The Boston Redevelopment Authority (BRA) has an affordable housing program in place that is one of the best in the nation, but there are plans to make even more of these units available in the future. In fact, Mayor Walsh's recently released housing plan includes a stipulation that 6,500 new affordable housing units should be constructed by 2030.

What Type of Affordable Housing is Available?

Condos are the only type of unit that can be purchased via the BRA affordable housing program. Rental units are also available, but it is typically against the rules to rent out a condo to someone else that you bought under the affordable housing terms. Industry experts are predicting thousands of new units will be built during the next few years, and this will include a mixture of condos and apartments.

In the long run, it makes much more sense to purchase an affordable housing unit than to pay rent. After all, you will never receive a return on your investment from a rental unit, but you will have the opportunity to sell an affordable condo for a profit. Each of these units has an average appreciation rate of 3 to 5 percent per year, so you could make a good profit if you live in home for at least a few years first.

Can Investors Utilize Affordable Housing Units?

If an investor falls within the income requirements, they could choose to purchase and live inside an affordable housing unit, but this scenario is very unlikely. The rules of the program forbid people from buying these properties for a real estate portfolio, and this is enforced via a requirement that the buyer must live in the condo. Therefore, these units are not a good opportunity for investors, but the Boston City Properties team can help you locate condos and houses that would be perfect for this purpose.

How Does the Pricing Structure Work?

Anyone who makes 120 percent or less of the average median income (AMI) has the ability to apply for affordable units within their percentage and price range. For example, a household of two with a combined AMI of no more than $37,650 would have been eligible for the 50 percent level in 2014, but the same household would have fallen into the 120 percent level if they made $90,350. Please note that these listed income amounts are only an example to help you learn how this process works, and they will no longer be applicable going forward.

The majority of affordable units in Boston are based around three percentages: 80, 100 and 120 percent. Instead of allowing each affordable condo to have a flexible price based on the applicant's AMI, every unit has a fixed percentage level that you will need to be able to qualify for. In other words, if a development has 20 designated affordable units, there could be four at 120 percent, six at 100 percent and 10 at 80 percent. This allows a diverse group of buyers to purchase property in the same development, and it can be highly beneficial for individuals who would like to move into a luxury community without paying the standard sales price.

The BRA Lottery

Even though there are more affordable condos and apartments in Boston than in most other major cities, there is still not a high enough quantity to meet the typical demand. This is why it is so important for Mayor Walsh's housing plan to move forward, especially the creation of 6,500 new units for lower-income buyers. At the current time, any developer who builds a community with 10 or more units has to offer 15 percent of them to buyers who are qualified for the specified affordable income percentage. However, developers also have the ability to opt out by putting $200,000 per unit into the city's housing fund.

If you are hoping to take advantage of these price breaks, you will need to utilize the BRA lottery. This gives everyone who is income eligible the opportunity to try to score a discounted condominium in Boston. However, it is imperative to pay close attention to the listed deadline for each lottery, and you will also lose your place if you happen to have an income increase after applying.

To give you a better idea of how this entire process works, we will reference a recent lottery for the Ink Block development. This luxury condo community that will be opening in 2015 has an average one-bedroom sales price of $640,000. This is definitely outside of the price range that people within the affordable housing income limits would typically be attracted to, but the lottery will allow a few buyers to purchase one-bedroom units for an average of $162,500. With this huge price reduction and all of the perks associated with luxury living, including having an on-site Whole Foods, it is no wonder that approximately 500 people filled out an application. There are only 41 units available, so 82 percent of these hopeful individuals will not have their names drawn.

What is the Purpose of Affordable Housing?

As Boston continues to grow, it is important to allow residents of all incomes to find a place within the city. In the past, cities that decided to make dedicated affording housing units often placed them all in one area. This typically led to a decline in the quality of housing that was made available, and it also prevented neighborhoods throughout the city from having a more diverse makeup.

Boston's program ensures that low and middle-income residents have the opportunity to move into any neighborhood. This helps stabilize housing and the local economy because it gives the working class the ability to comfortably live and work within the city limits. These units are protected by a deed that requires a 50 year affordable commitment. This is very beneficial because it helps avoid major real estate price spikes that would force the working class to move out of the area.

What Other Options Are Available?

Affordable housing offers a fantastic opportunity for people who are income eligible, but it can also be extremely difficult to purchase a condo via this program due to a lack of availability. Instead of possibly waiting several years without ever being selected via the lottery process, you can turn to Boston City Properties to help you find a home right now that suits your needs.

One of the best aspects of avoiding the lottery process is that you will be able to purchase a house instead of focusing exclusively on condos. Additionally, you can take advantage of great sales on fixer-upper properties and houses in neighborhoods that are currently being revitalized. In other words, most buyers can find a home in their price range in Greater Boston without filling our countless lottery applications. As an added bonus, this gives you the ability to invest in real estate property, and you will also be able to sell the house or condo later on without going through the BRA.

Another important point to consider is the fact that the BRA typically caps the appreciation value of affordable condos at 5 percent, but you can let the market decide the true value of a home that you buy without utilizing this program. Call us at (617) 247-1933 to find out more about your options for buying a home in Boston.

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