Affordable Housing: The Impact of Housing Costs on Families and Seniors

1. 2016 Housing Issues Training ForumsIncome < Expenses1 Solution: Home Sharing

2. Housing: What Does Affordable Mean? • Families who pay more than 30 % of their income for housing are considered moderately cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. • Families who pay more than 50% of their income are considered severely cost burdened. • In MA in 2014, • 22.5% of homeowners and renters were moderately cost burdened and • 25.5% were severely cost burdened.

3. Housing as Share of Income: Social Security Pensioners • Average Social Security Amount (2015): • $1,341/month ( However, the range is wide: Most people (just over half, 22M people) collect between $700 and $1,800 per month in Social Security payments. www.ssa.gov. • $16,100/year • Of Renters at the lowest step on the income ladder, under $15,000 • 84% are cost burdened (paying more than 30%) (of which 77% pay more than 50% of their income) • Renters with between $15,000 - $29,999 • Still 77% are cost burdened paying more than 30%.(of which 37% pay more than 50%)

4. National Picture for Renters • Over the past decade and a half, median rental housing costs climbed from $869 per month in 2001 to $934 in 2014. • Rents for newly constructed units are rising especially rapidly • The median asking rent for a newly completed apartment hit $1,372 in 2014—nearly 50 percent above the US median rent of $934. • Meanwhile, renter incomes have still not recovered from the recessions that began in 2001 and in 2007.

5. MA Rent Levels are Higher than National Average • Boston MA (has a rental market with costs twice as high as the nation.) The cost of living in Boston is 240% the national average, with apartments ranking 48% more expensive than the national average of $934 in 2014. • Boston, MA • 1 BR $1900 • 2 BR $2,300 • 3 BR $2,650 • Cambridge, MA • $1,400 1 bedroom • $1,750 2 bedroom • $2,300 3 bedroom • Sources: April 29, 2016 - Rent.com and https://www.rentrange.com/boston-ma/ • Brockton • 1 BR $1,000 • 2 BR $1,200 • 3 BR $1,400 • Springfield • 1 BR $800 • 2 BR $920 • 3 BR $1050 • Lawrence • 1 BR $1,150 • 2 BR $1,250 • 3 BR $1,410 • Pittsfield • 1 BR $780 • 2 BR $900 • 3 BR $1,000

6. An Inadequate Supply of Affordable Units Across US Counties County Population // Number of Affordable Units Available for extremely low-income households (w/income less than 30% of area median) • In county with 500,000 population, only 25 units per 100 people • 20,000 to 100,000 population, only 38 units per 100 people • Public Housing is Almost Sole Source of Affordable Units • In the largest US counties by population, of all available affordable units, 96% are publically assisted and only 4% are private units.

7. Vacancy rates are low! • Apartments in buildings with 2–4 units (most affordable) had the a low vacancy rate of 6.7 % through September 2015. • The 7% vacancy rate for single-family rentals was a little higher. • In both cases, vacancy rates now stand below their averages for the past 20 years! • The largest decline in vacancies has been for units in buildings with 5+ apartments, with rates falling from 12.3% in 2009 to 7.6% in Sept. 2015.

8. Utility Costs Loom Large for Low Income Households! • The average renter paid $130/month in 2014 for heating, cooling, lights costs (Source: ACS 2014). • Equal to 4% of income and 14% of housing costs • While the Utility Costs vary little across households, the impact upon low income households is great! • Low income under $15,000 spent $130 • By comparison higher income households over $75,000/year spent $150.

9. Long Term Impact of Excessive Housing Costs • Spending cutbacks by renters are a required due to their constrained budgets. • After paying more than half their incomes for housing, severely burdened renters at lowest income levels had on average $500 left per month to cover all other expenses. • To stay within their means, these households spent on average • 55% less on healthcare • 38% less on food • 42% less into retirement and pension savings

10. “Cutting back on food expenditures, in particular, may jeopardize the immediate health and well-being of cost-burdened renters. And over time, the inability to save sufficiently for retirement puts households’ financial stability in older age at risk.” --Joint Center on Housing Studies, Kennedy School of Government

11. Elder Index for Massachusetts 63% of elder-only households in MA are economically insecure. (income < basic and necessary expenses for housing, health care, food, transportation and modest miscellaneous) www.BenefitsCheckUp.org/MCOA

12. Economic Insecurity Worse for Single Elder Households • Economic Insecurity is directly linked with housing status – • Those living alone fare much worse economically (both renters and owners!) • 70% of all single person households are economically insecure • 73% Single Women Households • 63% Single Men Households • Versus 47% of all 2 person households. Source: Insecurity Rates of Elder Households in MA, by Household Composition, 2011

13. Expenses vs. Income Roommates/couples benefit from economies of scale, enabling them to spend less per person on housing, food, energy and transportation costs. • Roommates/couples have median household incomes more than double those of their single counterparts. • $39,508 versus $17,819. • MAOA, Living Below the Line, 2014.

14. www.BenefitsCheckUp.org/MCOA

16. With a nearly universal need to lower housing costs for households with incomes below $30,000… Home Sharing– is it the answer?

17. Benefits of the new “Sharing Economy”- • Increased Independence and Self-Reliance • Stronger inter-connected communities. • Reduced social isolation… • Reducing negative environmental impact (such as reducing the carbon footprint) and consumption of resources. • Do we all need to own a lawnmower and 3 teapots and a mahogany DR table? • Providing people with access to goods who can't afford buying them

18. "People are taking spare bedroom[s], cars, tools they are not using and becoming their own entrepreneurs…the sharing economy allows people to take idle capital and turn them into revenue sources.” • --Sharing Economy Researcher Christopher Koopman, George Mason University

19. Ideal Outcomes A safe and comfortable housing option for a single older woman whose labor patterns leave her with low wages (if still working) or a very low social security pension (if retired). Access to a furnished home for a student without the means to furnish a household while in school.

20. What is Home Sharing? • Home sharing is the simple idea where two or more people share a home to their mutual benefit, just like the old fashioned bartersystem. • One person (the homeowner or lead tenant) offers to share their housing in exchange for rent, or for help around the house, or a combination of the two. • Example: $600/month rent, or $400/month in cash plus 5 hours per week shopping for groceries, loading and unloading dishwasher and laundry. • https://www.youtube.com/watch?v=S9svqgp_s0U HomeShareNowvideo (1.30)

21. How Does It Work? • All home sharers receive their own bedroom plus shared use of the common areas, such as the kitchen, DR, yard, laundry room. • What they offer in exchange varies and is determined in advance by the two people. • Every agreement depends upon the needs, time and abilities of the people involved. • A successful home sharing takes flexibility and willingness for each person to communicate with the other.

22. How to Go About Home Sharing • Prepare the rental space • Advertise (word of mouth, in print) • Describe exactly what you are offering/and your essential considerations, • you cannot advertise in any way which shows a preference for or against any person based on their race, color, religion, national origin, family status, disability, age, sexual orientation, marital status, or their receipt of public benefits • however, you may state a gender preference in the ad if it’s a shared living space.

23. The Ad • General location of the home (do not give the street address at this time) • Number of bedrooms • Private or shared bath • Amount of rent charged and/or services you need • Number of people living in home now • Available parking • Proximity to public transportation • Pets in home now or allowed? • Are utilities included or not? If not, what are average utility costs? • Are you a smoker/nonsmoker? • Any other important detail about space or arrangement. • Phone number for inquires

24. The Interviews. • Interview– first talk over the phone • Contact information • Why do they want to home share? • What is their daily schedule? What do they do during the day? • Are they looking for housing for just themselves? • Are they a smoker or nonsmoker? • Do they have pets? • Do they have a car? • Then meet a few people in person at a local venue to find out how you get along. • Fair housing laws prohibit you from questions about race, religion, or where they were born, or if they’re married or have children.

25. Background Checks, then Rental Agreement • Check credit history • Background references of immediate prior landlord • And ability to pay from current employer and /or other sources of income • Offer to home share • Sign a simple rental agreement • Start collecting rent and /or receiving services in exchange for a reduced rent.

26. What to Ask for Rent/Service? • If home owner/leaseholder needs income, then ask for rent and a share for paying the utilities. • If what they really need is some help with IADLs like lawn maintenance, shoveling the walk, bringing in groceries, walking the dog, or housekeeping, then they may ask for a modest rent. • The more services needed, the less cash someone pays. • For a “services in lieu of cash” exchange agreement, the Home Share Vermont experts recommend a reasonable service exchange would be no more than 10-12 hours per week.

27. Services in Addition to Normal Share of Keeping Common Areas Clean All household members sharing a home are expected to do their fair share of the everyday clean up to keep common areas clean and safe. The services in lieu of rent performed by a home sharer are over and above these basic expectations. Examples of services to exchange for a reduced monthly rent : • Housekeeping • Laundry • Snow shoveling • Driving • Meal prep • Errands • Feeding and walking pets • Shopping • Watering plants • Yard work

28. Landlord Rights and Responsibilities LL has the Power to Define Lifestyle Rules • Overnight guests • Smoking or drinking • Length of visits by overnight guests • Notice if going to be absent – yes or no • Storage areas for food • Sharing some food/supplies • Share in Utilities Tenants have Basic Rights that Limit a Landlord’s Whims • LL cannot enter tenant’s private space to make repairs or inspect, without reasonable notice, unless emergency. • Abide by security deposit rules for proper handling • Must provide a safe and habitable living environment • Cannot lock you out or throw you out without a judge’s order • Keep the thermostat below 68*F in winter or above 78*F in summer….

29. Simple Rental Agreement • Address • Description of space provided, including bedroom, private or shared bathroom, parking space, laundry access, or other factors • Rent: Amount, monthly due date, and form of payment, any late payment penalties • House Rules (no TV after 10 PM; no overnight guests for more than 1 night per week; no smoking inside) • Period of Notice Required Prior to Moving Out • Any Security Deposit, and if so, where it is to be secured.

30. A Tenant at Will is…. • Someone who occupies a rented space or apartment without a lease, but pays rent periodically (typically monthly). • The agreement for the Tenancy at Will may be either written or verbal. • Either the landlord or the tenant may terminate this arrangement at any time by giving written notice of 30 days or one full rental period in advance, whichever is longer. • No reason is required to terminate a Tenancy at Will. • “I am going to need the space for my family this summer.” • “I’ve decided to move closer to my job.” • “I’ve finally saved enough for a down payment on my dream home – thanks for the memories!”

31. AARP 2010: One-Third of Adults Over 45 are Lonely Loneliness leads to • higher rates of depression, alcoholism and even suicide. • Diminished interaction with others can raise levels of circulating stress hormones and levels of blood pressure, a condition that can lead to heart disease and strokes. Source: University of Chicago psychologist John Cacioppo, 2003

32. ”What we might not realize is how living with others is beneficial to not only finances, but also to physical well-being. Little did I know that the loneliness I was experiencing on a daily basis in my tucked-away studio was actually bad for my health. “ • A Chicagoan named Leilani Clark wrote about her experience becoming a home sharer with 3 other adults after her divorce.

33. Acknowledgements and Resources • In Packet, see the new “Time to Share – Home Sharing, An Idea Whose Time Has Come” toolkit. • For Rights of Landlords and Tenants, download the booklet with those names from the OCABR website. http://www.mass.gov/ocabr/consumer-rights-and-resources/housing/tenant-and-landlord/ • Special Thanks to Key Contributors • HomeShare Vermont - Kirby Dunn • HomeShare Now – Christina Goodwin • Greater Boston Legal Services – Betsey Crimmins

34. 2016 Housing Issues Training Forums4 Things to Consider When Moving

35. #1 – Compare the Long Term Financial Benefits of Owning vs. Renting • Which is better? • “It may be hard for people living in bubbly markets to believe, but, overall, home prices in the United States have risen just 0.37 percent annualized, after inflation, for the last 126 years.” • Robert J. Shiller, an economist who received the Nobel in economic science in 2013 and wrote the book on speculative bubbles, “Irrational Exuberance.”

36. True Opportunity Costs • Most financial professionals caution against viewing a home purchase as an investment, particularly after factoring in: • Costs of buying (the down payment and mortgage interest) • Recurring maintenance, property taxes, and insurance costs, and • Costs of selling (preparation, broker fees) • For figuring it out for your specific market and down-payment amounts, etc., see the “New York Times Calculator” by Zandi and Miller at http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=1

37. “Disregarding the special amenities that many people value in homeownership, it would be hugely better [financially to be] invested in the stock market.” • -- Professor Shiller, with caveats for allocating investments and investing all savings.

39. But What About an Older Person… Q: What about an older adult with a fixed income, if they have a home now, is it not heresy to suggest they sell it and become a renter? A: Jonathan D. Pond, nationally recognized PBS financial expert and author of A Boomer’s Guide to a Great Retirement, recommends downsizing one’s housing in retirement to improve one’s financial condition. Downsizing allows one to free up capital to invest, so as to enjoy more income throughout retirement. (Buying a smaller less expensive home and investing the balance of equity from the prior home sale is also an option).

40. Further, the Link between Social Security and Elderly Poverty A 2004 study showed how the steady rise in social security pensions has encouraged living alone by lower income elders. • These households are relatively poor households, compared with when elders live in a household with additional family members or other people. • In 1967, 34% of widowed or divorced elders lived in shared living arrangements; • By 1982, that rate dropped significantly (by a third) to 24%. • Overall from 1960 to 2001, there was a stark change in the living arrangements by elders with a large shift in living with others to living independently.

41. Discuss Your Rent or Own Decision with an Objective Financial Planner • Sale of home • Annuitize the net proceeds • Receive a stream of income in addition to other sources of income • Rent an apartment • Landlord responsible for repairs and maintenance • Sale of home • Use net proceeds to buy new home outright or make large down payment • Move into a new home/condo • Incur costs of maintenance, insurance, taxes, and lawn care.

42. Consideration #2: Recruit Your Team!!! • Realtor to sell current home and find new home or apartment • De-clutter bug in your social circle or a downsizing specialist for paring down possessions • Photos/Wall hangings • Special accessories • Heirlooms • Clothing • Financial Advisor • Movers • House cleaners • Packers and Unpackers • Handy-person for small renovations / repairs to make it age-friendly

43. Planners, Doers and Movers = Your Team • See the MCOA Housing Issues Book for Downsizing Tips and Resources • Everybody knows somebody who wants to “Clean Out Your Junk!” Give them this golden opportunity!!

44. #3 - Plan on a Realistic Time Frame Start planning and downsizing long before you need the new space • Over a few months, discuss home sharing with some close friends • Be diligent in downsizing over a 1 or 2 year period • Visit potential new sites • Decide on how to manage the gain from the sale of home

45. #4 – Change Your Perspective “Look on every exit as being an entrance somewhere else.” ― Tom Stoppard, Playwright