Odds are, if you poll people on the street in Ithaca and ask them to name the most pressing problem in the City, the prevailing answer would be the lack of affordable housing. Over the years, we’ve managed to run up a housing market demand that overruns housing supply.

The Breckenridge Place ribbon-cutting ceremony last May 26th presented a startling reminder of how the lack of affordable housing threatens vulnerable populations, and why it’s so difficult to accomplish.

Among the speakers was Ithaca Mayor Svante Myrick, whom spoke of his own experiences growing up with housing uncertainty, and at times, literally homeless. It’s important for us to define housing as a basic need in society, but also housing that is located near downtowns, civic institutions, and economic centers, so that residents are able to take full advantage of social and economic opportunities. Svante made the same point by recalling that his family had lived in a nicely-furnished affordable housing complex for two years, but it had been very far from a town center, which severely reduced the benefits of the housing due to the lack of reasonable mobility to places of work, to basic needs like groceries, and to local resources.

Downtown affordable housing developments are tremendously difficult projects to accomplish, primarily due to the cost of building and financing projects under current building codes, costs, and site availability. Not to say building codes, costs, or site availability are to blame: codes keep people safe, costs are largely predetermined due to wages, materials, and technology, and site availability due to existing productive structures and planning considerations.

At the ceremony, Paul Mazzarella, director of Ithaca Neighborhood Housing Services, introduced Stuart J. Mitchell, CEO of Pathstone Development Corp. (project partner-developer), whom emphasized the complexity of the financing and planning involved in Breckenridge. Generally nowadays, affordable housing projects are complicated public/private/not-for-profit deals that leverage a slew of public and grant funding sources with private equity to finance the construction. The legal and tax benefits of each corporate structure are utilized to take full advantage of each of the funding nuances in order to make the project happen, a bit like putting together a financial puzzle set.

Programs like the Federal Low Income Housing Tax Credit (LIHTC), NYS Homes & Community Renewal programs (NYSDHCR), and federal neighborhood revitalization grants are typically oversubscribed, especially programs for urban multifamily housing development. LIHTC is said to be oversubscribed 3 to 1 with project applications each funding cycle. Organizations like Smart Growth America’s LOCUS are actively pushing federal and state governments to gear their programs towards smarter (denser, downtown) developments in order to re-align incentives with the existing and future sustainable American market for housing.

I wanted to present the current picture in Ithaca, and coincidentally, Paul gave a great presentation on housing trends in Ithaca and Tompkins County to the City Planning Committee last February 12th, and has agreed to share the slides here on the blog. Here’s a selection of slides from the presentation with brief explanations:

Housing sales cost trends show that from 2000 to 2013, prices have increased about twice as fast as income growth, and the fastest in urban areas of Tompkins County, especially in the City of Ithaca. The largest percentage of price gains have been in the lowest quartile of the housing market, essentially pricing-out many buyers from the lower end of the market.

Regionally, we have the greatest gap between median purchase price and median family income:

Affordable (defined by a multiplier of median income) home sales volumes have slipped:

Fair Market Rents (FMRs, defined by the federal government at the 40th percentile of median family income) have increased dramatically from 2000 to 2014:

Tompkins County’s FMRs are almost twice as expensive as some nearby counties:

Rental housing in Ithaca is clearly dominated by student housing, which has been the intended consumer for most new multifamily rental development since 1980, however, rental housing development has not kept pace with demand for new units.

The vacancy rate for apartments in the Ithaca urban area is 0.5%, which is far below the 5% rate considered to be a good rule of thumb for a desirable and competitive market. If not enough units are left vacant, the market is incentivized towards supplying sub-standard housing for the revenues the units command. In addition, the burden of finding housing imposes a cost to consumers. There are demographic changes that drive this housing demand: the City of Ithaca has seen minimal population growth (just less than 1%) from 1990 to 2010, while the County has seen growth around 8%. Part of the discrepancy can be traced to the lack of affordable and new housing created in the City.

Employment is arguably the major driver, since living closer to work is desirable; from 2000 to 2013, the change in private employment looks like this:

(MSA= Metropolitan Statistical Area)

The New York State Comptroller’s Office recently published a report (March 2014) on housing affordability in New York State, and the figures statewide are quite grim. According to the State, housing affordability is defined by housing costs being a portion of 30% or less of household income. Housing costs are defined not only by rent or mortgage payments, but also utilities, insurance, and real estate taxes. Severe housing burden is a 50% cost-share of household income.

Tompkins County’s numbers may be skewed due to the fact that student households with ACS-sampled low incomes but high rents are included in the Census Bureau statistics, and thus, the reported percentage (47.8%) of rental households above affordability thresholds may not be accurate. The percentage of owner households above the affordability threshold is likely to be much more accurate, at 21.8%, since students generally do not own the property they live in.

Regardless, the reality in Ithaca is that many people are priced out of the market for housing, and the solutions are not easy. Breckenridge was the first affordable housing development in the downtown area in 30 years.

The Second Part in this series will put on “Developer Goggles”: I’ll present and explain a traditionally-financed development pro forma (cost, financing, and cash flow analysis) with up-to-date construction cost information, financing terms, and typical operating revenue and expenses to show a developer’s financial view of building and operating a sample project in Ithaca.

My thanks to Paul for sharing the presentation on housing trends. You can find out more about the mission and history of INHS at their website: Ithaca Neighborhood Housing Services