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HomeMy WebLinkAboutHeadwaters CHT Bridger View ApplicationFrom:webadmin@bozeman.net To:Tanya Andreasen Subject:Community Housing Fund Funding Request Application Submission Entry Date:Wednesday, September 30, 2020 2:26:06 PM A new entry to a form/survey has been submitted. Form Name:Community Housing Fund: Funding Request Application Date & Time:09/30/2020 2:06 PM Response #:2 Submitter ID:30943 IP address:8.22.11.92 Time to complete:30 min. , 54 sec. Survey Details Page 1 Community Housing Fund Scoring Sheet Community Housing Allocation Process 1.Organization Seeking Funding Organization Name Headwaters Community Housing Trust Address 7600 Sypes Canyon Road, Bozeman MT 59715 Contact Name Michael Brown Contact Phone Number (320) 363-0912 Contact Email Address mbrown@burlingtonassociates.com 2.Project Information Project Name Bridger View Neighborhood Location of Project Corner of Bridger Canyon Drive and Story Mill Road – immediately east of the Story Mill Community Park – in northeast Bozeman Project Description The Headwaters Community Housing Trust (HCHT) is requesting a grant of $620,000 from the Community Housing Fund to ensure an affordable purchase price for 31 homes being built in the Bridger View neighborhood – homes that will be kept affordable forever by HCHT. Bridger View is designed and will be built as a diverse, amenity-rich neighborhood with 62 modest, highly energy-efficient, owner-occupied (1-bedroom, 2-bedroom, and 3-bedroom) homes on the 8-acre site, immediately adjacent to the Story Mill Community Park. Through a combination of generous philanthropic investment, value-engineered design and orchestrated community partnerships, the purchase price of 31 of the 62 homes will be reduced to levels to make them affordable to households currently locked out of homeownership in Bozeman. 26 homes will be priced affordably and targeted to “missing middle”-income households – working families with incomes between 80% to 120% local median income who earn too much to qualify for federal and state assistance programs but still cannot afford to purchase and own a home of their own here in Bozeman. The other five (5) homes will be priced even more affordably – to households with incomes at 70% of local median income, meeting the requirements of the City’s Affordable Housing Ordinance. These homes will be scattered throughout and mixed into the neighborhood in all unit types and home sizes, indistinguishable from their market-rate neighbors and the homes they own. The Headwaters Community Housing Trust will ensure that these 31 homes will be well-maintained, that the owners of these homes will have access and resources needed to be successful as homeowners and as residents of this community, and that these homes will remain affordable from one working homeowner household to the next, for generations to come. In so doing, the Headwaters Community Housing Trust and the Bridger View neighborhood – with the support of the City of Bozeman – are on track to have significant and lasting impact on a critical segment of the affordable housing crisis we face here in this community. Headwaters Community Housing Trust In the summer of 2019, a community-wide assessment was conducted, exploring how best to ensure the availability and affordability of the 31 income-restricted homes at Bridger View. The result of this feasibility assessment process was a consensus decision to establish a new community land trust organization with the focus and capacity needed to create and permanently preserve housing availability and affordability in Bozeman and the surrounding region. After months of planning, the Headwaters Community Housing Trust was incorporated in June, 2020, governed by a founding board of directors that includes: Carson Taylor (former Bozeman City Commissioner and former Mayor), Barb Cestero (Wilderness Society), Randy Carpenter (Future West), Kelly Olinger (Comma-Q Architecture), Christine Walker (Navigate, LLC), and Tracy Menuez (HRDC). Technical assistance and executive management assistance are provided by Michael Brown, a national community land trust expert who lives just north of Bozeman. The mission of the Headwaters Community Housing Trust (HCHT) is twofold: 1. To preserve permanently the condition, quality and affordability of the 31 income-restricted homes in the Bridger View community and to ensure that the owners of these homes have access to the services and resources they need in their efforts to be successful homeowners. 2. To work in partnership with the City of Bozeman and other public sector and private sector partners to significantly increase the number of homes that are permanently affordable to working households otherwise unable to afford to own a home of their in Bozeman and throughout the region – and to act as the stewardship entity to ensure that these homes remain affordable to limited-income households forever. HRDC has owned the 8-acre site and carried lead responsibility for the development of the Bridger View development, since 2019. From the outset, the plan has been for the Bridger View project to transition from HRDC to a stewardship entity that could focus on preserving the availability and affordability of the affordably priced homes, thereby leveraging and protecting the philanthropic and community investment in the neighborhood. This transition was originally anticipated to take place after the homes were built and each of the affordably priced homes were sold. The presence and developing capacity of HCHT as an integral member of the development team has created an opportunity both to accelerate and expand the changeover. Consequently, recognizing that HCHT's core mission includes providing homes for middle-income earners, an agreement has been brokered for HCHT to assume ownership of the Bridger View site, along with lead developer responsibilities, in November 2020. This arrangement allows HRDC to continue to respond to a range of housing needs, including those at the lowest of the housing continuum, particularly in response to the COVID-19 pandemic, while allowing the Headwaters Community Housing Trust to work to achieve two primary strategic goals – to create a replicable neighborhood development model and to build a portfolio of homes that enhances its prospects for becoming sustainable over the long haul. It bears noting that the professional and experienced development team and the resources needed will remain in place, working with HCHT to complete the Bridger View project, with minimal risk. The “Missing Middle” As we all know, the need for affordably priced homes in Bozeman is urgent – and growing dramatically. We need only refer to the recent Community Housing Needs Assessment for detailed and alarming indicators, including: * Demand for housing is up in Bozeman. Local jobs have been increasing at 4.4% each year and unemployment (pre-COVID) is less than 3% – and naturally occurring affordable housing (NOAH) is rapidly disappearing. * Local housing production is up, creating nearly 800 homes each year – but, according to the Needs Assessment, a total of 5,400-6,400 net new units are needed by 2025. * Housing affordability is now an economic vitality issue as over 70% of Bozeman employers – representing one-third (1/3) of the jobs in the city – see housing that is affordable to their workforce as one of the very most critical problems they face. Many Bozeman workers have no option other than to live elsewhere and commute in daily to work * And local housing prices continue to spiral. The median sales price of a home in Bozeman has grown by 75% since 2012. And this dire situation is only getting worse. The Bozeman Daily Chronicle, on September 18, reported that the median cost of a home within the city limits increased by 21.5% from August 2019 to August 202o – and then, in August 2o2o, rose from $510,000 to $585,500, an astonishing 1-month increase of 14.8%. Households with incomes below 120% of area median income are being squeezed – with the consequence becoming more extreme and desperate as the level of gross household income decreases. A growing – and overlooked and misunderstood – face of the housing affordability crisis in Bozeman are working families who earn more than 80% of local median income (the federal definition of “low income”), which means they cannot qualify for governmental assistance programs (including many of the City of Bozeman’s affordable housing programs) but nowhere near enough to be able to afford to purchase and own a home of their own here in Bozeman. This is the “missing middle” – households with incomes between 80%–120% of local median income. One-third (1/3) of all households currently living here in Bozeman fall within this income range. And the simple but harsh reality is: 1. The marketplace – i.e., conventional builders building homes to Bozeman code and building standards and to local market preferences – cannot, on its own, create housing that is priced affordably for these working households. And 2. There are literally no public sector housing affordability resources available to create housing that middle-income households can afford. For these urgent reasons, missing middle-income households are the focus and priority of the Bridger View neighborhood. The Bridger View Neighborhood Creating housing affordability in Bozeman – especially for owner-occupied homes – is far from easy and, almost certainly, is likely not to get any easier in the future. Consequently, we cannot keep doing the same things and expect different results. Crafting effective, long-term solutions to the growing housing affordability crisis in our community will, without question, require: 1. Considerable investment of resources from the private sector, including foundations, private donors, employers and development partner concessions, as well as from the public sector, including the City of Bozeman, Gallatin County, the State of Montana. 2. New approaches to housing development that incorporate best practices of how established neighborhoods developed over time here in Bozeman, combined with recent innovations in energy- efficient, sustainable home designs and sensible land use. 3. A stubborn commitment to ensuring homes made affordable through the investment of private sector and public sector resources are guaranteed to be kept affordable forever. We must acknowledge that providing affordability assistance as grants or loans to individual households rather than locking these subsidies into the homes and controlling the resale prices of these subsidized homes – especially in a rapidly escalating housing market like Bozeman – is simply not an effective or best use of precious and limited subsidies. We are pleased and proud that the Bridger View neighborhood incorporates and embodies these three foundational principles. The initial affordability of these 31 homes to be built for and marketed and sold to “missing middle” households in the Bridger View neighborhood will be created through a combination of intentional innovation and investment, including: • Smaller 1-, 2- and 3-bedroom homes ranging in size from 750 to 1,500 square feet, built to exceptionally high energy-efficiency standards will be constructed on smaller lots in an intentionally designed compact neighborhood, reducing the cost to produce these homes without sacrificing quality, efficiency and sustainability. • The neighborhood has been designed and will be developed by a value-driven, partnership-based effort that is coordinated by a nonprofit, charitable, 501(c)(3) community-based organization that will not be collecting a developer fee upon completion of the project. • The fee-simple sale of 31 Bridger View homes at market-rate prices will help subsidize the 31 homes to be made and kept permanently affordable by the Headwaters Community Housing Trust. • A major philanthropic partner has committed a substantial level of philanthropic investment to create an innovative neighborhood development model for future replication, along with the assurance that 31 desperately needed, income-targeted homes will be cared for and kept affordable forever by a focused and dedicated stewardship entity. These unparalleled commitments are already in place to create the initial affordability of 26 homes to be marketed and sold to working families with incomes between 80%-120% of local area median and five homes to be marketed and sold to working families with incomes below 70% of local AMI. Even so, there remains a substantial project gap that needs to be filled through a variety of sources and mechanisms, including funding commitments, in-kind contributions and project cost-offsets. Grant funding of $620,000 from the City of Bozeman’s Community Housing Fund will allow us to leverage additional millions of dollars of additional grant funding from our major philanthropic partner to close the remaining project development cost gap. The Headwaters Community Housing Trust will ensure that all 31 of these Bridger View homes are initially made affordable, marketed and sold to middle-income households (or lower, in the case of the homes meeting the City’s lower-income ordinance requirements). HCHT will ensure that these homes will be well- cared-for and that all taxes and fees are paid – and that homeowner households will have access to resources and services they may need in their efforts to remain successful as neighbors and as homeowners. And, each time a HCHT home is resold, the homeowner/seller will be allowed to keep all of the equity they earn through paying down the principal balance on their home purchase mortgage plus a percentage-based share of the home’s increase in value during their ownership, while the remainder of the equity remains with the home to ensure the home remains affordable for the subsequent “missing middle” (or lower) homebuyer household without requiring additional subsidy resources from public sector or private sector sources – for generations to come. In sum, quoting a comment made by a City Commissioner during the meeting on May 18 2020 when the preliminary PUD for Bridger View was unanimously approved by the Bozeman City Commission, “This project ticks a lot of the boxes… a sense of place; a sense of community; a place where people of diverse incomes can live side by side; shared spaces; compact living; and permanent affordability. What more could you want?” Community Housing Fund Funding Request In order to make the Bridger View neighborhood a reality – to create 31 sorely-needed permanently affordable, owner-occupied homes in this community and to serve as a replicable model for future developments here in Bozeman – we need to secure additional community support. For this reason, the Headwaters Community Housing Trust, in partnership with HRDC and the entire Bridger View design and development teams, requests a grant award of $620,000 from the City of Bozeman Community Housing Fund. This request is for $20,000 in home purchase affordability assistance for each of the 31 HCHT homes. It bears noting that this request is in lieu of (1) a request for $10,000 in down payment assistance for each of these homeowners plus (2) a request for $7,000 in impact fee reimbursement for each of these homes. And, in return for this investment, the City will benefit from 31 homes in Bozeman that will remain affordable forever. Creating homeownership for middle-income households in a housing market like Bozeman is the most difficult development to do, as there are no public sector resources targeted specifically to households in this income range. As a result, we must rely heavily on philanthropy to bridge the resulting affordability gaps. A $620,000 investment from the City of Bozeman’s Community Housing Fund is necessary to leveraging these additional charitable dollars. For this reason, the requested grant commitment from the City is integral to the financial viability and success of the Bridger View neighborhood and its 31 permanently affordable homes for working families. In the Community Housing Fund online application portal, two questions are asked: (1) “Would you accept 50% of the requested amount?” and (2) “Would you accept 25% of the requested amount?” Each of these questions allows only a “Yes” or “No” answer. We would like to explain here why we answered both of these questions “No”. We believe our request is fair, is consistent with the City’s community housing policy, and demonstrates a commitment to the project. And we know we can, instead, access $10,000 in down payment assistance per home, as well as access impact fee waivers for each home – which, combined, would equally nearly the same amount as this request. And, finally, we chose to ask for what we believe is a fair and appropriate amount, rather than electing to “juice” our request to a higher amount, assuming we may need to negotiate for a lower amount. This project – and this request – aligns closely with the allocation priorities of the Community Housing Fund and merits highest scores in the Community Housing Fund Scoring Sheet: Alignment with Community Housing Action Plan The 31 permanently affordable owner-occupied homes in the Bridger View neighborhood match exactly with the urgent needs identified and the highest priorities articulated in the Community Housing Action Plan. Specifically, quoting the City’s adopted plan, “Objectives established in the Plan that will continue to be tracked to ensure progress is made, include: • Ensuring community housing serves the full range of incomes…. This includes safety net rentals below 30% AMI (about $20,000 per year), additional resident and employee rentals up to 80% AMI (about $55,000 per year), and ownership housing up to 150% AMI (about $104,000 per year). • Producing community housing at a rate that exceeds, or at least matches, job growth so that new employees can find homes. • Striving to produce community housing at a rate that matches the spectrum of community housing needs, while also preserving what we have through a target of no net loss of existing community housing stock below 80% AMI. Ability of this Project to Address a Community Need As referenced above, there is an urgent and growing need for housing that is affordable to local working families who, based on their gross household earnings, do not qualify for existing housing affordability assistance programs but are forced either to live elsewhere or to pay unreasonably and precariously high percentages of their income to rent in Bozeman. And this “missing middle” crisis has moved beyond a community development issue into also being an economic development issue as many local businesses report serious challenges in recruiting and retaining employees to fill available jobs. Bridger View is the only housing development geared to innovatively and effectively address this middle-income homeownership crisis, at scale, here in Bozeman. Target Income There is a critical, unmet need to assist middle-income households to secure quality, stable housing they can afford in the community in which they work and where their children go to school. That is the priority objective of the Bridger View neighborhood. And by permanently preserving the availability and affordability of these 31 owner-occupied homes, the Headwaters Community Housing Trust will protect and leverage the City’s investment by keeping these homes for “missing middle” households (as well as households with lower incomes) for generations to come. Opportunity Cost In a remarkable display of generosity and foresight, our major philanthropic partner has already invested millions of dollars in grant funds to enhance the success and economic viability of the Bridger View neighborhood, funding the purchase of the 8-acre site owned by HRDC and to be transferred to HCHT in November and covering project soft costs, so these costs will not be reflected in the purchase price of the Bridger View homes. And, finally, this partner has pledged substantial additional grant funding to the project, contingent on the ability of HCHT and its project partners to leverage these funds by securing additional grant funding and project cost offsets. A commitment of $620,000 from the City’s Community Housing Fund will go a long way towards bridging this gap. Conversely, a decision by the City not to fund this request has the very real potential to jeopardize this substantial philanthropic investment and, thereby, imperil the successful development and completion of the Bridger View neighborhood – a potentially devastating opportunity cost lost. Level of Partnership with Other Organizations From the outset, Bridger View has been a partnership-based development. In addition to the close working partnership forged between HRDC and HCHT, Bridger View evolved from a very deliberate collaboration between a range of community partners – including Comma-Q Architecture, Langlas & Associates, ERA Landmark Realty, Groundprint, Stahly Engineering, among others, as well as a number of regional and national partners, including our major philanthropic partner – all committed to designing and creating a neighborhood that will not only address an urgent community need but also serve as a replicable model for how Bozeman can grow in the future. Additionally, the City of Bozeman is also a partner, having approved the preliminary Planned Unit Development (PUD) and plat for the Bridger View development, as well as entering into a cost-sharing arrangement for off-site infrastructure upgrades through the Capital Improvements Plan. Alternate Funding Sources Have Been Committed See operating budget assumptions below. Thoroughness of the Application and Budget It is our hope that you find this application and accompanying documents, including the projected project budget – along with all of the information available on the Bridger View website (www.bridgerview.org) and in materials previously submitted to and reviewed by the City in the approval process for the preliminary PUD and plat – to be thorough and sufficient. Viability of the Proposed Project The Bridger View neighborhood is the outcome of several years of design, entitlement, and financial planning by respected local, regional and national experts. These companies and individuals continue their commitment to make this not only a successful neighborhood development, but one is replicable, working model for future Bozeman neighborhoods, as well as a launching pad for the Headwaters Community Housing Trust. The preliminary Bridger View Planned Unit Development (PUD) and preliminary plan were unanimously and enthusiastically approved by both the Bozeman Planning Board and the City Commission – and documents for final PUD approval has been submitted and those needed for approval of the final plat are to be submitted by year’s end. All indications point to the Bridger View development proceeding next year. Plans are underway for a groundbreaking ceremony – and the start of construction – in April 2021. Scope of Project: Number of Affordable Housing Units to be Built Bridger View is the first and only development in Bozeman to date to target the affordability of 31 homes to middle-income households in the City. It is our intention to make sure that this unprecedented development – in composition and scale – is not the last. Project’s Generation of Permanently Affordable Housing & Ongoing Project Affordability The Headwaters Community Housing Trust was established and will operate with a sole, dedicated focus on the stewardship of permanently affordable housing, including these 31 homes at Bridger View. Building on the groundwork laid by HRDC, the Headwaters Community Housing Trust will demonstrate here in Bozeman the proven effectiveness of the nationally accepted and proven framework of the community land trust model to establish, maintain and sustain the organizational and technical capacity needed to ensure the ongoing stewardship of permanently affordable homes and their owner-occupants forever. Projects that Demonstrate a Significant Return on Investment That Advances the Creation of Community Housing in Bozeman The City of Bozeman’s investment in the Bridger View neighborhood will not only help create homeownership opportunities for the initial 31 households who will contribute to the economic vitality and social fabric of this community but for future generations of homeowners, as well. Across the country, the average tenure of CLT homeowners is seven (7) years. Additionally, studies conducted in a number of communities in which CLTs have been operating for some time have documented that nearly 70% of CLT homeowners selling their homes were able to leverage (1) the security and stability of owning a home they would otherwise have been unable to afford plus (2) the limited-appreciation return from the sale of their home to purchase an unsubsidized, market-rate home of their own. If, as we hope, the experience of HCHT homeowners mirrors this national track record, Bridger View’s 31 HCHT homes could provide affordable homeownership to over 120 limited-income households over the first 30 years of the existence of these homes. And those HCHT homeowners who elect to sell their Bridger View homes and move on are very likely to be able to transition into conventional fee-simple homeownership. And this process will repeat itself for generations to come. This, we suggest, is most certainly a significant return on the investment of funds committed by the City of Bozeman through the Community Housing Fund. NOTE: A more readable version of this proposal, including graphics, is attached a PDF file below. Project Timing On-site construction, including all necessary infrastructure, will begin in April 2021. The first phase of ten homes will be completed by June 1, 2022. Phase Two homes will be completed by November 1, 2o22. And Phase Three homes – and the entire development – will be completed by June 1, 2023. In all phases, an equal number of market-rate and HCHT homes will be developed and completed. Which Community Housing Action Plan Strategy/Action Item Does This Project Address? As referenced above, the Housing Action Plan adopted by the City of Bozeman calls for effective long-term community housing strategies that serve local households in a broad range of incomes – from households with incomes below 30% AMI (about $20,000 annually) to households with incomes up to 150% AMI (about $104,000 annually). Bridger View is the only project in Bozeman on track to create a substantial number of owner- occupied homes that are affordable to households with incomes toward the higher end of this range – specifically, from 70%-120% AMI. And, second, meeting another high priority of the City’s Housing Action Plan, these 31 homes will be kept affordable forever by the Headwater Community Housing Trust. # of Affordable Dwelling Units to be Generated/Renovated 31 owner-occupied homes will be created. Area Median Income % Targeted All 31 homes will be priced affordably to households with incomes identified as highest priorities by the Community Housing Action Plan. 5 of the homes will be priced affordably to households with incomes below 70% of local median income and the remaining 26 homes will be priced affordability to households with gross incomes between 80%-120% of local media income. Project Partners (if applicable) Headwaters Community Housing Trust. HRDC. Navigate, LLC. Burlington Associates in Community Development. Comma-Q Architecture. Evolve Architecture. Groundprint. Stahly Engineering. Langlas & Associates. Central Plumbing and Heating. Design 5 Consulting. Design Solutions. Beartooth Lighting Design. Beyond Efficiency. A major philanthropic funding partner 3.Indicate how this project ensures permanent or long term affordability [×] Land Trust Please Explain Not answered Page 2 4.Project Funding (Please attach budget at the end of the application) Total Project Budget The development budget for Bridger View is constantly being refined, consistent with the project timeline, in advance of start of construction in April 2021. Construction cost estimates will be updated in November 2020 and finalized in March 2021. And analysis is constantly underway, trying to assess the impact of COVID on the Bozeman economy, as construction costs are escalating, projected sale prices for the market-rate homes are increasing dramatically, and local wages are not simply not keeping pace. As we continue to refine certainty around these costs – and the variables impacting these costs – it is difficult for us to provide an actual project cost budget at this time. Similarly, we cannot predict with any real accuracy just how much philanthropic investment will be needed. Our budget pro forma is being updated regularly, in advance of final total development numbers in March 2021. We anticipate the total project budget to be in the range of $35-$40 million dollars. These costs will be paid from the following sources in roughly these estimated percentages: Land donation: 5%. Sale of market-rate homes: 50%. Sale of HCHT homes: 24%. Local partnerships and fundraising: 6% (inclusive of Community Housing Fund grant). Additional investment from philanthropic partners: 15% A contribution of $620,00o from the Community Housing Fund, while only about 1.5% of the total project budget (at $40 million), would be a substantial investment to help us close the remaining project gap, by leveraging the additional philanthropic resources needed to fund the project in toto. 5.Primary Project Funding Sources 1.See answer to #4 above. $ Amount Not answered 2.See answer to #4 above. $ Amount Not answered 3.See answer to #4 above. $ Amount Not answered Amount Requested From Community Housing Fund $620,000 6.Which Project Elements Will Funds Be Used For? (attach line item budget if needed) 1.See answer to #4 above. $ Amount Not answered 2.See answer to #4 above. $ Amount Not answered 3.See answer to #4 above. $ Amount Not answered 7.Type of Funding Requested (○) Grant 8.If you selected Grant, would you consider a Loan if Grant was not available? (○) No 9.Would you accept 50% of your requested amount? (○) No 10.Would you accept 25% of your requested amount? (○) No 11.Could the Grant / Loan be split among multiple years? (○) No 12.When would the funds requested need to be received in order to optimize the benefit of the funds requested for the project? March 1, 2021 13.Have you received community housing funding assistance in the past 5 years? (○) No Page 3 14.Additional Information What is the level of urgency behind the funding request? $620,000 from the City of Bozeman’s Community Housing Fund are urgently needed and must be in place no later than March 1, 2021, in order to (a) leverage a commitment of additional, substantial grant funding from our major philanthropic partner for the Bridger View neighborhood to reduce the size of the construction financing loan and (b) provide a level of comfort needed to the Headwaters Community Housing Trust to proceed with securing the construction financing in advance of start of construction in April 2021. If Community Housing Funds are not allocated to this project, how does impact the project? If funding of the amount requested is not committed, there is the very real potential that our philanthropic partner will not allocate the additional funding needed, due to lack of demonstrated local community support. This, in turn, would mean that the Bridger View development would not proceed. 15.Additional Documentation (i.e. Cover letter, budget, project description, letters of support, etc...) HCHT_CommunityHousingFund_CoverLetter_September.30.2020.pdf HCHT support letter 9.30.20.pdf Thank you, City Of Bozeman This is an automated message generated by the Vision Content Management System™. Please do not reply directly to this email.