The Not-So-Silent Second

Remember when the rule of thumb was your house should cost three times your annual income? In Ventura today, the average house costs ten times the average household income. If you already own a house, you’re probably okay. But if you’re a young family – or you live somewhere else and you get a job here – it’s almost impossible to buy a house.

This is not only a problem for families – it’s also a problem for businesses. If the people who work for you can’t afford to buy a house in the community where you’re located, they’ll probably leave. At best, they’ll commute long distances, creating traffic congestion and environmental damage.

It’s a problem for small businesses like the one I run, which has seven employees. It’s also a problem for big organizations that employ hundreds of people, like the City of Ventura. The truth of the matter is that our community isn’t going to be competitive – and organizations large and small can’t do their job well – if people can’t afford to live in Ventura.

Last Monday night, the City Council unanimously approved one of the most important new initiatives to come forth since I was elected almost four years ago: the Employee Housing Assistance Program. It’s a simple, low-risk, and inexpensive way for the city to help city employees buy houses here in Ventura – an important element in “recruiting and retaining” good city employees. Just as important, it lays the foundation for a communitywide effort that would allow all employers – large and small – to do the same thing. Already, our city’s Housing Authority and Community Memorial Hospital have expressed interest in joining the program.

The concept is deceptively simple. You might call it a “not so silent” second mortgage. An employee qualifies for a mortgage. The employer puts up the collateral for an interest-only second mortgage and then pays the interest. The bottom line: The homebuyer’s monthly payment on a $450,000 mortgage debt is cut from $3,000 to $2,000 a month.

Too good to be true? Not really. Here are a few more details:

-- The employer isn’t really out the cost of the mortgage. It’s only collateral. The employer pays the interest on the second mortgage, but that cost is defrayed by the fact that the employer can still invest the cash. When the house is sold or refinanced, the employer gets the money back – with the interest.

On Monday night, the City Council approved $2 million for the program. But that’s not tax money the city is spending. That’s money the city already has in its investment portfolio that has simply been pledged against the employee’s mortgage. The $2 million will still be in the city’s investment portfolio, accumulating interest. The net annual cost to an employer like the city is estimated to be $3,000.

The program can provide a lot of help even for people who don’t make a lot of money. Virtually all full-time employees at the city are eligible for a second mortgage of $150,000.

At the city government, the lowest-paid full-time employees make about $13 to $14 an hour. You may think somebody making that kind of money would never be able to afford a house. But if two working adults make that amount, their household income is somewhere around $55,000 – enough to qualify for a mortgage of around $275,000-$300,000. Add the $150,000 second, and even people with modest incomes are back in the housing market.

And best of all: This program doesn’t have to be limited only to city employees. It can be opened up to anybody whose employer is willing to participate in the program. Right now the program will be run by the city, but as more and more employers join, it will probably be spun off into a separate entity.

The city has been in discussions with many large employers about participating – not just Community Memorial and the Housing Authority but also the county, Ventura College (which spoke in favor of the idea Monday night), Patagonia, and the school district. We’ve also been working with the Chamber of Commerce on ways to bring this program to small employers as well.

That’s good news for small business owners, like me. In my day job, I am fortunate to attract some of the most talented and promising young people in the country to work for me. But they almost always leave, usually because of housing price. I’d like to find ways to keep them in Ventura long-term, and as an employer I look forward to working with the Chamber on being a small-business participant in this program.

Thanks to Mayor Morehouse and especially Councilmember Neal Andrews for promoting and crafting the program as members of the Workforce Housing Ad Hoc committee. This is the most important step we’ve ever taken to “recruit and retain” good employees – not just at City Hall, but everywhere in our city.