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October 2005

Understanding Affordability

A new initiative at MIT's Center for Real Estate is helping to tackle the high cost of homes.

By Jim H. Smith
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You can easily drive past Elm Brook and miss it. The 13-acre Concord, MA, housing project is tucked along a meandering cul-de-sac. A marshy area, dense with viny growth, encircles most of the development, blocking it from the views of neighbors to the east and west. To the south, Elm Brook abuts undeveloped land.

There are 12 houses: clapboard-clad capes, saltboxes, and two-story colonials, all with less than 180 square meters of living space. They are single-family units on small lots landscaped to conform to the natural environment. Each of these three-bedroom modular houses was crafted to meet exacting energy standards in central New York state and then shipped to Massachusetts for on-site assembly.

Completed just three years ago, Elm Brook offers no hints of the local resistance that Toby Kramer, SM '91, a Concord real-estate consultant, and Peter Roth, MAR '85, SM '86, developer of the project, encountered in bringing the project to reality. The Elm Brook homes seem, well, commonplace. But in a community where expensive historic properties abound, these houses are an increasingly rare commodity. They are "affordable."

Housing affordability is a complex issue. For many years, conventional wisdom held that a household should not spend more than 30 percent of its income on housing. But that view does little to help policymakers address the region's needs. Much more useful is a clear understanding of a community's proximity to job markets. Affordable housing that is 25 miles from a concentration of employers is not as valuable as housing within 10 miles. States and communities cannot develop appropriate housing policies without a tangible definition of the problem to be solved. And that means understanding just what affordability means. Through its new Housing Affordability Initiative (HAI), MIT's Center for Real Estate is helping the housing industry do that.
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Comments

  • Affordability and Investments
    Guest on 11/09/2005 at 2:41 PM
    Posts:
    1
    Nice to see a study that makes sense. It would be terrific if this concept was expanded throughout the US so Real Estate Developers could guage the best areas to build in, including innner city areas that need extensive renovation. Here in the Detroit area, we have a lot of run down areas that hold tremendous potential. A tool like this could show Civic Leaders where to place the most emphasis to make the area grow, and bring in more tax revenues.

    FYI - I spent 20+ years living in SOuthern California, which is no longer the affordable state it was back in the 50s, 60s and to some extent the 70s. I moved because it was impossible to buy anything bigger than a 1100 sqft condo ($140K in 1995 - now selling for over $400K).
    Rate this comment: 12345
  • Affordability and Investments
    Guest on 11/09/2005 at 2:41 PM
    Posts:
    1
    Nice to see a study that makes sense. It would be terrific if this concept was expanded throughout the US so Real Estate Developers could guage the best areas to build in, including innner city areas that need extensive renovation. Here in the Detroit area, we have a lot of run down areas that hold tremendous potential. A tool like this could show Civic Leaders where to place the most emphasis to make the area grow, and bring in more tax revenues.

    FYI - I spent 20+ years living in SOuthern California, which is no longer the affordable state it was back in the 50s, 60s and to some extent the 70s. I moved because it was impossible to buy anything bigger than a 1100 sqft condo ($140K in 1995 - now selling for over $400K).
    Rate this comment: 12345
  • The maintenance factor in affordability
    Guest on 11/09/2005 at 3:16 PM
    Posts:
    1
    As a new first-time homeowner, I am beginning to recognize an often &quothidden&quot factor in a homes affordability... maintenance. In my opinion, affordability - at least when applied to home ownership - cant be determined without an understanding of what maintenance costs will be involved as the home ages.  

    I would find it very interesting to see some in-depth research into what types of home construction are most &quotaffordable&quot in the long run. My own experience has been that there are alot of contradictory and unfounded beliefs about construction materials and methods that muddy the water significantly. Exactly how well does a wood-framed house compare to a house with metal studs in the long run?  From a maintenance standpoint, how do conventional foundations compare to slab foundations?
    Rate this comment: 12345
  • The maintenance factor in affordability
    Guest on 11/09/2005 at 3:16 PM
    Posts:
    1
    As a new first-time homeowner, I am beginning to recognize an often &quothidden&quot factor in a homes affordability... maintenance. In my opinion, affordability - at least when applied to home ownership - cant be determined without an understanding of what maintenance costs will be involved as the home ages.  

    I would find it very interesting to see some in-depth research into what types of home construction are most &quotaffordable&quot in the long run. My own experience has been that there are alot of contradictory and unfounded beliefs about construction materials and methods that muddy the water significantly. Exactly how well does a wood-framed house compare to a house with metal studs in the long run?  From a maintenance standpoint, how do conventional foundations compare to slab foundations?
    Rate this comment: 12345
  • What Of The Knowledge Gained?
    Guest on 11/20/2005 at 12:32 AM
    Posts:
    1
    Im guessing that these statistics and algorithms will maximize city planning, bank loans, and a plethora of ancillary benefits. All to the good of the public, government, and corporations.

    This knowledge, in itself, is of great value. Other cities, governments, and corporations could make better decisions with the help of good planning aids.

    The big question is will this information be shared?
    Rate this comment: 12345
    • Let them eat cake?
      Guest on 11/25/2005 at 5:46 PM
      Posts:
      1
      Is it just me, or does Lynn Fischers remark &quotrenting is a ...way to afford housing&quot seem a bit Marie Anntoinette-ish?
      And couldnt it be said that by limiting the supply of land, all lot sizes will be less affordable?
      I just think the researchers are kind of off in what &quotlow income&quot is? I finally graduated college and am making slightly less than their &quotlow income&quot amount and I am feeling rich...but not that rich.
      Rate this comment: 12345
      • Hello.  I want to talk about towers.
        Guest on 12/08/2005 at 10:35 AM
        Posts:
        1
        Hello. I just had an idea about building super structures and super edifices.  We may need to build structures within cities that are much more densely populated that todays buidings.

        In todays apartment rent housing, people are probably unhappy with rents, space, roaches, and noise.  We might need to find out more knowledge about construction and building techniques for building some of these structures in the future.  If we can use technology to combat some of these problems, it will all be better for all of us.

        Sincerely,

        Lilia Mallik
        Rate this comment: 12345
      • Hello.  I want to talk about towers.
        Guest on 12/08/2005 at 10:35 AM
        Posts:
        1
        Hello. I just had an idea about building super structures and super edifices.  We may need to build structures within cities that are much more densely populated that todays buidings.

        In todays apartment rent housing, people are probably unhappy with rents, space, roaches, and noise.  We might need to find out more knowledge about construction and building techniques for building some of these structures in the future.  If we can use technology to combat some of these problems, it will all be better for all of us.

        Sincerely,

        Lilia Mallik
        Rate this comment: 12345
      • Hello,  I want to talk more about towers.
        Guest on 12/08/2005 at 10:53 AM
        Posts:
        1
        In any super structure or super edifice, we need to put very heavy emphasis on safety and evacuation and safety during fires, terrorist attack, or disasters.  We may need to explore issues with air defense or homeland security when we think about building these types of these.  We need to seriously deal with peoples fear and trepidation about some of these issues.  We could also think about lunar housing, etc.

        We can also consider building housing underground or underwater.  We should always think about quality of life issues for people.
        Rate this comment: 12345
      • Hello,  I want to talk more about towers.
        Guest on 12/08/2005 at 10:53 AM
        Posts:
        1
        In any super structure or super edifice, we need to put very heavy emphasis on safety and evacuation and safety during fires, terrorist attack, or disasters.  We may need to explore issues with air defense or homeland security when we think about building these types of these.  We need to seriously deal with peoples fear and trepidation about some of these issues.  We could also think about lunar housing, etc.

        We can also consider building housing underground or underwater.  We should always think about quality of life issues for people.
        Rate this comment: 12345
    • Let them eat cake?
      Guest on 11/25/2005 at 5:46 PM
      Posts:
      1
      Is it just me, or does Lynn Fischers remark &quotrenting is a ...way to afford housing&quot seem a bit Marie Anntoinette-ish?
      And couldnt it be said that by limiting the supply of land, all lot sizes will be less affordable?
      I just think the researchers are kind of off in what &quotlow income&quot is? I finally graduated college and am making slightly less than their &quotlow income&quot amount and I am feeling rich...but not that rich.
      Rate this comment: 12345
    • Hello.  I need to talk about housing affordability.
      Guest on 12/07/2005 at 1:59 PM
      Posts:
      1
      Hello.  I wanted to talk about factors affecting housing affordabilty.  I believe that geotechnical, geothermal and green technologies, etc. may be able to be used for lowering utility and energy costs for homeowners.

      But, we need to furthur explore the issues involved with these technolgies to ensure that they are cost effecient, economically benficial and are financially sensible.

      These such technologies should ideally really giving a real return to the consumer very quickly.  So, people will definitely see the value in their long-term investments in these types of systems.
      Rate this comment: 12345
    • Hello.  I need to talk about housing affordability.
      Guest on 12/07/2005 at 1:59 PM
      Posts:
      1
      Hello.  I wanted to talk about factors affecting housing affordabilty.  I believe that geotechnical, geothermal and green technologies, etc. may be able to be used for lowering utility and energy costs for homeowners.

      But, we need to furthur explore the issues involved with these technolgies to ensure that they are cost effecient, economically benficial and are financially sensible.

      These such technologies should ideally really giving a real return to the consumer very quickly.  So, people will definitely see the value in their long-term investments in these types of systems.
      Rate this comment: 12345
    • Housing affordability
      Guest on 12/16/2005 at 5:27 AM
      Posts:
      1
      Hello.  I think that there are problems in the financial system that worsen the problem of housing affordability.  There is a problem in the appraisal process involving banks in many communities.  Investors, activists, and politicians should all try to get more involved.
      Rate this comment: 12345
    • Housing affordability
      Guest on 12/16/2005 at 5:27 AM
      Posts:
      1
      Hello.  I think that there are problems in the financial system that worsen the problem of housing affordability.  There is a problem in the appraisal process involving banks in many communities.  Investors, activists, and politicians should all try to get more involved.
      Rate this comment: 12345
    • Hello.  I just wanted to talk about housing affordability.
      Guest on 12/31/2005 at 1:11 AM
      Posts:
      1
      I believe that housing affordability is affected by the number of occupants that are allowed to live within an apartment unit or housing unit.  The more people are allowed to live within a space, i.e. two family home, etc. then housing usually becomes more affordable.  The occupancy and landlord restrictions will probably have an effect on housing affordability.
      Rate this comment: 12345
    • Hello.  I just wanted to talk about housing affordability.
      Guest on 12/31/2005 at 1:11 AM
      Posts:
      1
      I believe that housing affordability is affected by the number of occupants that are allowed to live within an apartment unit or housing unit.  The more people are allowed to live within a space, i.e. two family home, etc. then housing usually becomes more affordable.  The occupancy and landlord restrictions will probably have an effect on housing affordability.
      Rate this comment: 12345
  • What Of The Knowledge Gained?
    Guest on 11/20/2005 at 12:32 AM
    Posts:
    1
    Im guessing that these statistics and algorithms will maximize city planning, bank loans, and a plethora of ancillary benefits. All to the good of the public, government, and corporations.

    This knowledge, in itself, is of great value. Other cities, governments, and corporations could make better decisions with the help of good planning aids.

    The big question is will this information be shared?
    Rate this comment: 12345
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