In helping middle class buy homes, Boulder weighs backing loans vs. making them

Photo by Emily Campbell on Unsplash

Boulder may make use of an existing program to help the city’s middle class buy homes here, and model its efforts after a University of Colorado endeavor of backing mortgages. City council debated the merits of the initiative Tuesday night.

A shared-equity pilot program was first suggested by council members Sam Weaver and Bob Yates. Several programs exist around the country to help with down payments and large mortgages, but Boulder’s would be the first to require that any homes purchased through the program remain permanently affordable, via an appreciation cap written into the deed of the house.

The leading option for the program’s structure was one in which Boulder would pay banks, in cash, the difference between what a buyer could afford and the market rate of a home. So for a $600,000 house, if a buyer could handle a $400,000 mortgage and a 10% down payment, the city could fund the $140,000 gap and take the corresponding equity stake in the home; in this example, 23%.

Weaver suggested that a more sustainable model might be one that CU employs to help its young professors buy homes. Using the earlier example, the buyer would take out two mortgages on a $600,000 home: one for the $400,000 within their budget, and another for the rest. The city would guarantee the gap mortgage through a lender in case of default.

Payments on the second mortgage would begin after a set amount of time in the house. Council suggested 15 years, per the city’s existing affordable housing program. However, homeowners in that program only stay in their houses for an average of seven years, according to staff.

Backing loans would be a cheaper alternative to providing them. The banks themselves would provide both the original and the second mortgage, so the city’s only cost would be whatever lenders charged them for the guarantee.

“It preserves intent of what we were thinking of but ties up less cash,” Weaver said. Plus, CU’s program provides an “example in our own backyard we can look to.”

“I really see it as right of first refusal,” said Yates. In the case of default, “we just bought ourselves a house, which is not the end of the world.”

Homeowners defaulting on mortgages is also extremely unusual in Boulder’s always-up market. The foreclosure rate is one in 11,962, according to In March of this year, Colorado as a whole had the lowest rate of delinquent mortgages (1.8%) and foreclosures (0.1%) in the country, Westword reported.

With Boulder’s current affordable home ownership program, there have been 10 defaults among approximately 1,373 owners since 2004, according to Senior Planner Jay Sugnet.  Out of 83 loans made through  the city’s current down payment assistance program, H2O, there have been zero defaults.

To fund the pilot, Boulder may tap the nearly $1 million left in H2O funds. The program has not proved very popular, with just three households utilizing it since 2014, due to the low amount of help provided in relation to the extremely high cost of homes.

Boulder adds most of its middle-class permanently affordable houses through annexation. There are requirements tied to being added into the city that are often met by agreeing to limit the cost of additional homes, such as with the recently approved annexation of 5469 South Boulder Road. When developed, four dwellings on the land will be reserved and priced for middle-income earners.

In the past three years, only 25 permanently affordable homes within reach of the city’s middle class have been added to Boulder, according to housing director Kurt Firnhaber. The goal is to have 1,000 more by 2030.

To reach that, said Yates, “we need to step it up.”

Council on Tuesday also provided direction as to who should be allowed to participate, what kinds of homes they can buy and what the program should look like. Among their feedback:

  • Buyers can earn up to 120% AMI, which in 2018 was $91,320 for a single person, $104,280 per couple. They also must have some connection to the city, either living or working here. Preference should be given to those who have lived or worked here longer, council said.
  • 15% of assistance dollars will be set aside for City of Boulder employees, per a suggestion from councilwoman Cindy Carlisle.
  • The pilot will not be limited to first-time homebuyers
  • Annual appreciation on the homes will be capped to the interest rate of the loan plus 1%
  • Additional equity will be granted to homeowners who make significant improvements, as is allowed in the city’s existing affordable ownership program
  • Homes will qualify for assistance only if they are priced at or below the median price for that housing type. In 2018, the median cost of a single-family home was $919,525; condos and townhomes were $435,000, according to the Boulder Area Realtors Association.

Councilman Aaron Brockett asked that staff return with “deep research” on several things, including how often the homes will turn over, freeing up funds for other buyers. There was concern among council members and staff that the same house would need continued assistance from the city for each new buyer.

Given the realities of Boulder housing prices, it’s unlikely that many of the people the city is attempting to retain will ever see wage gains large enough to leave the affordable program and purchase a home on the open market. Teachers, for example, Mayor Suzanne Jones noted, may need to stay in affordable housing indefinitely.

“Why is that bad?” asked councilman Yates. “We want them to stay in this community.”

That’s true, Jones noted: Keeping people here is the point. “It’s just a matter of if we can afford to do it.”

Slow churn is less of an issue if the city goes with loan guarantees, Weaver pointed out, because a smaller amount of money would be invested into each house. “The real question is, will people take us up on this?” he said.

Not just buyers, Yates added, “but also lending organizations, too.”

The pilot program will be revisited this year. Staff hoped to bring it back to council June 4, but it now may require more time. In any event, it will need to be discussed as part of the 2020 budget process.

To view a Twitter thread of council’s discussion, visit

— Shay Castle,, @shayshinecastle

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