I have been an active member of Cohousing-L, an email discussion list on cohousing, since 1994. I’ve learned an enormous amount from all the cohousers who have answered questions and shared experiences. The one topic that comes up often and lurks in the background is low-income cohousing but there is not progress in developing it. Sustainable Cohousing is an effort to focus on this absence and attempt to resolve it.
Why There Is No Low-Income Cohousing
In the early years, very few real estate developers or construction companies were willing to work with forming cohousing communities. Lot development with each household building its own house was more common than attached dwelling units because loans for single households were more available. And even then, mortgages were difficult to obtain for an untested model that reminded bankers of cults. This meant that potential cohousing residents had to have enough savings and income to finance construction while also paying housing costs elsewhere. That limited the potential residents significantly and effectively eliminated low-income households.
About the turn of the century, the process became easier because developers began to trust the model (and some had even received awards for them). On the strength of the developer’s reputation, communities were able to obtain construction loans and mortgages. But developers are paid by commission—usually 10-15% of sales prices. Unless the development sells at or above market rates, the developer’s income will not be commensurate with the time and resources they commit. Planning, permitting, and construction usually take 2-3 years. The developer is working all that time. Building a small community of low-cost houses can take as much time and effort as building high-end housing. (Maybe not totally, but close.)
So cohousing has been almost always constructed and resold at market prices, or above. Communities that managed their own development learned by trial and error, basically reinventing the wheel. They often paid more than their home would have cost if they had had professional help. But professional help was not available. Low-cost cohousing is still considered impossible by anyone who has experience in real estate. (Almost.)
Zoning requirements strongly favor free-standing houses occupied by related people on a minimum sized lot. Multi-unit or attached unit buildings are heatedly resisted by neighbors in conventional suburban neighborhoods. While cohousing communities have almost without exception been welcomed after construction, vehement objections to approval were standard. If the communities had been low-cost construction to be occupied by low-income people, the objections would have been almost impossible to overcome. (Visions of rusty cars and that sort of thing.)
But it is also true that the interest, need, and efforts to build low-cost cohousing has not been coordinated and the energy focused on a solution. Early cohousers became their own experts with determinations and by learning as they failed. I’m betting that the same approach will work for low-income cohousers.
Government Subsidized Housing
There have been some breakthroughs in obtaining financing for a few government-subsidized units within market-rate cohousing. But the restrictions have been onerous and on-going. For example, many of the programs only approve a household when the project is completed and the house is ready for move-in. But financing for cohousing typically requires signed contracts on 70-75% of the units and a portion of the downpayment paid before construction begins. The commitments are required early in the process.
A central principle of cohousing is that residents are actively involved in the design and formation of the community from inception. The process begins well before a developer is contracted. If a household needed a subsidized unit, they had to participate without knowing if they or the unit would be approved. Or they could wait to join until the community was completed and all the subsidized units would be gone. Either way, those requiring subsidies had to take their chances for the 2-3 years construction would take. In addition, without being able to make a commitment and participate fully as the community was forming meant they would have a different kind of relationship with it.
Cohousing with Rental Units
Rental units for those who can’t afford to purchase or are too young to make a commitment has not been possible. Even when the prospective residents are in the upper-middle-income brackets, they have not had the ability to purchase two or more units and rent them. If they did, in order to pay taxes, condo fees, and mortgage payments on the second unit they would still need to rent it at close to market rates as possible. Rent can be higher than mortgage payments. While it is the only alternative for most US residents, it isn’t necessarily better.
There are one or two communities that have formed in a government-subsidized building in which everyone rents. That situation, however, lacks the security and constancy of living as an equal with control over one’s residency for longer than one year to the next. Even for one three-year lease to the next three-year lease. Rents can be raised until the household has to move.
Households with an annual income of $30,000 and those of $150,000 most often have different lifestyles. The same for households with substantial inherited income raised with high social expectations. Members of each of these groups will almost certainly have different expectations and interests. The higher-income households may choose to pay for the amenities they want and that others can’t afford. They may subsidize equipment or furnishings. But how long does this altruism last?
The lifestyle differences may not easily mesh. Some taking expensive vacations and others not able to take any. Wine or beer with dinner? Prepared from birth to go to Harvard or expected to become a plumber through an apprenticeship? Watch PBS or the Food Channel?
It is often argued that cohousing works with those of greater means helping those with lesser means—each contributes to the whole and the variety is what enriches the community. But this argument is more often heard from the higher incomes, and not the lower. That’s even if the lower-income household can buy into cohousing in the first place. Lifestyle (or class) differences are real. And most people are most comfortable with the one they grew up with. Unless the low-income people aspire to become like those with an above-average income, the conflicts will be ongoing. Being generous is a glimmer in the eye of the liberal, educated, and economically advantaged. But not so much in the eye of the group that others believe need help. The mix and mean that the reach is too great.
The differences aren’t in intelligence, diligence, responsibility, child centeredness, or any of the other virtues that are often believed to be the result of elite education and wealth. Measures of these characteristics are not necessarily different in those living one lifestyle or the other. Interestingly, the relationship between cognitive ability and interests is not as strong as we assume it is. There are equally challenged people pursuing interests and occupations of all kinds. Incompetent doctors and brilliant waiters.
Many people choose to live on a lower income. It’s a trade-off because they want a more relaxed life. Or they want time to do peace work. Or to write or paint. Rescue endangered animals. They may have dropped out of the high-pressure professions or never entered them as a conscious choice. Low-income does not have a strong correlation with rusted cars on the front lawn. Or with addictive behavior.
Responsibility for Worldwide Inequality
Some people believe that until we in the more developed, rich countries learn to live on less, the rest of the world will never be able to live on more. The United States and even wealthier countries absorb more than their share. In order to keep our advantages, we ignore the fact that we are many times more advantaged than many whole countries. And it is hard to comprehend per person incomes 1,000 times more or less than our own.
Incomes are very hard to compare between one country and the next. Within countries, there may be a much wider disparity between high incomes and lower than in the United States. Averaging total wealth by the number of people may not accurately reflect the reality of how 75% live. Most sources reporting on the comparative wealth of countries divide the national gross income by the population to determine the relative wealth of each. Even though this may not represent the average income accurately, it is useful in comparing countries with large differences in national gross income.
According to WorldData.info, the average income in the United States of $63,000 a year is ~$173 a day. Even in European countries that most of us would consider highly developed and on a par with the United States, the average income is ~$123 a day with average earnings of $45,000 a year. In Bangladesh, the income is less than $5 a day. In Afghanistan, Madagascar, the Congo and large areas of other countries in the Near East, Africa, and South America live on $1-2 a day.
For many people, the purpose of living on less is leaving more for those who live on drastically less.
How Much House Can a Low-Income Person Afford?
Although the average income in the United States is $63,000, the median income according to the World Population Review for a household is $43,585 and for a single person $15,480. The median is the halfway point in the range of individual incomes. This means 50% of incomes per person are above $15,480 and the other half are below. A median income of $15,480 a year is ~$42 a day. Not the ~$173 that an averaging of the numbers would imply. (That is how much inequality there is in the United States.)
One measure of whether a house is within your salary range is to compare the price of the house with 2.5 times your annual income. Using this number, an income of $15,480 would qualify for a mortgage of $38,700. Another rule of thumb is called the 28/36 rule. All housing costs should be no more than 28% of after-tax income with a total debt of no more than 36%. Total debt includes credit card payments, car payments, student loan repayments, etc.
28% of $15,480 would be ~$4334 a year, ~$361 a month for housing costs.
And remember, $15,480 is the median income for one person. Half the population earns less than that.
Those are general figures to work with. Each person’s situation is different and calculating an after-tax income is too complicated for our purposes (and my calculator). The down payment also makes a difference. Some can afford a large down payment and others have very little savings. And remember, $15,480 is the median income for one person. Half the population earns less than that.
The Moving Definition of Affordable?
I am purposely avoiding the word affordable. Its definition changes with geographic location and is too easily misunderstood. It is often defined as houses that cost 80% of the median cost of houses in an area. That means if the median house price is $600,000, a $480,000 house would be affordable. You see the problem. It’s all relative. The same is true of income as measured by financial institutions when calculating mortgage qualifications:
- Extremely Low Income is 30 percent of the area’s median income level.
- Very Low Income is 50 percent of the area’s median income level.
- Low Income is 80 percent of the area’s median income level.
Again, we are up against the median income. This means that low income in an area with a median income of $200,000, would be $160,000. Not a very workable definition. This is more than 10 times the median income per person in the United States.
Low-income, however, has a more specific definition based on Poverty Guidelines. The Poverty Guidelines are determined annually by the Department of Health & Human Services and are supposed to represent the minimum income required essentially to stay alive. There are many arguments about the accuracy of this number but it is the measurement used by the government to determine eligibility for a variety of supplemental aid programs. For the contiguous United States, the 2020 poverty level for one person is $12, 760. For two, $17,240. For four, $26,200.
Low income is defined as 199% of the federal poverty level: $25,392.40. That is a firm number to work with. To keep the site focused on Shelterforce began in 1975 as a “how-to” publication for tenant activists. Over the years our focus expanded and we began to examine a wider range of place-based community-building issues. But we’ve always kept the goal of empowering people to make real change in their communities. We have a quarterly print magazine and a weekly newsletter. Shelterforce is the only independent, non-academic publication covering the worlds of community development, affordable housing, and neighborhood stabilization. Dedicated from the beginning to everyone working to empower and support low-income communities, Shelterforce provides a venue for conversations that need to be had—on topics from community planning More, I will be using an income for a single person of ~ $25,500 (rounded up from $25,392.40) or $70 a day (rounded up from 69.8630). An income of $25,500 would qualify for a mortgage of ~$64,000 using the 2.5 times income formula.
For the full list and other information: 2020 Poverty Guidelines
Calculating dollar amounts based on pennies produces numbers that I cannot remember and you probably can’t either. Rounding produces numbers that are specific enough for our purposes. What we need to do is understand generally what we are looking for in terms of housing requirements.