Guest Commentary: What Does ‘First Time’ Mean to You?

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RE: The need for a definition of a First-time Homebuyer

by Georgina Valencia

(1) The issue:
Currently, the City of Davis Municipal Code does not define a first-time Homebuyer.

(2) Why is the definition of a first-time homebuyer important?
Without a definition of a first-time homebuyer, affordable for sale housing will continue to be sold to individuals and families that already own a home. This result is inconsistent with the HUD rules and the intent of the affordable for sale housing program.

(3) Why is Affordable for Sale Housing Important?
There is substantial evidence that a lack of available affordable for-sale housing may trap families in debt, preventing investment in home ownership and reinforcing generations-old patterns of housing segregation by race and class. (The Color of Law by Richard Rothstein, 2017.)

Generally, it is accepted that the intent of affordable for sale housing is to provide opportunity for individuals that would not or could not participate in home ownership, as stated in our Municipal Code.

Examples of individuals that have difficulty buying homes in Davis are: DJUSD teachers and staff, junior faculty, service industry, university staff, and the children of current Davis homeowners.

(4) What are the program requirements?
Housing and Urban Development (HUD) establishes the income and asset requirements that our local government must follow. These requirements are based on the Area Median Income. (See City of Davis Website Income Eligibility Requirements.)

The City of Davis has no definition beyond income and asset requirements for the buyer of an affordable home in Davis. The HUD definition is as follows:

“A first-time homebuyer is an individual who meets any of the following criteria:
1. An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers).
2. A single parent who has only owned with a former spouse while married.
3. An individual who is a displaced homemaker and has only owned with a spouse.
4. An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.” (Example would be a mobile home.)

The HUD definition is used by most jurisdictions as good practice and ensures that the program is limited to the first time home buyer. If the Davis Housing Policy (Municipal Code 18, 18.04, 18.05) is changed to include the HUD definition of first-time homebuyer, Davis would have a well-managed, fair, and equitable for sale affordable housing program.

(5) Examples of Abuse:
Some homeowners sold their existing home in Davis or other cities in Yolo County and then purchased an affordable home in Davis. How did a seller of a home in Davis, or other cities in Yolo County, not exceed the asset limits of the Davis Affordable Housing Program and still qualify to purchase an affordable home? The equity in the home can be swallowed up by a phantom loan from a family member or a contractor lien for work that was never done or was overcharged for. These and other actions can convert the equity in a home to a recorded lien for debt owed, thus allowing the individual to move forward to purchase the affordable home and still meet asset requirements upon sale of their existing home. The actions described are legal and the city can do nothing to disqualify the individual selling their Davis home to buy the affordable home

Many jurisdictions adopted the HUD definition for a first-time homebuyer to prevent the kinds of abuses described (i.e., phantom loans, contractor liens). The HUD definition prohibits a current homeowner(s) from selling their home and then buying an affordable home in Davis.

(6) Fixing the problem:
The signers of this letter ask that the City Council and City Manager act on the recommendations made by the Social Services Commission to provide a clear first-time homebuyer definition. Further, we recommend that the city adopt the definition of first-time homebuyer used by HUD.
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1 Municipal Code 18.04.010 #4
2 Social Services Commission – Meeting Minutes 12.17.18 and 7.15.19 discussion re First time homebuyer.

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10 thoughts on “Guest Commentary: What Does ‘First Time’ Mean to You?”

  1. John Clark

    Isn’t the issue “first time home buyer” subject to lawsuits when restrictions are in place to prevent any buyer from purchasing a home. This is the same issue that Bretton Woods faced, limiting buyers to a select group. If the Council specifically defines a term that limits home buyers, lawsuits will definitely follow.

     

    1. Georgina Valencia Post author

      John
      thank you for your comment. I am compelled to share the fact that the definition for a first time homebuyer, described in my article, is recognized as a best practice by every Housing agency, lender and government entity that works in the arena of affordable housing.

      -Georgina

  2. Ron Oertel

    From the title of this article, I had assumed that “first time” was referring to something else.

    I was at least a little disappointed, after seeing what it actually referred to.

    1. Georgina Valencia Post author

      Keith

      Thank you for your thoughts on this topic.  When you say Davis do you mean City of Davis (Government) or the Community?  I have been working with members of the community for a number of years on this, First time homebuyer, and other affordable housing topics.  Mostly I find community members are uninformed, and that is understandable as it is a complex topic.  When I have spent time explaining and providing examples there haven’t been too many people that felt “First time homebuyer” should be someone that already owned a home.  The idea of “deed restricted” affordable housing is to: facilitate inclusion and opportunity for individuals and families that might never have the opportunity to “own” a home, specifically in this case to own a home in Davis.

      Georgina

  3. Keith Y Echols

    There seems to be a distinction between Davis’ affordable home ownership program and HUD’s First Time Buyer’s definition.  Davis seems to want people who have owned homes…maybe ones that have had some hardship and have to sell…can buy another home and qualify for low (120% the median income) income housing opportunities.  Is the issue you have with Davis’ program the potential abuse that you’ve listed such as the fake debts you wrote about?  Or is it the actual “first time” (the 3 years of no home ownership) that is the issue?

    1. Bill Marshall

      I remember my “first time”… but wasn’t about ‘housing’ until a couple of years later…

      Seriously, I believe “first time” should be ‘first time’.  Period.  If you want to call something “second chance” or “re-do”, that’s fine with me… but HUD’s definition is as much a potential for ‘abuse’ as any other.  It is not ‘first time’… too many “ifs” and “outs”… when I was a first-time home buyer, we got no special treatment… @ 12.5-14% mortgage rates we were out on a limb.  We survived, although it was tough for years… we would have met the criteria now espoused… but it wasn’t an option.  We survived, making many sacrifices…

      1. Keith Y Echols

        Seriously, I believe “first time” should be ‘first time’.  Period.  If you want to call something “second chance” or “re-do”, that’s fine with me…

        There’s nothing online about the City of Davis’ Affordable Housing Ownership info that says anything about “First Time Buyers”.  It just lists the qualifications necessary to buy an affordable home in Davis.  Being a first time buyer isn’t one of them.

         when I was a first-time home buyer, we got no special treatment… @ 12.5-14% mortgage rates we were out on a limb.  We survived, although it was tough for years… we would have met the criteria now espoused… but it wasn’t an option.  We survived, making many sacrifices…

        12.5% – 14%.  Yikes!…are we talking about the end of the Carter years or beginning of the Reagan years?  The first hard money loan I ever took out for a property was a flat 30%.  Thank god we were able to sell that property in a year or so.  I co-signed that loan figuring that it would be absolutely ridiculous to come after me for 50% of the loan amount since I was obviously way too poor to pay it.

  4. Georgina Valencia Post author

    Bill

    I too bought my first house by saving and scrimping and doing without.  But, that was 35 years ago.  I also had an 18% negative amortized loan and survived that ordeal.  I eventually sold the home, I took my equity and moved on. What you may be overlooking is the fact that housing has increased in price faster than incomes.  For instance,  when I bought my first house I was making $45,000 per year (UCDavis Staff) and the house cost $125,000.  Today if I was starting out I might be making $55,000 (UCDavis Staff) per year and that same house is now $425,000 (I am a real estate Broker and aware of housing prices).  As the expression goes…numbers don’t lie.

    I believe it is important to help a few more people buy homes that might not otherwise be able to buy.   Buying and owning a home changes lives.  Let’s change some people lives.

    Georgina

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