Experts Say Community Housing Funds Won't Be Panaceas But Won't Overheat Real Estate Market, Either

That the East End has an affordable housing crisis is a given. The extent to which the proposed Community Housing Funds that each of the five towns is considering putting on the ballot this fall will be able to solve that problem remains to be seen.

But government officials and those in the real estate and mortgage businesses interviewed have by and large rejected the notion that the CHF, which is modeled on the wildly successful Community Preservation Fund and would be fed by a half-percent tax added to most real estate sales, would add fuel to an already overheated real estate market that has made it all but impossible for first-time buyers to find a home they can afford.

As part of the process, the towns are required to create plans outlining how they would use the money collected by the new transfer tax. They are considering a variety of measures, such as building more affordable housing developments themselves, encouraging property owners to create accessory apartments and floating programs that would provide financial assistance to individual buyers in their search for a home.

Those in the industry agree down payment assistance or shared equity programs may help some buyers over the hump, but they question whether there is enough inventory at the lower end of the price range to make a meaningful difference.

But East Hampton Town Supervisor Peter Van Scoyoc said the housing market is so unbalanced now that towns have to take steps to level the playing field.

“What’s really happening is local people who rely on local incomes have to compete with an economy outside of town,” he said. “I don’t think it will have any impact if someone locally buys a house or someone from outside the town buys it.”

He said East Hampton Town, which recently adopted its housing plan, was taking a flexible approach that would aim to provide help where it is needed most. “We’re talking about giving local people an opportunity to have houses here and compete in the marketplace,” he said.

Simon Harrison of Simon Harrison Real Estate in Sag Harbor said that while he believed the Community Preservation Fund contributed to higher real estate values all across the East End — “When you remove more than $1 billion in inventory from the market, it’s going to have an impact.” — he said he didn’t see the CHF having the same effect.

“The affordable housing issue we are facing now has been at a crisis level for five years, and it’s fully present up and down the coast and across the country,” he said. “With respect to a housing fund, I don’t believe it is going to add to the problem.

“The bigger question that comes up for me isn’t, is this going to be adding fuel to the fire?” he continued. “The question is how many $800,000, how many $1 million houses do we have? The answer is not enough.”

Even then, he said, if someone were able to afford an $800,000 house and could find one that is habitable, they would need a down payment of about $160,000 and have to be prepared to spend about $50,000 a year on mortgage payments. To qualify for that kind of payment, they would have to be making $150,000 a year, and many local jobs simply don’t pay that much, he said.

Harrison said if the towns were able to create several hundred accessory apartments or cottages, it might take some pressure off the market for starter homes — those with three or four bedrooms and two baths — because there would be less demand from local workers willing to rent them for $5,000 to $6,000 per month.

But he stressed that if the towns go that route, they risk having a negative impact on infrastructure, such as roads, and natural resources, such as drinking water supplies.

Bill Wright, a partner at PAR East Mortgage in Southampton, said many in his business were taking a wait-and-see approach until the towns adopt their housing plans and until voters approve the tax or not. He said if the towns decided to subsidize down payments or establish shared equity programs, they would most likely have to work out deals with lenders, other than mortgage brokers.

“When the government comes in and acts as a partner, banks don’t like that,” he said, noting that it makes their job more complicated when they have to deal with more than one owner. “It opens the door to more questions in the application process.”

Dawn Watson, a real estate agent with Douglas Elliman in Westhampton Beach, agreed subsidies could interfere with some deals. “First-time buyers find themselves in a cut-throat competition with luxury home buyers,” she said. “It’s less about the CHF. It’s how to you compete with someone with a million dollars cash.”

Southampton Town Supervisor Jay Schneiderman said a number of issues are still up in the air, but he said that using recent CPF revenues as a guide, the town could conservatively estimate that it would take in $10 million to $15 million a year for its housing fund.

He said low-interest loans to first-time homeowners would probably make more sense for the town than investing large amounts of the money it brings in on shared equity programs that would benefit fewer people.

“I don’t think it’s going to drive the market higher,” he said of the CHF. “I’m not seeing that as a problem. What I am seeing is it will help create more accessory apartments and provide more low-interest loans that would come back to the program over time. There are always unforeseen consequences, but the reality is we are in a housing crisis, and there are a lot of unforeseen consequences of people not being able to afford to live in the area, too.”

Schneiderman said that while building affordable housing developments would give the town “the best bang for the buck, they are also the most difficult” because of knee-jerk opposition from neighbors and the need to devote the time to environmental study for each proposal.

“Getting them off the ground can be hard,” he said. “But now we have two good examples with Speonk Commons and Sandy Hollow. When people ask us, ‘What’s it going to be like?’ we can say, ‘It’s going to be like this.’”

The supervisor said he thought the easiest way to meet the demand for housing would be to encourage more accessory apartments in existing homes. He said, as an example, that the town could help senior citizens, who want to stay in their homes, partition off a portion for an affordable rental that would provide them with additional income and a place for a teacher or fire department volunteer to live.

Assemblyman Fred W. Thiele Jr., who sponsored the legislation allowing the creation of community housing funds in the five East End towns, dismissed the notion that the fund would have any impact on real estate values.

“The ability of local town policy to have a substantial impact on the real estate market is way overblown,” he said. “Market forces are much stronger than anything the town can do.”

He suggested that the national economy and what’s happening on Wall Street both play a larger role. “What we are trying to do is counterbalance that by giving local people a fair chance,” he said. “We are not the first ones to think of this. There have been similar programs in other communities that have been successful.”

He said the enabling legislation provides towns with the flexibility to create any number of tools they can use to help solve their housing issues as they see fit. “But you can’t exhibit creativity unless you have the resources,” he said.