Housing Affordability Threshold…the “take-aways”

We have been asked once again to discuss the Housing Affordability Threshold %; how it is calculated, and why is it important to the taxpayers?

We started on this journey after discovering the ~40% increase in this writer’s property taxes after living for 10 years in Concord Township. Our concern was that if we continue on this path of ever-increasing property taxes we will price seniors, and those living on fixed incomes out of their homes that they have worked all their lives to achieve.  That pronouncement lead us to do some research on what is deemed “affordable housing'”?

We found that this question has been asked for a very long time.  Here is a research paper done by none other than a group from the prestigious Harvard University in September,  2018.


Here is an excerpt from the study:

“The origin of the [housing affordability] standard can be traced back to an old aphorism [LFC: an observation that contains a general truth] that one should devote “a week’s wages to a month’s rent,” which itself is based on studies of what typical families spent on housing going back to the late 1800’s. The notion was that if housing accounted for more than this share of income, there would not be enough left over to pay for life’s other necessities. This 25 percent of income standard was incorporated into laws for federal housing assistance programs in the 1960’s and 1970’s. However, in the early 1980’s, new legislation increased the standard to 30 percent for most programs.  Since then, the 30 percent of income measure has been the norm for defining housing affordability.”

What are the factors to be considered in calculating the HAT %?
From the Cleveland based Center for Community Solutions, we learned that for renters it is the monthly rent plus the monthly utilities.  For the home owners, we need to add the monthly mortgage, utilities, and property taxes.

We summarized the HAT % for all renters and all homeowners for all 88 counties reported by the Center for Community Solutions.  Here are the statistics for your review: Housing Affordability Threshold by County

For Lake County, we found that all renters on average are at 28.9% of their annual income, and all homeowners at 21.4%.  Geauga renters are at 26.7%, and homeowners at 26.6%.
The overall average for the State of Ohio is 28.45% for renters, 21.0% for homeowners.

What happens to a homeowner’s HAT % when there is an increase in property taxes?
Assumptions for our example: Monthly mortgage $1,000 / Monthly Utilities $250 / Monthly property taxes $500 / Household Annual Income $84,000, or $7,000 per month

Total expenses per month are $1,750.00 [$1,000 + $250 + $500]
Total household income per month is $7,000.00
Therefore, the HAT % in this example is 25% [$1,750.00 / $7,000.00]

What happens when a local school board wants to add an additional 4.99 operating levy to pay for the monthly expenses?
First, we calculate the annual cost of the operating levy:  4.99 mills x $35.00 = $174.65 for every $100,000 of appraised value [market value] of the home.  For this example, we will assume that the home’s appraised value is $200,000. Therefore, the homeowner will pay an additional $349.30 per year [$174.65 x 2], or $29.10 per month [$349.30 / 12].

Total monthly expenses are now $1,779.10 [$1,750.00 + $29.10], and assuming no increase in the household income, the new HAT % would be 25.4%. [$1,779.10 / $7,000.00].  Each subsequent property tax increase, without a corresponding increase in the household income, will mean the homeowners will move closer and closer to the 30% unaffordability threshold.

How much would the household income need to increase to not move closer to the 30%?
It is a simple calculation: Divide the increase in the property taxes by the household’s current HAT %.  In our example, divide $349.30 by 25%, and the answer is $1,397.20 per year, or $116.43 per month [$1,397.20 / 12]  If the household income does not increase by that amount, the homeowner will move closer to the 30% threshold.

To check our math:
The new monthly expenses are $1,779.10 [$1,750.00 + $29.10]
The new monthly income is $7,116.43 [$7,000.00 + $116.43]
The new HAT % is the same 25% [$1,779/10 / $7,116.43]

Renters have been led to believe that since they do not pay property taxes directly, then any increase in property taxes will not affect them.  We call this out as a deception. Whether the renter knows it or not, the property taxes paid by their landlord are a factor in the amount they pay monthly.  If the property taxes increase, their monthly rent will eventually increase.  DO NOT BE DECEIVED BY THE OFFICIALS OF ANY POLITICAL SUB-DIVISION THAT SAYS RENTERS ARE NOT IMPACTED BY PROPERTY TAXES INCREASES.

takeaway 2 inage

What are the “take-aways” that we want all taxpayers to understand?

1. Know how to easily calculate a proposed property tax increase.  [Number of mills x $35.00 = cost per $100,000 of appraised value] Any renewal levies will require you to know the “effective tax rate” since renewals may be subject to the affect of H.B. 920 and will reduce the number of mills.

2.Do not just consider the increase in the property taxes.  It is how much more you need in additional income to pay the additional tax that is important.

3. Know your own HAT %.

4. Do not be deceived by the officials that tell you the new tax is only $.xx per day.  It is meant to lull you into a false sense of security, and the seeming affordability of the proposed tax increase.

5. Be cognizant of how much additional income you will need to earn to pay the increased property taxes without moving you closer to the 30% unaffordablity threshold.

6. Without continued increases in your household income, the ever-increasing property taxes will price you out of your home!  No one can dispute this fact!

7. The American dream of home ownership is an illusion.  If you do not pay your property taxes, you will face foreclosure for non-payment of those taxes, and your home will be taken from you.



Categories: Real Estate Taxes, Tax Levies, Uncategorized


2 replies

  1. Home ownership is an illusion period. If you pay for EVERYTHING with a debt note, how do you really OWN anything. You cannot pay a debt with a debt. Ding, ding, ding what do we have for them Johnny?! Folks it is time to wake up and stop lying to yourselves. As for the housing stock on the west side…I say buy the thing, tear it down…maybe get some help from the Land Bank…put up a tiny house and say “TAX THIS BITCHES!” Something’s gotta give…we need a reset and the people are going to have to do it because the fat slobs in government won’t…they are living high on the hog…we are paying for their bloated salaries and pensions PLUS their Cadillac medical plans. Do you ever get tired of funding your own destruction? Apparently not.

    Until the federal reserve goes back to the gold standard…or backs our currency with ANYTHING OF INTRINSIC VALUE…you own nothing. Wake up and smell the tyranny dummies. Slowly over time, and with the help of the likes of Mr. Tentacles and Mr. Continuous Malchesky right here in good ole Lake County (both POS lawyers and members of the despicable BAR Association who also carry titles of nobility such as ESQUIRE which is illegal under our Constitution), our freedom and the entirety of the American Dream has been stolen from us. We are absolutely slaves…all of us.

    This country was free for a hot minute. Franklin knew how much work it would take to maintain this REPUBLIC. And he knew that for all intents and purposes, mankind is lazy and it would continue to be a few that carry the rest. Nothing new under the sun.


  2. Your mathematical analysis gives good mathematical information, but, we are dealing with thievery!!!

    t only took Chairman Mao 10 years to take away all private land-ownership in China and the people have never gotten their land, back.

    Look to California for your shocking future as a homeowner, business owner and taxpayer. This isn’t “our” USA, anymore!

    Our local governments, all over this country, now see the responsible home/business owner as their deep pockets and they are planning to take it all. They don’t care if we have to sell and move.

    Every year, the water tax (L.A.) is raised 12% without notice, with $14 million skimmed to the General Fund, doing this for 13+years. A DIRECT VIOLATION of the California State Constitution.

    WE THE PEOPLE will have to sue the local governments because they don’t care and
    won’t stop. THEY WANT THAT MONEY

    In California, now statewide rent-control starting Jan. 1, 2020 without the people’s vote. Their dismantling Prop 13, voted-in by the people!!!!

    RC was voted NO in every city in 2018 and, again, in the Nov. election 2019, yet, they are going to force it on us. It only gives the govt. control of the private citizens property, giving them big kickback money, and it does not help the homeless or the low-income as proven for years by Chicago, NYC, LA, etc.

    That’s history and we’re not learning from it. The last few generations have not even heard of this and, therefore, can not learn from history.


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