COVER STORY ‌ Middle Class Squeeze 

Affordable Housing -- It's Not Just For The Poor Anymore

click to enlarge Hanson "Boo" Abu would rather rent where he wants to live -- Downtown -- than buy where he can afford -- Ladson
  • Hanson "Boo" Abu would rather rent where he wants to live -- Downtown -- than buy where he can afford -- Ladson

If there ever was a perfect example of a Charlestonian needing affordable middle-class housing, it would have to be Hanson Abu.

A professional floor installer, Abu, or "Boo" to everyone he grew up with in Orangeburg, makes his home in the peninsular West Side neighborhood, a few blocks off the Crosstown.

Rather, he rents a two-bedroom, first floor apartment in a house that is nearly 100 years old where he lives with his young wife, who works in the local news media, and their5-year-old daughter.

Between his and his wife's salaries, Boo's small family earns a little more than $60,000a year before taxes. Considering what they make and what they're flushing down the toilet in monthly rent ($1,100), why aren't they buying a home, building equity and wealth, and living out the American dream?

"Because of the kind of work I do, I'm in a lot of homes I could not afford," says Boo, 33, taking a smoke break on a flooring job in Mt. Pleasant. "A lot of times I find myself saying, 'How does anyone afford this kind of shit?'

"And then I remember it's America; it's debt," he says. "It's all paper money, and in this country, ink is worth a lot."

He and his wife, who both come from families of relatively modest means, have scraped together about ten grand to put down on a house, Boo says. "But when I look at the actual numbers between what's on the market and what I can afford, the gap is just too wide.

"In Charleston, you can rent where you want to live, or buy where you don't."

Boo is living the "drive 'til you qualify" lifestyle, where homebuyers head up I-26 until they find a subdivision cheap enough for them to swing a loan. Except he refuses to live anywhere but on the peninsula, an increasingly difficult stance considering that the median price for homes sold above the Crosstown in October was nearly $270,000, with sellers getting more than 97 percent of their asking prices.

According to a home affordability calculator found on CNNMoney's website, a family pulling down what Boo's clan is, shouldn't be buying a home much more expensive than $208,000, paying right around $1,300 a month in mortgage payments.

Boo knows he could afford a house in Goose Creek, or somewhere else out in the sticks, but that's not why he and his new family decided to relocate to Charleston from Atlanta.

"We recently went to the fair in Ladson, and that sealed it; we're not living in Goose Creek," laughs Boo, who prefers the sophistication of urban life.

"We moved to Charleston for Charleston," he says. "We did not move here for long commutes, living in the country, and listening to the morning drive radio shows. We wanted to live downtown for the vibe of the city; everything we loved about Charleston is in Charleston."

Boo and his wife looked for a house to buy for about a year and a half, but gave up about six months ago.

Last year, he found a house around the corner on Newman street for under $100,000. "But I wouldn't raise a rat in there, much less my daughter."

Children or a Mortgage
With the 36th most over-priced real estate market in the nation, according to a study reported on earlier this year in Atlantic Monthly, money doesn't go far in the Charleston real estate market.

According to Doug Hickerson, a loan consultant at Eqqus Mortgage downtown, if a person wanted to get out of a $1,000-a-month apartment and into a home, at current rates, that same $1,000 would support a $120,000 mortgage, including taxes and escrow, in Charleston County.

And what does $120,000 get you on the peninsula? Not much, unless you count 33 Lockwood Drive, Slip A-9, in the Ashley Marina. It's nicer than it sounds, as the "dockominium" comes with a locker.

"But no boat," chides Boo, who was freaked out last year when his realtor encouraged him to make a $125,000 offer on a peninsular home that had just come up on the market, sight unseen.

"That's the mentality around here, and it breeds such a feeding frenzy of people wanting to buy on the peninsula. ... Where do you go for common sense in this market?"

Starting a few years ago, a lot of homebuyers decided to take a shortcut and took out seductive interest-only mortgages, which typically suspend principal payments for periods of either two, three, or five years.

The loans became very popular as homebuyers around town, and the country, gambled on houses more expensive than they could normally afford with long-term plans to either refinance or cash out before rates took off again.

click to enlarge As prime mortgage rates have increased a full point over the past eight months, it's getting harder and harder for loan consultants in the super-charged Charleston real estate market like Doug Hickerson (l) to be able to put middle-class singles into homes like the one medical secretary Sandra Stringer bought on James Island
  • As prime mortgage rates have increased a full point over the past eight months, it's getting harder and harder for loan consultants in the super-charged Charleston real estate market like Doug Hickerson (l) to be able to put middle-class singles into homes like the one medical secretary Sandra Stringer bought on James Island

With prime interest rates climbing from 6 to 7 percent over the last eight months, the historic sub-6 percent mortgages have been virtually eliminated, says Hickerson. As a result, refinancing became very hot for a while, making a lot of money for loan consultants like Hickerson, who says that 75 percent of the loans he inked this year were for families trying to get into flat rate mortgages before their interest-only adjustable rate mortgages crashed and burned.

With the sharp increase in prime lending rates, Hickerson now expects consumers to have one more year, two at the most, of low interest rates.

At the same time, he also expects for there to be a quickening in the number of foreclosures on the market, as "interest only" families struggle with ballooning payments.

According to Hickerson, interest-only loans were costing home-buying consumers $458 a month for every $100,000 they borrowed. With rates rising and many interest-only mortgages converting back to standard ones, families could see their monthly payments jump between $1,000-$1,500 a month, especially for those who may have overextended themselves by jumping into the $400,000-$500,000 house market.

"The good news," he says, "is that MSN recently ranked the Charleston real estate market as one of the top 10 in the country in increased sales. Yes, rates did go up, and people need to adjust, but Charleston's market is still increasing at a good and steady rate."

The idea that a lender would hand him $300,000 for a new house is enticing, but Boo knows there's no way he could afford the monthly payments -- unless he gave up eating.

"Or my daughter," he jokes.

"They've all got these crazy loans that polish it up so that you're not having to pay squat now. But when the time comes to pay, what the heck do you do then? Interest-only loans? I don't want to walk into that trap. I want for my family, but I want to get what I can get."

Losing Ground
Mary Graham, the do-it-all vice president of public policy at the Charleston Metro Chamber of Commerce, wonders if there will be anything for Boo and families like his to buy in Charleston proper.

"We've been doing benchmark studies," says Mary Graham, a 16-year Chamber vet, as she pulls up the last set of numbers on her computer. "We look at housing affordability by pulling listings from the MLS (multiple listing service) and getting a snapshot in time we can compare from year to year."

Graham finds it "astounding" that on one specific day in 2001, there were 681 properties listed for under $100,000. "Of course, 30 percent were in Moncks Corner, Pinopolis, and rural Berkeley County -- there were only four east of the Cooper." That was four years ago.

And housing prices in Charleston haven't gone down. According to a story that ran recently in The Post and Courier, more than 3,500 homes in Charleston County alone were assessed at $1 million and above in 2003.

Two years ago, Graham helped found the Developers Council at the Chamber, which brought together builders and local officials in hopes of getting more work done in the "workforce housing" arena.

"Frankly, we haven't done enough, and a month ago we decided to refocus on the issue," she says before sighing. "We're still losing ground."

Not having houses on the market that a middle-class Joe (or Boo) can afford is a real stumbling block in luring new business to town, one of the Chamber's main jobs, she says.

"I hear that from companies all over the place who are trying to just recruit people to come here, too," says Graham, who rented a one-bedroom apartment on Adger's Wharf across from Rainbow Row for $400 a month when she first moved here 16 years ago.

(She moved in Sept. 1, 1989, and thanks to Hurricane Hugo, didn't live there very long at all.)

"I live in Mt. Pleasant now, and, boy, am I glad we bought 14 years ago, because we could never could afford it now," says Graham. "My husband and I won't sell, because where could we go?"

'What's the Point?'
Now before you say focusing on Boo doesn't make sense, that his only problem is that he's got champagne tastes on a beer budget, remember: he's exactly the kind of guy Mayor Joe Riley is scrambling like mad to take care of -- first and foremost in the name of diversity.

"We want our community to be diverse because a wide range of people brings a wide range of experiences and backgrounds, and that makes Charleston a better place," says Riley.

Riley has seen the hell Hilton Head has descended into. The resort island near Savannah has became so expensive that many of its workers, no longer able to afford living on the island, clog the main roads on their way to and from work.

"No one could have seen 20 years ago that cars today in Hilton Head would need 50 minutes to go six or seven miles. A lack of diversity there created dysfunction there.

"If we aren't diverse, and if people of modest resources are increasingly removed or segregated, then there will be the sense that we are not trying to be as good as we can be as a city. Look at Europe, where if you go into the squares of the great cities, large or small, you will see that everyone has a place."

Riley warns that if Charleston doesn't do something about increasing its stock of affordable housing to the widest range of home buyers, "it will come back to haunt us."

In response to the mounting crisis, City Hall has been busy over the past few years, from orchestrating the buyout of a cash-poor, private affordable housing project in the East Side to creating the ambitious Charleston Homeownership Initiative (CHI).

With the initiative, the City has been able to get its hands on 127 units in one form or another, whether it be through condemnation or sales. According to the mayor, 16 of the units have been sold, 13 are up for sale, and 98 are in "development."

The initiative strives to repair and restore homes, and then resell them to families making 80 percent of the city's median income, about $40,000. With the help of municipal, county, state, and federal grants and programs, much of the actual cost of the house is forgiven and the first-time homebuyers are guaranteed lower monthly payments than most standard mortgages.

Sounds like a great solution for someone like Boo. Problem is, as much as he appreciates Mayor Riley trying to provide "affordable housing" to the poor and "workforce housing" to families like his, he isn't exactly sold on the CHI.

Bo may know football, but Boo knows the real estate game -- even if he doesn't have the coin to play it.

Take the house at 72 Lee St. being offered by CHI. At $104,228 for two bedrooms, one bathroom, and just over 1,000 square feet, it looks like a steal, especially with all the different forms of assistance City Hall has poured into it, from lower interest rates to a turn-key rehab.

It's $50,000 below the max he's willing to pay for a house right now. It's smack downtown, a half-block off Meeting Street, and the raw stretch of scorched earth across the street from the home where the Cooper River bridges used to stand will one day be turned into a park, ball fields, and a mixed-use retail and residential building.

In short, it's on the verge of real renaissance and vibrancy.

But it doesn't change the fact that Boo has better common sense than he has a bottom line.

He knows that since the property is part of the CHI, he won't be able to build as much equity as quickly because the home's government-arranged financing means the house will re-enter the market yet again as affordable housing.

"What I'm saying is that, at this point, that house is in the 'hood and looks over a pile of dirt. And I won't be able to do what the 'vulture capitalist' buying into the neighborhood will be able to do: sell my house for a profit and move on to my next house.

"Officially, the government may 'give' you part of the house, thereby making it 'affordable,' but you still have to play by their rules," says Boo, who doesn't relish the idea of a neighbor making scads of money by flipping a house while he has to hand over a big chunk of his profits to Riley and City Hall.

"What's the point?" Boo asks.

The point, according to the mayor, is that not everyone might need the CHI, but for those who can't get into a normal, conforming mortgage, it's there for them.

click to enlarge For Tammy Hoy, the executive director of the Lowcountry land trust who grew up in public housing, affordable homes are the foundation of a balanced community
  • For Tammy Hoy, the executive director of the Lowcountry land trust who grew up in public housing, affordable homes are the foundation of a balanced community

Radar Screen
Knowing that Tammy Hoy grew up in public housing on the outskirts of one of the toughest cities in America, Gary, Ind., it's not hard to understand why making affordable housing available to everyone is her passion.

These days, Hoy, as the first executive director of the Lowcountry Land Trust, fights the stereotype of who needs affordable housing on a daily basis.

"The stereotype was that there has only been these 'sorts' of people who don't have any choices," says Hoy, who worked for Riley before the City helped secure a $1.4 million grant to open the trust. "The reality is there's not enough choices in affordable housing, or workforce housing, whatever you want to call it.

"The truth is 'affordability' is relative to what you earn and what's available in the market. If you only earn X, and what's out there costs Y, you have a gap."

According to the Chamber, the median income in the tricounty area is $54,219. For a family of four making $40,000 -- roughly 80 percent of the area's median salary -- there isn't much wiggle room in Charleston County, where the median home price is over $270,000.

After attending a recent Urban Land Institute workshop, Hoy is convinced that it's going to get tougher and tougher for Boo to find his dream home because of a stagnant minimum wage.

"Minimum wage acts as a precedent for other wages increasing," she says. "With that not changing, coupled with continued rising in housing costs, the gap is going to continue to widen. What Boo thinks he can afford today, he will not be able to afford tomorrow. That's depressing."

Since the fastest growing job market in town remains the service and tourism industries -- not the best-paying fields -- Hoy expects there will be a lot more families in the same predicament as Boo's.

As evidence, Hoy points to a presentation for the Carolina Park residential development west of the city she recently attended. "The news was good; we were told the area was going to be getting 1,100 new jobs, three new Super Wal-Marts, and more big boxes," she says. "But I raised my hand and asked what a starter home would cost, and they were talking about houses in the $300,000 range.

"Who works at a Wal-Mart, making on average between $8 and $9 an hour, that could afford to live there?"

According to the federal department of Housing and Urban Development (HUD), a family's debt ratio shouldn't rise above 30 percent of their income. So for one making 80 percent of median income, they shouldn't be spending more than about $1,100 a month on a mortgage., which is what Boo's family kicks a month in rent.

That $40,000 mark is important here for two reasons. One, it represents roughly 80 percent median income. Two, it's also the amount of money a mom and a dad working full-time at a Wal-Mart would bring home (pre-tax) in a year, assuming they worked a little overtime.

Because of the growing gap between what most people make in the Charleston area -- which severely lags behind national median salaries for identical jobs, according to another study the Chamber commissioned -- Hoy's only hope may be in educating local politicians about the dangers of a non-level housing arena.

"I've got to get this on their radar screens," she says, before she can help implement government programs that create incentives in the housing market, including setting money aside to subsidize developments.

"The City has always led in that effort," says Hoy. "It's a good thing, but the other municipalities and governments need to follow their lead. In Mt. Pleasant and in even some of the outlying counties, nobody has begun to address or plan for this issue."

According to Hoy, there are missing rungs on the housing ladder. "You can't go from public housing to what's being built these days -- homes starting at $250,000. Who's going to make that leap? A person who won the lottery?!"

Have Faith, Boo
For Sandra Stringer, finally being able to buy a home was like winning the lottery.

"I lucked into it, no doubt about it," says the MUSC employee, who, because of her master's in teaching she earned at USC, jokingly refers to herself as "the most over-qualified medical secretary in town."

Frustrated by her relatively meager salary as compared to the price of homes on Folly Beach where she always wanted to live, Stringer had basically given up on finding a home.

She looked at houses under $100,000 on James Island, but only found ones built on concrete slab foundations ("which is crazy when you consider you live in a flood-prone area"), ones in horrid disrepair, and (gulp) trailers.

"Even though you can't get trailers insured, I really thought about it when I came across the Tern's Nest neighborhood, thinking, well, at least it's close to Folly."

She almost bought a house downtown, but stopped short after punching a windowsill and hearing the telltale flutter of termite-eaten wood falling down between the sheetrock and the outside wall.

Stringer went back to the basics and did what she could to improve her credit score and was soon able to qualify for a $151,000 fixed-rate mortgage to buy a house on Fairway Links on James Island, built by local affordable housing developer/guru Cathy Kleiman.

Even though the house she looked at was still only a quarter of the way completed, Stringer knew she was home. She immediately told her real estate agent to make an offer, which was accepted. With a little financial help from her mother, Stringer was homeless no more. The next day, she says, there were 20 offers on the house.

"It was sheer stubbornness on my part," says Stringer, who still clearly delights in her newly-built home, despite half of her weekly check going toward her mortgage and having to scrimp by so she can save enough to cover the recent jump in property taxes.

"Sometimes, when I come home, I think I've walked into a vacation home, and that I've only rented it for a week. It's the nicest place I've ever lived.

"I wish somebody would build more communities like this."

Super Happy -- In Charleston?
Boo stresses he's neither jaded nor bitter about not being able to buy a home where he wants to live. "The fact is, I still live where I want to be, it's just that the living situation Charleston provides for us doesn't always make us super happy. But I'll take it any way I can get it.

"I'm not a guy who's pissed off; I'm pretty damn happy. I'm getting by. I'm not living a harder life.

I just rent."

Boo says the trick is to stay motivated and "to keep chopping at that tree," especially when he and his wife see friends, who got married after them, moving into their first homes. One of the younger couples they know even moved into a pricey East Cooper subdivision.

What Boo does have are patience, common sense, and options.

But how much longer will it be before market forces shove Boo and his middle-class family out of town for good? And what other families and qualities of living will go with them?


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