Home sales

The median sales price of a Flagstaff-area single-family home in January 2017 was about $359,000.

Proposition 422, which would allow the city to take out $25 million worth of bonds dedicated to affordable housing solutions, is notable in two ways.

First, it is notable in its attempt to tackle an issue that has dogged the Flagstaff community for decades and, second, in how it does not spell out the exact strategy to do so.

While other propositions put forth by the city are far more specific on how the bond or tax dollars will be used, Proposition 422 takes another route.

Prop 422 only promises that the bonded money will be used to address issues of affordable housing by either assisting those trying to buy a home or in the creation of additional affordable units through “construction, rehabilitation, redevelopment and acquisition of land for housing units; and the related infrastructure.”

This would then allow future city councils, with advice and input from an affordable housing committee appointed by the council, to determine how the money may best be spent.

This has some concerned about how this money might be used, including Flagstaff Realtors Association president Tammara Prager, who said this ambiguity has left many in the association unsure of how to feel about Prop 422.

“While the lack of affordable housing is a serious concern in our community that needs to be addressed, the Northern Arizona Association of Realtors would like to see more specific planning and strategies before offering our full support," Prager said via email.

She added that the advisory board concept is encouraging, but its effectiveness entirely depends on who the council appoints to the committee.

“Should the council appoint those suggested in the bond pamphlet like realtors, lenders and builders, then the advisory board could be very effective,” Prager said. “However, not utilizing the expertise of those in the industry could lead to ineffective policy, even with the best of intentions.”

But the flexibility in the bonding language may also offer some particular advantages, said Sarah Darr, the housing director for the city of Flagstaff.

Primarily, Darr said, this allows the bonded money to be flexible and to continue to be useful throughout the entire 20-year lifespan of the bond. The council could determine a portion of the money should be spent on a down payment assistance program one year and on incentives to encourage developers to create affordable housing the next.

“Working in housing, we're working as part of a market we're not in control of. So we have to be responsive to the market, to the mortgage market, to interest rates, to the availability of lending, those types of things,” Darr said. “So to keep programs relevant and helpful in our community, sometimes those parameters change.”

This also means that, should there be an unforeseen change in Flagstaff’s housing market, such as a crash, the city is not left flat-footed with bonded money it cannot use.

Darr pointed to the “related infrastructure” component of the language as an example of how restrictions may be counterintuitive.

While disallowing bonded money dedicated to affordable housing to be spent on, say, utilities may make sense, Darr said, there are situations in which spending money on utilities can create affordable housing.

“We have worked with small builders who may own a lot and want to build a duplex or triplex, but the utilities connected to that parcel are not set up to support that many units,” Darr said. But without the city upgrading those utilities, that developer may build a less affordable single-family unit.

The bonded money may provide the city the opportunity to develop strong affordable housing programs that far outlive the 20 years the money is bonded for, Darr said.

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What is affordable?

But a bond attempting to address issues of affordable housing in Flagstaff begs the question: what exactly is affordable?

When people hear “affordable housing” they often think of low-income housing, but this proposition is aimed at assisting those on all parts of the socioeconomic spectrum, interim city manager Barbara Goodrich said.

Because of this, what is considered affordable is determined by the individual household's finances using the simple formula that someone should not be spending more than 30 percent of their annual take-home income on housing, including utilities.

And this is a real problem in Flagstaff, said Devonna McLaughlin, Housing Solutions of Northern Arizona CEO. Many in Flagstaff -- including professions like teachers, police officers, firefighters and nurses -- make too much to qualify for housing assistance while not making nearly enough to allow them to put a down payment on a house, especially when also paying rent every month.

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McLaughlin said Housing Solutions is often forced to turn away people in those professions. Federal and state dollars dedicated to help with the cost of housing are restricted to only assisting those making less than 80 percent of the median income, even if the housing market or rent prices are unaffordable to those making over that.

According to a report released earlier this year by the National Low Income Housing Coalition and the Arizona Housing Coalition, of all the large cities in Arizona, Flagstaff has the highest average rental prices when compared to the average wages of a renter.

That conclusion is backed up by a survey of rental prices conducted by Housing Solutions of Northern Arizona earlier this year, which found that in order for the rent of an average two-bedroom apartment to be considered affordable, the resident would have to make $4,800 monthly, $57,600 annually, or $27.70 per hour.

A report by the Economic Collaborative of Northern Arizona found a similar problem of affordability within the housing market.

In 2016, median sales price for a single-family home was $350,000, requiring an income over $90,000 a year to purchase. The report also found that 43 percent of households spend more than 30 percent of their annual income on housing.

Flagstaff has one of the lowest rates of housing ownership in the state. On average, 63 percent of Arizona residents own their homes while only 45 percent of Flagstaff residents do.

The goal of this proposition “is to address that population within our community who are making a livable wage but they just can't make that leap into home ownership,” Goodrich said. “We know they can make their rent payments -- they’re paying $1,400 a month, $2,000 a month -- but they can’t make that leap to save that money to buy a house.”

The bond

As a bond measure, should Prop 422 pass, the city would have 20 years to pay back the bonded money using the secondary property tax, which should remain below the .8366 percent rate that the city has set for itself.

The projected average cost of that tax rate over the next 20 years is $0.236 per $100 of assessed value. According to the city, based off the average assessed value of housing in Flagstaff, most households will pay about $168 per year in secondary property taxes.

The city has a limited amount of bonding capability; at the moment, the city is at 38 percent of its capacity.

Should Prop 422 pass, the city would still have $175 million in bonding capacity left. This would, however, require an increase to the secondary tax rate, which voters can legally raise to 2.2 percent should they decide to do so.

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Adrian Skabelund can be reached at the office at askabelund@azdailysun.com, by phone at (928) 556-2261 or on twitter @AdrianSkabelund.


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