Deed Restrictions by Government.

 The City’s support, financially and officially, of the WRHA’s policy of requiring each buyer of a WRHA property to accept deed restrictions as a condition of purchase must be terminated.  

No other government entity that I am aware of requires the placement of such a burden on the home buyers they help.

Here's how it works in with the Richmond Redevelopment and Housing Authority:

If a buyers needs dollar assistance and they qualify, the RRDA gives it to them. They do this by giving them a cash credit, it may be quite a bit $50,000 +, to help with the down payment and to make the house affordable for them. Until the debt is cleared or forgiven, the buyer may be restricted from renting the home.  If the buyer keeps the home for 5-10 years, then this debt is forgiven. However,  if they sell the home before the end of the 5-10 years,  they will have to pay a portion of the cash credit back. BUT - once the 5-10 year period  passes then the buyer owes nothing and owns their home just like any other home owner, and may rent the home if they wish. This is the way Williamsburg USED to help home buyers.

About five years ago, some in Williamsburg began to lobby against rentals. In response, the council teemed up with the Housing Authority and came up with a plan that appeared to help them both (but not the buyer). Anyone who bought property from the authority (whether they receive monetary help or not) would be prohibited from renting the property AND the Authority would retain the right of first refusal on the property for the life of the property! (3 - see below)

Here's how it works in with the Williamsburg Housing Authority:

Any person who buys property from the Housing Authority, whether they receive assistance or not, must agree to the following:

• The owner may not rent the property, and must occupy the property 9 months out of each year. If they fail to do so they must sell the home. As a consequence of this rule for example, an owner would not be allowed to have their daughter's family move into the owner's home while the owner takes an extended trip or when they move to a nursing home. Instead, the owner would be required to sell. This rule runs with the deed and applies to all future owners.
• When selling the property, the owner may not accept any offer to purchase they are able to negotiate, without first submitting it to the Housing Authority. The Housing Authority then has the right to decide if they would like to take the price and terms of that offer for themselves. To bad for the person who made the original offer! This rule runs with the deed and applies to all future owners.
• And, as to the argument that investors will take unfair advantage  - it is the Housing Authority who selects the buyer.

These deed restrictions take fundamental rights of property ownership away from the owner. They have no limit (3) and they are not tied to a loan or favorable pricing terms. They also keep a government agency, the WRHA, involved in the deeds of homes in Williamsburg forever, thereby guaranteeing the continued existence of this agency. These deed restrictions are being applied to every home and property that the Housing Authority sells, whether ‘affordable housing’ or not.

Today over 60 homes in the City contain these deed restrictions.

Here is a recent specific example of this partnership between the City and the Housing Authority. The city financed the Housing Authority’s acquisition of 110 Harrison Avenue in order to convert this affordable two unit structure into a single family home. The purpose was to take the home off the rental market so that the “…long term viability of this neighborhood would be advanced by this intervention” (1). This is not an 'affordable' home, but its sale is still subject to the restrictions described above. This home remains unsold today. City tax dollars should NOT be used for such intervention, nor in support of this type of real estate transaction.

The best way to judge these restrictions is to leave aside whether the applicant's are 'poor' or being 'generously assisted by government' and simply apply these to your own home. How would you feel about these restrictions? Did you receive help when buying your home?  Did anyone require that you agree to any restrictions? Almost everyone gets help in buying their home, from a mortgage company, or from the family. There are many government loan programs that help qualified buyers including FHA, VA loan and VHDA. None of these 'helpers' place these kinds of restrictions on the new home owner in exchange for assistance. 

We are now entering a tough market for home selling and things are bound to get tougher. Imagine you have such restrictions. Now imagine interest rates have gone to 10% and no houses are moving. You are transferred in your job. You can't sell your home and you are prohibited from renting it. You are in serious financial jeopardy.

One argument offered in favor of these restrictions is that If a buyer "doesn't want that entanglement, they don't have to buy those properties". 

This is the type of government point of view I find so frustrating. All of the land the current authority owns was acquired using government loans or inherited from the past taking of private property. The original goal was to rehabilitate communities and help those who needed help with housing.  What caused them five years ago to determine that they had a right to begin imposing these creative restrictions when they return the property back to the private sector? 

What this argument also leaves out is the monopoly that the WRHA has established through its aggressive effort to buy up affordable city lots. They do this using tax money and government loans. They also refurbish high end properties with tax dollars. In this way, government competes directly with the private sector, but has the advantage of using tax dollars to fund their purchases and improvements. It appears that the argument is that "He who has the land makes the rules", and the council, through the Housing Authority,  has been making the rules for a large number of homeowners.

 Many buyers do not understand the impact of these restrictions. Realtors are specifically excluded from participation in any sale so their advice is forfeit. It is probable that for the first time buyer, excited about a new home, the potential of harmful impact is not sufficiently understood.

These restrictions also place an intolerable restraint upon the homeowner. It is the homeowner who pays the mortgage, pays the taxes, pays for the maintenance of the property and takes on all risks of ownership, including a potential depreciation in price. The restrictions make a home more difficult to sell. Today there are many homes for sale in Williamsburg , each in competition with the other. These deed restrictions are an overburden to a seller in an already difficult market. This is evident by the fact that the Housing Authority themselves are having difficulty selling their residential properties. In the June 10^th 2008 City Council minutes, our City Manager, is paraphrased as justifying the extension of loans by the city to the Housing Authority, without collecting the late penalties that were due, because ‘some public purpose features of these properties, such as occupancy clauses, makes them harder to sell’.

Let's return to what is fair and right. Other government programs help entry level buyers by granting them favorable loan terms or cash credits. While the owner is benefiting from this assistance, he/she may not rent the property without permission (2). Once the loan is paid off, they have all the rights of ownership as the next person. This is the fair way. If we want to help people purchase their first home, let's help them. If we don't want to truly help them attain all the benefits of home ownership, then the government should get out of development business and let the private sector, using available loans and private donations, do the job.

Some make the case that these restrictions are needed to shift the balance of rental units. It seems we are mainly targeting one class of persons to accomplish this goal, the first time home buyer. This proposition also assumes that rentals are to be discouraged while the facts are that rentals are a large part of affordable housing. Without rentals only the well off could live in Williamsburg. Please see my entry on RENTALS in the margin for more thoughts on this larger topic.

Terence Wehle

Candidate for City Council

- Full disclosure. My wife and I purchased a lot from the Housing Authority over four years ago to build our home on - and so we do have these restrictions in our deed. We initially protested these restrictions and attempted to negotiate, but with no other recourse if we wished to build on this land,  we did accept these restrictions as a condition of purchase. This platform addresses the future - the City’s monetary support, in money and land, to the Authority in pursuing this policy. Our purchase is finalized and recorded. No action by the City, or myself as a member of Council, will alter this fact or offer my wife and I any personal advantage.

(1) Intervention quote is from Letter to Council from the City Manager dated March 2, 2006.

(2) The VHDA, the Virginia Housing and Development Authority, which also helps entry level home buyers, requires that if an owner wishes to rent while their VHDA loan is active, the owner must send VHDA a letter requesting permission to do so and inform the home insurance company. Once the loan is paid off, the owner owns their home with the with the same rights as any other buyer, to rent or not as they wish.

(3) Depending on the deed. Most deeds are written so that the restrictions automatically renew every twenty years. To avoid this, the owner must let the Authority know that he/she wishes to end these restrictions, during the 19th year. If they do not send notice during the 19th year, the terms are automatically renewed for another twenty years. There is no provision made to notify the owner of the upcoming 20th anniversary.