A new neighborhood will soon go up on one of Boise’s most high-profile corners, but this time a portion of the homes will be sold to low-income Boiseans.
Non-profit home developer NeighborWorks Boise will build a ‘pocket neighborhood’ with 39 homes on the former site of historic Cole Elementary School at the intersection of Cole Road and Fairview Avenue. This project, the second development of its kind by the organization in Boise, will use grant funds, secondary loans and other assistance to sell a large portion of the homes to those for whom homeownership would be out of reach.
You might know NeighborWorks for its annual Paint the Town or Rake up Boise events to help residents in need spruce up their homes. But a big part of its mission is helping provide housing solutions to underserved communities.
As rents and single-family home prices in Ada County continue to shoot through the roof, NeighborWorks is working to boost families making 80% of the area median income or below into homeownership to build equity and provide stability. In 2020, this is equivalent to $53,856 per year for a family of four, or $2,071 per biweekly paycheck before taxes.
Affordable housing options ‘inadequate’
NeighborWorks’ Director of Grant Development Mitchell Lee called the spectrum of affordable housing in Boise “inadequate” at all levels of need. He said his organization’s goal is to provide homeownership opportunities to households within reach of purchasing their own home who need a leg up into Boise’s rapidly growing market.
“How do they make that leap to ‘I’m paying $1,500 a month to rent, is there a house I can buy for that or less?’” he said. “Sadly there aren’t a lot of houses you can buy for that so we are in that niche to help people make that transition from apartment living to building equity in a home.”
The first phase of the Cole and Fairview project, called The Cole Cottages, is underway now and will include 19 homes. Of those 19, NeighborWorks will sell seven or eight to those making under 80% of the AMI. The others will go to those making between 140% and 150% of AMI, or possibly higher depending on the circumstance.
Lee said the mix of incomes helps keep the price down for the more affordable homes and also builds a mixed-income neighborhood, which is now a national best practice for affordable housing construction. The price of the homes has not been set, but it is estimated they will run from between $255,000 to $360,000 each depending on the square footage.
Sticker shock? Not to fear
But the sticker price doesn’t tell the entire story. For the homes sold to those who meet the low-income requirements, NeighborWorks helps secure grants to lower the price and puts special financing methods in place to keep payments low. This could include down payment assistance or a second mortgage through another lender who assists low-income homebuyers.
Sometimes, NeighborWorks also uses HOME Funds from the U.S. Department of Housing and Urban Development granted to the City of Boise to help fund the purchase of the land so the homebuyer is only buying the structure. By taking the land cost out of the agreement, this lowers the price further and helps keep the pocket development affordable for a longer period of time because of a deed restriction on the land.
Even though NeighborWorks homeowners purchased their homes with assistance, they still get equity. During the first 20 years of owning their new home, the owner has a boost from a second loan to help make the home affordable. If they choose to sell their home during this period, NeighborWorks gets the right of first refusal on the home and the homeowner gets partial equity and the home will remain affordable for a new buyer to come in and purchase it at the lower rate with the help of the financing.
If a homeowner keeps the home past the 20 year mark, the second loan is forgiven and then they can sell the home at full market value to anyone like a typical property.
“It’s not a free house and it’s not building a cheap house to put people in, it’s a real house with real equity and real investment and real value,” Lee said. “We’re just finding ways to make it affordable for people, particularly from a wide range of incomes from that below 80% AMI to say 150% or even higher in some cases.”
A pivot from rehab to new construction
NeighborWorks Boise’s first pocket neighborhood in Boise opened in 2019 off of Vista Avenue. The Hawthorne Cottages subdivision cost NeighborWorks $2.4 million to build and the City of Boise pitched in with $280,000 in grant funds to help with financing for four families to purchase in the subdivision. The other pocket neighborhoods the non-profit built are located in Garden City.
As of 2019, the non-profit has built and sold 75 new homes in Boise and Garden City. Prior to developing neighborhoods of their own, NeighborWorks used to purchase homes for affordable rates, fix them up and sell them to low-income buyers.
But, as the market drove prices up this strategy no longer worked at the same rate they completed projects before. Lee said one possible step forward is to work with homeowners who would like to sell their homes to NeighborWorks to be used for low-income single-family home sales.
“Someone might very well have a house they want to donate or sell at or below market rate to a not for profit to take the tax write off that might be available and turn that house into something that is going to be part of the affordable housing pool for generations,” Lee said. “We’re keeping an eye out for that sort of thing and looking for ways to cultivate that sort of giving.”