Loading...
HomeMy WebLinkAboutAgenda - 04-04-2000-9aORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: Apri14, 2000 Action Agenda Item No. ,,. q- 4 SUBJECT: Lon -Term Housing Affordability Policy DEPARTMENT: Housing/Community Dev. PUBLIC HEARING: (Y/1~ No ATTACHMENT(S): INFORMATION CONTACT: Tara L. Fikes, ext 2490 Long Term Housing Affordability Policy Letter from EmPOWERment, Inc. Comparison Statement TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 6$$-7331 Mebane 336-227-2031 PURPOSE: To approve along-Term Housing Affordability Policy that will ensure long-term housing affordability with County affordable housing projects. BACKGROUND: On December 7, 1999, the County Attorney and the Housing/Comrnunity Development Director presented a report regarding long-term housing affordability that included several potential strategies that could be utilized with future County affordable housing projects. Since that time, the Board has indicated an interest in adopting specific strategies for ensuring long-term affordability for the County's programs. The attached Policy includes specific strategies that may be utilized for both rental and owner-occupied affordable housing projects that receive fmancial contributions from the County. These strategies are designed to promote the Commissioners' interest in retaining these properties in the County's affordable housing inventory. After the Board's initial discussion, the local non-profit, EmPOWERment, Inc., expressed concerns regarding the equity sharing proposal included in the attached Policy. Their concerns are detailed in the attached February 7, 20001etter. In an effort to illustrate the details of the equity sharing proposals, included with this abstract is a "Comparison Statement" comparing the County's current equity sharing proposal and the one proposed by EmPOWERment. FINANCIAL IMPACT: None. RECOMMENDATION (S): The Manager recommends approval of the Long Term Housing Affordability Policy. Lon$-Term T3ousing Affordabilit.~PolicX P r se: 2 This policy establishes the acceptable strategies far ensuring long-term affordability in all affordable housing programs supported by County financial resources. Homeownership programs are targeted to families with incomes at or below $0% 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 which can be purchased for no more than 2.5 times to 3.0 times the total annual family income, or (2) rental housing for which the occupant pays no more than 30% of gross income for all housing costs including utilities. First-time homebuyer/Qualified buyer - A first-time 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. Fact Fee Reimbursemen~~~Qgram (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 twenty (20) 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 requiring repayment to Orange County of the impact fee if the rental housing does not remain affordable during the period of affordability, which covenant will be further secured by a note and deed of trust. Evidence must be provided that agency and/or program guidelines are in place to assure affordability compliance. II. Land Trust Model The Land Trust model utilizes anon-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 along-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 and housing ownership and 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 Homebu, e~grams A. Right of First Refusal A right of first refusal or right to purchase is accomplished by means of a Declazation 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 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. If neither Orange County nor the sponsoring non-profit organization advise the Buyer in a timely fashion of an intent to purchase the Property, then the Buyer shall be free to Transfer the property in accordance with this Section. S. Equity Sharing 4 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 period of affordability will be 99 years and each individual housing unit will be secured by a Declaration of Restrictive Covenants that will incorporate a right of first refusal that may be exercised by a sponsoring non-profit organization and/or Orange County. 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 anon-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., aloes-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 anon-qualified homebuyer to be used as their principal residence, the net sales proceeds (sales price less selling costs and 1$` mortgage payoff) or "equity", after repayment, if required by the Note and Deed of Trust, of the initial County contribution, 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. Effective Date: Apri13, 2000 5 Ens r~er~# INC. Reclaiming the POWER of our Communifies February 7, 2000 ~oneec o~_oi~crc~ Y+v~m S Foushee, Presideae { ~ 000 ~~ ~~, ~~ r ~ V Ms. Tara F'ki es F 1 s~~y ~a~, v~ Praidanc Dkector of Housing and Comrmmity Developm~t ye~s~p Orange County Maethew Feaaington, Seereeuy ~ 81, g 1 r~dsa~-ea~ I~llsborough, NC 27278 ~ane Sxin, Tneasueee C,bc<.•, Cora/mwr Saiv Fmoidatioir ~'M Br°°~ Dear ]VIs. Fakes: REA.LIl7H s~ s~~ ~~~ We appreciate your contimied support of our efforts to preserve local '~°" B'm"`~` Z.b~d St,.d Nag6lo,~oad Asroaufion neighborhoods and expand affordable housing for working famlies. In just two years we have helped 22 famn7ies to purchase theQ first homes, and we currently x~ ~b~ x~.sx~aa. have nine properties under development. We have buds a strong track record of ~~ ~ accountably, production and commmmity control rya s~a~b~. ~,m >~ I am writing on behalf of the Board to express our complete dismay at the County's ~~ .gyp. ~ unfair and disproportionate equity sharing proposals. As members of the Board and ~~ staff explained, EmPOVVERment, Inc. works with low income, first-time buyers with incomes averaging about SO°l~o of area median. For these families Mme, ~~ homeownership is not just a safe place to live, but also a chance to begin building n~ wealth through the equity in their homes. Lake the rest of us, this equity is ava0able M~~ ~;~n for home repairs, coIlege education or financial crises. la fact, studies have shown ~"""'°~' ~°"'~'~'` spar that over 70°yo of the assets held by people of color is in their homes. Severely -rte. c~•« curtailing the ab'y to bufid wealth on the single largest investment in a famd<1y's life ~'°'"~ is both unfair and counter-productive. Ifthese e~ead to the HoME Y_ F~s~ program, the Commissioners wfil be moving toward the unfommate goal of creating ~~ °~ two classes of homeowners ion Orange County. those rich enough to buy m. an . J ~ mfiated market, and the rest of us who would have to sacrifice our farmilies' economic security for the right to hve in the community we work in. ,I trust this is ~~ not the County's interion. ~os-a vvesc tt~«~y s~eee ExnPOWERmeat, Inc. respects the County's com®otment to protecting pubfic c~.~, rrc z~sio Phanc l~i~! ~~-sr~n mv~~ and maintainin lon term affordab ' and we have ah~eady designed g g- ~Y~ F~ c~l~ ~~-0~io our program to promote these goals. We require that families grant us a right of `~°""`~ fnrst refiisal, and we secure any subsidy with a deed of trust to ensure that these fiords are returned if the ~Y sells their home. Additionally, we require that they repay a percentage of the appreciation on their home based upon the amount of subsidy received to the total appraised value of the home. We believe that this 6 solution fairly balances the goals of protectiug pubfic investment, promoting long-term affordability and helping working families build wealth and security. I am attaching a description of how our program works using the Fine I~i71 project as au example. We sincerely hope that the Commissioners will allow us to continue with a model that protects the interests of the County and our homebuyers. We look forward to meeting with you or the Commissianers to discuss our concerns. Sincerely, ~,G~aw a0. ~! Vivian S. Foushee President W C i+ V _ ~. ~ ~ C Q.' as o m Qa ~o ag N ~/1 O ~--~ ~ ~ bR 64 a~ U a w a 8 ~ ~ b ~ '~ ~. ~ $ s $ ~ ~ CV t+ ~--~ N N ~ ~. a a a .~ a a ~. e e Q a .~ N ~t h .~ 00 O ~u~ ~ ~ ~N~ ~ ~ :~ ~' s ~~ ~~~, ~.'~~ ~~ ~~ ..., cn e ~. a, 8 COMPARISON~SHEE~QUITY SHARING PROPOSALS Situation I The property is sold during the term of affordability by the original buyer to another qualified homebuyer, i.e., aloes-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. County Proposal No equity sharing is required. The original dwelling unit remains in the affordable housing stock. EXAMPLE: This family purchased this home in 1995 for a purchase price of $120,000. The family financed this purchase in the following manner. Cash downpayment $ 1,000 First Mortgage $ 89,000 Deferred Loan/County ~ 30,000 Total $120,000 In 2000; the family decides to sell the home at a price of $130,000. Property Sales Price: $130,000 First Mortgage Payoff $(8'7,000) Deferred Loan to be assumed by the next buyer. ~ 00,0001 Proceeds to the Seller $ 13,000 In this example, the seller must sell to a low income family, thus, the property sales price less the deferred loan must make the property affordable to the next buyer. Property Sales Price: $130,000 Deferred Loan to be assumed by the next buyer. ~ (,30.0001 $100,000 The property must be affordable at $140,000 or the sales price must be reduced to make it affordable for the next buyer. When the property is sold to a qualified buyer, the seller retains 100% of the appreciation (proceeds from the sale). The property remains in the affordable housing stock of the community. 9 EmPOWERment Proposal Shared appreciation upon the sale of the home, based upon the proportion of the public subsidy to the total appraised value of the home. The original dwelling unit remains in the affordable housing stock. EXAMPLE: This family purchased this home in 1995 for a purchase price of $120,000. The family financed this purchase in the following manner. Cash downpayment $ 1,000 First Mortgage $ 89,000 Deferred Loan/County X0.000 Total $120,000 In 2000, the family decides to sell the home at a price of $130,000. Property Sales Price: $130,000 First Mortgage Payoff $ (87,000) Deferred Loan to be assumed by the next buyer. X30.0001 Net Proceeds $ 13,000 When the property is sold to a qualified buyer, the seller shares the proceeds of the sale (equity) in proportion to the total cost of home at the initial purchase. Continuing with this example, the original sales price was $120,000 and the $30,000 deferred loan represents 25% of the total appreciation. Applying the "proportionate share" formula, 25% of the proceeds or $3,250 would be repaid to the County and the remainder, $9,750 would be retained by the seller. 10 Situation II The property is sold during the term of affordability to anon-qualified homebuyer to be used as their principal residence. County Proposal The equity, after repayment of the initial County contribution, will be divided SO/50 by the seller of the Property and the County. The original dwelling unit does not remain in the affordable housing stock. EXAMPLE: This family purchased this home five years ago for a purchase price of $120,000 five years ago. The family financed this purchase in the following manner. Cash downpayment $ 1,000 First Mortgage $ 89,000 Deferred Loan/County ~ 30,009 Total $120,000 In 2000, the family decides to sell the home at the market value of $130,000. Property Sales Price: $130,000 First Mortgage Payoff $ (87,000) Deferred Loan Repayment $ 00,0001 Proceeds to the Seller $ 13,000 In this example, the seller does not sell to a low income family, the County recovers the initial $30,000 investment, and, the buyer and the County share the net proceeds of the sale 50/50. In this example, the County would receive the initial investment of $30,000 and $6,500 in equity payment. The seller would receive $6,500. 11 EmPOWERment Proposal Shared appreciation upon the sale of the home, based upon the proportion of the public subsidy to the total appraised value of the home. The property would not remain in the affordable housing inventory. EXAMPLE: This family purchased this home in 1995 for a purchase price of $120,000. The family financed this purchase in the following manner. Cash downpayment $ 1,000 First Mortgage $ 89,000 Deferred Loan/County S ~Qi000 Total $120,000 In 2000, the family decides to sell the home at a price of $130,000. Property Sales Price: $130,000 First Mortgage Payoff $ (87,000) Deferred Loan Repayment $ 00.0001 Proceeds to the Seller $ 13,000 In this example, the seller does not sell to aloes-income family. When the property is sold, the seller shares the proceeds of the sale (equity) in proportion to the total cost of home at the initial purchase. Continuing with this example, the original sales price was $120,000 and the $30,000 deferred loan represents 25% of the total appreciation. Thus, at the time of resale, the actual return to the buyer is as follows. Original Sales Price Deferred Loan $120,000 $30,000 or 25% ofthe price Current Property Sales Price First Mortgage Payoff Deferred Loan Repayment Net Proceeds $130,000 $ (87,000) X30,0001 $ 13,000 Applying the "proportionate share" formula, 25% of the proceeds or $3,250 would be repaid to the County and the remainder, the seller would retain $9,750. The County would receive the initial investment of $30,000 plus $3,250.