Thread by @shayshinecastle

Now we're discussing Boulder's shared-equity pilot program, to try and help middle-income earners buy houses here. Kurt Firnhaber kicks us off by elucidating the values of Golden West senior housing, where the city has helped create 55 permanently affordable homes.

Jones: I don't think ppl in the community realize how much affordable housing they provide. This is a success story.

(I don't remember how many units, but I think Golden West is on the Top 5 list for providers of affordable housing in Boulder.)

Yates jumps in with this: It's a tad over 35 feet
Laughs from council.

Back to Firnhaber: Home ownership is an important part of that (middle income) strategy. This program is a way to get there.

Now Jay Sugnet is taking over.

Reminder: This is a Yates/Weaver proposal. The dynamic duo.

A few communities have programs to help with down payments and mortgages (Cambridge, Denver, SF, L.A.) but Boulder would be the first to make the homes permanently affordable via the deed, and only the second to do a shared-equity model (the other is Eagle County, CO)

City would make up the gap of what a homeowner could afford on a home (so, for a $600K house and buyers have $400K and 10% downpayment, city pays $140K in cash to lender) and then take corresponding equity stake in the home. (in this example, 23%)

City recoups its investment at the sale of the house OR after a certain time, plus a 23% share of the appreciation, which will be capped at a certain amount to keep it affordable.

Six funding options for this; the first one is to convert the city's existing assistance program, which isn't helping many people bc it doesn't provide enough $$ for how expensive homes have become.

The others:
2. General Fund Reserves
3. One time or Annual Budget Allocation from
the Housing and General Fund
4. Voter Approved Debt
5. Certificates of Participation
6. Line of Credit or Loss Reserve Fund

Most of the tradeoffs on these are: do we tie up $$ that we might need for other things (including housing programs) or do we issue debt (which is expensive)?

To be decided is who will qualify. Currently looking at those earning 80-20% AMI (I'm sorry, I'm having trouble finding an AMI calculator that extends above 60%, since that is who gets assistance)

Also, should they have to live and/or work in Boulder? Be first-time home buyers? What homes should be allowed for purchase? Should they be inspected first? And should owners have to pay the city back before they sell (after 10 yrs or so)?

Also TBD is how much to let the homes appreciate. Yates asks how difficult it would be to tie appreciation to Boulder County AMI appreciation? (How much income goes up)

Also could use current housing program model, based on consumer price index. Averaged 1.92% over last decade

Problem with that is CPI is expenses, not income, Yates say.

If council chooses to convert the H2O program, issue can come back to council June 4. If not, the other funding options will be part of the 2020 budget process, which starts later.

Weaver: Evolution I've had since we've done the white paper (with Yates) is on a loan-loss program. CU does one for young professors. "Preserves intent of what we were thinking of but ties up less cash."

How loan loss works: Private entity does a loan. Gov't (city of Boulder in this case) guarantees it in case of a default.

Weaver: "One good thing about if we run a program like that where we back a big second mortgage, we get our share of the equity in the home. Unless home has depreciated, which is very unusual in Boulder, we get our money back."

"We have an example in our own back yard we can look to." (CU)

Yates: "The primary lender, Elevations let’s say, Elevations would loan not only $400K but also $140K (using that original example) It would be their money, not ours."

Points out that default rates are historically low, 2-3%
I'll find out what Boulder's is, but I'm fairly certain it's lower. 1% or less, generally.

Weaver: $400K mortage would be one they pay down over time, but $140K would be a balloon. When the home sells, bank gets paid back for $140K with compounded interest per year.

Past 3 years, 25 deed-restricted middle-income houses added to Boulder. Goal is 1,000 by 2030.
"We need to step it up," Yates says.

Weaver: The real q is will ppl take us up on this? The Boulder programs have too small a $ amount to get ppl into homes here.

Brockett: This sounds really promising. When you talk about will ppl take us up on this, it's buyers but also lending organization, too. That might determine appreciation amounts.

Brockett talking about subsequent buyers. A home will likely need to be kept in the program for a long time bc income does not keep up with home values. "The next buyer will not be able to magically afford" the home with the new appreciation but a similar income to the 1st buyer.

Morzel: Would ppl move? It's hard to move when homes are so expensive? Then we never recoup our money.
Weaver: That's what the balloon is there for; hopefully their wages have gone up, maybe gotten a promotion or a wage. Their situation has improved or they were able to save $$

Avg first-time homebuyer stays in home for 7 yrs, as Yates shares.
"In this case, they may move even faster. If they're looking at the neighbor with appreciation, they're saying I want out of this" to get more appreciation.

Yates not a "big fan" of the balloon. "I think we'll be in the foreclosure business."

Wants staff research on churn.
Weaver: There are examples of ppl who do stay in deed-restricted homes for a long time
Jones: Especially if they're teachers or whatever, they're never.....
Yates: Why is that bad? We want her to stay in this community.

Jones: It's just a matter of if we can afford to do it.

Brockett predicts that ppl will stay or next buyer would need help, too. "The money won't return to the program." Wants "deep" research from staff; "decades" of modeling.

Weaver: With loan loss reserve, that slow turn doesn't hurt you as much.

Chatting a bit about additions or major renovations, and allowing those parts to appreciate at market-rate.

Nagle likes that idea; thinks ppl need "incentives" to keep their properties nice. Says a lot of Boulder looks "run down."

Staff shares that Boulder buyers in the city's affordable program also stay in the homes for 7 years, on average.

As to who can qualify: Up to 120% AMI, with no bottom floor.
Staff says maybe 150%, for household of four would be income of $150K.
Council doesn't seem too hot on that.

Council agrees; pilot should move forward.
Brockett wants an approximation of how much it will cost the city long term.

Also looking like they want to combine two funding options: Using the existing H2O funds (around $1M) with a loan loss reserve option.

Yates: A couple lenders are already wanting to participate. "They're already here, they're already doing this. The q should be, would you like to participate in this program and how much, if anything will you charge us?"

"What kind of collateral might they want? Maybe 100%, maybe 50%, maybe 0% because we're good for it."

Yates: I really see it as right of first refusal, bc of default, we just bought ourself a house, which is not the end of the world. If we did 100 of these things, we may end up with 2-3 of these things, that's not the worst result.

Carr talking about TABOR requirements: You're creating multi-year financial obligation. So you can ask the voters, or you can provide it through annual appropriations (in the budget).

But it's a q of whether banks would accept that second option
Weaver: Staff should talk with lenders about this. We have a track record; it's a relatively small $$ amount.

Carr: Key is, you have to give bank security, whatever it is. They know you're going to appropriate the money bc if you don't, they take the building.
Staff has said there's not a lot of collateral available.

Weaver: I think for a pilot, we do that. For the full program, maybe we do go to the voters. I hate to go to the voters with no info on whether ppl will use this program or not.

Council debating whether they should attach a live/work requirement.
"We could take cars off the road" Yates says, if we take someone who works here but lives in Erie or (as Weaver says) Westminster.

Brockett: Maybe if program is oversubscribed, we give preference to ppl who have lived/worked here for longer.

Young has suggested that preference be given to ethnic minorities as well.
Carr says he wants to make sure that's legal.

Should it be limited to first-time homebuyers? No, council says.

What homes should qualify? Suggestion is that homes be at or below median-price for that particular type of house? (single-family, duplex, triplex, etc.)

Yates: We can pick certain % (60% below median) but the problem is if you go too low, you're going to be severely limit what can be bought

Could do a cap on the amount of subsidy, too.
Morzel suggests mobile homes be included, in ones that are Thistle-owned or resident-owned. "Some of those homes are up to $100K, $120K"

Weaver: How about buying the entire mobile home park? I agree with you, but another thing that can grow out of this is being a loan loss backer for someone buying a mobile home park, and then it will be deed-restricted permanently affordable

Morzel: I am hoping we create more mobile home parks.

Weaver: I would like to see homes be median price or less. Reason I think it's important to say it, when we talk to public we need to say we're not subsidizing luxury housing.

Council seems to agree they should have a maximum amount of what they will subsidize houses for

They settle on median price (or below) for that type of home: mobile homes, single-family or condos/townhomes

Onto rate of appreciation. Morzel likes Yates suggestion of tying it to wage increases. Weaver: I love it in theory, but if it's not equal to or greater than the interest rate they're paying on the loan, they're losing money.

Suggests putting it at 1% over interest rate.
No balloon payment, but a phasing(?) of re-payment at 15 years....?

They didn't talk about phasing, or else I missed it. @AaronBrockett12 can you fill me (and my readers) in when the meeting is over? plz and thx

Also some discussion on how much equity the owners should have to have. That will be researched. Homes will have to be owner-occupied. Current home ownership program doesn't allow ADUs, so council not sure how to handle that.

Jones: You're going to bring this back June 4?
Prob not, since there are so many questions. But it will be close to that, staff says.

Carlisle asks about prioritizing city of Boulder employees
Weaver: I'm concerned about how it appears to the public
Carlisle: I'm not talking about the whole things; just a certain %
Weaver: We can do a set-aside; 15%?
Carlisle: That's reasonable, given how many ppl commute in

That's all for this one, folks. Still to come: Wonderland Lake!

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