Builers Outlook 12:8

Page 1

EL PASO

ASSOCIATION

years

DIGITAL EDITION OF

BUILDERS

B U I L D I N G E L PA S O ’ S F U T U R E S I N C E 19 4 6

www.elpasobuilders.com www.epbuilders.org

Builders Cutting RD Loan Assistance devastating blow to affordable housing in El Paso

utlook USDA RD Program New Home Price / 1100+ SF

$

Annual % Rate

1.00%

# of Payments / 30 year Monthly Principal and Interest Taxes / Insurance Total Monthly Payment Annual Income to purchase Required Hourly Wage Payment as % of income One Bedroom Apartment / 650 SF Total Monthly Home Payment MONTHLY SAVINGS Min. Annual Income to "RENT" Required Hourly Wage

1% Direct Loan

$ $ $ $ $

96,500.00

2% Direct Loan $

96,500.00

3% Direct Loan $

2.00% 360

360

310.38 210.94 521.32

$ $ $

20,850.00 10.02

$ $

30.00%

2012/8

96,500.00 3.00% 360

356.68 210.94 567.62 22,725.00 10.93

$ $ $ $ $

30.00%

406.85 210.94 617.79 24,725.00 11.89 30.00%

$

670.00

$

670.00

$

670.00

$

521.32

$

567.62

$

617.79

$

148.68

$

102.38

$

52.21

$ $

27,331.00 13.14

$ $

27,331.00 13.14

$ $

27,331.00 13.14

W

Editor’s Note: The following letter was sent to Francisco Valentin Jr., State Director USDA Rural Development by David Ballard, CEO, Partner of the Huntington Group LLC upon the annoucement of the removal of Horizon City and San Elizario Texas from USDA RD eligibility. As an association, we face challenges regarding affordable housing everyday. We are re-printing the letter with Mr. Ballard’s permission to help bring awareness to this issue. Dear Mr. Valentin: It has just recently been made aware of an announcement by USDA Rural Development (RD) that certain Towns in El Paso County are tentatively scheduled to be deleted from the list of areas eligible to receive RD loan assistance (Guarantee and Direct). Specifically the list includes the Town of Horizon City and San Elizario due to the 2010 Census population increases. Although the attached spreadsheet identifying these areas indicates the data is preliminary and subject to change we have been told that the cut-off date to submit remaining RD loans is September 15, 2012 and the effective date to remove these Towns from the eligibility list is October 1, 2012. It is our opinion, if this action is not reversed, RD will be dealing a devastating blow to the affordable housing market in El Paso County. The end result will be an increase in Colonia populations and the “rent to own” scenario. This will also significantly reduced inventory of safe, sanitary affordable housing options for those families most in need. The Texas Secretary of State website identifies three hundred twenty six (326) Colonia’s currently active in El Paso County alone. According to Texas Housing.org “colonias have been defined as impoverished, unincorporated areas with inadequate infrastructure found largely along the U.S. – Mexico border. Many colonias lack adequate water and sewer systems, electricity, street lights,

sidewalks, storm drainage, paved roads, and of course, decent, safe and sanitary housing”. Of the three hundred twenty six (326) active El Paso County colonias, seventy seven (77) are within a five (5) mile radius of the Town of Horizon City. If the radius is increased to eight (8) miles the number of colonias doubles for a total of one hundred and fifty four (154), see attached map. Geographically all of the colonias are east and south of the Town of Horizon City. San Elizario shares a similar demographic. It is important to note that eighty five (85%) percent of the families living in colonias are U.S. citizens which qualify them to purchase housing if housing options are available at an affordable level. The average family is five (5) to six (6) individuals. According to HUD.org “The generally accepted definition of affordability is for a household to pay no more than thirty percent (30%) of its annual income on housing.” Families who pay more than thirty percent (30%) percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. Texas Housing.org reports as much as fifty one percent (51%) of poverty level households in El Paso pay more than half of their income for housing. The affordable housing crisis in El Paso is further exacerbated by a large increase in the military population which has created a shortage of rental property and significant increases in rental rates. Rick Soto, President of the El Paso Apartment Association as of August 24, 2012 reports occupancy rates at ninety seven percent (97%) with rates at $1.05 to $1.06 per square foot. A standard “one bedroom” apartment of six hundred fifty (650) square feet rents for between six hundred seventy dollars ($670) and six hundred eighty three dollars ($683) per month. A full time wage earner would have to earn at least thirteen dollars and fourteen cents ($13.14) per hour to rent this one bedroom unit and meet the 30% of annual income criteria. Utilizing the RD Direct program this same low income family can purchase a

In short, population must not be the only deciding factor to justify such action by RD. It is imperative that a global approach be taken and the availability and location of existing and basic infrastructure (water and wastewater) considered. three (3) bedroom two (bath) home in Horizon City, Texas. This is a brick and siding home with concrete drive and enclosed garage, refrigerated air, all appliances (washer, dryer, refrigerator, stove, range hood, dishwasher and garbage disposal), paved street with engineered curb and gutter, public water and wastewater, gas, electric, cable and minimum six thousand (6000) square foot lot. These homes typically include the standard one (1) year builder warranty and ten (10) year extended warranty. Note the following comparison using the RD Direct program versus renting. What the above does not include is the ability to build equity that homeownership affords. Nor does it apply the additional annual savings from interest and tax deductions. In addition to the economic gain there are social benefits that cannot be ignored. In a study completed by Richard Green and Michelle White entitled “Measuring the Benefits of Home owning: Effects on Children,” it was determined that homeownership has a significant effect on children’s success. The decision to stay in school by teenage students is higher for those raised by home-owning parents compared to those in renter households. Furthermore, daughters of homeowners have a much lower incidence of teenage pregnancy. A study conducted by the New York Federal Reserve Bank also found that, though homeownership raises educational outcomes for children, neighborhood stability further enhanced the positive outcome. Speaking specifically to low income families Hanushek, Kain, and Rivkin in their published works “The Cost of Switching Schools,” concluded that changing

schools negatively impacts children’s educational outcomes particularly for minorities and low income families. RD, by eliminating Horizon City and San Elizario from its area of eligibility pushes the requirement to construct affordable housing into unincorporated areas of El Paso County that simply do not and will not in the foreseeable future support the necessary infrastructure to even begin meeting the need. The cost of extending infrastructure in these areas is excessive and more importantly unnecessary when resources are readily available and currently in place in both Horizon City and San Elizario. This action will also have a detrimental and direct effect on employment. Many of the contractors currently laboring on these homes will have to lay off employees creating an additional burden on an already struggling work force and economy. In short, population must not be the only deciding factor to justify such action by RD. It is imperative that a global approach be taken and the availability and location of existing and basic infrastructure (water and wastewater) considered. Pushing eligibility lines into outlying areas that do not support this basic infrastructure does not assist families or improve living conditions. In fact, it only serves to penalize these families and forces us to turn our backs on those most in need. We implore RD to reconsider the decision to place the Town of Horizon and San Elizario on the ineligible list for the reasons stated herein and for the sake of the families that will ultimately suffer the consequences of this decision. We appreciate your consideration and pray for a reversal of this decision.


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Builers Outlook 12:8 by Ted Escobedo - Issuu