City of Houston Looks to Expand Homebuyer Assistance

INSIGHTS :  Jun. 25, 2018 HOUSING

Though the level of subsidies a qualified homebuyer receives has decreased in recent years, the city hopes to turn that around to stem a housing affordability crisis.

Front of three Burghli homes

Though the level of subsidies a qualified homebuyer receives has decreased in recent years, the city hopes to turn that around to stem a housing affordability crisis.

It's hot and muggy on a dead-end street in Acres Homes. The sound of cicadas hums from a tangle of green on one side of the street's end. On the other side sit six new homes, each with a porch and wide driveway in front. Across a blue, one-story home a large red ribbon reads "Home ownership made possible!!!"

Michael Sapp eyes the homes. He's buying one, yet to be built just down the road, from the same builder so he's come out to the ribbon cutting ceremony Monday to see what he has to look forward to. A renter in the neighborhood where he's lived for more than 20 years now, Sapp and his wife are lined up to purchase a three-bedroom, one-story home thanks to homebuyer classes from the city and a $25,000 down payment assist.

"No shopping, no furniture, everything the same," a woman from the bank they've been working with tells him before the ceremony. His homebuyer assistance depends on him meeting certain income requirements and his lenders don't want to see any change to his credit or financials while the home is built and the deal eventually goes through. It will be his third time buying a home after a long stint of renting. "It would mean a whole lot because I'm getting older and I can't take no more chances," he explained.

The six homes have already sold but, on that street alone, the developer, Zack Burghli, has a total of 27 lots, many awaiting construction, including the site of Sapp's future home. The rest of the street has single family homes and large green lots and trees. The dead end had become an illegal dumping ground, according to Burghli, who said teams had to clear truckloads of garbage from the lots. That's part of the city support he said is crucial to making such projects viable.

The homes will sell for a range of $105,000 to $150,000, with most going for somewhere around $125,000, according to Burghli. That's below the current median listing price for the neighborhood, which Zillow puts at $175,000 but above Zillow's estimated median home value of $111,300 for the area. As those numbers rise, the neighborhood has begun to feel the pressures of change. Just 10 years ago, Zillow's estimated median home value for the area was $85,600. Such a large increase, in a neighborhood where more than a quarter are below the poverty line and an estimated 70 percent are low-wage earners, according to the Kinder Institute's Houston Community Data Connections, housing affordability is a growing concern.

To meet that concern, the city also helped subsidize Sapp's home by acquiring the land and selling it cheap to Burghli, who in turn committed to building affordable homes. In this case, affordable means within reach for households earning around 70 to 80 percent of the area median income, or roughly $54,000 to $60,000 for a family of four. Homebuyers at or below that 70 percent mark are qualified for $25,000 in homebuyer assistance from the city while those earning up to 80 percent can get $15,000 under the current program.

That subsidy makes the formula work from Burghli's point of view. But for people who earn much less than that, these homes on Sunnyhill Street are out of reach.

The city is hoping to change that. While the program has been around in various forms for years, the amount of assistance a homebuyer could get had actually gone down in recent years, even as prices were rising. The mayor has pushed for the city to prioritize homeownership and, under his watch, the housing department has also stepped up its efforts to support affordable home construction. "The plan is to build literally thousands of homes" across Houston, Mayor Sylvester Turner told the crowd gathered Monday. "This city needs homes."

Though it's a work in progress, Laurie Vignaud, the assistant director of the city's housing and community development department's single family and economic development divisions, said the city is hoping to increase homebuyer assistance up to around $50,000 and even as high as $100,000 in some cases. "We know all the benefits associated with homeownership," she said. "It's a multiplier effect."

The money to expand the subsidies would come from a variety of sources, including federally-funded programs and grants and local Tax Increment Reinvestment Zones. In addition to increasing the subsidy for homebuyers, the city is considering expanding the income eligibility to include people earning up to 120 percent of the area median income. The city's community land trust, which will operate as a nonprofit, will be part of the effort to broaden opportunities for homeownership, particularly for folks who fall well below the 70 percent area median income. The focus will start in the mayor's five Complete Communities, which includes Acres Homes.

"The mayor is not kidding," said Vignaud. "We're hoping it's going to be very soon."

What this means for developers like Burghli, who has been working with the city since Mayor Bill White's administration, is more opportunity. Right now, builders who benefit from the city's cheap sale of land through its land bank generally price things so that the homes are affordable for the same people who can qualify for down payment assistance. But with an expanded pool, that means they developers could build to a higher price point, which may bring even more developers on board. "It's a tough market," he said, "if it was easy, everybody would do it."

Burghli builds all kinds of homes in all kinds of neighborhoods, including multimillion dollar listings. But the reward, he said, cannot compare. "The other end, you sign a contract, it's just a transaction," he said. Burghli envisions the homes as a start for many families and even the underserved neighborhood itself. The street, for example, doesn't have sidewalks. But, he said, "You're seeing no sidewalks, I'm seeing a street without five tons of trash."

A total of 12 homes have been pre-sold already, even with only six builta sign of the demand, according to Burghli. "What good is a dream if you can't attain it," he asked.



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