End near for Grand Forks homebuyers assistance program

Only five months after coming online, a Grand Forks city program aimed at easing the cost of homebuying is facing the chopping block.

The Down Payment and Closing Cost Assistance Program, offering financial assistance to homebuyers in the form of a loan up to $10,000, has yet to close a loan, said Meredith Richards, deputy director of the city’s urban development department.

That means the $420,000 in federal grants designated for the program has remained untouched. When added to other grant money, the total balance of the city’s Home Investment Partnership Program funding is $804,000.

“The upshot is that we have $800,000 there, but it doesn’t really look like it’ll be going anywhere anytime soon,” Richards said.  ”The money doesn’t do us any good unless we’re spending it on good projects.”

At Monday’s City Council’s finance committee meeting, she recommended discontinuing the program and find “shovel-ready” projects the money could be spent on instead. The committee voted to follow that recommendation.

‘Perfect storm’

The recommendation to ax the program came from a task force formed by the Grand Forks Board of Realtors.

According to Richards, the group formed shortly after the start of the homebuyer assistance program in May.

The task force concluded the program faced the perfect storm for being unsuccessful: strict federal requirements, a changing lending climate and a low housing inventory.

The program’s funding originates through the U.S. Department of Housing and Urban Development, meaning all applicants are subject to requirements set by the department.

One of those is an income limit. For a family of four, that limit is $54,150. Also mandated by the department is a maximum home purchase price — $200,160 in this case.

Finding a home under that price is getting harder, according to housing data compiled by the city’s Blue Ribbon Commission on Housing, which was formed in 2012 to analyze and recommend actions to alleviate Grand Forks’ housing crunch.

 

In the city, the number of homes selling for less than $150,000 declined from 56.5 of sales to 46.3 percent from 2007 to 2012 because of rising home prices.

Previous efforts

If the full council votes this Monday to discontinue the Down Payment and Closing Cost Assistance Program, the assistance program would follow the path of its predecessor, the American Dream Program.

That program was offered by the city for 10 years starting in 2002 to first-time homebuyers. It also was funded through HOME funds, which can only be used for housing activities that benefit low-to-middle income people, according to Richards.

Its usage peaked in 2003 when 75 homebuyers received more than $819,000 in assistance, according to a 2012 annual performance report. Use of the program began to decrease, with only 12 low-to-middle income households accessing the money in 2012.

This left the program with a carryover balance of $197,000 going into 2013, according to a city staff report. The continued lack of use prompted the city to suspend the program in December 2012 and led to the creation of the current homebuyers assistance program.

The Down Payment and Closing Cost Assistance Program received much fanfare when it was announced, according to Richards.

“The excitement that was generated by the announcement of the program shows that there’s need or demand or at least interest,” she said.

Replacement

Discontinuing the current program means new projects would need to replace it and spend down part of the $804,000 balance.

That way the city isn’t punished for having such a large fund balance.

Richards said state HOME program administrators have raised concerns about Grand Forks’ fund balance and the city could face performance measure sanctions as a result — ending in a loss of some of the money.

The fund’s balance ballooned because of a very slow spending. One solution is to find projects that can get off the ground and be funded quickly.

Richards said she will return to the committee with a list of possible projects for 2014.

The Board of Realtors task force has expressed interest in continuing to meet and work with city staff to pursue homeowner assistance without federal funding.

Council members directed Richards to keep working with the task force to see if creating another homebuyers assistance program with a different funding source is a possibility in the future.

One thought on “End near for Grand Forks homebuyers assistance program

  1. Change the income limits people! I have a family of 4 and my wife and I together make around $60,000 a year. We could use the program but the income limits prohibit us from using the program. We want to be first time homebuyers but it takes time to save money for the downpayment and closing cost when you have daycare expenses and child support payments to make. The 54,000 dollar income level should at least be the minimum amount of income you need annually not the maximum. If you make less than that you should not even think about looking to buy a home for $200,000 to begin with.

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