HomeMy WebLinkAboutG.2 HCHT Staff Memo Final
Community Affordable Housing Advisory Board Memorandum
REPORT TO: Chair Thane and Board Members
FROM: Tanya Andreasen, Community Housing Program Manger SUBJECT: Request from Headwaters Community Housing Trust for investment of Community Housing Fund grant dollars to act as a perpetual subsidy of public funds for each
of the thirty-one (31) homes priced below 120% of Area Median Income.
MEETING DATE: November 6, 2020 AGENDA ITEM TYPE: Action
RECOMMENDATION: It is the recommendation of staff that the request should not be funded. RECOMMENDED MOTION: Having reviewed and discussed the application materials,
applicant’s presentation, and staff recommendations, I move that CAHAB recommend the City
Commission deny the grant request of Headwaters Community Housing Trust at this time. DISCUSSION: Headwaters Community Housing Trust (“HCHT”) submitted a grant application for $620,000 from the Community Housing Fund to subsidize 31 homes in the
Bridger View Redevelopment Planned Unit Development (“Bridger View”). HCHT presented
its funding application at the October 14, 2020 CAHAB meeting. This funding request aligns with the CAHAB approved Community Housing Fund Philosophy (see Community Housing Fund Allocation Process and Priorities) as it will use the funds to
create more housing units in Bozeman affordable for households earning less than 70% of Area
Median Income (AMI) (5 homes), as well as those households earning between 80% and 100% of AMI (26 homes)., These 31 Bridger View homes will be restricted by a 75-year ground lease and held in a Community Land Trust by Headwaters Community Housing Trust (HCHT) to ensure each home’s long-term affordability.
Using CAHAB’s recommended Community Housing Fund Proposal Scoring Methodology, CAHAB’s composite score was 49.79 points (34.79 average points for the first section, and 15 for the second). The minimum number of points required for review of a funding request application with dwelling units in the project is 42 points. Staff also scored the application,
giving it 51 points (36 in the first section and 15 in the second). CAHAB composite score and staff score align closely. The reality of granting public dollars is that the funds are limited, The Community Housing Fund has less than predictable revenue streams. The Community Housing Fund receives mills
from the City of Bozeman’s General Fund, and in FY21, that amount is $388,611. Further revenue is generated by payments of Cash in Lieu of built affordable homes and some subsidy recapture when affordable homes are sold by buyers who received down payment assistance from the City of Bozeman. To date, no subsidy recapture has been received. Cash in lieu of
affordable homes has been received, but as those payments are dependent upon the payment
calculation for each particular subdivision and the timing of the development of each
subdivision, it can be difficult to predict when those payments will be received, and in what amount. This background information is given as a basis for considering alternatives to fully funding this and other immediate requests for funding from the Community Housing Fund (the current Community Housing Fund report is under Fiscal Effects in this report). Also, the
CAHAB membership has seen some turnover in the past year, and it is important that all
members share the same understanding of how the fund generates revenues. Bridger View will provide our community with 62 new homes. Half of those homes will be sold as market rate homes, and half will be sold below market rate to qualified buyers. Of the
31 below-market homes, five will be sold as Lower Priced Homes as required by the Affordable
Housing Ordinance (AHO). The other 26 affordable homes will be priced and be sold to households earning between 80% and 120% of AMI, referred to as missing middle wage earners in the Community Housing Action Plan. All 31 below-market homes will be restricted by a 75-year ground lease and held in a land trust stewarded by HCHT to ensure their permanent
affordability and availability to income-qualified households over time and enduring future
changes of home ownership. The staff recommendation to not fund this request is influenced by two factors. First, while HCHT is the applicant for the funds, it is not the property owner of the project as of the writing
of this memorandum. Having consulted the City Attorney’s office and the Finance Director, the
requested public investment of Community Housing Funds in the homes must be paid to the property owner. The applicant states that “…an agreement has been brokered for HCHT to assume ownership of the Bridger View site, along with lead developer responsibilities, in November 2020.” As of the writing of this report, that conveyance of ownership has not
happened. Staff must make recommendations based upon the facts and information submitted.
Second, based upon the Affordable Housing Plan submitted 10-19-2019 (Exhibit A) approved by the City Commission with the Preliminary Plat application on May 19, 2020, no City subsidies were requested or required to ensure that these homes would be affordably priced. In accordance with the AHO, 38.380.100.C, the Affordable Housing Plan must include “a
description of the procedural adjustments and subsidies requested.” This funding application
requests investment of $20,000 per below-market home, contradicting the approved Affordable Housing Plan and the understanding of the City Commission when it approved the preliminary plat.
Staff acknowledge that the funding application scores of CAHAB members and staff are more
than sufficient for a positive recommendation. Bearing in mind the Community Housing Fund’s limited balance and projected revenues, along with the two concerns about property ownership and the disparity between the City Commission approved PUD and this request, staff recommend that this application not be funded.
ALTERNATIVES: 1. Approve the proposed motion. 2. Approve the proposed motion with modifications as specified by the Board. 3. Other action as determined appropriate by the Board.
4. Approve the partial funding of the request as described in the Alternative
Recommendation section of this memorandum.
ALTERNATIVE RECOMMENDATION: Staff alternatively recommend that the request be funded at less than the requested amount of
$620,000. Staff have considered the application materials and presentation with the Community Housing Fund balance in mind, and propose an alternative to fully or not funding this request. The completion and approval of a grant agreement will be needed before presentation to the City Commission, and the City Commission must be informed of the change in request and
need for public subsidy to maintain affordability in the 31 CLT homes.
Of the 31 below market homes, 5 are Lower Priced Homes as required by the City’s AHO. Staff recommends investing $20,000 in each of these five homes, for a total of $100,000. In lieu of down payment assistance of $10,000 that could go to a qualified household and up to $10,000 of
reimbursement to the developer of each affordable homes, an investment of $20,000 for each
Lower Priced Home would remain with that home, and allow the initial and future sale price of those homes to remain affordable to limited income households (Exhibit B is an image of how public subsidy remains with a home held in a community land trust model that requires legally binding resale restriction).
Of the 31 below market homes in this project, 26 will be priced so that they are affordable to households earning between 80% and 120% of AMI. Although the same rationale used above for public investment remains true for these homes, they are being priced to be affordable to households with higher earning capacity. As some alternative to fully funding this request must
be considered based upon the fund balance of the Community Housing Fund, a reduced
investment in these homes is recommended by staff. Staff recommends an investment of $10,000 in each of the 26 homes priced to be affordable to households earning between 80% and 120%.
Requested investment per home
Recommended Community Housing Fund Investment per home
Total Recommended Community Housing Fund Investment
5 Lower Priced Homes (below 70% AMI)
$20,000 per home $20,000 per home $100,000
26 Missing Middle Homes (between 80% - 120% AMI)
$20,000 per home $10,000 $260,000
$360,000 recommended total project investment
ALTERNATIVE SUGGESTED MOTION: Having reviewed and discussed the funding request from Headwaters Community Housing Trust, I move to recommend City Commission approval of an amount not to exceed $360,000 of public investment to offset a portion of the
original purchase price and be retained in the value of the 31 perpetually affordable homes in
the Bridger View Redevelopment Planned Unit Development.
FISCAL EFFECTS: The fiscal year 2021 budgeted fund balance after all proposed and
recommended funding and expenditures remains at over $766,514 (includes only Commission approved grants and appropriations) on the date this memorandum was written.
Report compiled on 10/30/2020
Exhibit A
Bridger View Redevelopment
Preliminary Plat and PUD Application
Section 10.c
Affordable Housing
Plan
Bridger View Affordable Housing Plan 10.01.2019
10.c Affordable Housing Plan
Introduction
This Affordable Housing Plan is submitted as a component of the Preliminary Plat Application
for the Bridger View Redevelopment. The plan may be further clarified as the development
progresses with any adjustments captured in the Final Plat Applications.
The Bridger View Redevelopment proposes to provide 62 homes on the site of the former
Bridger View Trailer Park, adjacent to the Story Mill Community Park. The developer is utilizing
an innovative housing model that meaningfully addresses Bozeman’s housing affordability
challenge, mixing subsidized homes that households earning from 70-120% of the Area Median
Income can afford to purchase with market rate homes.
In this mixed-income neighborhood, all units will be the same size and built to the same quality
standards, making the market and subsidized units indistinguishable. Not only will the
development meet the requirements of the affordable housing ordinance, but the neighborhood
will also contribute to our community’s “missing middle” housing stock. According to the City’s
Affordable Needs Assessment: “An estimated 5,405 to 6,340 housing units for residents and
employees are needed by 2025, or an average of about 770 to 905 units per year. About 50% of
the housing needed should be priced below market: 2,775 to 3,255 units (395 to 465 per year).
This means ownership housing mostly priced below $350,000 (150% AMI).”
This Affordable Housing Plan specifically addresses those homes which will meet the
requirements of the City’s Affordable Housing Ordinance. Homes priced at levels that “missing
middle” households can afford will be addressed in the accompanying Community Housing
Plan.
A Community Land Trust entity will be established to permanently maintain the affordability and
protect the philanthropic investment for all subsidized homes in the Bridger View neighborhood.
The Community Land Trust entity will be described in greater detail in the Community Housing
Plan.
1. Number of affordable homes proposed in each affordable home category and
number of market- rate homes.
The Bridger View Redevelopment proposes 62 total homes, consisting of townhomes,
condominiums and single household detached homes. Ten (10) of the homes are
condominiums, which are exempt from the Affordable Housing Ordinance (AHO), leaving 52
homes subject to the AHO.
Bridger View Redevelopment – Unit Mix
Bridger View Affordable Housing Plan 10.01.2019
Condominiums Townhomes/ Single-household Total
Lower-priced homes 0 5 5
"Missing Middle" homes 5 21 26
Market rate homes 5 26 31
Total 10 52 62
Five (5) homes will be Lower-priced Homes meeting the Affordable Housing Ordinance (AHO)
requirements, with a .2 pay-in as determined by the City’s published chart.
52 townhomes/single household homes x 10% = 5.2 homes required
Twenty-six (26) homes will be sold at prices that “Missing Middle” households can afford to
purchase (discussed in the Community Housing Plan) with the remaining 31 homes sold at
market rates.
2. The number of bedrooms in each affordable home
Of the five affordable homes meeting the AHO, one home will be a one-bedroom, 3 homes will
be two-bedrooms, and 1 home will be a three bedroom.
Bedroom Mix of Lower Priced Homes
1-bedroom 2-bedroom 3-bedroom
Lower-priced homes 1 3 1
This unit mix is consistent with the mix of bedrooms within the neighborhood.
3. Anticipated Pricing and deed restrictions
The five lower-priced homes meeting the AHO requirements will be priced in accordance with
the City’s published AHO pricing schedule. The investment in the affordability of the lower-
priced homes will be maintained in perpetuity utilizing a 75-year ground lease (located in
Appendix 10.e) managed by the new Community Land Trust as described in the Community
Housing Plan.
4. Location of affordable homes in the development (lots in the plat or units within a
site plan)
Lower-priced homes will be intermixed with the townhomes and detached homes, throughout
the site and evenly distributed by phase. Lower-priced homes will not be included within the
condominium units. However, the different classification of homes will be evenly distributed
throughout the neighborhood and built the same so that all the homes are equivalent and
Bridger View Affordable Housing Plan 10.01.2019
indistinguishable. The final location of the Lower-priced homes meeting the AHO will be
identified as part of the Affordable Housing Plan submitted with Final Plat.
5. Timing of delivery of the affordable homes in relation to the market-rate homes in
the development
HRDC is constructing the infrastructure and homes in the Bridger View neighborhood in three
phases. The Lower-priced Homes meeting the AHO will be evenly distributed by phase to be
delivered concurrently with the market rate homes. The final location of the AHO homes will be
identified as part of the Affordable Housing Plan submitted with Final Plat.
6. Marketing plan describing how affordable homes will be offered to the public;
The development of the Bridger View neighborhood includes the establishment of a new CLT
stewardship entity to preserve the investment in affordability. This CLT will actively market the
Lower-priced homes to income-qualified residents using best practices, including
homeownership education to help buyers understand the unique financing and ownership
structure of the community land trust model.
7. Plan for construction of affordable homes in phased developments.
HRDC is constructing the infrastructure and homes in the Bridger View neighborhood in three
phases. The Lower-priced Homes meeting the AHO will be evenly distributed by phase to be
delivered concurrently with the market rate homes. The final location of the AHO homes will be
identified as part of the Affordable Housing Plan submitted with Final Plat.
8. Any other information that is reasonably necessary to evaluate the compliance of
the affordable housing plan with the requirements of the affordable housing
ordinance.
The proposed project meets the requirements of the AHO, while substantially exceeding it
through the accompanying Community Housing Plan. The Bridger View neighborhood will make
a meaningful contribution to Bozeman’s Community Housing needs through the inclusion of
homes that households earning median incomes (between 80 and 120% of AMI) can afford to
purchase. In addition to providing quality homes that residents can afford, the development
team is committed to keeping the lower-priced and missing middle homes affordable in
perpetuity via a new Community Land Trust entity, ensuring that the investments necessary to
achieve affordability endure for generations.
Exhibit B