June 30, 1999
via telefax 305-376-8950
& email: HeraldEd@herald.com
The Miami Herald
1 Herald Plaza
Miami, FL. 33132-1693
One part of the federal and county "Section 8" housing program provides rent vouchers to low-income households to rent privately owned housing units, either apartments or single family houses. Residents pay approximately 30 percent of their income for rent and HUD pays the rest. According to HUD, there are more than 1 million subsidized rental housing units nationwide (15,000 in Miami-Dade County alone). Maybe we can do something better.
For example, there are 3BR/2BA houses in West Coconut Grove in the Section 8 program that rent for $900 per month and more. This means that the taxpayer funded subsidy for such a house is at least $600 per month. By comparison, Wind & Rain, a private for-profit homebuilder, to date has built nine 3BR/2BA houses for ownership by low-to-moderate income families for which the total monthly housing cost (including principal, interest, taxes and insurance) comes to under $700 per month.
What makes this possible is a low-interest (usually 3%) "soft 2nd" mortgage administered by the City with federal funding. This amounts to $35,000 of the $85,000 purchase price of the house, with the balance coming in the form of a modest $3,000 down payment and a "market rate" 1st mortgage. The cost to the taxpayers of providing the subsidy is approximately $85 per month, albeit for 30 years.
Those who advocate for Section 8 would argue: "Yes, the cost to the taxpayer is $600 per month instead of $85 per month, but there are many families who can't afford to pay $700 per month to be homeowners, who can only afford to pay $300 per month and therefore must remain renters. Besides, this is a very popular program, both with the landlords who own the houses and the tenants who live in them who might otherwise be in an even less desirable apartment project."
This is a plausible argument on the surface, but let's "follow the money" --who gets it? In the Section 8 program the money goes to the landlord. The tenant stays a tenant, maybe forever. In the "soft 2nd" mortgage homeownership program, it is the low-income family buying the house that receives the benefit of the taxpayers' largesse, which literally propels them into the middle class forever.
What if the taxpayers' $600 in Section 8 rent subsidy could instead be used to fund both larger amount and lower interest "soft 2nd" mortgages? For example, a 1% "soft 2nd" mortgage of $85,000 would have a taxpayer cost to provide the subsidy of under $300, with the family paying around $275 to fully amortize the loan over 30 years. If the taxpayers were also to pick up the $230 for the real estate taxes and insurance, they would still be $70 better off than paying the Section 8 rental subsidy. All of a sudden you would have a family making only $12,000 in annual income able to buy a 3BR/2BA house that would be their own, to give them a stake in society.
What a difference for all of us!
Anthony R. Parrish, Jr. President