"Moderate" Income Home Buying Programs

For as long as there have been programs to give lower income families a hand up (or a hand out, depending on your perspective or political affiliation), the familiar cries from the middle class have been heard.  "We can't afford it (usually "it" refers to a house or college), yet all the programs are designed for people who are poorer than we are.  You either have to make a lot of money, or none at all.  Fall somewhere in the middle and you're screwed."

Recently, I discovered some programs that seem to address those folks in the middle.  For many, it may not climb up the income food chain far enough to work for you, but it's a step.  They are called "Moderate Income Housing Programs."  Let me give you an example of one in particular that I was looking at.

The Metropolitan at Warner Center. Warner Center is an area within the city of Woodland Hills, CA.  According to the neighborhood info stats on ZipRealty, 85% of the community is "white collar" and the median household income is $88,745.  In other words, it's a relatively well to do community.  A quick search on ZipRealty reveals that the cheapest condo in the area is an 812 sq. foot, 2 br, 1 ba condo built in 1966 for $262,000.  Oddly, that seems below market, as the next cheapest is a 599 sq. foot, 1 br, 1 ba condo built in 1979 for $279,990.

Back to the Metropolitan.  It's a brand new, luxury condo complex, featuring swimming pools, six tennis courts, raquet ball courts, fitness center, and a community room that residents can reserve for parties or special events.  It's high end all the way.

So, how much do you think you'll pay for a condo here?  Well, a one bedroom, one bathroom 660 square foot unit goes for $302,000, with the three bed, two bath going for around $530,000.  HOA dues are another $250 or so.

However, with the "Moderate Housing Program," residents can own a condo for well below current market rates.  A one bedroom condo is available for $206,000, a massive reduction from the $302k price tag.  What are the qualifications?

• First time home buyer.  What they are looking for is someone who has not had a mortgage deduction on their tax returns for the last three years.  So, if you owned four years ago, you are still considered a first time buyer.
• Income criteria.  For a single person, you cannot have made more in 2006 than $58,200.  For two people, the limit is $66,500.

The income must be calculated on all persons over age 21 who will be living in the unit.  So, if you made $48,000 last year and your girlfriend made $72,000, you're thinking that you could buy it under your name alone and the two of you can live there, right?  I mean, $206k for a condo in a community like this near Los Angeles?  That's cheap!

Wrong.  I mean, you can try to lie, but I wouldn't advise it.  If you are both planning on living there, her $72k income is part of the calculation, and obviously puts you over the limit.

Okay, so let's say you qualify.  What are the restrictions?

• You must live in the unit for at least two years.  This is an owner occupied program, not a buy cheap using government cheese to rent out at a profit program.
• After two years, you cannot sell at market rates.  If you decide to sell, the government agency determines your allowable sale price.  It may be some margin higher than your purchase price to allow for inflation, but they aren't trying to help you make a profit.
• After two years, you can rent the unit.  Again, not at market rates.  The same government agency will tell you how much you can rent it for.  They want it to stay in the hands of the "moderate income" population.

Well, even with a screaming good deal, that sounds like you're just a little too much at the mercy of "The Man" to me.  However, for a single person starting out after college, this may be a great way to buy property and get some tax deductions.  After all, at that price, your mortgage may be comparable to renting in the area.

Comments

[Jumpcut]

Very interesting post. About a year ago I had an opportunity to purchase at a West LA condo community under these same terms. I determined it wasn't worth it. Not being able to resell the unit at a profit was the deal-breaker for me.

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