In an effort to make homeownership a more attainable goal for some of Alexandria's most vulnerable apartment dwellers, the City Council voted last week to increase financial assistance for home buyers.
The decision comes as thousands of apartments in the city are being converted to condominiums, potentially displacing renters, many of whom cannot afford to purchase their dwellings, officials say.
About 8.7 percent of the city's rental units in multifamily buildings -- about 2,353 -- have been converted to condos or are in the process, officials say.
Rather than see those renters forced out, the City Council voted to change the Moderate Income Homeownership Assistance Program, which provides money for down payments for the purchase of homes in the city.
The council agreed to increase from $20,000 to $40,000 the amount that residents whose apartment buildings are being converted to condos can borrow if they buy the unit they live in or one in their building.
"There are a range of folks who basically needed the assistance," said Shane Cochran, chief of Alexandria's housing division. "Their incomes are too low to qualify for the mortgage needed, but their incomes are too high to qualify for [low-income] assistance programs. We're trying to fill that gap."
City officials said renters are being given the state-mandated right of first refusal to buy their units before they are converted, assisted in some cases by a 2.5 to 5 percent discount offered at the developer's discretion. If they choose to leave, renters receive relocation assistance funds, which city officials said are required under state law.
In a real estate market in which sales prices are rising more quickly than rents, condo conversions are a lucrative business.
Orion Residential, which has offices in Seattle, Phoenix and Chicago, owns the EOS Twenty-One development of 1,524 apartments on Van Dorn Street, across from Landmark Mall. The company is in the process of converting 344 of the units to condominiums.
Orion's chief financial officer, Daniel Gumbiner, said it was an easy decision.
"It's good business these days," Gumbiner said. "If you do it right and buy right and develop right -- because there's a shortage of housing in the market and the single-family home prices are a lot more than condos -- it's very profitable."
Alexandria Mayor William D. Euille (D) said the conversions are happening more quickly than the city would like, making it tough for some residents to find other housing.
"We'd like to think they'd find something else in the city, but the odds are remote and they'd probably go elsewhere," Euille said. "This program is a tool we're making available to our citizens and residents to encourage them to live and work in the city."
The council also adopted changes to the program that affect participants who want to buy a home unrelated to a condo conversion. Those buyers may now receive up to $30,000 in assistance, an increase of $10,000.
In both cases, buyers use the money as a no-interest, deferred-payment loan that is repaid to the city if the property is resold or 99 years pass. The limit on the amount the buyer can spend is $399,600.
Buyers are required to put $3,000 of their own money toward the purchase. Salary is also a qualifying factor.
Last week, the City Council approved an increase in the maximum income for eligible residents, raising the limit for a one-person household to $71,440 from $68,000. The two-person household limit was lifted to $80,370 from $68,700, and the amount a household of three or more can earn was raised to $89,300 from $79,500.
In Arlington, which is also experiencing a spike in condo conversions, would-be homeowners can receive up to $25,000 in assistance for a down payment and closing costs or to reduce the interest rate of their first-trust mortgage through the Moderate Income Purchase Assistance Program.
Only households earning less than 80 percent of the Washington area median income -- which, for example, is $58,550 for a two-person household -- are eligible.
The county's assistance is provided through a second- and/or third-trust mortgage. Nothing is paid back for five years. Starting in the sixth year, homeowners begin paying back both trusts at an interest rate of 3 or 4 percent, depending on the loan, officials said.
In Alexandria, assessments for residential condominiums, the largest source of affordable home purchases, have increased much more than for other types of property over the past four years, officials said.
The average assessment for such units increased by 23.4 percent in 2004 and 28.8 percent in 2005, to an average of $287,765. The annual income required to be able to afford such a unit is $86,627, according to city housing officials.
The city typically provides about 25 loans a year through the moderate-income assistance program, but officials said they hope to help 47 households in fiscal 2006 using $822,500 allocated by the City Council from the Housing Trust Fund.
Euille said city planners will meet with owners of apartment complexes Wednesday to explain the city's objectives for maintaining affordable housing. Euille said the newly formed Alexandria Housing Development Corp. would like to purchase some of those properties to keep rental prices down.
"We don't want to see the market driven up to a degree that after the conversions, renters can't afford to buy the units," Euille said. "My hope is that we'll be able to slow down the process."