Affordable condo lottery

NEW -> Contingent Buyer Assistance Program
[quote author="jwlam" date=1231752021][quote author="tkaratz" date=1229992501][quote author="asianinvasian" date=1229937724]Not everyone should own a condo. Is it fair that just because you make less than someone else you should own the same condo for a quarter the cost? Is it fair that someone works their ass off just so their hard earned tax money goes to pay for someone else's condo?</blockquote>


Tax money does not goes toward the subsidized affordable homes, they are developer subsidized and are required as part of their condition of approval.</blockquote>


This is not correct. Affordable housing units in new construction are usually subsidized by public money in the form of Redevelopment Tax Increment 20% set-aside funds. All Redevelopment Agencies must set aside 20% of their tax increment funds for the sole purpose of affordable housing, which takes the form in many different forms like low interest loans, buying affordability covenants from developers to subsidize affordable units. In the scenario the OP discusses, the redevelopment agency either paid the developer a large sum of money to reserve these units for low-moderate income individuals/families or they sold the land to the developer at a reduced price.</blockquote>


i'm specifically talking about the affordable homes at the VoC. As part of their conditions of approval to build market rate homes, the developer is required to provide a small percentage of either moderate, low, or very low income homes. This is not a 100% affordable housing development and due to the small percentage of homes that are considered affordable, the developer is often not eligible or is low on the list for tax credit eligibility. It's just the cost of doing residential development in california.



The redevelopment agency did not own the land, the navy did, therefore it was not the agency's to sell.



Furthermore, affordable housing units are not typically subsidized by the redevelopment agency. The land may be contributed, but at a price that reflects zoning and approval to only build affordable homes. Developers primarily rely on the award of tax credits by the state and the sale of those credits to outside investors.
 
[quote author="tkaratz" date=1231809642][quote author="jwlam" date=1231752021][quote author="tkaratz" date=1229992501][quote author="asianinvasian" date=1229937724]Not everyone should own a condo. Is it fair that just because you make less than someone else you should own the same condo for a quarter the cost? Is it fair that someone works their ass off just so their hard earned tax money goes to pay for someone else's condo?</blockquote>


Tax money does not goes toward the subsidized affordable homes, they are developer subsidized and are required as part of their condition of approval.</blockquote>


This is not correct. Affordable housing units in new construction are usually subsidized by public money in the form of Redevelopment Tax Increment 20% set-aside funds. All Redevelopment Agencies must set aside 20% of their tax increment funds for the sole purpose of affordable housing, which takes the form in many different forms like low interest loans, buying affordability covenants from developers to subsidize affordable units. In the scenario the OP discusses, the redevelopment agency either paid the developer a large sum of money to reserve these units for low-moderate income individuals/families or they sold the land to the developer at a reduced price.</blockquote>


i'm specifically talking about the affordable homes at the VoC. As part of their conditions of approval to build market rate homes, the developer is required to provide a small percentage of either moderate, low, or very low income homes. This is not a 100% affordable housing development and due to the small percentage of homes that are considered affordable, the developer is often not eligible or is low on the list for tax credit eligibility. It's just the cost of doing residential development in california.



The redevelopment agency did not own the land, the navy did, therefore it was not the agency's to sell.



Furthermore, affordable housing units are not typically subsidized by the redevelopment agency. The land may be contributed, but at a price that reflects zoning and approval to only build affordable homes. Developers primarily rely on the award of tax credits by the state and the sale of those credits to outside investors.</blockquote>




I work on affordable housing developments very frequently. The majority of affordable housing developments are not 100% affordable, but the redevelopment agencies and their money are involved 90% of the time. The other 10% of the time comes from grants or loans from non-profits or state and federal monies. Also, tax credit financing is only one way of subsidizing affordable housing. Usually numerous different financing sources are used for a particular project. It is very common for redevelopment agencies to only require the developer to restrict a small number of units for any given project. The redevelopment agency will pay for affordability covenants to be recorded on individual units ensuring that they are affordable.



Also, a redevelopment does not have to own the land to participate in the project. Land write-downs is just one way of assisting. And yes, these land write downs are based on the fair reuse value - i.e., the value of the land in light of the zoning, conditions of approvals like affordability covenants. Also, affordable housing units are nearly always subsidized by the redevelopment agency as I said above at or more 90% of the time. Like I explained in my previous post, one of their statutory mandates is to set aside 20% of their tax increment revenue for the sole purpose of providing low-moderate housing.
 
Irvine has a link on their website dedicated to affordable housing.



<a href="http://www.cityofirvine.org/depts/cd/planningactivities/affordablehse/first_time_homebuyers.asp">Irvine Affordable Housing.</a>



There are restrictions that Irvine seems to tap dance around which is the future sale. They state that "There are restrictions on these units to ensure the affordability for at least the next 30 years, and in some cases much longer.



In other words the program decides the selling price if you ever decide to move so that the home remains affordable housing.
 
20% of tax increment revune seems like a grossly insufficent amount to fund a fraction of the sufficent amount of affordable housing or even a portion of the affordable housing development currently under construction.



I don't understand what you mean by that the city "pay for affordability covenants to be recorded". Is the city paying for the drafting and processing of the covenant (marginal expense)?



I don't understand how you can write down the land if, having done due diligence, the developer factors in the loss on the affordable units into the purchase price from the seller. Please explain.
 
[quote author="tkaratz" date=1231813124]20% of tax increment revune seems like a grossly insufficent amount to fund a fraction of the sufficent amount of affordable housing or even a portion of the affordable housing development currently under construction.



<strong><em>Redevelopment agencies in california generate billions and billions of dollars in tax increment per year. 20% of these billions is a very significant amount and is probably the largest source of public funds to be used for affordable housing. The amount of 20% set-aside obviously depends on each city's redevelopment agency.</em></strong>



I don't understand what you mean by that the city "pay for affordability covenants to be recorded". Is the city paying for the drafting and processing of the covenant (marginal expense)?



<strong><em>When I say pay for affordability covenants, I mean that redevelopment agencies will buy affordability covenants by paying a developer money either through straight up cash, low interest loans that are forgiven after 45-55 years depending on whether it is rental or occupant owned, or through selling land that is substantially discounted. For example, if the developer has determined that $300k is the price they need for each unit sold to make what the want to make, a redevelopment agency will purchase an affordability covenant from the developer for the price of $100k so that the developer can sell the property at $200k to a low income buyer. In exchange, this unit will now be restricted for xx number of years. This is also done for rental units. A redevelopment agency will pay a developer for usually 45 yr covenant restricting a rental unit to a certain very low, low, or moderate rental rate. The amount paid for the covenant will depend on the fair market rent for that unit. The money paid by the agency is intended to offset the lower rental rates over the life of the unit. *addendum* Another method of assistance that I did not originally mention that does not involve affordability covenants is through direct loans or grants to the home buyer to make the unit affordable. In this situation, the loan will be repaid to either the redevelopment agency or the City depending on the source of the funds. These types of buyer assistance programs will have an equity sharing component when the buyer sells the property later down the line.</em></strong>



I don't understand how you can write down the land if, having done due diligence, the developer factors in the loss on the affordable units into the purchase price from the seller. Please explain.



<strong><em>When I refer to write down, I am only referring to situations where the redevelopment agency owns the land and sells it at the Fair Reuse Value. Sometimes, the fair reuse value may very well be $0 depending on the conditions of approval required. However, you are correct that these affordability covenants are part of the conditions of approval required by the City, but developers do not eat the cost of affordable units. They may accept that their project will include some affordable units, but they are compensated by redevelopment agencies. </em></strong></blockquote>
 
To clarify, they do not eat the costs of the affordable unit as long as the development is within a TIF district, correct?



In my opinion, the majority of affordable units are not being provided within these districts, if they were and if subsidies were so easy to come by from the billion dollar coffers of redevelopment agencys, why is their so much competition for tax credits? Why do developers pay in-lieu fees insteead of providing the affodable units if they were so easily subsidized?
 
[quote author="tkaratz" date=1231827657]To clarify, they do not eat the costs of the affordable unit as long as the development is within a TIF district, correct?



In my opinion, the majority of affordable units are not being provided within these districts, if they were and if subsidies were so easy to come by from the billion dollar coffers of redevelopment agencys, why is their so much competition for tax credits? Why do developers pay in-lieu fees insteead of providing the affodable units if they were so easily subsidized?</blockquote>


A TIF district is different from a redevelopment area. TIF districts are smaller and are formed for the specific task of usually paying back government bonds used for public improvements and land acquisition within a larger redevelopment area. Whereas when a redevelopment area is created there is a tax snap shot taken of the whole area which serves as a baseline. Future property taxes over the baseline are calculated and passed through to various other government agencies. The remainder is the general tax increment that is available to redevelopment agencies for eliminating blight. 20% of this amount must be set aside for low-mod housing. Lots of urban infill projects will be within redevelopment areas b/c many are "blighted." It is not uncommon to see half of a city within a redevelopment area.



As to why there is so much competition for tax credits...it's simple...nearly free financing. Like I said before, there are usually layers and layers of different financing methods for housing developments which contain some affordable units, but I go back and say that they are almost always subsidized in some way by public money. Even tax credits is an indirect allocation of tax revenue.



I apologize for hijacking this thread.
 
The affordable condos in Irvine/Tustin were paid for by tax increment. No Federal or State Funds were used. The Tustin website explains it. The city provides financial and non financial developer based incentives. I believe that they also carry a second. Those condos are required to remain affordable for 40 or 45 years.
 
I don't think the program is that great. I have a friend who purchased a condo. With mortgage, tax, MR, and HOA, she is paying roughly $2,000/month.

If she was to rent a comparable place, it would be $2,400/month. And since you can't profit from the resale of an affordable home, it's pretty much like renting.

So, if you were to buy an affordable, it's like getting a $200-$500 discount on rent. Is that valuable, yes. A buyer could potential save $25,000 by living there for 5 years.

But if they do sell, minusing closing costs and selling costs, they would only save around $10,000.



Now for all of those on this log who makes 100K+, does saving 10K in five years really mean that much to you?



So... if you do win the "affordable lottery", it's better than winning $1, $10, $100, or $1000.

But, it might be like winning $10,000 - over time. Very cool, but not a life changing event.
 
[quote author="hs_teacher" date=1231914134]I don't think the program is that great. I have a friend who purchased a condo. With mortgage, tax, MR, and HOA, she is paying roughly $2,000/month.

If she was to rent a comparable place, it would be $2,400/month. And since you can't profit from the resale of an affordable home, it's pretty much like renting.

</blockquote>


She does profit from the sale. She may profit less, but she paid less to begin with.



She also pays almost zero (very little) property tax and mello roos, that means everyone else is paying more to cover her share. Is that fair?
 
[quote author="asianinvasian" date=1231920689][quote author="hs_teacher" date=1231914134]I don't think the program is that great. I have a friend who purchased a condo. With mortgage, tax, MR, and HOA, she is paying roughly $2,000/month.

If she was to rent a comparable place, it would be $2,400/month. And since you can't profit from the resale of an affordable home, it's pretty much like renting.

</blockquote>


She does profit from the sale. She may profit less, but she paid less to begin with.



She also pays almost zero (very little) property tax and mello roos, that means everyone else is paying more to cover her share. Is that fair?</blockquote> I hope she is paying her full share of HOA dues.
 
[quote author="bkshopr" date=1231920949][quote author="asianinvasian" date=1231920689][quote author="hs_teacher" date=1231914134]I don't think the program is that great. I have a friend who purchased a condo. With mortgage, tax, MR, and HOA, she is paying roughly $2,000/month.

If she was to rent a comparable place, it would be $2,400/month. And since you can't profit from the resale of an affordable home, it's pretty much like renting.

</blockquote>


She does profit from the sale. She may profit less, but she paid less to begin with.



She also pays almost zero (very little) property tax and mello roos, that means everyone else is paying more to cover her share. Is that fair?</blockquote> I hope she is paying her full share of HOA dues.</blockquote>


I hope so too.
 
The affordable program limits resale price so that the owner really can't make a profit.

She pays her mortgage, tax, and MR based on the purchase price just like anyone else.

She pays the full HOA amount just like anyone else.

The only difference is that her cost to live there is $2,000/month.

If she had rented the place from someone else, she would have paid $2,400/month.

Assuming that she cannot profit from the sale of the property per the covenants of the City,

her only true value is the $400 savings per month. In the affordable program, you don't build equity based on appreciation.

If your household makes under 50K a year, saving $400/month is a big deal.

If your household makes over 150K a year, it's not that significant anymore.

$400 is how much many of us make in a day or two.
 
[quote author="freedomCM" date=1231931293]Hah, but this is the AFFORDABLE program for low and moderate income owners, not people who make $100k, so why talk about that?</blockquote>


For some low-income housing, it looks like you can make $100k (or more) and still be considered low-income, depending on your family size. I have no idea how much the requirements vary from place to place, but <a href="http://www.redfin.com/CA/Tustin/32-Look-Out-Ln-92782/home/7219182">here is an example:</a>



"There are special income requirements that the buyer must meet to qualify for the city of tustin affordable housing program. Buyers maximum income for family of 1 $70,680, faimly of 2: $80,760 family of 3: $90,840, family of 4: $100,920 family of 5:$108,960, family of 6: $117,120"
 
Glad I found this site. I just registered today. I recently got pre-approved for the affordable housing program in the Villages of Columbus in Tustin. I am debating on getting this property as there are so many restrictions. I am also comparing this property with a property in Irvine. Here are some, I think, pros and cons on both the Irvine property and the Tustin property. Please help me decide...



Irvine: http://www.realtor.com/realestateandhomes-detail/3-Montgomery_Irvine_CA_92604_1109243143

2bdrm, 2.5 bath, attached garage.



PROS: Can be rented out in the future, sold at profit, sold with no minimum # of years living there, open floor plan with usable space. Irvine unified school.

CONS; Built 1977, cost more, will take all our down payment (gift money of $95,000), and take away some of our savings for closing costs and furniture, and some work on the bedrooms. house payments will be around $1800 (including HOA, Utilities)



Tustin: http://www.lennar.com/New-Homes/California/Orange-County/Camden-Place-@-Columbus-Square

3bdrm, 3bath, attached garage. Its the unit that is sized at 1300 sq/ft and not the 1500 sq/ft



PROS: Brand new, requires only $51000 down, house payments will be at $1400/month (including HOA, Meal Roos, Utilities)

CONS: Cannot be sold at profit until 45 years, relatively small size with not much usable space, cannot be rented out. Tustin unified school (is this a pro or a con??)





Thanks....
 
[quote author="affordable hosing?" date=1244595593]Glad I found this site. I just registered today. I recently got pre-approved for the affordable housing program in the Villages of Columbus in Tustin. I am debating on getting this property as there are so many restrictions. I am also comparing this property with a property in Irvine. Here are some, I think, pros and cons on both the Irvine property and the Tustin property. Please help me decide...



Irvine: http://www.realtor.com/realestateandhomes-detail/3-Montgomery_Irvine_CA_92604_1109243143

2bdrm, 2.5 bath, attached garage.



PROS: Can be rented out in the future, sold at profit, sold with no minimum # of years living there, open floor plan with usable space. Irvine unified school.

CONS; Built 1977, cost more, will take all our down payment (gift money of $95,000), and take away some of our savings for closing costs and furniture, and some work on the bedrooms. house payments will be around $1800 (including HOA, Utilities)



Tustin: http://www.lennar.com/New-Homes/California/Orange-County/Camden-Place-@-Columbus-Square

3bdrm, 3bath, attached garage. Its the unit that is sized at 1300 sq/ft and not the 1500 sq/ft



PROS: Brand new, requires only $51000 down, house payments will be at $1400/month (including HOA, Meal Roos, Utilities)

CONS: Cannot be sold at profit until 45 years, relatively small size with not much usable space, cannot be rented out. Tustin unified school (is this a pro or a con??)





Thanks....</blockquote>


You're saving basically $400/month? That would come out to $5,000/year and $25,000 in 5 years. Think to yourself, do you want to save 25K in five years of living there? Or do you think your other purchase would appreciate 25K in five year's time? Personally, I think the market is going to bottom out by the end of 2009. With an annual appreciation of 3%, a 300K purchase this year might be worth 345K in five years. Real estate in a normal market should be a long term investment. I would have strongly urged you to buy the affordable in 05,06,07, and 08; but from this point on, I'm not too sure....
 
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