Ballot issue 2I – Imposition of a middle-income housing program

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Friday, Oct. 18, 2019

Official ballot language: SHALL CITY OF BOULDER DEBT BE INCREASED BY AN AMOUNT NOT TO EXCEED $10,000,000, WITH A MAXIMUM REPAYMENT COST OF NOT TO EXCEED $15,000,000, WITHOUT RAISING TAXES, TO PROVIDE FOR A HOUSING ASSISTANCE PROGRAM THAT WILL INCLUDE PERMANENTLY AFFORDABLE DEED RESTRICTIONS AND MAKE LOANS TO MIDDLE-INCOME HOUSEHOLDS TO PURCHASE HOMES SOLD IN BOULDER, SUCH DEBT TO BE SOLD AT SUCH TIME AND IN SUCH MANNER AND CONTAIN SUCH TERMS, NOT INCONSISTENT HEREWITH, AS THE CITY COUNCIL MAY DETERMINE AND TO PAY ALL NECESSARY OR INCIDENTAL COSTS RELATED THERETO BY THE ISSUANCE AND PAYMENT OF NOTES, BONDS, LINES OF CREDIT OR OTHER DEBT OBLIGATIONS AS PROVIDED BY THE CITY CHARTER, WHICH OBLIGATIONS SHALL BE PAYABLE FROM THE GENERAL FUND AND ANY OTHER LEGALLY AVAILABLE FUNDS OF THE CITY, ALL WITHOUT IN ANY OTHER WAY AFFECTING THE CITY’S OTHER TAXES, REVENUES OR EXPENDITURES UNDER THE CONSTITUTION AND LAWS OF THIS STATE?

What it means: This will authorize the city to issue up to $10 million via a line of credit to assist middle-income earners in the purchase of homes in Boulder. The 10-year line of credit will be used as needed; as qualified buyers come in, Boulder will help make up the gap between what a buyer can afford and the actual cost of the home.

The example used in council discussions about the program was a $600,000 house. A buyer who qualified for a $432,000 mortgage would  be required to pay a 5% down payment of $30,000. The city would use its line of credit to fill the $138,000 gap. Those funds would be a loan that owners are obligated to pay back. 

Middle-income earners are defined as making between 80% and 120% of Area Median Income, which varies based on the size of the household. In 2018, AMI for one person in Boulder County was $76,100. Based on that, the income parameters for payment assistance from the city would be:

For a one-person household, income of between $60,880 and $91,320

For a two-person household, income of between $69,250 and $104,280

For a four-person household, income of between $86,880 and $130,320.

This ballot measure, if passed, will not implement the program; it will merely give city council the authority to issue the debt. As such, the program hasn’t been fully developed. But city council and staff have said that Boulder will issue up to 10 loans per year, with repayment due in 7 to10 years or when the house is sold.

Council also discussed setting aside 15%  of the funds for loans to help city of Boulder employees buy homes here. Fewer than half (37%) of city staff live in Boulder.

To qualify for the program, buyers must have a connection to Boulder, either working here or living here already, with preference being given to those who have worked or lived here longest. Participants may only be able to buy homes at or below the median sales price.

Why you might want to vote yes: Boulder established its middle-income housing strategy in 2016, after a decline in the city’s share of middle-income earners. The goal is to preserve or build 1,000 homes attainable by the middle class by 2030. Twenty-five homes have been added so far, Housing Director Kurt Firnhaber testified in February.

Boulder’s home prices largely put ownership of detached dwellings out of reach for the middle class: A median single-family house in the city cost more than $900,000 in 2018, according to Re/Max of Boulder. (Attached dwellings such as condos, townhomes, duplexes and triplexes, averaging around $435,000, are still largely affordable to middle-income earners.)

The down payment assistance program will help families buy homes. A cap on how much homes in the program can appreciate — 2% per year, roughly equal to the average annual gains in AMI over the last decade — will keep them relatively affordable over the years.

For the city, which will be paid back, it’s a lower-cost way to provide assistance than building new or buying. Boulder will have to pay only the interest on the line of credit, not exceeding $5 million. The money it lends to buyers will be paid back, funding additional purchases.

Money from an existing home ownership assistance program will be used to kick-start assistance. Assuming flat interest rates and 10 loans a year averaging $150,000, it will be a few years before the city needs to tap into this money.

Who is advocating for a yes vote: No formal groups have formed to advocate for passage of this measure, though it has been endorsed by PLAN Boulder County and Better Boulder. All members of council supported this initiative.

Why you might want to vote no: There is a risk to the city and to owners of foreclosure. The program’s success is predicated on the idea that homes will never lose value. A balloon repayment of the money Boulder contributed for the purchase will be due either when the home sells or at a certain time; likely 10 years after the purchase. (People keep their homes in the existing affordable housing program for an average of seven years, currently.)

If participants want to keep living in the house beyond 10 years, they must repay  that money to the city. A refinance is one way to come up with the cash, but is possible only if the home has gained enough value. If not, the owners would be in default. 

Council has discussed setting up a fund so people aren’t forced out of their homes in this case. Foreclosure is also extremely rare: Less than 1% of all affordable ownership units in the city have gone into default. 

Such interventions would cost money, leaving less financial help available for subsequent buyers. Boulder also may be able to help fewer buyers than anticipated if interest rates rise.

Even with a successful program, relatively few families will receive assistance. With a goal of 10 loans per year, 100 families over the life span of the 10-year line of credit will be housed, at a (maximum) cost of $5 million to the city, roughly a $50,000 per-unit subsidy. That’s about half (or less) the current cost to subsidize the build or purchase of a middle-income dwelling, but critics have argued that more good could be done with no-cost changes to zoning, such as allowing attached homes to be built in more places throughout the city.

A consultant found in 2016 that the best way to retain Boulder’s middle class would be to build more duplexes, triplexes and townhomes with small yards or shared common spaces. A majority of attached dwellings are still within financial reach of the middle class without subsidy.

There has also been some debate over using limited government funds to subsidize homes for residents earning relatively high incomes when many residents earning less also struggle to find and pay for housing.

Who is advocating for a no vote: No formal groups have formed to oppose his measure.

Learn more:

Issue 2I explainedBoulder Weekly

Editorial: Issue 2I would help middle-income families live in BoulderDaily Camera

Boulder seeks voter OK to issue debt for middle-class down payment assistanceBoulder Beat

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

Boulder looks to help middle class buy homes with shared-equity pilotBoulder Beat

Townhomes seen as best chance to retain middle class in BoulderDaily Camera

Boulder consider middle-income strategy for those making $50K-$150KDaily Camera

2018 Colorado county income and rent tables, Colorado Housing and Finance Authority

Author’s note: This article has been updated to include Better Boulder’s endorsement of 2I, as well as a link to the Boulder Weekly explainer story.

— Shay Castle, boulderbeatnews@gmail.com, @shayshinecastle. Edited by Art Dalglish.

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