When thinking about affordable housing, it is important to remember all the elements that make up housing costs. The generally accepted definition of affordable housing is that a household pay no more than 30 percent of its gross income toward the cost of housing. Often this definition is only applied to the rent or mortgage payment and does not factor in the cost of utilities or full cost of insurance associated with home ownership or rent.
 
A report sponsored by the Wilmington Regional Association of Realtors and the Wilmington-Cape Fear Home Builders Association offers some interesting statistics. According to the Cape Fear Area Housing and Economic Climate Report 2015-2016, a household earning $48,700, the Wilmington MSA median household income, can afford a single family home at the 2015 average price of $250,912. A closer look at the report is required to recognize some important caveats to meeting the affordability standard, such as having a down payment of up to 25 percent or exceptionally low utility costs of no more than $80 a month.
 
I would argue that neither of these scenarios represents the average or typical median-income home buyer. Although, someone selling a previous home or receiving an inheritance, gift or other windfall may have a large down payment, it is more likely that coming up with a 10 percent down payment of $25,100 is a monumental task.

It’s likely even more difficult for first-time homebuyers, given the median net worth, excluding home equity, for a married household less than 35 years old is $10,226. A single householder age 35 to 44 has a median net worth of $14,226. Older married households, age 35 to 54, are in a better position, with a median net worth of $43,493. Similarly, single households in the 55 to 64 age range have a median net worth of $45,447. (data source: U.S. Census 2011).

Clearly, some homebuyers with the ability to make a large down payment may not exceed the 30 percent affordability standard. If they do, paying more for housing does not cause them to sacrifice life’s other necessities. For those households earning $48,700, with limited savings, having affordable housing is important to acquiring and keeping housing.
 
Now consider the average costs of basic utilities, water/wastewater and electricity, in the equation. Below is a table prepared by Steve Spain, executive director Cape Fear Habitat for Humanity, that includes the costs of taxes, insurance and utilities in the computation of affordable housing using the 30 percent definition.   

Insurance estimate based on median home with hazard and wind/hail coverage not in flood zone.

When considering housing affordability, it is important to think through all the costs associated with housing and to seek solutions to high insurance rates and to find energy and water savings (green solutions). Along with keeping utility and insurance costs down, median income families may need help with down payment or financing to lower mortgage costs. 
 
Developers may be able to bring down the costs of housing with tools such as lowered permitting fees, increased density, or access to lower cost capital. As has been pointed out before, the answers to our affordable housing needs will require cooperation among all the stakeholders and a shared understanding of the many factors contributing to the problem.
 
Earl Sheridan, Ph.D., is a native of Wilmington, North Carolina, and a Councilman for the City of Wilmington. He is currently serving his third term in office. For more information about the city’s efforts for affordable housing, visit https://www.facebook.com/wilmingtonhousing or go to http://www.wilmingtonnc.gov/community_services/housing.