The city of Sedona is looking into a unique program that would encourage not only homeownership but longevity within the workforce as well.
The Sedona City Council gave direction to staff after hearing a presentation regarding a partnership with Housing Solutions of Northern Arizona for a down payment/closing cost assistance program for city employees as well as employees working within city limits. The program will come back before council at a later date for possible approval.
“Homeownership allows workforce to establish roots within the community and the way the program is structured promotes longevity in local employment,” City Manager Karen Osburn said, adding that the city needs a variety of options when dealing with the everincreasing housing crisis.
Devonna McLaughlin, the CEO of Housing Solutions of Northern Arizona, said she appreciated the city’s openness to look at alternatives when dealing with the housing problem.
“Homeownership is a dream for families across the nation and we know that with rising prices and rising rents it’s becoming harder and harder to open that door to homeownership,” she said.
A report states that the city’s housing study prepared in November 2020 identified an affordable housing gap between the current need and current inventory.
“The housing crisis has been exacerbated even further since the study’s completion with a first quarter 2021 median home sales price in Sedona of over $800,000,” the report states. “That figure continues to rise dramatically month after month. There is also historically low inventory of housing for sale or lease.”
The city’s Affordable Housing Action Plan recommended a five-year effort to address affordable housing. The report goes on to state that various strategies were recommended including the development of a down payment assistance program.
Down payment assistance programs match a buyer’s down payment of two to three times up to some established maximum contribution, the report states. Programs can take several forms and usually target essential or workforce households making 80% to 120% of the area median income and employed within the region. Communities with high housing costs often also provide loans or grants to city employees to assist in the purchase of a home.
“These programs help to provide stability in homeownership and employment,” the report states. “The lack of new residential development activity in Sedona and the exorbitant cost of housing will limit the effectiveness of a down payment program if it is established as a traditional model that only supports employees purchasing within the jurisdiction that funds the program.”
In order to develop a program design that meets the goal of assisting local employees with homeownership, staff is recommending broadening the area in which employees — both city employees and those working within the city for a minimum 30 hours a week — can purchase a home within the entire Verde Valley.
For over 15 years, the city of Flagstaff has contracted with Housing Solutions of Northern Arizona to assist with administration of the Flagstaff down payment programs. The proposed Sedona programs would also contract with HSNA to administer a down payment and closing cost assistance program.
Osburn said council has already appropriated $400,000 in the upcoming budget to be used to fund the assistance portion of the program. HNSA will hire an additional housing counselor who would be based out of the offices in Flagstaff but spend two or three days a week in Sedona to work with potential clients. The administrative costs are estimated at $68,000 annually. She said there may be an opportunity to share these costs with the city of Cottonwood, which is considering a similar program.
According to Housing Solutions, the assistance amount is determined by the borrower’s contribution. The program provides a 2.5-to-1 match on borrower funds — up to $10,000 of borrower funds can be matched with up to $25,000 in assistance funds. Total assistance is capped at $25,000 per household. Borrower contribution must be sourced and documented. The borrower’s contribution may be a documented gift, as allowed by the first mortgage lender.
In order to be eligible, the individual must be a first-time Sedona area homebuyer. This is defined as not owning a home within Yavapai or Coconino counties in the last three years. The buyer must owner-occupy the home. If the homeowner sells the home the city is repaid upon its sale. Osburn said repayment is based on an equity-share formula.
If the buyer is purchasing a market-rate home, the buyer agrees to pay back to the city a percentage of the sale price. The percentage is determined by the amount of initial assistance to the initial purchase price. If the buyer gets a better job outside of Sedona but intends to still live in the home, the idea is that the city would give them six months to sell or refinance the home so they could pay back the funds with whatever equity share the city would be entitled to. And if they can’t pay it back, the city would have the right to foreclose on the property and force a sale.
Osburn pointed out, however, that the program and how it would operate in Sedona is still in the draft phase and some elements of it are subject to change.
