March 18, 2010

Relaxing BMR Rules At Mission Walk To Compete With Bank-Owned

Mission Walk Walk (www.SocketSite.com)

Plugged-in people should have seen this coming (others simply scoffed at our noting reductions on BMR re-sales and comparisons of bank-owned and BMR price points).

From the Examiner today:

Purchasing rules that govern scores of San Francisco Redevelopment Agency condos are being relaxed to help sell the units in a battered real estate market.
“We’ve never had this much inventory on the market,” Redevelopment Agency Executive Director Fred Blackwell said.
Agency commissioners this week raised the income cap for buyers to qualify for some of the units at Mission Walk — a 131-unit, two-building project completed on Mission Bay’s Berry Street in July — from those earning 100 percent of The City’s median income to those earning 120 percent.
“The price points, when you look at foreclosures and look at our units, are pretty much the same,” he said. “What people are doing, it seems, is choosing to go with the foreclosures because the foreclosures don’t have the same kind of income restrictions or equity restrictions.”

Income restrictions have already been relaxed for the Bay Oaks development at 4800 Third Street and are expected to be relaxed for the 125-unit project at 5600 Third Street.

The Redevelopment Agency might also begin offering down-payment assistance for buyers in either of the two Third Street developments.

Reductions Reach Below Market Rate Units On Ora Way (And Others) [SocketSite]
Buy A BMR For $10K $25K More Than Bank-Owned At Candlestick Point [SocketSite]
Changing rules to spur homebuying [San Francisco Examiner]
Mission Walk (330/335 Berry) Phase 2 Inventory/Application Scoop [SocketSite]

First Published: March 18, 2010 8:30 AM

Comments from "Plugged In" Readers

"The price points, when you look at foreclosures and look at our units, are pretty much the same"

Really? What is the price points?

I wouldn't mind buying a condo in Mission Bay

Posted by: zig at March 18, 2010 9:15 AM

I can understand why a buyer would prefer a market rate condo over a BMR if the prices are the same. But how does relaxing the BMR requirements address this ? Is this a matter of increasing the pool of eligible applicants in hopes of improving the chances of finding someone who does not see the disadvantages of owning a BMR ?

Posted by: The Milkshake of Despair at March 18, 2010 9:20 AM

“The price points, when you look at foreclosures and look at our units, are pretty much the same...”

So, lower the BMR price points. Fiddling with eligibility rules will accomplish about as much as fiddling with the interest rate and duration on an underwater mortgage.

Posted by: Delancey at March 18, 2010 9:21 AM

Prices can't be the same can they? They must mean elsewhere in the city there are similar prices (Like Candlestick Cove) and therefore some people are choosing that.

BMR would be 300-400K I would think

Posted by: SF at March 18, 2010 9:25 AM

It's 2010 and these SFRA fools are still in denial. They can afford to be after all: It's other people's money (the one generously given by the ever-gullible SF taxpayers).

HINT: Lower the prices to at least 30% under foreclosure / market rate and people will buy your bloody units. Foreclosures ARE a big part of the market in this segment, then why not adapt to the situation? It costs more to own BMR than to rent the same unit, and you have less of the upside potential that buyers expect in this town. The numbers have to make sense for people to buy into this scheme.

Posted by: lol at March 18, 2010 9:29 AM

The article states they are raising it from "those earning 100 percent of The City’s median income to those earning 120 percent". Anyone know what the median income is?

Posted by: sfquestion at March 18, 2010 9:35 AM

Am I reading this wrong?

Where are the comparable foreclosures that they speak of and what are the price points?

Posted by: Zig at March 18, 2010 9:37 AM

sfquestion, it's in the article:

A two-person household earning up to $77,450 originally qualified to buy a two-unit Mission Walk home for roughly $210,000.

Such households continue to qualify for the homes, but two-person households earning up to $92,900 also now qualify for the same units.

Only in SF is a couple making 92K considered "low income".

Posted by: lol at March 18, 2010 9:38 AM

so if the rules are relaxed to dupe more people into buying these, can the rules later be tightened to make it tougher to get out?

Posted by: resp at March 18, 2010 9:49 AM

I haven't seen any of these units come up for sale. If the prices are really pretty much the same as BMR units, I'm sure a lot of people would be interested.

Posted by: bornnraised at March 18, 2010 9:55 AM

This is typical asinine government self-preservation. If "BMR" is now "MR" or even above "MR" then just get rid of the program altogether! It is not needed anymore now that prices at the low end have fallen so far. As others note, only a fool would buy into one of these places now where you get little to no price break but all the disadvantages of homeownership (mortgage, maintenance, HOAs, property taxes, insurance, lack of liquidity, etc.) and you also miss out on the potential upside of appreciation you get with a market-rate place.

Posted by: A.T. at March 18, 2010 10:02 AM

The BMR resale restrictions should roll off over time (20 years.

The buy in price should allow citizens who make 50% of the median houshold income buy in.

Sales prices should reflect affordability to that level of income.

BMR should not restrict the size of the home a single people can buy.

Posted by: kathleen at March 18, 2010 10:02 AM

I think Mission Walk is nice, and the area is extremely convenient. My only 2 complaints are that Berry Street is (1) pedestrian unfriendly, and (2) they are having sewer problems, and on most days (in fact everyday I have been down Berry Street), the street smells like a sewer. The were working to clean it up, but it didn't solve anything.

A couple making $92k, should not be considered low income. They should reserve those units for lower income people, such as teachers, police offices, and anyone making under $60k. Especially since making $92k and buying a place that is $210k, is a MUCH better than most in SF

Posted by: SFRE at March 18, 2010 10:06 AM

"The BMR resale restrictions should roll off over time (20 years."

Perhaps, but who should reap the potential appreciation windfall when the restrictions are removed ? I see no reason that the current owner of the unit should benefit and it seems much more fair for the city to recover the windfall that occurs when adjusting to market rate.

Posted by: The Milkshake of Despair at March 18, 2010 10:07 AM

"for lower income people, such as teachers, police office[r]s, and anyone making under $60k"

Police officers? Boy, are you out of touch.

Posted by: tipster at March 18, 2010 10:13 AM

"for lower income people, such as teachers, police office[r]s, and anyone making under $60k"

"Police officers? Boy, are you out of touch."

And have you ever heard of the California Teachers Association. Take a look at the teachers salaries, even in San Francisco, thanks to their union lobby.
http://portal.sfusd.edu/data/hr/salary/CredentialTeachers.pdf

First year teacher in SFUSD with no additional degrees start at $47k, top out at $82k. While not a fortune, this is certainly enough than the thousands of Bay Area folks looking for jobs.

Posted by: Copernicus at March 18, 2010 10:35 AM

"Police officers? Boy, are you out of touch."

At least she didn't say firefighters. That meme boils my blood. Firefighters love it

Posted by: zig at March 18, 2010 10:38 AM

"The BMR resale restrictions should roll off over time (20 years)."

Or not, when you're dealing with a corrupt bureaucracy like the S.F. Mayor's Office of Housing (MOH), who's only interest is self-preservation:

http://www.sfweekly.com/2009-11-25/news/screwed/

The MOH has illegally changed the rules of their programs, including extending the 20 year limit indefinitely for many BMR owners. Based on my own experience in the MOH's BMR program, I would not recommend any BMR program run by the SF MOH--who knows what rules the bureaucrats in the MOH will decide to change next...

Posted by: BMR Blues at March 18, 2010 10:39 AM

The whole BMR Pgrm is moronic. Why the Fu*k buy a unit that an overbearing gov like SF has can tinker with the rules. Also, you get no future appreciation value (unless you hold it forever, agree to dome profit sharing scheme etc). Just rent, as rent control is your subsidy.

But in the meantime private developers have to basically pay for the BMR's. The notion that they are now competing with market rate units is an ominous, and ironic message: the more SF gov tries to screw around with the free market the more distortions it creates, unfairly benefiting some people while totally screwing others...the rough hand of government at work. Enjoy!

Posted by: 45yo hipster at March 18, 2010 10:40 AM

If "BMR" is now "MR" or even above "MR" then just get rid of the program altogether!

Mission Bay is not Candlestick Cove.

$210K for a brand new 2BR in Mission Bay is way below market rate. I'm guessing that the 120% above median income group will be paying ~$250K, which is currently very much BMR in that neighbhorhood. I can't imagine market-rate prices in Mission Bay dropping under to $300/sqft.

For a couple who qualifies (makes $92.9K or less), these units will allow them to buy a home in a decent neighborhood without stretching themselves financially (

With all of that said, what I dislike about this program is the middle class gets screwed once again (at least part of the middle class). Those households who make $100K-$150K cannot realistically buy anything comparable at 3x, even 4x income.

Posted by: joh at March 18, 2010 10:42 AM

Police officers? Boy, are you out of touch.

Seriously. There are a lot of departments in the Bay Area that pay cops six figure salaries. A lot. And we're not talking sergeants or lieutenants or captains here...we're just talking police officers who have ~10 years experience. Plus they're exempt from SS and can retire near full pay in their 50s. It's a pretty sweet gig (as long as you're not patrolling Bayview or E. Oakland...which most Bay Area cops are not)...I'm kind of surprised that more people don't line up to do it. Especially in this economy.

Posted by: anonm at March 18, 2010 10:48 AM

Just rent, as rent control is your subsidy.

Do rent-controlled units comparable to this one for the same monthly payment exist? I haven't seen any, at least in a decent SF neighborhood (not that I'm defending the BMR program or anything).

Posted by: joh at March 18, 2010 10:52 AM

joh - GOOD POINT! I've always wondered why someone who makes $60,000 receives city assistance to buy a brand new condo while someone who makes $90,000 needs to have a roommate to just afford a decent apartment?

Posted by: CameronRex at March 18, 2010 10:58 AM

The BMR resale restrictions should roll off over time (20 years.

The problem with that is then the city will have to keep subsidizing the construction of new BMR units, as existing stock converts to market rate. Not that I'm supportive of the BMR program or anything, but the city certainly is.

Sales prices should reflect affordability to that level of income.

It already does.

BMR should not restrict the size of the home a single people can buy.

If a single person bought a 2BR BMR unit, the extra bedroom would be a luxury for him/her. Such a unit would much better serve a small family, imho. After all, these units are subsidized by our tax dollars.

Posted by: joh at March 18, 2010 11:00 AM

"After all, these units are subsidized by our tax dollars."

As far as I am aware inclusionary housing is subsidized by market rate buyers and not our tax dollars


Posted by: zig at March 18, 2010 11:12 AM

New BMRs don't become MR until 50 years have passed. I own one and it was in my documentation. Maybe it was 20 years in the past, but it's not now (unless it's different depending on the building).

On another note, renting my place at MR would cost more than what I'm paying and while 92k doesn't scream low-income, you have to take into account the cost of living in San Francisco.

BMR units do appreciate, just slowly, and there are the tax benefits that help a lot as well. Of course if the economy drops a lot more they will lose value just like any other property, nothing is guaranteed.

Posted by: Michael at March 18, 2010 11:15 AM

Michael - do the docs you have specify who receives the windfall from the sudden jump from BMR to MR ? Also when does the clock on 50 years start ? Is it from when the unit is first occupied or is it reset upon each resale ?

Posted by: The Milkshake of Despair at March 18, 2010 12:29 PM

I own a BMR unit. The 50 year period resets upon resale.

Buying a BMR unit was a great financial decision for me. I live in a fantastic location, and my payment is less than what I'd be paying in rent. The tax benefits are great and I'm building equity. The unit appreciates at roughly 3% a year (appreciation is tied to wage inflation). I could care less about the resale restrictions; I'm in this for the long term like most people who purchase these units.

Posted by: Dakota at March 18, 2010 2:37 PM

BMR units make sense only if you can't afford to buy and plan on living there for next 20-40 years (when it becomes MR). Otherwise you really are better off renting or buying MR unit.
The restrictions on BMR units are pretty ridiculous.

Posted by: Anon at March 18, 2010 3:20 PM

Dakota & Michael,

Are you sure about the 50 years? I thought the city got away from these rules and now all BMR's cannot be converted to MR "ever". Maybe I'm behind in the new rules but I thought they had a hearing about this.

Posted by: POPS at March 18, 2010 3:26 PM

I agree with Joh. Its a shame if a couple get lucky, and either of the two get a raise putting them at $100k, they can not afford anything nearly as nice, and instead of buying in Mission Walk, they end up renting in the Mission. Its really sad, how these programs end up disenfranchise one group of people to help another group. Another example, of good intentions, bad idea and execution.

Posted by: SFRE at March 18, 2010 3:40 PM

POPS - I'm not aware of any changes to the 50 year rule.

Anon - If you can afford to buy at MR, you won't qualify for a BMR. I could barely afford to buy a BMR unit, and my income at the time was 99% of area median income.

Posted by: Dakota at March 18, 2010 4:00 PM

Thanks Dakota - that 50yr expiration, but resets on resale rule is perplexing. Someone who buys a BMR at age 20 would have to live there 50 years to reap the windfall at age 70. The odds are slim of that occurring. Is this a special consolation prize for staying put for half a century ?

Given that almost no-one lives in a home for 50 years (hrm, the lady I bought my place from almost made it : she lived there 45 years ! ), this rule seems to be a fluke.

Posted by: The Milkshake of Despair at March 18, 2010 4:18 PM

is that a 50 year expiration from when the building opens - so it would be a hard date like year 2060, or a new 50-year every time it changes hands?

Posted by: condoshopper at March 18, 2010 5:04 PM

"Its really sad, how these programs end up disenfranchise one group of people to help another group. Another example, of good intentions, bad idea and execution."

this is 100% true of the layer upon layer of our tax codes, subsidies, tax expenditures

All picking winners and losers of stuff we like and stuff we don't

Posted by: zig at March 18, 2010 5:16 PM

@zig: I agree. I am happy for those that qualify, and feel bad for those who just miss being qualified.

Posted by: SFRE at March 18, 2010 5:22 PM

condoshopper - as Dakota describes it, the 50 years resets on each transaction. A carrot at the end of a very long stick.

Posted by: The Milkshake of Despair at March 18, 2010 5:35 PM

I assume the 50 year rule is in place for some legal reason, as if they can't say it will never convert, but instead have to provide a "reasonable" time limit. I'll be 80 when it changes so it's not like I'm planning on selling it at MR. In the meanwhile I have a decent place that I'm really happy with.

I'd say that anyone who has a 20 year rule is pretty lucky and probably nearing that date by now.

Posted by: Michael at March 18, 2010 5:46 PM

Yes, those poor police officers: CHP website advertises that average compensation after 5-yrs is $110k. San Jose PD's at $116k base pay (w/o any OT) after 7-yrs. I have family doing that gig--they HATE patrolling the good neighborhoods, where according to them, they're treated like "servants". They live for the code 1 calls where they get to race around lights, sirens, and guns...The thrill of it all...

Posted by: Sonnyboy at March 18, 2010 10:56 PM

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