Being poor graduate students, the husband and I attempted to get into some low-income type housing. The city here runs a program where, whenever there is a new housing development (which is rare. They hate expanding the town), a few of the houses are designated “low income” and the purchase price is subsidized by the city. In the program we were trying for, we would have been able to buy a modest townhouse valued at about $350,000 for $193,000.
But then the housing market went south.
The city office running the program told us that, because of the sour market and the fact that the townhouses had not been built yet, the developer was requesting more money for the units, and since the city only had so much funding to help with, our mortgage would now be $250,000. Our credit and relative income right now is bad enough that we couldn’t get a non-stupid mortgage for that much money. We pulled out of the program.
So what the hell happened? Why would the market going bad raise the price of a house, nevermind one that has a guaranteed buyer and isn’t even built yet? Is the city office just lying to me? It’s possible that they want us out of the pool of prospective buyers. The point of the program is to help low income families, not grad students who will be rather well off in a couple years when they finish school. I am extra suspicious because, suddenly, no one is returning my calls. I had to tell them we were retracting by voicemail.
Let’s say they have 10 townhouses to sell, 9 at $350 and 1 to the city for $243, which they subsidize $50 of, down to your $193 price. The builder has already paid for the land, has to pay for the workers/supplies, but expects to make an acceptable profit overall. Since the total profit is OK, the builder is willing to sell one unit at a discount to the city, in order to secure approval of the project.
Now the market tanks, he won’t sell 9 at $350 anymore, it’s 9 at $300. At that point, he can’t afford to sell one at $243, he needs the full $300 price to earn enough profit to make the construction worth the trouble.
I didn’t realize that you can qualify for LIH while you are studying for your masters, so that sounds like a scam.
Unless the terms of your agreement with the city and the builder prohibit what just happened I doubt you have any recourse. The builder isn’t doing this out of charity and the city can’t force them to build homes that they can’t sell in order to subsidize your purchase.
I think the builder is trying to scam the city. Presumably the conditions for building this group of houses included that one be sold below market value to a low-income person, but the builder is trying to break this agreement, However, of course, most of the expected loss from the development comes from the other houses, not from the one designated “low-income”, but they want the city to help them minimise their losses. However, of course, the city can’t afford to, so it’s passing on the loss to the low-income person.