Marianne Cusato was busy designing cottages for people displaced by Hurricane Katrina when requests started pouring in from developers, builders and homeowners across the country begging her to create a similarly compact dwelling for them.

“I was very focused on disaster housing and the small-house movement came to me,” Cusato told WalletPop.

Though Cusato’s 300- to 1,800-square-foot Katrina Cottages — now for sale at Lowe’s — are an extreme example of the smaller-is-better mentality, the movement appears to be more than a fad, especially now that the economy has tanked.

A slew of surveys shows that homeowners are looking to slim down, hoping for less space to heat, cool and clean, and cheaper mortgage payments. A recent CNN poll found 69% of respondents felt homes had gotten too big and Kermit Baker, an American Institute of Architects economist, reported in October that while people want a home office more than ever (reflecting in part the growing number of self-employed and telecommuting workers), special-function rooms such as home theaters, exercise rooms, guest wings and three-car garages have become less popular.

Consumers are also abandoning some of the excesses that had come to define the modern home before the housing bubble burst: living rooms in addition to family rooms, big master bedrooms with big master baths, walk-in showers that are adjacent to standalone Jacuzzi tubs, pantries the size of closets and closets the size of bedrooms.

Soraida Oquendo of Shrewsbury, Mass., is among those homeowners desperately seeking to downsize. Her 4,369-square-foot home, now for sale, includes a full basement and a pool — both amenities that seemed perfect when her two children still lived there. But now she and her husband yearn for a house that’s half the size and more affordable. The economic downturn, she says, has hit their liquor store business and the family’s finances.

“I’d like something only one floor…the most three bedrooms. Bathrooms? Two and a half would be fine. No big dining room. Something very simple and easy to clean,” Oquendo said.

Robert Lang, director of Brookings Mountain West, an urban development research partnership between the Brookings Institution and the University of Nevada, Las Vegas, sees the downsizing trend as a pendulum swing from just a few years ago. The sociologist describes the previous upsizing of housing as “the Tuscanization of wealth,” in which Tuscany-style homes grew ever larger as they were layered with add-on after add-on. “There were oversized entry halls, grand staircases,” he told WalletPop. “Their purpose was to demonstrate status.”

While the Oquendos are more traditional downsizers — empty-nesters ready to move on — Christine Harmel of Austin, Tex., is part of the new wave of less-is-more-leaning homeowners. Harmel, who does public relations for green companies, moved last year from a three-bedroom, three-and-a-half bath home in Charleston, S.C., to half of a 1,200-square-foot duplex.

The hardest thing to give up was the kitchen, she said, since she likes to entertain. Now she plans parties for good weather so she can hold them outdoors — and warns people not to come if it rains.

A National Association of Home Builders survey found the downsizing trend started back in 2007, when potential buyers were asked what trade offs they would prefer if costs exceeded their budget. In 2007, 58% said they would choose a smaller house with high quality materials and amenities over a bigger home with fewer amenities. In 2004, only 37% said they would make that choice. During that period, the desired square footage dropped from 2,426 square feet to 2,292.

“The living room is the most likely to disappear when the buyer is forced to choose,” Stephen Melman, the NAHB’s director of economic services, told WalletPop. Also on the chopping block: giant kitchens and large master baths.

A recent Wall Street Journal article said builders have become so convinced of the trend that they are making some of the choices for consumers, drawing up blueprints without the grand foyers and staircases, forgoing fireplaces and reconfiguring garages so that cars park end to end instead of side by side.

The Katrina designer, Cusato, has responded to the downsizing movement with the soon-to-be unveiled “New Economy Home” models. “I’m shifting from natural disasters to man-made disasters: the economy,” she said.

At 1,676-square feet, Cusato’s floor plans offer several options, including a downstairs suite that can ebb and flow with a family’s needs, starting out as a family room or office, morphing into a rental or in-law housing and perhaps later a downstairs master bedroom for retired homeowners. Cusato even suggests it could allow a divorced couple to continue to share the house if finances demanded it. What you won’t see in Cusato’s blueprints are large hallways, giant master suites, media rooms and her least favorite luxury: the Roman tub.

The smaller-is-better movement isn’t just a passing fad, said the NAHB’s Melman. Baby Boomers are now empty nesters and they simply don’t need as much space. Combine that with a recession and it appears this trend has legs.

“The trend of increased floor area over the past 35 years declined slightly during previous recessions in 1975, 1980-82 and the early 1990s. But this time it could be more permanent,” he said. “The depth of the recession and anticipation of increased energy costs combine with demographics this time.”

Picture a middle school dance. Boys on one side of the room, girls on the other, everyone too shy to make the first move onto the gym-turned-dance floor.

In a sense, the relationship between young professionals and their elder counterparts can be thought of the same way.

Either side may want to participate in community initiatives, but their involvement won’t happen without a first step. Or: until somebody walks across that room, nobody dances.

Talk of how to take those first steps — and why they are important — happened Friday morning in Keene, at an annual Business Leaders Breakfast sponsored by Heading for Home, the Monadnock Region’s housing coalition.

Though the discussion hinged on the economic necessity of young professionals, much of it also centered on the necessity of their having affordable housing — something a community needs for a vibrant workforce to flourish in the first place, event participants said.

Affordable housing — defined as housing people in low- and middle-income brackets can afford — is something “everyone in the community has to take notice of,” said Keith F. Thibault, chief development officer for Southwestern Community Services.

Lately many communities have. The state Legislature passed a workforce housing law last year that requires towns to provide for their fair share of affordable housing. Southwestern is hoping to break ground in spring 2010 on a 24-unit affordable housing complex off Water Street in Keene.

And the link between affordable housing and economic vitality was fortified this summer, thanks to the final report of the Governor’s Task Force on the Retention of Young Workers.

The group — a varied crew including members from state colleges and labor organizations — was charged with devising a plan to recruit and retain young workers, essentially combating what’s been called “brain drain.”

Half of the state’s college students vacate New Hampshire post-graduation, said Stephen J. Reno, former chancellor of the University System of New Hampshire and another speaker at Friday’s event.

The national average is 18 percent.

Most of New Hampshire’s workforce is also closer to retirement than entry-level age, he said. That means a dip in the state’s labor pool is coming once those workers officially leave. And the decrease will probably be severe, since it will be accompanied by workers who held off retirement to survive the recession, he said.

“We are a graying workforce,” Reno said.

If the state doesn’t do something about it, New Hampshire will not be attractive to businesses, he said.

The governor’s task force issued a list of recommendations, and among them was something affordable housing advocates have been promoting for years: Continue supporting increased opportunities for workforce housing.

There is certainly a local shortage. In the past seven years, the amount of workforce housing in the Monadnock Region decreased by more than 55 percent, according to a report written by students in Keene State College’s geography department, in collaboration with Heading for Home, and published in April.

Finding an affordable place to live was a big challenge for Neil Giarratana, president of Keene software company Lucidus Corp., and another speaker at Friday’s breakfast (and generator of the young professional-middle school dance metaphor).

Giarratana and his wife searched and searched for a place to rent. Once they found a rental home, they were beat out in the application process, and eventually had to buy a place of their own.

The struggle almost prevented him from moving to Keene, said Giarratana, who is also chairman of the city’s Young Professionals Network. But he’s glad his family did.

“Once we looked we fell in love with this town,” he said.

“(Keene) continues to look at who it is as a culture and what it wants to be when it grows up,” through initiatives like Cheshire Medical Center/Dartmouth Hitchcock Keene’s Vision 2020 and the city’s master plan revision process.

And discussions like those are crucial to solving the problem of young worker retention — and, in turn, affordable housing — event participants said.

“It really does take a community putting its heads together,” Reno said, to figure out how to create a more hospitable environment.

Jessica Arriens can be reached at 352-1234, extension 1433, or jarriens@keenesentinel.com

Topic: Will the Monadnock Region be ready for economic recovery?

Panelists:
Neil Giarrantana, President and CTO of Lucidus Internet Solutions, Katie Sutherland, Architect, and Steve Reno, the former Chancellor of the University System of New Hampshire.

The panel discussed the economic necessity of having affordable housing available when trying to recruit and retain younger professional workers. This is one of the critical issues that could make or break the Monadnock region’s future economic growth as we compete with the rest of the state and New England.

Dan Scully, Daniel V. Scully Architects, presented his three dimensional model of central Keene showing how housing density could be increased in the central business district by adding upper levels to existing buildings.

Community Sponsors:
This event was sponsored by the Savings Bank of Walpole and Connecticut River Bank, NA.

We are utilizing this approach to maximize the impact of our donors’ contributions while minimizing the high overhead costs (postage, printing, etc.) incurred when using a mail-based donor campaign.

Do you have questions about what Heading for Home has accomplished? Click here to see a summary of Heading for Home’s recent accomplishments.

It’s not often that a tax map is so shocking it makes people gasp.

But when those maps show that in six years more than half of Keene’s workforce housing — housing stock that employed people in low- and middle-income brackets can afford — simply disappeared, otherwise mundane tax maps become unbelievable.

Put simply, “It’s a pretty significant decrease,” said Torin Hjelmstad, one of three Keene State College geography students responsible for the map, one part of a workforce housing study titled “May the Force be with you: Workforce Housing in the Monadnock Region.”

Hjelmstad, along with students Sarah Forler and Elizabeth Kane, presented the report to the public Wednesday night at Bentley Commons in Keene.

The report, which looked at single-family homes only, was the students’ senior project: Forler and Kane will graduate next month, Hjelmstad graduated in December.

“This is the first time we’ve really had a study of this caliber,” said Susan R. Thielen, coordinator of Keene’s nonprofit housing coalition Heading for Home, which collaborated with the students on the report.

The students surveyed city and town planners, selectmen, employees of Cheshire Medical Center/Dartmouth-Hitchcock Keene, and did a case study in Walpole, looking at why that town chose to conserve 52 acres of land, known as the Ballum Farm property, from development.

In the end, what most surprised the students was “how big of a problem this really is,” said Forler.

“You just don’t really think about it as an issue,” she said.

To determine how much of Keene’s workforce housing shrank between 2001 and 2008, the students first used the median income of Keene residents as a benchmark for what an affordable home would be.

In 2008, the median income was $61,089. Using the N.H. Housing Finance Authority’s “affordability calculator,” students determined that an affordable home for a family of four in Keene would be about $188,351.

The affordability calculator takes into account such things as interest and property tax rates, mortgage repayment terms and available cash for a down payment.

In 2001, when the median income was $57,640, an affordable home was $176,130, the report said.

The students then applied those figures to assessed property values to find which homes in the city would be considered workforce housing.

The result? Those shocking tax maps — one for 2001 and one for 2008, with the workforce housing properties marked in green.

In 2001, Keene had 3,958 single-family homes that could be considered workforce housing. In 2008, there were only 2,193 — a 55.4 percent decrease.

This workforce housing shortage also contributes to a host of other problems, according to the report.

It has skewed the average age of residents in Keene: Young families cannot afford to live here, but the city has a high population of 20 to 24-year-olds, due to Keene State and Antioch University New England, and a high population of 40- to 55-year-olds.

But while Keene’s population has basically flatlined for the past 20 years, the population of Cheshire County has continued to rise, from about 75,000 in 1970 to 100,000 in 2007.

People are finding it more practical to live outside of Keene and commute to work, the report said, since both property taxes and home prices are much higher in the Elm City.

The report ended with ways to alleviate the workforce housing shortage, such as revamping zoning regulations, offering better incentives to developers and dispelling myths about the definition of workforce housing — that it equates to building ghettos that will overcrowd towns, for example.

People also have to realize how big of an issue workforce housing truly is, the students said.

“You have to spread the word to everyone,” Kane said.

Hjelmstad agreed. The importance and shortage of workforce housing needs a bigger audience, he said, “to make a dent in people’s consciousness.”

Jessica Arriens can be reached at 352-1234, extension 1433, or jarriens@keenesentinel.com.

Susan R. Thielen has heard the myths.

When people hear “workforce housing,” they picture derelict trailers, imagine an influx of children and cry out that such a move will cost them more in property tax dollars.

It’s all part of what Thielen, coordinator of Keene’s workforce housing coalition Heading for Home, calls workforce housing’s “image problem.”

“(People) want the younger people, they want the workforce, they want the viable tax base,” she said. “But they just don’t want their neighborhood to change.”

Whether towns like it or not, that change has come, in the form of a new workforce housing law, passed last year and set to take effect this July.

Concern from towns about how to implement the law - which requires municipalities to provide their fair share of workforce housing - led to another bill that would delay the law’s implementation for one year.

That bill recently passed the House, after being amended to a six-month delay, and Thielen said it will probably be approved in the Senate. The delay will give towns “a bit of breathing room” in trying to adhere to the new regulations, she said.

But the legislation is just one step in solving New Hampshire’s workforce housing problem, a problem with deep roots and far-reaching implications.

“I don’t think the public realizes how serious it is,” Thielen said.

N.H. court sparks change in workforce housing rules

Another facet of the solution is happening in Keene on Friday, at a business leaders’ breakfast sponsored by Heading for Home and featuring a presentation by Benjamin D. Frost, director of public affairs at the N.H. Housing Finance Authority.

At its core, workforce housing - housing stock that employed people in low- and middle-income brackets can afford - is linked with economic development, Frost said.

Without an adequate stock of affordable housing, business growth in New Hampshire is stymied, he said. Businesses can’t find workers, he said, because potential employees can’t afford to live where they work.

This strong interest from the business community helped propel the workforce housing law forward, Frost said.

The law was written to codify a 1991 N.H. Supreme Court decision, Britton v. Chester, a case sparked after the town of Chester blocked one developer’s attempt to build housing that included lots for low- and moderate-income tenants.

In that case, the court determined that every municipality has the obligation to provide a reasonable and realistic opportunity for developing affordable housing.

“The expectation at that time was that municipalities would change their zoning ordinances to comply with what the court was saying,” Frost said.

That didn’t happen, he said, partly due to a housing market surplus in the early ’90s.

But by mid-decade, that surplus was eaten up and home prices began to inflate rapidly, the situation becoming so dire by about 2000 that the state Legislature commissioned a series of studies on how to boost workforce housing in the Granite State.

The business community ran on a parallel track, Frost said, and the state’s Business and Industry Association made workforce housing its top legislative priority for three years, until last year’s law was passed.

The law requires municipalities to allow workforce housing within a majority of total land area zoned for residential use.

Rental multi-family housing - a structure with five or more dwelling units - must also be allowed.

Under the law, municipalities are not held responsible for economic conditions beyond their control, or natural features that make development impossible.

The law also defines workforce housing: that which is “affordable” to a household within an income no greater than the median income for a four-person family, in the geographic area where the housing is located.

But definitions like that make most people’s eyes glaze over, Thielen said. So in 2006 she set out to put some real numbers next to that definition.

The quest for affordability

An affordable home in the Monadnock Region would be about $134,000 to $252,000, she said, a range that’s primarily affordable for households with salaries of about $50,000 to $70,000 per year. A household usually consists of two people, she said.

People making that kind of money are some of the workforce’s critical pillars, Thielen said, such as police, teachers and nurses.

“We’re not talking about irresponsible people who are partying,” she said. “We’re talking about key younger people that we need to retain and bring into the state.”

But increasing the state’s affordable housing stock in not as simple as just building more two-bedroom starter homes and apartment buildings.

“The rub is, land is expensive and demand is high,” said Susan B. Newcomer, workforce development coordinator for the Greater Keene Chamber of Commerce.

Even though the housing market has cooled substantially, that doesn’t mean things are truly affordable again - like they were in the early ’90s - Frost said, since land values in the state haven’t gone down.

And when high land prices are combined with restrictive zoning ordinances - which can demand minimum lot sizes of up to 5 acres and large frontage requirements - building affordable housing becomes even more of a challenge.

But it can be done, Thielen said, if communities and businesses think creatively and cooperate.

One way to build affordably, and to ensure municipalities comply with the new law, is through inclusionary zoning, which allows towns to offer incentives to building affordable housing.

Frost gives the example of a 15-lot subdivision proposed by a developer who promises to make some of the units affordable. The town might then give that developer a bonus: five extra lots on the subdivision.

Heading for Home is also looking at “smart growth” principles and cluster housing, Thielen said, which allows for more homes to be built closer together, leaving room for the open space so valuable to many New Hampshire communities.

Collaborative solutions to the housing crisis

Some New Hampshire residents have already seen changes to their towns’ planning regulations, due to the new law.

Fitzwilliam, Pelham, Brookline and Goffstown all passed articles at last week’s town meetings, adding some variation of a workforce housing statute to zoning ordinances.

What the law will essentially do, Thielen said, is speed up workforce housing development, since municipalities are required to respond to a developer’s request to build workforce housing within six months from when a plan is submitted.

The law “doesn’t force anything down anyone’s throat,” she said.

“It obligates communities to look at these issues, to actually take a fair look at them and try to address them.”

As with any new law, there’s a certain amount of ambiguity, she said, and the legislation will surely be tested in the courts.

The law is certainly on municipalities’ radars, if Frost’s schedule is any indication. He has done 50 presentations to local planning and zoning boards over the last six months, educating them about what they need to accomplish under the law.

But when it comes to workforce housing, relying on those board members to solve the problem is not enough, Newcomer said.

Businesses understand that to recruit employees, they need workforce housing nearby.

“Yet any individual business struggles with an answer,” she said.

The Keene breakfast this Friday is an “attempt to bring the business community into a place where they understand it on a broader scale.”

And this is important despite the recession, Newcomer said, since the central roadblock to workforce housing is zoning restrictions, which means developers can’t build affordable housing no matter what the economy is doing.

Frost agrees, adding that the business community can play a fundamental role in educating local officials.

“Right now, not too many businesses are expanding,” he said. “But everyone is looking to the future.”

u Heading for Home’s Business Leaders Breakfast will be held this Friday from 7-9 a.m. at Bentley Commons, 197 Water St. in Keene.

If you are interested in attending, please RSVP Susan Thielen at 352-1449 or susyt@headingforhome.org.

Jessica Arriens can be reached at 352-1234, extension 1433, or jarriens@keenesentinel.com

Sentinel Staff

Published: Monday, February 02, 2009

New Hampshire’s workforce housing law, passed this summer, has a grand goal: To fight the state’s affordable-housing shortage, and in turn create a productive, thriving workforce that can afford to live where it works.

Despite this lofty goal, the law — set to take effect in July — has caused communities across New Hampshire to struggle with meeting its web of new requirements.

“The law is difficult for communities to understand and comply with,” said Bruce D. Simpson, chairman of Dublin’s planning board.

To give these communities time to figure out what to do, state Rep. Peter R. Leishman recently helped sponsor a bill to delay the law for a year, until July 2010.

The Peterborough Democrat said he decided to introduce the bill after receiving a call from town officials in Sharon.

“They were totally overwhelmed by the (workforce housing law) due to their size and lack of resources,” he said.

“(They) didn’t feel they could get things together before July of this year.”

The law requires towns to ensure that land-use ordinances and regulations “provide reasonable and realistic opportunities for the development of workforce housing.”

All towns are required to allow developers to build workforce housing in more than half of their residential areas. Towns must also allow for “reasonable and realistic” opportunities to develop multi-family housing, which is a building with at least five dwelling units.

The law describes workforce housing as being affordable to a household with an average income for the region.

Affordable housing is defined as housing that costs, at most, 30 percent of a household’s gross annual income.

The mean income for a family of four in New Hampshire is $72,606, according to 2004 data from the state’s Department of Health and Human Services.

That means that for housing to be considered affordable in New Hampshire, families making that amount must spend no more than $21,781 a year on housing — be it in a combination of rent and utilities, or a mortgage, property taxes and insurance.

Delaying the start date won’t wipe out the workforce housing law, Leishman said.

It will simply “give people a little more time to implement it.”

For small towns like Sharon, which have no full-time planning and zoning staff, it is a challenge to decipher what needs to change, or doesn’t, to meet the law’s requirements, Leishman said.

“The towns are concerned that they can’t put ordinances in effect quick enough,” said Lisa J. Murphy, senior planner at the Southwest Regional Planning Commission.

And while the law doesn’t impose penalties on towns that fail to meet its requirements, it does open the door to potential litigation.

If a developer is denied a building permit on a workforce housing application — or if a permit is approved with “adverse” conditions or restrictions — the developer can appeal the town’s decision directly to superior court, according to the law.

The law doesn’t state what “adverse” conditions might be.

Towns “need that first lawsuit to come forward” to understand just how workforce housing litigation will play out in the state, said Murphy.

Waiting to be sued, however, is not exactly appealing.

“Nobody wants to be that first guinea pig,” she said.

The law, as it is written now, is also vague, Murphy said.

For example, towns are required to provide their fair share of workforce housing in their region, she said, but the law doesn’t define what “fair share” is.

To help navigate the legislation, towns could commission a study to cull all information about available and desired housing in town.

But thost studies are “quite costly and would take some time to do,” Murphy said.

Paying for a land-use consultant is also an expense towns might not be willing to take on now.

“All the towns are struggling, just like families,” Murphy said.

The poor economy has also stalled the nation’s building market, Murphy said.

Combine this stagnant building market with the confusion in the law, and both Murphy and Leishman said there are enough reasons to delay it.

There are still changes towns can make in the interim, Murphy said, such as revising zoning ordinances to allow buildings to have accessory apartments, which would boost the town’s housing stock, and therefore help towns meet the new requirements.

In Dublin’s village district, 1-acre zoning already provides a reasonable opportunity for more affordable housing, said Simpson.

The smaller lot sizes means more housing, and more affordable housing, can be built in downtown Dublin.

The town has also considered expanding the size of the village district, and Simpson said he plans to discuss the workforce housing law with the planning board in the coming months.

Rindge is also working on trying to “get our arms around what (the law) means,” said Town Administrator Carlotta Lilback Pini.

The town already has a jump-start on complying with the law, she said, thanks to the creation of a workforce housing committee and a $6,000 grant, which the town used to hire a housing consultant.

Rindge is also considering building workforce housing on town-owned property at Cromwell Drive.

“It’s an economic development issue,” Pini said of the need for workforce housing in Rindge, and the rest of New Hampshire.

Without workforce housing, a town won’t have a viable pool of employees to draw from, she said. This makes it harder for a town’s government and businesses to remain viable.

Simpson agreed that the lack of workforce housing in New Hampshire is a problem.

“The Legislature had a good intent,” he said, but something got lost in translation.

“No one knows exactly what they’re supposed to do to comply with (the law),” he said.

Jessica Arriens can be reached at 352-1234, extension 1433, or jarriens@keenesentinel.com

By J. FERGUSON
Arizona Sun Staff Reporter
Monday, October 06, 2008

Another local Flagstaff developer has answered the call from the community for more affordable housing options.

John Crowley has recently lowered the price of nearly 5 percent of his condo conversion units at The Village at University Heights by $30,000 apiece to help locals buy their first home. Crowley has created 10 permanently affordable units in the former apartment complex for Flagstaff residents earning between 80 and 125 percent of the area median income, which is currently about $58,000 for a family of four.

That means households earning between roughly $46,400 and $73,750 would qualify for Crowley’s condos.

Crowley, who owns Alta Sierra Development, has already sold 75 percent of the 207-unit development. He said he decided to lower the price on the units because some residents couldn’t afford to spend $180,000 to $200,000 on a mortgage.

“It was a marketing decision,” he said. “The units at the Village are priced at a much lower spot than our standard sales price.”

He said he will make a slight profit on the 10 converted and remodeled two-bedroom apartments units, even after they are repriced between $149,900 and $169,900.

Crowley said he remembers when demand for another affordable housing development, Rio Homes, had people sleeping on the steps of City Hall just for a chance to own a home.

“I can remember a few years ago when 200 people lined up at City Hall for a handful of affordable units,” he said.

A consultant for the city said in a report released last year that there was an immediate need for 800 units priced so that households making between 80 percent and 150 percent of the area median income could afford them.

A recently released study by the Arizona Department of Housing suggested the median rent on a two-bedroom apartment in Flagstaff would cost roughly what a standard monthhly mortgage payment on the discounted units would be.

David McIntire, the city’s land trust program manager, said the discounted condos would be a boon for city residents interested in owning their own home.

“We are excited to be working with Alta Sierra Development to create an opportunity for out workforce through permanently affordable housing,” McIntire said.

The city will play a minor role in the sale of the units, reviewing applications for the units and have its non-profit partner, Bothands, do income-eligibility verification.

The discounted units will be sold to qualified buyers, and when the units are put back on the market, they will again be sold to residents making between 80 and 125 percent of the area median income.

When the homes are resold, the sellers will be allowed to increase the price of the home by one-quarter of the market rate increase. So if a market-priced unit increases in value by $40,000, the affordable housing unit could be sold for $10,000 more than its original price.

Resale of the units will be left to the owner of the home, although the city is likely to notify residents on affordable housing “interest list” that unit is for sale. Currently, there is 200 persons on that list.

Crowley is optimistic his affordable units will be well-received by city residents, but he acknowledges the local real estate market is in a slump.

“We just don’t know how well it work until we try it,” he said.

Those interested in the units can call either The Village at University Heights at 214-8500 or David McIntire at 779-7632, Ext. 7218.

J. Ferguson can be reached at 556-2253 or jferguson@azdailysun.com.

Income cap hindering sales

Despite an interest in the community for affordable housing, two resale units at Rio Homes priced around $160,000 are struggling to find buyers.

With a cap on the income of buyers of $47,200, the city acknowledges it is difficult to find qualified buyers.

David McIntire of the city of Flagstaff land trust program, confirmed that the city is in negotiations with AzNorth, the developers of Rio Homes, to increase the cap from 80 percent of the area median income to 125 percent.

He said he believed by changing the income restrictions that the homes would be able to find a buyer.

Devonna McLaughlin, the assistant director of local housing nonprofit Bothands, said income and price are the deciding factors for buying income-restricted homes at the Rio Homes development.

“Either of those aspects are going to be a factor in selling those homes,” she said.

McLaughlin said another reason why more people are not buying the Rio townhomes despite the attractive price is a fundamental misunderstanding about the economy. She said people are equating problems on Wall Street trickling down to their local bank when they try to qualify for a loan.

“It is a misinterpretation of what you are seeing every night on the news,” she said. “Folks still can get loans.”

Affordable housing options in Flagstaff

Qualifying income* Units available Price Estimated eligible demand (households)

Rio Homes $35,400 to $47,200 2 $160,000 (approx) 200

The Village $47,200 to $73,750 10 $149,900 to $169,900 800

* Family of four

MIAMI

Al Ray is so strapped for cash, the only time he eats out is on Wednesday or Sunday, when the local McDonald’s sells hamburgers for 49 cents.

Ray lost his engineering job last November, and has been working as high school tutor, scratching out about $1,000 a month — if he’s lucky. He struggled to make his $1,400 monthly mortgage payment and $330 monthly homeowners’ association fee until May, when he stopped paying.

Ray, 44, is looking for work and renting out a room in his two-bedroom condo in Davie, Fla., for $500, but his monthly income doesn’t match his expenses and he’s facing foreclosure.

“I barely have money to survive,” he said.

Ray is one of more than 7.5 million people — almost 15 percent of American homeowners with a mortgage — who are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.

Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage — 19 million of them.

Though home prices have fallen this year, in the most expensive markets where home prices tripled during the boom, many working families still cannot afford to buy a home.

“We had a bubble,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “This is a case where we absolutely want the market to adjust.”

The data underscore the serious affordability problems in this country and highlight how the slightest financial problem — from a lost job to higher gas prices or insurance premiums — can put a family behind on their mortgages and into the realm of foreclosure.

When home prices fell in the early 1990s, borrowers had more equity in their homes, and were able to escape foreclosure. But now, an estimated 10 million homeowners owe more on their mortgages than their homes are worth, according to Moody’s economy.com.

More than 4 million homeowners were at least one month behind on their loans at the end of June, and almost 500,000 had started the foreclosure process, according to the Mortgage Bankers Association.

Cascading foreclosures over the past two years created a domino effect in the lending industry, undermining investor confidence and forcing the Bush administration last weekend to announce the greatest rescue package and market intervention since the Great Depression.

And yet, the deal will not help Dolly Hanna, 51, and her husband, who bought five homes in the San Francisco area over the past 20 years, and were enjoying life during the housing boom by renting them out.

But her husband’s overtime at his mechanic’s job was cut, and the Hannas now find themselves overextended at a loss of $15,000 per month and trying two sell two of the homes.

With four children, Hanna had been a stay-at-home mom, but Monday she started a job in real estate. They are seeking a renter for two upstairs bedrooms in their primary residence for $1,200.

Getting a loan during the boom was easy, Hanna knows. Too easy.

“All you had to was massage the information enough to fit it into their round hole, and they gave us a mortgage,” Hanna said.

In San Francisco, more than one out of five homeowners with a mortgage spends half or more of their income on housing.

That’s also true in 13 more of the largest 100 metro areas analyzed by the Associated Press. Other places include California metro areas of Stockton, Los Angeles, Riverside, Oxnard-Thousand Oaks, San Francisco, and San Diego. Also in the top 10 are the Fort Myers, Sarasota and Orlando metro areas in Florida, and New York-Northern New Jersey-Long Island.

But the most cost-burdened homeowners in the country live the Miami-Fort Lauderdale-Miami Beach metro area: 58 percent of homeowners spending 30 percent of their income on housing costs, and 29 percent spending half of their income or more on housing.

Though prices here are dropping, the high cost of land, construction, insurance and property taxes makes living in South Florida too expensive for some.

“Certainly, we hear about people leaving South Florida and going into Atlanta where they can get into a house for less money,” Suzanne Weiss, associate director for real estate with Neighborhood Housing Services of South Florida.

To help with the affordable housing stock, Neighborhood Housing Services of South Florida joined forces with a construction company to build homes for low- to moderate-income residents that include energy-efficient appliances and hurricane-resistant windows.

Other cities and states are also taking action.

In Illinois, a network of 15 nonprofit housing groups gives free advice to struggling homeowners seeking to avoid foreclosure amid rising mortgage payments.

In New England, an affordable housing program funded by the Federal Home Loan Bank of Boston awards grants and low-interest loans to communities to encourage affordable-housing initiatives for very low- to moderate-income households.

And in Las Vegas, the Nevada Fair Housing Center is helping Rita Harvey renegotiate her mortgage from $2,700 to around $1,800 per month.

Harvey, 64, lives on about $3,300 a month in social security and disability payments for herself and her four disabled grandchildren. She nearly lost her home this summer after her adjustable rate mortgage payment jumped.

“I did not understand that in two years, this would adjust out of control,” she said. “Nobody deserves what I’ve had to go through.”

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AP Data Specialist Allen Chen contributed to this report.

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