Affordable Housing Still Scarce

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Payson's Housing Advisory Commission this week will grapple with complicated options for helping working people buy homes, although the housing slump of recent months has apparently undercut its initial efforts.

The committee on Thursday will study a developer's proposal to meet the town's affordable housing goals with financing arrangements that could enable people willing to share potential equity in their homes with a lender in return for a no-money-down, below-prime interest rate.

Formed just over a year ago to come up with creative new ways to make sure builders provide homes that Payson workers can afford, the committee had accumulated roughly $1 million in various subsidies and incentive programs.

However, the softening real estate market has put many of the projects that had promised to contribute to work-force housing on hold, according to Community Development Director Jerry Owens.

Generally, the town has struggled to encourage subdivisions that the average Payson wage-earner can afford, including teachers, police officers, firefighters and other pillars of the community. The average single family house in Payson costs about $325,000, while the median income for a family of four in Gila County is about $44,000.

For years, the vacancy rate for apartments in Payson has also been so low that rents remain relatively high, although anecdotal reports suggest the vacancy rate has been rising in the past year. Coupled with a drop in school enrollment this semester, some speculate that the crackdown on the employment of undocumented workers and the looming recession may actually be causing the Payson work force to shrink.

The Housing Advisory Commission recently set the income threshold for its assistance programs at about 130 percent of the median county income -- or about $55,000 for a family of four.

The commission on Thursday in the Community Development Conference Room will discuss a plan by the proposed, 83-unit Mogollon Ridge development to offer residents low-cost loans as the way to fulfill its contribution to workforce housing.

That plan came in for council discussion last week at the first reading of a proposed zone change for the project. Town staff had recommended waiving the affordable housing contribution after the developer had agreed to pay $200,000 in offsite drainage improvements to benefit the neighborhood. However, several council members said the development should still contribute to providing affordable housing.

Developer Mike Horton suggested his contribution would be to meet with the Housing Commission to help it learn about a low-cost loan program, which would help middle- and lower-income residents get into a loan by giving the lender a share in the equity -- and therefore the appreciation of the home.

That idea could contribute to a variety of approaches the housing commission has embraced already, said Owens.

Payson for years has applied for federal grants and other programs to provide housing assistance for residents. The town has more than $500,000 in federal funds to help residents, making less than about $35,000 for a family of four, rehabilitate their homes.

The town has also approved several small apartment complexes near Main Street, financed in part through a complicated federal program that gives developers valuable tax breaks in return for an agreement to rent a certain share of the units to people with lower incomes. The Green Valley and Canal apartments will offer relatively low-rent apartments, once they're completed.

More recently, the town has asked developers of high-end projects to make some sort of a contribution to affordable housing, on the theory that the people living in those more expensive homes still needed a community that offered housing for teachers, police officers and other workers.

Developers have offered a range of pledges, from buying water hookup credits and donating them to Habitat for Humanity, to donating land. Most of those promises won't be redeemed until the projects are actually built, and several of those projects have been put on hold as a result of the housing slump.

Technically, contributions to affordable housing remain "voluntary," but most developers realize that since council members don't have to give a reason for opposing a new development the town staff has a lot of leverage in negotiating for contributions to things high on the council's priority list.

At last week's council meeting, several council members insisted that Mogollon Ridge Developer Michael Horton should work out something with the Housing Commission. Horton said any additional costs imposed by the council could sink the project -- which has already shrunk from more than the 100 units first proposed to 83. Payson imposes about $15,000 in fees for each unit, including a $7,500 water development fee and a $5,400 sewer hookup fee.

Richard Croy, a member of the housing commission and a council candidate, triggered the discussion by questioning why his commission had never been consulted.

"I was really sorry to see there was no contribution to affordable housing," said Councilor Su Connell. "If we have a housing commission, then they should be involved."

Horton said he has struggled to meet all the conditions the town has imposed and doubts he could absorb another fee to provide affordable housing. However, he said he is lining up $2 million in low-cost financing to make the units costing $240,000 to $350,000 as affordable as possible.

When it sounded like several council members were suggesting developers should routinely meet with the housing commission, Community Services Director Jerry Owens delicately said that such a requirement would further slow and complicate the development process.

Mayor Bob Edwards cautioned his fellow councilors against imposing new restrictions on a deal to solve neighborhood flooding problems.

"We have some homes with some serious flooding problems. And yes, work-force housing is a problem. But we have serious drainage problems we can't get resolved. I'd hate to see us play with this right now."

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