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BOOK 96 u. E 145 ANALYSIS With its recent Local Housing Assistance Plan revisions,. the Board's intent was to ensure that SHIP assisted households do not pay an excessive amount of their income for housing, hence the requirement that SHIP applicants' housing cost to income ratio not exceed 30%. At the same time, the Board wanted to ensure that SHIP households pay an adequate amount of their housing cost and not receive unnecessary assistance. For this reason the 28% minimum housing cost to income ratio was instituted. Based on experience, local lenders have determined that a housing cost to income ratio range of 28% (minimum) to 30% (maximum) is too restrictive. Lenders have also determined that a lower housing cost to income ratio is necessary to qualify some SHIP applicants. In fact, lenders have determined that the 28% minimum ratio could have the unintended effect of encouraging SHIP applicants to purchase amore expensive home than they want or need in order to _ increase their housing cost to income ratio to be within the 28% to 30% range. Both staff and the lenders committee feel that, even without the cost/income ratio requirements, the Local Housing Assistance Plan has sufficient safeguards to ensure that SHIP funds will go only to those needing assistance. Among these other provisions are a maximum housing cost of $77,150, a limitation on moderate income household eligibility, and asset limitations. For those reasons, staff and lenders feel that the minimum housing cost to income ratio can -be lowered to 20%. Not only will this provide lenders more flexibility in qualifying SHIP applicants; it will also ensure that SHIP applicants spend at least 1/5 of their income on housing expenses. When the Local Housing Assistance Plan was revised to incorporate the cost/income ratios, the plan was also amended to incorporate a provision for required inspections for homes to be purchased with SHIP funds. Because this amendment was made at the Affordable Housing Advisory Committee meeting, the home inspection requirement lack specificity. Since then, staff has considered how to implement this requirement. In coordinating with local lenders, staff determined that lenders currently use the appraisal report prepared in conjunction with a mortgage application as an indication of structural conditions. Since most SHIP loans are provided to applicants who are also getting a mortgage from- a financial institution, staff has determined and lenders agree that the SHIP home inspection requirement can be met by relying on lenders for those SHIP applicants obtaining a principal mortgage from a financial institution. For other SHIP applicants, staff has developed criteria for evaluating and applying SHIP inspection results. All of these changes have been drafted and are attached as proposed Local Housing Assistance Plan amendments. ALTERNATIVES With respect to the recommendations outlined above, the Board of County Commissioners has three alternatives. These are: c To adopt the recommendations as outlined in attachment 1 c To adopt the recommendations with changes C `To reject the recommendations Staff and -the SHIP leers committee import the first alternat4ve - - 50 - September 19, 1995 M