Housing staff is proposing a Bond-Funded Homebuyer Assistance Program to assist eligible first-time Flagstaff homebuyers with down payment and closing cost assistance to purchase a home within city limits. This program will utilize general obligation bond funds totaling seven million dollars ($7,000,000) resulting from the approval of Proposition 442 in November 2022. The program is an expansion of the existing Community Homebuyer Assistance Program (CHAP), currently funded by the City's general fund.  

Once Council has reviewed the proposed program, staff will work with Purchasing to conduct a formal Request for Statement of Qualifications (RSOQ) solicitation process to select a service provider to administer the program. Staff will negotiate with the successful respondent, given their industry expertise, to finalize the scope of work and refine program details before returning to City Council for contract approval. 

The current Community Homebuyer Assistance Program (CHAP) is the blueprint for the bond-funded program, with adjustments and additional features developed by staff and the Housing Commission. 

Launched in 1998 to assist middle-income first-time homebuyers, CHAP facilitates homeownership for Flagstaff residents by providing a one-time loan to eligible households. This program assists households who are mortgage-eligible based on credit and income but lack the cash necessary for the down payment and closing costs associated with purchasing a home. 

CHAP is a revolving loan fund and utilizes additional investments of general fund dollars when funding is available. The program was adapted post-recession to meet new lending regulations but faced challenges with fund utilization due to program dynamics that were recently amended by the City Council on October 17, 2023.  

The Housing Commission reviewed the proposed program framework at their August and September 2024 meetings. The proposed expanded program has two goals: 

•  Assist eligible first-time Flagstaff homebuyers with down payment and closing cost assistance for the purchase of a home within City limits 

• Create more permanently affordable units in the community in exchange for purchase assistance  

Prop 442 – Housing Bond         

In the November 2022 Election, voters approved $20 million to create rental and homeownership opportunities for Flagstaff residents. Of the $20 million, $7 million is designated to assist eligible first-time Flagstaff homebuyers with down payment and closing cost assistance for purchasing a home within City limits. The bond funding alleviates the need for the Council to allocate general fund dollars toward the CHAP program.  

Overview of Recent CHAP Changes 

On October 17, 2023, there were several Council-approved changes made to CHAP:  

• 3:1 matching requirement increased to 8:1 

• $15,000 increased to $40,000 in maximum assistance per household 

• Removal of home purchase price limit 

Current CHAP Eligibility Criteria 

• U.S. Citizen or legal resident  

• First-time buyer, has not owned a home for three years 

• Homebuyer education course and housing counseling  

• Owner occupancy requirement  

• 125% maximum Area Median Income (AMI) ($122,175 household of 3) 

• Home purchased within Flagstaff city limits 

• Current address in Flagstaff Metropolitan Planning Organization (FMPO) boundary 

• Up to $40,000 in maximum assistance  

  • 8:1 matching ratio 

  • Max $5,000 of household funds matched 

  • Example: Household contributes $5,000 and receives $40,000 in assistance  

• Loan repaid based on shared appreciation formula (% of assistance) 

  • At time of sale   

  • No longer owner-occupied   

  • Refinancing with cash out 

• Maximum Ratios 

  • 35% housing ratio  

  • 45% debt-to-income ratio   

  • 79% loan-to-value ratio 

Affordability Analysis and Data 

The maximum affordable purchase price for a household of four earning $162,900 (150% of the Area Median Income (AMI)) is $536,000. In this analysis, the maximum affordable purchase price calculations assume a 30-year fixed mortgage interest rate of 7.25% and a 5% down payment. To ensure housing costs remain manageable, the housing ratio is capped at 30% of gross monthly income. Additional fees were considered such as a monthly homeowners association (HOA) fee of $140, estimated monthly taxes and insurance at $450. Together, these factors provide a comprehensive framework for determining an achievable and sustainable home purchase price relative to household income. Market data suggests that homes available within Flagstaff city limits under $550,000 are becoming increasingly scarce. This dwindling supply highlights a significant gap between what moderate incomes can afford and what is available on the market. To address this issue, staff is recommending program adjustments that reflect current market conditions.  Staff is recommending two key components for the bond-funded program: an expansion of the current CHAP program and a pilot Permanent Affordability option.    

Proposed Expansion of CHAP with Bond Funds  

Much of the eligibility criteria (as listed above) will remain the same, including the loan repayment requirements. However, to establish an expanded bond-funded program that meets current market conditions, Housing staff is recommending the following changes: 

• Increase the maximum Area Median Income (AMI) to 150% ($146,610 for a household of 3)  

• Re-define Residency as: Lived or worked in FMPO boundary for at least 1 year  

• Change First-Time Homebuyer definition to First-Time Flagstaff Buyer - has not owned a home in 3 years in the FMPO boundary 

• Increase the maximum assistance amount to $50,000 per household 

• Change the matching ratio to 10:1  

  • Example: Household contributes $5,000 and receives $50,000 in assistance  

Proposed Permanent Affordability Option (Pilot) 

Staff is recommending a new option within the expansion of the CHAP program that employs an innovative approach to creating more permanent affordable housing units in our community. This strategy, which is inspired by models in peer cities and aligns with ideas from the Housing Commission, aims to address current housing needs in a forward-thinking manner. The proposed program will offer assistance in exchange for permanent affordability. The framework outlined below will serve as a preliminary guide. The final details of the scope of work will be refined based on input from the successful Request for Statement of Qualifications (RSOQ) respondent. 

• First-Time Flagstaff buyer, has not owned a home in 3 years in the FMPO boundary 

• Residency Requirement: Lived or worked in FMPO boundary for at least 1 year 

• Area of Home Purchase: Within Flagstaff City limits  

• AMI: 150% ($146,610 for a household of 3) 

• Assistance Amount: Minimum $100,000 - Maximum $200,000 

• Matching Contribution Ratio: 10:1 (Max $20,000 of household funds matched) 

  • Example: Household contributes $10,0000 and receives $100,0000 in assistance 

• This is not a loan; a deed restriction or ground lease will secure the City’s investment in a permanently affordable unit. 

RSOQ Process 

Once Council has reviewed the proposed expansion program, staff will conduct a formal RSOQ solicitation process to evaluate and select a service provider to administer the program. Staff will negotiate with the successful respondent, given their industry expertise, to finalize the scope of work and refine program details before returning to City Council for contract approval.  The successful provider will also administer the Employer Assisted Housing (EAH) program, which is funded with general funds. 

Next Steps 

September - October 2024   
Request for Statement of Qualifications (RSOQ) drafted and legal/purchasing review   

November 2024   
RSOQ published (30 days)    

December 2024   
Evaluate Statements and select service provider, and develop program scope of work    

January 2025   
Housing Commission recommendation    

February 2025   
City Council contract approval 

Prior Community Discussions:  

• Housing Commission brainstorming session on January 25, 2024 

• Presented the program framework to the Housing Commission on August 27, 2024 

• Working group discussion on September 12, 2024 

• Second Presentation to the Housing Commission on September 26, 2024 

Connection to 10-Year Housing Plan:  

10-Year Housing Plan 

• Create 1.8 Explore the use of the community land trust model and public/private partnerships to incentivize the development of ownership units that are priced significantly below market rate. 

• Create 3.3 Identify ongoing resource opportunities for the purpose of assisting households experiencing homelessness, households at risk of becoming homeless, first-time homebuyers, and affordable housing targeted to these populations. 

• Connect 2 Implement a framework for centering equity in proposed and existing housing practices, policies, and programs.   

• Protect 2 Ensure affordable housing is a part of every Flagstaff neighborhood and work to address disparate impact as part of any development or redevelopment.