DENVER – The city of Denver has overseen an affordable housing program that, since 2002, has put hundreds of low-income families in the homes of their dreams. However, last year the Inclusionary Housing Ordinance got a new director and with her came a new directive for those hoping to qualify for the program.
Now, builders, realtors, buyers and sellers say Denver’s most successful affordable housing program is about to implode, leaving hundreds of families unable to participate in a program designed for them.
The Contact7 Investigates team took a closer look at the changes that were made to the program and discovered they make it more difficult for most who could benefit from the program to even qualify.
From the beginning, the Inclusionary Housing Ordinance has offered those will little or no cash up front to purchase homes from an inventory of properties priced much lower than the market would typically demand. In exchange, the city helped families build equity, sell those homes to other, low income families and enter the Denver housing market as conventional buyers.
The Stapleton neighborhood is one of the places where developers agreed to build dozens of these affordable homes.
Gary Gibson bought one of them at a time when he was single, had little or no debt and was not making a lot of money.
“Somehow on Facebook, this property popped up,” Gibson said.
He bought a new townhome in 2016 through the city’s affordable housing program.
“I was a bartender, which I still do currently,” Gibson said. “I had been renting ever since college.”
He paid $231,000, which is about $100,000 below what his townhome could have sold for to a conventional buyer.
Gibson is now married with a small child. He’s making a lot more money and doesn’t need the affordable program anymore. This fall, he chose to buy and build another home outside the program and give another low-income buyer a chance to take advantage of the program just as he had.
Problem is, Gibson can’t sell the home.
“My situation today is a disaster. Utter disaster,” Gibson said. “And it’s just criteria after criteria that I never heard of when I purchased the house.”
The problem is a matrix of metrics that make it almost impossible for a new buyer to qualify for an affordable home like Gibson’s.
The Inclusionary Housing Ordinance laid out specific guidelines for new buyers. But the city never really enforced them until late last year. It trusted, with great success, lenders to determine who were the greatest risks for the program. Now the city’s Office of Economic Development wants that control back and is applying two criteria fast and hard.
First, no buyer can qualify if their debt to income ratio, on mortgage and homeowners’ association fees combined, is greater than 30-percent. At the same time, the buyer’s income cannot exceed 80-percent of Denver’s median income. Most low-income buyers can certainly meet one of these criteria. But realtors and developers say it’s very rare to find a buyer who can meet both.
Gary Gibson has had dozens of showings to affordable housing buyers over the last four months. Not one has been able to qualify since the city tightened the rules. He said the first person who saw the home put in an offer, got qualified by a lender, then after spending more than $1,000 for an inspection and appraisal, was denied that approval based on the city’s tightening criteria.
To be clear, Gibson’s home is a jewel in a highly-inflated real estate market like Denver. And it cannot sell.
“We’ve had more than 80 people through the home in the last 4 months,” Gibson’s realtor, Brian Conley said. “With HOAs included, this is the least expensive 3-bedroom home in the city of Denver. Yet, it won’t sell. We can’t sell it because we can’t find that needle in a haystack of a buyer.”
Conley said none of the buyers coming through Gibson’s door can qualify to buy the home because they make a little too much money or they exceed that 30-percent debt-to-income ratio.
Contact7 took the complaints of dozens of buyers, agents and builders to the new chief housing officer, Britta Fisher, who administers the Inclusionary Housing Ordinance. As far as she is concerned, the program continues to “work for most.”
As written, the ordinance allows her to make exceptions to the very stringent rules of the program. Those exceptions have been the rule now for years. Not anymore.
“My point as the Chief Housing Officer is – like, let’s not work so much on exceptions, but let’s make sure that the rules work,” Fisher said.
Last week, the Office of Economic Development held a public hearing on Fisher’s decision to hold hard and fast to the specific guidelines of the ordinance. Gary Gibson was in that standing room-only hearing. And like all but one in attendance, he explained why the new rules have broken the system.
“It was great for me. I love it,” Gibson told the room. “But now I can’t get out of it.”
In an effort to show the city was able to bend a little, officials announced the city was looking at raising the 30-percent ratio to 35-percent. That extra 5-percent, according to the builders and sellers of these affordable homes, still doesn’t come close to the years of flexibility the program used to extend to buyers. In fact, conventional lenders routinely approve loans with debt-to-income ratios as high as 50-percent.
Thrive Home Builders is one of the primary builders of Stapleton’s affordable housing inventory. Its CEO, Gene Myers, told the hearing that even at 35-percent, they will kill the program. He says of the 201 affordable homes he has built for the program, he has seen only one foreclosure. So, this is not about saving buyers from getting in over their heads. He claims he will not be able to find future buyers who qualify if the front-end ratios arbitrarily move to 35-percent.
Those who have been financing these affordable housing loans also came to tell the city they too are comfortable with higher ratios and that the foreclosure rates among these buyers has been lower than the conventional housing market.
Real estate agents like Caldwell Banker’s Susan Todd has two issues with the city’s handling of the program over the last few months. First, many of her clients were cut off after they had already been approved for the program. They were on their way to closing based on the old rules, then told they were no longer qualified under the new rules -- no grandfathering in for those already deep into the process.
But she also insists none of her clients can afford the large down payments they will now need to bring their ratios in line with to meet the tougher criteria. She says not even the down payment assistance programs available can make up the difference.
One of her clients caught in the middle last September was Justin Gorrie. He too had spent more than $1,000 on an appraisal and inspection when the city came to him hours before closing and withdrew his qualification. They claimed his front-end ratios were suddenly too high for the program.
For this young man to buy his $138,000 condo, he was forced to borrow what was now a $30,000 down payment from his parents in Texas. They had to take out a loan to get the money for him. Had he not had that option, both he and the seller would have been left in the cold.
“It’s just so frustrating that it’s wasting a lot of people’s time and money,” Gorrie said. “It just doesn’t make any sense.”
Gary Gibson feels the same way as his Stapleton townhouse enters its fifth month on the market and as he continues to entertain agents and clients coming through his home, knowing only one-in-1,000 people might qualify to buy it. His situation is made even tougher because Gibson, his wife and new baby are about to close on a new home in nearby Green Valley Ranch.
“The down payment from this sale was contingent on our new house. So now we don’t have the $50,000 we were hoping to have from this house. So, therefore we’re now having to draw from our 401Ks,” he said.
Soon they’ll be paying two mortgages on two homes, not because of a sluggish housing market, but because Gibson got involved in an affordable housing program that let him in but won’t let him out.
“I don’t need this program anymore. I’m well above the threshold,” Gibson said. “It provided for me. Let me give it back to you.”
Knowing that the Office of Economic Development appears to have made up its mind about a 35-percent front-end ratio for all buyers coming into the program, companies like Thrive Home Builders have already stopped acquiring new land to build affordable housing in Denver.
“Why not, when no buyers can qualify to buy them?” Myers said.