CHAPTER 4

HOUSING: HOW MANY?, WHAT TYPE?, WHERE?, AND HOW AFFORDABLE?

In order to achieve the most desirable composition and quality of dwelling units in the community, the housing and residential construction portion of the Plan of Development has identified the following goals:

• To continue to encourage a diverse mix of private single family residential dwellings on lots of varying densities so as to correct the current imbalance between multi-family and single family dwellings.
• Provide for diversity in the future single family residential housing stock in order to attract an economically and culturally diverse population capable of sustaining or improving the current status of the community.
• To identify older neighborhoods in need of rehabilitation and adopt policies and regulations to encourage this rehabilitation will discourage gentrification.
• Monitor population growth and avoid residential density increases which would overburden the capacity of the city’s infrastructure.

It is important to have a housing and residential construction portion in the Plan of Development to better understand the currently available housing stock and the potential future housing stock. Understanding the type of future housing available in the city will contribute to a better understanding of the future socio-economic characteristics of the city’s population.

This portion of the Plan of Development will review recent residential construction activity, the current number of dwelling units, the potential number of units and finally, will analyze the affordability of a home in Middletown. This portion of the Plan of Development will then end with several conclusions and recommendations aimed at achieving the housing and residential construction goals as discussed above. ALL FIGURES WILL BE UPDATED WHEN THE OFFICIAL 1990 CENSUS FIGURES BECOME AVAILABLE.

CONSTRUCTION ACTIVITY

Middletown has experienced a rapid surge in residential building construction over the past several years. Figure 4.1 displays the building permit activity over the past 6 years. From this figure it is clear that construction activity has decreased substantially in 1988 and 1989, down from record highs in 1985 through 1987, and it appears activity will continue to be much slower in 1990. Figure 4.2 displays the certificate of occupancy activity. The large number of certificates of occupancy in 1988 is merely a delayed effect from the past record years in terms of building permits. Accordingly, the number of certificates of occupancy issued did decline in 1989 and 1990.

BUILDING PERMITS 1985 – AUGUST 1, 1990 Source: Middletown Building Department Chart here……. FIGURE 4.1

CERTIFICATES OF OCCUPANCY 1986 – 1990 Source: Middletown Building Department Chart here……

Figure 4.2 THE CURRENT HOUSING SUPPLY

The rapid surge in construction activity has resulted in a substantial increase in dwelling units over the past decade. In 1980 there was a total of 14,774 dwelling units in the city. From 1980 to August 1, 1990, there have been 3944 building permits issued for the construction of both multi-family and single-family dwelling units. This addition in units since 1980 results in a total of 18,718 dwelling units in the city. This growth represents a 27# increase in housing units. The next two figures, 4.3 and 4.4, display the distribution of dwelling units, by census tract, throughout the city. From these figures, it is clear that the Westfield portion of the city contains a substantial portion of the entire city’s housing stock.

Figure 4.5 displays the change in the number of dwelling units between 1980 and August 1 of 1990. In this figure, it becomes obvious the most substantial growth occurs in the 5413 census tract. This is the result of the multi-family construction in the Westlake Planned Residential Development. In order to gain a further understanding of the housing stock and the population contained within, it is important to divide the total number of dwelling units into single family and multi-family dwellings. Figure 4.6 accomplishes this and shows that the multi-family homes have been increasing much more rapidly than single-family. Figure 4.7 shows the distribution of multi-family (56%) and single family (44%) dwelling units. This phenomenon is once again due to the rapid development of the Westlake PRD.

1990 CENSUS TRACTS MIDDLETOWN, CONNECTICUT PLANNING & ZONING DEPARTMENT Map here…….

HOUSING UNITS BY TRACT

Census Tracts	Units 1980	Units 1985	Units Aug. 1, 1990
5411	1206	1207	1256
5412	1615	1615	1897
5413	1511	1841	3491
5414	2240	2409	2864
5415	737	766	791
5416	1329	1404	1439
5417	890	943	956
5418	28	31	31
5419	1911	2041	2225
5420	1681	1708	1815
5421	1140	1159	1328
5422	481	561	625
Total	14774	15685	18718

UNITS BY CENSUS TRACT, AUG. 1, 1990 Source: Middletown Building Department

Chart here CHART HERE…….. CHANGE IN UNITS 1980 – AUG.1, 1990

Figure 4.5 Charts here……… Chart here………

THE COMPOSITION OF THE FUTURE HOUSING STOCK

The current distribution of single and multi-family homes, as discussed earlier, is generally not a favorable mix. Therefore, in order to understand whether the future distribution will be similar to the present distribution the Planning Office predicted the future mix. Based on the density the current zoning scheme allows for, it becomes clear that there is far more room for single family home expansion. Figures 4.8 and 4.9 display the approximate distribution of multi-family and single family dwelling units at the time of total residential build out, approximated in the year 2007, barring any significant residential zone changes which increase density.

The estimate of the year 2007 as the year of total residential buildout is merely an estimate based on previous building permit activity. Considering the recent slow down in construction activity, it is not unrealistic to project total residential buildout as far in advance as 2020.

DWELLING UNITS AT TOTAL BUILDOUT

Chart here… DISTRIBUTION AT TOTAL BUILD OUT Chart here……..

HOUSING AFFORDABILITY

Having an understanding of the quantity and distribution of dwelling units both presently and in the future raises a new issue. This new issue, which is particularly pertinent in this region, is the question of affordability. More and more the lack of starter homes in Connecticut is arising as one of the State’s most serious problems. For this reason, Public Act 88-13 “An Act Concerning the Updating of Municipal Plans of Development” was adopted. This act requires that moderate income housing be considered in the Plan of Development. The act also provides that the Plan of Development may include plans for the implementation of moderate income housing programs. This section will analyze the affordability of housing in Middletown for various income groups, and then in consideration of the work of the Middletown Housing Partnership, make general recommendations aimed at bridging the affordability gap.

ON COST: What is Middletown’s current real estate market?

While Middletown’s housing supply has been growing steadily, the cost of these homes has increased dramatically. Based on the single-family home sales for the first half of 1990, the average cost of a single-family was calculation to be $156,080. This figure is down from the average calculated between May of 1988 and May of 1989, that figure was $159,000. In 1980 the Census of the Population reported the average price of a home to be $60,400. This reveals that there has been a 158% increase in the average price of a single-family home over the past ten years. Condominiums behaved similarly. The average price of a condominium during the first half of 1990 was $113,860. This value is up 108% from the 1980 value. The next table displays the current average values for various types of single-family homes and condominiums.

TABLE 4.1 AVERAGE HOME PRICES

Type of Home- Single Family	First Half of 1990 Avg. Sales Price
Cape Cod	$152,790
Colonial	$191,381
Contemporary	$155,940
Raised Ranch	$160,180
Ranch	$137,500
Condominiums	$113,860

In general, there are two reasons for these dramatic increases in the average price of a home. These reasons are land costs and location. Since 1980, land costs have represented an increasingly large share of the total cost of constructing a home. Statewide, between 1980 and 1986, the land as a variable in the cost of a single-family home has increased from 29% to 40%. Clearly, due to the lack of buildable land, land is gradually becoming the most significant cost in the price of a single-family home.

In terms of location, there has been substantial economic growth occurring in Middletown and in other towns surrounding the I-91 corridor. This economic development has resulted in a dramatic impact on the Middletown housing market. The development in greater Hartford has also affected Middletown and the region. Housing prices in Middletown have historically been less than those in the Greater Hartford region and easy access to major highways has been good. This has made Middletown an attractive residential alternative.

ON INCOME: What can Middletown resident afford?

While overall, the incomes of Middletown residents have been increasing, they have not matched the increase in the average price of a single-family home. Income figures for 1990 are unavailable, however, the Department of Housing and Urban Development estimates the median income as of May 1, 1990. This estimate as shown below would mean there has been a 112% increase in median family income between 1980 and 1990.

TABLE 4.2 INCOME FIGURES

1980	Median Family Income	$21,085
1986	Median Family Income	$34,157
1990	Median Family Income	$44,800 HUD Estimate

MidState Region 1987 Income Figures

Median	$37,200
Low	$29,760
Very Low	$18,600

ON AFFORDABILITY: What income is required to buy a home in Middletown?

Having concluded that Middletown home prices have increased more rapidly than the incomes of Middletown residents, it is logical to discuss the incomes required purchasing these homes. The following tables analyze the affordability of homes in the following sales price distribution.

TABLE 4.3 SALES PRICE DISTRIBUTION OF SINGLE FAMILY HOMES FIRST HALF OF 1990

10%	25%	MEDIAN	75%	90%
$114,500	$131,000	$148,000	$169,000	$224,000

The table below presents the incomes required to purchase the homes in this distribution. The table is based on a 30 year 9.5% mortgage and assumes that a family can devote 28% of it’s gross monthly income to mortgage payments, real estate taxes and hazard insurance. One other very significant assumption was made. In developing these examples it was assumed that home-buyers had accumulated sufficient funds to cover down payments and financing costs. This is often not the case and the down payment is commonly the factor which prevents home ownership.

TABLE 4.4 INCOME REQUIRED TO PURCHASE HOMES IN MIDDLETOWN

Income Required to Purchase	Income
Lower 10% of Homes	$46,000
Lower 25% of Homes	$52,000
Median Priced Home	$56,000
Lower 75% of Homes	$66,000
Lower 90% of Homes	$86,000
Average Priced Condominium	$44,000

When comparing the above required income figures with the income figures available and the 1990 estimate for Middletown it becomes clear that many people, especially fist time home buyers, are being increasingly shut out of Middletown’s single-family home market and in many cases, the condominium market.

ON THE RENTAL MARKET

A major source of housing here in Middletown is the rental market. In 1980, 51% of the housing units in the city were renter-occupied. For this section it is assumed that rental housing is affordable when it costs a household no more than 30% of its gross monthly income to pay rent and utilities. The following information on rental housing in the City of Middletown was extracted from the May 1989 Middletown Housing Partnership Report.

The partnership conducted a survey of 281 two-bedroom units in December 1988. This survey revealed that two bedroom non-subsidized units range from $515 per month, including heat and hot water, to $850 per month for a luxury unit. The survey also indicated a vacancy rate of only 1.4%.

The next table provides estimated data on households by income range and affordable rent ranges for the various income groups.

TABLE 4.5 1988 ESTIMATED HOUSEHOLD INCOME

Income	Units	Percent	Affordable Rent Range
less than $15,000	3,219	21.8%	$0-$375
$15,000-$24,999	2,863	19.4%	$375-$624
$25,000-$34,999	2,320	15.7%	$624-$1,250
$35,000-$49,999	2,947	19.9%	$875-$1,250
$50,000	3,424	23.2%	$1,250+

As the Housing Partnership Report pointed out, this data suggests that for most households, the private market provides units which would be affordable. This does not mean that there are not problems in the rental market.

Rental needs tend to be concentrated at the lower end of the income spectrum. In 1980 only an approximate 27% if renters had incomes above the regional median. A more recent survey, conducted by the Institute of Social Inquiry at the University of Connecticut, found that statewide 53% of households with incomes less than $30,000 were renters compared with only 8% of those with incomes over $50,000. For this reason, the demand and thus the shortage for rental units are skewed towards the lower end of the income spectrum.

Based on the data available, it appears that one group which is poorly served by both the private market and the assisted market is that group earning approximately $15,000 - $25,000 per year. This group, capable of paying $375 to $625 per month, must struggle to find rental units which are affordable in the private market, but may not qualify for other assisted housing.

ASSISTED HOUSING

The table above indicates that 3,219 households had earnings of less than $15,000 per year. This constitutes approximately 22% of the cities population. There are 2,374 assisted housing units in the City. At first glance the conclusion may be drawn that the City needs approximately 1000 new assisted housing units. However, a substantial proportion of the households with the lowest incomes, at least 600, are elderly homeowners, often with small or no mortgage payments.

Keeping this in mind, the Housing Partnership concluded that there is a need of an additional 245 rental units for household’s earnings less than $15,000 annually. As mentioned earlier, there are 2,374 assisted rental units in Middletown. It should be noted that the Connecticut Department of Housing has indicated that Middletown has the sixth highest percentage of assisted housing units in the State. Only Hartford, New Haven, New London, Windham and Waterbury provide a higher percentage of assisted housing.

Nevertheless, the city should target this segment of the population when addressing the affordable housing issue. However, when attempting to provide homes for those households with incomes of less than $15,000 creativity and new ideas should be used. SOURCE: Housing Partnership

IMPLICATIONS

The implications of this lack of affordability in Middletown are many and include:

1. The City and the City’s employers will need to raise salaries of employees to attract and retain qualified workers who cannot afford to live in Middletown or the region.
2. There will be a decline in the number of residents with moderate incomes and a relative increase in the numbers of individuals at the low and high ends of the income spectrum.
3. The City will lose its diversified population consisting of both blue and white-collar workers of various income groups.
4. Children of City residents, particularly those without the benefit of a college education, will be unable to live in the City in which they grew up, and the social network of long time residents will erode.
5. Businesses in the lower paying sectors, retail and low-end service, will fine it increasingly difficult to attract acceptable employees.
6. Formally, untapped labor pools such as the elderly, handicapped and retarded will be drawn from as the labor shortage intensifies.

1. Develop a strong public and private sector partnership. This has largely been accomplished with the creation of the Middletown Housing Partnership. In addition, the private sector, with public sector support, should be encouraged to provide moderate-income housing within market rate developments.
2. The City should target firms that have large workforces and therefore must take some responsibility for the supply/demand imbalance in the moderate-income housing market.
3. In order to foster a pride in ownership, the city should consider the rehabili-tation, possibly through sweat equity and privatization of some of the existing assisted housing units.
4. The Planning and Zoning Commission should consider amending its regulations to provide for the provisions as allowed for in Public Act 338. This act allows for Planning and Zoning Commissions to have, as special exception use, a use which is exempt from density limits. In granting this special exception, the Planning and Zoning Commission, working with the Housing Partnership, can require that for each unit constructed in excess of the number permitted by applicable density limits, the developer construct, either off site or on site, a unit of moderate income housing. In lieu of the provisions of affordable units, the developer may be required to make payments.
5. The Planning and Zoning Commission should encourage the use of the infill provision allowing for carefully designed subdivisions with lots as small as 5000 square feet in the R-1 and RPZ zones so as to encourage the production of starter homes.
6. Encourage the Housing Partnership to provide for a down payment assistance program.
7. The City should establish a Housing Trust Fund. Money deposited into this fund will come from many sources including payments in lieu of moderate income housing construction, proceeds from sales of city-owned affordable units, State Department of Housing grants and private sector donations. These private sector donations, encouraged by tax credits, which will represent a major source to the fund, will also generate matching dollars from the Department of Housing. Once established, the fund could be used in many different ways to create moderate income and assisted housing.

1. Create a subsidy program that lowers the cost of a house to that amount that is affordable for target income groups. This subsidy could be used for land purchase and write downs, the lowering of interest rates, grants or mortgage purposes.
2. A land purchase program, in which the Housing Partnership buys developable land, reduces the price and sells or leases lots to individuals. The Housing Partnership may also act as a developer, with assistance available from the Department of Housing to develop the land itself. The Housing Partnership would then sell these homes as affordable units to the target income groups. These units while being initially affordable would also need deed restrictions to insure that they remain affordable.
3. The Housing Partnership may also enter into the real estate market, purchasing existing properties and then selling them at an affordable price to those in need of moderate income and assisted housing. It is essential that the deeds on these homes be restricted to insure that they will remain affordable.

1. Avoid zone changes allowing for significant increases in residential density which would over-burden the capacity of the city’s infrastructure and which would increase the ultimate population beyond the target population of 65,000.
2. The Housing Partnership and private developers should be encouraged to provide moderate income and assisted housing in a manner as discussed in the affordability section of the Housing Plan.
3. Adopt regulations which will lead to the gradual revitalization of older, problem neighborhoods by the private sector.
4. Address the problems in existing neighborhoods which tend to be losing vitality.
5. Consider the fiscal impact, in terms of city services, of large residential special exceptions prior to their approval.

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