The objective of this council priority is to increase the opportunity for middle-income households to purchase market rate homes by implementing a Middle-income Down Payment Pilot.

  1. Plan

  2. Design

  3. Implement

Project Overview

The Middle Income Down Payment Pilot program aims to assist middle-income Boulder workers and residents in purchasing a home to preserve economic diversity in the city and potentially reduce in-commuting.

In 2019, Boulder voters approved a ballot measure authorizing “…the City Council to increase City of Boulder debt by an amount not to exceed $10,000,000 … without raising taxes, to provide for a housing assistance program that will include permanently affordable deed restrictions and make loans to middle-income households to purchase homes sold in Boulder.”

Through the proposed Middle Income Down Payment Pilot, the city will draw upon the voter approved funding to provide down payment assistance to middle-income home buyers to purchase a market-rate home. In exchange, the homeowner agrees to make that home permanently affordable through a deed restriction.

Work on this effort was paused early in 2020 due to the COVID-19 pandemic. In February 2022, Boulder City Council elevated work on the Middle Income Down Payment Pilot as one of its 10 priorities for the 2022-2023 term. Council will host a study session, tentatively slated for October 2022, to review project development progress.

Background

Over the last several decades, the City of Boulder has significantly increased the availability of low- and moderate-income housing options, through new construction and preservation, but middle-income housing has not seen the same growth. Low- and moderate-income represents 30-60% of Area Median Income (AMI). AMI is a federal calculation based on census data from Boulder - half of households make less than the 100 percent AMI and half make more.

It is increasingly difficult for middle-income households (up to 120% of AMI) to purchase a home in Boulder. This is a result of various factors, including home prices outpacing income growth, leaving many middle-income households priced out of homeownership in Boulder.

In 2018, the city increased its goal of permanently affordable homes, which includes low-, moderate- and middle-income homes, from 10 to 15%. Currently, 8.1% of the city’s housing stock is permanently affordable. Learn more about affordable housing in the City of Boulder on the city’s website.

Timeline

  • June 2022: Review previous work and scope

  • July – Sept. 2022: Develop RFP and hire consultant to conduct a financial analysis and feasibility study

  • Sept. – Dec. 2022: Complete analysis, design program, get input from council

  • Jan 2023: Launch program

How will the pilot work?

While there are significant details to work through, this pilot promises to provide an important tool in addressing our housing affordability challenges. As it is currently being proposed, the pilot will operate as follows.

  1. The income-and asset-qualified purchaser locates a home to buy which is below the median price for that type of housing.

  1. The purchaser secures a loan from a commercial lender.

  1. The purchaser applies to the city’s Middle Income Down Payment Pilot to cover the gap between the loan they qualify for and the total purchase price of the home.

  1. Once the purchaser is approved for the Middle Income Down Payment Pilot, the city funds a second mortgage to cover the purchaser’s funding gap and the home is deed restricted to remain permanently affordable.

  1. After 20 years, or if the home is sold before 20 years, the purchaser repays the city for the second loan plus interest.

  1. The deed-restricted home is now part of the city’s Permanently Affordable Homes Program and is sold to another eligible middle-income homebuyer.

For example, a buyer is looking to purchase a home with a $600,000 purchase price. The buyer has a down-payment of $30,000 (5%) but can only qualify for a loan from a commercial lender for $432,000 (72%). This leaves the buyers with a funding gap of $138,000 (23%). Under the proposed pilot, the city receives their application, determines if they are income- and asset-qualified and that the purchase price is below the median purchase price for that type of home in the City of Boulder. The city funds a second mortgage for $138,000, 23% of the home value. The qualified buyer makes no monthly payments on the second loan which reduces their monthly housing costs significantly. After 20 years or if the home is sold (whichever is earlier), the buyer pays the city the amount of the second loan ($138,000) plus interest.

Why hire a consultant?

There are several details of this pilot program that need to be established prior to launch. The consultant hired for this pilot program will conduct a financial impact assessment and feasibility study. This study will help the city better understand potential financial and social impacts of this pilot program and will also explore potential parameters of the pilot program including household and income limits, resale restrictions, and other variables.

Other Homeownership Programs

The City of Boulder is committed to making homes in our community available to a variety of people. We offer opportunities for homeownership to those with low, moderate and middle incomes.

Learn more about the city’s Homeownership Programs on the city’s website.