Habitat for Humanity shifts model in Flagstaff to combat area's affordable housing crisis

FLAGSTAFF — Just across the street from the first Habitat for Humanity house Eric Wolverton helped build, he is now overseeing the construction of a new kind of Habitat home.

This time, the house has the explicit purpose of helping alleviate Flagstaff’s affordable housing crisis.

Flagstaff desperately needs more affordable housing, evidenced by the hundreds of people who have applied to own this new Habitat property. The city’s lengthy zoning and approval process, limited amount of residential land and proliferation of short-term vacation rentals and second homes have contributed to a housing shortage in the area, causing prices to climb.

As of January 2021, housing in the city cost a third more than the national average, according to Arizona State University’s Morrison Institute for Public Policy. And half of renters in Coconino County are cost-burdened, meaning they spend more than 30% of their income on housing, a Morrison Institute report said.

Instead of the single-family “forever homes” that Habitat has built in the past, Wolverton has led the shift to starter homes.

Each of these residences, in addition to being shelter, will also be an investment opportunity for a series of homeowners, said Wolverton, executive director of Habitat for Humanity’s northern Arizona affiliate.

“We don’t look at starter homes as just being an affordable workforce solution, it's an investment solution,” he said. “We’re really looking at this as the opportunity to allow families that aren’t upper-middle class and rich to save money through equity.”

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A home and a savings tool

The new Habitat homes are meant to change hands every few years.

Under the new Habitat model in Flagstaff, buyers will pay $1,000 down and a monthly mortgage of $1,000 or less. In return, they will earn $10,000 in equity savings for each year they live in the home, which they will collect in full when they move out.

The program requires buyers to live in the home for between three and 10 years. This will allow each buyer to grow their savings and ensure that subsequent buyers will be able to benefit, Wolverton said.

“Flagstaff has major housing needs, but what it comes down to is opening up the equity savings platform to everyone,” Wolverton said.

Three starter homes should be able to host about 15 families over the course of 30 years, generating almost $1 million in savings during that time, Wolverton said.

The starter homes are smaller and cheaper to build than Habitat for Humanity of Northern Arizona's earlier, "forever home" models. Historically, for the same construction cost, Habitat would have built just one single-family home that would operate under a traditional mortgage structure.

Flagstaff's housing emergency

For decades, Flagstaff's high cost of living has led some people to dub the famously scenic city "poverty with a view." But over the past several years, the city's longtime shortage of affordable housing has grown worse, reaching crisis levels.

In 2020, the city formally declared a housing emergency.

One contributing factor has been an increase in vacation rentals, such as Airbnbs or Vrbos. There are more than 2,000 short-term rental listings in or nearby Flagstaff, according to AirDNA, a company that tracks short-term rental data. The vast majority of these listings are for entire homes as opposed to private rooms.

Flagstaff’s large number of second homes also cuts into the housing stock available for full-time residents. Flagstaff has almost 4,000 second homes, which account for more than a fifth of all parcels in the city, according to the city’s 10-year housing plan.

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The plan, which was created after the city declared a housing emergency, was adopted in February. It has two main goals: First, to create housing units for, or provide subsidies to, at least 6,000 low-to-moderate income residents. Second, to create or preserve almost 8,000 housing units by 2031, at least 10% of which will be affordable.

Wolverton hopes the Habitat homes will bring the city a step closer to those goals.

“With starter homes, you’ve got a choice: You can live in 'poverty with a view' or you can live in 'prosperity with a view,'" Wolverton said. "That’s what this is building."

Joe Galli, senior public policy adviser for the Greater Flagstaff Chamber of Commerce, said the city’s high cost of living means Flagstaff employers and employees suffer.

“The question that we often ask is, 'Who didn’t come here? Who did we lose from an economic development standpoint because their employees would not be able to attain housing?’” Galli said at the Arizona Legislature's Housing Supply Study Committee meeting in September.

The first of many

Each Habitat starter home will be about 500 square feet and will feature a full bath, kitchen, living area and staircase leading to a lofted bed area. The homes include sustainable features, including heating and cooling run by solar panels.

The homes, which cost between $100,000 and $125,000 to build, are funded entirely through cash and in-kind donations. The first two homes were sponsored by the M3F music festival, the Arizona Lottery Gives Back program and other donors, with Wespac Construction providing free contracting services.

Construction students at Coconino Community College are completing the framing of the homes off-site, which allows for building to continue year-round, Wolverton said. After the students finish the framing, the pieces are brought to the homesite, and within a few days, a new starter home is standing.

Habitat has received more than 500 applications for the city's first starter home on Butler Avenue and O'Leary Street since the application process opened on Sept. 6, Wolverton said. He expects even more ahead of the Nov. 1 deadline.

In order to qualify for either of the first two starter homes, homebuyers must have lived or worked in Flagstaff for at least a year and make between 50% and 80% of the area median income. That's roughly $30,100 to $48,100 for a one-person household. Applicants must also be first-time homebuyers, provide proof of U.S. residency and pass a credit review.

A local selection committee will select homeowners based on level of need, ability to pay the mortgage and willingness to partner with Habitat, including a commitment to invest 200 hours of sweat equity on a Habitat home.

While the odds of being chosen are slim, Wolverton wants interested residents to apply anyway to demonstrate the overwhelming need for more affordable housing. He said a massive show of interest could encourage more donations so more starter homes can be built and impress upon city leaders the desperate need for affordable housing.

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While Flagstaff's first Habitat starter home has yet to be matched to a buyer, others are already in the works. Habitat, in partnership with the private developer Vintage Properties, expects to build 48 more starter homes on 3 acres of donated land on the west side of town. And amid staffing troubles exacerbated by local housing costs, the Flagstaff Unified School District is working with Habitat to develop land near its administration building for 12 starter homes specifically for faculty and staff.

More than just offering a temporary solution, Wolverton said, Habitat's new program gives people the opportunity for upward mobility. If the starter home pilot program is successful in Flagstaff, Habitat may expand it to other U.S. communities facing affordable housing challenges, he said.

For example, someone in a two-year transitional housing program can work and save up, buy a house through this program for $1,000 and then save $30,000 over the next three years, he said.

“You can go from homeless to $30,000 in your bank account in five years," he said.

Contact northern Arizona reporter Lacey Latch at llatch@gannett.com or on social media @laceylatch. Coverage of northern Arizona on azcentral.com and in The Arizona Republic is funded by the nonprofit Report for America and a grant from the Vitalyst Health Foundation in association with The Arizona Republic.

Juliette Rihl covers housing insecurity and homelessness for The Arizona Republic. You can reach her at jrihl@arizonarepublic.com or on Twitter @julietterihl. Coverage of housing insecurity on azcentral.com and in The Arizona Republic is supported by a grant from the Arizona Community Foundation.

This article originally appeared on Arizona Republic: Habitat for Humanity shifts model in Flagstaff to fight housing crisis