In August 2023, the City of Boulder launched a down payment assistance program for middle-income home buyers, hoping to give residents a foothold in a housing market where prices are rising faster than incomes. More than two years later, no one has signed up, according to city officials.
City officials are now considering ending the program as soon as June. They said certain requirements, including the timeline for repaying the loan and a cap on appreciation rates, may have deterred potential participants.
Ending the pilot would close one of the city’s few programs aimed at adding deed-restricted, permanently affordable units for middle-income residents to Boulder’s housing supply.
In January 2022, councilmembers made launching the program one of their top priorities, after the pandemic paused work on it. The program was open to residents earning 80% to 120% of the area median income. That’s roughly $84,000 to $127,000 for an individual, according to the Colorado Housing and Finance Authority.
The program offers a 0% interest loan of up to $200,000. In exchange, buyers must agree to a deed restriction capping appreciation at up to 5.2%, according to a city staff memo. The loan must be repaid within 15 years or at the time of sale, and future buyers would have to meet the same income requirements.
City officials said the combination of capped appreciation and repayment terms may have created concerns among potential participants. The program also may have been less appealing compared with the city’s other affordable homeownership options.
The city’s House to Homeownership program, for instance, known as H2O, offers a 0% interest loan of up to $100,000 that does not have to be repaid for 30 years or until the home is sold. Buyers are not required to sign a deed restriction capping appreciation. Instead, the city collects a share of any appreciation based on the loan amount. Future buyers of those homes also do not need to meet income requirements, and the home can be sold at market rate.
Since 2000, 94 households have participated in the H2O program, according to city officials.
Hollie Hendrikson, a housing policy senior project manager with the city’s Housing and Human Services, said the city has not formally received feedback from residents who chose not to participate in the middle-income down payment pilot. But she said it likely suffered by comparison.
“The middle-income down payment assistance program offers a higher assistance level than the H2O program,” Hendrikson said. “But that comes at a price, and the price is a deed restriction. And we’re just assuming that when people see those two options side by side, it’s just not a competitive comparison.”
A central goal of the pilot was to add deed-restricted units to the city’s housing supply for middle-income residents. That segment is particularly challenging to serve because it falls outside the reach of most affordable housing subsidy programs, which are designed for lower-income households, but also does not pencil out for market-rate developers.
The city’s middle-income housing goal, established in its 2016 strategy, is to build or preserve 3,500 middle-income homes by 2030, including 1,000 deed-restricted homeowner units.
Of Boulder’s current 836 affordable homeowner units, 107 serve households earning above 100% of area median income and 595 serve households in the 61% to 100% range, according to city data. The city’s affordable housing dashboard does not break the data down by the middle-income threshold of 80% to 120%.
The middle-income downpayment assistance program followed the passage of a 2019 ballot measure in which voters authorized the city to take on $10 million in debt “for a housing assistance program that will include permanently affordable deed restrictions and make loans to middle-income households to purchase homes sold in Boulder.”
City officials said they have not yet drawn on that debt.
Councilmember Matt Benjamin indicated during a council meeting earlier this month that he would like to see the money directed toward a new middle-income program.
“It’s hanging out there as an unfulfilled promise to the voters,” Benjamin said. “I just think we owe it to them to either say, ‘hey we got a new plan for this money’ or something.”
This program was a very bad idea from the beginning. It is illogical that one would buy into this scheme and for Mr Benjamin to suggest that the money be repurposed also is a poor idea. Just say we made a mistake and we are not going to do this any longer. Get out of the mortgage business and do something meaningful like fix the roads which are a mess.
Other communities are building affordable housing with deed restrictions, so the investments last 100 years instead of when whoever sells their home and moves on. It’s obvious by the results, that the current plan isn’t competitive.
Change the plan, put the money to work, and let’s get more housing built. There’s no need to stay beholden to the long-timers that want to inflate housing costs to fund their lifestyle.
I agree that money for middle income buyers is misdirected. But this debt isn’t available for other projects like roads, that is what the new transportation fee is for. The notion that building more is going to make this place more affordable based on supply and demand is false in this market, part of economics 101 is understanding what an inelastic market is, and that Boulder is it. Affordable housing will only come with mandates and continuing to require a 20 percent contribution to the affordable housing fund or units by developers. But that program is not geared to creating middle income housing.
I live in Boulder and have been here for nine years. During that time, I’ve often fallen into the income range for affordable housing or middle-income loan programs. However, I’ve repeatedly been excluded because of asset limits.
The frustrating part is that most of my assets are in retirement accounts. I’ve lived very frugally and prioritized saving because I know how important it is to plan for the future. But the way these programs are structured ends up penalizing that behavior.
As a single-income household, buying a home in Boulder has always felt like it would make me house-poor, so I’ve continued to save instead. Yet those savings—money that isn’t realistically accessible without major penalties—end up disqualifying me from programs designed to help people in exactly my situation.
I hope the city also considers how asset limits affect long-time residents who have tried to be financially responsible. Right now, it feels like people who save carefully are being unintentionally excluded.
Why end a program which no one is using? These programs are important evidence of Boulder’s good will, used or not. To end a program like this places an unfair burden on Council and staff to evaluate effectiveness before enacting a program. It is much more important to do things than to fuss about structure and utility. Council, staff, and various boards do not have time to do market research ahead of action. Such research would deflect time and funds from the most important mission, which is to solve self-evident problems via new programs.
Lou Barnes
Yet again another demonstration of the fact that city council does not have the slightest clue about how to approach the affordability problem. How was this wrong headed approach supposed to make it more affordable for middle income buyers? It put extra burden on them and simultaneously stripped them of appreciation. What a deal! As our schools are emptying and the population rapidly ages, council continues to grasps at straws thinking they can just pull something up to address problems that are beyond their ability to understand or manage. I shudder to think what else they may concoct.
Also, I recall Kurt Firnhaber recently saying that Boulder should consider becoming an affordable housing developer, especially because they now have the new modular factory and it would be cost effective to do the work themselves. Could this be what Matt is thinking of when he says he wants to repurpose that debt funding?
I would have qualified for this program when I bought my first condo, but I would have sacrificed the appreciation that allowed me to leverage that into a small sfh after some more years of savings and career growth, which I will then leverage into the next home as my family grows.
Signing away your appreciation is not worth it in Boulder. Better to get something smaller that needs work, and build equity. One of the reasons I bought in Boulder BECAUSE I knew it would help me become more financially secure.
Like it or not, home equity is the biggest driver of wealth for the middle class. Take that incentive away, owning doesn’t look so attractive (especially after the hidden costs!).
The city should help middle income buyers enter the city and create generational wealth by letting them keep the equity. The current program perpetuates further wealth inequality and should be sunset in its current form.
The lack of appreciation for the home buyers was the main reason people did not use this program.
There is no middle income anymore. Your either dirt poor or rich and the divide is growing fast.