Nearly half of Stauntonians are struggling to make ends meet. How Habitat For Humanity talks challenges and solutions.

When The News Leader asked Lance Barton, the executive director of Staunton-Augusta-Waynesboro Habitat for Humanity, for his reaction to April's ALICE report from the United Way, he said the results were shocking, amongst other colorful language.

The report, which focuses on Asset Limited, Income Constrained, and Employed households, shed light on a shocking situation: 46% of people in Staunton are struggling to make ends meet.

That number is a 16% increase since before the COVID-19 pandemic, and among comparable localities, Staunton had the highest increase of any municipality in Virginia.

Those statistics have an enormous implication on what "affordable housing" means in Staunton. What would traditionally be considered "middle-class" families are facing a near-impossible path to home ownership.

“The missing middle is people who ten years ago could have bought a new house, and ten years later, can’t," Barton said, adding, "You cannot work even a good paying job, a decent paying job and buy a house here unless you work, unfortunately, with the one affordable housing provider and that’s Habitat.”

How did we get to this point?

"It's really happening as a result of complacency," Barton said.

Barton doesn't believe that the onus of that blame should go on the city's government.

“The city just doesn’t know, it’s not their business necessarily to stay on top of all of these things. It’s our business to alert them to it," Barton said.

The core of the issue is that Staunton doesn't just have an affordable housing issue. It has a housing issue. There simply isn't enough housing stock in the city, and prices are reflective of the demand to get into the city.

Barton took issue with the idea of letting the market guide the value for homes, as housing stock dwindles and more and more people are left without affordable housing solutions. He simply doesn't believe it works in the face of the current affordable housing issue. Instead, Barton saw opportunities for government intervention in healthy ways.

He recognized that government intervention can take both healthy and unhealthy forms. The growing recognition amongst Stauntonians of the housing issue could help guide that intervention better. "It takes citizens to help them make what I believe are healthier choices," Barton said.

Beyond that, there's an issue with the stigma associated with Habitat for Humanity homes and the clientele that the organization serves that is only worsening the problem.

"The problem now is that there’s a much larger, much more detrimental problem that we’re dealing with right now," Barton said, adding, "People who don’t consider themselves 'Habitat-type' people have no other option of buying a house."

What does this mean for sustainable home ownership?

"The ALICE report has changed trajectory of the organization," Barton said.

While the goal is to provide affordable homeownership for families that otherwise couldn't, that solution has to be sustainable. It's becoming more and more evident that home ownership is no longer viable for segments of the population making less than the average median income (AMI).

For example, suppose a family of five is looking into purchasing a house with three bedrooms and two bathrooms. Using a mortgage calculator he created, Barton said the mortgage on that house would be $2,450. According to Barton, that family is going to have to be at about 110% of the AMI to consider that affordable. Otherwise, that mortgage could cost about 45% of that family's income.

As a result, Habitat for Humanity will no longer build houses for those making less than 40% of the AMI. They will finish out the projects and relationships they currently have in that bracket, but the goal of sustainable and affordable home ownership means they have to be realistic about the market.

"It’s unfortunately, I hate to say it, it’s more appropriate for them in this day and age to be in a secure rental position than it is for them to get into home ownership," Barton said reluctantly, adding, "We’ve had to make that decision based on what the economics of our community is."

How can the city help?

According to Barton, the city has a real opportunity to help alleviate those concerns.

The city's dream is to build a partnership with for-profit businesses and non-profit organizations surrounding affordable housing. The problem is that for for-profit companies, there's no real incentive to get into that market. The margins that they make on regular house building far exceed the potential profit they could see from subsidies to make affordable units.

Barton doesn't blame them for that, as companies have to be profit-motivated. He admits that while Habitat for Humanity has favorable options for lower-income families, they still have to keep the doors open to keep serving the community. The difference is that a non-profit like Habitat can choose what their bottom line is.

By the time the margins on building regular homes drop below the benefit of affordable housing subsidies, it could be too late, per Barton.

It's a problem that's reflective of what has happened in Charlottesville over the last 15 years, with a lack of workforce housing despite increased levels of development. According to Barton, Staunton's comprehensive plan seems built to explicitly avoid those issues, but the city still finds itself at that crossroads.

Two more direct actions the city could take revolve around zoning and working on blight. As far as zoning goes, Barton believes the city would do well to revisit density regulations in the city. By expanding the number of units and families that can exist per acre of land in residential areas, townhome-style houses and other more dense home construction can occur that provides both a path to homeownership as well as sustainable living.

“Cities are made for density. Cities are made for land to be used. County is made for land to be much more spread out," Barton said. "The nature of cities is to maximize the internal resources, maximize space and to have rural living in the city, it just doesn’t make sense.”

Dealing with blight comes from the amount of property tied up in systems like probate court. By accelerating the process on those homes, the city could open up those properties and lands for development.

"We have a lot of property in our area that could be a significant part of the need for workforce housing," Barton said. He said that dealing with blighted property was a fantastic low-hanging fruit for those in the community concerned both about neighborhood aesthetics and workforce housing.

Staunton has discussed forming a housing commission. How can that help?

At a recent city council meeting, councilor and former Habitat for Humanity executive director Brad Arrowood updated the community on the potential formation of a housing commission. Barton has met with Arrowood to discuss what he sees as the commission's role.

To Barton, the commission needs to be a think tank made up of citizens who do not have a financial motivation or conflict of interest. Behind them, Barton wants a group of housing providers, contractors, city workers, and other people involved in housing solution coaching them and providing information for the committee to work. The job is to come up with realistic housing opportunities in staunton

"Unrealistic opportunities like 'Cut property taxes in half' is not appropriate in this commission," Barton said. "The commission should be understanding of how the city works and the city's vision, and coming up with solutions inside of that."

One of the most important things to Barton is to define the term "affordable housing." Barton believes everyone has a different definition, and it's important to get everyone on the same page. He also doesn't see that definition as a single number, but as a changing ratio based on where the community is.

"The decision is not, and should not be, 'I want to help people 60-80% of the AMI,'" Barton said. Rather, it should take into consideration law enforcement officers, teachers, restaurant workers, and other middle-class occupations necessary for the city, and then figure out the parameters from there.

The guiding principle should be learning from real-time data of how bad things are getting.

"The world is full of anecdotes and unfortunately too many of the experts are experts of anecdotes, not data. The greatest amount of data ever is available and needs to be a part of that education," Barton said.

It's important for the housing commission to choose its fights. Barton sees three sides to the affordable housing issue: homelessness, affordable rentals, and affordable homeownership.

"They are three very different beasts," Barton said. "Obviously, we feel like this housing commission should concentrate not on all housing but on homeownership and the diminishing access of it from the middle class."

Not all affordable housing is created equally.

Barton cautioned against the "quick fix" of affordable renting in the city. While it definitely has its place, Barton pointed out that it couldn't truly replace the value of homeownership.

The issue comes from the for-profit developers tasked with creating these communities. The financial benefits of entering in the program and getting subsidies from the federal and state government typically last somewhere between 15-20 years. Once those subsidies start getting forgiven, there's nothing stopping a developer from kicking all of the tenants out of the building and turning the units into luxury apartments. The additional downside is that the equity in the house also remains with the builder.

That's a stark difference to an actual home, where the equity is built for the homebuyer through making mortgage payments. But even that option is dwindling as interest rates creep up and growth rates remain somewhat stagnant. A bank loan with 6.8% interest, assuming a 4% growth rate for Staunton, doesn't actually allow residents to build up what's called "equity three"

The first kind of equity is how much your house is worth, not taking into consideration how much you still owe on the house. The second is the difference between how much you've already paid and how much the house is worth. According to Barton, equity three (or net equity) is based on after a household pays to borrow the money, how much did the homeowner make? This is what every real estate firm and bank sells families on in a house.

At a 4% growth rate in Staunton, that doesn't exist. Barton said even at 5% growth, owning a house will contribute less than a $1,000 per year to that family.

"People aren't really building the wealth in their homes that they did in years past," Barton said, "Buying a mortgage, you're only going to earn equity one and equity two. Three is the only wealth-building part of it."

—Akhil Ganesh is the Government Reporter at The News Leader. You can contact him at aganesh@newsleader.com and follow him on Twitter @akhildoesthings.

This article originally appeared on Staunton News Leader: Nearly half of Stauntonians are struggling to make ends meet. How Habitat For Humanity talks challenges and solutions.