The National Housing Act was passed and signed in 1934 by American president Franklin Roosevelt as part of his New Deal Program. The act itself worked hard to establish a stable enough housing market in the Great Depression. It was later meshed into the Department of Housing and Urban Development. The National Housing Act was among the crucial legislation pieces signed in order to combat the terrors of the Great Depression. Roosevelt's Administration and the American Congress introduced a number of laws that gave the federal government the power to stabilize and manage America's economy (Hoffman & Arck, 2019). This law is what later became the Federal Housing Administration, of who's primary concern was to establish a federally accepted mortgage insurance package which would insure mortgage lenders against the threat of default.
It had been established that the housing department was in great need of intervention if it was to survive the Great Depression (Nguyen, 2005). More than a thousand owners of homes used to default their mortgages every day in 1932, and by 1933, half of America's mortgage was in arrears. All this is justified as mortgage finance was not available to Americans at the time, and loans were burdensome. Typical mortgages riddled with restrictive covenants required as much as 50% down, which was to be paid after a mere five years. After the establishment of mortgage finance, better rates like 20% down and repays spanning thirty years became a reality (Kautz, 2001). A clause known as a restrictive covenant limited what owners of the property could do with the property, and control over the private sector was possible through including these clauses in contracts.
Decades later, after the Great Depression had bubbled over, the Great Recession hit in the late 2000s. Banks, insurance companies, and hedge funds resulted in the subprime mortgage crisis. Banks and hedge funds created Mortgage-backed securities, and this resulted in the banking crisis of 2007, the financial crisis of 2008, and finally, the Great Recession (Nguyen, 2005). Emerging as the worst recession after the Great Depression, the Great Recession was further fueled by inadequate housing inventory, lack of construction labor, and an increase in land costs. As a result, house prices rose higher than they have ever been, and more than 10 million Americans ended up losing their homes (Hoffman & Arck, 2019). This was the infamous 2008 housing crisis. The focus of this paper then, after taking account of the two most significant recessions ever and their aftermaths, is to establish the best way to accommodate Americans who are looking for homes without necessarily breaking their bank accounts.
The Need for Affordable Housing
As a response to the Great Depression and the Great Recession, the need to provide or find affordable housing has become the goal of many Americans. Affordable housing itself can be defined as housing units one can consider friendly priced by part of a society whose income can be regarded as below median household income (Nguyen, 2005). Affordable housing sets out to address the housing needs and wants of middle- and lower-income families or individuals. Ranging in prices all across the world, affordable housing is more prevalent in developing countries where the populace is not well endowed financially to purchases abodes at the market price.
The primary factor dictating affordability when it comes to affordable houses is the disposable income of the individual looking to rent. In America, as a result of this, the government has taken the increased duty of availing more and more affordable houses to combat issues like congestion and homelessness (Hoffman & Arck, 2019). Various measures have been taken to ensure the increased demand for such houses has been met. This has been done through partnerships with the private sector to ensure affordable housing can be supplied where needed.
This study and review of affordable housing in America was done in accordance with Alexander von Hoffman and Matthew Arck's Pro Neighborhoods: Innovative Strategies for Affordable Housing. Focusing on low- and medium-income Americans, Hoffman and Arck's work expounds on five replicable programs that are aimed at ensuring there is always ample provision of housing for Americans who need homes (Hoffman & Arck, 2019). These programs have been tailor-made with the help of Community Development Financial Institutions (CDFIs).
The detailed reports in Pro Neighborhoods: Innovative Strategies for Affordable Housing came in handy in objectively studying the American housing market accordingly. It is prudent to mention that the partnership behind Hoffman and Arck provided financial support to people, small businesses and developers of affordable housing in initiatives established all over America in a bid to many kinds of housing establishments including private and subsidized manufactured housing, homeowner houses, and rental units (Hoffman & Arck, 2019). As such, their insight was crucial in understanding not only the housing industry but the plight for homes all over the country.
A concept rivaling affordable housing is market-rate housing, which deals with apartments that have no restrictions on their rent. Apartments in market-rate housing usually have flexible rents as the landlord is at liberty to tweak the rent as they see fit. These rentals do not conform to the rules that govern affordable housing (Nguyen, 2005). Thanks to this model of operation, housing affordability is increased for all individuals irrespective of their economic background. Market rate housing ensures the demand for housing is always sated, and this reduces the competition for houses between low- and medium-income families (Kautz, 2001). As an extension of this, there is always slow growth with regards to house prices and rents where market-rate housing is involved.
Comparison of Affordable Housing in New York and Saint Paul
The case study of this paper revolves around two cities, namely Saint Paul in Ramsey County, Minnesota, and New York City, in the state of New York. A brief comparison of these two cities clearly showed that housing in the former was as cheap, and housing in the latter was expensive (Lee, 2016). They are opposites.
Saint Paul has a population of 11,966. There is a total of around 4800 houses in the city alone, which each house sheltering one or two people (Lerman, 2006). 33.19% of the city's populace are renters. The city's median gross income for each household is $56, 008 annually, which divides to $4,500 a month. As such, the median rent of living in the city is only $700 every month. Households paying more than 30% of their gross income are seen as overburdened by many (Hoffman & Arck, 2019). Houses whose median are close to 50% are also seen as overburdened.
New York City, on the other hand, is the biggest city in the entire United States and has equally the largest housing market in the country. Manhattan, one of the most populated boroughs in the city, demands a rent of $3,000 every month, other boroughs following closely behind (Hoffman & Arck, 2019). The average rent is 80% of the median salary in New York. This is 50% more than that of Saint Paul. In the Big Apple's Manhattan borough, an entire year's worth rent for a household clock close to $38,000, which is more than three-quarters of an average American's annual salary. Market-rate housing is more prevalent in New York because its dense population makes it difficult for the federal government to intervene on matters housing fully.
Since affordable housing packages are usually aligned with one's income, its viability in Saint Paul is seen as more successful than in New York. This reduces the rates of market-rate housing in the city. In Saint Paul, the Area Median Income (AMI) of a small family of three is around $100,000 (Lerman, 2006). This AMI determines most of the city's affordable housing packages. Saint Paul has a myriad art gallery, museums, and sporting events. The city boasts 133 housing apartments that are low income. In total, 13,000 apartments are affordable in the city (Lee, 2016). Rental Assistance is also viable in the city where subsidies help pay a portion of people's rent and other monthly costs housing-wise. Affordable housing is more successful in Saint Paul than in New York.
An Interview and My Input of Affordable Housing
An interview with New York City tenant Amy brings a subjective view of the matter to the table. Amy reveals the brutal living conditions of the city. She observes that the famous Yankee stadium would be too small to house the city's homeless. People staying in the city shelters were more than 64,000 in January alone. The stadium is only able to handle a third of that number. She also reveals that vast numbers of Manhattan apartments are vacant and have been vacant for more than three months. Even the cheapest neighborhood in the borough still demands a rent of more than a thousand dollars (Kautz, 2001). As such, her position on the matter is that the city could benefit from affordable house programs.
From a personal standpoint, I think affordable housing describes any housing situation where the tenant doesn't spend more than a third of their salary on rent. Housing is a right as every person has the right to shelter and security. There are diseases and adverse weather effects atop hostile civilians and animals that could harm or even kill individuals (Kautz, 2001). Having the security of a house is a requirement. Mixed-income neighborhood offers a neutral ground for people of different financial backgrounds to interact and help each other. The downside to this openness is that in order to cater to both high income and low-income individuals, one side of the party always suffers. It leads to social alienation and stigma (Lerman, 2006). The U.S should pursue regulating and standardizing rent and house prices equally across the different income levels. This might help with the issue of congestion and homelessness in America. If I am gifted 15 minutes with U.S. Housing Secretary Dr. Ben Carson, I will bring to light the importance of the government assisting urban settlements in dealing with housing from a personal level. The key to this dilemma is helping the landlords as much as tenants in securing affordable houses (Lee, 2016). Through Alexander von Hoffman and Matthew Arck's Pro Neighborhoods: Innovative Strategies for Affordable Housing its clear to see that providing material and financial support to establish housing establishments goes a long way in not only helping tenants looking for a home but landlords looking to offer a house.
The need to stay in a warm home is deeply embedded in human beings. Since time immemorial, humanity has strived to find suitable shelter as it seeks to advance itself. In today's world, settlements are in the form of apartments that are made available to those in need of a place to stay. Both the prices of these apartments are too high, or these apartments are not enough. This has led to congestion and homelessness in most areas of the united states. Through affordable housing, this issue can be averted and a better tomorrow forged.
Hoffman, D., Arck, M. (2019) Pro Neighborhoods: Innovative Strategies for Affordable Housing https://www.jchs.harvard.edu//research-areas/research-briefs/pro-neighborhoods-innovative-strategies-affordable-housing
Kautz, B. E. (2001). In defense of inclusionary zoning: Successfully creating affordable housing. USFL, Rev., 36, 97...
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