Monday, Aug. 28, 2 p.m. ET

Housing Crisis Goes Suburban

Michael Grunwald
Washington Post Staff Writer
Monday, August 28, 2006; 2:00 PM

Washington Post staff writer Michael Grunwald was online Monday, Aug. 28, at 2 p.m. ET to discuss his Sunday Outlook article, " The Housing Crisis Goes Suburban ."

Grunwald reports that the nation's affordable housing crisis is deepening, and not just for inner-city families on welfare. The problem has climbed the income ladder and moved to the suburbs, where service workers cram their families into overcrowded apartments, college graduates have to crash with their parents, and firefighters, police officers and teachers can't afford to live in the communities they serve.

A transcript follows.


Michael Grunwald: Hi there. Housing is clearly a topic close to many of your hearts, and I'm looking forward to your questions. I've never understood why this is considered such an unsexy issue; I mean, everyone has to pay for housing. But I guess it's at least a bit sexier than the Army Corps of Engineers, so maybe I'm moving up in the world.

Before I start, I want to thank everyone who emailed me--more than 100 already--but especially the guy who wrote that if I knew anything about housing I would stop whining about snob zoning and start writing about the D.C. height restriction. Funny you should mention that! We'll post my height restriction screed as well.

OK, shoot.


Great Article!: Michael, I loved the article. This topic is near and dear to my heart. The problem, in my opinion, is the gross vs. take home number. The take home pay is the only number that SHOULD matter in the mortgage determination equation. My husband and I have a very significant amount taken out just for 401K and we sock even more away for savings. Our "monthly income" number is far lower than our "salaries" would indicate but mortgage companies dont see it that way. So people like us get approved for 3-6 times our income and that is just crazy!

I have always thought that people (not taking debt into account) should get approved for about twice what they make. So -- a couple makes $120,000 a year -- great -- they can get a loan for around $240k. Is this currently happening? NO WAY. Do people want to live like this? Probably not.

Thank you for highlighting this issue. No matter how much a person makes -- a house payment that eats up 40-60 percent of take home pay is going to hurt.

Michael Grunwald: Thanks for your kind words. It's near and dear to my heart, too. And you're right that lenders got extremely loose with their cash during the housing boom; a lot of lower-income families with risky mortgages could find themselves in a world of hurt in the not-too-distant future.

But I don't think that's "the problem." In general, the Owns are doing OK; it's the Own-Nots who are getting hosed. The problem is the mismatch between the demand for and the supply of affordable housing near jobs. And there's evidence that a big part of that is

Michael Grunwald: the restrictions that communities place on high-density development--by requiring one-acre lots or two-car garages, or screening out multi-family or affordable developments.

_______________________ D.C.'s Fear of Heights ( Post, July 2 )


Washington, D.C.: Your "ballooning budget" comment is grossly oversimplified. In the deep housing assistance category, the Housing Choice Voucher program budget has grown substantially (for good policy reasons, I believe), but since 2001, the public housing program has lost approximately $1 billion 2007 dollars. The Operating Fund budget (that supports public housing operating subsidies) is scheduled to be funded at 75 percent of what public housing apartment complexes are eligible to receive and need to operate.

Michael Grunwald: I was referring to the overall federal budget, not the housing budget. My point was that government spending has skyrocketed, while government spending on housing has remained essentially flat.


Wheaton, Md.: Now that housing prices are coming down, is it expected that those who currently can't afford houses will soon be able?

Michael Grunwald: This is an excellent question. No one knows exactly how far housing prices will come down, but most of the experts I talked to think the gap between incomes and prices--and between supply and demand--is so vast that even a crash won't entirely fix it. For one thing, the price slump is already slowing down new development, which means reduced supply. And look at the numbers for Fairfax County: The median home price would have to be cut almost in half for it to be "affordable" (less than 30 percent of income) for a household with the median income.


Hyattsville, Md.: I once read a study that showed that the amount of tax relief provided to property owners completely and totally dwarfed all federal, state and local assistance to those in need of housing assistance. In my opinion, one of the biggest helps to affordable housing would be to eliminate the mortgage deduction on second homes. Eliminating the deduction on first homes would also help, but seems politically unfeasible.

Michael Grunwald: This is absolutely true, and it's a point worth repeating: The federal government already subsidizes middle-income and even upper-income homeowners through the mortgage interest deduction as well as property tax deductions. This is a public policy choice the nation has made--it's one reason homeownership rates are near 70 percent--and it's undoubtedly stimulated the production of housing. (Often in sprawlville--but that's a different screed.) But eliminating the mortgage deduction--even for second homes--wouldn't make housing more affordable by itself.


Washington, D.C.: I'm glad you brought up the aversion to higher density housing. I believe our long commutes and profligate fuel consumption are strongly related to desire of virtually everyone to have a single family home in the suburbs and oppose multifamily housing.

Isn't the emphasis of homeowning generally a problem. I know many people laud it, but if people where more likely to rent, wouldn't they feel less obligated to maintain a home 50 miles away from their job. Isn't it time to begin phasing out the home mortgage interest deduction?

Michael Grunwald: Many questions about the home mortgage deduction. I would point out that there's a reason home ownership is considered part of the American dream--stability, a sense of personal ownership, etc. Remember, rental housing has become extraordinarily expensive as well. I think that many commuters would be happy to rent near their jobs if they could afford it--and I think it would be easier for them to afford it if those communities weren't snob-zoning them out to the exurbs and beyond.


McLean Gardens, Washington, D.C.: Your article drove home the point that, in the very near future, the only people who will be able to live near cities are either the very rich (who can afford to buy houses) or the very poor (who will benefit from low-income housing created). But what about the people like me: not rich enough to buy, but too "rich" to qualify for low-income housing. It seems like we are the people who will be lost in the shuffle.

Michael Grunwald: This is another good point, and it's the reason I suggested that politicians might discover the issue someday. If it's any consolation to you--and it certainly isn't to the poor--low-income housing isn't an entitlement, so three-quarters of the families who are poor enough to qualify don't get it.


Arlington, Va.: The Alliance for Housing Solutions, Arlington, Va., will be releasing a report based on review of affordable housing programs around the country. One of the report's recommendations stresses the need to engage major employers in meeting the affordable housing crisis. Did you talk with any employers about their stake and interest in meeting the crisis?

Michael Grunwald: I did talk to a few employers, and they emphasized that affordable housing is a big part of competitiveness: it's hard for them to attract employees if there's no place for them to live, and it's hard for communities to attract employers if there's no place for their employees to live.


Arlington, Va.: Thanks for pointing out snob zoning, that's a great term for it! I think the biggest obstacle to affordable housing is the existing homeowners. I can't wait for the Vienna Metro West development to start up. What people seem to forget about existing homeowners is that due to the increase in prices, if someone bought a house more than five years ago, they are sitting on the equivalent of a guaranteed lottery ticket. Tough to generate sympathy when view that way.

Michael Grunwald: Well, that lottery ticket wasn't guaranteed when they bought it. But I do think that zoning restrictions and other NIMBYish rules designed to protect property values of existing homeowners at the expense of newcomers are often tough to defend. I mean, why exactly shouldn't there be high-density development near the Tenleytown metro? To preserve the rural character of the neighborhood?


Arlington, Va.: I'm 28 years old, unmarried, and on a single income of $43K per year. I have no debt, I have good credit, and I'd categorize myself as white-collar middle-class.

I presently rent ($1100 for a studio apartment), because if I chose to buy a home/condo/townhouse, the absolute most I could afford is the upper $100s. That said, is it a total pipedream to hope that, in the D.C. region, someone with my demographics will EVER be able to afford to buy a home?

Because from my vantage point, the answer is a resounding no --unless I changed careers and got 6-digit salary (minimum), or unless I got married to someone who has a 6-digit salary, or unless the housing market faced an unfathomable and unspeakable recession. I seriously doubt I'd qualify for any kind of housing assistance, because I'm technically not low-income (I never thought I'd have to classify $43K as low-income), so I'm left to my own devices if I ever wanted to buy.

So I ask again, is it possible that someone with my demographics will EVER be able to afford to buy a home in the D.C. region?

Michael Grunwald: Hmm. I'm not a mortgage lender, so I'm not sure. The situation in Fairfax shows that some counties are willing to subsidize some moderate-income workers--especially if they're firefighters, teachers, police officers, etc.

You may have to do what I'm about to do, and marry up.


San Diego, Calif.: When we look at the affordable housing crisis and wonder why it occurred, you might look at developers' profits over the last five years. They have skyrocketed! While I don't deny anyone profits, I am tired of "zoning regulation barriers" being cited as the main impediment to affordable housing production.

Michael Grunwald: But why shouldn't developers make profits? That's why they're building homes. And those zoning barriers tend to inflate their profits; when there's an artificial restriction on supply, prices go up. It's just like the piece I did on the D.C. height restriction; the developers who already have 12-story office buildings love it, because they can jack up their rents, knowing that no one can build anything bigger. Again, it's incumbent protection.


McLean, Va.: The affordability of planned Vienna West housing is open to discussion. I haven't seen any data on projected prices. I can tell you that the existing condos close to the station are priced at $400K and up -- hardly affordable.

Michael Grunwald: First of all, the Metrowest developer will be required to reserve some affordable units. But more importantly--and this is the point I've been trying somewhat ineffectually to make clear--it's OK if rich people get those apartments near the subway. By expanding the supply of housing with access to employment, MetroWest will ripple (maybe only a little bit; it's impossible to quantify yet) throughout the entire housing market. Maybe the public affairs officer who's commuting from Winchester won't be able to afford MetroWest, but perhaps someone in Herndon will, and maybe someone from Warrenton will move into the Herndon home, and then the public affairs officer will move to Warrenton, and everyone will be a bit better off.


Washington, D.C.: I see your point about the height restriction but that's what I love about Washington. It's so unique when compared with Chicago or New York. Do you think there is some sort of compromise?

Michael Grunwald: NO! NO!

Well, actually, yes. Personally, I'm not big on any height restriction, but you could certainly keep it in place near the Mall and waive it everywhere else. Or you could relax the height restriction to, say, 20 stories. Or you could even force developers to include affordable units (or, more efficiently, contribute to an affordable housing trust fund) in exchange for exemptions from the height limits.


Austin, Tex.: There are vast swathes of the country where it's still possible to buy a perfectly respectable home for, say, $150,000-$175,000. Most of Texas is that way (although not, unfortunately, my city).

How is the housing downturn likely to affect all those places. Am I right to assume that since they didn't experience the huge increases in home values, they're not likely to suffer much?

Michael Grunwald: This is another excellent point that I tried to make in the article, but probably could have emphasized more: The affordability crisis isn't everywhere. It's in metropolitan areas, and mostly in coastal states. I think you're right to assume that the housing downturn won't affect the other areas as much, since the housing upturn didn't affect them as much.


Laurel, Md.: I remember talking to a housing activist at my church who said that one of the big barriers to affordable housing is the credit rating of those who would buy it. If your rating only supports a 9 percent mortgage, you can't buy the same house as someone who can get 6 percent. So poorer people (who usually have worse ratings) actually pay MORE to buy than others do.

Michael Grunwald: I'm sympathetic to people with credit problems, but I don't think that's one of the major causes of the current affordability crunch. As one of the earlier questioners pointed out, banks have been more lenient than ever about extending credit to previously marginal homebuyers.

_______________________ The Housing Crisis Goes Suburban ( Post, Aug. 27 )


Arlington, Va.: I may be too dumb or just not get it, but how will cutting the mortgage interest deduction make housing more affordable? It would make my current mortgage more harder to pay as I'd have less income to use for it.

Michael Grunwald: Yes, that's what I said.

I think the questioner was suggesting that it would ease the problem if the money the Treasury would save from eliminating the deduction on second homes was used for rental assistance. That is at least plausible.


Washington, D.C.: I understand your point about the ripple effect, but as a renter in the U Street area, I am really not seeing that happen. What I am seeing is, a person moves out of their old apartment for a place in the Ellington. The building owner of the old apartment renovates and doubles (or triples) the rent, because they know that someone out there will be willing to pay it, and the result is a seemingly never-ending escalation.

Michael Grunwald: I live in your neighborhood, and I see your point. Our area is just about finished transforming from cheap to expensive--partly because it's an amazing location, with tremendous access to jobs and transit. There is unfortunately a limited supply of housing that fits that description--thanks, Mr. Height Restriction! But the ripples will still be felt in other neighborhoods.


Glenmont, Md.: The current new house prices within Montgomery county (averaging over 600k) aren't affordable to most people who live there. So, how are they being bought and how likely are the owners to end up in foreclosure?

Michael Grunwald: Well, presumably someone's buying them. I wouldn't say they're any more likely than anyone else to end up in foreclosure. But you're certainly right that with more risky mortgages out there, we might be seeing more foreclosures, depending on the market, interest rates, etc.


Bremo Bluff, Va.: Are prices for condos dropping in coastal Florida?

Michael Grunwald: As a matter of fact, they are. The construction boom there has been completely insane. But unless coastal Florida ends up underwater--which is completely possible--there's always going to be a lot of demand for those condos. The baby boomers have to retire somewhere, and Florida is a lot nicer than Cleveland or Buffalo in the winter. (Or, for different reasons, Havana or Port au Prince all year long.)

I just wrote a book about Florida, so this is a topic close to my heart. Maybe we can put up a link...


San Diego Calif.: My national nonprofit organization teaches developers and affordable housing advocates how to frame the message about affordable housing so the "snob zoning" factor you cited is overcome by logic. What do you think of our mission, and will you come to our conference next month?

Michael Grunwald: Send me an email!


Arlington, Va.: Did you check any SRO's in the Northern Virginia area? Anything that could act a model for other locations?

Michael Grunwald: Many SRO's have been zoned out of existence--partly because many of them used to be lousy. But the Fairfax Housing Authority actually has 20 SRO's for day laborers in its office building!


Washington, D.C.: The Post has been AWOL on affordable housing issues for so long that it was great to see an article with such prominent placement. Unfortunately, the "McMansion" pictured, the $90,000 income qualification, and even the family depicted distort the tremendous need for Federal housing assistance, the type of home typically involved, and the typical recipients of aid. Are you planning more inquiry into these issues that will provide a more balanced picture?

Michael Grunwald: Thanks, I think. The point of the photo was that the only way to shoehorn affordable housing into some of these fancy neighborhoods is to disguise it as the gargantuan fuel-hogging McMansions that some suburbanites seem to demand.

I think the main point that only one out of four families eligible for aid receives it is germane to your point, don't you?


L'Enfant Plaza: For the height restriction -- it is based on the height of the Capitol building -- the idea it should dominate the skyline. So either you keep it in certain parts of the city or get rid of it completely. The 20-story idea is the worst of both worlds -- restrictions that limit occupancy at choice locations and changes the character of the city.

Michael Grunwald: It is not based on the Capitol building! A common myth.


Homeowner Blues: For most of my career I have been a preschool teacher -- not the best paying field out there even with a Master's degree. It took years to save for a condo and in 2004 and I had to move out of my beloved U Street neighborhood to afford a home where I felt safe and could move up to a one-bedroom and landed in Alexandria which is nice, but not D.C. I can't tell you how depressing it is to me to know that I am stuck in a condo for as long as I live in this area as a single home owner. I may never be able to sell at enough of a profit to upgrade to a SFH unless I move completely out of the area.

Is there any hope of seeing a downturn in prices enough to help out middle class purchasers, or at least new programs created to help those who find themselves in similar positions?

Michael Grunwald: Many questions like this. I am very sympathetic, and I applaud your desire to live in the city, as well as your work as a teacher. I guess we have to acknowledge that there's no entitlement to live wherever we want; I'd like the penthouse of the Trump Tower, but it's occupied by someone with more money. From a public policy perspective, everyone can't get what they want--especially if what we want is a single-family home on an acre lot--but it would be nice if there were more affordable places to live within striking distance of jobs and transit.


Arlington, Va.: What can affordable housing advocates do -- locally and nationally -- to get this issue on the radar screen for the 2008 election?

Michael Grunwald: This is the last one I'll have time for. The answer is: I don't know! I would think that housing would have power as a middle-class economic security issue, even more so than health care or gas prices. But it hasn't in the past. I stumbled into the housing issue as an entry-level reporter covering the night shift in Boston, when I decided I should try to write about something aside from gangbangers getting shot, and it occurred to me that at night people tended to be in their homes. I thought it was fascinating. But many people don't seem to agree. There aren't too many housing reporters at newspapers anymore. (I just ran into Howie Kurtz, a former housing reporter, in the men's room; he said he read every word!) But just because something isn't sexy today doesn't mean someone couldn't make it sexy tomorrow. Those numbers I mentioned are pretty stark: One out of every three Americans now has "unaffordable" housing. Surely they could be persuaded to care?


Michael Grunwald: Thanks for all your terrific questions; I'm sorry there were so many I didn't get to.

And, as always: Hi Mom! Hi Dad!


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