The vision for Stapleton to have 10% of all for-sale homes be “affordable” has been elusive; it hovered around 5% for many years. In the past couple years, however, with an increasing number of affordable homes being built and the dramatically increasing need for such units, affordable homes in Stapleton reached 7.1% of all for-sale units as of December 31, 2018.
Then suddenly in October, the steady sale of affordable homes turned dramatically downward. It wasn’t for lack of homes or lack of qualifying buyers who make 80% of the area median income. These buyers were getting qualified for loans with mainstream lenders, and then they were getting contracts for homes in the affordable program up to the level the lenders approved—just as market rate buyers do.
But that’s where the similarity to market rate buying ends. Gene Myers, Thrive Homes CEO, came to the Stapleton Citizens Advisory Board in March to share with the community the magnitude of the problems facing affordable home buyers, sellers and builders—problems so severe they threaten to end his company’s involvement in the program.
Myers’ company, Thrive, has built approximately 200 homes in the affordable program, and it has had only one foreclosure. With rule changes the city made in October, his sales went from 30 in a quarter to 3. His company did an analysis and determined that 9 out of 10 buyers he had closed on in his latest project would never have been approved under the new guidelines.
The problems plaguing him as a builder are also plaguing people trying to re-sell their affordable home. Myers said he had learned of a seller who ended up having 167 showings of his home before he could find a qualified buyer.
“The point here is that the program could be successful,” says Myers. “This was never intended to be permanent affordable housing. This is intended to be a way for families to get into home ownership, build wealth, and move on and sell to another family at 80% of the area income so that they could do the same. That way, of our 200 houses that we’ve closed here, maybe we’re helping 600 families or 700 or 800 over the 15 years before the deed restriction ends. When we stop allowing the resale of these, we’re going to cause these families to be ruined in these houses until the deed restriction expires because they’re not going to be able to sell.”
Myers also talked about buyers who, after getting their loan approval and contract, begin what amounts to a second loan approval process with the City. “We’ve seen some denial letters that were not denied for income. Their version of income was tuition reimbursement from their employer. Mileage reimbursement. Those aren’t income. Yet those were listed as reasons for denial. It’s our belief that the City doesn’t have the trained personnel to properly do this evaluation of these files.
“Furthermore, all of these files are approved for loans from FHA or Fannie May or Freddie Mac. Our take is that the city is not more competent than a mortgage underwriter and that if a low-income buyer can be approved for a loan, who is the City to intervene…even though the lender thinks you’re qualified? Even though you’ve done everything that a wealthier American would have to do to buy a home, we’re telling you, you can’t. I just fundamentally have a philosophical problem. We’ve worked with a lot of low-income families on these homes, and they are quite capable of making intelligent decisions about their housing and their own interests, and I think our foreclosure rate proves it.”
The City’s rule change came because the City’s Auditor said the program wasn’t following HUD guidelines. “Those guidelines are to protect the government’s investment in housing,” said Myers. “There is no government investment in this housing. This is a City of Denver program. We don’t need, in my view, the burden of all the federal bureaucracy around housing being imposed on our system.”
Myers’ final words at the meeting were, “Our take is, on one hand, the City’s leaning all over Brookfield to produce—and then on the other side of the City, they’re making it impossible to produce. It just seems like the ultimate bureaucracy—what we hate about the bureaucracy.”