Manna gave testimony at a public hearing on July 25 for the DC Department of Housing and Community Development. The hearing was to provide the public an opportunity to respond to the proposed FY2013 Consolidated Action Plan. This plan will guide the Department of Housing and Community Development (DHCD) through most of 2013.
This post covers the testimonies of homeowners and Manna regarding long-term resale restrictions administered by DHCD. Long-term resale restrictions require buyers to sell to someone else in their income category for 15-30 years and restrict equity access and build-up during that period of time. Click here for more information.
Manna began by explaining why the entire Manna Board of Directors and staff believe that the long-term resale restrictions implemented by DHCD are unfair and make it difficult to sell units:
· Family circumstances—death, marriage, divorce, kids, health problems, job transfers—change over time. Long term and resale requirements by their very nature severely limit equity buildup. The fact is that most affordable units are 1 and 2 bedroom types. If you cannot build equity, you cannot trade up when a life-changing circumstance occurs and you need more space. You are really a glorified renter, and can easily end up losing money. You may have to become a renter again if you need a larger home.
· Since these life-changing circumstances often cost a lot of money, very restricted asset buildup effectively prevents low-income owners from obtaining home equity lines of credit to handle emergencies.
· Our experience indicates that low-income prospects are educated about this issue and many refuse to buy units with restrictions. They will accept having a subsidy recaptured, but want to be treated fairly like others. They do have options, e.g. buying from for-profit developers with no restrictions or simply staying where they are currently living.
· With little potential for asset building, there is no incentive to maintain the condition of their properties.
· Neither DHCD nor any of the advocates on the other side of the issue have been able to produce data that justifies their positions on this issue.
The proponents of the current DHCD-imposed resale restrictions would have you believe that losing an affordable unit is sacrosanct and that making long term restrictions fairer would lead to the decimation of the affordable housing stock. They would have you believe that low-income owners will make quick resales and flip units for a quick profit. They would have you believe that there are ways for low-income families to build substantial equity under the current system. Yet they haven’t produce data supporting these assertions, and Manna’s experience indicates the opposite.”
Manna also touched specifically on the situation of Affordable Dwelling Unit (ADU) owners who were integrated into market-rate condo buildings:
“Many ADU owners are now facing unexpected hurdles. Often unaware of the actual impact that these restrictions would have on them, these homeowners certainly didn’t know that they would become social pariahs in their buildings or that their condo fees would increase by around 75% in just three years of ownership (as opposed to the standard 3-5% annual increase that normally occurs with market rate units). They didn’t realize that when an emergency came up that warranted relocation, they would face an extraordinarily tedious resale process that would require them to do the work of a realtor, a lender, a home inspector, an appraiser, and a housing counselor, as well as vet each potential buyer with DHCD, draft a real estate contract, and ultimately assume the District’s role of preserving affordable units for other low and moderate income families. These homeowners spent months working to purchase their units and after years of making mortgage payments and managing escalating condo fees, real estate taxes, and other expenses, they thought they would be entitled to some reward for their hard work and assumed risk. This hasn’t been the case, and with long-term restrictions in place, will never be.”
ADU owners dealing with long-term resale restrictions and rising condo fees also testified:
Sarita - ADU owner in Ward 3
“My condo fee was originally set at $324 [in 2008]. This spiked to over $500 11 months later. Since that time, the condo fees I am required to pay have only risen further...I am now burdened with a monthly condo fee of $700. Not only does this represent a 116% increase from the original amount but it is also higher than my monthly mortgage payment. While I do recall some discussion regarding potential projects within the building that might require greater condo fees, I was never informed that such drastic increases would be in the works. Why did the City not plan for this? Never in my wildest dreams did I imagine the possibility of paying a higher amount for condo fees than for my mortgage payment. I stand assured that if this were to be conveyed to me before settlement, I would never have agreed to [purchase in my building].
Tanya - ADU owner in Ward 1
“I’ve always wanted the opportunity to become a home owner in this area and that opportunity presented itself in 2007 when I purchased my condo... At that time I couldn’t have imagined how much my life would change: taking in an elderly friend, getting married and having a baby... As most at DHCD know, I was not given a free home. I had to qualify with credit and finances in order to even be eligible to purchase this unit. I pay the escalating condo fees associated with living here as well as utilities. Currently I rent a parking space because we were not allowed to purchase parking with the ADUs...What bothers me is that when we face economic difficulty as others do, our homes that we worked hard to pay for can’t work for us as they do for every other homeowner...I’m not asking DHCD to dismiss all requirements, but to instead reconsider the amount of time the restriction is tied to our property and work with owners, the City Council and others to address this situation. Life happens! It’s not easy to remain the same for 20 years and if you do, something is wrong. Buying your first home should be a stepping stone, not a road block.”
