InnovaHomes are a modular home construction innovation that InnovaLaB has debuted in Kent County that can bring in new construction for far less than the traditional new construction housing prices – $159,000 – $230,000. These prices can help with the “missing middle” housing shortage. Missing middle, what is that?
There is a lot of terminology that is tossed about when talking about housing; “housing affordability,” “low-income housing,” “affordable housing,” “missing middle,” “market rate housing,” the list goes on. The following are some widely agreed upon definitions for these various labels.
- Housing Affordability is a calculation used in the industry. In order for a person to be living in a house or apartment that is “affordable”, they should not be paying more than 30% of their monthly income on their rent or mortgage.
- Low-Income Housing is typically housing, overwhelmingly rental, for families or individuals earning less than 60% of the area median income. For a family of two that would be $31,465. Housing affordability, then, would be $786 a month for rent or mortgage.
- Affordable Housing is typically used to describe homeownership initiatives focused on families earning between 80% and 100% of the area median income. For a family of two that would be $52,442. Housing affordability, then, would be $1,311 a month for a mortgage including taxes and insurance.
- Missing Middle is somewhat of a new term that has surfaced while we are in the midst of this housing shortage across the country. This is housing with a price point that families or individuals earning between 100% and 125% of the area median income. For a family of two that would be $69,922. Housing affordability, then, would be $1,748 per month for a mortgage including taxes and insurance. This allows a qualified buyer to purchase a home in the $175-$190,000 range.
- Market Rate is basically the housing that anyone earning over 125% AMI can afford.
We want to be clear – InnovaHomes are not “low-income housing.” However, InnovaHomes are part of a solution to make housing more affordable for low-income and middle-income families across the County.
Let us show an example that is happening across Kent County every day to illustrate this point; we’ll use Amar and Evie as our family. They are a middle-income family making $69,000/year as a family of two. Their bank approved them for up to a $190,000 home, and ideally, they are looking for a home between $150,000 – 190,000, but right now in Kent County, there are only 75 homes that meet that criteria. To narrow it further, they want to live in Grand Rapids proper, which means there are only 25 homes that meet that criteria. They are competing with hundreds of families for those 25 homes, and as those homes go on the market, dozens of families are bidding and outbidding each other to buy those homes – making a home that they looked at with a price tag of $160,000 go for $175,000.
Amar and Evie cannot buy a higher priced home. So, they can continue hoping they get a home in their ideal price range, or they start moving into less expensive homes – traditionally for low-income families. When this happens, they start becoming the family that starts outbidding low-income families and raising prices of these houses across this low-income housing level.
What we see is in part supply and demand, and market opportunism. When there is little supply for homes in a specific price range, despite high demand, those homes in that price range become more expensive. At the same time, traditionally low-income homeowners see the opportunity to fill a void in the market of homes and begin raising the price of their homes to match this price in that market.
This is where InnovaHomes come in. If InnovaHomes come into the market and put new high-quality housing in at the $159-230,000 price range, it creates a ceiling in the market. Lower-income homes will have a hard time competing with brand new homes in the same marketplace at the same price point. This price ceiling is good for low-income families, and the supply of additional middle-income homes helps to stabilize the middle-income housing market.
While InnovaHomes is not the solution, it alone will not solve the housing crisis we face across Kent County, but it is part of the solution. It will take a multi-faceted approach to ensure housing prices and wages are more aligned to ensure that all families have access to housing in their price range. We are excited to be a part of the solution, and we look forward to working alongside private developers and municipalities to create even more solutions to help solve these difficult problems.