The Housing Problem Part One

By LYDIA BERGLAR
News Editor

If you’re looking for an affordable place to live in Dade County—and one that’s in decent condition—chances are you’ve run into challenges. In an attempt to gain local insight into the complicated topic of housing, the Sentinel spoke with several builders, flippers, and landlords in the area. This article is the first part of a series with several more to follow.

When talking about “affordability,” we’ll refer to the United State Census Bureau’s data. In 2023 numbers, the Bureau lists Dade County’s average household income at just under $59,000.

First, the Sentinel spoke with Troy Duble and Jason Coffey who, along with Chris Thompson, own Rock Creek Capital (an investing company) and Slate and Stone (a building company). This conversation focused on four houses that RCC and Slate and Stone built in 2024: two in Trenton and two on Signal Mountain.

The Signal Mountain homes sold for $869,000 and $935,000 while the Trenton homes (on Oak Avenue) both sold for $260,000. At 1,255 square feet, these Trenton homes cost the buyers $207 per square foot, while the Signal Mountain homes (3,402 and 3,534 square feet) were $255 and $265 per square foot.

Coffey and Duble explained that they approached the two Oak Avenue houses as an experiment. Duble said, “We wanted to know if we could build entry-level affordable homes for people.”

Coffey continued, “The answer we found was that the builder (Slate and Stone) had to reduce its fees from 15 percent to nine percent—which means we’re hurting the people that work for Slate and Stone—and RCC lost $5,000 per house on a half million dollar investment.” On top of that, the time investment was roughly eight months.

Meanwhile, the Signal houses were a $1.5 million dollar investment that resulted in a net $150,000 profit for RCC. Also, the builder charged its usual fee of 15 percent, which is within the industry standard range.

Duble commented, “I’ll risk a million and a half all day long and make $150,000 as opposed to risking half a million and losing money, with the builder not even earning their full amount.”

However, while the project didn’t turn out as hoped, the team isn’t too distressed. In Coffey’s words, “We went in knowing we were okay if we didn’t make money because we wanted to know if it could be done. Both of us have other full-time jobs that pay our bills, and we do this as a side project.”

The big questions are: Why is it so expensive to build, and what can be done to build affordable homes in Dade County? According to Duble and Coffey, the cost of labor and cost of materials are expensive, and interest rates are a major factor. Coffey summarized, “Land is expensive, materials are expensive, labor is expensive, and the interest rates make all of that even more expensive.”

Of the comparison between Signal Mountain and Trenton, Coffey stated simply, “Building nicer houses in nicer areas gets a higher price per square foot. Entry-level housing in an entry-level neighborhood has a lower comp value on the price that you can charge per square foot.”

“So why would anyone want to build here?” asked Duble, to which Coffey continued, “Unless you’re part of the community and have a desire to serve your neighbor and make sure people have quality affordable housing.”

Duble explained, “We’d heard about the need for years. I go to church in Trenton, and we care about that need, and we wanted to see if it could be done. We would’ve loved to sell those houses for $230,000 or less, but the math don’t work.”

The team found that investing in and building homes like these can’t be their livelihood, although they noted that only building two at a time is more expensive per home than building a subdivision.

Coffey said, “The only way to do this again in a way that works would be to get a price per acre that works and a place where we could do 20 of them to get economies of scale. Then, we might be able to get our contractor fees back to a 15 percent fee. On houses this size, every $100 on every line item makes or breaks the deal.”

Interest rates are key to this topic. Duble said, “History is important here. Some people can’t believe that interest rates are all the way above six percent, but in the 1970s, they were in the teens.”

The monthly mortgage for a $260,000 house (like these Oak Avenue houses) with a three percent down payment, 30-year mortgage, and 7.5 percent interest rate is nearly $1,800 (plus taxes and insurance). The same loan at 4.5 percent is nearly $1,300 a month (plus taxes and insurance).

Using the 30 percent rule (i.e. budgeting 30 percent of your gross monthly income for housing) and round numbers, someone would have to make $72,000 a year to afford the 7.5 percent interest rate. With the 4.5 percent rate, someone making $52,000 could afford that $260,000 house, making it affordable for those earning Dade’s average household income of $59,000.

Until interest rates decrease (if they decrease), what’s the path forward for those making the average $59,000 or less and hoping to buy a home? Coffey encouraged, “Buy a house you can afford, even if it’s not the one you want and the interest rate is higher than you want. If you can afford it at the current rate, then when the market changes for the better, you can refinance and gain some household cushion again.”

He also urged potential home buyers to save as much as possible (by living within your means) for a larger down payment in order to save money in the long run.

Duble added that another unpopular option is to build higher density homes in less desirable locations to lower costs. He concluded, “This was discouraging, but I don’t think it means we shouldn’t keep trying to figure it out.”