Slow money and affordable housing

Submitted by the Lopez Community Land Trust

Slow money is basically a low-interest loan with a long payback term. Imagine this:

A household makes $31,200 annually, the median home price is now around $500,000 but they find a home through Lopez Community Land Trust (LCLT) for $250,000. At 5 percent interest and a 30-year term, payments for principle and interest would be $1,342 – about twice what they can afford. But what if we had Slow Money at 1.5 percent interest over a 40 year term making monthly payments for principle and interest just $693 per month? We can begin to make it all work. This is where slow money can come into play.

Banks and economists have adopted a standard of no more than 30 percent of household income to be used to cover housing costs. For rental housing this includes utilities. For ownership housing, this includes the principal and interest on the mortgage and taxes and insurance on the property. This standard generally enables households to have sufficient income for other expenses, such as food, clothing, transportation, health care, and savings.

Many low wage earners are still making just $12.50 per hour making it even more difficult to afford a rental.

Although LCLT owns land in the Lopez Village Urban Growth Area and manages a Class A water system, the costs associated with housing development is staggering. In 2015 LCLT built two Tiny Houses of 400 square feet each. Before we could even begin to construct a Tiny House we spent over $50,000 for water, sewer and other basic infrastructure. Nonprofits rely on grants and donations to close the gap between rents and home mortgages that are affordable to islanders. It has been documented that for every 100 very low-income renters, there are about 20 affordable rental units available. For LCLT to develop either an affordable rental or an ownership opportunity, the gap between the cost of development and what the household can afford is between $75,000 and $125,000 per home.

A house built by LCLT in 1995 was 90 percent publicly financed, but in 2015 it dropped to only 20 percent, leaving a huge burden on local philanthropy. Public funding to help with affordable housing has been cut dramatically. The pace of delivery by non-profits is based on the availability of these grants and donations, not on the needs of our islanders.

LCLT was started in 1989 when housing prices went up 190 percent in that one year. In 28 years LCLT has built 42 new homes – an average of about two homes every three years. People who live in LCLT developed homes own small businesses and volunteer countless hours to community organizations and events, all contributing to making Lopez a great little island community. In 1994 LCLT was able to arrange for Slow Money at 1 percent over 60 years. Although there have never been terms like that again, wouldn’t it be wonderful if we could make it so? Slow Money could make all the difference for affordable housing.