To:   HONORABLE MAYOR                             From:   Leslye Corsiglia

                        AND CITY COUNCIL                                              

 

   Subject:   SEE BELOW                                               Date:   November 24, 2003

 

COUNCIL DISTRICT:  Citywide

SNI Area: All

 

Subject:     REVISIONS TO THE TEACHER HOMEBUYER PROGRAM.

 

RECOMMENDATION

 

Adoption of a resolution modifying the Teacher Homebuyer Program as follows:

 

  1. Decreasing the maximum loan amount from $40,000 to $25,000 for teacher households that earn between 90% and 120% of Area Median Income.

 

  1. Establishing a maximum home purchase price of 95% of the median home price for the San José Metropolitan Area.

 

  1. Making the proposed changes applicable to home purchase contracts executed after January 31, 2004.

 

  1. Authorizing the Director of Housing to negotiate and execute all necessary documents evidencing the program revisions on behalf of the City.

 

BACKGROUND

 

On June 29, 1999, the City Council approved the Teacher Homebuyer Program (THP).  Modifications to the program were adopted by the City Council on April 4, 2000, increasing the maximum loan amount from $7,200 to $40,000.  The program has been a significant success and has served nearly 400 teachers to date.

 

During FY 2002-03, sustained high program production at the $40,000 maximum loan amount resulted in the depletion of program funds by March 31, 2003.  While in past years, additional funds were made available to meet the demand for the program, the City’s current funding constraints limit the amount of funds available for the program.  Based upon first quarter data for the current fiscal year, the Department is projecting to exhaust the FY 2003-2004 THP appropriation by April 2004.

 

Accordingly, the Department is proposing changes that are intended to make the program more cost-effective while continuing to assure that the program will continue to achieve its primary objective—attracting and retaining public school teachers that are needed to provide quality education for San Jose youth.

 

ANALYSIS

 

The following proposed revisions are designed to help ensure that limited THP funds are used most efficiently and can maximize the number of teachers assisted.

 

Maximum Loan Limit

 

The Department recommends decreasing the maximum loan amount from $40,000 to $25,000 for teacher households that earn between 90% and 120% of Area Median Income.  This recommendation is based on several considerations:

 

·        The income restrictions for the THP program, based on limits published by the California Department of Housing and Community Development (HCD), have increased since the program was approved.  In 1999, the income limit for a four-person family was $99,100; in 2003, the limit is $126,600, a 30% increase.  As a result, more moderate-income teacher households are able to purchase a home without the assistance of the THP. 

 

·        The number of non-City resources for first-time homebuyers, including teachers, has increased steadily since the THP was approved.  Many teachers assisted by the THP take advantage of  three or four different levels of homebuyer assistance.  The THP program has successfully combined with the California Housing Down-payment Assistance Program (CHDAP) authorized by the Proposition 46 statewide housing bond issue.  Typically, the amount of CHDAP funds available to teachers is $15,000.  Neighborhood Housing Services Silicon Valley (NHSSV) is also able to assist teachers by leveraging the funds from local lenders that have contributed to the non-profit’s first-time homebuyer program, the HomeVenture Fund.  In addition, teachers have been able to cover their loan closing costs by applying for funds from the Santa Clara County Housing Trust Fund.

 

·        Other City commitments have made units available for teacher homebuyers.  With the City’s commitment of nearly $5 million for an estimated 95 down-payment assistance loans to KB Homes’ Midtown Plaza Project, teachers can purchase a unit at Midtown Plaza with less THP funding. 

 

Maximum Purchase Price Limit

 

The THP program guidelines do not establish a maximum purchase price limit.  Such limits are requirements for all of the assistance programs with which the THP may be combined, including the California Housing Down-payment Assistance Program (CHDAP) and other California Housing Financing Agency down-payment assistance programs.  A purchase price limit would assure that homes purchased with THP assistance would be relatively modest, yet not restrict the number of quality homes available in the marketplace.

 

It is proposed that the maximum purchase price not exceed 95% of the median area purchase price for Santa Clara County, currently approximately $475,000.  This is the limit used for any homebuyer assistance or home rehabilitation that is assisted with federal HOME funds.  A recent analysis of THP assisted home purchases indicate that nearly all the homes were purchased for less than this amount, however several did exceed $475,000.  In addition, this standard is compatible with the 90% average area median home price limit that the federal Internal Revenue Code requires for a Mortgage Credit Certificate, another tool used to assist teachers in purchasing a home.

 

Effective Date

 

It is proposed that the recommended changes be applicable to home purchases that occur after January 31, 2004.  This will allow for an orderly transition and avoid adversely affecting home purchase negotiations currently under way.

 

COST IMPLICATIONS

 

No additional funds are required to implement these recommendations.

 

PUBLIC OUTREACH

 

Not Applicable.

 

COORDINATION

 

The preparation of this report has been coordinated with the Office of the City Attorney and the City Manager’s Budget Office.

 

CEQA

 

Not applicable. Not a project.

 

 

LESLYE CORSIGLIA

Director of Housing