Committee hears split on raising allowable homeownership payment to 38% of income

Lede: The committee on April 2 heard extended testimony for House Bill 5956, a proposal to change the methodology used to price deed-restricted affordable homeownership units from a 30% of household income cap to a permissive maximum of 38% of household income.

Nut graf: The bill’s sponsors and housing developers argued the change is modest, aligns pricing with conventional mortgage underwriting (which routinely allows 36–42% front-end ratios), and would allow more moderately priced homeownership units to be produced with the same public subsidy. Nonprofit homebuilders and tenant advocates warned that raising the formula would make deed-restricted units unaffordable for the lower-income households the current program targets, could increase homeowners’ debt burdens and risk foreclosure, and would encourage private developers to rely less on direct subsidy.

What supporters said: Carla DiStefano (SWAP) and other nonprofit builders said the 30% formula is built for the lowest-income renters and not appropriate for a wider pool of middle-income buyers. SWAP and Valley Affordable Housing argued the permissive change (up to 38%) is voluntary for developers and would allow builders to produce more moderately priced “starter” homeownership units without tapping additional scarce subsidy dollars. They said the change would increase the homeownership portion of the recently approved housing bond by roughly 25% in purchasing power and would follow mortgage industry norms.

What opponents said: Habitat for Humanity’s local director warned the national Habitat network intentionally keeps its 30% policy because increasing the percentage would put households at higher monthly debt ratios and risk long-term sustainability. Mortgage counselors and NeighborWorks said their underwriting experience shows many buyers of deed-restricted units already borrow up to back-end ratios that put them at higher housing burden; raising the maximum would increase that risk and widen the gap between the deed restriction design and actual buyers’ incomes. Outreach advocates and land-trust monitors said many deed-restricted resale buyers are already at higher AMI levels than the unit’s target and would be further price-burdened by a higher formula.

Points of detail and next steps: Several witnesses urged safeguards if the change is adopted: preserve deed restrictions, require homebuyer counseling and underwriting standards, monitor resale outcomes and foreclosure incidence, and craft carve-outs so that deep-subsidy projects for very low-income buyers are not changed. The committee asked for additional written pro forma examples and data on resale outcomes and recommended revising language to make the 38% cap permissive rather than mandatory.

Ending: Committee staff asked proponents and opponents to submit detailed underwriting examples and resale data so the panel can weigh estimates of subsidy stretch against higher buyer risk before any vote.