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HomeMy WebLinkAboutAgenda - 02-16-2017 - 1 - Review and Amend the Orange County Housing Affordability Policy 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: February 16, 2017 Action Agenda Item No. 1 SUBJECT: Review and Amend the Orange County Housing Affordability Policy DEPARTMENT: Housing, Community Development and Human Rights ATTACHMENT(S) INFORMATION CONTACT: A. DRAFT Amended Housing Bonnie Hammersley, 919-245-2306 Affordability Policy (Pages 3-6) John Roberts, 919-245-2318 B. Input from First Group of Affordable Housing Providers (Pages 7-10) C. Input from Second Group of Affordable Housing Providers (Pages 11-14) D. Input from First Group of Affordable Housing Providers (Pages 15-20) PURPOSE: To review and discuss changes to the Orange County Housing Affordability Policy and consider suggested changes from the Affordable Housing Providers and the County Attorney. BACKGROUND: At the November 15, 2016 BOCC meeting, the Board requested that staff schedule the County's housing affordability policy for discussion at a 2017 work session. The County Attorney drafted an exceptions section in the policy to provide flexibility in the affordability term and the restrictive covenants as well as the addition of execution of agreement. The draft policy was shared with the Affordable Housing providers for their input. Staff reviewed the providers input and included some of the suggestions in the amended policy. The following recommendations are included in the amended policy (Attachment A — Pages 3- 6): 1. Change the target population numbers to percentages for consistency with the Affordable Housing ranking criteria. 2. Added language to reflect the current practices 3. Edited Land Trust Model to reflect the Community Home Trust; 4. Added Exceptions Section 5. Added Execution of Agreement In addition, all the input from the Affordable Housing providers is attached for the Boards review and consideration. (See Attachment B — Pages 7-10, Attachment C — Pages 11-14, and Attachment D — Pages 15-20) 2 FINANCIAL IMPACT: This abstract is to provide information to the Board of County Commissioners. As such there is no additional financial impact. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this item: • GOAL: ENABLE FULL CIVIC PARTICIPATION Ensure that Orange County residents are able to engage government through voting and volunteering by eliminating disparities in participation and barriers to participation. RECOMMENDATION(S): The Manager recommends that the Board review and discuss the information and provide direction to staff on amending the Orange County Housing Affordability policy. Attachment A 3 DRAFT Amended Housing Affordability Policy ATTACHMENT-- 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 are 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 forwhich the monthly housing costs (including PITI, HOA dues and required fees) do not exceed 30 percent of the gross monthly income of the purchaser(s), can be purchascd for no more than 2.5 times to 3.0 times the total annual family income, or (2)rental housing forwhich the occupant pays no more than 30%of gross income for all housing costs including utilities. First-time homebuyer/Qualified buyer - A first-time homebuyer for the purposes of this program is any low or moderate -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. The first-time homebuyer restriction may be waived after a home is available for sale for 90 days. Impact Fee Reimbursement 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. B. 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 requilng 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 seemed 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 II. Land Trust Model The Land Trust model utilizes a non-profit, community based organization known as a Community Land Home Trust (CH-LT) 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 CLT. The ChHT conveys a leasehold interest in the land and improvements to the homebuyers (lessees) they own the improvements or housing units/structures on the land. The benefits of this model include the ability of the CLT to retain the affordability of the home over successive generations of home buyers. - . _- •-- _ --_ .. - - - ---- - - - -- . - _ _ protection of affordability for future residents in the sale of buildings and other improvements „n the land! _The land lease gives the CLT 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. III. 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 be sold to households remain affordable to families at or below 80% of area median income for a minimum of ninety-nine (99) years from the date of initial assistance-subsequent resales are allowable to households earning up to 115%of area median income. 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 followed. If the original homebuyer or any subsequent qualified homebuyer ('Buyer") contemplates a Transfer to a unqualified 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 wits 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 of 40 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 inc porate 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, i.e., 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. Exceptions A. The Board of Commissioners may reduce the required ninety-nine (99) year affordability restriction to forty (40) years when: i. The County's total financial contribution to the project is less than fifteen percent (15%) of the total project cost; or ii. The developer agrees to and develops at least thirty-five percent (35%) of the project units as affordable units. B. The Board of Commissioners may authorize the cancellation of restrictive covenants upon a determination that: i. A structure is in a state of disrepair such that the estimated cost to repair the structure exceeds one hundred percent (100%) of the value of the structure; and ii. Redevelopment of the property is cost prohibitive; and iii. Sale of the property is substantially unlikely to occur if the restrictive covenants are not cancelled. C. The Board of Commissioners authorizes the County Manager to approve removal of properties from the affordable housing inventory in accordance with the April 21, 2015 Interlocal Agreement for the Community Home Trust. D. In the event an application for exception does not meet all of the required elements to grant an exception pursuant to IV A— D above the Board of Commissioners may examine each application individually and ascertain whether the circumstances justify the granting of an exception. In such event the Board of Commissioners may grant an exception upon making findings of fact setting out all the relevant factors that reasonably and equitably justify such an exception to this policy. V. Execution of Agreements The County Manager is authorized to sign all documents necessary to ensure the long term affordability of affordable housing projects using County financial resources. VI. 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: June 6, 2000 Attachment B 7 Input from First Group of Affordable Housing Providers ATTACHMENT-- 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. [Given the high cost of housing in the county, and relatively low AMIs, arguably locally funded homeownership programs should be allowed to target a slightly higher AMI range, perhaps up to 100% AMI. I do agree that prioritizing lower incomes is important.) Rental housing programs are 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 [This seems limiting and alsol[su] not very responsive to changes in programs and market conditions. E.g., a Habitat home comes with a 0% mortgage so can be priced higher than 3x income and still very affordable, while other programs' affordability varies with interest rates over time. I'd suggest using a 30% gross income standard like with rental or similar approach), or(2)rental housing forwhich the occupant pays no more than 30%of gross income for all housing costs including utilities. First-time homebuyer/Qualified buyer - A first-time homebuyer 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 Reimbursement 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. B. 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 requilng 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 seemed by a note and deed of trust. Evidence must be provided that agency and/or program guidelines are in place to assure affordability compliance. 8 II. 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 CLT - 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 affordability for future residents in the sale of buildings and other improvements on the land. The land lease gives the CLT 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. III. 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 followed. 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 sponsothring 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. 9 If neither Orange County nor the sponsoring non-profit organization advises the Buyer in a timely fashion of wits 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 of 40 years. This Deed of Trust and Promissory Note shall constitute a lien on the Property; subordinate only to private construction financing or permanent first land second?l mortgage financing. The 99 year period of affordability for each individual housing unit will be secured by a declaration of restrictive covenants that will inc0lporate 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, i.e., 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 astheir 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. [Two comments: 1 ) This is a bit confusing and would benefit from an example. 2) What's the logic for giving a seller who violates the covenant 50% of profits? Seems it could incentivize sales if rising market prices make it financially attractive.11f 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. 10 IV. Exceptions A. The Board of Commissioners may reduce the required ninety-nine (99) year affordability restriction to forty (40) years when: i. The County's total financial contribution to the project is less than fifteen percent (15%) of the total project cost; or ii. The developer agrees to and develops at least thirty-five percent (35%) of the project units as affordable units [I'm not sure I follow how this would work in practice. I presume it is supposed to focus on market rate projects that include affordable units but it doesn't read that way and seems confusing'. B. The Board of Commissioners may authorize the cancellation of restrictive covenants upon a determination that: i. A structure is in a state of disrepair such that the estimated cost to repair the structure exceeds one hundred percent (100%) of the value of the structure; and ii. Redevelopment of the property is cost prohibitive; and iii. Sale of the property is substantially unlikely to occur if the restrictive covenants are not cancelled. C. The Board of Commissioners authorizes the County Manager to approve removal of properties from the affordable housing inventory in accordance with the April 21, 2015 Interlocal Agreement for the Community Home Trust. D. In the event an application for exception does not meet all of the required elements to grant an exception pursuant to IV A— D above the Board of Commissioners may examine each application individually and ascertain whether the circumstances justify the granting of an exception. In such event the Board of Commissioners may grant an exception upon making findings of fact setting out all the relevant factors that reasonably and equitably justify such exeption to this policy. V. 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: June 6, 2000 Attachment C 11 Input from Second Group of Affordable Housing Providers ATTACHMENT-- 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[ri]. Target Population: Homeownership programs are generally targeted to families with incomes at or below 80% of the HUD published area median income. However, some nonprofit providers also sell a limited number of homes to households over 80% AMI, but no higher than 115% AMI. Rental housing programs are 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 for which the monthly housing costs (including PITI, HOA dues and required fees) do not exceed 30 percent of the gross monthly income of the purchaser(s).which can be purchased for no more than 2.5 times to 3.0 times the total annual family income, or(2)rental housing forwhich the occupant pays no more than 30%of gross income for all housing costs including utilities. First-time homebuyer/Qualified buyer - A first-time homebuyer for the purposes of this program is any low or moderate 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. As previously agreed, the first-time homebuyer restriction will be waived after a home is available for sale for 90 days. As a result, a Qualified buyer is not necessarily a first- time homebuyer. I. Impact Fee Reimbursement 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. B. 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 requilng 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 seemed[r2] by a note and deed of trust. Evidence must be provided that agency and/or program guidelines are in place to assure affordability compliance. 12 II. 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 CLT. The CLT conveys a leasehold interest in the land and improvements to the homebuyers (lessees) they own the improvements or housing units/structures on the land. The benefits of this model include the ability of the CLT to retain the affordability of the home over successive generations of home buyers.- protection of affordability for future residents in the sale of buildings and other improvements on the land The land lease gives the CLT 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. III. 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 be sold to households remain affordable to families at or below 80% of area median income. -Ffor a minimum of ninety-nine (99)years from the date of initial assistance-subsequent resales are allowable to households earning up to 115% of area median income. 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 followed. If the original homebuyer or any subsequent qualified homebuyer ('Buyer") contemplates a Transfer to an unqualified 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 sponsothring 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. 13 If neither Orange County nor the sponsoring non-profit organization advises the Buyer in a timely fashion of wits 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 of 40 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[r3]. The 99 year period of affordability for each individual housing unit will be secured by a declaration of restrictive covenants that will inc0lporate 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 tru4r4]. 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,as defined herein i.e., a low - - t!°. e _ -_ median household income by family size, as determined by the U.S. Department of -e_ • _ _•e - e-• 0- . - __•--- _ -- --- _ -- _ - , 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 Count [r5]. 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. 14 IV. Exceptions A. The Board of Commissioners may reduce the required ninety-nine (99) year affordability restriction to forty (40) years when: i. The County's total financial contribution to the project is less than fifteen percent (15%) of the total project cost; or ii. The developer agrees to and develops at least thirty-five percent (35%) of the project units as affordable unit4r6]. B. The Board of Commissioners may authorize the cancellation of restrictive covenants upon a determination that: i. A structure is in a state of disrepair such that the estimated cost to repair the structure exceeds one hundred percent (100%) of the value of the structure; and ii. Redevelopment of the property is cost prohibitive; and iii. Sale of the property is substantially unlikely to occur if the restrictive covenants are not cancelled. C. The Board of Commissioners authorizes the County Manager to approve removal of properties from the affordable housing inventory in accordance with the April 21, 2015 Interlocal Agreement for the Community Home Trust. D. In the event an application for exception does not meet all of the required elements to grant an exception pursuant to IV A— D above the Board of Commissioners may examine each application individually and ascertain whether the circumstances justify the granting of an exception. In such event the Board of Commissioners may grant an exception upon making findings of fact setting out all the relevant factors that reasonably and equitably justify such exeption to this policy. V. 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: June 6, 2000 15 Attachment D Input from Third Group of Affordable Housing Providers ATTACHMENT-- 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. [Given the high cost of housing in the county, and relatively low AMIs, arguably locally funded homeownership programs should be allowed to target a slightly higher AMI range, perhaps up to 100% AMI. I do agree that prioritizing lower incomes is important.1 Rental housing programs are 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 [This seems limiting and alsol[su] not very responsive to changes in programs and market conditions. E.q., a Habitat home comes with a 0% mortgage so can be priced higher than 3x income and still very affordable, while other programs' affordability varies with interest rates over time. I'd suggest using a 30% gross income standard like with rental or similar approachl, or(2)rental housing forwhich the occupant pays no more than 30%of gross income forall housing costs including utilities [CASA finds this "definition" problematic. We are not able in all circumstances to customize every rent to 30% of the person's income, in particular because incomes fluctuate. For example, LIHTC projects have set rents, and this language seems to either a) disqualify certain very low-income tenants who, by renting the unit, would be paying more than 30% of their income, which is not ideal but we want people to have the choice to be slightly cost-burdened as opposed to being homeless or living in unsafe housing or b) provide a way for any tenant who pays more than 30% to claim CASA is violating this policy. Neither are outcomes that we want. The 30% rule has always been a rule of thumb — not a hard and fast policy. I recommend including some softer language here (maybe replace "no more than 30%" with "approximately 30% or less")- First-time homebuyer/Qualified buyer - A first-time homebuyer 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 Reimbursement 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 16 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. B. 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 requilng 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 seemed by a note and deed of trust. Evidence must be provided that agency and/or program guidelines are in place to assure affordability compliance [CASA strongly recommends that the period of affordability for rental property should expire with the debt. 99 years is not a realistic time frame for the life of rental property without significant reinvestment. The affordability restrictions discourage that and hamper a non-profit's ability to sell and re-invest the proceeds.' 17 II. 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 CLT - 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 affordability for future residents in the sale of buildings and other improvements on the land. The land lease gives the CLT 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. III. 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 followed. 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 sponso g 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. 18 If neither Orange County nor the sponsoring non-profit organization advises the Buyer in a timely fashion of wits 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 of 40 years. [CASA instead recommends forgiving the debt over the life of the loan (Durham does this—i.e. 1140th forgiven each year), or after the first 10 year! on an accelerated basis like HUD does (I.e. 1130th forgiven in years 11-40). This offsets the impact of depreciation on the value of the asset.] • This Deed of Trust and Promissory Note shall constitute a lien on the Property; subordinate only to private construction financing or permanent first second?l mortgage financing._ The 99 year period of affordability for each individual housing unit will be secured by a declaration of restrictive covenants that will inc0lporate 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, i.e., 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 astheir 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. [Two comments: 1 ) This is a bit confusing and would benefit from an example. 2) What's the logic for giving a seller who violates the covenant 50% of profits? Seems it could incentivize sales if rising market prices make it financially attractive.11f 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. [First, this equity sharing language here does 19 not specifically cover rental housing, so CASA recommends including that for clarity. Second CASA urges the County to lift the equity recapture in rental housing where the property is held by a non-profit that is dedicated to the mission of promoting affordable housing. There is value to allowing local nonprofits to build equity and capacity in order to do more and better work in the County. CASA recommends that sale proceeds be able to be retained by the nonprofit owner, wish the condition that they be earmarked for future development. A time limit could be put on the funds for actually spending them on a development project.. say within 5 years of the sale, after which time the 50/50 recapture could be put into effect.] 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. 20 IV. Exceptions A. The Board of Commissioners may reduce the required ninety-nine (99) year affordability restriction to forty (40) years when: i. The County's total financial contribution to the project is less than fifteen percent (15%) of the total project cost; or ii. The developer agrees to and develops at least thirty-five percent (35%) of the project units as affordable units [I'm not sure I follow how this would work in practice. I presume it is supposed to focus on market rate projects that include affordable units but it doesn't read that way and seems confusing. B. The Board of Commissioners may authorize the cancellation of restrictive covenants upon a determination that: i. A structure is in a state of disrepair such that the estimated cost to repair the structure exceeds one hundred percent (100%) of the value of the structure; and ii. Redevelopment of the property is cost prohibitive; and iii. Sale of the property is substantially unlikely to occur if the restrictive covenants are not cancelled. C. The Board of Commissioners authorizes the County Manager to approve removal of properties from the affordable housing inventory in accordance with the April 21, 2015 Interlocal Agreement for the Community Home Trust. D. In the event an application for exception does not meet all of the required elements to grant an exception pursuant to IV A— D above the Board of Commissioners may examine each application individually and ascertain whether the circumstances justify the granting of an exception. In such event the Board of Commissioners may grant an exception upon making findings of fact setting out all the relevant factors that reasonably and equitably justify such exeption to this policy. 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: June 6, 2000