The Workforce Housing Program is a shared appreciation program where a portion of the accrued equity in the workforce housing unit will belong to the City of Virginia Beach upon the sale or transfer of the unit.
At the closing, the developer will sell the workforce housing unit to an eligible buyer, and the eligible buyer will pay the developer a discounted sales price. The eligible buyer will secure a first mortgage, and the city will provide a second mortgage in the amount of the workforce housing discount. For example:
| Fair Market Value of the WFH Unit |
$240,000.00 |
| 25% WFH Discount (Developer’s obligation to City) |
- 60,000.00 |
| Discounted Sales Price (Amount due to Developer) |
$180,000.00 |
| |
|
| Initial Sales Price to Eligible Buyer |
$240,000.00 |
| Eligible Buyer to Provide Own Financing for |
$180,000.00 |
| City Holds Second Mortgage (25% WFH Discount) |
$ 60,000.00 |
The city’s second deed of trust (mortgage) carries a 0% interest rate, requires no monthly payments, and is due and payable to the city upon resale or transfer of the unit. The city’s second deed of trust secures repayment of the loan made by the city in the amount of the WFH Discount, plus a proportionate share of the net appreciation of the unit. For example, if the amount of the second deed of trust equals 25% of the initial sales price, the amount of shared appreciation owed to the city will be 25% of the net appreciation of the unit. The WFH Discount a buyer receives may vary (between 1% and 25%). Net appreciation is determined by subtracting the following items from the resale price of the workforce housing unit:
- Original principal amount of the first mortgage loan;
- The principal amount of the city’s second deed of trust note;
- Closing costs actually paid when the owner/seller initially purchased the unit;
- The owner/sellers down payment;
- The appraised value of any capital improvements approved by the city, and
- The reasonable and customary sales commission paid by the seller.
To see an example of how to calculate the Shared Net Appreciation due to the city upon resale, click
here