Rising prices force Scottsdale to return $855K meant for affordable housing

The Scottsdale housing market recovery has created a scarcity of affordable housing within city limits. (Independent Newsmedia/Terrance Thornton)

The Scottsdale housing market recovery has created a scarcity of affordable housing within city limits. (Independent Newsmedia/Terrance Thornton)

Rising home prices and stricter regulations on the use of federal grant funds are forcing the return of nearly $1 million originally meant to create affordable housing options in Scottsdale.

Scottsdale received $1.2 million of federal grant money in 2011, but because the city has been unable to spend these funds in accordance with grant regulations, $855,000 must be returned or else be in violation of the HOME Investment Partnership Program.

Kathy Littlefield

Kathy Littlefield

Scottsdale Councilwoman Kathy Littlefield says the grant situation the city now finds itself in is unique.

“It is a very rare situation, but on the other hand we have had one of the worst economic downturns,” she said in an April 28 phone interview. “But I am not sure what the causes of it were and when these decisions were made.”

The HOME Investment Partnership Program is a federal block grant designed by the Department of Housing and Urban Development to provide affordable housing options to low-income families.

HOME funds were allocated to the Maricopa County Home Consortium, a partnership between eight Arizona cities that makes it possible for the cities to apply for HUD money, explained Michelle Albanese, Scottsdale community assistance manager.

Under the consortium, each city receives a “piece of the pie, so to speak,” said Ms. Albanese in an April 24 phone interview.

Newtown Community Development Corp. was awarded HOME funds by Scottsdale for fiscal years 2011-12 through 2014-15 to purchase and renovate local homes, city officials say.  A combination of rising home values and stricter HUD regulations made it impossible to use approximately $855,000 of the original $1.2 million given for use in Scottsdale, said Allen Carlson, executive director of Newtown.

“City staff is trying to spend the money, but there are a lot of rules and regulations to follow,” Mr. Carlson continued in an April 23 phone interview. “It’s made it really difficult for us to find affordable housing for people.”

The cost of living

The value of a house purchased through the HOME program cannot exceed 95 percent of the median value of surrounding homes, explained Mr. Carlson.

In 2014, Scottsdale surveyed the average price of homes and set the limit that can be spent at $201,875. This means Newtown cannot spend more than $201,875 to purchase and rehabilitate a home.

“Housing prices have risen significantly since we started our program, and we can’t even buy a house now within our limit,” Mr. Carlson confirmed. “It’s really part of the challenge. One of the things to understand here is city staff in Scottsdale is very much dedicated to having affordable housing for community members.”

Councilwoman Littlefield says local economic indicators — typically home valuations and real estate pricing — are trending in positive directions.

“I have seen some increase on home valuations in the real estate market,” she said. “I have a friend who sends me home prices and they are going up quite nicely. I think the market is recovering and I think it is doing well. It is pretty close to where it was before the crash.”

But as home prices increase, the amount of affordable housing within Scottsdale decreases.

Arizona State University Center for Real Estate Theory and Practice Director Mike Orr says Scottsdale has seen significant increases in single-family home valuations from calendar year 2011 to 2014.

“But there has been little growth over the last year or so,” he said in an April 28 phone interview. “Prices definitely increased from the point in the recession but if you’re looking to find homes below $200,000 you will definitely have a problem in Scottsdale.”

Mr. Orr says “affordable housing” has become a scarce commodity in Scottsdale.

“Aside from a few pockets after south Scottsdale, there is nothing really below $200K,” he said of current valuations. “There has been a sufficient increase in price in that area.”

Housing prices have increased significantly since the grant money was awarded in 2011. The average price of a three-bedroom, single-family home in Scottsdale in 2011 was $157,000, Independent archives state. Today, the price is $231,000.

Affordable housing in Scottsdale

Newtown has worked with Scottsdale to create affordable housing options since 2010. To date, the corporation has spent approximately $1 million to purchase 10 homes in the Scottsdale area.

Scottsdale City Hall is at 3939 N. Drinkwater Blvd. (File Photo)

Scottsdale City Hall is at 3939 N. Drinkwater Blvd. (File Photo)

Newtown sells homes under a community land trust, Mr. Carlson explained. An eligible resident may purchase a HOME property, and may receive a fair return on that property if they choose to sell, but Newtown still holds the land trust.

This was especially important during the recession, when many homeowners were forced to give up their homes. Newtown has not lost any homes to foreclosure, Mr. Carlson reported.

Affordable housing is especially important for residents in low-paying, service industry jobs, said Mr. Carlson, especially when housing prices increase yet income levels remain stagnant.

“I think there’s an impression there are no individuals in Scottsdale who receive low-income (assistance), and that’s not true,” Ms. Albanese said.

With their limit set at $201,000, Newtown watched as it became increasingly difficult to purchase and renovate homes in Scottsdale. The corporation had never experienced a problem like this before, Mr. Carlson said, and a team sat down months in advance to discuss a new strategy.

One idea was to purchase townhouses instead of homes, and to establish a down-payment-assistance program.

“If it were private money, it’d be pretty simple. We’d simply say, ‘This isn’t working and we need to do this,’” Mr. Carlson said. The process to repurpose federal grant money is much more complex, he said. Newtown is contracted for a specific activity, and to change the way grant funds have been allocated to Newtown is a long and tedious process.

Should the HOME funds stay within Scottsdale, the consortium runs the risk of not being able to use the grant money before the term expires — and having to return $855,000 to HUD.  If Scottsdale City Council votes to return the funds to Maricopa County now, the money can be given to a partner city better able to make immediate use of the money, Ms. Albanese said.

The option to return unused HOME funds was placed on the April 14 Scottsdale City Council agenda. City staff requested the item be removed from the agenda because intergovernmental agreements about where the money would be sent and how it would be used were not complete at that time.

“It’s not a negative thing,” Ms. Albanese said. “This allows opportunities for the consortium as a whole.”

City officials say the item will likely appear on an early May city council agenda.

The town of Gilbert had to return a portion of HOME funds a few years ago, Ms. Albanese pointed out. The funds were given to other cities within the consortium, and today Gilbert is still a member of the program and successfully using its share of grant money.

Editor’s note: North Valley News Editor Terrance Thornton can be contacted at 623-445-2774 or you can follow him at twitter.com/nvnewsman

Ms. Walker is a freelance journalist under contract with the North Valley Office of Independent Newsmedia Inc. USA

Independent Newsmedia Arizona Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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