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Home My WebLink AboutAffordable Housing Update 061318 City of Bozeman Affordable Housing Program Work Plan City of Bozeman Vision Strategy: Develop a Comprehensive Affordable Housing Action Plan that includes but is not limited to: 1. Mandates the creation of affordable housing across all dwelling unit types. 2. Provides prescribed flexibility in the manner in which the mandate can be accomplished. 3. Provide a substantial, broad-based and reliable source of funding for the construction of affordable housing and for affordable housing loans. 4. Actively encourages Bozeman's major employers to develop workforce housing programs for their employees. Deliverables: • Monthly update of Affordable Housing Program progress reported to the Community Development Director and Assistant City Manager • Bi-annual update of the Affordable Housing Program progress to the City Commission • Annual Report of the Affordable Housing Program work that has been completed and the goals and plan for work that will be completed over the following year including: -Total number of Affordable Housing dwellings added to stock -Amount of incentives provided -Qualitative data from the community -Other goals as set by the Housing Action Plan Short-Term Goals Actions/Activities Target Date 1: Update the 1.1 Update the purpose and structure of the CAHAB documents to 1.1 June, 2018 Community be adopted by resolution Affordable Housing Advisory Board 1.2 Develop roles and processes for Affordable Housing Program 1.2 July, 2018 (CAHAB) Manager and CAHAB members to address affordable housing program, projects and budgetary recommendations 2: Continue 2.1 Work with the neighborhoods coordinator to setup community 2.1 Ongoing Community conversations around defining affordable housing Conversations 2.2 Release an online community survey around affordable 2.2 May, 2018 housing accessible to everyone in the community 2.3 Utilize community conversation and survey data as a source for 2.3 During Needs the community housing needs assessment Assessment Process 3: Refine the 3.1 Affordable Housing Plan/Application 3.1 May, 2018 Affordable Housing Planning Process in 3.2 Reimbursement for Impact Fees Process 3.2 June, 2018 the Community Development 3.3 Affordable Housing Rep at Development Review Committee 3.3 Ongoing Department 3.4 Update outreach materials 3.4 June, 2018 3.5 Update the Affordable Housing website 3.5 June, 2018 3.6 Continue to work with community partners to refine the 3.6 Ongoing Affordable Housing Program process. a. Lenders/Title Companies b. Montana Department of Commerce/HUD c. HRDC d. Homebuyers e. Real Estate Community 4: Comprehensive 4.1 Apply for a State of Montana Community Development Block 4.1 May, 2018 Community Housing Grant(CDBG) Planning Grant Needs Assessment 4.2 Create and publish an RFP for a community housing needs 4.2 June, 2018 assessment and development of a 4 year housing action plan 4.3 Interview,select and sign the contract with the consultants to 4.3 August, 2018 conduct the housing needs assessment and develop an action plan. 4.4 Conduct the needs assessment in partnership with the 4.4 September- consultant December 2018 4.5 Report on needs assessment results to City Commission 4.5 January 2019 5: Commission 5.1 Create a presentation and report sent out to City Commission 5.1 October 2018 Update on the update of the Affordable Housing Program including: a. Changes in data or trends b. Results from community conversations c. Status of the Housing Needs Assessment d. The next 6 to 12 month work plan. Long-Term Goals Actions/Activities Target Date 1: Development of a 1.1 Begin to create process that involves exploring the options for 1.1 November 2018 program for Cash- how and when the money gets spent to develop affordable housing in-Lieu Payments options for the housing continuum. and Land Donations 2: Development of 4- 2.1 After completion of the Comprehensive Housing Needs 2.1 January—March year Housing Action Assessment, utilize data and work with consultant and community 2019 Plan to develop the 4 year housing action plan 2.2 Set measurable Affordable Housing program goals to drive the �2.2 March 2019 next 3 to 5 years of the Affordable Housing Program 2.3 Develop a new strategic work plan that aligns the City of 2.3 April 2019 Bozeman's Strategic Plan to the Housing Action Plan with defined dates and measurable 3: Update of the 3.1 Collect practice knowledge as the ordinance is implemented and 113.1 Ongoing Affordable Housing worked through. Ordinance 3.2 Present possible suggestions for ordinance changes :3.2 September 2018 3.3 Utilizing data from the Housing Needs Assessment, draft and 3.3 May 2019 pass a rewrite of the Affordable Housing Ordinance a. Condos, rentals, all new subdivision development. _-In Progress -Completed 7 - MA ' - MT 3O Community Development Affordable Housing Community Survey Thank you for taking the time to fill out the City of Bozeman's Affordable Housing survey. Your answers will help to define and craft the Affordable Housing Program. Do you currently live in Bozeman? Yes No Do you work in Bozeman? Yes No Do you rent or own your home? Rent Own If you are renting, are you interested in buying? Yes No 1. What do you think of when you hear the term "Affordable Housing"? 2. What are some of the challenges around housing in Bozeman? 3. Whose responsibility is it to fix the problem? 4. How can you or your business/organization/neighborhood contribute to resolving the issues? (Creativity welcome!) All answers are anonymous and may be used to report out on the results from this survey. For further information,please contact Matthew Madsen,406-582-2953 or mmadsen@bozeman.net Bozeman, • TDD: 406-582-2301 THE MOST LIVABLE PLACE Affordable Housing Ordinance#1922 Working Suggestions for Update: 1. Add a pricing tier for a 2-bedroom at a 3-person household 2. Affordability terms to maintain the stock of affordable houses a. Deed Restrictive time amounts 3. Incentives a. Removal of the expedited permit review b. Removal of the subdivision pre-application waiver c. What are the terms on concurrent construction? Are they simply based of the current language in the UDC d. Reduced Size Lots for all dwelling units in the development, not just the affordable dwelling unit lots. 4. How are the goals set on an annual and 5-year basis a. Percentage of overall building permits 5. Buyer Requirements a. City of Bozeman Residents b. Full-time employment in the City of Bozeman i BOZ T Community Developmentopment AFFORDABLE HOU INN PROGRAM INFORMATION FAR BUYERS ARE YOU INTERESTED IN BUYING A HOME THROUGH THE CITY OF BOZEMAN'S AFFORDABLE HOUSING PROGRAM? WHAT ARE THE BENEFITS? • Down payment assistance of up to $10,000 • Ownership of an Affordably Priced Home • Possibility to build equity for the future IS THIS PROGRAM FOR YOU? Buyers must meet the following qualifications: i • Make less than $81,200 (family of four) • Use the home as a primary residence _ p� • Qualify for a conventional home mortgage • Meet the definition of"First-Time Home buyer" STEP ONE Register and attend a Home Buyers Education Class STEP TWO HRDC BUI LDING�N�TTfA LOM1fUNItY Meet one-on-one with a Certified Housing Counselor STEP THREE Meet with a lender to get prequalified for a mortgage STEP FOUR Be placed on Home Buyer's Waitlist STEP FIVE The HRDC www.thehrdc.org Receive updates on Affordable Home listings 406-587-4486 STEP SIX City of Bozeman Affordable Housing Program www.bozeman.net/planning Connect with the City or HRDC Staff to complete the process 406-582-2260 Cii.y of Bozeman DepaWment of Community Development \ 20 cast Olive,Bozeman,AAT 597"15 \ wwwbozeman net/planning \ 406 582.2260 i i BOZ ev MANMT Community Development AFFORDABLE HOUSING PROGRAM INFORMATION FOR LENDERS WHAT IS IT? The City of Bozeman, through the Affordable Housing Program provides qualified buyers with the chance to purchase lower-priced homes. I WTMA DZ101:NIKTivA10160� • Lower-priced home prices are set off of an affordable mortgage for a buyer at 70% of Area Median Income (AMI) • • Up to $10,000 in down payment assistance is available to buyers from the City of Bozeman • Additional down payment assistance may be available through HRDC • Buyers must also qualify for a conventional home mortgage • Lower-priced homes will have a lien for down payment assistance. • Lower-priced homes will have a lien for a non-cash subsidy that is the difference between 98% of appraised value and the actual sale price is considered a non-cash subsidy. 0Z4l-'- Buyers work with HRDC to be certified eligible. • ........•........•. . Buyer must meet definition of "First-Time Homebuyer". Once approved, buyers will be able to purchase homes as they become available. ... •.. ..The City of Bozeman or HRDC will draft all of the required secondary mortgage documents • Liens are placed at the time of first sale. • . ._. Liens are recaptured at time of resale, refinance, or when the home owner has not met the requirements of primary residence. •................ ........ If the housing market falls, owners will not be liable for more repayment that any net proceeds can cover. For questions or more information,please contact: CODE REFERENCE City of Bozeman Affordable Housing Program The HRDC o UDC 3&aftiso Buyer Qualification www.bozeman.net/planning www.thehrdc.org &Subsidy Recapture 406-582-2260 406-587-4486 �Nft 01v of Bozeman Department of Crmrnunry Develcpmern \ 20 Fast Olive,Bozeman,MI 1.)97]5 \ www ho?ernan net/planning, \ 406.S8)2.250 BOZ E MANMT Community Development AFFORDABLE HOUSING PROGRAM INFORMATION FOR BUILDERS AND DEVELOPERS low WHAT IS IT? Affordable Housing is a dwelling for purchase by an owner-occupant that requires no more than 33% of a household's income for housing payments. Affordability is determined based off of the annual Area Median Income (AMI). O WHERE IS THIS REQUIRED? All new development that includes 10 or more units of either detached single homes or attached townhomes and any annexation large enough to build 10 or more units. Cash-in-lieu or land donations are possible alternatives. WHAT TYPE OF HOMES? Lower Priced Homes (70%AMI)- 10% of total units to meet requirements; or Moderately Priced Homes (90%AMI)- 30% of total units to meet requirements O CODE REFERENCE UDC 38.380 WHAT ARE THE COSTS? Affordable Housing Refer to the Administrative Manual for Annual Pricing Schedule a:Z�Z4 1 Submit affordable housing application/plan with formal planning application ......-I I......••.•. Planner and Affordable Housing Manager review application ..•••..•.. ......••. . Meet with Planner and Affordable Housing Manager for recommendations or approval Market the affordable units concurrently with all units in the development ... . ........ .. Submit affordable housing building permit Work with City, City's Agent and Buyer to secure all required documentation • ........... Provide Settlement Statement showing the unit was sold meeting the current affordability schedule to receive incentive reimbursements HE R 4�I I N71 Incentives Lower Priced Homes Moderate Priced Homes Financial 70%AMI 90%AMI Impact fee subsidy x Down payment assistance (Buyers at 80%AMI or less) x Process Waiver of subdivision pre-application x Concurrent infrastructure construction x Zoning Reduction of parkland x Reduction of minimum lot size and setbacks x Reduced parking requirements x x Gty of Bozeman Department of Commumfy Development \ 20'tast Olive,Bozeman,NIT 59715 www_bozeman net/olanming \ 406582.2260 1 �� BOZE MAN MT Community Development Affordable Housing Ordinance Administrative Manual Adopted by Resolution 4915 13 June 2018 DRAFT Supersedes AHO Administrative Manual adopted February 8,2016 by Resolution 4659 Prepared by: Matthew Madsen Affordable Housing Manager - . - ' / | w , . ` ' | . / . . / . . "� � . / ` . . / . U MT City of Bozeman Affordable Housing Ordinance Administrative Manual TABLE OF CONTENTS EXECUTIVE SUMMARY...............................................................................................................3 Purpose of the AHO Administrative Manual..................................................................................................3 Goals for the Affordable Housing Program* ..................................................................................................3 A. Applicability.........................................................................................................................4 B. Definitions............................................................................................................................4 C. Number of Required Affordable Homes .............................................................................4 D. Pricing...................................................................................................................................5 E. Timing of Delivery of Affordable Homes.............................................................................6 F. Incentives.............................................................................................................................6 G. Minimum Design &Construction Standards.......................................................................6 H. Affordable Housing Plan* ....................................................................................................7 I. Non-Compliance With a Signed Affordable Housing Plan...................................................8 J. Marketing&Sales of Affordable Homes* ...........................................................................8 K. Cash-in-Lieu Policy& Procedures........................................................................................9 L. Buyers—Application, Qualification and Purchase.............................................................10 M Recordation and Subsidy Recapture for Lower-Priced Homes .........................................11 N. Recordation for Moderate-Priced Homes.........................................................................12 0. Ownership Requirements... ._..._ ................................................................................12 P. Administration, Monitoring and Enforcement..................................................................12 Q. City's Agent.........................................................................................................................13 DRAFTJune 13, 2018 Table of Contents City of Bozeman B O Z E M A N MT Affordable Housing Ordinance Administrative Manual ii Table of Contents DRAFT June 13,2018 BOZ E MAN MT City of Bozeman Affordable Housing Ordinance Administrative Manual EXECUTIVE SUMMARY Purpose of the AHO Administrative Manual The purpose of this Administrative Manual ("manual") is to provide guidance and information for the effective and efficient implementation and administration of Chapter 38, division 380 of the Bozeman Municipal Code as created pursuant to Ordinance 1922 ("Affordable Housing Ordinance" or"AHO"). This manual is to be used as a guide for administrators of the City's affordable housing program, developers and builders of affordable homes, city agents for affordable housing services and other interested parties. In the case of a conflict or difference of interpretation between the text of this manual and the text of the AHO,the AHO controls. The Community Development Director may update this manual periodically to reflect updates in the AHO,the annual release of Area Median Income (AMI) by the Department of Housing and Urban Development(HUD), or make other administrative edits to correct errors in the manual. Goals for the Affordable Housing Program* *Goals will be set on an annual basis using the updated action plan when completed. The City Commission will annually set goals for the creation of affordable housing. For the first two years of the program, 2016-2017,the City Commission set the following goals for voluntary development of affordable homes,through the adoption of Ordinance 1922: Affordable Homes, single family or townhomes,to be constructed and sold prior to September 12, 2016: fourteen (14) of which a minimum of four shall meet the definition of Lower-Priced Homes.Of these four Lower-Priced Homes,three must be sold at or below the maximum price schedule established for 80%of Area Median Income (AMI). One of the Lower-Priced Homes may be sold at or below the price scheduled established for 70%AMI. Affordable Homes, single family or townhomes, to be constructed and sold prior to June 12,2017:twenty seven (27)Affordable Homes, of which no less than seven (7)shall meet the definition of Lower-Priced Homes. Of these seven Lower-Priced Homes,five (5) must be sold at or below the maximum price schedule established for 80%of Area Median Income (AMI).Two (2) of the Lower-Priced Homes may be sold at or below the price scheduled established for 70%AMI. Affordable Homes, single family or townhomes,to be constructed and sold prior to December 12, 2017: fifty four(54)Affordable Homes, of which no less than twelve (12)shall meet the definition of Lower-Priced Homes. Of these twelve Lower-Priced Homes,three (3) must be sold at or below the maximum price schedule established for 70%AMI. These target dates were extended once by Ordinance 1954. Under the terms of the AHO, should any of the goals described above not be met by a target date,the requirements of 38.380 would become mandatory. The requirements became mandatory on July 12, 2017, meaning development proposals submitted after that date are required to provide 10%of the total residential units in the development as Lower-Priced Homes, 30% of the total residential units as Moderate-Priced Home, or a mix of both types as defined in the AHO and this Manual. DRAFTJune 13,2018 Executive Summary 3 City of Bozeman B O Z E M A N MT Affordable Housing Ordinance Administrative Manual A. Applicability City of Bozeman Ordinance 1922 applies to all of the following: 1. Subdivisions and Site Plans which propose 10 or more new market rate homes 2. Annexations where the net developable area could result in 10 or more dwellings 3. Developments seeking to use incentives to develop affordable housing 4. Condominiums and rental units are exempt from the AHO B. Definitions Most of the definitions that are used in the manual can be found in Section 38.380.040—Definitions of the Bozeman Unified Development Code. However,some of the terms used in this manual are not found in the AHO and are provided here: 1. Buyer Certification—Process by which it is established that a given household meets the requirements in the AHO and this manual to qualify to purchase a home produced through the AHO. This can be done by the City or City's Agent. 2. City''s Agent—Refers to a qualified entity retained by the city to implement the AHO. 3. AHO IVIaXimi:m Price—The.— ,,Z]X;I U I Ii AHO-ai!owed price ice of Lower-Pr iced i ion i des and�d 1,AG derate-Priced Homes as determined from a schedule of AHO Maximum Prices calculated and published annually as an update to the manual. 4. Eligible Buyer—A household meeting the AHO's eligibility requirements to purchase a home that is subject to the conditions of the AHO. S. Housing Counseling Agency—An organization certified by the US Department of Housing and Urban Development(HUD)to provide housing counseling and education. 6. Substantial Improvement—Any repair, reconstruction or improvement of a structure,the cost of which equals or exceeds 50 percent of the market value of the structure either: a. Before the improvement or repair is started; or b. If the structure has been damaged, and is being restored, before the damage occurred. For the purposed of this definition, substantial improvement is considered to occur when the first construction to any wall, ceiling,floor or other structural part of the building commences. The term "substantial improvement" does not include any project for improvement of a structure to comply with existing state or local health,sanitary or safety code specifications which are solely necessary to protect the public health, safety and general welfare of residents; or any alteration of a structure listed on the National Register of Historic Places or state inventory of historic places. C. Number of Required Affordable Homes The number of Affordable Homes that a developer/builder is required to build is a percentage of the total number of market-rate homes proposed in the development plan, calculated in accordance with the AHO pricing. See the ordinance or fillable form below. 4 Executive Summary DRAFT June 13, 2018 BOZ E MAN MT City of Bozeman Affordable Housing Ordinance Administrative Manual D. Pricing The annual pricing schedule of the AHO establishes two pricing categories for Affordable Homes to include: 1. Lower-Priced Homes- Maximum price is calculate at 70%of Area Median Income for the number of bedrooms in the home. 2. Moderate-Priced Homes—Maximum price is calculated at 90%of Area Median Income for the number of bedrooms in the home. The City will publish an updated pricing schedule for Affordable Homes on an annual basis following the release of updated AMI. The pricing requirement for Lower-Priced and Moderate-Priced homes in a development is based off of the pricing schedule that is in effect at the time of the issuance of building permits. The City considers the following in determining maximum sales prices: 1. Assumptions About Cost of Home Ownership—The costs of homeownership include real estate taxes, homeowners insurance, mortgage interest rates, association fees and private mortgage insurance. These costs will be updated during the annual pricing schedule update if community averages have changed. In addition,the Community Development Director may make de minimis exceptions and make changes to maximum allowed prices if prevailing mortgage interest rates have adjusted by 50 basis points or more over the current rate schedule. 2. Household Size for the Type/Size of Affordable Home—The City uses the AMI for different household sizes to determine the pricing of Affordable Homes of different sizes, as follows: Home Size AMI Used Studio/Zero-Bedroom One-Person Household One-Bedroom Two-Person Household Two-Bedroom Two-Person Household Three-Bedroom Four-Person Household 3. The Percentage of AMI that Corresponds to the Category of Affordable Home—The maximum price for a Lower-Priced Home is based on an AMI of 70%, adjusted to the number of bedrooms and calculated at the present value based on 12 monthly payments for a term of 360 months. The maximum price for a Moderate-Priced Home is based on an AMI of 90%, adjusted to the number of bedrooms and calculated at the present value based on 12 monthly payments for a term of 360 months. Affordable Home Type Buyer's Qualifying Income Used to Determine Income Sales Price Lower-Priced Home 65%-80%AMI 70%AMI Moderate-Priced Home 81%- 100%AMI 90%AMI 4. Maximum Monthly Housing Payment—is determined by dividing annual AMI by 12 and multiplying that number by 33%. a. Example: 70%AMI for family of four=$56,840/12 =$4,737 x 33%=maximum monthly housing payment of$1,563 *See Exhibit A for the AMI, Pricing, Cash-in-Lieu Rates and Fractional Fee schedule. DRAFTJune 13, 2018 Executive Summary 5 City of Bozeman B O Z E M A N MT Affordable Housing Ordinance Administrative Manual E. Timing of Delivery of Affordable Homes The AHO requires that in any development in which more than one affordable home will be sold,the affordable homes must be sold concurrently and in proportion to the sale of unimproved lots or market-rate homes. The timing must be included in the Affordable Housing Plan that is submitted. A developer may always sell affordable homes earlier than is required in an Affordable Housing Plan. A developer may also partner with another builder or sell lots to a builder to build affordable homes as long as the timing coincides with the building and selling of market-rate homes. F. Incentives A developer must submit an Affordable Housing Plan for review and approval by the city describing how the proposed plan will meet the requirements of the AHO and what incentives are being requested for the plan, if any. Developers may apply for incentives at any time during the development process in conjunction with their Affordable Housing Plan. However, applying for incentives at the time of subdivision plan submittal can result in the greatest benefit from incentives. Impact Fees: Developers/builders will be responsible for paying impact fees at the time of securing building permits. Once the home is sold and the sales price is verified with the Affordable Housing Program staff the developer/builder may apply for impact fee reimbursement. See Exhibit B: Affordable Housing Incentives Chart. G. Minimum Design&Construction Standards Minimum design and construction standards are intended to meet the AHO requirement to "ensure livability and compatibility with nearby market-rate homes in the development." 1. Mix of Bedroom Sizes—Affordable Homes must represent a mix of bedrooms per unit as similar as possible to the mix of bedrooms in the market-rate homes in the development. The developer may provide units with a different mix if it meets the needs of the next qualified household. 2. Equipment and Equipment Hookups—Affordable Homes must at a minimum include a new kitchen range and refrigerator, hookups for a clothes washer, dryer, a built-in dishwasher, and a central heating system to meet the same standard as the market-rate homes in the development. 3. Location within Neighborhood—Affordable Homes must be dispersed among the market-rate homes in the development as evidenced on the recorded plat. 4. Design and Materials—Affordable Homes must be designed, built and landscaped similar to market- rate homes in the development with similar quality and type of materials, lighting, plantings and irrigation systems. 5. Other Features—Affordable Homes need features that are functionally equivalent to market rate homes in the development. Additional features may include garages, parking areas, carports or other green-building features. Affordable Homes must have the same amenities as the market-rate homes in the development, including the same access to and enjoyment of common open space and facilities. 6 Executive Summary DRAFT June 13,2018 BOZ E MAN MT City of Bozeman Affordable Housing Ordinance Administrative Manual H. Affordable Housing Plan* *An example of a completed affordable housing plan is available upon request from staff The applicant for any development is required to create affordable housing or for any development where the applicant is seeking incentives must submit an Affordable Housing Plan using form AH (available Bozeman.net, Planning website or at the back of this manual) describing how all the requirements of the AHO will be met. 1. Contents of the Affordable Housing Plan include: a. Number of Lower-Priced Home including number of bedrooms b. Number of Moderate-Priced Homes including number of bedrooms c. Number of Market-Rate Homes including number of bedrooms d. Location of the Affordable Homes(lots in the plat or units in a site plan) e. Timing of the delivery of the Affordable Homes in relation to Market-Rate Homes f. Marketing plan describing how the Affordable Homes will be offered to the public g. Plan for construction of Affordable Homes in phased developments. h. Any other information that is necessary to evaluate compliance with the AHO. 2. Process for submission and approval of an Affordable Housing Plan: a. Applicant submits Affordable Housing Plan with development application b. City Planner and Affordable Housing Manager review application c. Applicant meets with Planner and Affordable Housing Manager for recommendations d. Affordable Housing Plan is signed and approved e. Applicant develops marketing plan with City&City's Agent f. Applicant secures building permits and pricing for Affordable Homes is set g. Applicant works with City, City's Agent and qualified buyer to complete all required documentation h. Applicant sells Affordable Home to qualified buyer i. Applicant provides settlement statement showing Affordable Home sales price to City or City's Agent j. Applicant receives incentive reimbursements if applicable 3. Once approved and signed,the Affordable housing Plan will become a recorded part of subdivision plat(s) and site plans. DRAFTJune 13,2018 Executive Summary 7 City of Bozeman BOZ E MANMT Affordable Housing Ordinance Administrative Manual I. Non-Compliance With a Signed Affordable Housing Plan If the City determines a developer/builder subject to the AHO has failed to comply with any terms or conditions of the Affordable Housing Plan or AHO,the Affordable Housing Program Manager will notify the developer/builder of the noncompliance in writing and order compliance. Notification will describe: 1. Date by which compliance must occur 2. Exact nature of the non-compliance 3. Possible sanctions for continued non-compliance If the compliance deadline has passed and the developer/builder remains non-compliant,the City may take those enforcement actions described in the AHO. J. Marketing&Sales of Affordable Homes* *An example of a marketing plan is available upon request from staff ThP marketine and -alas nrnvi-ion-of the AHO and this manual are riecignerl to enci ire that A,Hn requirements are met and that Lower-Priced Homes are marketed and sold as quickly and efficiently as possible. Developers and builders can partner with the City or the City's Agent to help with the marketing of the Affordable Home but agreements have to be made in advance between all parties and documented in the Affordable Housing Plan. The steps in the marketing process are: 1. Intent to Build—A developer/builder must provide the City of the City's Agent with floor plans, elevation drawings, location of the unit and anticipated construction schedule. 2. Coordination Meeting—Setup a face-to-face or over the phone meeting with the City&the City's Agent to review the AHO requirements. 3. Marketing to Buyers—The City and City's Agent and developer will utilize the processes that are set out for marketing. 4. Sales Contract—Before a sales contract is signed, buyer must be certified eligible to purchase an affordable home by the City or the City's Agent. 5. Transmit Copy of Sales Contract—Within 3 business days of after execution of the sales contract,the developer or sales agent must transit a copy of the sales contract to the City and the City's Agent. 6. Pre-Closing Tasks—An appraisal must be completed by the buyer or lender and shared with the City and City's Agent. The City currently uses the Human Resource Development Council (HRDC)to assist with the marketing and sales of homes through the Affordable Housing Program. After an initial meeting with the City's Affordable Housing Program Staff, plans can be made with the City and City's Agent to begin to develop a more thorough marketing plan including set dates and requirements. The City of Bozeman's Affordable Housing website will be a resource for any of the homes that are available for purchase through upcoming developments. 8 Executive Summary DRAFT June 13, 2018 B O Z E M A N MT City of Bozeman Affordable Housing Ordinance Administrative Manual K. Cash-in-Lieu Policy&Procedures This section will be updated by Administrative Policy following the adoption of Cash-in-Lieu program. DRAFT June 13,2018 Executive Summary 9 City of Bozeman B OZ E MA N MT Affordable Housing Ordinance Administrative Manual L. Buyers—Application,Qualification and Purchase The AHO establishes two price categories for Affordable Homes as explained in section 4. In order to qualify, buyers have to report an income that meets the requirements for each of the pricing categories. See the below chart for those income qualifications: Affordable Home Type Buyer's Qualifying Income Income Used to Determine Sales Price Lower-Priced Home 65%-80%AM 70%AM Moderate-Priced Home 81%-100%AM 90%AM All of the requirements for buyers of Affordable Homes can be found in the AHO Sec. 38.380.150. All verification for buyers will be conducted by the city or the city's agent to include: 1. Income verification—Must meet income requirements for the purchase price. 2. Asset verification—Liquid assets cannot exceed $25,000 as defined in the AHO. a. Community Development Director may waive requirement 3. Household eligibility—Must meet the definition as explained in the AHO. 4. First-Time Home Buyer—Must meet the definition as explained in the AHO. 5. Buyer Contribution—Must have at least$1,000 to contribute at time of sale. If a buyer is interested in purchasing a home through the City of Bozeman's Affordable Housing Program,there are steps that they must take to purchase a home. 1. Attend a HUD Certified Home-Buyers Education Class. The Human Resource Development Council (HRDC)of Bozeman currently runs Home-Buyers Education classes. 2. Meet with city staff or city's agent to determine eligibility. The method of verification will be the HUD Part 5 definition (24 CFR Part 5) as applied to the HOME program. If eligibility is determined by the city's agent,they will provide certification to the city. a. See: Exhibit I for Certification Letter 3. Meet with a local lender to get qualified for a traditional mortgage. a. A list of local lenders is available from the city or the city's agent. The City or City's Agent will maintain a wait list of eligible buyers for homes through the AHO. This list will be updated and used to send out notices of for-sale affordable homes as they become available. It is the responsibility of the interested home-buyer to be actively engaging in the home-buying process. 10 Executive Summary DRAFT June 13,2018 BOZ E MANMT City of Bozeman Affordable Housing Ordinance Administrative Manual M. Recordation and Subsidy Recapture for Lower-Priced Homes The City will secure and recapture both its cash and non-cash investments in affordable housing with the goal of creating a revolving Affordable Housing Fund. All homes sold in the Lower-Priced category will have one to two liens attached to them depending on the financial assistance that is needed by the buyers. Origination of all lien documents will be completed by the City or the City's Agent. See Exhibits D,E,F&G. As a governmental entity, the City of Bozeman is not required to be FHA certified for secondary mortgages. See Exhibit H. Lower-Priced Homes will be subject to up to two city-created liens: Type of Lien Purpose Repayment Terms A. Down Payment Assistance Lien To recapture the City's loan of Payable at 0%interest upon sale, (Cash Subsidy cash to an eligible buyer for transfer, cash-out refinance or down payment assistance for the default on AHO requirements. purchase, up to$10,000. B. Buyer Subsidy Lien (Non-Cash To recapture the difference Payable at 0% interest upon sale, Subsidy) between 98%of the market value transfer, cash-out refinance or and the AHO Maximum Price of a default on AHO requirements. Lower-Priced Home. 1. Down Payment Assistance Recapture(Cash-Subsidy): Down Payment Assistance is provided to home buyers as a cash subsidy subject to availability of the funds in the City's Affordable Housing Program Fund. a. Lien Amount: Equal to the down payment assistance that is received from the City of Bozeman. b. Terms of Loan: Principal amount of the lien will be repaid at 0% interest by the buyer due upon subsequent sale or refinance of the Lower-Priced Home or if the buyer fails to meet ownership or other AHO requirements. The city's lien will be subordinate to any first mortgage and secondary financing for down payment or principal reduction through state or federal funds. c. Lien Form: Liens will be placed in the form of a deed of trust and promissory note payable to the City of Bozeman. d. Recordation:These documents will be recorded at the Gallatin County Clerk and Recorders office. e. Net Proceeds Insufficient to Repay Subsidy: Upon resale, if the net proceeds are not sufficient to recapture the full amount of the City cash subsidy,the City will accept the available net proceeds as full payment. 2. Buyer Subsidy Recapture (Non-Cash Subsidy): Qualified buyers purchasing homes through the City of Bozeman's Affordable Housing Program will be receiving a non-cash subsidy in the form of the price difference between the lower-priced home and an equivalent market-rate home, calculated as described below. a. Lien Amount: Equal to the difference between 98%of the appraised value of the home and the Lower-Priced Home sales price. b. Terms of Loan: Principal amount of the lien will be repaid at 0% interest by the buyer due upon subsequent sale or refinance of the Lower-Priced Home or if the buyer fails to meet ownership requirements. The city's lien will be subordinate to any first mortgage and secondary financing for DRAFTJune 13,2018 Executive Summary 11 City of Bozeman B O Z E M A N MT Affordable Housing Ordinance Administrative Manual down payment or principal reduction through state or federal funds. c. Lien Form: Liens will be placed in the form of a deed of trust and promissory note payable to the City of Bozeman. d. Recordation:These documents will be recorded at the Gallatin County Clerk and Recorders office. e. Net Proceeds Insufficient to Repay Subsidy: Upon resale, if the net proceeds are not sufficient to recapture the full amount of the City cash non-cash subsidy,the City will accept the available net proceeds as full payment. See Exhibit C for examples of cash and non-cash subsidy recapture. N. Recordation for Moderate-Priced Homes Buyers who qualify for purchase of a Moderate-Priced Home through the City of Bozeman's Affordable Housing Program must have an income between 81-100%AMI. They will be required to occupy the home as their primary residence and sign an occupancy agreement (exhibit F) upon purchase of the new home. O. Ownership Requirements Buyers of Affordable Homes through the City of Bozeman's Affordable Housing Program are required to .,.,+�.,.+-,iv. ., .phi., .,.,+s+., .,.,+;.,�,.,+.. . .,+h., h.,.,.,fi+..F+h., Aff..r.J-,4,1., LJ.,...., Th.,-., meci cer Lain ow ncrs! p requir cmci iu w contin,uc o receive 1Ic be icni of hle mff0 dab!c i omc. Theo,- requirements are set out in the AHO. Buyers of Affordable Homes through the City of Bozeman's Affordable Housing Program are required to occupy the home as their primary residence and are not allowed to rent the entirety of the house to another household. Ownership requirements will be checked on an annual basis by the City or the City's Agent to make sure that the homeowners are in compliance. If found not in compliance, owners may be forced to repay the cash and non-cash subsidy liens as described in terms of liens in section 10. P. Administration, Monitoring and Enforcement The Affordable Housing Program Manager and/or City's Agent are authorized to implement the Affordable Housing Ordinance. These responsibilities include but are not limited to: 1. Administration—The Director of Community Development may promulgate and enforce all rules and regulations and take all actions necessary to the effective operation and enforcement of the AHO and this manual including: a. Reviewing a developer's Affordable Housing Plan for compliance with the AHO b. Developing and adopting all required forms and documentation c. Monitoring developers' compliance with approved Affordable Housing Plans d. Taking enforcement actions authorized by the AHO e. Calculating and publishing the annual Affordable Homes Pricing schedule which includes: AMI, Affordable Home sales pricing, cash-in-lieu rates and the fractional fee scale f. The Community Development Director may update these schedules more frequently if the 12 Executive Summary DRAFT June 13,2018 BOZ E MA N MT City of Bozeman Affordable Housing Ordinance Administrative Manual prevailing mortgage interest rate increases more than .5% g. Tracking of all Affordable Homes built and sold including any cash and non-cash subsidies that were included as part of the sale h. Verification of owner-occupancy of Affordable Homes i. Disbursement of down payment assistance and impact fee reimbursement expenditures for developments with approved Affordable Housing Plans. 2. Verification of Purchase Transactions—The Affordable Housing Program Manager will complete the final verification that the home sale met the requirements for both Lower-Priced or Moderate-Priced Homes and buyer qualification including: a. Occupancy Agreement(Exhibit E) b. Settlement Disclosure Statement—After closing c. Issuance of any impact fee reimbursements 3. Non-Compliance—The Affordable Housing Program Manager will work with developers throughout the development and implementation of an Affordable Housing Plan and will be responsible for addressing any issues of non-compliance that may arise throughout that process 4. Review of Program Effectiveness—The Affordable Housing Program Manager will periodically review the effectiveness of the City's Affordable Housing Program. This will include but is not limited to: a. Audits of program files maintained by the City's Agents b. Affordable Housing Annual Review c. Completion and maintenance of all files related to the Affordable Housing Program d. Tracking of all affordable homes built and sold e. Interviews with home buyers about the effectiveness of the program f. Meetings with community members Q. City's Agent Through a Professional Services Agreement (PSA),the City may choose to use an agent to help fulfill some or all of the duties described in this manual for the implementation of some of all aspects of the AHO. The City's Agent must be HUD certified to be able to complete all the tasks as laid out in the PSA. In addition,the City's Agent must have the administrative capacity to accurately and securely maintain any and all documentation as required by the AHO. DRAFTJune 13,2018 Executive Summary 13 nOZ E MANMT 121 North Rouse Ave Bozeman,MT 59771 www.bozeman.net