Dublin City Council recently approved a two-year extension to the Temporary Policy for the Rental of Below Market Rate Ownership Units. This Temporary Policy was renewed because Below Market Rate (BMR) owners who wish to sell their BMR units due to changing life circumstances are having difficulty finding qualified buyers willing to purchase homes that come with resale restrictions. Since the implosion of the housing market in Dublin, many BMR units have become more expensive than their market rate counterparts. As a result, qualified buyers would rather purchase market rate homes.

BMR homes for very low-income families are priced significantly below the market rate. During the housing boom a few years ago, some of the condos at Elan were selling for $135K, a price that is nearly two-thirds below the market rate at the time. Before the City Council approved the Temporary Policy for the Rental of Below Market Rate Ownership Units, BMR homeowners were not allowed to rent out their units. Due to concerns that some BMR homeowners could turn a profit by renting out their homes at market rate while making artificially low BMR mortgage payments, the City Council added a provision that restricts the total amount in rent the BMR homeowners can charge for their units. Under this provision, BMR homeowners who wish to rent out their homes may not charge rent in excess of their estimated total cost of homeownership.

Unfortunately the City of Dublin never counted on such a severe housing downturn when it drafted that provision. While the rental market took a nose dive, the total cost of BMR homeownership for the residents who bought during the peak remains fixed. As people’s life circumstances change, some need to rent out their BMR units. Given today’s economic climate, what these homeowners need to charge for their BMR units typically exceeds even the market rate rent. Without the Temporary Policy for the Rental of Below Market Rate Ownership Units, the BMR homeowners will be at risk of losing their homes to foreclosure, as they will not be able to charge sufficient rent to cover their mortgage payments and other property assessments.

The success of the Temporary Policy for the Rental of Below Market Rate Ownership Units is debatable. To date, only two BMR owners have signed up with the City of Dublin to rent out their homes. The City of Dublin, therefore, can claim that it has prevented two foreclosures as a result of this program. Because the City of Dublin refuses to exercise sufficient oversight of the for-sale BMR units after the homes are purchased, the City does not know how many BMR homes have already been rented out by opportunistic homeowners at market rate without the City’s approval. Still, the City is effectively losing BMR units regardless of whether or not the BMR homeowners choose to work with the City as they rent out their units at prices above today’s below market rate.