November 24, 2008

Must Have Limited Income (But Be Able To Afford $710/mo In HOAs)

501 Beale #5F: Bedroom

It’s a Mayor’s Office of Housing two-bedroom unit in the Watermark (which explains the appliances). And while the income restricted price is well below market rate ($287,375), keep in mind the monthly HOA dues are not ($710).

∙ Listing: 501 Beale #5F (2/1) - $287,375 (BMR) [MLS]

First Published: November 24, 2008 9:00 AM

Comments from "Plugged In" Readers

Editor: I'm guessing you meant "now $710"? MOH cannot mandate HOA fees for these units (as HOA's are mini governments run by the homeowners themselves) but they do figure them into the price the developer is able to charge for the unit. A lower HOA would yield a higher BMR price as a result. I have no idea what that means if, in a couple of years, the HOA decides to double their fee.

Posted by: Jake at November 24, 2008 9:13 AM

Editor: I'm guessing you meant "now $710"? oops, my bad, I misread, coffee needed...

Posted by: Jake at November 24, 2008 9:41 AM

Is anybody familiar with the rules (or a URL that clearly states them) on income limitations for these properties, and the general process to be approved to buy one of these?

For example, could a wealthy individual that had not been working and not been making income for a couple years come in and buy one of these properties? What are the controls here?

Posted by: T at November 24, 2008 9:49 AM

the listing points us to the main sfgov.org webpage, which i cannot easily navigate to find relevant information at this time, but i had read the qualification requirements before and there were restrictions on your wealth as well as income.

Posted by: condoshopper at November 24, 2008 9:57 AM

They average your last 3 paychecks, multiply by 12, then add 10% of your interest-bearing savings to see if you're under the income limit. They do check your last 3 tax returns for consistency.

Posted by: anon at November 24, 2008 10:00 AM

By the time I could afford one of these, our household was already over the limit. It seems to me most people couldn't afford a mortgage plus the HOA and be under it, unless they had help from family. I think possibly the only people who can have these are gaming the system and hiding their wealth, or have family helping them out, and in both cases they should have to deal with the open market like the rest of us. What a scam.

Posted by: kthnxybe at November 24, 2008 10:03 AM

Here is a link I found for BMR requirements:

http://www.sfgov.org/site/uploadedfiles/moh/programs/FirstTimeBuyer/Ownership%20Program%20Overview%205.8.08(1).doc

Note the fuzzy definition of a "first-time homebuyer". If you haven't owned for 3 years, you might still qualify. Also, look at the asset testing section: "The Mayor’s Office of Housing will apply an asset test to all applicants. Assets include all savings, checking accounts, gifts and other sources of money (cash) other than retirement accounts." Does this include brokerage accounts, funds, offshore accounts, other real estate? I'm sure the Mayor's Office of Housing has a huge, highly paid staff that can provide answers.

Posted by: FSBO at November 24, 2008 10:11 AM

It includes anything that isn't a retirement account and makes interest. If you have other real estate you obviously don't qualify.

Posted by: anon again at November 24, 2008 10:20 AM

They also sometimes require annual reporting to confirm that you still qualify after you purchase. I see that as a real disincentive to earning more income, trying to better yourself, etc. In my opinion, the MOH would be better off with participating mortgages, and they would just participate less as your income increases AND changes over time. But who am I....

Posted by: Dede at November 24, 2008 11:13 AM

They also sometimes require annual reporting to confirm that you still qualify after you purchase.

And what do they do if you stop qualifying? Throw you out? Charge you what they consider to be "fair market price"? I don't see how this can be applied. It's probably one of these clauses you ad to reassure yourself you've closed a loophole in a badly designed scheme.

These BMRs are artificially reducing affordable supply to most, do not taper demand (the beneficiaries wouldn't qualify in this market), incite developers to make up for it with the Market rates units. You have helped A FEW but have made the market worse for ALL.

Instead of letting the market decide on a (probably) lower price, they compound the problem with these gimmicks.

Rent control does the same thing: the lucky pay less, the unlucky pay more and no social wrong was actually resolved in the process. But a lot of goodwill was damaged along the way: Think landlords who would like to charge a more reasonable rent for more peace of mind but HAVE to ask for an arm and a leg because they can hear the rent control machine skimming them little by little.

Posted by: San FronziScheme at November 24, 2008 11:31 AM

They don't do annual reporting - once you're in, you're in.

Posted by: Michael at November 24, 2008 11:35 AM

These are great for college kids. They have no income -- but the parents can help out. Great way to start.

Posted by: Mark at November 24, 2008 11:56 AM

Here's a story for you on BMR housing. Seems our illustrious BOS member Chris Daly gamed the system. Shortly before becoming a BOS, he bought a BMR unit for himself. The very next few months, he was elected to the BOS and in a flash, didn't qualify anymore for the program. But, he gets to stay in the home and enjoy the fruits of everone else's labors. Typical Daly.

Posted by: Insider at November 24, 2008 12:12 PM

My problems with this program are that: 1) it is a disincentive to move up economically since you are limited to an increase upon sale while you still have to dump ( presumably) all that you can afford to buy it to begin with. BMR Renting would be a wiser choice allowing people to keep their capital to invest in a better deal;
2) the program mixes not only income classes but people with different economic goals; so the HOA issue leads to a built in culture war when those who vote for improvements are opposed by those who want to see the HOA dues stay the same

$710 seems pretty high to start with in this case

Posted by: jose at November 24, 2008 12:23 PM

These units are perfect for law, medical, and business school grad students. You buy with help from family while you're in school. Once you graduate and land a high income, you pay off your family and the unit quickly. When I was in grad school, people approached me with this deal. Apparently I was either too ethical or too risk-adverse.

Posted by: D at November 24, 2008 12:42 PM

Ah, the stupidity of the whole BMR program, out for everyone to see. Idiot progressives.

Posted by: Usually Named at November 24, 2008 1:00 PM

You do not have to move out of a BMR if your income goes up. There are some programs where income monitoring is part of the requirements, but this is NOT one of them.

Insider, your information is hardly that. I'm no Daly lover, but he did not "game the system" getting his unit. This is old news and if he didn't get elected to the BOS, his family might very well remain eligible (eligibility is also based on number of family members). Anyone can get one of these units if you meet the requirements and the next year you can make $50 million , it doesn't matter. MOH is fully aware of this and could care less because the whole idea is to get people who otherwise could not afford it, into homeownership. That's why it's known as a "first time homeowners program".

Posted by: Jake at November 24, 2008 1:18 PM

Not one but two comments pointing out that it's great for young people just starting out with help from their family. If they have help from their family,why do they need help from this program?! Gah.

Posted by: kthnxybe at November 24, 2008 2:15 PM

BMR programs do distort markets in nasty ways, but they also result in a mix of units. That is the key, and in turn increases community diversity.

Posted by: Mole Man at November 24, 2008 2:24 PM

I heard that the Ritz Residences created BMO units in another building. Which very honestly, probably makes the most sense for everyone.

Posted by: pwb at November 24, 2008 3:18 PM

I guess then when one of the BMR unit owners in my building didn't take a higher paying job because she thought she'd loose her unit was either ill informed or just lazy. Not a big fan of BMR units in a for sale building. You get into all of these class discussions at HOA meetings that to say the least are full of bad friction.

Posted by: Dede at November 24, 2008 3:21 PM

You are correct about the Ritz. Another example of creating another development to house the BMR's is the Infinity. Instead of having BMR's in the complex itself, they opted to put the BMR's at 888 7th St. The ordinance stipulates only that BMR's be located within a mile of the primary complex and that more BMR's be made available if the developer chooses to take this route.

Posted by: insider at November 24, 2008 3:41 PM

I'd like to know what happened to ORH's BMR units. I'm sure they're not onsite.

Posted by: Michael at November 24, 2008 3:47 PM

That is definitely a BMR-looking kitchen.

Posted by: deshard at November 24, 2008 3:58 PM

888 7th definitely isn't within a mile of The Infinity.

Posted by: who at November 24, 2008 4:04 PM

Since when do you need to stage a BMR unit to sell it??

Posted by: sunnyvalesteve at November 24, 2008 8:43 PM

staged? really? is that what the curling irons on an upside down bucket are for? heaven forbid the current bmr resident has a bed AND a couch! with pillows! OMG what's next?! maybe a tee-vee?

Posted by: michael at November 25, 2008 12:14 AM

Michael,

ORH paid the city a fee (huge I'm sure) I don't know the exact amount to not have to have any BMR's.

The developer can set aside X amount of units in the building as BMR's based on how many units in the building total. OR they can pay a nice chunk of change to the city, intern the city uses the money for other BMR housing projects.

I can't think of another development off the top of my head that has done this recently...

Posted by: Ryan at November 25, 2008 5:40 PM

The BMR program has good intentions, but the requirements are unrealistic. Yes, 50% of SF households meet the income requirements, but in reality, a very small percentage will have the resources and credit to actually purchase the BMR property.

Using this unit as an example, a couple earning less than $75,450 combined must be able to 1)come up with a down payment of $25,000-$50,000 to qualify for a loan (must be "seasoned" funds -not gifted prior to closing), 2) $8,000 for closing costs and 3) maintain mortgage/HOA payments around $2,600 per month. To make things even more difficult, the MOH applies the down payment above a certain level towards annual earnings, so an applicant is penalized for saving the money required to secure a home loan (if a couple can somehow afford to save on $75,000/yr in the Bay Area).

Does this seem realistic to anyone?


Posted by: Dakota at December 8, 2008 3:36 PM

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