Win an affordable housing lottery, lose out on equity? |

Win an affordable housing lottery, lose out on equity?

Janet Urquhart
Aspen Times Staff Writer

The local affordable housing program harms the very people it’s intended to help, according to a local man who grew up in government-subsidized housing elsewhere.

Aspen resident Jerry Bovino recently pitched his ideas for revamping the housing program to the Aspen-Pitkin County Housing Board.

While board members weren’t convinced Bovino’s plan would work, several praised his attempt to devise a program that would allow buyers of deed-restricted housing to recoup more money from their investment.

It’s all about equity, according to Bovino, who said his parents purchased a government-subsidized apartment in New York after his father returned from service in World War II. Decades later, they recouped little more than the $9,000 they paid for it, while free-market homes across the street that sold for $12,000 initially had accrued in value by hundreds of thousands of dollars. What was intended to help veterans actually hurt them, Bovino said.

The deed-restricted housing built for local workers functions in much the same manner and spurs local residents to move downvalley, where they can buy a free-market home that allows them to accumulate equity, Bovino contends.

The housing program seduces local workers into buying a unit and then robs them of normal appreciation in their homes ? the most important source of equity growth enjoyed by most middle-class Americans, he said.

“I’m concerned that unless we restructure the affordable housing program, we’ll have a system that harms the very people it’s trying to help,” Bovino told the board.

Tim Semrau, a city councilman and board chairman, said he too believes appreciation is a concern for buyers of deed-restricted housing. Semrau, a builder, has several deed-restricted projects to his credit.

“When I sell the units and talk to people, it’s a big deal,” he said. “People generally retire on the equity of their home ? it’s a huge deal.”

Local deed-restricted units do appreciate in value. New units appreciate at 3 percent a year or at the Consumer Price Index rate, whichever is less. There are some homes that gain 4 percent annually and some of the oldest units in the housing authority inventory appreciate by as much as 6 percent.

“Do you plan on making a huge windfall? No. Is it for investment purposes? No,” said Cindy Christensen, operations manager for the housing authority. “But it’s not like you’re not going to be able to walk out with some type of equity.”

“We have a capricious or arbitrary appreciation,” countered Bovino, who proposed what he calls a “blended free-market” approach to affordable housing.

@ATD Sub heds:Subsidized mortgages

@ATD body copy: Rather than using government money to subsidize units, Bovino suggested Aspen and Pitkin County subsidize mortgages by “buying down” the interest rate on the mortgage for a deed-restricted unit.

The less an individual earns, the greater the subsidy, but as a homeowner’s income rises, the subsidy would decrease. A homeowner would have to turn over his or her tax returns annually so the housing office could track income.

The idea, Bovino said, is to provide a helping hand to buyers rather than a lifetime subsidy.

As a hypothetical example, he suggested the buyer of a $180,000 unit with a $30,000 down payment and a 6 percent interest rate would face a monthly interest payment of $750. A subsidy, based on income, could drop the interest payment to $250, $375 or $500. Someone who earned enough money wouldn’t qualify for any subsidy. When the unit is sold, the buyer sells it for whatever price he can get, but must repay whatever subsidy he has received over the years with the proceeds. That, said Bovino, is an incentive for the homeowner to increase his income and end the subsidy as quickly as possible.

Since the unit must be sold to a qualified, full-time worker, the resale price can’t escalate out of sight, Bovino reasoned.

“If we subsidize the interest rate on the mortgage, almost any apartment becomes affordable,” he said.

Board members and housing officials weren’t so sure, though several said they were intrigued by Bovino’s ideas.

Some buyers could wind up pocketing a pretty significant windfall, Christensen predicted.

“I like the idea of trying to build some equity ? maybe it’s not as aggressive as this,” said board member Sheri Sanzone.

“If there’s a way we could allow people to do that [realize greater appreciation] and still keep the goals of the program, it might be a win for everybody,” said Semrau, who was not present for the discussion, but is familiar with Bovino’s ideas. “I don’t know if it can work, but it’s certainly worth looking into.”

Bovino’s proposal represents a considerable departure from the original premise of the housing program, noted board member Jamie Knowlton. The idea, he said, was that buyers made the decision to forego huge appreciation in exchange for the opportunity to own a home in Aspen and pursue the lifestyle they love here, he said.

“A large return on your investment was something you gave up,” Knowlton said. “That was a decision the community made a long time ago.”

And, though the architects of the housing program decided to cap appreciation on deed-restricted units, it was at a rate considered comparable to national averages, Knowlton added.

Nonetheless, Knowlton lauded Bovino for coming forward.

“We like fresh ideas,” he said. “I think your ideas are valid, I’m not sure how we can make them work. I’d like to sit down with you over a beer.”

A new approach wouldn’t have to apply to the housing authority’s existing inventory, Bovino noted, conceding housing officials may be able to poke “a thousand holes” in the idea.

“Is this the exact plan? Maybe not. Maybe you can think of something better,” Bovino said. “There’s a pony in here somewhere that we can ride.”

[Janet Urquhart’s e-mail address is]

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