By ignoring changing mortgage interest rates, affordable housing advocates have greatly exaggerated the cost-crunch facing would-be home buyers in Evanston.
In a report scheduled for presentation to the City Council tomorrow, the city’s Housing Commission cites figures from the advocacy group Business and Professional People for the Public Interest to justify spending taxpayer funds to subsidize affordable housing.
The report claims the value of a home a two-person household earning 80 percent of the Chicago area median income could afford rose 15.5 percent from 2000 to 2005 while median housing prices in Evanston rose 44 percent.
In fact, because of declining mortgage interest rates, the increase in what that family could afford was actually 45 percent — matching the rise in prices.
In its calculations, the housing group holds the mortgage interest rate constant at 8.05 percent from 2000 to 2005.
Mortgage rates actually changed dramatically over that time. On this date in 2000, the rate for a 30-year fixed-rate loan was 8.31 percent, while by this date in 2005 it had fallen to 5.69 percent, based on the Federal Home Loan Mortgage Corporation’s Weekly Primary Mortgage Market Survey.
Since 2005 mortgage interest rates have again risen, to 6.22 percent in the latest FreddieMac weekly report. But price increases for Evanston homes have slowed, to an average of just 3 percent in 2006. Last year only single-family homes showed a price gain in Evanston, while the median selling price of condos and town homes both dropped.
The advocacy group’s numbers also dramatically understate, compared to city planning department estimates, the amount of new construction in Evanston since 2000.
However, by failing to account for condominium conversions, the group’s numbers may underestimate a possible decline in the amount of affordable rental housing in the community.
The Housing Commission report to the City Council goes into extensive detail about various types of housing programs that might be supported, but offers no guidance about what proportion of Evanston’s housing should be affordable to different income levels, and therefore no indication of when it’s work might actually be accomplished.