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HomeMy WebLinkAboutAgenda - 10-04-2016 - 7-b (added) - Downtown Housing Improvement Corporation, Inc.’s (DHIC) Request to Reduce OC’s 99 Year Affordability Period for the Greenfield Place Project to 40 Years. 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 4, 2016 Action Agenda Item No. 7-b (Proposed) SUBJECT: Downtown Housing Improvement Corporation, Inc.'s (DHIC) Request to Reduce Orange County's 99 Year Affordability Period for the Greenfield Place Project to 40 Years DEPARTMENT: Housing, Human Rights and Community Development ATTACHMENT(S): INFORMATION CONTACT: Long Term Affordability Policy Audrey Spencer-Horsley, Director, (919) 245-2490 PURPOSE: To consider a reduction of the County's long term affordability period as requested by Downtown Housing Improvement Corporation (DHIC), Inc. from 99 years to 40 years for the Greenfield Place project in the Town of Chapel Hill (Representatives from DHIC will be available during the meeting to address questions.). BACKGROUND: On May 5, 2015 the Board approved the Orange County FY 2015-2016 HOME Program Design recommended by the Orange County Consortium Program Review Committee. Participants in the HOME Consortium are Orange County and the Towns of Carrboro, Chapel Hill, and Hillsborough. Under the HOME Program Design, funds in the amount of $154,500 were approved for the Downtown Housing Improvement Corporation, Inc. (DHIC) to support the new construction of eighty (80) apartment homes known as Greenfield Place for households at less than sixty percent (60%) area median income (AM I). This is a Low Income Housing Tax Credit (tax credits) development and will be located on Legion Road in Chapel Hill on land to be donated by the Town of Chapel Hill. The County's Long Term Housing Affordability Policy establishes the acceptable strategies for ensuring long term affordability in affordable housing programs supported by County financial resources. Housing projects that are funded with Orange County HOME Program funds have been subject to the County's 99 year long term affordability period that includes recorded deed restrictions. DHIC has requested that the County reduce the 99 year affordability period to 40 years for the Greenfield Place development. DHIC has expressed that the 99 year requirement makes 2 financing challenging and creates issues for the tax credit investor in how it models the project for tax purposes. According to the agency, the 99 year affordability period may cause challenges in getting the equity closed in as timely a manner as needed. DHIC also stated that the 99 year affordability period could also create problems in the future when DHIC will need to get new financing to make capital improvements to the buildings to keep them in high quality condition for tenants. DHIC noted that the affordability requirement for the federal tax credits used in this project is 30 years. The Town of Chapel Hill, which is also a partner in this project, is requiring a 32 year affordability period. FINANCIAL IMPACT: There is no financial impact associated with this item. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable to this agenda item: • GOAL: FOSTER A COMMUNITY CULTURE THAT REJECTS OPPRESSION AND INEQUITY The fair treatment and meaningful involvement of all people regardless of race or color; religious or philosophical beliefs; sex, gender or sexual orientation; national origin or ethnic background; age; military service; disability; and familial, residential or economic status. • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. • GOAL: CREATE A SAFE COMMUNITY The reduction of risks from vehicle/traffic accidents, childhood and senior injuries, gang activity, substance abuse and domestic violence. • GOAL: ESTABLISH SUSTAINABLE AND EQUITABLE LAND-USE AND ENVIRONMENTAL POLICIES The fair treatment and meaningful involvement of people of all races, cultures, incomes and educational levels with respect to the development and enforcement of environmental laws, regulations, policies, and decisions. Fair treatment means that no group of people should bear a disproportionate share of the negative environmental consequences resulting from industrial, governmental and commercial operations or policies. RECOMMENDATION(S): The Manager recommends that the Board approve a 40-year housing affordability period for the DHIC, Inc. Greenfield Place project. 3 LONG TERM HOUSING AFFORDABILITY POLICY Purpose: This policy establishes the acceptable strategies fOr ensuring long-term affordability in all affordable housing programs supported by County financial resources. Target Population:. Homeownership programs are targeted to families with incomes at or below 80% of the HUD published area median income.. Rental housing programs arc targeted to families with incomes at or below 60% of the HUD published area median income. Definitions Affordable Housing--is defined as (1) owner-occupied housing which can be purchased for no more than 2.5 times to 3.0 times the total annual family income, or (2) rental housing for which the occupant pays no more than 30% of gross income for all housing costs including utilities. First-time homebuyer/Qualified buyer - A first-time homebu,yer for the purposes of this program is any low income household that has not owned a home within the past three (3) years including households living in manufactured housing not permanently affixed to a foundation, or owner-occupants of homes not feasible for renovation, I. Impact Fee R,eimbursement Program (existing policy last revised March 4, 1998.) A. Owner-Occupied Housing Any organization requesting impact fee reimbursement must certify in writing, that, for owner occupied housing, it will remain affordable to the anticipated beneficiary or beneficiaries for a period of a minimum of ninety-nine (99) years or longer depending upon the funding source. This requirement will be secured by a Declaration of Restrictive Covenants. 13. Rental Housing An organization requesting impact fee reimbursement for rental housing must certify that the property will remain affordable for ninety-nine (99) years. The rental housing certification must be secured by a Declaration of Restrictive Covenant requiring repayment to Orange County of the impact fee if the rental housing does not remain affordable during the period of affordability, which covenant will be further secured by a note and deed of trust. Evidence must be provided that agency and/or program guidelines are in place to assure affordability compliance. 4 Land Trust Model The Land Trust model utilizes a non-profit, community based organization known as a Community Land Trust (CLT) whose purpose is to acquire land and make it available to individual families and others, such as cooperatives, through a long-term lease for a term up to 99 years. The leaseholders or homebuyers do not hold title to the land - the title is retained by the CI,,T - they own the improvements or housing units/structures on the land. The benefits of this model include the ability of the CLT to provide first-time homeownership opportunities for the initial buyer as well as protection of affindability for future residents in the sale of buildings and other improvements on the land, The land lease gives the cur the first option to purchase the home, when and if it is sold., at an affordable price set by a resale fOrmula. The resale formula gives homeowners a fair return for their investment, while keeping the price of the housing units/structures affordable for future residents,. ILL New and Existing First-Time Homebuyer Programs A. Period of Affordability. All properties supported by County financial resources for the purpose of facilitating homeownership must remain affordable to families at or below 80% of median income for a minimum of ninety-nine (99) years from the date of initial assistance. B. Right of First Refusal A right of first refusal or right to purchase is accomplished by means of a Declaration of Restrictive Covenants on the property purchased by the first-time homebuyer. Any assignment, sale, transfer, conveyance, or other disposition of the Property or any part thereof whether voluntarily or involuntarily or by operation of law ("Transfer") shall not be effective unless and until the below-described procedure is Miowed. If the original homebuyer or any subsequent qualified homebuyer ("Buyer") contemplates a Transfer to a non low-income household as defined herein, Buyer shall send to Orange County and/or the sponsoring non-profit organization, not less than 90 days prior to the contemplated closing date of the Transfer, a "Notice of Intent to Sell." This Notice of Intent to Sell shall be accompanied by a copy of a completed, fully executed bona fide offer to purchase the Property on the then current North Carolina Bar Association "Offer to Purchase and Contract" form. If Orange County and/or the sponsoring non-profit organizations elects to exercise its said right of refusal, it shall notify the Buyer of its election to purchase within 30 days of its receipt of the Notice and shall purchase the Property or portion thereof within 90 days of the receipt of the "Notice of Intent to Sell." As between the County and the sponsoring non-profit organization, if both wish to and have the means to exercise the right of first refusal, the sponsoring non- profit organization shall have priority. 5 If neither Orange County nor the sponsoring non-profit organization advises the Buyer in a timely fashion of an intent to purchase the Property, then the Buyer shall be free to transfer the property in accordance with the Equity Sharing subsection of this policy. C. Equity Sharing. All financial contributions provided by the County will be provided as a deferred second loan secured by a forty (40) year Deed of Trust and Promissory Note, forgivable at the end o140 years. This Deed of Trust and Promissory Note shall constitute a lien on the Property; subordinate only to private construction financing or permanent first mortgage financing. The 99 year period of affordability for each individual housing unit will be secured by a declaration of restrictive covenants that will incorporate a right of first refusal that may be exercised by a sponsoring non-profit organization and/or Orange County., This declaration of restrictive covenants will be further secured by a deed of trust. The non-profit organization and/or the County as applicable retains full responsibility for compliance with the affordability requirement for assisted units throughout the term of affordability, unless affordability restrictions are terminated due to the sale of the Property to a non-qualified buyer. If the buyer no longer uses the Property as a principal residence or is unable to continue ownership, then the buyer must sell, transfer, or otherwise dispose of their interest in the Property only to a qualified homebuyer, a low-income household, one whose combined income does not exceed 80% of the area median household income by family size, as determined by the U.S. Department of Housing and Urban Development at the time of the transfer, to use as their principal residence. However, if the property is sold during the term of affordability to a non-qualified homebuyer to be used as their principal residence, the net sales proceeds (sales price less: 1) selling cost,. 2) the unpaid principal amount of the original first mortgage and 3) the unpaid principal amount of the initial County contribution and any other initial government contribution secured by a deferred payment promissory note and deed of trust) or "equity" will be divided 50/50 by the seller of the Property and the County. If the initial County contribution does not have to be repaid because the sale occurs more than .forty years after the County contribution is made, then the seller of the Property and the County will divide the entire equity realized from the sale, Any proceeds from the recapture of funds under this provision will be used to facilitate the acquisition, construction, and/or rehabilitation of housing for the purposes of promoting affordable housing. 6 IV. Policy Review. This policy will be reviewed by County staff and officials within two (2) years of the original approval date to ensure continued congruency with local affordable housing programs, Effective Date: April 3, 2000 Revised: „Tune 6,2000