While the 2012 budget and term lengths got most of the attention at Tuesday’s Davidson Town Board meeting, the board also took action on another item that is stirring questions from some residents. Commissioners voted 5-0 to transfer money from the town fund balance – savings account – to buy two designated “affordable” houses in the Bradford neighborhood, off Davidson-Concord Road, that reportedly are in foreclosure.
The vote followed a closed session after the public portion of Tuesday’s monthly board meeting. The board briefly came back into open session and approved the expenditure – after citizens and reporters had left the meeting.
Town officials said the move is an effort to preserve two homes that were at risk of falling out of Davidson’s affordable housing program after the foreclosures. The town ordinance requires that 12.5 percent of the homes in all new multi-unit developments be built and sold or rented at rates deemed affordable according to federal standards.
The town did not announce the board action, but provided information to DavidsonNews.net after rumors began circulating about the vote on Thursday.
Bradford was developed over the past decade by local developer Frank Jacobus, who also developed other projects in town that are troubled or in foreclosure, including Davidson East, off NC 73, and Abersham, off Grey and Shearer roads.
The two unfinished homes are at 19818 and 19822 Davidson-Concord Road. Davidson Commissioner Margo Williams and other town officials said they are owned by a bank – though nobody could say Thursday night which one. Mecklenburg County property records show that Fifth Third Bank owns one of the buildings, while the other is owned by Neighborhood at Bradford LLC, Mr. Jacobus’s company.
After negotiations with the owners, the town agreed to pay $120,000 each for the two houses. Since the homes are unfinished, the town will have to complete construction, which is estimated to cost another $15,800 per house. So the town’s total cost would be $271,600.
However, it wasn’t clear Thursday how much money the town is appropriating for the deal. Ms. Williams said the town does not expect to spend the full amount on the homes, but will obtain financing. And she said the town expects to sell the homes soon – to buyers on the town’s affordable housing waiting list, who must meet federal income limits to qualify.
Megan Davis, Davidson’s town spokeswoman, agreed. “We expect to sell them each for more than the purchase price,” she said Thursday.
Commissioner Laurie Venzon said even if the houses don’t sell for a year, the town is likely to spend only a few thousand dollars on the purchase, plus the construction costs – not the whole $271,600.
And the town should get its money back with a sale. She said the price the town would pay ($120,000 per unit) is below market rate, which she said is somewhere around $145,000 to $155,000.
Ms. Williams said the purchase was an opportunity to save two homes that were at risk of being taken out of the affordable housing program. Under the program, restrictions on the deeds of certain homes require that the homes be first offered to qualified lower-income buyers.
“These houses were designed and built in the town’s affordable housing program,” Ms. Williams said Thursday. “When the houses went into receivership unfinished, the deed restrictions went away. What we looked at was the fact that we had two very fine houses that were well-designed, well built.”
One of the homes is 3 bedrooms, the other 4 bedrooms, according to property records.
“We decided it would be good to explore the very best deal we could get from the bank and to see what we could do to finish them and them into the hands of those who need them,” Ms. Williams said.
Asked why the bank couldn’t have just sold the homes on the open market, Ms. Williams said that the homes’ unfinished state was a barrier. She said the bank wanted to sell, but it’s very difficult for an affordable buyer to deal with a house that’s unfinished. She said Davidson will acquire the homes at “splendid prices.”
DavidsonNews.net has received several inquiries and comments from readers questioning the town board’s action on the Bradford homes.
Vince Winegardner, a River Run resident and Davidson Planning Board member, wrote a letter to the Town Board Thursday saying: “This is NOT a ‘no brainer,’ this is an example of the type of thinking that got us into the MI Connection situation. I expect the town will buy these properties at the ‘appraised’ value or whatever the bank has into them. The town will then attempt to sell them in this weak market. I expect the town will end up selling them at a loss. Who pays for this ‘no brainer’ social experiment? The taxpayers.”
In addition to preserving affordable housing, the board’s action addresses concerns among neighbors in Bradford about poor infrastructure, including roads and streetlights. In March, Mr. Jacobus agreed to pay a total of $25,000 from the sale of lots into an escrow account that would be used for street repairs.
Commissioner Laurie Venzon said Thursday the affordable housing purchase is part of an effort to help out a neighborhood that has been hit hard by the economy, the decline in home values, and the developer’s troubles.
“The thing’s in bankruptcy, houses are sitting there on the front row of Bradford Park, the neighborhood is up in arms about the roads not being finished,” she said. The town has the ability to step in and help, she said.
Ms. Venzon said the town has six or seven people in its affordable housing “queue,” but they can’t buy the houses unless construction is complete.
These houses were approved and comply with the affordable housing section of our ordinance. A foreclosure would not cut off the Town requirement that they remain affordable. These houses could have been sold at foreclosure or, as time goes by, even cheaper to someone directly from the lender. Whoever would eventually purchase these houses (below market rate) would still be required to comply with them remaining affordable under the ordinance.
I believe this action can produce a slippery slope for the Town to become the bailout for a number of sectors when they start to fail. The Town should not become a “mini-developer” working to benefit a certain area, or in this case 2 families. The economy has taken a toll on everyone and to spend tax dollars on real estate that does not have a direct benefit to the citizens (parks, greenways, municipal buildings etc.) seems to be an odd move at this point in time.
I have absolute faith that the motivating intent was good but I believe it failed to consider our economic situation as well as possibly setting a precedent that does not benefit all in the Town.
As a last comment, I would like to throw out that maybe we as a Town should consider going back to having a Commissioner responsible for overseeing each Town Department. This would give more hands-on involvement with the Commissioners and the several departments. I will not go into detail here but would be happy to discuss how it worked for so many years.
We talked to Commissioner Connie Wessner this morning, and she adds a couple of thoughts about why the town acted. She said the town’s affordable housing program has not had larger houses (3- or 4-bedroom) like these to meet the needs of people who are waiting for a chance to buy. (The town works with the Davidson Housing Coalition to qualify buyers.)
“This is a very very special opportunity for the town,” she said Friday. “We’re sitting in the sweet spot. We’ve not had this. (Here’s) this stock we can get our hands on, at a purchase price that would be totally affordable for a buyer going through the Housing Coalition’s process.”
She said the private housing market isn’t serving these people, and it’s appropriate for the town to step in. “Our program is meant to compensate for the fact that the market’s broken,” Ms. Wessner said.
In buying the two houses, the town also may be able to experiment with a new way of helping buyers, using a lease-to-purchase agreement. Buyers would lease for a year or two and also put away money that would go toward a purchase, she said.
She said the purchase is part of the town’s efforts to adapt its affordable housing program so it meets needs in the community. “What do we need to do to adjust the program overall, to begin serving more of the very types of people that the town says it wants to serve? … Right now we have a program, but there’s a big population we can’t serve.”
Today there are 17 homes with at least 3 bedrooms for sale in Davidson (this is only the Mecklenburg County portion of Davidson; there are 31 if you include Cabarrus County) under $200,000, including several under $165,000 in the walkable ‘infill’ area. Most likely none of these homes is in the affordable housing program, but it indicates that actually the market is providing 3BR housing at affordable prices in Davidson, and doing so without artificial pricing or a mandate from our local government.
If the Town wants to support an individual’s ability to purchase a home, why doesn’t it at least do it in an area of town that would also support the Town’s goals of downtown density and sustainable development?
I agree with Sandy that it is a slippery slope for the Town to become the buyer of last resort on distressed properties. We do not have the charter nor the funding to play that role.
While not as potentially devastating as MI-Connection, this could go wrong in many ways: 1) Foreclosure properties are seldom what they seem. They need lots of work, have “last minute” fixtures disappear, mold behind walls,etc. 2) The town, as Sandy said, is setting a strange precedent of bailing out certain banks and developers while leaving others to market forces. 3) Do we really have a list of potential buyers looking for three and four bedroom houses? 4) Does the town need more debt right now?
The motivation behind this decision may be pure, but I think there are better ways to spend the money right now that are more equitable for all Davidson’s citizens and do not include further debt.