Innovative affordable housing program is helping first time homebuyers
In its first year of operation in 2007, the City of Santa Clara’s innovative Below Market Priced program helped 41 families purchase their first home. And it has created a $5.3 million source of funds for the City to continue to help more people with affordable housing in the future.
The City has had an "inclusionary" housing policy in the General Plan Housing Element since 1992 that requires private development projects with more than 10 units to include 10% of new housing units as affordable. Until recently, the affordability of these homes was guaranteed by the use of long-term restrictions. Buyers were able to purchase the home at a below-market rate price, but the home could not be resold at market rate for 45 years. This guaranteed that the home would continue to be affordable for future buyers, but it did not allow the current home owner to benefit from appreciation of the property value.
Under the new policy, private development projects still have 10% of their units set aside for moderate and low income households. The difference is that the City is providing a principal-only loan to cover the difference between the unrestricted initial market value of the home and the affordable sale price for a moderate-income buyer to qualify. This loan is not re-paid until the property is sold. When the loan is paid back, the funds are set aside for more affordable housing investments in the future.
The revised program allows the home owner to share in the appreciation of the property over time. The homeowner’s portion of the equity increases gradually, year by year, and after 20 years, the homeowner is entitled to all of the equity appreciation.
"Cities really only have two tools available to them to assist in affordable housing production – land use entitlements and financial assistance,” said Housing & Community Services Division Manager Jeff Pedersen. "The model of Santa Clara’s program for first time home buyers is effective because it provides maximum value to home buyers, minimizes the subsidy burden on home builders, and creates a mechanism for generating additional funds for future affordable housing efforts."
For more information on Santa Clara’s affordable housing programs, including both the Below Market Priced program and a secondary loan financing program for first time homebuyers, contact (408) 615-2490.