аЯрЁБс>ўџ EGўџџџFџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџьЅСq` №Пg bjbjqPqP 42::A%џџџџџџЄ       & & & 8^ $‚ Ѓ№Њ Њ "Ь Ь Ь Ї.ещ "$$$$$$$“hћ4H рЇЇррH  Ь Ь л]ŽŽŽрX Ь Ь "Žр"ŽŽ  ŽЬ ž p=`РmШ& 8XŽ"s0ЃŽ/І/Ž/ Ž”ѕИ­:Žчќу§ѕѕѕHH6XѕѕѕЃррррЄТ dТ       џџџџ  To: Senate Commerce Committee From: Luke Bell, KAR Director of Governmental Relations Date: February 13, 2008 Subject: SB 488 – Authorizing the Kansas Development Finance Authority to Issue Mortgage Revenue Bonds Chairperson Brownlee and members of the Senate Commerce Committee, thank you for the opportunity to appear today on behalf of the Kansas Association of REALTORSЎ (KAR) to offer testimony in opposition to SB 488. KAR has faithfully represented the interests of the 10,000 real estate professionals and over 700,000 homeowners in the State of Kansas for over 85 years. SB 488 would authorize the Kansas Development Finance Authority (KDFA) to issue mortgage revenue bonds for financing, acquiring and originating residential mortgage loans. While KAR strongly supports providing additional affordable housing opportunities for the citizens of Kansas, this legislation will unfortunately not solve any problems currently facing the state. Kansas Already Has an Existing Statewide Mortgage Revenue Bond Program; Program’s Distribution Rates Are Similar to Other States of Similar Size and Demographics Proponents of this legislation will assert that Kansas does not currently have a mortgage revenue bond program that services the entire state. Instead, these proponents have no doubt alleged that the administrators of the existing Kansas Local Government Statewide Housing Program (hereinafter “statewide housing program”) have failed to distribute loans across the state in an equitable manner. However, those statements are misleading and inaccurate. The existing statewide housing program administered by Sedgwick and Shawnee counties currently operates and has approved private industry lender partners in nearly every single county across the state. Over the last two years, the statewide housing program has provided nearly 4,300 low- and moderate-income Kansas families living in 67 counties with the funds to pay for downpayment assistance, closing cost assistance and below-market rate residential mortgages. Based on an analysis of the statewide housing program’s lending distribution rates over the last two years, it is clear that the statewide housing program does not currently make loans in every area of the state. However, these trends are not that uncommon when you compare the statewide housing program in Kansas to existing statewide mortgage revenue bond programs in other states of similar size and urban versus rural demographics. As a basic rule of thumb, urban areas experiencing relatively high rates of population growth are much more likely to have significantly larger numbers of first-time homebuyers than a rural county with low or even negative rates of population growth. When you overlay a map of the statewide housing program’s loan disbursements in 2007 on a map detailing the population loss of many rural counties in rural parts of the state from 1970 to 2000, you will see that the program is generally not as active in areas of the state experiencing low or negative rates of population growth. Rural Kansas Does Need New Affordable Housing Opportunities; However, Transferring Control of the Statewide Housing Program Will Not Create New Affordable Housing Opportunities in Rural Kansas The Kansas Legislature does have a legitimate role in promoting the development of new affordable housing opportunities in rural Kansas. However, simply transferring the administration of the statewide housing program from Sedgwick and Shawnee counties to KDFA will not create new demand for a first-time homebuyers program in areas of the state with limited or negative population growth. The major problem inhibiting the construction and development of new residential housing in rural Kansas is the high cost of new home construction. For the most part, it typically costs more to build a new home in rural Kansas than the home is worth in terms of the appraised value. When the cost of the new home substantially exceeds the appraised value, it is very difficult to obtain mortgage financing and property insurance for the new home. No matter what cost-cutting steps are taken by the developer of a new home, it is generally impossible to build a new home for less than $100 per square foot. A basic new 1,200 square-foot new construction home built in rural Kansas will generally cost around $115,000 to $125,000 to build. However, that same home may only have an appraised value of $80,000 to $90,000. As a result, the only proven way to increase the supply of affordable housing is to decrease the cost of construction for new homes whereby the cost of the new home does not exceed its appraised value. Fortunately, the Kansas Senate has already passed legislation that would take a substantial step in alleviating this valuation gap problem. SB 417, which passed the Senate on a vote of 35 to 5, would establish a new housing development block grant program to be administered by the Kansas Housing Resources Corporation (KHRC). This development block grant program would allow cities in rural Kansas to request grant funding to provide public infrastructure to new residential development. In our opinion, the development block grant program that would be created under SB 417 has the potential to be the most innovative new tool for the development of new affordable residential housing in the history of the public policy of this state. Providing adequate public infrastructure (sewer, water, arterial streets, etc.) to new residential developments is a daunting (and extremely expensive) obstacle to the creation of new affordable housing opportunities. When public infrastructure is provided to a new residential development, the developer or homebuilder is able to pass significant cost savings along to the eventual buyers of the new homes in the development. In turn, this has the potential to reduce the cost of building a new home by an estimated $25,000 to $35,000, which would decrease the difference between the cost and appraised value of the new home. Passage of SB 417 by the Kansas Legislature would be a substantial step to address this valuation gap problem in rural Kansas.     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