Rising construction costs and a big drop in public funding is forcing an organization that builds inexpensive homes for low-income buyers to sell them for higher prices than many of those people can afford.
The group, Habitat for Humanity, says it can’t raise money fast enough to cover the gap between what very low-income residents can pay and the actual costs of providing homes, even with the help of legions of volunteers.
That scenario is playing itself out right now in Fremont, Calif., where Habitat for Humanity is selling 19 of 30 planned condos to families whose income is 40 to 115 percent higher than that of the buyers originally targeted.
Janice Jensen, president and CEO of Habitat for Humanity East Bay/Silicon Valley, said costs for everything from raw materials such as wood and drywall, to labor and real estate have soared over the past five years. Materials alone jumped almost 5 percent from December 2016 to December 2017, the fastest rate in six years, according to the Associated Builders and Contractors, Inc.
“If you look broadly at affordable housing, it’s never been more expensive than it is right now to build,” Jensen said.
When first envisioned, half of the condos in Habitat’s Central Commons project were supposed to be sold to very low-income families and half to low-income families. But Habitat had to raise the price of the homes twice in the past couple of years to cover the additional $3.54 million the project was costing, effectively excluding very low-income families from a shot at the homes. Those families earn up to half of the median income for the area, or $58,100 for a family of four.
So far, 11 condos are nearly complete and have been sold to low-income families earning a maximum of 80 percent of the area median income, which amounts to roughly $89,600 annually for a family of four. Those two-, three- and four-bedroom units sold for between $169,100 and $200,500, according to Habitat.
Eligio Rivera-Cuevas, of Sunnyvale, his wife Liliana and their sons Sebastian, 6, and Diego, 9, are among the 11 families expecting to move into one of those condos by early this year.
“It meant a lot of things, but the most important is just the stability of my family, and a safe place for my kids,” Rivera-Cuevas said of having a home to call their own.
The project was conceived in 2013 and helped along by $530,000 in community development block grants from the city and a little more than $1 million in affordable housing fees from a land purchase development fund.
Because the condos must now go for more than initially intended, the Fremont City Council on Dec. 4 authorized Habitat to sell the remaining 19 to moderate-income families earning 120 percent of the median, or a maximum of $125,300 for four people.
Jensen estimated those homes will be sold for between $419,500 and $462,600, still a significant amount less than their appraised value of $700,000 to $830,000 and affordable to some people who otherwise wouldn’t have a hope of owning a home in the region.
Jensen said although Habitat had to deviate from its original plan for Central Commons, moderate-level income housing is badly needed in Fremont as well.
“There’s no philosophic change, this is all dollars and cents,” she said. “We want to serve more families, not less.