Based on national averages, a teacher’s starting salary is about $39,000 a year; retiring teachers average $67,000. For many of them, that puts the prospect of home ownership out of reach. Today, despite the drop in home prices since 2008 and historically low interest rates, the problem persists for teachers in communities around the country. It is particularly acute in major metropolitan markets. According to Paycheck to Paycheck, a 2009 survey of more than 200 U.S. metropolitan areas, an elementary school teacher can’t afford to buy a median-priced home in 40 percent of the markets surveyed--that is, in 83 of those markets. And in 11 of the 210 metropolitan rental markets surveyed, teachers can’t afford the rent on a typical two-bedroom apartment. The 2009 survey contained some good news, however. From 2008 to 2009, the drop in housing prices made housing more affordable in some metropolitan areas. According to the report, “Although incomes for elementary school teachers rose by a median of just 1.6 percent, falling home prices and low interest rates made buying a median-priced home newly affordable for elementary school teachers in 33 metropolitan areas [in 2009] compared to 2008.” Nonetheless it’s an issue that persists in most major cities, wealthy outlying suburbs, and tony resort communities.
The financial challenge for teachers can be compounded by the high cost of commuting. When teachers can’t afford to live near schools or locate housing near public transit, they sometimes take on long commutes, which translates not only into higher costs for teachers but more traffic congestion and higher auto emissions. As an example at the higher education level, after the University of Chicago implemented an employer-assisted housing (EAH) program for its employees, a follow-up study showed that the average driving distance for participating employees had dropped from 5.98 miles to 1.30 miles. “In some cases, employees who were driving 30 miles each way to work now live less than three miles from campus,” according to the March 2010 report by the Metropolitan Planning Council.
According to Something’s Gotta Give, a report on working families and the cost of housing published by the Center for Housing Policy in 2005, “Commuting is a common strategy for working families to cope with high housing costs. When the cost of transportation is considered together with the cost of housing, the percentage of working families paying more than half their total expenditures increases five-fold from 8.3 percent to 44.3 percent of working families. Calculations show that working families spend 77 cents on transportation for every dollar decrease in housing costs. Although not all of family transportation cost is attributable to commuting, the journey to work from less expensive housing likely accounts for a substantial part of it.” It’s an expensive trade-off.
Responding with Housing Assistance Programs
In response to teacher shortages, high turnover rates, and the rising cost of housing in recent years, states and municipalities have implemented a variety of programs to make housing more affordable and accessible for teachers. Some of these are programs for which any government employee is eligible including employer-assisted housing (EAH) benefits programs. EAH benefits to an employee include homebuyer/homeownership education and counseling and/or financial assistance. Others are specifically aimed at helping teachers and other key community service professionals such as police, fire fighters, and first responders. Still others link directly to neighborhood revitalization initiatives. For example, Connecticut’s Teachers Mortgage Assistance Program is aimed primarily at encouraging teachers to live and teach in “challenged communities,” those designated by the state as “priority or transitional school districts.” The federal Good Neighbor Next Door Program under the U.S. Department of Housing and Urban Development provides listings for houses in revitalization areas. These homes are available for half the list price to pre K-12 teachers, firefighters, and law enforcement officers. The program has a three-year occupancy requirement, and listings are open for only five days.
The Chicago Public School system has one of the leading EAH benefit programs in the nation--the Teacher Homebuyer Assistance program, administered through a partnership with the Chicago Department of Housing. According to HousingPolicy.org, the program provides $3,000 in down payment and closing cost assistance for homes purchased in the city, as well as interest-free loans that are fully forgiven after fulfillment of a five-year teaching commitment. To spur revitalization, the program increases its award to $7,500 if a qualified teacher buys a Chicago Housing Authority redevelopment property. Launched in 2005 to improve teacher retention rates, by 2008 Chicago’s Teacher Homebuyer Assistance had helped more than 500 teachers buy homes in the city, according to a report by the city’s Metropolitan Planning Council. And it includes an education and counseling component, widely recognized as a key element of any successful EAH program.
In high-priced housing markets such as the San Francisco Bay area or the city of Orlando, Florida, it’s all about affordability--and making it easier for teachers to live where they work. The San Jose Teacher Homebuyer Program, established in 1999, has helped hundreds of teachers purchase new homes. The city has also built units for teachers to rent at below-market costs. Orlando’s Down Payment Assistance Program provides as much as $20,000 in homebuyer assistance to qualified teachers and public safety personnel.
In 2011, New York addressed teacher shortages in the fields of mathematics, science, and special education by launching a targeted housing program. The new program provides about $15,000 over a period of two years for housing- and relocation-related expenses for qualified teachers. That in exchange for a three-year commitment to teach in one of these disciplines in a “high-need school.”
Getting Creative in Maryland
Private initiatives have surfaced in some communities to address the problem, including bank-administered mortgage programs for qualified teachers that offer discounted mortgage rates and closing-cost assistance. Perhaps more compelling, however, are the innovative private initiatives that have sprung up--programs that combine entrepreneurial creativity with federal, state, and county tax incentives or government-sponsored EAH benefit programs to expand access to affordable housing. Among these, two recent examples--both in the state of Maryland--stand out.
Maryland is one of the wealthiest states in the country, a fact reflected in the high cost of housing. “Even now, the average cost of a house is way beyond what a single teacher can afford on their own without help,” says Ed Robinson, president of TheMDRealEstateTeam.com with Keller Williams Flagship of Maryland. The state aggressively recruits new teachers to address teacher shortages and some Maryland counties experience low teacher retention rates. According to the Maryland State Education Association, teacher education programs produce less than half the number of teachers needed to fill vacancies each year, and it costs a school district well over $100,000 every time a teacher leaves--something nearly 7,000 Maryland teachers do each year. As a result, out-of-state recruiting is ongoing, and every year thousands of new teachers move to Maryland. Relocating teachers, many of whom are recent graduates, face particular challenges.
The state has responded with a number of programs. According to REALTOR® Ed Robinson, Maryland has a closing assistance program and an EAH program in which the state matches up to $2,500 of employer-assisted housing contributions; both operate at the local or county level. And there are an array of other programs--many of them county-based--that can be used to help teachers lower the cost of home buying. In 2005, after researching the mix of benefits available, Robinson founded the Housing Program for Educators, which operates through an exclusive arrangement with six Maryland teacher associations to provide a wide range of benefits to teachers who use TheMDRealEstateTeam.com as their agency. The level of benefits available to specific teachers depends on any number of factors, and it gets complicated. “To access the state’s employer-assisted matching fund, you have to use a Community Development Administration (CDA) loan. That’s a statewide loan program,” says Robinson. “Using the CDA Loan as the foundation, you can piggyback other programs. In Anne Arundel County, for example, employer-assisted matching funds are available to any county employee; the county will put up the initial $2,500 in employer-assisted housing funds and then match their own $2,500. Our program can work with that program. Then we layer different benefits on top of it. For example, there’s one program that, if you literally live in the same jurisdiction as the school where you teach, you get additional benefits on top of that.”
In addition to piggybacking these federal, state, and county benefits to help teachers finance new homes, Robinson’s Housing Program for Educators adds other benefits, including up to $1,000 in closing assistance, access to short-term discounts on mortgage rates from two major lending institutions, and an educational program that teaches teachers about credit and the home buying process. Perhaps the most ingenious element of the program is this: Robinson works with local landlords to negotiate special lease terms for teachers--so relocating teachers can rent an apartment until they’re ready to buy a house and then get out of those leases without penalties. Again, in order to gain access to the benefits of the Housing Program for Educators, a teacher who is buying a home must use Ed Robinson’s firm as his or her real estate agent. But there are clear advantages for teachers. By affiliating with six of the state’s teacher associations, Robinson has access to a large pool of clients, which gives him significant negotiating leverage. The result is an unusual private initiative that gives thousands of teachers access not only to affordable housing options but to a dedicated real estate team that can work with them, sometimes over a period of years, to help them find and afford housing.
Then there’s a pioneering private effort under way in the city of Baltimore, where Seawall Development Company has turned an abandoned factory in a transitional north Baltimore neighborhood--once the home of H. F. Miller and Son Tin Box and Can Manufacturing Plant--into Miller’s Court, a mixed-use development with loft style apartments for teachers. The inspiration for this extraordinary project sprang from two distinct impulses--the desire both to improve teacher housing and to do socially responsible real estate development. Donald Manekin, who started the development company with his son Thibault, was formerly the chief operating officer of the Baltimore City Public School System. “He saw this rotating door of great teachers being recruited--through programs like Teach for America and the Baltimore City Teacher Residency--and they’d come in and do a two-year commitment,” says Jon Constable of Seawall Development. “When they moved to Baltimore, they had to find housing quickly, and there wasn’t much available. So most of them ended up isolated with a challenging job and a challenging living situation. They would do their two years and get out of Dodge.” As a result, the Baltimore schools were losing out on keeping these talented and committed teachers.
To address the issue, Seawall Development used creative financing to rehab the abandoned factory and turn it into a model for affordable teacher housing. The developers combined a U.S. Treasury Department New Market Tax Credit and federal and state historic tax credits to put together the project, which combines commercial space for nonprofit tenants and 40 loft style apartment units--all available to teachers at below-market rents. With the teacher discount, at the low end, a one-bedroom in Miller’s Court goes for $760 a month, compared to $1,100 for the market. At the high end, a three-bedroom goes for the mid-$1500s. “It’s generally a roommate situation,” says Constable of the larger units. Although the rental units have the look and feel of high-end condominiums that would appeal to just about any urban professional, Miller’s Court was specifically designed to meet the needs of teachers--with elements based on insights from focus groups made up of Baltimore teachers. For example, every bedroom has its own bathroom, so larger apartments can be shared. Instead of a common laundry facility, teachers said they wanted their own washers and dryers--because most of them have been living in dorm spaces and buildings with shared laundry facilities for years. And Miller’s Court features a common resource room, with copy machines and other conveniences. Plus there’s free parking and a free fitness center. “I know it sounds too good to be true,” says Constable. “So some of these folks are signing leases sight unseen.” Not surprisingly, when it opened in 2009, the building had 100 teachers on its “waiting list,” a database of interested renters; Seawall Development now has 400 interested teachers on that list.
Although the apartments are available to nonteachers at standard rents, today Miller’s Court is 100 percent occupied by teachers--most of them K-12 teachers in the Baltimore City school system. The keys to the project’s feasibility include the creative financing based on upfront tax credits, thoughtful planning, and what can only be called pure inspiration. And, given its success, Seawall Development is rehabbing another nearby Baltimore building, replicating the Miller’s Court development and financing strategy. Union Mill, slated to open in August 2011, encompasses 25,000 square feet of commercial space for nonprofit tenants and 55 apartments expressly developed for Baltimore teachers. As of May 2011, the commercial space is 100 percent preleased, and the apartments are 65 percent preleased. Says Constable, “And we’re on track to be 100 percent preleased before the building opens its doors.” That’s no surprise given the compelling need for attractive, affordable housing for the city’s teachers.
Paycheck to Paycheck1
The Center for Housing Policy’s 2010 report on wages and the cost of housing in America, available in an online, interactive version.
Metropolitan Planning Council2
The Metropolitan Planning Council (MPC) helps employers and communities design and implement customized EAH programs to meet local needs and engage business leaders in broader housing solutions.
The Housing Program for Educators, founded by REALTOR® Ed Robinson and serving members of six of the state’s teacher associations.
This Baltimore project provides an example of how one developer used a combination of tax credits to develop affordable housing for teachers and play a role in revitalizing an urban neighborhood.
See related article in REALTORS® Making a Difference, “Explore Housing Programs that