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McKenzie County JDA Housing Development Subsidy Program Approves First Home

 

August 28, 2019 | View PDF

Conceptual drawing of approved home. (Photo submitted)

In June 2019, board members of the McKenzie County Job Development Authority (JDA) announced the start of a new program that is designed to help defray infrastructure costs for qualifying housing projects in McKenzie County. The program will prove to be beneficial to the citizens of McKenzie County who are affected by the high cost of living, by providing a development subsidy of up to $50,000 per single-family house in McKenzie County.

The program is called the JDA Housing Subsidy Program, and it was grown organically from within the McKenzie County JDA. Joel Brown, President of the JDA, explained, "We were challenged in 2018 by the McKenzie County Board and consulted with multiple entities in the public and private sphere regarding the program to provide additional insight. In December 2018, we began regular discussions through several special meetings, which ultimately led to the current program, which was released in June 2019."

Just a month after the program was established, the first house was approved by the designated JDA subcommittee. The approved house is a newly built structure and is located in the Stepping Stone Development, north of the Watford City Golf Course. "The original application required minor tweaks to meet the quality specifications of the program, which were agreed to, and the application was approved unanimously by the subcommittee. We will be following the process closely as this first house moves through the program," stated Brown.

So far, there has been a lot of conversation with interested participants in helping to educate potential home buyers on the program, and Brown expects to see the number of applicants to increase within the next couple months.

One of the most significant issues in McKenzie County is the lack of affordable single-family houses. "We have a staggering portion of our population currently living in apartments, which are near 99% occupancy. Our goal with the housing program was to incentivize the construction and sale of quality single-family houses that provide the next step for our population living in apartments to buy a house and put down some permanent roots in McKenzie County. The feedback we received from developers was that a quality single-family house with three beds, two baths, a two-car garage, etc. was typically able to be built and sold for $365,000 in McKenzie County, with approximately $50,000 of that amount attributed to infrastructure costs such as curb, gutter, sidewalk, utilities, and dirt-work," explained Brown. 

In McKenzie County, the Federal Housing Administration (FHA) loan limit is $314,827. "There is virtually no opportunity for McKenzie County home buyers to take advantage of the benefits of using an FHA loan. We designed this program to bridge the gap between the current market price and the FHA loan limit, so if a newly constructed house is approved for the JDA Housing program, the JDA will provide a conditional grant to offset the sale price down to the current FHA loan limit. The grant amount is capped at $50,000, and one of the qualifications is that the house must be sold at the current FHA loan limit net to the buyer after the grant is applied. For example, an approved new house could be sold to a buyer for $364,827. At the closing of that sale, the JDA would provide a $50,000 grant to bring the purchase price net to the buyer down to $314,827. That would provide the opportunity for the home-buyer to apply an FHA loan which requires a lower down payment and a lower credit score than a conventional house loan," added Brown. 

In order for a house to qualify for the program, it must be a newly constructed site-built house that meets the quality requirements detailed in the application process. A qualifying house must be located within the city limits of Watford City, Arnegard, Alexander, or in an approved County Subdivision. "Once the house is approved, the builder must meet certain scheduled milestones to ensure JDA funds are not tied up in construction projects that aren't diligently moving forward. At the closing of the sale, the JDA funds are transferred to the seller. The grant is conditional upon the buyer using the house as their primary residence for at least five years. If the buyer sells the house prior to that period, the grant amount would be paid back to the JDA out of the profits of the sale-this creates no risk for the home-buyer, but ensures they don't have the opportunity to flip the house for a quick profit at the expense of McKenzie County," said Brown.

The program is structured as a pilot program to test the concept and guide decisions on expanding or editing the program in future years. "For the pilot program, we have $1,000,000 from McKenzie County, but our anticipation is that a successful program will grow from that amount in years to come. It is important to note that over 95% of the revenues realized by McKenzie County are related directly to oilfield activity through gross production tax and property tax on oilfield infrastructure. Through this program, we are utilizing that funding in a way that supports that industry along with all of our community," said Brown.

The program is currently limited to $1,000,000 in funding for the program. Brown anticipates that this limit will impact 20 to 30 houses being bought and sold in McKenzie County in 2019 and stretching into 2020. 

Brown stated, "We offer a tremendous opportunity for our citizens in McKenzie County-high paying jobs, great schools, thriving community, constant quality of life improvements-and we find that people want to stay here. The issue with housing is the greatest bar to entry for someone looking to become a long term resident, and we are hopeful that a program like this will incentivize more construction to meet those needs." 

For more information about the Housing Development Subsidy Program, you can visit the website: https://econdev.mckenziecounty.net/Opportunities/Housing-Development-Subsidy.

 

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