Tiffany Johnson wanted to buy a home in Boulder.
But when the single mother and Starbucks barista for Boulder stores began looking at homes, Johnson realized, with assets from a recently dissolved marriage to a former spouse who she said makes six figures, she was at a competitive disadvantage.
When Johnson decided it was time to stop renting in Boulder, as she had since 2014, finding a place to buy in the city proved difficult.
“(We) wanted to make it permanent because of the schools and lifestyle,” Johnson said. “(I) kept getting thwarted. Looked out at condos in north Boulder, kept losing out to cash buyers from California buying condos for their kids to live in while they’re at school. We gave up, found a house in Broomfield.”
She is days away from taking possession of her Broomfield home, where her child will be able to remain in the Boulder Valley School District, which was a goal.
Voters in the Nov. 5 election have the option to authorize Boulder to take on up to $10 million in debt to start a program to aid middle-income earners in purchasing homes in the city’s increasingly pricey real estate market. The assistance would be available to those making up to 120% of the area median income, which is $122,760 for a family of three, or an asset limit of $170,000.
The idea to help such earners was put forward by councilmen Sam Weaver and Bob Yates with the intent of helping close a gap into which many potential Boulder homebuyers fall. Countless families make too much to qualify for the city’s low- and median-income homeowner programs, which are open to earners between 30% and 60% of the area median income, but not enough to qualify for a commercial loan to afford a home in the city.
“Are you going to have just the poor and the very rich?” Boulder-based real estate attorney James Newell said, describing Boulder’s demographics trend without the program. “I think it’s definitely a worthwhile goal, I don’t (blame) them for trying.”
Concerns have been voiced over such a program.
Some residents question whether Boulder should aim to help people who are already making in excess of $90,000, which sounds like a lot of money to many, and could afford homeownership in almost every other city across the Front Range, including neighboring cities.
“I think that any type of proposal towards middle-income, as long as they don’t reduce their efforts toward low income, is a step in the right direction,” said Ashley Newell, the real estate attorney’s partner and owner of Boulder-based Royal Arch Real Estate.
Alyssa Miller, client concierge manager for Boulder-based 8Z Real Estate, said she understands the need for such a program in a market like Boulder.
The debt, if approved and drawn upon by the city, wouldn’t take any city attention away from its low-income housing program, Weaver said. That program encompasses about 7.5% of Boulder’s housing stock, and the goal is to grow it to 15%.
The middle income program as envisioned also could end up partially supporting low- and median-income earners, in addition to the challenged middle. That’s because a floor has not been set for assistance, Weaver said. It would be capped at 120% of area median income.
The city also could use the debt to help any residents of the recently annexed city-owned Ponderosa Mobile Home Park to afford a Flatirons Habitat for Humanity financing model or one of the new, fixed-foundation homes planned to eventually replace mobile homes.
The ballot measure is simply a request for debt. If passed, details would be ironed out as to how it would be used to expand homeownership opportunities. The flexibility makes it an attractive and effective program, Weaver said.
The lack of clarity in the ballot measure language as to how the debt would be used, and the potential for the city to make tweaks to the program as it is created makes Camera letter writer David Edwards skeptical of supporting the initiative. Edwards argued voters should be given more specifics with how the money could be used.
As envisioned, the main function would be to allow the city to operate as a secondary mortgage provider for families who have large enough down payments, but not enough monthly income to qualify for a commercial loanfor a Boulder home. In such cases, the city would step in and close the gap with a second loan to the buyer.
The loan would be due in 10 years, which means ]refinancing would be the likely method for making the balloon payment back.
But Boulder also would want to make any homes bought through the program permanently affordable to the same tier of earners, which means annual appreciation would be capped through deed restriction.
Correct appreciation limit?
Right now, officials have pitched 2% as the appreciation limit, with Weaver stating he would be comfortable moving to 3% if the program attracted no takers after six months. Lack of interest is a possibility since market-rate appreciation has been much higher not only in Boulder, but also its neighbors from where tens of thousands of workers in the city commute. The program is intended to be a tool to lessen the number of in-commuters and, in turn, reduce vehicle emissions in the city.
But gaining market-rate appreciation on a home can be an important financial tool for a family to help pay for college and comfortably retire, said Newell, of Royal Arch Real Estate.
“The balloon payment scares me a little, but I also know that after 10 years you should have paid down your mortgage a good amount, so the only way around that is to refinance,” Newell said. “… Refinancing can make sense, but it can also not make sense. To be forced into a position where you’d have to refinance, because that’s the only way I can see unless you’ve saved $200,000, (or whatever amount the city lent), I’m not sure that’s the perfect situation.”
But she remains supportive of the city exploring its options to assist people in the middle who officials perceive as increasingly being priced out of Boulder.
“I like seeing Boulder city and Boulder County take an active approach to helping middle-income families and low-income families,” Newell said. “We want to keep the diversity, all forms of diversity, that’s what’s going to make it thrive. I certainly think that this is a demographic that could benefit from a program. I’m not sure that all of these details are the perfect combination.”
Weaver contends his math shows that, in most instances, a 10-year period at a 2% appreciation cap would allow refinancing without hiking monthly costs to the homeowner, allowing the home to remain affordable for the next buyer without putting a heavier burden on the resident a decade into ownership.
“The choice is a lower appreciation rate in exchange for owning rather than renting, or alternately a lower appreciation rate which allows the building of some equity while having a shorter commute and easier access to Boulder schools, open space and cultural amenities,” Weaver said.
Plus, the councilman said, the city’s program would allow a graceful exit from the balloon payment to the city in cases of hardship faced by borrowers. One possibility is the city taking possession of a house if a borrower defaults and renting it back to the same tenant.
“That concern has been out there about the refinancing of the loan from the city,” Weaver said. “We really do want to have a hardship provision in place so folks don’t get trapped.”