One Lakewood Progress: How Affordable Is Lakewood's New Affordable Housing Policy?
Affordable housing has been on the minds of many Lakewood residents. Over the past two years, Lakewood has seen rents and property tax rates skyrocket during the city’s real estate boom. Many have demanded solutions from city council on rising property taxes, as well as equity of access to housing for lower income Lakewoodites.
In response to concerns from the community, Lakewood City Council, on December 2nd, adopted a resolution to amend an existing ordinance (Ordinance 58.04). The impetus of the policy amendment, “fostering the investment and development of affordable housing in new multi-family and mixed-use construction projects in Community Reinvestment Area #1…[and] #2,” utilizes tax abatements to encourage the development of affordable housing in both single unit residential and multi-family and multi-floor residential units.
In the previous version of the ordinance, tax abatements were utilized by the city for renovations to dwellings containing no more than two family units and single condominium units.
One big change in the ordinance is language that sets rents for 20% of the units in *new* multi-family and mixed-use developments of 100 units or more based on a percentage of Area Median Income (AMI). The updated policy states that in these new developments, “(i) 10% of units be set aside for households making up to 80% AMI at the time of the initial lease and (ii) 10% of the units be set aside for households making up to 120% AMI at the time of the initial lease.”
The policy states in its own interpretive guidelines, that the AMI of Lakewood should be set at the median income of the Elyria-Cleveland Metropolitan Statistical Area (MSA).
The Area Median Income set by the U.S. Department of Housing and Urban Development (HUD) for the Elyria-Cleveland MSA, as of this writing, is estimated to be $73,700. That’s $25,000 more than the widely reported, and accepted, median income estimate for the city of Lakewood of $48,700.
Identifying this number is important: not only does it determine the relative affordability of the affordable housing units, but it also determines the rent charged and percentage of rent estimate relative to net take-home pay.
The new policy stipulates that allowances for electricity, gas and water must be included in determining the rate of rent and that the total rent collected each year cannot exceed more than 30% of the recalculated percentage of AMI.
At the AMI set by the policy, estimated rents could be as much as $1,474 per month at 80% of AMI or as much as $2,211 per month at 120% AMI.
The rate of rent for these new units does not fluctuate according to how much a person or family actually makes. This comes into play only to determine who is eligible to rent the unit. At the time of this writing, a renter cannot make more than $58,960 per year to qualify to rent 10% of the units in a given development that participates in the abatement, and not more than $88,440 to rent the other 10% of the units.
Utilizing the Cleveland-Elyria statistical area average instead of the real median family income average of Lakewood proper raises rental rates for these units by as much as 66% over what the rent would have been had city council used the average income of Lakewood residents alone. The area median incomes of other, more affluent cities like Rocky River, Bay Village and Westlake are factored into the area average city council utilized to determine the maximum rent value.
An average family making $45,000 per year has a semi-monthly estimated net take-home pay (after taxes) of $1,478 according to SmartAsset. This hypothetical family, according to the new policy, would qualify to rent an affordable housing unit at 80% of AMI. The rent for that unit cannot exceed 30% of that recalculated value. At the maximum rent level of 30%, the estimated rent charged, less the estimated utility allowance would be $1,274 per month, or up to 43% of this family’s net take home pay per month. This number is not much different than many rentals across the city that are currently going for $1,200-$1,400 per month in rent.