Tax hikes, slow economy test Habitat for Humanity
By Kelly Alm
Unlike the banks and mortgage lenders who bear at least partial responsibility for the current upheaval in the housing market, Habitat for Humanity tries to ensure that the families with whom it builds homes do not pay a mortgage greater than 30 percent of their income.
“Thirty percent should really be the guideline for everyone,” said Fauquier Habitat for Humanity [FHFH] Director Jack Flikeid. “You shouldn’t have to pay more than that. If you’re paying 50 percent, that means something else is not getting paid for.”
Habitat's reliance on material donations and volunteer labor enables the organization to exert a great deal of control over the building costs of its houses. The organization cannot, however, control fluctuations in house costs due to taxes and insurance. “The 800-pound gorilla is taxes,” Flikeid said. “If taxes go up dramatically, our homeowners must pay more.”
Both property taxes and insurance rates are subject to go up based on property assessments, which the county conducts every four years. In 2005, an appraiser assessed the land value of a Habitat site on Haiti Street in Warrenton at $12,000, and the house at $62,200. In 2006, an appraiser reassessed the same property at $145,000, and the house at $99,800. The homeowner's tax bill, previously $367.29 twice a year, more than doubled to $789.48 (1,578.96 per year) — an additional $844.38 a year.
“Maybe, that doesn’t sound like a lot,” Flikeid said, “but it is for someone living on $24,000 [FHFH’s minimum income requirement in 2006].”
Flikeid is seeing more late mortgage payments from Habitat partner families than in the past, which he primarily attributes to tax increases. And he only expects the problem to worsen.
The Fauquier County Board of Supervisors recently approved a 12.5 cent (15 percent) real estate tax hike from 64.5 cents to 76.5 cents per $100 assessed value. According to Flikeid, this will result in an average $24 per month tax increase for Habitat owners.
“That $24 could be the difference between keeping the thermostat at 68 degrees and 62 degrees,” he said. “People are having a much more difficult time than they have in the past. We have to find a solution.”
According to Flikeid, the recommendations set forth in the county's Affordable Housing Task Force Report aim to provide affordable housing for low- to middle-income people, and will not provide much benefit for extremely low-income people.
If the supervisors wanted to offer tax breaks to the county’s poor, the proposal would need to pass through the state legislature first. Flikeid said that this is unlikely to occur, because it would result in a significant loss of revenue for Virginia.
Affordable housing options are few and far between for middle-income families in Fauquier. For residents trying to escape poverty housing-- approximately 400 county residents live in poverty housing-the challenge is even greater.
FHFH has built 37 homes and rehabbed three since its inception in 1993. The affiliate continues to cater to those at the “extremely-low” end of the income scale, a number that is growing.
Roofs that leak, poorly insulated windows and walls, a lack of electricity and indoor plumbing, all comprise poverty housing. “Sometimes there are eight people living in a 500-square-foot shack,” Flikeid said. “Then there are places where you wouldn’t expect to find people living ? cars, buses, abandoned vehicles, situations that come pretty close to homelessness.”
Taxes are one problem. The combination of higher building costs and stagnant wages is another.
A dramatic increase in the cost of building materials has driven up the price tag of a Habitat house from $60,000 to $75,000. Habitat partner families pay a no-interest monthly mortgage that averages about $350.
In order to qualify for Habitat housing, a family must earn no less than 25 percent and no more than 50 percent of the county’s median family income. Over the last eight years, the county’s median family income has jumped by approximately 30 percent, from $69,507 in 1999 to $99,000 today. Paralleled by dragging wages, especially on the lower end of the economic spectrum, fewer low-income families are able to meet the minimum income requirement.
That puts Habitat for Humanity affiliates in the unenviable position of having to build with partner families that are somewhat more affluent, or tweaking the organization's central founding principle, which says that the ministry offers “a hand up, not a handout.” FHFH has chosen the later.
“More and more families cannot qualify for Habitat houses unless we partially subsidize those families,” Flikeid said. “Since we are a Christian building ministry, we believe that it is our obligation to continue to serve those families.”
Habitat partner families still pay for the cost of building the house, and put in 400 hours of sweat equity. Subsidies primarily come in the form of land. Habitat may forgo charging Habitat homeowners for land donated to Habitat in order to make the partnership feasible. Subsidies can also come in the form of grants, such as those that cover the cost of installing plumbing.
This year, a family (up to four people) needs to earn at least $27,100. “We receive a lot of phone calls from families living on less than $27,000,” Flikeid said. “But that’s really the minimum income that someone would need to meet in order to pay the mortgage and still have money for food, clothing and utilities.”
FHFH expects to break ground to begin building the first of seven two-unit duplexes slated for the Sterling Court Community off Academy Hill Road in Warrenton in the next few weeks. The last duplex is expected to be complete by 2012.