Push For Affordable Guam Housing Could Cause Crisis: Expert

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Real estate group claims administration relying on outdated data

By Mark-Alexander Pieper

HAGÅTÑA, Guam (Pacific Daily News, July 16, 2013) – The governor's push to build 3,000 affordable housing units for Guam is based on outdated information and could cause a housing crisis, according to a local real estate expert.

If anything, the island currently has thousands more homes than the population can support, said Nick Captain, president of Captain Real Estate Group.

A "housing market crisis" could be looming, if the administration continues with its efforts, he reported.

Captain Real Estate yesterday issued its Guam Real Estate Market Update for June.

The governor has said that affordable housing is a priority for his administration and he has pushed for the construction and renovation of 3,000 affordable housing units in the coming years.

Much of the new housing construction is being coordinated through the Guam Housing and Urban Renewal Authority, which is using federal tax breaks to encourage developers to build affordable housing under the Low Income Housing Tax Credit Program.

A recently passed law gave $1.4 million to the Guam Housing Corporation's Housing Trust Fund for the First Time Homeowner Assistance Program. It's the most recent in a line of programs with the aim of making housing on Guam more affordable.

The problem with the government's plan is that adding that many more homes to the housing market is devaluing existing properties, Captain said in the report.

"The danger of a housing market crisis over the next few years is increasing," Captain said.

The value of homes has dropped significantly in the last six years, the report states. The company reported that the 2013 median price of a single-family residence declined by 12 percent from 2012, to $190,000 -- the lowest level since 2007.

The 2013 median price of a condominium unit also declined by 15 percent from 2012, to $128,000.

According to Captain, housing prices aren't dropping because of a lack of interested buyers. He said people this year actually are buying more single-family homes and condominiums than last year.

Captain in his report is critical of the Guam Housing Study, which points to the need for additional housing units.

The problem with the study, according to Captain, is that it was conducted when market conditions were vastly different.

There have been significant changes in population estimates that projected Guam's population to reach 170,000. The actual number is closer to 158,000, according to U.S. Census figures.

There also had been a collapse in the anticipated economic activity that was generated by the optimism and speculation associated with "what was once a $20-plus billion military build-up, but is now a consistent $0 in military construction authorized by Congress."

The government's aim is to give residents more options for affordable homes, said Michael Duenas, Guam Housing and Urban Renewal Authority executive director.

"A buyer's market, from our view, is good," Duenas said.

"We want to afford more options for lower-income families to be able to find affordable housing -- we're not looking at the families that can go out and purchase $400,000 homes."

Reducing the number of available homes for families will make it harder for people to make ends meet, Duenas said.

Creating a buyer's market is a long-term goal that could help to combat against poverty down the line. Duenas said appraisers also play a part in setting the market rates.

Captain, in his report, warns against that line of thought. He cites American Samoa, where his company recently completed multiple property studies, as an example.

"The locals were upset because they didn't qualify for the Low Income Housing Tax Credit program, so the U.S. government gave the equivalent in a grant to be distributed on a 10 equity/90 percent grant basis by the Development Bank," Captain said.

"The grant program, hailed by many as realizing the dream of affordable housing, devastated the local housing market."

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