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NTF
Worksheet. ccwatch25.doc.
11-05. NEBRASKA TAXPAYERS FOR
FREEDOM WORKSHEET: BACKGROUND.
The City of
Omaha stopped requesting Section 312 funding in 1995, the same year that the
Homesteading and Neighborhood Restoration Act began providing
grants to cities and organizations that help facilitate the development of
self-help home ownership opportunities. Many other cities like Ogden, UT. and
Richmond, VA. have implemented these newer urban homestead programs. The
objective of such programs is to help moderate and lower income prospective
homebuyers obtain affordable financing for a home purchase or rehabilitation of
decrepit or vacant housing/lots. On
vacant rebuildable residential lots, the city aggressively pursues title to
property and markets it via foreclosure of special assessment liens and title
action. The city retains a list of
city-owned vacant lots suitable for single-family residential construction.
The city can combine 2 or more adjacent lots to sell as one parcel, if 1
lot size is too small to build a modest, modern home. Federally-owned properties the city can select and purchase
as suitable for homesteading and rehabilitation. Vacant houses might be
HUD-foreclosed properties. PROMOTION.
Media
releases and communications to builders and developers with dates of offerings
publicize this program. Signs on
designated properties direct inquirers to offices to apply. Lots sell on a first come, first ready to buy basis.
The city lists a purchase price for each available home.
Homesteading increases the total and rate of home ownership in a
municipality. It saves existing housing stock and recaptures and improves the
city tax base. ELIGIBILITY.
Only 1 lot is
available per applicant. To
minimally qualify, a buyer must verify to the city that annual household income
meets the minimum limits determined by the U.S. Department of Housing and Urban
Development. Purchasers can belong to several income ranges.
A program will create high quality housing to attract middle-class people
to the city core and preserve historic structures. Those who meet income,
credit, and other requirements can receive financial assistance to purchase and
rehabilitate homes as they become available.
Buyer must have sufficient income to obtain financing for the purchase
price. Credit history with documentation must indicate substantial evidence of
buyer ability to pay. Applicants may not have filed or completed a bankruptcy in
the past 2 years. Buyer may not own other residential property at the time of
application. Household head must be at least 21 years old. Applying households
must fit the size of the house, usually no more than two persons per bedroom. APPLICATION PROCESS.
After screening and verification, the applicant and city enter into
an urban homestead agreement. That agreement contains detailed descriptions of
program procedures and requirements. Prospective borrowers fill out an urban
homestead program application and return it to the city with verification of
income. Applicants receive information about available construction financing,
contractors, and building designs. A city committee reviews the application for
compliance with guidelines and notifies the applicant in writing of preliminary
approval status. After notification, a drawing selects the first eligible
applicant to win a chance to purchase a home. All applications will become
ranked based on this drawing. Subsequent applicants will have a chance to
purchase a home, a process quickened if applicants ahead of them in priority do
not qualify for financing. A winning applicant must submit a non-refundable $50
application fee, which will apply towards a credit report. The urban homestead
agreement is a purchase contract. If the applicant meets all program
requirements, including obtaining bank financing for a portion of the purchase
price, the city will transfer ownership to the applicant. The new owner then
will complete required repairs within three years and must live in the home for
five years. At that time, if owner meets all program requirements, the city
gives the owner clear title to the property, and the owner continues to make
monthly payments on the purchase and rehabilitation loans according to the
agreement. HOMESTEADING.
Successful
applicant homesteaders can purchase city-owned vacant lots and construct
single-family dwellings or purchase single-family homes owned by the city. The
city can purchase houses suitable for rehabilitation and resale through
foreclosure of city liens. Homesteaders
must agree to live in a house as a permanent resident for at least 5 years.
The head of household must attend approved homebuyer education classes
and obtain a certificate of completion. The
household size must fit the home size. Lots
sell for assessed value set by the county assessor.
The buyer pays a $500 deposit toward the purchase when signing the
contract, $500 more at closing. The
balance due becomes secured against the property under a 5-yr. deferred payment
lien, forgiven at the rate of 20% per full year of owner residence. A deed document would allow title to revert to the city if
construction not started within 6 months of closing. Other funds paid by a buyer would forfeit to the city.
Title would revert to the city, if property not used for homesteading.
The balance on the 5 yr. urban homesteading lien would come due
immediately for payment if 1) homesteader dies; 2) homesteader sells or
transfers property title; 3) property no longer the principal residence; or 4)
property not maintained at minimum housing standards.
Homesteaders must upgrade vacant housing stock by performing repairs
which will remove hazards, conform house to current building codes, promote
energy efficiency, extend the life of the house, and stabilize or improve
neighborhoods. The buyer must maintain the home in compliance with all city
building codes and zoning ordinances during occupancy and throughout the term of
financing. Prior to occupancy, the buyer must assure that all life/safety
habitability work is complete. All other required rehabilitation work must
finish within three years of purchase. The homesteader must repair, within one
year from the date of conditional conveyance of the property, defects that pose
a substantial danger to health and safety, make additional repairs and
improvements necessary to meet the applicable local standards for decent, safe,
and sanitary housing within three years from the date of conditional conveyance
of the property, permit reasonable inspections at reasonable times by city
employees to determine compliance with the agreement, and surrender possession
of the property upon material breach of the homesteader agreement (including
default on rehabilitation financing secured by the property), as determined by
the city. TAKE ACTION NOW. Many
more urban Nebraskans are becoming irate at the increased placement of
subsidized housing units in their neighborhoods. People in these units often do not maintain or upgrade these
properties and cause social problems like crime. Adjacent property values plummet. Taxpaying citizens lose equity in their homes.
Home resale prices drop. Urban
homesteading offers a viable alternative to government scattered-site subsidized
housing, as it allows those needing residential placement to buy or build their
own homes in their own neighborhoods, homes in which they can show pride. Contact your city councilman today to accelerate the
initiation and implementation of an urban homesteading program in your
municipality. Research,
documentation, and analysis for this worksheet done by Doug Kagan.
This material copyrighted by Nebraska Taxpayers for Freedom, with express
prior permission granted for its use by Citizens for Local Control, Cherry
County Taxpayers, Dawes County Taxpayers, and other groups in the Tax Freedom
Network. 11-05 C |