Howard County Maryland Blog

Local Politics and Current Events

Will the High Cost of Living in HoCo be It’s Downfall?

Posted by bsflag2007 on Wednesday, November 29, 2006

The new County Council members recently attended a two day briefing/retreat. The impact of the high cost of housing in the area on future growth and development was apparently a recurring theme.

———————————————————————————-

“The labor force is the single biggest issue in economic development,” said Ed Ely, a former Rouse Co. official who runs a commercial development firm and briefed the council on the county’s big-picture prospects.

“We have a labor shortage,” he said, a point reinforced by McMahon and school Superintendent Sydney L. Cousin.

“If you attract new jobs but limit homes, it ignores a contradiction,” Ely said. “We could kill that golden [economic] goose. Housing and job growth go hand in hand.”

To make things worse, Howard County is the only county between Baltimore and Washington without mass transit, making it harder for workers to get to local jobs from other places. Cousin said the county is facing a crisis in attracting and keeping custodians, school bus drivers and teachers, despite starting salaries for teachers that are double from what they were two decades ago.

“In 1986, at $19,000 a year, our teachers could afford to live in the county,” Cousin said. “Now, at $40,000, they can’t, unless they live with you all.”

 

Despite that need, Leonard Vaughan, the county housing director, noted that some residents oppose subsidized housing for working families with incomes from about $30,000 to $50,000 if the units would be built near them.

shamelessly lifted from The Baltimore Sun, 11/29/06

_________________________________________________________

The cost of housing in HoCo is high, and has grown quickly. No question about that. A truly healthy, self sufficient, local economy needs to have economic diversity and adequate, affordable housing for all segments of the population. I believe that.

Although, I am not at the hand wringing, hair tearing stage…. yet.

I think some of the oft repeated statements made about how things used to be soo much different and better are an exercise in revisionist history. For example, the comment was made that20 years ago a new teacher could afford to
live in the county – but now at $40,000 they can’t.

Using a tiny one bedroom condo over by the Columbia Mall that sold for $50,000 in 1985, and sold again in 2005 for $125,000 as an example — (on little patuxent pkwy – found with just a quick check of transfer records) … tells me that in 1985, when interest rates were 12% — it would have required a $24,000 per year salary to qualify as “affordable” housing. A little tight for our new teacher.

(according to HUD  “affordable” means no more than 30% of income for housing expense – though lenders used 28% for housing to income ratio) $462.88 principle and interest plus another $125 for taxes, insurance, condo fees and private mortgage insurance common for first time buyers = about $600 per month total payment with 10% down.

The same condo today — at $125,000 with 10% down at 7% = $748.47 (pi) plus about$225 (tic/pmi)=$975 monthly expense — which, at 30% affordable housing indicator, requires exactly $40,000 income.

Soooo – sadly, a young teacher fresh out of school, living alone, is not going to be able to “afford” a lovely four bedroom, 3 1/2 bath mini-manse…. but, he or she can afford exactly the same one bedroom condo his 1985 counterpart could possibly squeeze into – right here in Howard County – with more ease than the 1985 grad.

In fact, I graduated from college in 1983 — and my first job did not pay $19,000 per 10 months. though I did buy a tiny one bedroom condo in the North End of Boston on $17,000 per year in 1985. I don’t think it was as nice as the one by the mall, though. Mine was a 400 sq ft 4th floor walk up in a 200 year old building…. and it had orange shag carpet and mushrooms growing between the baseboard and the flooring.

That’s not to say affordable housing is not an issue — I just prefer we not cloud our thinking with fictional nostalgia.

Cindy V.

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14 Responses to “Will the High Cost of Living in HoCo be It’s Downfall?”

  1. Cory said

    As one who has read your opinions on the HoCoEd board for a few years and now on this blog you always seem to dislike when people leave out facts or ignore them to make their point. However, I see there are a number of items that are absent from this post.

    You say based on 30% that a new teacher can afford that 1 bedroom condo. What you left out is most financial advice that I’ve read in journals, newspapers, etc say that 30% is even a stretch for more people. Also most teachers have an expense that most of the rest of us do not: school supplies. I know many teachers who spend at least $1000/year on supplies because they are not supplied by the school system. Special Ed teachers have it even worse as most of them don’t have a curriculum to work from and hence have to also buy most of their materials as well as the supplies to modify those materials for their students. Add those costs in and all of a sudden that one bedroom condo isn’t so affordable anymore.

    Plus you found the $125K exception, most housing is Howard County isn’t that cheap. If it was rental units wouldn’t rent for more than $975 because everyone would be demanding a $125K condo to buy.

    Does all that mean that new teachers should get $75K to start? No, our taxes couldn’t handle that without exponential increases. What the right answer is I do not know but please don’t pretend the problem doesn’t exist. Many public workers and others can’t afford to live in Howard County because of the cost of housing.

  2. bsflag2007 said

    Dear Cory-
    I agree, there is no question that it is hard to buy a piece of property in HoCo, especially for a recent college grad ona starting salary. My point is that has not changed as much in the last 20 years as the rhetoris would suggest.

    Also – to find my example I simply went to the Maryland Real Estate Transfers page, plugged in Howard County and Little Patuxent Parkway (since I know there are lots of condos over there that are reasonable for new grads and is a reasonably safe and inviting neighborhood area I would not mind seeing my own child live) – and scanned half a dozen entries looking for an original transfer in the mid 1980’s with a resale in 2005. It may have been an abberation — and maybe I got etremely “lucky” – so I went back and looked some more.

    While it does not appear there are oodles of condo changing hands – those that have fit the same parameters.

    There are many more factors in making the leap to home ownership versus renting than the simple cost of rental versus cost of monthly morgage/piti. But, ignoring those for the moment – your point that people would be “demanding a $125,000 condo to buy” is exactly on point.

    There is pretty significant demand for $125,000 one bedroom condos – even if they are 30 years old and only 750 sq ft. And the people who want to buy them are nice, respectable college graduates who are “good enough” to teach our children…. but for some reason, many folks don’t want this kind of housing built “in their backyards” (the nimby folks).

    Isn’t that the point about “moderate income housing”?

    Also – I mention the 30% figure because (as I mentioned) that is the HUD definition of affordable… even though (as I also mentioned) responsible lenders use 28% income to housing expense ratios —- and as you point out, financial professionals will caution buyers to keep in mind that the real expense of owning a home goes beyond mortage piti…. (which goes to the myriad reawsons people do not necessarily make a dollar per dollar analysis of ownership versus renting.)

    Finally – your point about the “start up costs” for new teachers is a “pet peeve” of mine. It is hard for me to understand why the BOE chambers need a $300,000 plus makeover when the classroom teachers have to dip deep into shallow pockets to buy teaching materials, and learning aids.

    While that certainly has an impact on what a teacher might decide to spend on housing — affordable housing and the out of pocket business expenses of teachers are two distinct, albeit very important, issues.

    Thank you for pointing out where I may have been unclear — It is hard for a new college grad to afford to live alone, purchase real estate, and get the supplies and equipment necessary to begin his career. That has not changed all that much in the last 20 years.

    I don’t suugest or pretend the problem does not exist — I suspect, however, that support for the necessary steps to help remedy this significant problem is eroded when the “facts” get confused or manipulated.

    consider this — do you believe a recent college grad ought to be able to go right out and buy a nice home, a work wardrobe, all his professional equipment, maybe a nice car to get to work, and have enough money left over to buy food and a reasonale amount of entertainment and save for his future?

    Did you? Or did you have to spend some time “building” your wealth, making hard choices (new car versus down payment on house …. vacation versus getting cavities filled…. food versus beer?)

    There are perfectly reasonable, generous, conservative folks whose eyes start glazing over when they hear comments about how these “recent college grads” “ought to be able to” ______ (fill in the blank). They just dip into their memory banks about how things were when they were fresh out of college (or the military) and mutter something about “entitlements” — those would be my parents.

    If your desire is to actually persuade folks that there is a problem and that something needs to be done about it — I think you get further by recognizing the flaws in your argument and acknowledging what your audience already “knows” on a gut level.

    Do you agree?

    Cindy Vaillancourt

  3. bsflag2007 said

    Different part of same issue — the new teacher and the one bedroom condo were prompted by the comment about the relative affordability of first time housing in hoco 1985 vs 2005.

    The fact is, I don’t really see that as the most pressing part of the affordable housing crisis in hoco.

    Young college grads at the beginning of their adult lives and careers will have great character building experiences living with roommates, taking the bus, living on macaroni and cheese 😉 and if they stretch to buy a little condo, that squeeze will get more comfortable over the years as their incomes go up and their equity builds — (again, that’s a different question than whther new teachers are adequately compensated or if a teacher’s workload is reasonable)

    The more pressing problem is for young families (that one bedroom condo is not going to do it) – and folks with jobs which have reached their earnings limit — like the custodians and bus drivers Dr. Cousin mentioned. These are not careers destined for exponential income increases.
    Stretching on housing ultimately causes a break in the rest of their financial lives.

    How much can a hard working school custodian afford for housing? Is housing in that price range available and where” Is it accessible to his job?

    There are limits to society’s obligation to provide for some folks at the expense of others — but there are things society can and should do to help those members of the community who struggle so much.

    Zoning can be used to help or hinder the availability of affordable housing. Reliable, efficient mass transit can be the difference between individuals helpng themselves or being stranded.

    Other suggestions?

    Cindy V.

  4. Cory said

    I do believe that “a recent college grad ought to be able to go right out and buy a nice home, a work wardrobe, all his professional equipment, maybe a nice car to get to work, and have enough money left over to buy food and a reasonable amount of entertainment and save for his future”. I wasn’t trying to imply that at all. I just don’t believe even on $40000/year a teacher (or any other worker in this county on that salary) can afford even a $1000/moth rent or mortgage. Take this example:

    $40000/year = $3333/month gross pay minus on average 25% or $833/month (for federal, state, local, Medicare, and social security taxes), minus required state retirement, minus union dues (which even if a teacher doesn’t want to be in the union is required for most because in this sue happy world we live it you have to have financial protection), minus what the school system doesn’t cover in health benefits. All that adds to about another 7% or $228. Now subtract 6% for a 403b contribution which is still a lower percentage that most financial advisors would recommend which is another $200. Now we’re down to $2072.

    Now let’s start talking about real living expenses. Take that $1000 rent or mortgage and we’re down to $1072. Let’s assume that the new worker already has a car they own free and clear (a big assumption by the way). They’ll still need to pay renters and car insurance say $60/month. They need gas to get to work say $50/month. Take another $200/month for groceries ($50/week which probably is low). Take out a monthly average of $85 for school supplies (based on $1000/year). Another $60/month for utilities. Now we’re down to $617. Lets take a combo package of phone, cable, internet service which runs around $100/month. I realize some can argue that those aren’t needed but in this day in age they are become essential items. I’ll alot $25/month for cell phone use for emergencies only. I won’t even say they’ll have a real plan with thousands of minutes. That leaves us with $492.

    However, we’ve still forgotten a few things. First most teachers will be carrying school loans. Lets say in-state school so on the low side $40000 in loans to repay over 10 years which is the gov’t loan time period. With 0% interest that is $333/month. Now we’re down to $192 leftover. But let us not forget that teachers are required for their certifications to continue to go back to school. The school system reimburses around half depending on where one goes (some places are less than half). Now our teacher is in the red. So where is the savings they’ll need to for that house? Not to mention I assumed there is 0 days of eating out, seeing a movie (heck not even renting a movie), needing clothes for work, repairs or oil changes for the car, etc.

    My conclusion, $40000 isn’t enough for anyone to live on in this county. It doesn’t matter if it is teachers, fire fighters, police officers, EMTs, janitors, or bus drivers. Sure having roommates will help, but not everyone who gets a job here knows someone here to room with.

    The problem is a huge one, without a single or easy solution. There are many ideas all with upsides and downsides. But real discussion needs to occur before we lose good people in all those services to places where they can afford to live.

    Cory

  5. bsflag2007 said

    I can’t imagine anyone not agreeing with pretty much everything you have said.

    In fact, I find it a little weird that HUD considers a 30% income to housing expense ratio “affordable”.

    Also – the laundry list of other expenses you mention make a huge impact…. though (just as interesting minor considerations) Howard County is not the most expensive place in the region for car or renters insurance … or food. It is still, as you say, pretty hard to live comfortably on $40,000 per year in hoco.

    May I suggest that in order to further the various parts of this discussion – it would need to be divided into at least three sections.

    1) – The premises of the original post — seperate the facts from the myth. It was just as diificult for a “new teacher” to afford to buy a home in HoCo “20 years ago” as it is today. (though it may have been easier to find the “affordable” condos which are now infrequently on the market) That is not to say it is not difficult – and it is a prblem which leads to other problems which ought to be addressed.

    2) – Young college grads beginning their professional lives have lots of exenses in addition to the basics. Teachers are of particular concern to us as a cmmunity because we – as a community – employ them, invest in them, rely on them …. and if they leave our community after we have invested in them, we “take a loss” as a community.

    3) – Young professionals who can reasonably expect a steady increase in salary over time are one group …. other laborers/workers/skilled professionals in occupations with salary limits in the “moderate range” are a seperate group with a different group of concerns for the community.

    cory says – “The problem is a huge one, without a single or easy solution. There are many ideas all with upsides and downsides. But real discussion needs to occur before we lose good people in all those services to places where they can afford to live.”

    I could not agree more. “We” tend to waste so much time essentially tring to find a “magic bullet” … or “one size fits all” solutions — or more accurately, arguing about why any particular plan won’t fix every problem — that nothing gets done.

    I subscribe to the Mother Theresa theory of tackling big problems…. we can’t always do great things, we can only do small things with great kindness…(not a direct quote)

    Cindy V.

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  7. Matt said

    I moved to Carroll County for this very reason. I was born and raised Howard and work for the county but cannot afford to live here because it’s too expensive.

  8. bill said

    “Will the High Cost of Living in HoCo be ITS Downfall?”

    There. I fixed that for you.
    Sad.

  9. Mike said

    I didnt realize you censor people on this blog

  10. J. Mark Braga said

    Why should hard working Howard County home owners and taxpayers (typically with two working parents and a substantial mortgage of their own) be forced to support “subsidized housing for working families?” The right answer is they should not.

    That many “public workers” and others can’t afford to live in Howard County because of the cost of housing is a free market fact, but it does justify do-gooder government intervention with public funds. Get real; “public workers” typically can’t afford to live in Beverly Hills or Palm Beach either, should government intervene?

    If Leonard Vaughan, the county housing director, thinks that providing some residents with incomes from about $30,000 to $50,000 with housing units is a good investment, he is free to invest his own money in a low rent apartment building; or he can renovate his basement into low cost apartments. That is his right. However, he has no right to steel my money at the point of a government gun and give it to someone else to pay their rent or mortgage.

  11. Mike,

    Censorship? I only delete spam and you spammed this site 6 times. If you want to use a blog as a forum for your candidate then ask for dialogue.

    I delete all spam on this site. My readers appreciate that fact.

    If you have something of substance to say let us here it instead of throwing out one liners that simply say “Vote for….”

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