What is a BMR Home?
The following is a general description of the primary elements tied to the purchase and ownership of a Below Market Rate, or BMR, home. Guidelines vary with each city. Accordingly, a BMR homebuyer should review the specific guidelines provided by the city in which they will be purchasing their BMR.
BMR homes are established through an Inclusionary Zoning city Ordinance that expands affordable home ownership opportunities in the community. The ordinance requires developers to set aside a percentage of the new units they bring to market to be permanently affordable for low to moderate income households. Keep in mind that not all cities have Inclusionary Zoning Ordinances in place.
Prices are originally set and continuously maintained in compliance with the targeted income levels the program has been established to serve. Most BMRs are priced to assist households with incomes that range from below, or are at, 80% of the area’s median income or incomes that range from below, or are at, 120% of the Area Median Incomes (AMI). Incomes are adjusted for household size (total amount of people living in and/or moving into the house). BMR home prices are finalized by incorporating the various housing costs, including interest rates at the time the home is originally placed on the market. Prices for future resales are established based on how much incomes rise in the area. Accordingly, a household who purchases a BMR will be assigned a resale price by the city at the time they sell their BMR home. Each city has its own protocol to establish future resale prices for their BMR portfolio. Usually price increases are derived through either or a combination of the increase/decrease in Area Median Income (AMI), a Consumer Price Index (CPI), and current mortgage interest rates.
BMRs could offer households a viable format to secure the benefits of homeownership. In many cases, the cost of ownership may be considerably less than purchasing an open market (not a BMR) home; and in some cases could be less than or comparable to the cost of renting a home. These privileges and benefits; however, do come with a number of restrictions that apply to BMR homeownership (type and level of restrictions vary for each city):
- The owner must permanently reside in the home – it cannot be rented
- There are guidelines that may restrict the transfer of title to another family member or heir
- There are restrictions on refinancing the home, including obtaining cash out refinancing
- The property must be resold at an assigned price by the city and a strict set of protocols must be maintained in selling the home
- The property must be maintained in good shape and within all health and safety codes
- There are restrictions in adding capital improvements to the home
Many cities will provide a comprehensive manual and set of Program agreements that outline all the responsibilities and restrictions associated with the ownership of a BMR unit. It is important that you read and understand all the covenants and restrictions established in the Agreements and discussed in the Manual. These covenants must be strictly adhered to. Violation of any of the covenants could lead to a default in your ownership, which, if not cured, could lead to the required resale of your home to another eligible and qualified Program participant/owner.
There are a specific set of steps and protocols that you need to adhere to in order to become a BMR owner. Make certain to contact city’s Housing Department or their designated Program Administrator to secure additional information and to address any questions or concerns that you have.
BMR resale prices are set by the city. Buyers cannot offer a higher price for the unit and there is no purchasing advantage gained by the buyer in offering cash or a higher down payment for the home. Buyers are chosen by the city based on their eligibility to participate and purchase within the parameters of the city’s BMR Program.