Support Your Neighbors! – Affordable Condo Owners in NW DC

Please raise a voice of support for your neighbors – affordable condo owners in NW DC!

Many affordable condo owners in NW DC, who were integrated into market-rate condo buildings through DC government agreements with various developers, are dealing with rising condo fees that are making their units unaffordable. One owner at Kenyon Square is now paying a condo fee almost more than his monthly mortgage. Due to certain resale and rental restrictions imposed by the City on these affordable units, many of these owners cannot sell or rent and are faced with the choice of future foreclosure or taking the City to court. The City has put these responsible DC residents in an impossible and financially disastrous situation. The City can do better!

For more details on the situation of affordable condos in Northwest DC, see: http://hatdc.org/?p=456

Sign a petition asking the DC government  for an equitable solution to the problem the City has created (please include your address and/or zipcode in the comments section): http://www.ipetitions.com/petition/affordablecondos/

Listen to the stories of affordable condo owners at Kenyon Square in Columbia Heights:

Your voices are essential! Please support your neighbors!

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Low Homeownership Rate in DC

According to a new report by the US Census Bureau, the homeownership rate in Washington, DC increased 10.7% between 2001 and 2010. However, DC still has the third lowest homeownership rate (42%) of all US cities, behind New York and Los Angeles. One of the reasons for the low rate is the transient nature of some of DC’s population, but the more prominent reason is the high cost of homes and condos in DC. When looking at African American residents in DC, the homeownership rate is even lower at 38.8%.

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Listen to Your Neighbors: The Impact of Long-term Resale Restrictions

The DC government is imposing long-term (15-30 years) resale restrictions on homeowners who receive downpayment assistance and qualify to purchase an affordable home. These homeowners pay back every cent and take on the same risks that other homeowners do, yet these restrictions highly constrict equity build up and ignore regular circumstances that occur in people’s lives.

Listen to and stand with your neighbors by joining the Housing Advocacy Team listserv and following up on future urgent actions.

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Subprime Mortgage Meltdown – Challenging the Myths

For many, the foreclosure crisis has been pinned on uniformed minority and low-income borrowers as well as policies that support them in becoming homeowners. This myth has led some to consider low-income buyers as not ready for homeownership, as part of the problem rather than the solution.

A recent groundbreaking study by Maurice Jordain-Earl of ComplianceTech researches the demographics of the subprime fiaso and reveals that upper-income borrowers across all racial groups had the largest number of subprime rate loans, followed by middle-income borrowers from all racial groups. The study concludes that the meltdown “is better described as a mainstream white suburbia problem with aspects that affect minorities and urban communities. Erroneous assumptions about the demographics of subprime rate lending will only lead to poor decisions that result in ineffective solutions.”

Manna’s and others experiences have been that low down payments, 30 year-fixed rate loans and financial education/counseling have proven to be the key ingredients for making low-income home buyers successful, even through the foreclosure crisis. And homeownership has been a legitimate and important way for these responsible buyers and their families to build assets and move up the economic ladder. Low-income buyers are and can be part of the answer to the crisis we are in.

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History of Homeownership and Race in the United States

There has always and continues to be a wealth gap between whites and minority groups in the United States. According to a recent Pew Research Center study, the median wealth of white households is 20 times that of black households and 18 times that of Hispanic households. Though the gap has significantly widened in recent years, this gap also has deep roots in the history of the United States, including discriminatory policies and practices that limited the traditional way Americans have increased their wealth: Homeownership.

For a history of homeownership and race in the United States, see the below segment of the documentary “Race – The Power of An Illusion”:

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Plug into affordable housing issues today!

Check out the updated information in our Issues section. There is new information on the effects of long-term resale restrictions, Manna’s “Resale and Recapture” provision as an alternative to those restrictions, and the Continuum of Housing campaign. So, read up on the issues, let us know what you think, and consider joining the Continuum of Housing campaign.

HAT will offer you more ways to plug in soon. We can’t do our work without you!

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New and Improved hatdc.org

The website is back!  With great joy the Housing Advocacy Team ushers in the new and improved www.hatdc.org.  We also have a Facebook page where you can post your photos of HAT events, have discussions, and more.  Please give us “the thumbs up” by clicking on the “like” button! You can follow our Facebook page (and sign up for an account, if you need one) here.

While you are surfing the web.  Check out the following Housing Complex Blog article here

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The Situation of Affordable Condo Owners in NW DC

Through agreements with various developers, the DC government has attempted to integrate low and moderate income families into market rate condominium projects, most of which are in Northwest DC. While the idea was noble, it has been ill-designed.

The City placed 20 year resale restrictions on the Affordable Dwelling Units (ADU), assuming that if low and moderate income people (between 30% and 80% of the Area Median Income) purchased an ADU, these affordable owners would be able to resell to another family earning the same income as the original owner earned at the time of purchase. The City also assumed that the original owners would be able to earn a fixed percentage at the end such a sale. Unfortunately, the City did not factor in escalating condo fees or the costs associated with reselling the ADU. So now, when ADU owners need to resell their units for whatever reason, many of them cannot. With the increased condo fees, many of the units would not qualify as affordable for people in the same income categories, and even if they found someone else, the seller would have to come up with 10% of the sale price for closing costs fees in order to resell it at whatever price they originally purchased it for.

Compounding the issue even further for those owners who cannot sell their units, renting out their homes has not been an option either as the City-imposed rental restrictions forced these owners to rent their units at prices that are lower than the monthly costs associated with owning units. Below is a list of market-rate condo buildings with ADU owners facing rising condo fees compounded by resale and rental restrictions, with many owners paying condo fees almost equal to or more than their mortgage payments.

  1. Barcelona – 1435 Chapin St NW
  2. Chase Point – 4301 Military Rd NW
  3. City Vista K – 475 K St NW
  4. City Vista L – 440 L St NW
  5. Fedora – 1451 Belmont St NW
  6. Kenyon Square – 1390 Kenyon St NW
  7. The Heights of Columbia – 2750 14th St NW
  8. Union Row – 2125 14th St NW
  9. Verona Parc – 1348 Euclid St NW

In any scenario, the end result is the complete opposite of what the City originally set out to do, and many of these families, without intervention, will be returned back into the ranks of folks needing affordable housing, but with damaged credit and no prospect of purchasing again. This situation simply does not make sense as these families have to take the same level of risks and responsibilities of being homeowners, while reaping none of the benefits, even after the City is repaid its subsidies (which actually went to the developer in the first place).

In October 2011, Manna organized affordable owners across these buildings, collected physical and online petitions, and met with City Council officials. Throughout 2012, these owners organized within their buildings, sought support from their condo associations, met with City officials, testified publicly and worked through Manna and with the City Council to address their issues. Direct meetings between affordable owners and the Department of Housing and Community Development began in February 2013.

In the summer of 2013, the Department of Housing and Community Development (DHCD) put forward a process to evaluate the affordability of each ADU and possibly allow owners to rent or sell to people in higher income categories. Information on this process and the form are on DHCD’s website at http://dhcd.dc.gov/node/619912. More changes need to be made for current and future owners, but this is a significant step in the process.

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Addressing Affordable Homeownership in a Different Way: The Present and The Alternative

The Present: Long-Term Resale Restrictions

The current long-term resale restrictions that the DC government places on homebuyers of affordable units – typically 15-20 year restrictions, but even reaching up to 30 years or permanent – force home owners to sell their properties at below market rate. The intended purpose of these restrictions is to preserve affordable housing units in Washington, DC and ensure against people immediately reselling their properties and making a ‘windfall’ profit. However, the flipping of affordable units is almost nonexistent and these restrictions have the unintended result of preventing home owners from building up equity. The chance to build reasonable equity is one of the main reasons people become homeowners, and home equity has historically and continues to be the primary asset builder for lower income people.

The effects of long-term resale restrictions include:

  1. Short-term effects: home owners are unable to access their home equity when unforeseen or emergency expenses arise (e.g. health emergencies, emergency home repair, etc.).
  2. Long-term effect: home owners are unable to build wealth and maintain generational home ownership.  With long resale restrictions, home ownership is not a viable investment. Instead, it creates one-time home owners.

Real-life situations to consider in regards to long-term resale restrictions:

  1. If a lower income person gets married, or a couple has a child, and needs to trade up to a larger home in the same neighborhood, where will the equity come from to enable them to buy a larger home in DC? As second-time homeowners, they will not be eligible for the same benefits they could get as lower income, first-time homebuyers.
  2. If a lower income owner has a better job opportunity in another location, how will he/she be able to remain a homeowner unless reasonable equity can be realized so that a home can be purchased in another area? Even in an area with lower prices, substantial down payments are often needed for low-income persons.
  3. What happens if the housing market declines and there is a financial loss? It would appear that the lower income owner bears the full burden of all losses whereas that same owner is severely restricted in what he/she can realize.

In summary, without the ability to accumulate reasonable equity over time, the lower income buyer can easily become trapped in a homeownership situation and forced to sell rather than be able to cope with adverse life circumstances. Therefore, the people who can least afford it and are in need of the economic opportunity only homeownership can give them are being forced to shoulder a disproportionate share of the burden in creating affordable homeownership in DC. We and the population we serve feel this is unfair and discriminatory.

The Alternative: Recapture and Recycle

Manna advocates an alternative to long-term resale restrictions, particularly in wealthier areas of the city where home appreciation is high. A better, more equitable way to insure against the concerns voiced by long-term resale restrictions, specifically against “windfall profit” and “property flipping”, is through what Manna calls a “Recapture and Recycle” provision. This provision, which has been promoted in different forms by the US Department of Housing and Urban Development, recaptures all funds that are considered “subsidy” to the buyer, which is the difference in the original sales price to the lower income buyer and the higher appraised/market price at that time. This difference would be repaid if and when the lower income buyer resells his/her unit. This allows the “recaptured” funds and any funds considered subsidies to be treated as a loan that gets repaid and  “recycled” back into additional affordable units for more qualified lower income families. Rather than long-term resale restrictions, Manna advocates and employs a 5-10 year resale restriction.

An example of the “Recapture and Recycle” provision:
If a lower income person purchases a unit that is worth $435,000 from a developer for $235,500 (the cost of developing the unit), then the $199,500 “discount” would be considered a subsidy that would be repaid to the city to produce more affordable homeownership opportunities when the homeowner sells or refinances. The homeowner would benefit from being able to fully utilize, like a typical homeowner, any appreciation accumulated above the original $435,000 value after the 5-10 year period.

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