no additional savings. They’re living inside their piggy bank. Housing in this way represents much more than simply a roof — it’s also security, stability, and identity. Subsidized rental units provide only the roof.

Here’s where we may be solving the wrong problem. Home ownership has floated out of sight for many. The American Dream has gone dark for them. If we recognize that home ownership represents much more than lodging, we might reorganize some of our efforts.

Working only with current conditions, how much can an average person save? How long can they sustain that resolve? How much will banks lend a first-time home buyer?

Let’s say most people can save ten percent of their income, so long as their goal is not more than two years away. Banks require 20 percent down and income verification when writing a mortgage. Plug in our area’s median wage, and you have the parameters for an equity-based solution.

What sort of house could be sold for $38,460? A very small one, on a very small lot — perhaps only 200 square feet of living space. A tiny space like that wouldn’t work for everyone, and it may no be compatible in many neighborhoods, but it offers a very different approach to solving the original problem.

Given the choice between a subsidized rental or a small space that includes ownership, how many would choose the latter? We don’t know, because it’s not available. Small properties that are well cared for will go up in value. That added equity can make a larger home attainable. The American Dream lacks only that modest first step.

Local government’s hand in this solution would be relatively light. Bankers and builders and savers are doing what they naturally do. Market forces will need only a few well placed nudges from government.

Minimum lot size in certain designated areas will need to be drastically reduced. System development charges would have to be prorated by square footage, or waived altogether for a short time. If this model is used to promote infill, limits should be put in place so neighborhoods can adjust appropriately. Owner occupancy requirements may prove necessary. Lenders may need incentives to handle such small loans.

Will it work? I don’t know. Has it been tried elsewhere? Nowhere I can find. Could it lead to other strategies that work even better? I’m certain of that.

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Don Kahle (fridays@dksez.com) writes a column each Friday for The Register-Guard and blogs at www.dksez.com.