July 24, 2005 – Buying affordable housing for many Virgin Islanders has been difficult, and it is going to get more difficult, according to testimony last week at Senate budget hearings.
Virgin Islanders today find themselves in a squeeze between escalating housing costs and stagnant wages.
Clifford Graham, executive director of the V.I. Housing Finance Authority, last week outlined several projects the authority will be involved in during the upcoming year. They include:
— 24 three-bedroom/two-bath units expected to commence in September in Estate Calabash Boom, St. John. Projected unit sale price is $115,000
— Eight three-bedroom townhouses in the town of Frederiksted. Expected to be starting in August. Estimated unit price to buyers is $100,000 to $110,000.
— Six to eight three-bedroom townhouses in Christiansted. Expected to commence in November. Estimated unit price to buyers is $100,000 to $110,000.
— Five moderate-income, three-bedroom/two-bath homes, currently under construction, on one-third-acre lots in Estate Solitude, St. Croix. Estimated unit price to buyers is $150,000 to $170,000.
— 21 single family dwelling units on one-third-acre lots in Hermon Hill, St. Croix. Expected to commence in October. Estimated price to buyers is $110,000 to $120,000.
— 16 moderate-income dwelling units on one-third-acre lots in Estate Mariendahl, St. Thomas; continued construction of 11 additional single-family homes on one-third-acre lots. Estimated price to buyers is $130,000 to 135,000.
— 16 moderate-income dwelling units on one-third-acre lots in Estate Nazareth, St. Thomas. Estimated price to buyers is $175,000 to $188,000.
The problem is who can afford these "affordable" houses?
Many Virgin Islanders make their living in the service industry, specifically the tourism industry. These jobs have traditionally been low paying, and according to V.I. Labor Department statistics, the situation is even worse in the Virgin Islands where most workers earn much less than their counterparts in the United States.
The following statistics come from V.I. Labor Department Web site. The source of the information is a wage survey conducted last year. In sales-related jobs, the median income for U.S. workers is $32,000, while their V.I. counterparts earn only $21,000 on average. In security jobs, the average is $35,000 in the United States, compared to $23,000 in the Virgin Islands. The news is about the same in personal care and services sector, where V.I. residents earn $5,000 less than their U.S. counterparts, who earn $22,000.
In the traditionally low-paying sector of food preparation and service, the figures are roughly comparable: $17,500 in the United States to $17,000 for V.I. workers.
The only place the Virgin Islands fares well is in the category of production workers, where the U.S. average is $29,000, compared to the Virgin Islands' $32,000. The major employer of production workers in the Virgin Islands – Hovensa – pays its workers well.
However, the average monthly wages of V.I. production workers fell by more than $200 in 2005.
Even people working in education, training and libraries are paid substantially less than those in the United States. American mainland workers get an average pay of $42,000 compared to the average in the Virgin Islands of $34,000.
Again, who can afford the affordable housing being proposed?
Most real estate Web sites now have a calculator where one can enter the price of the home, the interest rate, and the down payment proposed, and the calculator will determine the monthly payment.
If a buyer has a down payment of $30,000, which is unrealistic if you are being paid $8 an hour, and bought one of the Hermon Hill homes at $120,000, the buyer's mortgage payment would be $692 a month.
The average worker in the service industry will make, after taxes, about a $1,000 a month. So, if this person wanted to buy into this affordable housing, they would have to live on $308 a month to cover transportation, food, electric, phone, and leisure. This scenario is impossible, without even adding possible children the worker has to support.
If the worker drops down to the very lowest priced house at the Hermon Hill development ($110,00) and has only $15,000 to put down the scenario gets even worse — payments are $721 a month.
Graham told the senators that there were several factors driving the cost of housing to a point unreachable by many Virgin Islanders.
He said development projects in China have driven up the cost of steel, while the cost of concrete has also gone up and there have been shortages.
He said the demand for high-cost houses has been a factor, too. He said carpenters who once only received $12 an hour could demand $19 an hour. He added that hurricanes contribute a cost to housing, too.
Dean Plaskett, testifying later in the week, said that home construction could soon be facing another shortage — sand to mix with the concrete. He said that he is working on a plan to buy the sand that comes from dredging projects in Frederiksted and Christiansted and sell it to developers.
Graham said the goal of VIHFA is to assist low-income residents become homeowners, but to do that the Authority has to have money to subsidize some of the costs of owning a home.
He testified, "In the first 10 years of operation (1984 to 1994), the Authority was highly successful in accomplishing its mission. Within this period the Government of the Virgin Islands helped underwrite the operating cost of the Affordable Housing Program by appropriating an average of $500,000 annually. Also, during this same time, the Housing Trust Fund was established to provide infrastructure funding to subsidize the cost of developing affordable housing in the Virgin Islands. Usually, up to $10,000 per unit was provided to assist our developers in the installation of the roads and utilities in our proposed developments. When these funds were available, the Authority was able to develop over 600 affordable homeownership units to generate sufficient revenues to have a balanced budget. However, by 1995 the funding in the Housing Trust Fund was depleted and never replenished."
The Authority then received no money from the V.I. government again until 1998, and then the appropriation was $450,000.
The Authority, according to Graham, has had to cut staff by 41 percent since 1995. During his testimony before the Finance Committee, he asked that the government bring its funding of the Authority up to $700,000. According to Graham this would be equal — after being adjusted for inflation and cost of living — to the subsidy the Authority was receiving in the early '90s.
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