HomeMy WebLinkAboutAgenda - 02-21-2017 - 7-b - Review and Amend the Orange County Housing Affordability Policy 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: February 21, 2017
Action Agenda
Item No. 7-b
SUBJECT: Review and Amend the Orange County Housing Affordability Policy
DEPARTMENT: Housing, Community Development and Human Rights
ATTACHMENT(S) INFORMATION CONTACT:
1) DRAFT Amended Housing Bonnie Hammersley, 919-245-2306
Affordability Policy (Pages 3-6) John Roberts, 919-245-2318
2) Input from First Group of Affordable
Housing Providers (Pages 7-10)
3) Input from Second Group of
Affordable Housing Providers
(Pages 11-14)
4) Input from First Group of Affordable
Housing Providers (Pages 15-20)
PURPOSE: To review suggested changes from the Affordable Housing Providers and consider
the recommended amendments to the Orange County Housing Affordability Policy.
BACKGROUND: At the November 15, 2016 BOCC meeting, the Board requested that staff
review the County's housing affordability policy and make a recommendation to amend the
policy based on recent activity and input from the Affordable Housing providers. 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
exceptions section supports the BOCC action on October 4, 2016 to approve the 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 as well as the November 15,
2016 action to approve the Community Home Trust (CHT) request for cancellation of a
declaration of restrictive covenants.
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 1):
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
2
In addition, all the input from the Affordable Housing providers is attached for the Boards review
and consideration. (See Attachment 2 — Pages 7-10, Attachment 3 — Pages 11-14, and
Attachment 4 — Pages 15-20)
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 consider
approving the amendments to the Orange County Housing Affordability policy as presented.
Attachment 1 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 2 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 3 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
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Attachment 4
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
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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.'
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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.
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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
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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.
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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