With Ironbridge closed to many, Garfield County considers housing changes
August 17, 2008
CARBONDALE ” Imagine for a moment that you and your spouse, 10-year-old son and toddler went to Saturday’s Ironbridge affordable-housing open house.
You promptly decided that the 20 three-bedroom, two-bath homes between Carbondale and Glenwood Springs were beautiful. You loved the garage. You knew the kids would love growing up with a pool and basketball courts nearby. You wondered if you might even be able to afford a membership to the golf course one day.
And let’s say a perfect storm of circumstances makes you eligible for the house: you meet the $53,200 income cap for a family of four, you have the 20 percent of the $230,000 house in cash ($46,000), which you’ve painstakingly saved over the years. You have no other substantial monthly debt (which could make you ineligible for the loan by raising your debt-to-income ratio). And you qualify for a 30-year mortgage with a 6.5 percent interest rate.
But you might wish to take a deep breath before applying for one of the first 10 houses by the Aug. 29 deadline: Statistics say you likely can’t afford that house.
Your housing costs each month, including a mortgage payment, taxes (estimated at $150), insurance (estimated at $50) and a $147 monthly HOA fee will now be approximately $1,700 a month, or $20,400 a year, roughly 38 percent of your pretax income.
Assuming you take the standard deduction, you will pay roughly $4,781 in federal taxes and $1,562 in state taxes, says a calculator at finance.cch.com.
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Your other annual household expenses will be roughly as follows: $4,575 on gas, $9,190 on food, $1,512 on phone service, $2,250 on health insurance, and $8,270 on child care for a child under 5. That’s according to Elizabeth Warren of Harvard Law School, who testified July 23 before the congressional Joint Economic Committee.
In short, your yearly standard expenses will be $52,540 ” leaving you only $660 for entertainment, emergencies, school supplies, vacations, savings, vehicle insurance and repairs, and anything else that comes up.
The Garfield County Housing Authority realizes there might be “a narrow pool” of applicants for the Ironbridge houses, said executive director Geneva Powell.
The county is working to change the affordable-housing section of the land-use code, but was not able to do so in time for the Ironbridge lottery, she said.
Right now, the county rules require that applicants make no more than 80 percent of the area’s median income. So income caps are set as follows: $37,250 for a single person, $42,550 for two people, $47,900 for three people, $53,200 for four people, $57,450 for five people and $61,700 for six people.
The regulations allow for all the houses at Ironbridge to be sold at one price, as long as that price is considered affordable for some income categories. Powell speculated that at Ironbridge, the developer may have felt that the three-bedroom houses should be keyed toward larger families. Currently, developers work with the county to set home prices, she said.
It appears the home prices were keyed toward the largest family size: a family of six. At a set price of $230,000, a family of six would only spend 33 percent of its pretax income on housing, the debt-to-income ratio considered desirable, according to Garfield County’s proposed new land-use code. On the other hand, a single person who tried to purchase a house at Ironbridge would be spending 54 percent of his pretax income on housing costs.
Not only does a higher debt-to-income ratio squeeze a family, it can arguably make it harder to actually get a mortgage. But Powell said the county closed on four units earlier this year for a higher price than the Ironbridge units, using the same income caps. And while she acknowledged that the rapidly changing mortgage climate may make it more difficult for this fall’s winners to obtain mortgages, she believes the county will ultimately be able to find enough qualified buyers.
And several local mortgage brokers (speaking on condition of anonymity, since they were not official spokesmen for their banks) said that buyers should be able to qualify for loans based on these house prices and income caps, as long as their other debt is “reasonable,” and they have very good credit.
But unlike most local people who take on a big mortgage, buyers of the Ironbridge units arguably won’t be able to console themselves with the knowledge that their tight budget will pay off when their house appreciates. Ironbridge units can only appreciate at 3 percent or the Denver-Boulder Consumer Price Index, whichever is higher.
In addition to setting buyers up for a high debt-to-income ratio, such low-income caps arguably exclude a segment of people who neither can afford regular market housing nor qualify for affordable housing.
But Powell argues that there are affordable-housing programs in Basalt and Carbondale right now for folks in those income brackets. And she notes again that Garfield County is doing its best to change its program.
The proposed changes to the Garfield County land-use code would create three income categories: 80, 100 and 120 percent of average median income. Such a change would suddenly make Garfield County’s affordable-housing program an option for thousands in the Roaring Fork Valley who can’t afford free-market housing.
It would also require developers to prorate homeowner association fees for owners of affordable-housing units. Prorated amounts would be based on the difference in lot size or unit size between market rate and deed-restricted properties.
Lastly, it creates a clear formula to set house prices. A studio must be priced so that a single person couldn’t be expected to pay more than 33 percent of his gross monthly income toward housing. A one-bedroom unit must be priced so that two people will keep their housing costs at 33 percent, and a five-bedroom unit must be priced so that six people can keep their housing costs at 33 percent.
The newly revised land-use code is now in the hands of the Planning and Zoning Commission, which will then send it back to the county commissioners, according to Powell. She said the planning staff has not been able to give her a solid estimate of how much longer the process will take.
According to Powell, since the affordable-housing program was started in 2001, the cost of real estate in Garfield County has risen so fast it’s been hard to keep up.
“The market just kind of got out of whack faster than we anticipated,” she said.
She pointed out that in Glenwood Springs, there is currently a 1.4 percent vacancy rate.
“That’s like saying zero,” she said. “If you don’t have at least a 3 percent vacancy rate, you don’t have places to house people.”
So the housing office is working on trying to catch up with the market, she said. But for now, many Garfield County residents will just have to wait for the new affordable-housing code.
“All I can say is it’s coming,” Powell said.