Ever since Bull Valley surpassed the 1,000-residents mark in the 2010 census, its Plan Commission began preparing for the requirements of the state’s Affordable Housing Planning and Appeal Act.
When the Illinois Housing and Development Authority published its latest list of communities that did not have enough affordable housing, Bull Valley wasn’t surprised it made the list, said Dick Magerl, chairman of the village’s Plan Commission.
As the community began working on a required plan, Magerl began digging into the way IHDA came up with its numbers.
He said the formula is flawed.
The state’s Affordable Housing Planning and Appeal Act calls for municipalities with more than 1,000 residents to have at least 10 percent of their housing units be deemed affordable.
Affordability for owner-occupied housing is based on several factors, such as median real estate taxes paid for owner-occupied units in a community and the area-median income (McHenry County communities use the Chicago metropolitan statistical area).
IHDA also assumes a 10 percent down payment, a 30-year mortgage and a 4.8 percent interest rate when determining affordability.
Magerl objects to the way property taxes are used in the formula. Magerl suggests the percentage of the monthly payment that goes toward property taxes be used, rather than the median amount of property taxes for a community.
Magerl said IHDA’s calculation penalizes a community with higher property values and hence higher property taxes, and lowers what would be considered affordable in that community. Communities with low property values and lower property taxes are rewarded, because it elevates the affordable price.
“You would never pay as much taxes on an affordable house as you would on a $500,000 median [value house] in Bull Valley, but yet they’re using that full value of taxes in the calculation,” Magerl said. “It artificially suppresses the amount of money you have for a mortgage.”
Man Yee Lee, the assistant director of Marketing and Communications for IHDA, said IHDA follows the Affordable Housing Planning and Appeals Act statute closely, and certain administrative decisions must be made during the agency’s calculations.
In an email to the Northwest Herald, Lee said there is not a correlation between home values and real estate taxes paid.
“In other words, there is no certainty that a home that is half the median value in Cary would pay half the median real estate taxes paid in Cary,” Lee wrote. “The full median real estate taxes paid is subtracted from the affordable monthly mortgage payment because it was a newly available data set and was regarded as an improvement to the existing calculation.”
She added that IHDA is now using information from the American Community Survey part of the U.S. Census. Before, IHDA used the American Housing Survey.
Lee said the American Community Survey provides more localized property data, including taxes.
“Previously, the calculation utilized an average effective property tax rate for the Chicago Metropolitan Statistical Area and applied it to the affordable monthly mortgage payment in all places in the metro area,” Lee wrote.
“We as an agency, we appreciate all the feedback,” Lee added in a phone interview. “We’re really open to having a dialogue with these communities.”
Lee said there isn’t one correct way to look at the data, but IHDA believes that the sources it’s using is the most accurate.
“What we have here is a difference of opinion,” Lee said.
Communities deemed to not have enough affordable housing have to file a plan with the IHDA that says how it will meet the 10 percent threshold.
Communities that reject affordable housing developments can have their decisions appealed by developers to the State Housing Appeals Board. However, a community has to be on the list of communities not making the 10 percent mark for at least five years for an appeal to be heard.
Magerl said for a house to be affordable in Bull Valley, it would have to sell for $81,256.
“What we wanted to do was what do we need to do to get off the list?” Magerl said. “That meant we had to determine where the threshold was, and building housing that was below that threshold and it was determined it was $81,000, and what a surprise.”
The affordability threshold would be $87,668 in Prairie Grove. For McHenry, a house would have to sell for no more than $174,414. In Hebron, houses could sell for no more than $201,547 to be deemed affordable.
Under Magerl’s suggestion, communities such as Algonquin, Cary, Fox River Grove, Johnsburg, Oakwood Hills and Prairie Grove, would come off the state’s list.
Bull Valley, Spring Grove and Barrington Hills would stay on the list.
Magerl said if IHDA used his proposal, for a house to be deemed affordable in Bull Valley, it would have to sell for no more than $190,157.
In Hebron, a house would have to sell for no more than $191,797. Prairie Grove’s affordability threshold would become $183,698. In McHenry, the affordability threshold would be $185,347.
“That’s a buildable single-family house,” Magerl said.