From strict affordable housing requirements to lack of appetite for rent control, growing homelessness, and evictions – it’s no secret that we have a plethora of housing issues to address in Denver.
I remember, in 2017, getting on the waitlist for a home through Denver’s income-based buyer’s program. At the time, I was a newly single mom, working for $16.25 an hour. We lived in Denver Affordable Housing in an income-based rental unit in Lincoln Park.
At the beginning of the year, my 4-month-old and I were hit by a drunk driver and severely injured. From that settlement, I was able to put together a down payment on an income-based townhome.
My mortgage application was denied because of my low wage, and being out of work due to the injury. Even with my down payment, I couldn’t get approved for a loan needed to buy a $179,500 two-bedroom townhome in the program.
Think on that for a moment. My income was low enough to put me in the pool of potential buyers of homes specifically set aside for low-income families. It also was too low to qualify for the mortgage needed to buy one of those homes.
So, like many others, I lingered on that waiting list. I picked up another job, eventually demonstrating income that was consistent enough, and finally just barely high enough, to get the loan.
I am grateful that my son and I have been able to buy in Denver. But, Denver’s Income-Based Buyers Program falls short of actually addressing housing inequity in Denver.
In its own words, the program is “designed to help qualified, low-to-moderate income residents, own affordable homes.” Instead, it has become extremely exclusive; most Denver residents who are low- to moderate-income remain unable to obtain a home.
Potential buyers can make no more than 80% of the Denver-area median income. That’s $55,000 for a one-person household, and $63,000 for a two-person household.
It makes sense for the program to address itself to the lowest end of the income scale. But it’s of little use when people at the lowest end of the income scale then run into a brick wall at the mortgage lender.
Then, in 2019, the city’s Office of Economic Development imposed a requirement that filters out the majority of low-income residents in Denver: No buyer can qualify if their mortgage payment and homeowners’ association fees combined amount to more than 30% of their income.
The 30% debt-to-income ratio is a widely accepted rule of thumb. The problem is, it’s a rule that doesn’t fit the thumbs of most low-income buyers. On this, realtors and developers agree.
Folks who manage to meet the income minimums for the program are more likely to have a higher debt-to-income ratio, disqualifying them. The solution to that is a higher income — but then, families with higher incomes aren’t the target market of a program intended for low-income households.
The program doesn’t really deliver what it’s built to deliver.
Nor does it deliver the other major benefit of homeownership: the opportunity to build intragenerational wealth.
Owning a home typically is an investment. But if you buy a property in this program, it doesn’t build the same amount of equity a market-priced home would.
The income-based buyer’s program only allows the home to appreciate at a maximum of 3.5% a year. For my home that would come to about $6,000. Compare that to the average equity appreciation of $78,000 per market priced property – statewide last year. On top of that, the rules don’t allow you to rent your property out on Airbnb or other rental services, even if you permanently live there.
We need permanent housing options for people with income below 80% of the area median. We need to cast a critical eye on how our existing programs function, how they address housing inequities, and what impact they are actually having on low-income Denver residents.
The need is great. There are 162,557 low-income households in Colorado making less than 30% of the median income, according to the recent report of the General Assembly’s Affordable Housing Task Force. For those families, there are 48,767 units, meaning only one-third of those Coloradans might be able to access affordable housing.
We need more affordable housing for a greater number of low-income families, with less strict debt-to-income limits, and without the artificial limits on property appreciation that keep the American Dream out of reach of those who are working as hard as anyone else to achieve it.
Anything less is missing the mark.
Kayla Q Frawley, of Denver, is a masters in public health candidate, focusing on social welfare policy. Twitter: @KaylaQFrawley
NOTE: The original version of the column incorrectly said the program requires applicant income to be at least 80% of the area’s median income. In fact, applicants are required to make less than that amount to qualify. The correction was made March 17 at 8:25 A.M.
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