For assumptions and background on affordability, scroll down below calculator, or click here.
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ASSUMPTIONS USED
Housing affordability is defined by the California Department of Housing and Community (HCD) as being when housing costs (mortgage payments or rent + utilities) does not exceed 30% of a household income. The Federal Government also uses this standard. It is often described as a percentage of Area Median Income (AMI). 80% or less of the AMI is considered Low Income. Between 80% and 120% is considered Moderate and 120% or more is considered Above Moderate. AMI for San Diego County is currently $92,100 for a family of four.
30% of income is the standard definition of affordability
The vast majority of housing being built in San Diego (and throughout California) is actually “above moderate” so we are most concerned with how much housing is available to people making less than the AMI as these are the people who are most housing burdened. The handy calculator above allows you to determine the likely affordability of a specific unit of housing in San Diego County based on that 30% standard. The 30% definition is what the state and the federal government use, but sometimes certain developers will use 35% to inflate the affordability of their units (Newland Sierra’s publicly available market analysis is one example). Our calculator lets you choose which standard to use to show what impact it has on stated affordability.
HOA fees are not typically included, but factor into affordability
Homeowner Association fees are prevalent in new construction, particularly in larger developments. They help pay for the cost of maintenance, public areas and any services that owners have access to. The average HOA fee (in 2017) was $317 per month in San Diego County. Our calculator allows you to enable or disable HOA fees to see what impact it has on affordability (hint, you need about an extra $4,000 in salary for every $100 of added HOA fees).
Mello-Roos sounds fun to say, but it is another cost of living in new developments and ignored in affordability calculations.
Mello-Roos are another term for Community Facility District fees, which is to say a special tax added to properties in certain developments. Basically, when new developments require added infrastructure such as sewer plants, fire stations, roads, the developer will issue a bond to help pay for the construction of that infrastructure. This can add another $150 to $300 to the monthly housing payment. At the moment we did not include Mello Roos in the affordability calculator because there is no reliable way to estimate what that will be at the moment. But the same rule applies above: every $100 will require you to earn an additional $4,000 in salary to afford the same house.
Fun with down payments. Some developers seeking to prove their projects are affordable will assume 10% downpayment.
While wealthier individuals might be able to put 10% or more down, people who are making AMI are less likely to have that type of downpayment available. First time homebuyers, have averaged between 2% to 7% downpayment in the past 20 years. In fact The County of San Diego uses a 5% figure in creating their affordability matrices. Especially when looking at the AMI or lower income individuals, where the housing need is greatest, 5% is the standard that should be used.
