People are constantly advising me to buy a home. They tell me that as a renter, I am simply throwing my money away every month. When I point out that between condo fees and property taxes, even a modest condo in Oakland that I owned outright with no mortgage payment would cost me more per month than I currently pay in rent, they say I am missing the point. The main reason to buy a home, I am repeatedly told by well meaning relatives and wealthy friends, is to build equity.
Okay. If they say so. I’m personally not entirely convinced of all the wonderful benefits of home ownership that seem to be widely accepted conventional wisdom in this country, but that’s really an issue for another day.
I’ve already discussed one of my big problems with for-sale affordable units (for those who missed it: The units can do more harm than good, since many who qualify for below market rate units may not have the financial capacity to deal with the many “hidden” costs of home ownership). Today, I want to talk about another: resale. BMR housing units (including those created through “inclusionary zoning” programs) are usually required to remain “affordable” for a period of anywhere from 40 to 70 years, depending on the specific requirements of the municipality in which they’re created.
From the inclusionary zoning ordinance (PDF!) considered by the City Council last October:
Inclusionary units required by this chapter that are ownership units must:
(1) in accordance with the schedule below, be sold only to moderate income households, with further maximum household income restrictions that restrict ownership inclusionary units produced as a result of a covered development project to a mean average of 100 percent of AMI adjusted for family size appropriate to the unit, averaged across all of the ownership inclusionary units produced as a result of the covered evelopment project;
(2) in accordance with the schedule below, be sold at an affordable sales prices for a household at the maximum household income level for the housing unit; and
(3) be subject to these restrictions on affordable sales prices and buyer incomes for a period of at least 45 years from the date of initial sale.
So what does this mean? Well, if you win a lottery for a BMR ownership unit, you do own it, but if and when you decide to sell, you cannot sell it for market value. You have to sell it to someone meeting the same income requirements you did, and for a price determined by a formula based on that income. The ordinance, by the way, includes no mechanism for monitoring the sales of these units (just one more example of the way IZ pushers ignore all practicalities of implementation).
On the one hand, this makes sense. The point of IZ is (allegedly) to provide workforce housing. If people could buy subsidized condos and then just re-sell them at market rate, then it would sort of defeat the point. You might as well just write a check to the lottery winners instead.
On the other hand, equity and resale restrictions sort of eliminate all the benefits of home ownership. What’s the point of buying a home if you have no chance to profit on it when you’re ready to move on? You get all of the burdens and none of the benefits.
I’d really like to see how IZ advocates answer that question.