2014-006 - Santa Ana General Plan Housing Element and Public Safety Element Updates

Home Browse Search

HOUSING CONSTRAINTS FINANCING COSTS Financing affects the feasibility of developing new housing and housing affordability. This includes the ability to secure a construction loan, homeownership assistance, and the recent issue of foreclosures. Construction Loans Construction financing costs also affect the feasibility of building new housing. The restrictive lending cycle has repeated itselfwith the housing market boom of the early 2000s. Relaxed lending rules allowed developers to secure a loan with only a 10 percent equity contribution (Apartment Finance Today, 2009). With the 2008 downturn, however, housing prices significantly declined and apartment rents also showing a decline, according to RealFacts. Loan underwriting has grown more conservative, with maximum leveraging topping out at 75 percent. In 2013 construction loans have begun to cycle back becoming easier to qualify for and new residential development is underway throughout the City. Although there is no hard threshold for how much equity is too much before a project would be deemed infeasible, the higher the proportion of equity required, the more unlikely a developer would proceed with the project. Not only would it require more up -front cash, but also higher equity contribution means a project must be able to achieve an even higher value at completion in order to generate the net cash flow needed to meet the minimum acceptable cash -on -cash return threshold. These types of trends underscore the condition of the housing market facing communities in southern California today.. Homeowner Assistance In recent years, the rising price of housing made it financially infeasible for many communities to offer homebuyer assistance to residents. In some cases, the public subsidies necessary to provide homeownership assistance were too high, and renter assistance served a greater number of residents. In other cases, rising market prices made it infeasible for local governments to offer subsidized loans, because the median home price well exceeds the maximum price allowed under the loan. Both of these factors have significantly reduced the feasibility of Santa Ana's homeownership programs. With changes in market prices as of 2013, homeowner assistance may once again be a feasible option. J�A B -4 CITY OF SANTA ANA GENERAL PLAN HOUSING ELEMENT