South Davis will soon house a new neighborhood. The Mahogany Lane Affordable Ownership Housing Program will have eight units available for qualified City of Davis residents, with the first few units to be completed in April.
Warmington Residential, a housing agency, is in collaboration with Davis in offering affordable homes to those who would like to purchase a house in Davis but cannot afford the over-$600,000 homes. Warmington builds and markets these units.
Four two-bedroom and four three-bedroom two-story duplexes will be for sale, ranging from 935 to 1,146 square feet. Two-bedroom homes are $220,000 each and three-bedroom homes are $240,000 each.
According to the Davis Affordable Housing website, to be qualified for ownership, total household income cannot exceed 120 percent of the Yolo County area median income values that are dependent on household size.
“There is a whole realm of qualifications that people need to figure out,” said Warmington Residential Vice President of Marketing for the Northern California division Joanne Anderson. “There’s income limitation and there’s a whole program set up by Davis.”
For each new home community in Davis, there is a part of the approval process called inclusionary zoning, which includes affordable, below-market-rate houses as well as market-rate houses. For Mahogany Lane, there are 28 homes with eight of them below market-rate.
“Davis is great because a lot of cities have gone away from their affordable housing program, but they still stick with their inclusionary zoning program,” Anderson said.
Potential owners can go online to pre-qualify themselves, although they will also have to go through a loan process to see if they’re qualified for a loan. Anderson said once people have determined they are qualified, their names are put into a lottery.
“We pull your name out of a hat and it just goes in order of whose name is pulled first,” she said. “Some people fall out at that point because either they make too much money or own too many houses.”
If qualified, people will have to wait for their loans to be approved and then they may set the closing date on the house and move in. Depending on the size of the household and income, a person either qualifies for a two-bedroom home or three-bedroom home.
To keep these homes cheap, there are deed restrictions set by the city.
For the affordable homes in Mahogany Lane, the City of Davis states: 1) The household must remain the owner occupant of the home at all times and must live in the home a minimum of twenty-four months before selling it; 2) Future sales prices are restricted to a maximum of 3.75 percent annual appreciation from the original price and date of sale; and 3) The city has the opportunity to provide income-qualified buyers in event of a sale. This requires one percent of the sales prices to be paid to the City of its designee to cover the program costs.
“There is a limit as to how much value [the affordable home] can get,” Anderson said. “If the market went crazy and prices went up by 20 percent, a below-market-rate home can only go up maybe two percent.”
Anderson said cities sometimes buy back below-market-rate homes, especially properties in foreclosure or distress.
Housing coordinator for the City of Davis Affordable Housing Program Tom Callinan said new affordable ownership housing units are built by the developer and sold directly to income-qualified households, so the city does not usually own the affordable houses at any point.
“The Affordable Housing Program does not typically involve the city purchasing affordable ownership units and reselling them,” Callinan said. “However, in certain situations, such as foreclosures, the city has purchased affordable units in order to preserve the affordable housing restrictions which otherwise may not survive foreclosure.”
According to Callinan, the city stepping in to purchase affordable homes is unusual and generally a last resort.
The deadline to turn in an application for an affordable home on Mahogany Lane is March 17. Applications will still be accepted after the deadline depending on the number of units still available. Although the affordable homes cost about $300,000 to build and are being sold for less, Anderson feels this isn’t a negative loss.
“This is a really good program,” Anderson said. “Although it cost the developer a lot of money, in the end, it’s a great offering to the public.”
CLAIRE TAN can be reached at email@example.com.