Inclusionary Housing BMR Ownership Program Overview
The San Francisco Mayor’s Office of Housing and Community Development Below Market Rate (“BMR”) Inclusionary Housing Program requires some developers to sell or rent 12% or more of units in new developments at a “below market rate” price that is affordable to lower or middle income households. The program is governed by Planning Code 415 and by the City and County of San Francisco Inclusionary Affordable Housing Program Monitoring and Procedures Manual 2013 (referred to as the” Procedures Manual”). The program is administered by the Mayor’s Office of Housing and Community Development (known as “MOHCD”) and currently includes approximately 900 ownership units.
To be eligible to purchase a “BMR” unit, a household must meet specific income and first-time homeowner requirements as detailed in this overview.
This document is an informal overview of the BMR program only. The formal rules and requirements of the Mayor’s Office of Housing and Community Development BMR program are described fully in the City and County of San Francisco Inclusionary Affordable Housing Program Monitoring and Procedures Manual 2013 ("Procedures Manual"). Each BMR unit is governed by the Procedures Manual that is in place at the time of the purchase.
APPLYING FOR A BMR UNIT
You can learn about new BMR opportunities through postings listed on the Mayor’s Office of Housing and Community Development website. Prospective buyers may also sign up for our Housing Email Alert Subscription. HomeownershipSF (www.homeownershipsf.org) is another great source of information on units available citywide.
New units are posted for at least 45 days before the application deadline. (Resale units are posted for 21 days with a lottery to follow.) Once a unit is listed on the MOHCD website, you may download the current application from the MOHCD website or contact the sales team for a paper copy of the application. Among other requirements, all titleholders must attend an approved first-time homebuyer workshop, as well as a one-on-one counseling and obtain a mortgage loan pre-approval from an approved MOHCD BMR lender in order to apply. Please visit www.homeownershipsf.org to view available workshop times.
Applicants must submit a complete application to the seller or seller’s agent by an established deadline date. MOHCD will hold a public lottery for the available BMR units in each development. Placing high on the lottery list does not guarantee the unit, as applicants must still be qualified by the MOHCD, must be the correct household size for an available BMR unit, and must be able to secure a mortgage loan.
Qualified Household Member
A household is defined in terms of financial relationships and can include any owner partnerships as long as their combined gross annual income meets the eligibility guidelines. To be considered a member of a household, a person must either be (1) on the title and the loan documents for the unit or (2) claimed as a dependent on the prior year tax returns of a household member who will appear on the title and loan for the BMR unit. (Certain exceptions apply.) All members of the household who will live in the unit must appear on the application and will count as a household member. For example, a child counts as a household member in terms of determining income maximums, unit size choice, etc.
While the definition of first-time buyer can differ for various programs, for those units restricted under the MOHCD BMR Program, the definition is as follows:
No member of the applicant Household may have owned any interest in a Housing Unit for a three (3) year period prior to applying to qualify for purchase of a BMR Unit restricted under the Inclusionary Housing Program. The period shall be counted backwards from the application date for the BMR Unit.
First-time Homebuyer Education Workshop
All BMR household members who will appear on loan and title must complete a first-time homebuyer workshop from an approved housing counseling agent before applying for a unit. Currently approved workshops include those offered by Asian, Inc., Mission Economic Development Agency (MEDA), Consumer Credit Counseling Service of San Francisco (CCCSF), San Francisco Housing Development Corporation (SFHDC) and San Francisco LGBT Center. Please visit www.homeownershipsf.org to view workshop dates and times. Certificate of Homebuyer Education issued before May 1, 2015 is valid for 1 year from the date of issuance. Verification of Homebuyer Education Completion is valid for 1 year from the date of issuance. In the case of buyers receiving down payment assistance from the City, certificates must not be older than 6 months from the time of closing on the unit.
In order to apply to and enter the lottery for a BMR unit, both new and resale, all titleholders must obtain a loan pre-approval from an approved BMR lender and submit this pre-approval with the application.
A minimum of one person per bedroom is required. In other words, a 1-person household may not purchase a 2-bedroom unit. There is no restriction on purchasing a unit that has fewer bedrooms than the household size.
Maximum Purchase Prices and Incomes for Ownership Units
For the purpose of all City programs, income is stated in terms of area median income or "AMI." A household at "100% of AMI" earns 50% more than other households and 50% less than other households, and is said to be "middle income" or "median income."
Most new BMR ownership units under the Inclusionary Housing Program will be priced to be affordable to households earning no more than 90% of area median income.
Older resale units will be priced at 80% to 120% of area median income with maximum qualifying incomes that are at the same AMI level. Although current owners are not able to sell their units at an AMI level higher than when they purchased the units, there are certain allowances for units that cannot resale in a timely manner and after a good faith effort, including a one-time increase in the maximum qualifying income level.
The following chart states the income maximums by household size. Note that every person in your household counts as one household member, including children, etc. Each new listing will state the maximum income limits for the units available.
Current Year Maximum Income Limits as of January 1 (PDF)
Please find your household size next to the applicable income target. Or find your household income to determine the AMI of your household.
Basis for Determining Income Eligibility
For purposes of determining household income, each person who is 18 years-old or older in an applicant household must present: (a) a complete set of past three years’ federal (only) Income Tax Returns (signed & dated) and W-2 forms; (b) three recent and consecutive income statements; and, (c) three recent and consecutive statements from each savings, checking or any other type of account in which each person has money saved. Mayor’s Office of Housing and Community Development will determine final income eligibility based on your household’s current income and assets.
How the Mayor’s Office of Housing and Community Development Calculates Household Income
MOHCD reviews the most recent three paystubs or other income statements (e.g. social security statements, unemployment income) for each applicant. The annual gross income is derived by dividing the current year-to-date gross income as stated on the most recent pay stub for the calendar year by the current pay period and then by annualizing the estimated pay period amount by the number of times the person will be paid in one year.
Year-to-date (YTD) income as stated on the most recent paystub for the calendar year = $20,000
Current pay period on most recent pay stub = 10
Estimated pay period amount = $2,000 ($20,000 divided by 10)
Total number of pay periods in one year for the applicant = 24
Annualized pay = $48,000 ($2,000 x 24)
In the case of a self-employed person or other special circumstances, please see the BMR ownership application instructions for more information.
The Mayor’s Office of Housing office must review income for all household members 18 years old or older, regardless of dependent status.
Asset Test for BMR Buyers
MOHCD will also apply an asset test to all applicants. Assets include all savings, checking accounts, gifts and other sources of money (cash) other than retirement accounts. (If your retirement account is currently generating income -- i.e. you are living off of your retirement -- you must count this money as income on the BMR application.) Assets also include any money that will be used toward a down payment on a BMR unit. Ten percent (10%) of all assets over $60,000 will be added to the total household income. Retirement savings will be excluded from the asset test, but all retirement statements should be included in the application package.
Household of 4 earns $85,000 a year
Total household cash assets = $140,000
First $60,000 of assets is excused: $140,000 - $60,000 = $80,000 in remaining assets
10% of remaining assets is added to income: $80,000 x 10% = $8,000
Total amount added to income: $8,000
New total household income: $85,000 + $8,000 = $93,000
Allowable Loan Types
All BMR buyers must be able to secure a loan through an approved BMR lender. BMR buyers must use a 30-year fully amortizing, fully documented, fixed rate loan. MOHCD BMR buyers are not able to use FHA, CalHFA or VA first loans at this time.
A BMR household must take out a loan for a BMR unit and cannot pay for the entire unit in cash except in certain circumstances. The loan must equal at least 28% of the household’s monthly income. The amount of income the buyer household spends on housing expenses each month must not exceed 38% of the total monthly household income. And the total amount of household debt that is paid off each month (housing expenses plus all other household debt) must not exceed 43% of monthly household income.
Please review complete lending guidelines in the Procedures Manual.
Homebuyers must make a minimum 5% down payment, which will vary based on the sales price of the home. Of the total 5%, 3% needs to be from the buyer’s own funds (held in a financial institution) and 2% can be gift funds. Loan amounts must never exceed the maximum sales price of the unit.
Additional Assistance for BMR Buyers
A buyer may be eligible for the following loan assistance programs. BMR buyers should ask their lenders to explore the following programs that work with BMR loans:
BMR-DALP (BMR Downpayment Assistance Loan Program) - a down payment assistance loan made possible by the California Department of Housing and Community Development (HCD) CalHome Mortgage Assistance Loan program for a loan amount of up-to $57,000 or 15% of the purchase price. This program is coordinated through the Mayor’s Office of Housing and Community Development and made available to program and income qualified households with a household combined income not to exceed 80% of the State Area Median Income Table.
BMR-DALP-Plus (BMR-DALP-Plus Loan Program) – a down payment assistance loan program for a loan amount up to 15% of the BMR purchase price to qualified program and income BMR buyers with a household combined incomes ranging from 81% - 120% of the Area Median Income. The funding source for this program is made possible through the City and County of San Francisco’s Housing Trust Fund. Lenders are advised to use the standard DALP loan application forms for to help a borrower apply for this program. Lenders are advised to use the standard DALP loan application. The BMR-DALP-Plus can be combined with the MCC program.
Mortgage Credit Certificate (MCC) – This State program allows first time homebuyers to deduct a portion of their monthly interest payments from their taxes, thereby lowering their monthly mortgage payment. This program is coordinated through the Mayor’s Office of Housing and Community Development. To qualify to use an MCC with the purchase of a BMR home, the borrowers total household income must be between 81% and 120% AMI, and DIT ratio must be at least 33%.
WISH Program – The Workforce Initiative Subsidy for Homeownership (WISH) Program provides matching grants to qualified first-time homebuyers through Federal Home Loan Bank members. This program is coordinated through certain lenders.
Other forms of downpayment assistance outside of MOHCD may be available to BMR buyers now and in the future. Please ask your lender for suggestions.
BMR units are priced to be affordable to low or median income households spending no more than 33% of their income on housing expenses. The unit is priced using the variables of condominium association fees, property taxes, a certain interest rate assumption, and an assumption of a 10% down payment. There is no down payment requirement for the program; however, if a buyer is not able to qualify for as large a mortgage as needed to purchase the unit, it may require a larger personal down payment to meet the purchase price. The City does not fix the price of the units but merely establishes the maximum price by this formula.
Sample Pricing for New BMR Units 2015 at 90% of Area Median Income
Almost all units in the Mayor’s Office of Housing and Community Development BMR program are condominium units that also require a monthly Homeowner Association payment, called “HOA dues.” HOA dues are paid in addition to the prices for the unit but are calculated into the price of the unit to produce an affordable price. Buyers should be aware of the fact that HOA dues can increase over time beyond the pace of inflation.
LOTTERY FOR UNITS
All individuals and households may enter the lottery for a BMR unit. However, those households in which one member holds a Certificate of Preference from the former San Francisco Redevelopment Agency will be given highest preference in the lottery ranking process. Those households in which one member holds an Ellis Act Housing Preference Certificate from the Mayor’s Office of Housing and Community Development will be given second highest preference in the lottery ranking process. Households that live or work in San Francisco will be given third highest preference in the lottery ranking process.
If the number of units available exceeds the number of qualified applicants who hold a Certificate of Preference, Ellis Act Housing Preference or who live or work in San Francisco, the units will become available to other qualified applicants outside of San Francisco.
Certificate of Preference (COP) holders are primarily households displaced by Agency action in Redevelopment Project Areas during the 1960’s and 1970's, but may also include other persons displaced by Agency action.
Ellis Act Housing Preference Program (EAHP) – The Ellis Act Displacement Emergency Assistance Ordinance was passed into law on December 18th, 2013. The legislation required a new preference in all City Affordable Housing Programs for tenants who are displaced due to withdrawal of their housing unit from the rental market, as allowable under the State Ellis Act. The legislation responded to concern over a rise in these Ellis Act Evictions that paralleled rising market-rate housing prices in 2013. The Mayor’s Office of Housing and Community Development’s Ellis Act Housing Preference Program implements the Ellis Act Displacement Emergency Assistance Ordinance.
For new developments going through the initial sale process, the EAHP priority applies to twenty percent (20%) of the affordable units. Buildings with four (4) or fewer affordable units are not required to provide the EAHP priority at initial sale because 20% of that number of units is zero. For re-sale units, EAHP certificate preference applies to every unit that becomes available, regardless of the number of affordable units in the building.
To be considered a COP or EAHP holder, you must submit a copy of your certificate with the application. Certificate holders must still meet the eligibility rules for any particular housing unit including income limits.
Please contact 415-701-5613 or firstname.lastname@example.org for more information about the COP and the Ellis Act Housing Preference Program.
RESTRICTIONS ON BMR UNITS
All BMR applicants should carefully review the current version of the City and County of San Francisco Affordable Housing Monitoring Procedures Manual 2013 to fully understand the restrictions on BMR units. The following information is for quick reference only.
Period of Restriction
BMR units will be restricted in their resale price and other applicable restrictions for the life of the project unless otherwise noted in the planning approvals or other use restrictions for the project.
Re-Selling BMR Units
A BMR owner is required to re-sell a BMR unit at a restricted price to a new qualified buyer through procedures established by MOHCD. Please review MOHCD’s resale guidelines for process information.
Pricing BMR Units for Resale
A BMR unit will be resold at a restricted affordable price to a household that meets the first-time homebuyer and income qualifications for the program and for the particular unit. New BMR units will be repriced according to change in the median income from the time of the current owner’s purchase to the time of sale. Specific repricing methods vary by development per the Planning Approval and applicable Procedures Manual for each unit.
The price of a BMR unit at resale is not guaranteed to exceed the initial purchase price of the unit. However, most long term BMR owners tend to see some appreciation on their units upon resale. Appreciation gained on a BMR unit upon resale belongs to the BMR owner minus all loans, closing costs, and any shared appreciation due from a City downpayment assistance loan.
Owners may add eligible capital improvements and special assessments to their resale price only if the improvements are (1) eligible and (2) made after the unit is 10 years old.
BMR units are intended to be owner-occupied at all times and used as a principal residence for the duration of ownership.
BMR units are intended to be owner-occupied and never used as investment property.
A BMR owner cannot add or remove a person to or from the title of a BMR unit without permission from the Mayor’s Office of Housing.
Refinancing BMR Units and Taking Cash Out
In general, BMR owners may refinance their units only to take advantage of a new loan that benefits the owner financially (e.g. a lower rate or lower monthly payments). Owners must contact our office for prior approval of all refinancing and must work with an approved BMR lender.
Inheritance is limited in the case of the death of a BMR owner.
OTHER HOUSING RESOURCES
Where can I find more information about City programs?
For further information about BMR ownership units available, please refer to the current affordable ownership listings on our website at www.sfmohcd.org or www.homeownershipsf.org is another great source of information on units available citywide.
The Mayor’s Office of Housing and Community Development offers low to moderate rate homeowners grants to abate lead hazards and no payment loans to make health and safety repairs on your home. Click here for more information.
Thank you and good luck!