Providing affordable housing

Material Information

Providing affordable housing issues for planners and private non-profit corporations
Carlson, Mary Ann
Publication Date:
Physical Description:
86, [4] leaves : ; 28 cm


Subjects / Keywords:
Housing -- United States ( lcsh )
Housing ( fast )
United States ( fast )
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )


Includes bibliographical references (leaf 90).
General Note:
Submitted in partial fulfillment of the requirements for the degree, Master of Planning and Community Development, College of Design and Planning.
Statement of Responsibility:
by Mary Ann Carlson.

Record Information

Source Institution:
University of Colorado Denver
Holding Location:
Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
14060320 ( OCLC )
LD1190.A78 1983 .C399 ( lcc )

Full Text
Presented in Partial Fulfillment of Graduation Requirements
for the
University of Colorado at Denver College of Design and Planning Denver, Colorado
Mary Ann Carlson
May 13, 1983


1.0 Introduction:
A long-standing personal interest in homeownership opportunities for moderate income households those with 80 120% of the local median income has led to the research and development of this thesis.
The components of this thesis evolved through a screening process which considered, but eventually eliminated other issues, topics and approaches related to affordable housing. The following criteria were used in this analysis:
1. Will both the topic and method of research be valuable and applicable in the long run to the practicing planner?
2. Will the thesis incorporate the skills, training, theory, etc. from the planning program course work and relate it to "the real world"?
3. Will the exercise of writing the thesis be beneficial for my professional preparedness?
As a result of the personal interest, the screening process, and the criteria, the following components were selected for this thesis:
The Problem: Producing and purchasing affordable housing.
The Role of the Planner: As an involved party, as a problem-solver or problem-maker.
The Role of the Private Non-Profit Organization: As the potential developer of affordable housing and the one who may have to assume an increasing portion of the responsibility in developing this type of housing.

"The Problem" is discussed in terms of the changes in housing production (unit size, project size, density, etc.) including the costs associated with it and the recent trends in mortgage activity. This information shows cost increases which have contributed to the difficulty in producing affordable housing as we knew it in the past and explains the shift to smaller units and projects. The characteristics of the home buyers and the homes being purchased are also examined. In short, this section shows where the market activity is and, conversely, who is "left out" of the home buying opportunities. This research was collected from secondary sources.
"The Role of the Planner" points out the need for planners to understand the relationship between affordable housing and a healthy community and the relationship between local government regulations, housing costs, and community benefits. By better understanding these interrelationships, the planner can contribute to solutions to increasing production of affordable housing. This discussion does not have clear-cut conclusions, but is intended to be thought-provoking. This research is a collection from both primary and secondary sources.
"The Role of the Private Non-Profit Organization" is the substantive, applicable and replicable portion of this writing. Through the use of case studies, the process which is generally required and followed by a private non-profit organization to develop affordable housing is outlined. The purpose is to prepare an inexperienced organization for the events they will probably encounter and, hopefully, offer them the forewarning and assistance which will make their effort easier and successful. This research was conducted via interviews with individuals and observations of organizations which were experienced in the process of developing affordable housing.
There are boundaries to the issues contained in this thesis and, therefore, to the use of the information offered. In general, affordable housing refers to the homeownership of one's principal residence; planning refers to local government planning; and private non-profit organizations are just that private, and should not be confused with public housing authorities.

In the section "The Role of the Planner", the costs of regulation are discussed. Here regulation refers to the local government regulations subdivision regulations, zoning, growth management controls, and development application review procedures. This list is not inclusive of all regulations which may add to the cost of housing, and should be recognized as only a sample.
To summarize, the purpose of this writing is to examine:
1. the problems of producing and purchasing housing which is affordable to the moderate income household;
2. the role of the planner as he/she recognizes the need for affordable housing in a community, and, at the same time, is sensitive to the effect of local government regulation on housing costs; and
3. the role of the private non-profit organization as the developer of affordable housing, if it chooses to assume that challenge, based on the case studies described.



2.0 The Problem:
Home ownership for the moderate income household is a diminishing opportunity as cuts are made in housing assistance program budgets, as costs rise, and as the market continues to migrate towards those housing types that produce the greatest profit.
In the past, smaller homes on smaller lots and attached housing were the affordable solution to increased housing costs. This procedure temporarily cut costs in production and, thereby, offered housing at lower prices.
However, rising costs and higher interest rates forced a shift towards smaller homes at a greater density, but the result was not necessarily homes priced within the reach of the moderate income household. At the same time, mortgage activity has shown significant increases in the median income of those who have qualified for mortgages, as well as increases in their net worth, down payment, monthly housing costs and purchase price.
None of these trends describe a climate in which the moderate income households are able to successfully compete.
This chapter examines these trends of production and borrowing in greater detail and provides some predictions for the future which include suggested solutions to close the affordability gap which excludes the moderate income household from homeownership.
2.1 Recent Trends in Housing Production:
In 1981 the publication "Professional Builder" conducted a nationwide survey of builders through its affiliate, The Bureau of Building Marketing Research.^" The respondents were a random sample of builders who had each constructed an average of 51 units during 1980.

In response to questions regarding trends in unit size, project size, and development density, the greatest number of those surveyed revealed a shift to smaller houses in smaller projects with higher densities.
More specifically, 69% of the builders indicated a trend towards less total living space in new homes, 28% had experienced no change in the unit size, and 3% were building larger homes.
As for the size of the projects being developed, 51% were building smaller projects, 31% were building projects the same size as in the past, and 18% were building larger projects. Related to the decrease in project size, 71% of the respondents were building at a higher density, while 23% were not making any change in density, and 6% had lowered the density in their projects.
In the same survey, respondents were asked to compare their best selling models from 1976 to the best sellers in 1981. (Refer to table 2.1-A). Over this five year period, both the median living area and lot size dropped, while the median construction cost and median sales price rose. The percent changes in median living area and lot size were less significant (-1.3% and -5.4%, respectively) than the increases in median construction cost and median sales price which were up 17.1% and 57.8% respectively.
Using the same data, calculations can be made to determine the median construction cost per square foot and the median sales cost per square foot for these models. Over that five years there was an increase of 18.6% in median construction cost per square foot and 59.9% in median sales cost per square foot. When those cost increases apply to smaller units being built on smaller lots, one can conclude that the homeowner is "getting less at a greater cost."
This clearly shows that the smaller home on the smaller lot is not carrying a proportionately smaller price tag.

Table 2.1-A
1976 1981 % Change
MEDIAN LIVING AREA 1,478 sq. ft. 1,459 sq. ft. - 1.3%
LOT SIZE 9,433 sq. ft. 8,928 sq. ft. - 5.4%
MEDIAN COUNSTRUCTION COST $28,750 $33,665 +17.1%
MEDIAN SALES PRICE $40,836 $64,441 +57.8%
Source: "Professional Builder"

In focusing on what makes up the purchase price of a home, the same survey
by "Professional Builder" provides two analyses. Table 2.1-B lists compo-
nent costs as percentages of the 1981 new home sales prices while Table
2.1- C shows selected cost categories for a development which had been constructed over the five years from 1975 to 1980.3 The costs given in Table 2.1-C have been converted to percentages of the average sales price, and the average annual percent change has been calculated for the five year period.
Referring to Table 2.1-B, note the importance of "materials and labor" (51,8%) as contributors to the sales price. If the cost of land is then added to the materials and labor, the result represents 62.4% of the total sales price. These three components material, labor and raw land are, not surprisingly, significant to the total sales price. Even though Table 2.1-C reflects costs for a specific project and Table 2.1-B shows the results of a national sample, the findings are related and comparable. For example, the 1980 cost percentage for site development is 5.7% from Table
2.1- C, while land improvements similarly contribute 8.9% in Table 2.1-B.
Even more closely related are the total unit development costs of the total sales price 59% for the five year project and the materials labor and land 62.4% from the nationwide sample. These similarities in the two analyses are important only in that two methods of data collection confirm, as one would expect, that land, labor, and materials play major roles in contributing to the cost of a housing unit.
To take this one step further, the average annual percent change has been calculated for the component costs, in Table 2.1-C. The outcome of this exercise shows that basic construction costs per square foot increased annually, on the average, by 21.2%, while land costs increased 40%.
Here again, the results show that the major components of the housing unit sales price rose by significant percentages over the five years from 1975 to 1980. The increases of these major cost components only compound the problem of producing housing which is affordable to the moderate income household.

Table 2.1-B
% New Home 1981 Sales Price
Materials 28.1% Labor 62.4% ^ 23.7% Raw land ^ 10.6% Land improvements 8.9% Overhead, Miscellany 8.3% Special financing 4.4% Marketing, sales, advertising 5.4% Profit 10.3%
Source: "Professional Builder"

Table 2.1-C
COMPONENT COST INCREASE OVER FIVE-YEAR PERIOD Cost per single-family house in a phased development in Orange County, California
Site Development 1975 % of Average Sales Price 1980 % of Average Sales Price Average Annual % Change
Landscaping (50% to governmental regulation) $ 1,250 $2,250 +16.0%
Street and driveway (30% blamed on excessive city standards) 1,358 1,650 + 4.3%
Sidewalks (50% blamed on excessive city standards) 180 V 2p / 1 $8,175 + 7.8%
TOTAL site development cost per unit 1 $ 5,804 9.3% 5.7% + 8.2%
Indirect Construction Items
Permits and fees (50% unnecessary) 1,153 > 1,4u + 5.2%
TOTAL indirect construction n $ 2,176 3.5% 1 2,900 2.0% + 6. / %
Unit Development Costs at 1,500 square feet:
Basic construction ($17/sq.ft 1975; $35/sq.ft. 1980) $25,500 $52,500 +21.2%
Land cost ($50,000/acre 1975; $150,000/acre 1980. 100% due to government delays 100% due to inflation) TOTAL unit development costs TOTAL COSTS 10,000 i_ / 1 36,494 $44,474 58.6% 71.4% 30,000 < 84,750 $95,825 59.0% 66.7% +40.0% +26.4% +23.1%
Marketing, sales, miscellany, profit 17,789 28.6% 47,912 33.3% NA
Minimum average sales price $62,263 100.0% $143,737 100.0% +26.2%
Professional Builder

2.2 Recent Trends in Homeownership
The U.S. League of Savings Associations (The League) has conducted a
national homebuyers' survey in each of the years, 1977, 1979, and 1981. Data from these surveys is displayed in Table 2.2-A. This data reveals that the median household income and household net worth increased annually, on the average, 18.1% and 17.4% from 1977 to 1981. The median purchase prices and down payments rose annually 11.4% and 15.5%, respectively, while the monthly housing costs (principal, interest, taxes and insurance plus utilities) rose 21.8%.
Also shown is the rise in the median age of the first-time homebuyer and the median age of all homebuyers. Along with that, the portion of first-time homebuyers as a percent of the total number of homebuyers has dropped significantly from 36.3% in 1977 to 13.5% in 1981. There has also been a shift to the purchase of more condominiums, to fewer newly constructed units or to slightly more purchases of units over 25 years old. BEtween 1979 and 1981, the wholesale cost of money to a lender rose from 7.4% to 10.9%, while mortgage interest rates were boosted during the same years from 10.6% to 14.5%.

Table 2.2-A
Median household income (all buyers)
Median household net worth (all buyers)
Median purchase price Median down payment
Median monthly cost (PITI plus utilities)
Median age (all buyers)
Median age (first time buyers)
First time buyers as percent of total buyers Unmarried first time buyers as percent of total buyers One and two income households as percent of total buyers Condominiums purchased as a % of all units purchased New Construction purchased as a % of all units purchased Homes over 25 years old as a % of all units purchased Cost of funds to lender Mortgage interest rates
1977 - 1981
Avg. Annual
1977 1979 1981 % Change
$22,700 $28,110 $39,196 +18.1%
31,800 52,277 70,519 +17.4%
44,000 58,000 72,000 +11.4%
9,000 12,282 46,100 +15.5%
400 550 816 +21.8%
32 years 33 years 34 years NA
NA 27 years 28 years NA
36.3% 17.8% 13.5% NA
NA 30.7% 40.5% NA
45.8% 51.9% 57.4% NA
NA 11.0% 21.5% NA
25.4% 30.8% 26.1% NA
23.7% 27.5% 29.5% NA
NA 7.4% 10.9% NA
NA 10.6% 14.47% NA
Professional Builder"

So v.hat can be concluded from this information?
0 Median household incomes for qualifying mortgagees had to increase substantially in 1981 as a result of both inflated home prices and high interest rates.
Compared to 1979, both housing prices and monthly housing costs increased significantly.
0 The majority of households still need two incomes to purchase their home.
0 Single homebuyers and the small households are growing in proportion to the total number of homebuyers.
0 First-time homebuyers as a percent of total homebuyers is decreasing at a significant rate.
Condominium purchases nearly doubled as a percent of total units sold between 1979 and 1981.
0 Due to difficult housing market conditions in 1981, the median age of the purchaser increased, which indicates the need for potential buyers to postpone their purchase.
The League5 reports that the predicament of the 1981 housing market is the result of a capital shortage: too little savings are available to meet the needs of the government, industry and households. This drives up interest rates and that, plus rising home prices, shuts out many would-be home-buyers.
Perhaps more important than the description of homeownership transactions is the description of who is priced out of the market. The income required to qualify for a mortgage and to meet the monthly costs is greater than many households command. The following scenario illustrates the point to be made.

In order to pinpoint who is unable to compete in the housing market, the following "real" example6 can be used. First of all, the following assumptions must be made:
1. The price of the home is $70,000.
2. A five percent down payment is required.
3. Cash for the down payment is available by the homebuyer.
4. The purchaser has essentially no other debt (no other
mortgage liability).
5. The monthly housing cost which is feasible for the homebuyer to commit is 28% of their effective monthly household income (gross monthly household income less any indebtedness committed for more than eight months e.g. car payments, etc.).
6. The mortgage is 30 year term, 12% fixed rate, FHA insured.
7. Cash is available for closing costs.
With the foregoing assumptions in mind, the following calculations can be estimated:
$70,000.00 purchase price X .05 5% down payment
$ 3,500.00
= $66,500.00 mortgage-which requires:
$ 677.26
monthly principal & interest monthly property tax expense monthly homeowners' insurance monthly mortgage insurance
$ 766.26 monthly or housing cost
If the monthly housing cost is not to exceed 25% of the effective monthly household income, this household would require:

$ 766.26
X 4
$ 2,736.64 effective monthly household income
$ 2,736.64 X 12
$32,839.68 approximate annual household income
Even though this example is simple, it is not unrealistic. Homes at $70,000 are not uncommonly high-priced or luxurious and the conditions of the mortgage described are typical.
Therefore, what can be gleaned from this scenario regarding who is left out?
In the 1980 census approximately 60,000,000 households (of related and unrelated persons) nationwide are estimated to earn annual incomes below $33,000.00 (74% of the total
Also, what about households
unable to pay $3,500.00 in down payments; unable to pay $3,325.00 in closing costs (5 points); unable to meet monthly housing payments of $766.00 (plus utilities); and/or
unable to find a house for $70,000.00 or less?
Even though homeownership is not a "right", the benefit should not be realized exclusively by the upper income groups. This is addressed more thoroughly in Chapter 3.

2.3 Closing the Affordability Gap;
The League predicts the remainder of this decade to be plagued with a
continuance of the capital shortage. The demographics of this decade are
just the opposite of those favorable for capital formation. The prime
mortgage borrowers (25-30 years old) make up the greatest portion of the
total population; these people are from the postwar "baby boom". At the
same time, the prime savers (45+ years old) are a shrinking portion of the
population. Because production of housing has lagged in the last few
years, the nation will enter 1983 with a cumulative production deficit in
excess of one full year's production when relating housing production to
the demand made by 25-35 year old first-time buyers. The result is an
increased demand for housing from this targeted first-time purchasers'
market without an adequate supply of housing to meet the demand and without
growth in capital to be lent for mortgages. The affordability gap grows.
At this time it should be pointed out that the cutbacks in federal housing programs complicate any solution. Without an infusion of funds into housing assistance programs or a reversal of the administration's policy to leave housing production in the marketplace, the affordability gap will not be eased.
So what can be done to lower the cost of housing in hopes of making homeownership a reality for more households?
The national builders' survey (by "Professional Builder") included a question asking what areas of influence had the greatest potential for savings in housing production. The respondents were asked to rank the areas 1-7; 1 having the greatest potential for saving, and 7 the least
potential for saving. The responses to that question are in Table 2.3-A.

Table 2.3-A
Area of Influence Median Rank
Relaxation of land use regulations 2.1 Down-sizing units 3.2 Innovative financing 3.3 Increased density 3.5 Building techniques 3.7 Construction time 5.1 Labor 5.7
Source: "Professional Builder"

The respondents clearly ranked the relaxation of land use regulations as the greatest potential cost-saver in housing production. After that, down-sizing units, innovative financing, increased density and building techniques ranked about the same as potential cost-savers, while costs related to construction time and labor were considered least influential. (Considering how important the cost of labor is in relation to the cost of a home, the bottom rank it has been given in this survey as a potential cost saver is perplexing. Or is it to be assumed that no negotiation of labor wages is possible?)
In a separate nationwide telephone survey^ by "Professional Builder, builders from firms of all sizes were questioned about what market they were serving. Forty percent responded that they were building for households with incomes at or below the median income for their area. Fifty-seven percent said they could not build for the below median income household. Table 2.3-B shows the ranking of cost cutting obstacles by those builders who build less costly housing and those builders who cannot build less costly housing. (#1 is greatest obstacle; #6 is least obstacle.)
Table 2.3-B Cost-cutting Obstacles (Telephone Survey)
Builders of Less Builders of More
Costly Housing Costly Housing
Materials costs 1 2
High land prices 2 1
Carrying costs 4 3
Price of labor 3 4
Government red tape 5 5
Others 6 6
Source: "Professional Builder"
The ranking by the builders of less costly housing puts materials, land and labor over carrying costs, government red tape and "others". Builders of

more costly housing ranked carrying costs in the top three obstacles for cost cutting (along with land and materials) and let labor slip into fourth place. Otherwise, the two categories of builders were essentially in agreement.
Some general correlation can be made between the cost-cutting obstacles presented in Tables 2.3-A and 2.3-B and local government regulation and planning.
To the extent that land use regulations affect land values, high land prices may result, but greedy speculation may also be the culprit.
0 Carrying costs may accumulate during an application review process. To require excessive local government review may add unnecessary costs which will eventually become part of the selling price of the home. Good review, however, should not be sacrificed.
Increased density and down-sized units may play a role in an acceptable planned unit development project, but design for a healthy living environment should be maintained as a minimum standard.
Innovative financing may include participation by the local government. Mortgage revenue bonds and Community Development Block Grand funds have been used to reduce housing costs. The intended use and potential public benefit should be clearly understood before using either of these.
The League asserts, and generally in concert with the builders, that regulatory reform such as streamlining the building permit process, modernizing building codes and standards plus reassessing zoning could have the effect of reducing home prices by 33 percent. These policy actions
could be the single greatest contributor to closing the affordability 11

So, there is a problem. The builders say they cannot build affordable housing because of high land cost, high cost of materials, land use regulation and excessive carrying costs due to regulatory delay. To that, add the League's prediction for a deficit in housing stock in 1983 due to production lags over the last few years, a pent-up demand for housing and mortgages by the 25-35 year olds which cannot be met by forecasted savings, and a solution is needed.


3.0 The Role of the Planner:
Planners should be concerned about housing in general, because it is a major land use. And more specifically, they should be concerned about the provision of a range of choices of housing for all economic levels of the population.
Residential land use is fundamental to city planning and the city's development patterns. Not to be overlooked is the need for services and facilities where housing is built and the substantial public cost implications. Housing demands transportation (streets and public mass transit), schools, parks and open spaces, as well as water, sewer and solid waste disposal. There is a long list of services essential to residential land use.
Also, commercial development reacts to the direction taken by residential development. Shopping centers will be constructed in areas of new residential development to capture the new market. Employment centers will also be sited where there is a resource of employees. Hence, housing triggers a whole series of actions and reactions that demand the special attention of planners.
Planners must be aware of some simple realities in relation to affordable housing. First, a community is a composite of many people holding varying jobs which make the community function. The disparity in income levels and the correlated ability to pay for housing mandates that a full range of housing choices be available. Implicit in this is the recognition of the need to provide fair housing/open housing for all.
Second, people have the right to live near their work to cut down on commuting time, transportation costs, and energy consumption. Related to this, if affordable housing is not available, the chance of high turnover in employment is greater than if affordable housing is available. This housing affordability dilemma is not applicable only to the "poor". In areas of high desirability and growth, this dilemma may well affect the

school teachers and city planners, for example, and not just the "less fortunate". If there is little opportunity to become a homeowner in a community, the young, upwardly mobile worker will relocate to one with the opportunity for homeownership, leaving behind all the negatives of high employment turnover.
The benefits of aiding in the provision of homeownership and encouraging homeownership opportunities are many-fold. First, neighborhoods made up of owner-occupied homes will be better cared for and more stable, which usually breeds a healthier environment for its residents. It will be safer from harm due to crime and violence, freer from disease and, in general, create an atmosphere that is both physically and mentally healthier to live in. Good neighborhoods breed good citizens. Second, if a declining neighborhood is going to be revitalized, the infusion of owner-occupied housing will strengthen the neighborhood more in the long run than pumping money into rehabilitation of residential rental properties.
The following quote from the U. S. League of Savings Associations' book
Homeownership: The American Dream Adrift, clearly describes the pride in homeownership:
"A family's home is much more than shelter. A home signifies the family's accomplishments in life, eloquently expresses its personality, establishes its place in the community, and defines the perimeter of its private and personal stake in the society. Indeed, the American dream traces its origins to the very beginning of this country, to the quest of those first colonists for the freedom to rule over their own domain, no matter how small, no matter how meager. This is a dream shared by those who have come to this country, and it is the rightful heritage of all Americans."
Even though homeownership is not a "right", this quote articulates an
explanation for the pursuit of "The American Dream."

3.1 Role of Planning: Adding to or Cutting Housing Costs:
In the previous section (2.0), the complaint was lodged that government regulation was a significant factor adding to the cost of housing and aggravating attempts to produce affordable housing. Subdivision regulations, zoning ordinances, growth management techniques, and the development application processing time will be reviewed here in light of those accusations as well as the role of planning in providing affordable housing. This review will focus on select portions of the aforementioned regulations and should be recognized only as an overview.
Within this framework, the regulation will be examined for two reasons: (1) its ability to serve the public good and (2) its implications for producing affordable housing. The regulations will be analyzed in terms of: (1) the objective of the regulation, (2) how it may add excess costs
to housing production, (3) how it may alleviate any excess cost.
3.1.1 Subdivision Regulations 1 2
Goals of subdivision regulations are:
1. A means to prevent low-grade subdivision of the land. Without them, the result would be inadequate public facilities and poor design which leads to unstable property values and decline. Ensuring that development is designed adequately in the first place so that there are not unnecessary public costs due to deterioration in the future.
2. Reducing uncertainty and risk from an investment perspective. These regulations should enhance the potential value of property for the developer and the homebuyer and, therefore, should reduce the purchaser's risk by ensuring adequate infrastructure.

While using regulations to ensure quality development, a community may also
sacrifice other essential public objectives. How to achieve the quality
development without misusing the rules to raise housing costs and exclude
the poor is the dilemma.
The guiding principle should be: health, safety and welfare must not be compromised, but improvements with excessive costs and limited benefit should be avoided. (i.e. requiring, and oftentimes providing, wastewater treatment for residential development is essential to health; however, stringing lines to serve 2-acre lots is what we fondly tagged the "royal flush" in Mesa County).
To examine the excess costs resulting from subdivision regulations, several sources have cited examples.
"Professional Builder" alleges that in 87 communities surveyed by the General Accounting Office (GAO) site improvement standards added as much as $2,655.00 to the cost of a new home.1^ (No further detailed discussion was provided.)
The architect from the Orange County, California project, described in Table 2.1-C, has estimated the cost increases due to government regulation in parenthesis in that table. He blames government regulation for 50% of the increased cost for landscaping and sidewalks and 30% of the increased costs for streets and driveway construction.
Stephen Seidel's suspicion of excessive cost was surrounding street standards. He established standards for local and collector street pavement widths and compared them to a survey of 77 municipalities' standards. The results are shown in Table 3.1.1-A.

Table 3.1.1-A
Width % Municipalities
Local Streets
25' 12%
25'-29' 27%
30' 17%
31'-39' 32%
40+ 12%
Collector Streets
30' 12%
30'-35' 28%
36 28%
371-40' 17%
40' + 15%
Source: Housing Costs and Government Regulations, Stephen Seidel.

Seidel maintains that an adequate local street pavement width standard is 20' and that the collector street pavement standard should be 28'. These standards were derived by the Urban Land Institute, American Society of Civil Engineers and the National Association of Homebuilders. Assuming these standards are acceptable, this survey reveals 88% of the municipalities sampled have excessive paved width for local and collector streets
which would result in higher housing costs.
In response to those various allegations, another side of the picture also must be understood. First of all, the GAO blanket implication that added costs are "bad" is naive. Some very necessary and valuable improvements justify the added costs. (e.g.: providing sewer and water to homes). Concern about who provides landscaping, streets, curb/gutter, sidewalks and how much of each is to be provided seems universal. The crux of what needs to be remembered lies in what is necessary, but not excessive, to create healthy, habitable environments. Luxury should not be required, but adequate parking for residents and visitors, for example should be part of the street design standards. Forcing children into the street to play on their tricycles and "hot wheels" is not a justified trade-off for narrower streets. This has been the result with inadequate parking; vehicles parked over the curbs and sidewalks where children should be playing. It should be kept in mind that "children" are synonymous with "affordable housing".
Also related to the subdivision regulations is the review time for application approval.
0 The nationwide builders surveyed claim the average delay adds
$1,410.00 to $2,100.00 per lot in financing charges (no detail was provided).
Referring to Table 2.1-C, the architect estimated the increase in land costs over 5 years was 300 percent. Of that, one third is allegedly the result of government delays.

Seidel also researched this subject by survey and his findings are shown in Table 3.1.1-B.
Table 3.1.1-B
% Developers
Time Required 1970 1975
(n=346) (n=350)
7 months or less72.2% 72.2% 14.5%
7-12 months 25.0% 27.5%
13-24 months 2.4% 47.0%
24+ months .4% 11.0%
Total 100.0% 100.0%
Sources Seidel

Even though this survey was conducted a few years ago, the shift to longer time requirements is significant. From 2.8% of the developers estimating over one year to obtain approval in 1970, to 58.0% of the developers estimating over one year is an impressive increase.'18 Implications18 for additional housing costs related to the review process are:
1. Complicated regulation procedures mean delay and uncertainty to the developer. Additional costs incurred (carry-cost and interest on interim financing) are passed on to the consumer.
2. Complicated regulatory procedures and potential or realized delay may move the development out of your jurisdiction and, thereby, under the development of new homes. The result may be leap-frog development and urban sprawl with all the costs attached to them.
At this point, one must point out that good review is a must. Contributing to delay should be avoided, but quality review for an assessment of public costs and the on-going public responsibility in perpetuity should not be compromised for speedy review.
One observation I made in Grand Junction related to this issue was the delays caused by the developers, but blamed on the city. For example, on one project the engineering required to develop in the flood plain was clearly done inadequately for the specifications and, therefore, returned to the developer by the city engineer as unacceptable. The developer caused his own problems because he had not hired a competent engineer to begin with. The city did not cause the problem.
One suggestion that I think can eliminate some delays in review is a good pre-application conference. If it is established that the developer, before buying the property, should come in to meet with the appropriate department heads, sit down with them to discuss what can be done with the property (use by right or need for rezone) and what will be required in the way of improvements, there should be less "stumbling" during the review.

For example, I watched one sub-division each step of the way through review. It was almost recommended for denial because the developer was "nickel and diming" the city on the street design. He had, in fact, paid too much for the property and needed to get X number of lots to make a profit. Designing the street properly was cutting into that number of lots. If he had come in before he bought the parcel, therefore anticipating the cost for the wider street from the beginning, he might have negotiated a better purchase price or passed it by. The developer and engineer continually caused their own problems in this case.
Seidel offers the following conclusions and recommendations to alleviate
the excessive costs of subdivision regulation and review time delay.
1. He believes that the subdivision approval and review process is more complex than in the past. There are more applications required, the number of agencies involved has increased and the number of approvals has expanded. He recommends that the process should be streamlined by using one office to coordinate the review through all agencies concurrently and small changes should be allowed in the project without starting another approval process.
Improved review process will give one community the competitive edge over others with less efficient procedures and may result in more development of the type the community wants. There will also be a savings in time for staff and public officials while assuring fairness and due process to the petitioner.
2. Seidel concludes that subdivision improvements are primarily determined by local officials and may bear no resemblance to minimum health and safety standards and, at the same time, drive up the cost of housing. He recommends that each community needs a set of improvement standards to measure against. As well as expediting the review, this will eliminate arbitrary negotiations and unequal treatment.
3. He concludes that subdivision regulations are increasingly being used to shift the cost of improvements from the public side to the developer.

He recommends that there must be a method to allocate cost of new development among the municipality, the developer and the new residents. New residents cannot be required to pay for more than they need (i.e., schools, parks, etc.). Balancing the revenues against the costs of new development is the crux of the matter.
Seidel's recommendations #1, #2 and #3 are reasonable and not particularly surprising. However, #3 needs to be elaborated on a bit. What Seidel has not addressed is assessing new development for excesses or deficiencies in existing service capacities. New development should not be required to bring existing services up to a standard higher than these services have been maintained in the past. This is not easily calculated, but must be considered in charging development. For example, if fire protection has been provided at one truck per 1000 housing units, but should be at one truck per 750 housing units to rate higher, the developer can not be expected to buy trucks for every 750 housing units. (The local standard has been one truck per 1000 housing units).
3.1.2 Zoning;
As a local government regulation, zoning has been criticized for making affordable housing difficult to produce. The following explains the goals of zoning and some suggestions to aid in the provision of affordable housing through zoning.
1. Zoning restricts the use of land and in effect eliminates the negative effects of its use by one property owner on his/her neighbors. This is considered a way to protect property owners from the noxious effects of other users by separating incompatible uses.
2. A more general aim of zoning has been to protect property values. This rationale has often been used, however, to support highly restrictive zoning techniques. As yet, there is no judicial agreement as to whether this purpose for zoning will stand as a primary motive for excluding undesired land uses.

3. Another commonly held goal for zoning is the preservation of the character of the neighborhood. There are justified neighborhood attributes which should be preserved (architecture, historical character), but too often, this goal is an excuse used so the neighborhood can avoid changes the residents do not want (e.g. multifamily housing in a single family neighborhood).
4. The practice of "fiscal zoning" has become more popular as a means to minimize public services required, while maximizing the tax base through land use regulations. The zoning simply excludes uses which are perceived to require more services and encourages uses which provide revenues in excess of costs (e.g. multifamily housing is not allowed, but industrial and commercial development are highly encouraged).
The Center for Urban Policy Research (the Center) surveyed homebuilders to
ascertain how regulations have affected or changed their development plans.
The results are shown in Table 3.1.2-A
Table 3.1.2-A Effect of Zoning Regulations on Development Plans (N=378)
Change in Development Plans Percent of Homebuilders* *
To build more expensive structures 60.6%
To build less dense development 62.5%
To build in less populated areas 40.9%
*Will not add to 100.0% due to multiplicity of responses.
Source: Seidel
The major impacts of zoning per the survey increased the cost of the homes built, decreased the density of their development patterns, and to a lesser degree, relocated their development to a lesser populated area.
Another survey of the Center focused on residential zoning by type of use
in 80 municipalities nationwide. The results are shown in Table 3.1.2-B.

Table 3.1.2-B Residential Zoning by Type of Use
Housing Type
Percent Residential Land
Single-family detached Low-rise multi-family Mid-rise Multi-family High-rise multi-family Other*
^Includes mobile homes, PUD's and other mixed height or use zones.
Source: Seidel
The results were disproportionally high zoning for single-family detached housing (64.1%), with about 25% zoned for low-rise multi-family and relatively little zoned for mid- or high-rise development. (2.6% and 1.4%, respectively).
This shows a definite preference for single-family housing over multi-family housing or mobile homes. "Over-zoning" for low density residential development may mean that less costly housing found in more dense zoning (and mobile home parks/subdivisions) is not readily available in these municipalities.
Seidel proposes the following conclusions and recommendations regarding the
regulation of land use through zoning.
1. He concludes that zoning regulations may be written in such a manner that they limit the construction of moderately priced housing. Elements which may contribute to this are: undermapping high density and multi-family dwelling units, excessive requirements for frontage, lot size, and floor area.
He recommends that even though standards to measure excesses are unavailable and even though some large lots and wide frontages, etc., may be justified, communities should review ordinances to ensure allowances to provide moderately priced housing units.

2. Ke concludes that excluding mobile homes removes one alternative for affordable housing. These units are often found unacceptable because they contribute too little in taxes; they are perceived to house undesirable people; and they are often aesthetically obtrusive.
He recommends that eliminating this housing type is unacceptable because of its affordability to low-to-moderate income households. To make the use of mobile homes more palatable, the tax structure should be altered and the site design improved. The option of owning a mobile home for low-to--moderate income households is too important to be jeopardized by zoning them out.
In addition to Seidel's recommendations, there should be recognition of the use of the PUD. If designed right, located properly in the zoning districts and proposed within the local government rezone criteria, these developments can offer density through attached housing which is profitable for the developer and affordable to the moderate income household.
3.1.3 Growth Controls
The enforcement of growth controls has been financially beneficial fcr some, while costly to others. Experience has shown that one result of this regulation is the need to mandate the production of affordable housing for the moderate income household. The following is a discussion of these issues.
. 25
Goals of Growth Controls"
1. In general, growth controls attempt to economize on the costs of municipal facilities and services by carefully phasing residential development with efficient provisions of public improvements.

2. Municipalities and counties strive to maintain control over the eventual character of development and maintain a desirable degree of balance among land uses.
3. The establishment and maintenance of the desired quality of community services and facilities is also a goal.
"Professional Builder" reports on the use of an urban service area and an
urban growth boundary in the Eugene-Springfield, Oregon area. The article
alleges that the technique creates an artificial scarcity of land within
the boundary which escalates the land costs. A comparison of costs between
1972 and 1979 within the same boundaries is shown in Table 3.1.3-A.

Table 3.1.3-A
1/ /
Price of raw land suitable for building $5,000/acre $25,000-30,000/acre
Price of developed building lots in city $7,000 each $27,000 each
Price of 2,000 sq. ft. home with lot $40,000 each $120,000 each
Density of housing units/acre +-3.2 +-4.9
Population 84,750 107,500

The change in costs over the seven years compared has been considerable. Raw land prices rose 5 to 6 times; building lots increased almost 4 times; home prices multiplied 3 times while the density increased about 1/3 and the population grew about 25%.
The builders maintain that the landowners of property outside the boundary find it difficult to sell their property for development. Land within the boundary continually rises in price, while land outside of it carries too great a risk (related to the provision of services) and does not sell. As the price of land goes up, the price of housing goes up. Costs resulting from the implementation of the urban service boundary will eventually be borne by the consumer.
After reviewing the data comparison between 1972 and 1979 in the Eugene-Springfield area, several thoughts come to mind. If there was an increase in population of just over 25%, would not the demand for homes and building lots push the price up even without an urban service area and growth boundary? Additionally, an increase in density from 3.2 dua to 4.9 dua might well mean a more efficient use of the land in an area transitioning from rural to urban development versus an implied negative effect.
The use of the urban service area and growth boundary is tricky for the precise accusations being made in this case. However, in their defense, it should be pointed out that even without lines drawn on a map, there is a limit to the extension of services which can efficiently be delivered and a limit to the costs for extension which can be borne by the homeowner.
The hard realities are that urban densities should be in urban areas and municipalities should implement strong annexation policies for the right to the use of urban services with equally strong stipulations which require development to municipal standards.
Over and above that, development to urban densities is not appropriate in the hinterland. On-site systems should be required on large lots low density development. Also, a proliferation of special districts is not desirable to serve rural development for a number of reasons. For example,

for sewer treatment, the package treatment plants have the reputation of malfunctioning due to improper maintenance/operation over the years. This creates quite a problem for the homeowner.
For massive urban development in rural areas (e.g. Battlement Mesa, Garfield County) the county should be aware of the cost of providing services and require, at least, a metro-district (for water, sewer, recreation) if not incorporation. From the residents' point of view, there is "no one" to be held accountable for insufficient services provided from all different sources without incorporation.
Cooperation between municipalities and counties can alleviate some of the problems of development on the urban fringes, if they will try. Both entities have costs to bear if development is not handled properly.
Another example of growth control is limiting the number of building
permits issued. The classic case, Petaluma, California, is cited by
"Professional Builder" as a good intention that is not working. Table
3.1.3-B shows the number of permits allotted since the ordinance was
adopted, the number of actual permits issued, and the issued permits as a
percent of allotted permits.

Table 3.1.3-B
Actual Issued Permits
Annual Permits As % of
Allotment Issued Allotment
1974 600 352 58.7%
1975 600 202 33.7%
1976 600 105 17.5%
1977 600 476 79.3%
1978 600 208 34.7%
"Professional Builder"

Between 1974 and 1978, Petaluma has never issued all 600 permits allotted annually. The range has been from 17.5% to 79.3%, and of the 5 years reported, only during two years was the number of permits issued over 300 50% of the annual allotment.
Housing development in Petaluma has dropped to a point that it is not keeping up with internal migration housing needs. Builders are going to surrounding communities to develop because the restrictions associated with the allocation and time delays in review are too costly. Also, something else complicating the situation is the hoarding of unbuilt allotments by speculators.^
These conclusions are offered from Seidel.
1. He concludes that growth controls should be reserved for solving crisis situations and for attaining positive planning objectives. He feels that the desire to restrict growth based on preference of residents and officials alone is not justified. Only when a crisis (i.e., inadequate water or sewer service, etc.) must be managed should growth restrictions be enacted, and only then when enacted in concert with a remedy for the crisis.
2. He concludes that growth control ordinances limiting the amount of developable land drives up housing costs. If developable land is at a premium, the result is more expensive houses and that minimizes the potential development of moderate income housing. Further, he recommends that when writing a growth control ordinance, provision be made for more developable land than currently demanded and the result will be an absence or artificially inflated land prices.
3. He concludes that the cost of growth control is felt by surrounding communities. Strong development pressures will have the effect of shifting the demand to the surrounding area which then experiences overburdened facilities and

highly inflated land values. He recommends that, when drafting a growth control ordinance, remember that no jurisdiction exists in a vacuum. Look at the implications to the neighboring jurisdictions.
In the description of the Petaluma situation and in Seidel's conclusions and recommendations, one issue has not been recognized with equal attention to its influence speculation.
There is no reason why Petaluma should issue limited building permits without any stipulation on the time allowed to complete construction. Permits should become void if not activated within a reasonable time, just as approvals for rezones and plans/plats should expire. Conditions change and commitments to provide public services must be reassessed. If too much time elapses, the local government has no idea what service commitments it has made and if it can still meet those commitments. All the while, the spill-over effects continue. For example, a rezone influences adjacent properties and more rezones are requested, usually to higher densities. As the properties are rezoned to higher and better uses, the expectations continue for more services. If the permits and approvals expire, speculation is somewhat controllable.
Also, sophisticated growth management techniques require sophisticated implementation and administration. By making processing so complicated that no one will apply for development approval is not a legitimate consequence of the regulation and the benefit to be gained should be accomplished through a well-managed process, understandable to petitioners.
This discussion of the selected government regulations is not meant to be an indictment of either the regulations or the planning profession. It should serve to remind planners that regulations have goals, benefits and costs. These costs and benefits must be evaluated at the time the regulation is first drafted and periodically during its enforcement. Conditions change over time and some of the best intentions become liabilities under new conditions and revisions should be made. Obviously, more than

affordable housing must be taken into account in designing a regulation, but it is a factor that should not be overlooked.


4.0 The Role of the Private Non-Profit Organization
In the previous two sections (2.0 and 3.0), there has been considerable discussion about what contributes to the cost of housing. As expected, materials, labor and land contributed the most to housing cost, but more prominent blame seems to have been placed on government regulation for increasing costs and impeding the production of affordable housing. This focus on regulation is partly by design (for the purpose of this thesis), but also loudly spoken by the building community.
However, it would seem that a closer inspection of other variables in the total housing unit cost formula would be appropriate. The suggestion is to acknowledge that high profits on land sales, substantial mark-ups on building materials and high labor wages also make the production of affordable housing difficult. Since these assumed "rights" of the "free enterprise system" are not very negotiable on the open market, a creative system is needed to circumvent these expenses, whenever possible.
Voila! The private non-profit organization takes on a special importance.
As a potential developer of moderate income housing, these organizations will not function differently than profit-motivated developers in many respects. For example, the non-profit must still acquire land, pay for materials and labor. However, as a non-profit, it might be able to acquire the land in a manner less costly than a for-profit developer. As a non-profit, it might receive the land as a charitable contribution or be able to purchase it at a below market price. Also, the non-profit will be intending to make some money after the sale of the units, but only to reinvest the funds into another project, not to provide wealth for individuals. This reinvestment can keep good ideas and creative solutions on-going.
Non-profits also have access to compete for some funds (loans and grants) which are not available to for-profit developers. These may be used for

land acquisition, construction, and/or permanent financing, depending on the conditions attached.
In summary, the private non-profit will be intent on producing affordable housing for the benefit of the homeowner, neighborhood, and community instead of for the express purpose of making a profit the bigger the better.
This section will assimilate the experience from the case studies and information provided through individual interviews with the process the private non-profit can expect to encounter in the role of a housing developer. The procedure is discussed in general terms and in specifics, such as suggestions that make the steps easier, suggestions for avoiding pit-falls and suggested resources to approach for assistance. The procedure has been broken down into the following categories:
1. forming the development team
2. preparing the feasibility study
3. packaging the financing
4. acquiring the land and producing the housing
5. counselling the potential homebuyer and marketing the project
6. following up after occupancy
Each category is discussed separately, but should be considered integrally related to the other categories. There is an implicit rational order, but because there is spill-over between categories, it is necessary to maintain flexibility in the sequence of events for any one project.
This is being written as an informative guide to the private non-profit organization.
4.0.1 Research Method
To write this section, "The Role of the Private Non-Profit Organization", two case studies were used as well as information gathered from various

other sources involved with non-profit housing development.
The case study which played the greatest role in the research for this thesis was the Patton Plaza Housing Complex sponsored by UFM Services, an organization whose membership consists of 15 churches in southwest Denver. Located at 3900 West Ohio Avenue in West Denver, the complex will consist of 28 two-bedroom townhomes when completed. The units will be priced about $58,000 to $60,000 and be affordable to households with annual incomes from $15,000.00. Ownership of these homes is available to Westwood Neighborhood residents who can qualify as first-time homebuyers. The first four units are under construction and nearly completed.^0 The detail to properly describe this project will be evident in later discussion.
The second case study used was the Del Norte Dollar House project. This neighborhood development corporation (Del Norte) purchased three houses in joint venture with the Denver Community Development Corporation from the City of Denver for $1.00. each. The houses needed to be moved from their sites because the city was clearing the parcel for park development. The joint venture moved them onto a parcel Del Norte had purchased for S25.000 at 29th Avenue and Speer Boulevard in North Denver. The houses were then rehabilitated with new wiring, heating systems, plumbing, roofs, windows, carpeting and paint.
The city paid the moving expenses and Empire Savings and Loan made the three construction loans.
After the "clean-up/fix-up" the homes were sold for $49,000 each to purchasers using Colorado Housing Financing Authority mortgages, with second mortgages, which lowered the monthly payments, from the Highlands Neighborhood Housing Service.
Del Norte "broke even" on the project.^1
In addition to observing the progress on the Patton Plaza townhomes and talking with the people involved in the Del Norte project, information to assist the private non-profit has been gathered from public housing

agencies, private lenders, foundations, housing counsellors, other non-profit developers as well as personal experience. All of this will be integrated into the development process sections.
4.2 The Development Process
Here we are With lots of heart For a worthy project,
But where the hell do we start?
What comes first the idea? the organization? the control of the land? the development team? the financing?
Any of these may come first. Land may be available without an organization to put together housing; or an organization may have identified a neighborhood in need (the idea) but not have any land; or a benevolent benefactor may be waiting to be presented an idea to fund. The combinations go on, but there is a point which needs to be understood. That is there are a number of steps the private non-profit must complete to successfully develop housing. Some steps are prerequisite to others, but seme will also be simultaneous. Each project will have to custom design the procedure it needs to follow.
The following discussion, therefore, should not be interpreted as a set procedure to be followed in strictest order, but should be recognized as a discussion inclusive of the actions required, in some cases, regardless of their order.

The major steps to be concerned about and included in this section are:
forming the development team 0 preparing the feasibility study packaging the financing
acquiring the land and producing the housing
0 counselling the potential purchasers and marketing the project following up after occupancy
One step not mentioned above or in the following is the need to establish one's organization as a tax-exempt private non-profit. Typically, the Secretary of State's office handles the formation of corporations and recording of incorporation documents and boards of directors for the state. At the federal level, the Internal Revenue Service requires an application for tax-exempt status which, along with information about the organization, must show a federal identification number. IRS Publication #557 explains the regulations and application procedures. To illustrate the importance of proper tax consideration, UFM Services created a separate arm, UFM Housing, Inc., to serve as its development corporation. This was done strictly for tax purposes. Good tax advice should be sought.
Keep in mind that the corporate board of the development organization is the legally responsible body. For example, officers sign checks and documents. This is to point out the difference in roles between the corporate board and the development team, which is discussed next.
4.2.1 Forming the Development Team
The development team is the combination of skills, talents and expertise the non-profit organization needs to assume the role of housing developer.
It needs to be made up of people who believe in the "good" of the project, who can contribute from a business perspective and who will commit the time and effort from the beginning to see the project completed. They may be volunteers or paid for their services.

To decide who should sit on this team, several factors must be considered.
Who will lead the team? Is there a staff member to do it, or will someone be selected from the team membership? The assurance that the leadership will continue until project completion is necessary.
0 Preferably, both the leadership position and the team membership will be well-connected both politically and to resources in the community. The stronger the experience this team brings to the project, the more smoothly the task should be accomplished.
The commitment to the time and effort needed to complete the project must be made by the entire team at the beginning. Sources of assistance regard the reputation and stability of the people involved as important factors, among others, in awarding funds to a project. Accountability ranks high.
It takes business acumen to be able to evaluate the risks involved in developing housing and minimize those risks to the extent possible. At the same time it is important to acknowledge the dynamics of the project because it is influence by the economy and politics, but must still be completed. Projects can die mid-stream if people with the moxie to keep things going are not involved. Agility, creativity and responsiveness are basic.
Along with the business talents must come the sensitivity to and respect for people who may be different from the team membership. This will not necessarily be a factor, but the need to cross ethnic, racial or religious lines may be the reality of serving "the good" of the project. People who cannot cross those lines should not be selected for the team regardless of their professional talents.
To illustrate who may be among the development team membership, the following list represents the Patton Plaza team:

Teamleader: Nancy Smith, Executive Director, UFM Services;
former Director of Urban Lending, Empire Savings and Loan; former staff of Brothers Redevelopment Group (private, non-profit housing developer).
Membership: Fr. Patrick Sullivan, UFM Services board secre-
tary; former chairman of the Mayor's Advisory Committee for CDBG process.
Dick Bergin, UFM Services Board, finance committee.
Harry VanderVliet, contractor, experienced builder for private non-profit projects.
Larry Nelson, Midland Federal Savings (correspondent) Urban Lending Department.
Shirley Cordova, Brothers Redevelopment Group, housing counsellor.
Lena Lopez, Brothers Redevelopment Group, a real estate broker.
Reid Grossnickle, Blizzard and Simmons, Architects, architect/land planner.
The composition of this team has made important contributions to the success of this project thus far. Nancy Smith's financial background, knowledge of resources and how to tap them and the respect she receives by virtue of her reputation have gained this project compliments over other non-profit projects from financial resource colleagues both in the public and private sectors.
Fr. Pat Sullivan is politically wel]-connected and well-acquainted in the community in general. This project is being built adjacent to his church

on property sold by the Denver Catholic Archdiocese for the housing complex. He is closely tied to the neighborhood to be served by this new housing since it is in his parish.
Dick Bergin is a board member and experienced with the finances of the private non-profit organization.
Harry VanderVliet serves as the general contractor, but was picked for reasons over and above that. He is experienced as a private non-profit boardmember and was willing to provide a set of townhomes plans he had built before, which were suitable for Patton Plaza. This saved the project considerable money in design fees.
Larry Nelson, as the representative from Midland Federal Savings (correspondent) offers financial expertise and experience in packaging and leveraging funds from public and private sources. His background with the development community and private non-profits is valuable to this effort.
Both Shirley Cordova and Lena Lopez, from Brothers Redevelopment Group, are experienced in marketing housing assistance programs and counselling first-time homebuyers. They are both well-versed in local resources, eligible potential purchasers and the local neighborhood.
Reid Grossnickle was "furnished" by his firm at cost for some minor redesign to the units and the land planning for the rezone and PUD application.
Starting off with the right combination of people will pay off in the long run. Spread the word that a team is being assembled and ask people who are respected for recommendations and without too much effort the team will probably come together.
4.2.2 Preparing the Feasibility Study
The result of the feasibility study will lay the path the team will follow until the project is completed, this study will define the intended target

market and its ability to purchase a home, analyze the land to be built upon from a financial and physical perspective, identify the housing product which will service the market and evaluate the resources available to put the whole package together. It essentially lays out the goal to be met so the direction of the team can stay focused.
To detail what needs to be done, the issues of importance are discussed individually below. To reiterate a point made early in this section, there is no correct or precise order to follow. This study is a good example of actions which may be simultaneous and spontaneous. Do not get stymied by the order of decisions. Just understand that they all need to be made and are related.
1. Identify the market to be served by the housing. Who does the private non-profit want to offer homeownership to? Typical target markets fall into two categories:
a. A section of the general populace (single parents, the elderly).
b. A geographic area (neighborhood revitalization).
The Del Norte project was open to North Denver residents because it is a neighborhood-based development corporation.
This is a large geographic area, though, and was intended for first-time buyers in the moderate income range.
The Patton Plaza complex is serving, however, low to moderate income families, but they must be residents of the Westwood neighborhood. This is a defined Denver neighborhood which is not only the focus of revitalization for this organization, but also a target area as defined by the U. S. Treasury (by census tract).
The result of this designation has a bearing on the use of mortgages available through the proceeds of a mortgage revenue bond issue. (The importance of this designation is not in

knowing the specifics of this project as much as knowing that local, state and federal agencies and programs do designate areas for special attention. Be familiar with what ones are designated and what the implications are).
The target market should not be selected by the team sitting in a "vacuum". If there is a consensus that a group should be served, go to that group and talk with them. Particularly, if it is a neighborhood, the importance of a neighborhood meeting ranks high. For one thing, the idea can be presented to them for their reaction in terms of the construction happening down the street from them and in terms of getting a sense of who in the area is interested in buying a unit. That interest can be recorded then and there. The fewer surprises the "do-gooders" from the outside plunk down into a neighborhood, the more success the project will enjoy.
In order to serve a target market, an analysis of the demographics of the group must be done. Census data can give information such as age, household size, household income, sex, etc. This information and anything collected from the individuals is the only way to know what they can afford and how much financial assistance they will need to become homeowners.
2. Decide what housing product will serve the market best. What is appropriate is the key here. If the potential buyer is the low to moderate income family, do you think a highrise condominium is the best housing for them? Or do you think townhomes with yards are a better solution for children?
This decision, as others that have been mentioned, cannot be made irrespective of some other factors. In particular, this housing type must be made with consideration for the piece of land in mind. Certain parcels support certain housing types. (This will be discussed in greater detail in #3 below). Of course the cost of producing and then selling the house must be considered. Only

those types which will end up in a price range affordable to the target market should be decided upon (e.g. large lot single family detached housing will not probably offer an affordable alternative to the moderate income family).
The Del Norte project was prompted by the housing type before land, target market or financing was thought through. This happened because the houses became available, at virtually no cost, and organizations and individuals then had to figure the way to make good use of the opportunity.
However, with the Patton Plaza complex, the housing type was decided more in concert with the target market and land. It should not be forgotten, though, the significance of using the townhome design available by the contractor and the subsequent savings to the project.
3. Research possible parcels of land to build on. The land may come into play from one of several directions. It may be the first "known" to be dealt with because it may have been donated or purchased. It may be an unknown yet to be selected.
At any rate, the parcel cannot be selected without forethought and some technical consideration. For example, the zoning will dictate the use of the land and the bulk development through setbacks, etc. Be familiar with what can legally be done. Is the parcel buildable? or does the topography prohibit development?
The proposed use of the land needs to be compared to the adjacent uses. If the project is to use attached housing, will the zoning allow the density and will it be compatible with the rest of the neighborhood?
What improvements are required for development? What are the service fees for hooking on? What needs to be done in the way of

engineering drainage, soil tests? All of these are realities which add to the cost of the development.
Location may be important, but it should not overshadow the other issues to be taken into account.
4. Resources available to assist in the project must be evaluated both in terms of effect on the project and in terms of timing. The experienced board member becomes valuable here, since everyone cannot become an expert overnight. Learning the roles and rules and regulations for all the resources takes time, and time can mean missing a deadline or an opportunity.
The resources available have been categorized into the following:
a. Government Sources:
To be used in conjunction with or through local government are Community Development Block Grant (CDBG) funds. In urban areas, these are more available and inquiries should be made through community development departments or agencies. Many cities have allocated a portion of the total CDBG award for housing and a housing committee reviews applications for projects. Guidelines are available or. request explaining the process.
In rural areas, the CDBG funds are awarded to towns on a project by project competitive basis. Applications are made by the local government to the state for awards.
In the past few years, local governments have issued mortgage revenue bonds. The proceeds of these have been used for below market interest rate mortgages. The availability of these mortgages is generally well-publicized and often units (mortgages) can be reserved with a lending institution for a project by its developer.

Public housing agencies, often at the state level, may have funds for which the private non-profit may qualify. The Colorado Division of Housing (CDOH) (part of the Department of Local Affairs) has a matching grant program for low income housing assistance. The Colorado Housing Financing Authority (CHFA) also has a construction loan program, and mortgages available through lenders for low to moderate income households.
In rural areas, funding is offered, though limited, through the Farmers Home Administration (FmHA) in addition to the CDOH and CHFA. They in the past have had both construction and mortgage financing programs. The local county office should be contacted.
Since much of the federal program assistance is no longer available, the government sources are fewer and evaluating them is less effort than in the past.
b. Financial Institutions:
The involvement of private financial institutions in pub-lic/private fund leveraging for urban revitalization, housing, etc. seems to come and go sometimes based on regulation and sometimes for other reasons. Urban lending departments were formed for this cooperation with public agencies, but many have ceased operation. Tapping the personnel formerly with an urban lending department or personnel still working for one is advantageous. Their creativity in leveraging funds pays off, not only in dollars made available, but also in the perception the project effort portrays to funding agencies. Both temporary anc permanent financing can be secured through the private lender.

c. Political Structure:
The resources here are probably not financial, but may lead to money. The local elected representatives have a vested interest in assisting housing projects. They may well be able to smooth the way towards city-controlled money. Not so much in influence as in knowledge of the process.
Another political entity that should not be overlooked is the neighborhood organization. If one exists, they may be a wealth of information and contacts, if they support the project. Well-connected members of grass-roots organizations may sit on other boards or committees which assist in housing. Lobby for their support. Cooperate with then.
d. Private Foundations/Housing Support Organizations:
This group may be the least visible ar.d require the greatest searching. As with private non-profit developers, the private foundation is playing a greater role in funding social programs, including housing. Each foundation ejected "a mission" and most of the time researching their historical giving will pay off.
With the Piton Foundation involvement in the Denver Family Housing Corporation, the monthly assistance it provides for lowering mortgage payments under the CHFA program enables low income families to buy a home. This is a unique vehicle in Denver which makes this possible.
The foundations which are active in housing will probably be well known in the development community and, therefore, fairly readily identifiable. However, those not having a track record in housing or new ones on the horizon will need to be ferreted out. A conscious pursuit and being in the

communication network for word-of-mouth transmission of "news" will bring new sources to light.
In addition to private foundations, there is a movement to get other large reserves of money to invest in mortgages.
In one example here in Colorado, employee retirement funds have been used. As wTith foundations newly involved in housing, these sources and the means to access them are known only to people who keep very well informed.
The private non-profit should be willing to explore public and private funding and political sources to assist in realizing a proposed development. The role of the team is as important here for its experience with the resources mentioned as its role in any other phase of the task. Knowing which resources require matches; knowing which are applicable for what use; knowing the method/personnel to access the funding; knowing the deadlines for applications; and knowing how to leverage one resource with another are all advantageous.
After completing the feasibility study to this point, the team should know what parcel is to be built upon, what housing type will be built and who the target market is. To go further, it should be ready to calculate the economic feasibility of the project. This takes the cost of the land, the construction and the financing and comes to a sales price to compare with the ability of the target market to pay for homeownership.
An early estimate for Phase I of the Patton Plaza development cost (using some assistance) and the sales price is shown on Table 4.2.2-A below. The total column represents 8 units. The final figures came out somewhat different, but for the sake of illustration, this will do.

Table 4.2.2-A
Land $ 40,000 $ 5,000
Construction Costs 320,000 40,000
Interest & Financial Costs 20,000 2,500
Total for Construction 380,000 47,500
Less CDBG & CDOH Grants (150,000) (18,750)
Net to Finance for Land & Const. $230,000 28,750
Marketing S Permanent Loan Costs 30,000 3,750
CDBG Recovery for Additional Development 60,000 7,500
Reserve for Downpayment Assistance 10,000 1,250
Sponsor Profit for Additional Development 30,000 3,750
Met to Recover through Sales $360,000 $45,000
Sales Proposal
Maximum Sales Price $452,000 $56,500
Available for Deferred Financing $ 92,000 $11,500

So what does this say? It shows that costs for Phase I construction and land total $380,000. But if $150,000 can be received from CDBG and CDOH funds, the cost is written down to $230,000. Costs for marketing and permanent financing ("points" paid by the seller, etc.) are $30,000. Recoveries of $60,000 to revolve CDBG funds into Phase II, of $10,000 to assist in downpayments and $30,000 to invest in Phase II as sponsor profits have been accounted for. This means the minimum net cost to recover through sales is $360,000. With sales equal to $452,000, the after-sales money available for deferred financing equals $92,000.
In a second look at the project economics, one can see that $182,000 ($60,000 + $30,000 + $92,000) are revolving funds to be reinvested from Phase I and that $10,000 is reserved for down payment assistance. These are important in the continuance of a project and in being able to serve the intended market.
The next step is to look at the sales price of the unit, calculate what income is required to qualify for purchasing it and compare that income to the target maiket income. The following example is for a home priced at $56,000 with a 15 year, 12.99% mortgage from the Denver mortgage bcr.c program. Again, this was a preliminary estimate for the Patton Plaza complex and their price and financial packaging have changed, but this illustrates the method.
$56,000.00 2,800.00 $53,300.00
- 5,000.00
- 5,000.00 $43,200.00
(5% down payment) balance
CDBG 8% 2nd mortgage DFHC 8% 2nd mortgage to mortgage
50.00 $589.00
P & I taxes
H.O. Ass'n fee monthly expense

This calculation takes into account two down payment assistances available, but at this point uncommitted:
$5,000 from CDBG funds as 8% 2nd mortgage
$5,000 from Denver Family Housing Corp. (DFHC) as 8% 2nd mortgage.
Even with these downpayment subsidies, the monthly expense shown will require $2,104.00 in monthly household income if the 28% ratio (of monthly expense to monthly income) is used. This translates into $25,248.00 anrual income. Note this has not included homeowners' hazard insurance.
Since the incomes of the households targeted for the Patton Plaza complex are much lower (shown below) than the calculated required income ($25,248.00), there is a gap in the feasibility of this project which needs to be filled. The gap is in the ability to make the monthly payment.
Target Incomes: 80% of the Local Median
Number Persons Per Household 1 2 o 4
To make this feasible for the intended buyers, other resources for assistance were added. They are shown below:
Monthly expense DFHC (2nd, 8%) CBDG (2nd, 8%) Monthly expense
$589.00 -120.00 60.00 $409.00
Using the same 28% ratio, this monthly expense requires $1,461.00 monthly income or $17,532.00 annual income. This monthly assistance brings the

income of the buyers to a lower level one which is within the range of the targeted market and makes the project feasible.
The bottom line of the feasibility study is to put everything together as is needed. Packaging the financing, acquiring the land, and producing and selling the housing is challenge enough, but conquering the unexpected events is the real challenge to complete the project.
4.3.3 Packaging the Financing
With a completed feasibility study in hand and the commitment to proceed in heart, the task is fairly well laid out in front of the team. Assuming the next step the team needs to take is securing the funding, the following will provide a general description of some sources previously mentioned. Though these are specific to Denver and Colorado, similar institutions should be in existence in other locales.
0 Community Development Block Grant Funds:
In urban areas these funds are automatically dispersed to the cities from the federal government. A common practice is for the city to set aside a percent of these funds for housing. This set-aside is then distributed to projects based on application competition and review criteria as they relate to a local housing plan or program. These programs may have identified target areas to receive special attention. Proposals may be submitted to Denver for the following purposes:
1. Land Acquisition
2. Abandoned Housing Acquisition
3. Infill Housing New Construction and Substantial
Rehabilitation Prototype Housing Units
4. House Moving
5. Counseling

- Homeownership
- Energy Conservation
- Architectural Assistance
6. Homeownership Writedowns, Subsidies and Patient
- Land Lease
- Shared Equity
- Mortgage Subsidy
- Co-Ops
* Homeownership writedowns, subsidies and patient mortgages should be designed to revolve the principal at no
interest or at a low interest rate.
Some of the criteria used by the Denver Community Development Housing Committee are:
1. Availability of Community Development housing funds
2. Completeness and feasibility of the overall development package including ability to control site location, verification of financial commitments and maximum use of Community Development funds (leveraging and revolving)
3. Evidence of citizen participation
4. The meeting of the overall project objective (affordability and availability of housing for low- and moderate-income families) including not displacing existing tenants
5. Ability of the developer and/or service non-profit to implement in a timely manner
6. Having received a favorable project feasibility rec-
ommendation from the Denver Housing Authority.
Councilmatic districts sometimes have local committees which review projects prior to the city review, which means inquiries should be made through elected officials as well as city departments.

State Housing Development Grant Program
The Colorado Division of Housing within the Department of Local Affairs has a grant program to aid in the provision of housing for low-income residents. The program eligibility guidelines are listed below:
Grants may be provided to eligible applicants for the rehabilitation, construction, or acquisition of owner-occupied housing and non-profit rental housing for low-income households. Eligible applicants are public entities and private, federal-income-tax-exempt non profit corporations. Low-income households are those households whose incomes do not exceed 80 percent of the median family income for the area.
Grants must be at least equally matched with non-State funds committed to, or under the control of, the applicant.
Planning and administrative expenses incurred by the applicant cannot be paid from State grant funds.
Non-State funds used for planning and administrative expenses are not an acceptable non_State match.^
"Special consideration is also given to projects which assist
households with incomes that do not exceed 50 percent of the
median family income for the area, to projects which are not
feasible without a state housing development grant, and/or
projects which incorporate measures to contain costs and to
recover and recycle funds".
The Division reviews applications four times a year.

The Colorado Housing Finance Authority
CHFA has programs for both construction loans and single-family mortgages. It administers the construction loan program which serves for acquisition and construction or rehabilitation of housing facilities for low- to moderate-income families. These can be rental, cooperative or owner-occupied. CHFA funds are available for a maximum term of two years at a below market interest rate."^
CHFA's single family mortgage program makes mortgages available to moderate income families through various savings and loan associations at interest rates below conventional mortgages. These funds are the proceeds of mortgage revenue bond issues. The program is somewhat in transition at the time of this writing but, in general, has the following homebuyer eligibility guidelines.
1. The applicant cannot have owned a home in the last 3 years.
2. The annual adjusted household income cannot exceed $23,000.00.
3. The mortgagee must occupy the purchased home as his principal residence within 60 days after closing.
4. The applicant cannot own other residential property.
5. The applicant cannot have a net worth in excess of $35,000, exclusive of the down payment and closing costs.
Specifics on either of these programs need to be explained by CHFA or a participating lender. Set-asides through the lenders are common practice for projects seeking these mortgages.

Denver Mortgage Bond Program
This is the mortgage program funded through the proceeds of a mortgage revenue bond issue. It is in limbo right now because the interest rate on the mortgages is not competitive with other rates and therefore not advantageous to the purchaser. It points out, though, that local bond issues are an option, unless the federal legislation that permits them "sunsets" at the end of 1983.
Denver Family Housing Corporation
DFHC is a non-profit which was initially funded by grants and loans through foundations, private corporations and the public sector. Its objectives are:
to help make housing in certain Denver neighborhoods affordable to low and moderate income families to stabilize these targeted low and moderate income neighborhoods
to prevent the displacement of long-term residents of these neighborhoods
to build the capacity of neighborhood based organizations to address the needs of low and moderate income families
to test and institutionalize innovative ways to mobilize private and public investment for such purposes
It has second mortgages at 8% available to dovetail with the Denver and CHFA Bond Program mortgages. These seconds assist in lowering the monthly payments so the mortgages can reach households with incomes lower than the first mortgages could reach without them.
The use of these seconds is limited to residents of target 38

Financial Institutions with Urban Lending Departments
Some lending institutions are still providing urban lending services. There has been a reduction in the last few years, but exploring the financial community is the best way to uncover ones still in existence. These are the private lenders that will leverage private and public funds to encourage urban revitalization. Personnel in these departments keep up with the public programs and know how to use them in concert with private funds.
Knowing the resources and how they can be joined together is a major element to the success of financing and completing the project. The project will require funds to purchase the land (if not donated), construct the housing and finance the purchases of the homes. The more information and experience that is combined in the designing of the financial package, the better the chance for success. And, without intending to dampen the uninitiated, the best package will be shaken up and different at the end than it was at the beginning.
To give some examples of the unexpected problems which can occur, there is a brief description of one surprise experienced by Patton Plaza.
The City of Denver awarded $100,000 of CDBG funds to the project: $40,000 for land acquisition and $60,000 to defray construction costs. Only after this had been calculated along with other funding for the construction loan, etc., was an error discovered.
HUD does not allow CDEG funds to be used for new construction unless the sponsor (developer) is a neighborhood-based development corporation. UFK Housing, Inc. did not have that organizational structure in its by-laws and, therefore, could not use the $60,000 for construction. That left the construction account $60,000. short.
Another experience which has caused a significant delay and, therefore, costs to the project, was an apparent obstruction to the process by a city

agency. Without pointing fingers, suffice it to say that projects too often encounter incompetence and political game-playing within
bureaucracies handling public funds. Initially the delay may seem excusable, but eventually the team realizes it has a problem. The process is stopped on dead-center for an unknown reason and in this case some inappropriate, but absolutely necessary, negotiating had to be used to get the paperwork flowing again.
Even given the above examples, do not be misled that the effort is not worth the hassles. Just know that while the financial pieces are coming together, there will be repeated conditional approvals with contingencies on other approvals, delays and disappointments. It will seem as though nothing is final and a spider's web might well depict the linkages graphically. Trust, cooperate, and roll with the punches. Sooner or later, and only after creating many new solutions, the whole package will be cemented. The Patton Plaza financial program is not static and the current picture follows.
The proposed mortgage package for Patton Plaza is described on a year-to-year basis in Table 4.2.3-A. The pieces are:
CHFA 30 year mortgage at 10%
CDBG 3-2-1 buydown (grant $2,934.48)
DFHC monthly assistance (2nd mortgage 8%)
This example uses a $60,000 purchase with a 5% down payment leaving $57,000 to finance. The payment schedule works as follows:
The CDBG grant of $2,934.48 reduces the monthly payments, in effect tc payments for a 7% mortgage the first years, to payments for an 8% mortgage the second year, and to payments for a 9% mortgage the third year. Hence the term 3-2-1 (%) buydown.
The DFHC monthly assistance is in the form of an 8% second mortgage. The assistance is $100.00 per month for the first 4 years, then drops to $20.00 per month/per year for each of the next four years or through the eighth

year of the mortgage. In the ninth year, the payment reaches its full unsubsidized level for a 30-year mortgage at 10%.
Then, starting in the tenth year, the repayment of the DFHC monthly assistance starts at $25.00 per month. The monthly repayment is increased by $25.00 per month per year through the fourteenth year, when it reaches its highest level at $125.00. This repayment level is maintained through the 25th year when the DFHC assistance repayment is complete.
The 26th through the 30th years, the monthly payment returns to the amount for the 30-year 10% mortgage.

Table 4.2.3-A
CDBG Buydown
DFHC Monthly Assistance
Buydown Cost $2,934.48
Sales Price Loan Amount Mo. Assit. Total Assis
Schedule of Payments
Year P&I Mo. Assist Net P&I DHFC Prin DHFC Int. DHFC Bal.
1 379.23 100.00 279.23 1200.00 52.00 1,252.00
2 418.25 100.00 318.25 2400.00 200.00 2,600.00
3 458.64 100.00 358.64 3600.00 444.00 4,044.00
4 500.22 100.00 400.22 4800.00 784.00 5,584.00
5 500.22 80.00 420.22 5760.00 1209.60 6,969.60
6 500.22 60.00 440.22 6480.00 1701.60 8,181.60
7 500.22 40.00 460.22 6960.00 2240.80 9200.80
8 500.22 20.00 480.22 7200.00 2808.00 10,008.00
9 500.22 0.00 500.22 7200.00 3384.00 10,584.00
Assistance Payment Begins
P&I Repayment Net P£I DFHC Bal
10 500.22 25.00 525.22 11130.72
11 500.22 50.00 550.22 11421.18
12 500.22 75.00 575.22 11434.8
13 500.22 100.00 600.22 113.40.66
14 500.22 125.00 625.22 10541.63
15 500.22 125.00 625.22 9884.97
16 500.22 125.00 625.22 9175.76
17 500.22 125.00 625.22 8409.82
18 500.22 125.00 625.22 7582.61
19 500.22 125.00 625.22 6689.22
20 500.22 125.00 625.22 5724.36
21 500.22 125.00 625.22 4682.30
2? 500.22 125.00 625.22 3556.89
23 500.22 125.00 625.22 2341.44
24 500.22 125.00 625.22 1028.5
25 500.22 125.00 625.22 0.00
26 500.22 0.00 500.22 0.00
27 500.22 0.00 500.22 0.00
28 500.22 0.00 500.22 0.00
29 500.22 0.00 500.22 0.00
30 500.22 0.00 500.22 0.00

The income estimated eligible to qualify for this financing ($14,293.00) is based on a 28% ratio of monthly housing expenses to monthly income. That monthly expense includes principal, interest, taxes, insurance and homeowner's association fees.
It is important to keep the ratio as low as is reasonably possible because some households in the target market may not have upward mobility which would enable them to absorb increased monthly expenses. To start with a ratio that is too high means they may not be able tc keep up with the increases as they are scheduled in future years.

Table 4.2.3-B
Land $ 40,000
Construction Costs $300,000
Interest & Financing Costs 14,000
Total for Construction $354,000
Less CDOK Grant (50,000)
Less St. Anthony Loan (60,000)
Net to Finance $244,000
DHA Repayment 25,000
Marketing & Permanent Financing 30,000
Land (Repayment to Const. Acct.) 40,000
St. Anthony Repayment 60,000
Recapture through sales (452,000)
Profit for Development $ 53,000

The proposed budget for Phase I of the Patton Plaza complex is shown in Table 4.2.3-B. Note the land construction and financing costs total $354,000. From that cost the CDOH grant of $50,000 and the St. Anthony loan of $60,000 is subtracted and the net to be financed is then $244,000. To that construction loan, other costs must be added: Denver Housing Authority payback $25,000; marketing and permanent financing costs -$30,000; land purchase repayment to the construction loan account -$40,000; and the St. Anthony loan repayment $60,000. This, netted against the recapture from sales ($452,000 = 8 units @ $56,500), leaves a sponsor profit for new development of $53,000.
That exercise to weigh costs against loans, grants and sales is fairly straight forward. However, the flow of money behind these figures is less obvious. For example, the construction loan was closed at $244,000 with Midland Federal Savings. This would lead one to believe that Midland loaned the total sum out of its resources allotted for construction loans. In reality, that is true, but with one twist. CHFA bought a certificate of deposit at a below-market interest rate from Midland for $122,000, oi half the loan amount. The result of this is the leveraging of funds by the two institutions as well as a sharing in the risk.
Something else, not obvious on the surface, is the reason for the loan from St. Anthony of Padua Church. V7hen the construction lean closec at $244,000, there was a commitment from the city through CDBG funds for $40,000 (land acquisition) and $60,000 (new construction money). After the closing, the project was informed that CDBG money cannot be used on this project for new construction. Hence, the construction account was short by $60,000. In order to replace this shortfall, the church decided to loan the project the $60,000 from its proceeds from the total land sale (the parcel for all 28 units). The church, in conjunction with the Archdiocese, is selling the land for the project.
These are only two examples of creative solutions in response to the challenge of "putting it together". There are other stories behind this budget, but these were used only to make a point. Also, one must keep in mind that the situation could change yet.

4.2.4 Acquiring the Land and Producing the Housing
From the feasibility study, the team should have an analysis of the parcel selected to be built upon. From the financial packaging, the means to purchase the property should be known. However, there is more to be said on the subject.
Since land cost is a major component of the housing unit cost, any triumph over that will serve the project well in the end.
Some suggestions to consider as the team tries to acquire the property are:
Lease the land instead of purchasing it. This reduces the front end cost and mortgage cost to the consumer.
Lobby for a below-market price on lands held in public ownership. As a private non-profit, serving the low tc moderate income family, there should be little leakage of the properties to bring a windfall profit which is oftentimes the concern of the public landowners.
Look for land which might be donated. This would be the ultimate situation if the land is suitable for development.
It is better to try than not. Someone might need the tax break for charitable contribution or a memorial.
The point is that if the land is not a "given", be aggressive and creative to try to keep down the project budget and the housing cost.
After the land is selected, there may be the need to rezone it and one must not forget to allow time for the rezone application processing. Most likely any rezone will be from the conventional zone to a PUD and, depending on the local government, that approval can take up to 90 days or more. The architect or contractor should be familiar with the local rules and regulations.

With regard to this subject, Patton Plaza had intended to design a PUD for its total project (28 units) but was able to start construction of its first building of four units without the zone change, because it met the bulk standards and set-backs of the existing zoning. Incidentally, their architect had originally advised them that they could build two buildings (8 units) prior to the rezone, but alas, an error another unexpected delay.
Shifting now to the production of the housing, recall the benefits of carefully selecting an experienced contractor. That, plus having access to house plans which have been used will save in design costs and, thereby, house unit cost.
If, however, the conventional contractor and stick-built home is not a necessity, there are two options beyond that to be considered.
0 Explore the possibility of using manufactured housing. The designs have improved, which makes the finished product less identifiable and therefore, mere acceptable. Definite per unit savings should be realized.
0 Self-help (sweat equity) programs have been in existence for a few years. The Colorado Rural Housing Development Corporation (CRHDC) has tied its program to Farmers Home Administration mortgages in several rural Colorado communities.
The crux of the program is that they put together a group of six or eight families to help each other build their homes.
Then CRHDC buys all the materials, contracts out the technical work and, through professional contractors, trains and supervises the homeowners to build the rest of the house.
Each phase is completed on each house before the team moves on to the next task. This organization claims a $10,000 savings on each home as a result of the self-help concept.
Regardless of the method used to produce the housing, two details need to be attended to. First, be sure to erect a very visible sign describing the

project, its sponsor, financing, etc. at the construction site. This will help advertise it and explain what is going on. Second, be sure to place a fence around the periphery of the project to prevent the neighborhood from entering an unsafe construction site, as well as to protect the project from vandalism.
Also related to the construction phase are uncontrollable delays because of bad weather. This is not uncommon, but remember that the time clock on the construction loan continues to tick and interest keeps accruing.
Something else which may increase with the time clock is costs of materials. If the project is to be built in phases, try to negotiate firm prices at the outset for the total project. Some suppliers want to fluctuate the prices with the market, but others are willing to negotiate firm prices on a "sure thing".
To reiterate, use initiative and creativity in acquiring the land and producing the housing. Systems and methods which have been traditionally used may well be successful, but history and tradition may not work. In that event, try something new.
4.2.5 Counselling the Potential Homebuver and Marketing the Project
Educating the potential purchaser about the homebuying process ana the responsibilities of homeownership is time well spent. With the unique financing programs and somewhat unusual ownership mechanisms used today, home counselling is more necessary than it was in the past. Add to that the inexperience of the purchaser from the low income household, who may have had essentially no exposure to homeownership from parents, for example, and may never have thought homeownership could be a personal accomplishment, and the need for housing counselling increases.
As the proposed project is introduced to the neighborhood, the first attempt to identify potential buyers can be made. Any residents in attendance at neighborhood meetings can express their interest in purchasing a

unit and can make an appointment with a housing counsellor to discuss the possibility. At that appointment, the counsellor can explain the down payment and income eligibility requirements to then identify those hopeful buyers who are ready to buy versus those who need to take more time, for example, to accumulate more savings. The housing counsellor can keep these names on file and use them as a source of potential buyers to be contacted when the units are marketed.
In order to reach the target market, such as low to moderate income households, the mortgage financing package may become fairly complex. This is evidenced by the Patton Plaza program. Add that type of many-component
financial scheme to condominium homeownership, which is new and unusual, to some people, and extra effort is clearly in order to explain how one buys the house and to explain just what they then own. Keep in mind that most people still think of homeownership as a single family detached house on a single lot purchased via a 30-year mortgage. With that in mind, and perhaps not clearly understood, imagine the confusion that a complex financing package can bring let alone condominium ownership and home-owners' associations. It is important to keep educating the market all along the way, and sooner or later the mysteries are lifted and the new ideas are understood.
Some examples of training the Brothers Redevelopment housing counsellors dc with potential and new homebuyers are:
Townhome Seminar:
They define the concept of the townhome and condominium ownership to potential buyers. The counsellors, working with many housing developments, explain some overall information in general terms, and also offer specific information about each development floor plan, location, price, etc.

Closing Seminar:
This includes an explanation of who participates in the closing, the purpose of the closing, the documents needed to conduct the closing, and an estimation of the costs. Also presented are tips and instructions which the homeowner will need in the future, such as: what insurance coverages are mandatory and which are optional; household budgeting which advises building a savings reserve and cautions against too much installment buying; a reiteration of homeowner responsibility to make payments on time, pay utilities, etc.; filing the first tax return as a homeowner and advice on what records to keep; and the costs of homeownership in light of yard maintenance, repair and replacement of systems, taxes, insurance and utilities.
Someone needs to assume the responsibility to counsel and educate the market. If an organization is not established to do this, the private non-profit should take on that role. Only with this will the new homeowner have the benefits that accompany a better understanding of their role and responsibilities.
The marketing of the project can start with those neighborhood meetings, too. Even though the houses are not constructed and available at that time, making people aware of the proposed project starts the potential sales effort.
Depending on the composition of the non-profit, who supports it and belongs to it, each marketing effort will be custom designed. For example, Fat ton Plaza has used the church membership of UFM Services to announce the project and seek potential buyers. Notices in church bulletins and announcements from the pulpit have both been used. Also, a canvassing of the Westwood neighborhood with brochures has raised interest. Brochures have been dropped door-to-door and placed on car windshields at major shopping areas.

These kinds of methods are short-term marketing efforts to invite residents to neighborhood meetings and raise interest among the target market for purchasing.
Before or at the time these initial efforts are being made, the team must come to a decision. Who will do the marketing? Is there an obvious choice of real estate agencies? Should the project be placed in the local multilist service book? What is the best way to approach the marketing?
Patton Plaza decided, at least initially, to use the Brothers Redevelopment Group real estate service. The cost is less for commissions (since it is a non-profit) and the housing counselling arm of their organization was involved, too.
The team and the broker in charge made the decision to promote the homes at the local, grass-roots level in the short-term, and to move on to the multi-list and media advertising later, only if necessary. Currently, the opinion is that the units will sell very quickly because of the program design and with the source of potential buyers developed through the housing counselling center.
Something to keep in mind if the project is in demand by many mere qualified potential purchasers than units available is the lottery. It is a means to select buyers while everyone has an equal chance.
CHFA requires that any builder with reservations for CHFA mortgages must agree to offer thorough exposure of the project for the purpose of making eligible homebuyers aware of the housing opportunity. The requirements are:
1. To advertise for two weeks, in a paper of major circulation, that applications for permanent loans are being accepted.
2. Set a date for a drawing or establish a waiting list and then have a drawing.

The criteria for eligible buyers are established by the project and may include income limits. These criteria should appear in the advertisement.
Another issue which should be brought up in relation to marketing is the homeowners' warranty. The builder needs to offer this on his product to ensure that any deficiencies as a result of construction will be repaired without charge for a specific period of time. Listing contracts may require that condition.
To have come this far in the development process means a great deal of effort has been expended and a considerable amount of success has been earned. So, to put forth any less effort in working with the buyers, or in marketing the product, would be regrettable. The success of the project, the reputation of the non-profit, and the ability to go forward into future phases will be measured on the total picture of this first phase or project. Be as interested in doing the last steps as you are in doing the first.
4.2.6 Following Up After Occupancy
The responsibility to the new homeowners does not stop at their closing. The private non-profit developer has a moral obligation to see that these new owner-occupants transition into their new roles as successfully as possible as well as an obligation to protect the housing it has produced with respect to the neighborhood, community, and its own reputation.
The continued involvement with the new owners is primarily through their homeowners' association, which any attached complex with condominium ownership will have. There needs to be an assurance that monthly dues are being paid, the organization's books are being kept up, restrictions are being honored and any violators are being dea]t with to remedy problems caused.
Setting up the organization with articles of incorporation and by-laws is fairly simple. There are many examples to be patterned after, but the

organization should be customized for the development. However, implementing the operation is yet another step which is vitally important to the functioning of the development. Enforcing rules is not always easy. Since it is necessary, though, the young organization may need help doing it. The continuance of a healthy living environment for the residents depends on a well-run homeowners' association.
During this first year, a repeat of information provided in the housing counselling seminars would be appropriate. Hearing the same information twice seldom hurts, and, somehow, it means more when the situation is real versus when the situation is hypothetical. For example, a tax filing workshop would be helpful in January or February after the new owners have occupied their homes.
Realistically, the developer should probably expect some calls from the new occupants about maintenance. These people have been renters and may expect the developer to take care of some maintenance as a landlord. Explaining these changes in their responsibilities will probably be repeated many-time s.
At any rate, the non-profit, developer will have an on-going role. Stay involved and support these new homeowners. There will be some rough spots to see them through, but, hopefully, they will survive to enjoy the benefits of homeownership, as was intended from the start.
This section (4.C) about the development process has, hopefully, provided the general overview of the elements which make up the total picture. Though the level of detail must be expanded upon when a real project is being pursued, the information included should be complete enough to direct the user to seek more information.
To repeat, from the introduction, the order of events will be dictated by the team and project, but the inclusion of all the steps is important to recognize.

5.0 Conclusion
The Denver Post, April 10, 1983, Joanne Ditmer "The State Sets Sites on Affordable Goal":
"A recent survey found that the average household in Colorado, with an income of $20,500, could not afford to buy an average house, with a median value of $64,100. In 1970 the median value of owner-occupied homes in Colorado was $17,300, about 18C percent of average household income, with an average down payment of 18 percent of that income. By 1980 the median value of owner-occupied homes was more than three times the average household income, and the required down payment had soared to 31 percent of income. In that decade ... the total annual costs of mortgage interest, insurance, taxes, utilities and upkeep had risen from 21 percent of average annual income to 51 percent. In addition, Colorado produces only 26,000 of the estimated 58,000 new housing units needed annually. National studies have shown that land is the single most costly component in housing....
While no one wanted more regulation on the state level...[the] state should set minimum statewide standards for subdivisions that preserve health and safety considerations, but not so excessive that they exclude affordable housing, and should not set maximum statewide standards, it was recommended."
The Denver Post article and the material presented in sections 2.0 and 2.0 are quite similar, even though they are described in different terns.
The problems surrounding how affordable housing can be produced are c common topic of conversation among housing specialists, developers, consumers, lenders, etc. As this is discussed, the remedies to the problem fall into similar categories, only interpretation and shading is slightly different.

The purpose for this thesis was:
to lay out the problem of producing and purchasing housing which is affordable for the moderate income family;
to suggest that planners have the option as professionals to help solve this problem or help compound it;
to offer that there is a role for private non-profit corporations to successfully develop affordable homeownership for the moderate income household.
After having researched and written this thesis, there are several observations that need to be given special attention:
0 Low income families can be assisted into homeownership without giving the house to them. The Patton Plaza model has very little grant assistance to the homeowner. Nearly all assistance is repaid in the course of the mortgage repayment period.
0 Denver Family Housing Corporation, though interested in revolving its funds, is willing to pay out funds without the start of repayment for several years. Even though interest is accruing, there is no cash flowing back to DFHC. That indicates to me that some money is either free (maybe public grants) and/or there is significant wealth willing to replenish the "pot" during those years. The 3atter seems more likely.
0 New sources of money must be pursued. Private sources, such as the Piton Foundation, can make a significant difference in the feasibility of a project. With the shrinking funding available through the former government assistance programs, the role of the private foundation has to increase.

The sophistication of the financing and ownership scheme must not intimidate the target market. However, if that appears to be an unavoidable problem in order to make the homeownership a reality, be sensitive to the need to educate, explain, iterate and reiterate until there is no misunderstanding remaining.
0 The selection of the development team, combining the right people, is a key to success. The better the resources on the inside, the less reliance on the outside for assistance.
0 In general, if the team is innovative, creative and aggressive while exercising patience, diplomacy and cooperation, it will serve the project well.
After having researched this thesis and having observed the development of affordable housing by the private non-profit corporation, I am convinced that the role of the private non-profit is more important than ever before and should be continued and expanded. With the cuts in federal funding to housing assistance programs, the public non-profits are not able to develop housing. To ensure that homeownership is an opportunity for the low to moderate income family, new private funding must be found and the private non-profit must pursue the role of developer.
The purposes for researching and writing this thesis have been met. It is now offered to the uninitiated private non-profit organization which ir willing to meet the challenge of developing affordable housing.

8. 9.
20. 21.
Bureau of Building Marketing Research, "1981 National Survey," Professional Builder, Affordable Housing Ideas, p. 51.
Ibid., p. 50.
Professional Builder, Affordable Housing Ideas, "Planner Pinpoints Price of Approval Delays," p. 215.
Economics Department, United States League of Savings Associations, Homeownership: The American Dream Adrift, p. 17.
Ibid., p. 16.
Tom Ames, Wright-Kingdom Realtors, Boulder, Colorado, telephone conversation, December 1, 1982.
U.S. Department of Commerce, Bureau of the Census, 1980 Census. Economics Department, p. 8.
Bureau of Building Marketing Research, p. 50.
Professional Builder, p. 280.
Economics Department, p.2.
Economics Department, p. 11, 12.
Stephen R. Seidel, Housing Costs and Government Regulations; Confronting the Pegulatory Maze, p. 124, 125, 126.
Building the American City, Report of the National Commission on Urban Problems, p. 208.
Professional Builder, p. 39.
Seidel, p. 139, 140. Professional Builder, p. 39.
Seidel, p. 133.
U. S. Department of Housing and Urban Development, Streamlinirc Land Use Regulation, p. 5,6.
Seidel, p. 307, 308.
Ibid., 163, 164, 165.
Ibid., p. 168.
Ibid., p. 169, 170.
Ibid., 309, 310.

25. Ibid., p. 207.
26. Professional Builder, p. 194, 195.
27. Ibid., p. 202.
28. Ibid., p. 203.
29. Seidel, p. 310.
30. From many conversations with the development team ing team meetings. and from attend-
31. Interviews with Debbie Ortega and Pamona Elizalde, Members, Denver, Colorado, November, 1982. Del Norte Board
32. Other than publications which are cited below, the information
collected about the development process (section 4.0) is from many conversations with Nancy Smith, Larry Nelson, Ramona Elizalae, Lena Lopez, Billie Bramhall and my personal experience in the City of Grand Junction Planning Office. It is nearly impossible to credit single sources for detailed suggestions because much of what is written came from more than one person. These individual conversations plus observations of the Patton Plaza team meetings are the overall sources of information given.
33. City of Denver, April 1982, 8th Year Community Development Comprehensive Housing Program Outline, p. 1, 2.
34. Ibid., p. 3, 4.
35. Colorado Division of Housing, "Housing Development Grant Program Guidelines", 1982-1983, p. 1.
36. Ibid., p. 2.
37. Colorado Housing Finance Authority, Construction Loan Fund Guidelines, p. 1.
38. Denver Family Housing Corporation, information sheet.

1. Bureau of Building Marketing Research, "Professional Builder", Affordable Housing, 1982.
2. City of Denver, Eighth Year Community Development Comprehensive
Housing Program Outline, 1982.
3. Colorado Division of Housing, "Housing Development Grant Program
Guidelines", 1982-83.
4. Colorado Housing Finance Authority, Construction Loan Fund Guidelines 1982.
5. Denver Family Housing Corporation, Information Sheet, 1982.
6. Economics Department, United States League of Savings Associations, Homeownership: The American Dream Adrift, 1962.
7. Report of the National Commission on Urban Problems, Building the American City, 196
8. Seidel, Stephen R., Housing Costs ana Government Regulations: Confronting the Regulatory Maze, 1981.
9. U. S. Department of Commerce, Bureau of the Census, 1980 Census, I960.
10. U. S. Department of Housing and Urban Development, Streamlining Land Use Regulation, 1982.
11. Interviews with the following persons:
Nancy Smith Dick Bergin Larry Nelson
Ramona Elizalde Debbie Ortega Lena Lopez
Billie Bramhall