JUPITER Cathy Goldsborough owns a desirable home in an area
where property values are soaring, yet she can't cash in and it's
driving her crazy.
Goldsborough owns one of the hundreds of Abacoa condos and
townhouses whose sale prices are limited by the town of Jupiter's
affordable-housing ordinance.
She figures the 2,000-square-foot unit is worth more than
$300,000. But under Jupiter's affordable-housing program,
Goldsborough can't sell her three-bedroom townhouse in Abacoa's
Osceola Woods development for more than $232,325.
"A lot of people are stuck in here," said Goldsborough, who
bought the unit in 2003 for $203,500. "The boom is on now, and here
we are we can't even sell these things."
Goldsborough can sell her unit. She just can't sell it for full
market value until five years after the town of Jupiter issued a
certificate of occupancy on the property 2007, in the case of her
unit.
Goldsborough, a homemaker, worries that by the time she can cash
in the full value of her unit, other homes in Jupiter will have
appreciated out of her price range.
Goldsborough's gripe is a common one among Abacoa unit owners,
many of whom say they didn't realize their appreciation was limited
when they bought their condos.
As public officials, employers and home buyers lament the
downside of Palm Beach County's skyrocketing home prices, Jupiter's
program shows how difficult it can be to buck the law of supply and
demand.
Builders and town officials have little sympathy for buyers such
as Goldsborough. Tim Hernandez, head of New Urban Communities, the
Delray Beach company that built Osceola Woods, says the low prices
on the designated affordable units mean big profits for owners who
can wait out the five years of price controls.
"Somebody buys one of these units and they're basically
guaranteed to make $100,000," Hernandez said. "It's the best deal in
Palm Beach County."
What's more, town officials say, all buyers sign "affordability
affidavits" in which they agree to price limits for the first five
years after a unit is built. Goldsborough, who bought her unit not
from the builder but from an individual seller, says she never
received the document.
James Mahrer, president of the Osceola Woods Homeowners
Association, feels similarly frustrated.
"It was marketed as luxury townhouses, and there was no mention
of affordable housing," Mahrer said. "It was buried in the
documents."
Boon for investors
When the town of Jupiter approved the massive Abacoa development
in the late 1990s, it required that a third of Abacoa's 6,000 units
be affordable. The town defines affordable as a home that could be
bought by a family of four with a household income of $75,000, or
about 120 percent of the county's median family income.
The price limit changes once a year and is adjusted for factors
such as changes in incomes, interest rates and insurance costs.
The affordable units look identical to full-price townhouses and
condos. In some cases, an affordable unit is next door to an
identical condo with no price cap.
It's unclear how well Jupiter's price controls are achieving the
goal of helping middle-class buyers. After all, the town puts no
income limits on the buyers of the units, so there's nothing to stop
someone who makes $1 million a year from buying a unit.
That means the affordable units represent a bargain for real
estate investors. By some estimates, as many as half the affordable
units have been snapped up by investors who can rent them out until
the price cap expires, then sell them at full market price.
Jim Sahnger, vice president of Palm Beach Financial Network in
Sewall's Point, owns an affordable unit in Osceola Woods as an
investment. He also owns full-price single-family home in
Abacoa.
"It does create an opportunity for investors," Sahnger said.
New Urban Communities hopes to block investors from affordable
units at its next Abacoa development, Greenwich. Buyers must sign an
affidavit that they plan to live in the units, Hernandez said, and
if the builder learns that a buyer plans to rent out the unit rather
than live in it, New Urban Communities will keep the buyer's deposit
and sell the townhouse to someone else.
Of course, the builder's authority ends after closing, and
there's no guarantee the builder will catch buyers who want the
units solely as investments.
Meanwhile, some units change hands for more than the town's price
cap because sellers can add builder upgrades to the price. In
Osceola Woods, two units sold last year for more than $300,000,
according to county property records. Those units were models with
extensive upgrades, Mahrer said.
Association polices sales
Bristol Management Services runs the homeowners association for
Osceola Woods and several other Abacoa developments with affordable
units. Bristol employee Bonner English checks sale prices against
the town's price limits, although she acknowledges some sales, such
as all-cash deals, might not cross her desk.
English said she recently rejected a $326,000 sale at Charleston
Court, another Abacoa development, because it far exceeded the price
cap. The seller got around the cap by agreeing to lease the unit to
the buyer until the price limit expires.
Such loopholes lead Bristol Management President Steve Inglis to
call the price controls well-intentioned but misguided.
"It was great in theory," Inglis said. "It has been a total
failure in implementation."
The town of Jupiter's affordable-housing expert, David Kemp,
points to Bristol Management as the enforcer of price controls in
the communities it manages. Yet Inglis presents himself as a
reluctant enforcer.
"The town expected us to police it, and I'm not the police
force," Inglis said. "Affordable housing basically means to
artificially keep the cost of the housing low. Last time I heard, we
lived in a capitalist country and making a profit wasn't a sin."
Meanwhile, Inglis expects another round of complaints from
homeowners if town officials approve DiVosta Homes' proposed
reduction in the price cap at Charleston Court. DiVosta recently
said that based on the city's affordability formula, the cap should
fall this year to $225,889 from $240,701 last year.
That means someone who paid $240,701 for a unit last year and
sold it this year would take a $15,000 loss, in spite of soaring
home prices. The lower cap has yet to be approved by the town
council.
Moreover, Inglis said some savvy sellers are getting around the
price cap by charging extra for furniture.
"If you want to beat the system, you say, 'I'm going to sell it
as furnished and charge an extra $100,000,' " Inglis said.
"Yes, there's an ordinance saying you can't do it. I live in the
real world."
It's fair to say town officials didn't anticipate such resentment
for an effort to help middle-class families. After all, in the late
'90s when the price caps were approved, Palm Beach County home
prices were rising by only a few percent a year.
Then came the housing boom. Prices in the county are up 35
percent in the past year and up a dizzying 220 percent in the past
five years.
Said Abacoa resident and investor Sahnger: "No one anticipated
the rapid appreciation levels we've seen."
