The challenge Payson faces in attracting projects that will provide housing even for "low-income" residents making $60,000 annually dominated a recent housing commission discussion of a proposed 83-unit subdivision.
After a detailed conversation, developer Mike Horton last week promised to offer innovative "shared equity" mortgages on at least five units in the Mogollon Ridge subdivision on Houston Mesa Road.
The commission accepted that pledge as a sufficient effort by the developer to help provide work-force housing, which the Town Council had debated in approving a first reading of a rezoning request for the project.
The project now goes back to the Town Council for a second reading on the zone change request this Thursday, March 6. The meeting starts at 5:30 at Town Hall.
Horton is still working on lining up financing for a mortgage plan that would enable residents making roughly $60,000 for a family of four to qualify for a no-money-down mortgage that was a couple of points below prime, providing the owners agreed to share with the lender a portion of the appreciation of the house while they owned it.
That approach could reduce the monthly mortgage cost to about $1,500 from about $1,800, according to rough estimates based on a chart provided by the federal Department of Housing and Urban Development.
Horton said that he hopes that perhaps a dozen of the two-bedroom townhouses in the 83-unit project will sell for a low end of $240,000 or $250,000. He hopes all of those units will qualify for the still speculative shared equity mortgage program that will effectively buy down the purchase price by about $30,000 -- which would make the units just barely within the reach of a household earning $60,000.
The debate also underscored the tradeoff between town requirements on other issues -- including lower densities -- and the ultimate cost of the units.
For instance, Horton noted that at one point, he'd asked for as many as 131 units on the 12-acre parcel. Neighborhood objections over time whittled down the number of units, with an ultimate design that made sure only single-family units faced other single family units in the neighborhood. The smaller, cheaper townhouses all ended up in the interior of the project. Horton estimated that at the original 131 units, he could have offered up to about 25 units each costing less than $200,000. The current preliminary plan calls instead for 15-18 units each costing about $250,000.
So far, the Mogollon Ridge project has been best known for struggles with the neighbors and a bright orange fence, which were resolved earlier this year when the developer agreed to pay $200,000 to help solve existing offsite drainage problems affecting about a dozen neighborhood homes -- which will add about $2,600 per unit to the cost of Horton's homes. When the project came to the council for a zone change, several council members asked that Horton also work out something with the housing commission to contribute to the provision of affordable housing.
The town has struggled to provide affordable housing in the past year and has accumulated roughly $1 million in pledges from developers, although the housing slowdown has cast doubt on many of those arrangements by stalling approved projects.
The wide-ranging discussion before the housing commission highlighted the difficulties.
"The council needs to make the decision as to what the priorities are," said Michael Hughes, a Realtor and town council candidate who serves on the commission, in reference to his belief that affordable housing is often a planning afterthought.
"In a sense, they've made that decision," said Horton, pointing out that the discussions with the town so far had focused more on getting him to contribute to the drainage problem and build lower densities than on keeping the cost of the units low.
"Where does it end," said Hughes, "when it comes to changes made to appease the neighbors?"
"I just felt we got left out of the process," said commissioner Richard Croy, an affordable housing advocate who is also running for council and whose appearance at the zone change hearing prompted the council to ask for more input from the commission. "How do we assure this gets done?" he said of the effort to fashion an agreement.
"It's to my advantage to get it done," said Horton, noting that the lower cost units and mortgages will sell better.
But he resisted an inflexible promise on the sorts of mortgages he could offer. "We have an economy that has both inflation and deflation" and setting up the shared equity mortgage program with lenders "is going to be like herding cats."
In the end, Horton agreed to a promise to offer at least five units that a family of four making $60,000 could afford by paying up to 31 percent of their income.
Payson has adopted a standard that makes anyone making up to 130 percent of the average income in the county eligible for help in getting "work-force" housing.
The HUD chart indicated that the average income for a family of four in the county is $45,700, which means they can pay only $1,143 a month and afford a $169,000 home. Town officials estimate that the average home price in Payson currently stands at $225,000.
In addition to providing at least five homes affordable to that hypothetical family of four making $60,000, Horton agreed to share with the town all the information he gathers on the shared equity mortgage approach, so the town could take advantage of that option on future projects.