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A third additional factor likely to negatively affect market conditions in the City's target geography is future rate adjustments. The City's data indicates that, throughout the City, there are approximately 6,875 more Adjustable Rate Mortgages (ARMS) due to reset in the next few years. Many of these loans can potentiallyjump in interest rate from introductory teaser rates to an adjustable market rate, which will make it very difficult for many homeowners to make their payments. With the sharp increase of foreclosures on the market during the next few years coupled with further increased unemployment, the ability for the housing market to absorb these additional homes will decrease. While it may not impact the capacity of the private market to absorb foreclosed properties, overcrowding is a serious issue affecting neighborhood decline in Santa Ana's target geography. Due to a mismatch between income and housing price increases over the last several years and our community's historical lower wages, families have resorted to doubling up with other families in one residence to decrease their housing cost burden. Another reason for overcrowding in Santa Ana is larger family sizes. According to the 2000 Census, the average Santa Ana household size is 4.7 persons; the largest in the county. The result is that, according to the 2000 Census, at least 50 percent of Santa Ana households live in overcrowded conditions that damage housing units, disrupt family life, and make neighborhoods less attractive to potential homebuyers. It also manifests itself in dilapidated infrastructure, increased numbers of illegal additions and garage conversions. A fourth factor that contributes to market conditions and neighborhood decline is the age of existing housing in Santa Ana's target geography. Currently there are 75,856 housing units located throughout the City. Approximately 81 percent of the housing stock was built before 1980. While Santa Ana residents work hard to keep their homes in good condition, homes require repairs as they age, and due to the lower incomes of residents they do not always have the financial resources to pay for such repairs themselves. The sight of older homes in need of repairs, and possibly harboring deteriorated lead based paint, can and does negatively impact neighborhood property values, homeowner willingness to make necessary and expensive repairs, and neighborhood attractiveness to potential homebuyers. The age of Santa Ana housing is associated with other potential problems. HUD and the U.S. Environmental Protection Agency have determined that homes built before 1978 often have NSP 2 Substantial Amendment - City of Santa Ana Page 9 29A -11