FAYETTEVILLE — Down payment assistance for first-time homebuyers could be coming to Fayetteville city employees soon.
The City Council voted unanimously Monday to have officials look into expanding its existing Good Neighbor Homebuyer Loan Program to include all eligible city employees.
When the program first started in 2019, the $20,000 down payment assistance was only offered to police officers.
The Council also asked officials to increase that assistance amount to $30,000 to account for rising home prices.
As of January, the latest available data, the typical sales price for an existing single-family home in Fayetteville was $189,450, according to Longleaf Pine Realtors.
That’s an increase of over 11% from January 2021.
Some ZIP codes in Fayetteville, such as 28314, 28306 and 28304, saw increases approaching 20%. ZIP codes 28305 and 28312 — which both saw an increase around 30% — have median sale prices for existing single-family homes at $243,000 and $304,504 respectively.
“There’s been a serious appreciation of housing costs,” Mayor Mitch Colvin said at Monday’s City Council meeting, advocating for the assistance increase.
“Houses are competitive … instead of it being one offer or two offers, it’s 10 offers. In order to really put them in the game, they have to put an increased down payment with the way prices have gone up.”
The program is funded through $400,000 from the city’s general fund and also from a $50,000 donation from First Horizon Bank.
Fayetteville’s economic and community development director Chris Cauley said in an interview prior to the meeting that the program incentivizes positive community aspects in two key ways.
“It’s about that community-oriented policing that is so important to achieve,” Cauley said.
“And then it is also about relief. Turning the tide from rental to homeownership. That’s one of the challenges with struggling neighborhoods. Someone’s grandmother passes away, and the grandchildren are in another state, and so they just rent the house out until they can’t rent the house anymore. That’s how a lot of neighborhoods decline over time.
“It’s really in the city’s interest and the community’s overall to help promote positive property ownership and homeownership from a generational wealth standpoint, from a community safety standpoint, and just from preservation of property tax values in those neighborhoods, keeping those neighborhoods intact.”
If the City Council approves a presented plan to expand the program in the coming weeks, eligible city employees can apply for the assistance as soon as April, Cauley said.
Who is eligible?
If the program is expanded, city employees can apply for assistance if they meet certain criteria.
Employees must have worked for the city for at least a year and received a “meets expectations” in their most recent evaluation.
They must also be a first-time homebuyer, which the city considers anyone who is purchasing the property, will live in the house as a primary residence and has had no ownership, sole or joint, in a residential property in the three years prior to date of purchase.
There are also income limitations.
Employees and their families must have an annual household income at or below 140% of the area median income.
In Fayetteville that’s $58,000 for a single person, and it’s $65,700, $73,400 and $81,100, respectively, for household sizes of two, three and four people.
Eligible city employees could only purchase a home through the program in certain neighborhoods.
As it currently exists, the program is limited to homes in the Central Campbellton neighborhood and the Murchinson Road Corridor.
The City Council also voted to have officials look into expanding that to four other neighborhoods — Massey HIll Community, Bonnie Doone, 71st District Community and Deep Creek.
“They all revolve around low-income census tract areas, areas that in some programs we call hard-to-develop,” Cauley said.
“If we’re really looking to try to create homeownership and tip the scale in our redevelopment areas, from renters to homeowners, then this is a really great program to do it.”
How the program works
The down payment assistance will come in the form of a five-year depreciating loan.
That means the amount owed, in the case that the city employee decides to sell, will decrease by 20% every year over a five-year period.
At the end of the five years, the loan, which is given at 0% interest, will be considered paid in full.
Since this is considered to be a forgivable loan by the Internal Revenue Service, the employee will also have to pay taxes on the assistance since it would be considered part of their annual compensation.
That taxable income will be spread out of the five-year period of the loan.
Homebuyer education class
Another part of the program’s expansion is the addition of a homebuyer education class.
Since the program started in late 2019, Cauley said about a half dozen police officers have inquired about the program, but none have purchased a home through it.
Cauley said that the primary reason based on feedback was that officers didn’t feel they were ready to buy a home.
A homebuyer education class, Cauley said, could address that issue.
“Folks just are not ready to be first-time homeowners and have been renters essentially their whole life,” he said.
“Their parents could have been renters their whole life, and buying a house is a serious thing. And it’s also complicated. We wanted to put together a first-time homebuyer education class as a component of this.”
Cauley said the city would find a certified housing counselor that would teach the potential homeowners how to navigate the home-buying process from finding a lender and real estate agent to finding a home in their price range.
The class would also teach them how to take on the new responsibilities that come with owning a home.
Council Member Antonio Jones, who is also a real estate agent, supports this addition to the program.
“There’s a lot that goes into buying a home, going from renting to buying,” Jones said. “The classes would definitely be beneficial because it prepares them for things that they may not have originally thought about or had to deal with on the rental side.”
Why not others in the city?
During Monday’s meeting, Council Member Shakeyla Ingram inquired about adding other occupations outside the city pay roll to the program, specifically teachers and firefighters.
Cauley said in response that significant changes would need to be made to expand the program in that fashion.
“The legalities of that are very different than us funding our own employees,” Cauley said. “This essentially becomes the base of their compensation.”
He also said hurdles exist to funding assistance for people who are not low-income.
“We’re very limited in what we can do outside of that moderate income for housing,” Cauley said.
“That’s not to say that we couldn’t, but that would need to really be a separate Council direction for us to go work on something like that.”