Editorial: Don’t Barge Ahead With Southold Down Payment Program

When we first heard that Southold Town was planning to expand its proposed first-time homebuyer down payment assistance program, we thought the logic made a lot of sense. Loaning new homeowners a large enough down payment to avoid paying for pricey private mortgage insurance does give them more long-term economic stability.

But, like so many things, the devil in this program is in the details, and after discussing its current form with numerous housing advocates, we are very concerned.

Southold has just over $8.5 million in its Community Housing Fund, and the town is ultimately planning to use up to 22 percent of its CHF funding for the down payment program — a very significant percentage. 

The town is looking to loan applicants 18 percent of a house valued at up to $999,999, repayable upon sale of the property, and is poised to give out around 10 of these awards next year. 

The Southold Town Board seems disinclined to significantly limit the assets of prospective loan recipients, particularly in their retirement accounts, and a suggestion to allow applicants to have up to 25 percent of the purchase price in liquid assets is absurd. Someone who has $250,000 in the bank shouldn’t need a down payment assistance loan.

When we were younger, everyone we knew raided their retirement account in order to buy their first home. So did we. In fact, that’s one of the few reasons you can withdraw from these types of accounts without penalty before reaching retirement age. Stable housing provides a level of long-term security that is at least as important as having a nest egg, especially when you are young. 

We believe the town can do a better job of determining whether people with such assets people can participate in this program.

But we have other questions. Who will get this money? As originally drafted, the guidelines say applications will be accepted on a rolling basis until funds are exhausted, but this doesn’t give us enough faith that the town will ensure they are distributed in a transparent and equitable fashion. Is a lottery feasible? Most importantly of all, how can the town ensure these funds go to people providing the vital services we need to keep our community running, people working at jobs that are actually in Southold Town? How many jobs here pay enough that people who work here will qualify for mortgages for these houses? 

Providing forgiveness for volunteer first responders who put in 10 years of service after receiving the loan is a start toward gearing this program to what both recipients and the community need, but it is only the beginning.

Down payment assistance is a thorny issue in areas where prices put most properties out of the reach of first-time homebuyers. In East Hampton, this issue has become so dire that East Hampton Town initially limited its down payment assistance program only to people buying homes that are already in the town’s affordable housing problem. Southold’s proposed program would dwarf East Hampton’s spending.

But in Southold, aside from The Cottages in Mattituck, affordable, ‘owned’ housing just doesn’t exist.

East Hampton is slated to spend just $600,000 of its Community Housing Fund money on its down payment assistance program this year, providing loans of $30,000.

Southampton Town adopted a nearly identical program to the one Southold is proposing earlier this September, which shouldn’t be surprising, since Southampton’s Director of Housing and Community Development is also Southold’s housing consultant. But Southampton collected almost seven times as much money in Community Housing Funds as Southold in the first half of this year. (Southampton collected $12.23 million, while Southold collected $1.8 million). And the median home price in Southampton is at least 80 percent higher than Southold.

What happened to doing things the Southold way? The Town of Southold has no problem insisting that it uses its Community Preservation Fund money differently than the South Fork towns, precisely because it collects so much less money than those towns do. Southold’s housing funds are also precious, and critically limited.

We were excited from the start to see the way Southold had structured its subsidies for developers of community housing — providing incentives for deeper affordability, adaptive reuse of existing buildings, locations near transportation hubs and environmentally friendly design.

Southold had initially said it would be rolling out Notices of Funding Availability (NOFA) for community housing developers earlier this year, but that has been delayed by the town’s decision to dramatically revamp its housing code before issuing those notices. Numerous housing developers have been waiting for quite some time for this program to start, and they will have to wait still longer while the code changes go through the public hearing process.

Initially, standing up the down payment program quickly seemed like an easy win. But the negative publicity, including widespread misinformation that the town had planned to give assistance to people buying homes up to $2 million in value, has already given the down payment program a black eye. 

The people of Southold deserve to see the town’s community housing money put to use in the ways that will benefit the most people, not in the way that will happen most quickly. 

There will be many ways to make your voice heard on this issue in the upcoming weeks and months, including this evening, Sept. 29 at 6 p.m. at Town Hall. We urge everyone to speak up. This is the time to get it right.