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I read Liz Kellar's recent article about the “Moderate Income Homeownership Ordinance” and was perplexed by the seeming effects of this “plan.”
As the piece states, the goal is to “boost the affordable supply for first-time home buyers.” To accomplish this Councilman Chauncey Poston proposes “lowering the requirement from 20 percent to 10 percent of the units.” Isn't this a reduction of 50 percent?
Later in the article he suggests trade offs in lieu of the actual building. How does this add to the affordable housing supply? Theoretically, as long as a builder pays an in-lieu-of fee, dedicates land, or transfers development rights, he/she doesn't have to build any affordable units. Again, how does this address the problem?
On affordability, according to figures from The Union, (“Market Snapshot — Morgan Ranch,” Oct. 10), the “average sold price” of a home in Nevada County this year to date, Oct. 5, 2009, was $337,000.
Based on this figure, raising the income standard from 80 percent to 120 percent of the median income (currently $50,000 to $60,000) would allow the higher income of $72,000 to qualify for a 30-year fixed loan at a rate of 5.25 percent (for example only). Including taxes and insurance, the monthly payment would be approximately 37 percent of gross monthly income with a 10 percent down payment and 33 percent with a 20 percent down payment. (The debt-to-income ratios used do not include all other debt.)
However, the lower income of $60,000 (120 percent percent of $50,000) would probably not qualify due to a high debt-to-income ratio, 44 percent with a 10 percent down payment, and 40 percent with a 20 percent down payment. (Again, the debt-to-income ratios used do not include all other debt.)
I'm not a mortgage broker, but I think lenders would tend to be very conservative with these ratios considering the current crisis. Interest rates are currently at historic lows. What happens to affordability when they rise to a more normative level?
So, I ask, “Whom does the plan really help?” For the $72,000-income earner, the current “average” home is already affordable. It would appear that those more in the range of the $60,000 income are the ones who need assistance.
How would the “affordable” units be priced to reflect this disparity? By providing affordable units would a builder still be able to make a profit? Are there other builder incentives that could be explored besides the reduction in the number of units built?
The goal of attracting and keeping talented people in our community is laudable. The incentive of affordable housing is certainly a terrific idea. Cutting the time a unit must remain affordable is a step in the right direction.
I think the “plan” needs a lot more work, but I applaud those who recognize the problem and are considering steps to rectify it.
Tim Stokes lives in Grass Valley.
As the piece states, the goal is to “boost the affordable supply for first-time home buyers.” To accomplish this Councilman Chauncey Poston proposes “lowering the requirement from 20 percent to 10 percent of the units.” Isn't this a reduction of 50 percent?
Later in the article he suggests trade offs in lieu of the actual building. How does this add to the affordable housing supply? Theoretically, as long as a builder pays an in-lieu-of fee, dedicates land, or transfers development rights, he/she doesn't have to build any affordable units. Again, how does this address the problem?
On affordability, according to figures from The Union, (“Market Snapshot — Morgan Ranch,” Oct. 10), the “average sold price” of a home in Nevada County this year to date, Oct. 5, 2009, was $337,000.
Based on this figure, raising the income standard from 80 percent to 120 percent of the median income (currently $50,000 to $60,000) would allow the higher income of $72,000 to qualify for a 30-year fixed loan at a rate of 5.25 percent (for example only). Including taxes and insurance, the monthly payment would be approximately 37 percent of gross monthly income with a 10 percent down payment and 33 percent with a 20 percent down payment. (The debt-to-income ratios used do not include all other debt.)
However, the lower income of $60,000 (120 percent percent of $50,000) would probably not qualify due to a high debt-to-income ratio, 44 percent with a 10 percent down payment, and 40 percent with a 20 percent down payment. (Again, the debt-to-income ratios used do not include all other debt.)
I'm not a mortgage broker, but I think lenders would tend to be very conservative with these ratios considering the current crisis. Interest rates are currently at historic lows. What happens to affordability when they rise to a more normative level?
So, I ask, “Whom does the plan really help?” For the $72,000-income earner, the current “average” home is already affordable. It would appear that those more in the range of the $60,000 income are the ones who need assistance.
How would the “affordable” units be priced to reflect this disparity? By providing affordable units would a builder still be able to make a profit? Are there other builder incentives that could be explored besides the reduction in the number of units built?
The goal of attracting and keeping talented people in our community is laudable. The incentive of affordable housing is certainly a terrific idea. Cutting the time a unit must remain affordable is a step in the right direction.
I think the “plan” needs a lot more work, but I applaud those who recognize the problem and are considering steps to rectify it.
Tim Stokes lives in Grass Valley.
