Who wants to be a millionaire?
You know, it never occurred to me that the problem with Aspen’s affordable housing program is that people aren’t making enough money from it.Sure, I know the program has problems. The big one, of course, is that there aren’t enough affordable homes. People enter countless lotteries, sign up for endless waiting lists, turn bitter, despair and, ultimately, leave town. These are good people, valuable community members, who leave because they can’t afford a place to live.That’s a problem.Actually, that’s the problem.But now we’re being told that the real problem is that people living in subsidized housing – which they bought at a small fraction of its real market value – don’t make enough profit when they sell those homes.One of Aspen’s mayoral candidates has declared that that is the real problem with the housing program.Well, you know what? I don’t think so.OK. Right about here I’d better apologize to all those people who own affordable units and really, really think they ought to be allowed to make more money when they sell. Everywhere you look in Aspen, people seem to be making millions of dollars on real estate deals. They don’t want to get left out. I don’t blame them. There’s nothing wrong with wanting to make more money – but in this case it would be flat wrong.Here’s the issue: Right now, the rules say the price of an affordable unit can’t go up more than 3 percent a year.I know that doesn’t sound like much, but it’s not that simple.The math of home ownership is complicated. There’s mortgage interest, loan principal payments, property taxes, income tax deductions … it goes on.But here are some quick figures from a web-based “cost of home ownership” program:Let’s assume you buy a $250,000 house, with 5 percent down. You get a 30-year mortgage at 6 percent interest. You pay 1 percent of the home’s value in property tax and pay $1,800 a year for insurance. Your state and federal income taxes amount to 20 percent of your income.And the value of your house is limited to a 3 percent a year increase.Whew! A lot of numbers, I know.But, one more very important thing to bear in mind. If you weren’t living in that affordable home, you’d be paying rent. Let’s assume that you got lucky and found a suitable place to rent for $1,500 a month, with no rent increase.OK. Let’s say you keep that $250,000 house for 30 years. At the end of 30 years, the cost of owning that house will have been a little under $650,000 (that’s factoring in the mortgage, the insurance, the property tax and the income tax savings).Meanwhile, after 30 years, even with that meager 3 percent appreciation rate, your $250,000 house will be worth a bit more than $600,000. So you lost almost $40,000? No – because if you had been paying $1,500 a month rent that entire time, you would have paid $540,000 in rent.So the bottom-line advantage of owning that home would be right around $500,000. And you wind up with more than $600,000 in your bank account.(If you sell after 10 years, the numbers change – but your bottom-line advantage is still well over $100,000. And you have more than $140,000 in the bank.)You know what? That’s not bad.Plus, you didn’t have to put up with a landlord who might kick you out any time.Plus, you got to live in Aspen, which is a damn nice place to live.Sure, if you’d had a million dollars to buy yourself a free-market condominium, you would have walked away with a lot more money.But you didn’t have a million dollars. That’s why you bought affordable housing.The American Dream is owning your own house. It is not getting rich by owning your own house.And owning your own home in Aspen really ought to be a dream come true. So, I’m sorry if that’s not good enough, but we need to focus on solving the real problem.Andy Stone is former editor of The Aspen Times. His e-mail address is email@example.com.
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The past sneaks up on us in the strangest of ways, and I don’t mean bounty hunters flashing those “Wanted: Dead or Alive” posters in our faces.