Homeownership: Permanent Affordability vs. Equity Building October 7, 2003 Rick Jacobus, LISC John Lowry, Burbank Housing Mark Moulton, Peninsula Habitat for Humanity

Burbank Housing Development

Discussion Question Given the costs and subsidies required, and Burbanks goals… How should they handle the potential increases in the value of that home? How should they handle the potential increases in the value of that home? Should the homeowners be allowed to keep all of the increase in price? Should the homeowners be allowed to keep all of the increase in price? Should they have to return all of the increase to Burbank? Should they have to return all of the increase to Burbank? …something in the middle? …something in the middle?

Peninsula Habitat for Humanity

Discussion Question Given the costs and subsidies required, and Habitats goals… How should they handle the potential increases in the value of that home? How should they handle the potential increases in the value of that home? Should Habitat be thinking about this differently from Burbank? Should Habitat be thinking about this differently from Burbank?

Continuum of Approaches Resale Price Restrictions Shared Equity Loans Option to Purchase Forgivable Loans Downpayment Grants Permanent Affordability Asset Building Mortgage Formulas Index Formulas Appraisal Formulas

Burbank Housing Development Shared Appreciation Loan Shared Appreciation Loan Option to repurchase at appraised value Option to repurchase at appraised value Deferred payments Deferred payments Buyer repays percentage of appraised value based on loan amount as a percent of initial value. Buyer repays percentage of appraised value based on loan amount as a percent of initial value.

Peninsula Habitat for Humanity Resale Price Restriction Resale Price Restriction Option to purchase at formula price (well below market) Option to purchase at formula price (well below market) Resale price indexed to CPI (up to 3%) Resale price indexed to CPI (up to 3%) Habitat provides mortgage with term (length) adjusted to insure affordability to 50% of Area Median Income Habitat provides mortgage with term (length) adjusted to insure affordability to 50% of Area Median Income