Back in 2004, members of the Charlottesville Area Association of REALTORS® decided to take action about a growing problem we face in our area. At that time they recognized that many of the essential members of our workforce were unable to purchase a home in the community in which they worked, forcing them to commute from elsewhere. The REALTORS® decided to focus on four essential workers—police officers, fire fighters, nurses and teachers—and find a way to assist them to become homeowners in Charlottesville or one of the surrounding counties of Albemarle, Greene, Nelson, Fluvanna or Louisa.
The solution was the CAAR Workforce Housing Fund (CWHF). Administered by Piedmont Housing Alliance (PHA), these funds can be used to help qualified home buyers pay for closing costs and pre-paids. While the funds can’t be used towards required down payments, for example the 3.5 percent that must be put down on an FHA loan, they can be used to increase down payments, reducing the amount of the main mortgage and therefore the monthly payment. They also could help someone purchase more house for the same monthly payment.
Ginny Barefoot, a REALTOR® with Roy Wheeler Realty who also serves on the PHA Board explained, “ We are happy to be able to help these people who work so hard to serve our community. It’s a great opportunity for us to be able to help them purchase a house and enjoy all the benefits of living close to where they work.”
Workforce Housing â¨is a National Concern
Concerns about workforce housing focus on finding quality places to live for people who work in a particular community but whose incomes prevent them from buying a home there. In our area, for example, over 70 percent of the police force lives in Waynesboro because the officers can’t afford Charlottesville and Albemarle County. Typically workforce housing solutions are for those whose incomes are between 80 and 120 percent of the area’s median. These are individuals who can’t afford local housing, but make too much money to qualify for many of the income sensitive mortgage programs.
For most people, living near their work is important for many reasons. For example, a big one is that it just makes life easier. Long commutes are time consuming and stressful, becoming more so when the weather is bad or there is fog to contend with. They make an already long workday longer and take away from leisure time with family and friends.
From the perspective of the larger community, it helps to have a workforce that is happy about where they live and fully committed to the municipality in which they work. If, on the other hand, individuals work in one place but live elsewhere, their loyalties are split.
While they may develop ties to the community where their job is, they also develop loyalties to their place of residence through neighborhood friends and acquaintances, through their children’s activities at school or through volunteer activities.
Communities have other big incentives to help their workers find nearby housing. Chances are when these individuals choose to give back, it is during their free time which means they are more likely to volunteer in the community where they live and where their children are, depriving the place where they work of their time and talents.
In addition, when many people are forced to commute in from outlying areas, both air pollution and congestion on the roads are worse, increasing local costs and decreasing the quality of life. At the same time, many of the taxes these commuters pay end up in the coffers of the community where they live so are not available to help offset these costs.
On the other hand, when someone works and lives in the same community they have the benefit of knowing that their taxes support the police force that pays their salary or the school where they work and/or send their children Finally, when fire fighters, police officers and medical personnel live elsewhere, it takes them longer to get to work in the event of an emergency; something that could endanger the rest of us.
The CAAR Workforce â¨Housing Fund
The CAAR Workforce Housing Fund was created by the real estate community to help alleviate this situation, contribute to a happier more productive workforce, and attract better quality workers. At a forum on this topic, which was held in 2007, Jeff Gaffney of Better Homes and Gardens Real Estate III, pointed out that the vast majority of our local police officers live in Waynesboro. In addition, he stated that Albemarle County was having difficulty hiring teachers because candidates were discouraged by the lack of affordable, close-in places to live. He referred to the CWHF as a “recruiting and retention tool” that could potentially influence an excellent employee to choose our area over another one.
The CWHF helps critical members of the workforce find housing by providing assistance with closing costs and down payment up to 5 percent of the sales price of the home, which cannot exceed $325,000. Participants must purchase a home in the area in which they work, however Albemarle and Charlottesville are considered one jurisdiction for these purposes. Homebuyers are required to contribute at least 1 percent of the purchase price, which can include the cost of their appraisal, credit report and/or home inspection.
To be eligible for the CWHF, participants must meet the VHDA first-time homebuyer income limits, which are $70,000 with two or less people in the household and $81,000 if household size exceeds two. This and other loan requirements are enforced by PHA, which administers the fund and assures that borrowers also complete their first-time homebuyer classes just like someone applying for a VHDA loan.
“A big plus of this program is that buyers don’t have to be first-time home buyers,” said Catherine Potter, a lender with Suntrust Mortgage. This is an advantage over other down payment and closing cost assistance programs, most of which impose this restriction. She referenced one of her clients who is a teacher. Recently divorced, she had been part owner of a previous home with her spouse, but nevertheless was able to use the CWHF program to purchase a house for herself and her two daughters. The money was used to pay down what she borrowed on the first mortgage, and without it, Potter said, she would have had a much tougher time finding an affordable house.
Another benefit of this program is that payments on the loan are not due until the home is sold, which means use of the money does not affect the buyer’s debt-to-income ratio when their lender determines how much they can borrow on their main mortgage. When they repay the loan they also pay 6 percent per year simple interest on the amount they borrowed.
Repayment of the loans, plus REALTOR® fund raising activities, help keep the CWHF in business. In years past, CAAR sponsored benefit concerts with big names such as B.B. King and Bruce Hornsby to help raise money. They also hosted smaller events like Broker Bartender Night where a percentage of money paid for drinks went to support the CWHF. In addition, many CAAR members make regular contributions to the fund.
The Workforce Housing Fund in Action
According to Donna Thacker of the Piedmont Housing Alliance, the CWHF has provided assistance in the amount of $351,488 since its inception. As a result, 40 essential workers are now homeowners in our community including three police officers, five fire fighters, two nurses and thirty teachers.
One of them is Mary Johnston, who has been a first grade teacher at Clark Elementary School in Charlottesville for six years. She is also a single mom with a daughter who will soon start kindergarten.
Today they are getting ready to celebrate the one-year anniversary of buying and moving into their new home. Prior to that, she and her daughter lived nearby in a rental. She loves the location, which is a quick commute to school and her daughter, who she said is “into directions,” likes to be able to point out that the new home is close to where they used to live.
Johnston decided to buy because she felt it made sense financially to invest in her own home rather than continue to rent. As a first time buyer, she looked into some of the available down payment assistance programs, but found she didn’t qualify because her income is too high. In addition to her regular job, she teaches summer school and does after school tutoring.
She did, however, qualify for the CWHF money and used it to pay her closing costs. Her agent, Janice Kavanaugh with Nest Realty, explained that without the CAAR funds Johnston would have had little in the way of cash reserves after purchasing her home. The CAAR money made it possible for her to move forward, buy a home and still feel financially stable.
Both Johnston and Kavanaugh had a lot of praise for PHA and the services they offer their clients. Johnston appreciated the homebuyer classes, which she said helped her become more knowledgeable about the process. “I could have read a book and learned some of the same information,” she said, “but the staff at PHA explained things well and made it easy.”
PHA also provides counseling for their buyers to help prepare them for getting a mortgage. Johnston said “they worked with me and helped me with some of my outstanding debt.” She was advised to pay down some of her bills and find ways to lower the interest paid on some others. They also helped her through the process of getting a deferment on payment of a college loan. This made it possible for her to obtain a favorable mortgage loan with payments she could afford.
Kavanaugh also appreciated PHA’s help. Thanks to their advice and preparation, Mary’s transaction was very smooth. “They kept us informed all along the way and met with Mary often to keep things on track. They were very informed, stuck with it and knew all the ins and outs,” she said.
Kavanaugh was the agent for another CWFH client, also a teacher, a few years ago. That transaction was also easy and proceeded with few if any of the kinds of challenges that are common in real estate transactions. Kavanaugh believes a lot of that has to do with PHA’s experience and persistence and she encourages anyone who qualifies for this fund to take advantage of what it has to offer.
Celeste Smucker is a writer, editor and author of Sold on Me, Daily Inspiration for Real Estate Agents. She lives near Charlottesville.