AHC Inc., an affordable housing corporation in Arlington, Virginia, has created a mixed-income housing development for first-time homebuyers, called “Bruner Place.” Four of the seven houses were sold at affordable prices; the other three were sold at market rates.

AHC, founded in 1975 as the Arlington Housing Corporation, works to create and sustain affordable rental and owner-occupied housing for low- and moderate-income families. Staff educate the public about the importance of high-quality affordable housing and work to enhance target neighborhoods in a variety of ways.
 
The agency constructs and rehabilitates single-family homes, provides homebuyer counseling and education, and offers home-improvement and purchase loans. In addition, AHC also is involved in the delivery of community services primarily directed to the needs of children and families residing in AHC properties.
 
In keeping with its mission, AHC began looking at ways to increase lower-income housing options in Nauck, one of its target neighborhoods in south Arlington that is in desperate need of affordable housing. When the former home and office of Dr. Roland Bruner, a local physician and long-time community leader, became available, AHC decided to purchase the property, rehabilitate its two existing homes, and build five additional town homes on the land. Nauck is a primarily African-American neighborhood.

The Houses.  At the time of AHC’s purchase, the Bruner property included 24,000 square feet of land and two homes. AHC moved the existing homes back 25 feet, renovated them, then subdivided the land and added five additional town homes.
 
Each house has two stories, three bedrooms, a full basement, and a two-car garage. All the houses look similar, but the market-rate houses are larger and have more amenities. The four affordable houses – all new construction – are between 1,400 and 1,500 square feet and were sold for $285,000. The three market-rate houses – the two rehabs and a corner town home – are between 1,900 and 2,000 square feet and were sold for between $490,000 and $575,000. The project was completed in February 2005.

Eligibility Factors.  All buyers had to meet specific eligibility factors. Each had to be a first-time homebuyer pre-approved by a local lender and attend a homebuyer education course through a local affiliate. The household had to be a family of four or more, have good credit, and live and/or work in Arlington. Buyers of the affordable units had to be at or below 65 percent of the area median income and be able to apply $2,000 of their own funds toward the down payment.

Selection Process.  To find buyers for the four affordable units, AHC turned to its waiting list of 140 families. Forty households from this list fit the buyer criteria. From this pool of 40, AHC used a lottery to draw eight names. Staff then went through this list of eight – one by one – to find interested and qualified buyers. Eight were selected to ensure that back-ups were available if needed.

Lending.  Buyers of the affordable properties received loans through Virginia Housing Development Authority’s (VHDA) “Sponsoring Partnerships and Revitalizing Communities” (SPARC) program. These loans are available for low- to moderate-income families at a low-interest rate reduction of 1 percent less than the current rate for the first mortgage amount of $220,000. The interest rates averaged 4 percent and were locked in by VHDA for up to 12 months during construction.
 
The remainder of the buyer’s loans came from various sources: $30,000 in Affordable Housing Investment Funds (AHIF) received by AHC from Arlington County; $25,000 in purchase assistance from AHC; and $15,000 from a NeighborWorks America grant to AHC.
 
The AHIF loans are deferred in perpetuity and have no interest charges. The purchase-assistance loans are deferred for five years and will then be repaid at low interest rates. The loans funded by the NeighborWorks America grant are deferred for 30 years then repaid to AHC at 2 percent interest. These funds will then be recycled into other low- to moderate-income properties. All buyers of market-rate homes received conventional loans through local lenders.

Marketing.  Since AHC used a lottery to find buyers for the affordable units, it only had to “sell” the three market-rate homes. AHC acted as its own seller’s agent for the properties, but had a local real estate partner post the houses on the Multiple Listing Service.

Costs and Funding.  Program costs included construction, property acquisition, consultant fees, and advertising. The cost was about $335,000 per property, or about $2.4 million in total. AHC received construction loans from Neighborhood Housing Services of America and Arlington County to cover the building, acquisition, and contractor fees. Staffing costs were covered by the agency’s budget.

The construction of Bruner Place has produced seven new and rehabilitated homes in a neighborhood in need of affordable housing. Furthermore, the project has given an aesthetic lift to the community and fostered the benefits of mixed-income living. This project made it possible for the lower-income families (who earn less than $50,000 a year) to purchase a home they never would have been able to afford otherwise.
 
By rehabilitating the original buildings, AHC was able to salvage a property that had historical significance to the Nauck neighborhood. Residents and members of the local civic association were thrilled with the effort put forth by AHC. Dr. Bruner’s daughter attended the opening event and said she was honored by AHC’s decision to pay tribute to her father in this way. AHC placed a historic plaque on Dr. Bruner’s original home, describing the impact he had on the Nauck community.
 
This project promoted AHC in the community. Its success inspired other lower-income families to contact the agency and consider homeownership.

• Dedicated funding partners are vital. To take on this type of project, NeighborWorks organizations will need funding partners that support the purchase and construction in an affordable way so the units can remain attainable for low- and moderate-income households.
   
• Affordable mortgage lending options are equally important. Even with a lower purchase price, low-income buyers will need special loan products with affordable or deferred interest rates. Creating mixed-income neighborhoods can also help increase affordability. The market-rate properties help subsidize the affordable properties.
   
• This type of construction project takes time. Network organizations cannot and should not be in a hurry. Obstacles will arise, and the process will most likely take longer than anticipated. Be flexible, and be prepared to rework the timeframe in order to alleviate stress on the agency and the buyers.
   
• Salvaging properties that have historical or neighborhood significance has a positive impact on the community. It is wise to respond to the needs as well as the desires of a neighborhood: It creates a win/win situation, appealing to local residents as well as the agency.

Agency interview on 4-18-05 with: Carlton Miller, Director of Homeownership Program