HomeMy WebLinkAboutA3. Resolution 4659 Housing Manual
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission FROM: Wendy Thomas, Director of Community Development
SUBJECT: Resolution 4659 for Adoption of the Affordable Housing Manual
MEETING DATE: February 8, 2016
AGENDA ITEM TYPE: Action
RECOMMENDATION: Adopt Resolution 4659 approving the administrative manual for the
affordable housing program.
MOTION: Having reviewed and considered the staff report, public comment, and all information presented, I hereby move to approve Resolution 4659 adopting a program manual
for the affordable housing program.
EXECUTIVE SUMMARY: The manual is a required component of Ordinance 1922 which
adopted the City’s inclusionary housing program. The manual, as drafted, is a one stop document that includes programmatic information from the ordinance supplemented with
process information, program components, and examples for a variety of users including city
staff, developers, builders, real estate agents, bankers and potential home buyers. In addition,
forms and sample documents for liens are included. The goal of the manual is to provide limited
flexibility for transition and evolution of the affordable housing program in a comprehensible and transparent document.
The manual addresses only the voluntary program as that is the program currently in place. The
manual may be updated in the future to accommodate any transition within the program.
Manual Components: The Affordable Housing Manual content is structured to follow directly
the structure of Ordinance 1922. Directly carrying over the basic components of the housing
program including goals, definitions, pricing, and construction standards. Below is the list of the
chapters within the manual.
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Overview and Goals
1. Definitions
2. Accessing Affordable Housing Incentives 3. Pricing of Affordable Homes
4. Timing of Delivery of Affordable Homes
5. Minimum Design and Construction Standards 6. Qualifying, Applying for, Buying and Occupying Lower-Priced Homes
7. Marketing and Sales of Lower-Priced Homes 8. Recordation and Subsidy Recapture for Lower-Priced Homes 9. Marketing and Sales of Moderate-Priced Homes
10. Administration, Monitoring and Enforcement by the City There are a series of forms and documents attached as Exhibits in order to assist stakeholders in
the process of documenting the creation of an affordable home, placing liens, recapture
documents and forms for monitoring residency of lower-priced homes. Key Components of Manual: There are comments within the draft manual, attached to this
report, that note where provisions in the adopting ordinance were further explained and detail has
been provided for the administration of the affordable housing program. Several of these
components are worth calling out. These components are:
• Goals
• Marketing Steps for Affordable Homes
• Subordination Policy
• Repayment Formula
• Responsibilities of the City/City’s Agent
The manual contains the current goals that are established in the Inclusionary Housing ordinance. The manual goes on to suggest how to calculate goals for future years beyond the initial two year
phase in. As discussed with the City Commission during the creation of the program, staff is
suggesting using a percentage of homes based on a five year rolling average of building permits
issued for single family, duplex and townhouses. The formula for calculation was supported by
stakeholders during the program creation process. The formula could be easily amended to respond to market forces. This type of a flexibility through the creation of a manual is vitally
important to keeping the program responsive to community needs and market conditions.
Marketing is an important part of an affordable housing program for reasons including fairness
of access, ensuring the success of the program through timely sale of properties, and creating a level of understanding by all participants regarding sale, occupancy and credit for the creation of
affordable homes.
The manual provides for the creation of a waiting list for Lower-Priced (65-80% AMI) homes.
Moderate Priced (81-100% AMI) homes will not be subject to a waiting list as the intent for the creation of homes in this category was to increase inventory of homes to create additional
opportunities within Bozeman for home ownership. For Lower-Priced homes a waiting list will
be kept by the City or the City’s Agent. Successful marketing will be the result of seamless
coordination between the housing creators, administrators, realtors, bankers, title agents and
purchasers. By creating specificity as to duties and responsibilities the manual’s purpose is to create clarity. Without question this will be a process that will have its challenges, however the
thoughtful input by members of CAHAB, with their expertise in areas that align with the future
participants in the affordable housing program was invaluable.
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The responsibility of the City or the City’s Agent is an important part of the manual. The terms
were intended to be used interchangeably because at this time, the City does not have
experienced staff in place to administer programs such as home buyer training or income
certification. The Human Resources Development Council (HRDC) has been and continues to be the provider of these types of services within Bozeman. Therefore, the best utilization of
resources and expertise would indicate that having HRDC continue to provide these services
would be the best choice for the community. HRDC and city staff have been working together
on the affordable housing program development, including discussions on administration for
approximately six months. The result has been coordination between us to create sample documents in the manual, ensuring coordination between down payment assistance programs and
clarity around administering and the affordable housing program.
The down payment assistance program currently administered by HRDC using federal funds was
the template for program minimums, applicant eligibility, and lien placement.
The Commission challenged the stakeholders, including staff, to develop a sustainable program.
An important part of the program is subsidy recapture. The community will be investing tax
dollars, from the Affordable Housing Fund, as well as non-cash subsidies such as expedited
processing, parkland dedication reduction and relaxations to lot size minimums.
Cash subsidies will be recapture through liens on the property. Cash subsidies will be used to
pay for impact fees and down payment assistance. The “loans” secured by liens will be held at
0% interest and are repayable at the time of sale or refinancing for purposes other than rate or
period adjustments. These liens will be subordinate to the mortgage, but also could be subordinate to HUD down payment assistance (DPA), and potentially Montana Board of
Housing loans for down payment assistance. HUD DPA always claims the first subordinate
position. What this could mean for the city is the lien may not be repaid if the homeowner were
to default on the mortgage.
The manual is specific about the repayment policy for subsidies. Basing the lien on 98% of the
assessed value creates a situation where the owner of the home will realize equity sooner making
the opportunity to own one of these homes appealing to buyers. One of the primary issued raised
by the community when reviewing the Work Force Housing Ordinance was the shared equity
provisions. This change in the program from the prior program allows a lien to act as a shared equity while trying to ensure affordability, accumulation of equity and the ability to resell the
property to any buyer.
Additional Steps: The manual was written so that sections or provisions that are of specific
interest to particular groups or persons could be pulled from the manual and placed into informational brochures. Staff will be proposing funding be designated to produce “marketing
materials” for the affordable housing program.
Advisory Board Comments: On Thursday, January 25, 2016, the Community Affordable
Housing Advisory Board (CAHAB) met to discuss the proposed manual. The manual they reviewed was an earlier version of what the City Commission is receiving as an attachment. The
minutes from the meeting are attached for your review. CAHAB made comments on many of
the provisions within the manual that are carry overs from the ordinance. The following is a
summary list of comments from the board and in italics following the comment, is the action that
has been taken to address the comment. 1. For goal target, homes that have already been constructed and are selling should be
counted. How to determine the homes to count toward the goal is in Ordinance 1922.
It specifies counts based on new construction.
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2. Staff response time to initial submittal. Section 2 has been amended to include a
response time of five business days.
3. Could incentives be used for homes selling for less than 65% AMI? The focus of the program is for homeownership for detached and attached units through fee simple ownership; however this suggestion is a good suggestion for modification to the
program.
4. Clarity should be provided on extent of stop work order for non-compliance. Members
felt that all construction in a subdivision should not be stopped if there was non-compliance on one home. 5. Specify the procedures for notification for non-compliance. Non-compliance with
provisions of the Unified Development Code (UDC) in 38.34.
6. Section #5, Remove minimum heated square footage from manual. The City
Commission may want to consider making the attached and detached square footages consistent or eliminating the requirement altogether and rely solely on building code minimum size requirements.
7. Remove dishwasher from equipment required for home.
8. Remove the requirement for landscaping. Landscaping is a requirement of the UDC,
38.26.050. Not providing landscaping was not proposed as an incentive because the premise was inclusionary and not to have these affordable home visually different from other homes in the community.
9. Section 6, Remove, “not more than 4 unrelated people”. This is a direct carry over from
the UDC and should not be considered as an amendment to the manual.
10. Manual should provide greater clarity on phasing. This issue will be addressed in individual affordable housing plans. 11. Section 6, $1,000 down payment. CAHAB recommended language be added to clarify
the payment should be at escrow.
12. Buyer Disclosure. CAHAB recommended replacing “developer” with “agent”. The text
was amended to reflect the recommended change, by adding agent.
13. Section 8, Subsidy recapture. Recommended removing “low market” as a term that is too general. The term was left in the draft based on public input that in fact these price
points are on achievable by the market at this time.
14. Allow cash in lieu payments as part of the voluntary program. The cash in lieu
provision of only addressed in the mandatory program. It is not appropriate to allow cash in lieu payments under the voluntary program that has a goal of housing creation. 15. Remove HUD-1 and replace with Closing Disclosure. This replacement was made
throughout the document to reflect adopted changes in terminology.
At this time one public comment has been receive regarding the size requirement of the
affordable units.
I fully anticipate this manual will be revised and refined as the program is utilized, as was
intended by the Commission when considering the inclusionary housing ordinance. Flexibility
in the manual will allow the program to be adaptive to market, regulatory, and best practice
changes in a responsive public process.
ALTERNATIVES: 1) Direct staff to amend the draft manual; or
2) As determined by the Commission.
FISCAL EFFECTS: The adoption of the manual will not have a direct fiscal impact other than income verification of moderately priced homes. It is estimated that this monitoring will be
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variable based on housing creation rates, but would generally cost $2000/year. Other programs
and monitoring in the manual are requirements required in Ordinance 1922.
Attachments: Draft Affordable Housing Manual for Adoption
Resolution 4659
CAHAB draft meeting minutes from January 25, 2016
Public Comment
Report compiled on: January 28, 2016
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COMMISSION RESOLUTION NO. 4659
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, APPROVING AN ADMINISTRATIVE MANUAL FOR THE INCLUSIONARY HOUSING PROGRAM AS REQUIRED IN ORDINANCE 1922,
AS CODIFIED IN THE UNIFIED DEVELOPMENT CODE, 38.43.140.
WHEREAS, the City of Bozeman is required by Ordinance 1922 to create and
adopt an administrative manual for the implementation of the Inclusionary Housing
program; and
WHEREAS, the City of Bozeman created an incentive based inclusionary
housing program that is voluntary; and
WHEREAS, the City of Bozeman has established goals for the creation of
affordable housing within Ordinance 1922;
NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City
of Bozeman, Montana:
Section 1
The administrative manual for the Inclusionary Housing program is approved for
use to implement the Inclusionary Housing program as adopted in Ordinance 1922. The
manual shall be as follows:
See Exhibit A
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Section 2
This manual shall be in full force and effect upon approval of this resolution.
PASSED AND APPROVED by the City Commission of the City of Bozeman, Montana,
at a regular session thereof held on the 8th day of February, 2016.
_______________________________
CARSON TAYLOR Mayor
ATTEST:
_________________________________
STACY ULMEN, CMC City Clerk
APPROVED AS TO FORM:
_______________________________
GREG SULLIVAN City Attorney
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City of Bozeman
Affordable Housing Ordinance (AHO)
Administrative Manual
Adopted by Resolution 4659
February 8, 2016
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Table of Contents
Purpose of This Manual and Goals of the Ordinance ............................................. 2
1. Definitions.......................................................................................................... 3
2. Accessing Affordable Housing Incentives ......................................................... 5
3. Pricing of Affordable Homes .............................................................................. 7
4. Timing of Delivery of Affordable Homes .........................................................12
5. Minimum Design and Construction Standards ............................................... 13
6. Qualifying, Applying for, Buying and Occupying Lower-Priced Homes .......... 15
7. Marketing and Sales of Lower-Priced Homes ..................................................22
8. Recordation and Subsidy Recapture for Lower-Priced Homes .......................24
9. Marketing and Sales of Moderate-Priced Homes ...........................................28
10. Administration, Monitoring and Enforcement by the City ............................29
Exhibits (See attachment)
A: Template for Affordable Housing Plan
B: Proposed Project Description
C: Template for Maximum Home Price Schedule
D: Intake Application Form
E: Template for Maximum Buyer Income Schedule
F: Preliminary Buyer Certification Form
G: Purchase Transaction Certification Form
H: Disclosure Statement for Buyers of Lower-Priced Homes
I: Homebuyer Certification Checklist
J: AHO Disclosure Addendum to Purchase Contract for Lower-Priced Home
K: AHO Buyer’s Guide
L: Form of Affordability Lien for Developer
M: Form of Affordability Lien for Subsidy Recapture
N: Form of Affordability Lien for Down Payment Assistance
O: AHO Disclosure Addendum to Purchase Contract for Moderate-Priced Homes
P: Occupancy Affidavit
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Purpose of This Manual and Goals of Ordinance
The purpose of this Administrative Manual is to describe the administrative procedures and
policies for administering Chapter 38, Article 43, Bozeman Municipal Code as created pursuant
to Ordinance 1922 (the Affordable Housing Ordinance or AHO). This Manual is intended to be
used as a guide for administrators of the City’s affordable housing program, developers of
affordable homes, and other interested parties.
Goals for the Voluntary Creation of Affordable Housing: 2016-2017
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 priced 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 priced 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% of Area Median Income (AMI).
Should the any of the goals described above not be met by a target date, development
proposals that are submitted after the relevant target date will be required to provide 10% of
the total residential units in the developed as Lower-Priced Homes, 30% of the total residential
units as Moderate-Priced Home, or a mix of both types as defined in the Ordinance and this
Manual.
When the voluntary goals are met, the formula for establishing new goals will be based on the
following: Using 10% of a five year rolling average of the number of permits pulled each year for
“single family” residential, duplex, triplex and townhouse construction.
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1. Definitions
a. Affordable Housing or Affordable Home – A dwelling for purchase by an owner-
occupant that requires no more than 33% of a household’s income for housing
payments, is marketed and sold subject to the AHO, and meets the definition of a
Lower-Priced Home or Moderate-Priced Home in the AHO.
b. Area Median Income or AMI – As calculated by the U.S. Department of Housing and
Urban Development (HUD), AMI is the median income for a family of four within a
specific geographical area, such as Gallatin County. For each such region, HUD adjusts
this AMI calculation for households of different sizes and updates the calculations
annually based on estimated changes in area incomes. For purposes of the AHO, the
city adopted HUD’s AMI calculations as an equitable and reasonable method to
determine affordability, based on percentages of AMI specified in the AHO.
c. 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.
d. Common Ownership or Control – “Common ownership or control” refers to property
owned or controlled by the same person, persons, or entity, or by separate entities in
which any shareholder, partner, member, or family member of an investor of the
entity owns ten percent (10%) or more of the interest in the property.
e. City’s Agent – Refers to a qualified entity selected by the city to carry out aspects of
the implementation of the AHO.
f. Developer – For purposes of the AHO, a developer is the person or legal entity, or
their successor(s) in interest who: (a) submits an Affordable Housing Plan for a subject
property along with other submissions required for land use approvals, zoning, or
permit reviews by the city, and/or (b) is the owner of property subject to the AHO
during the development phase or a successor in title, such as a builder, obligated to
implement the Affordable Housing Plan required by the AHO with respect to one or
more lots or parcels of land and/or (c) receives incentives for the production of
affordable housing.
g. AHO Maximum Price - The maximum AHO-allowed price of Lower-Priced Homes and
Moderate-Priced homes is determined from a schedule of AHO Maximum Prices
calculated as described in Section 3 and Schedule C of this Manual, to which may be
added (if feasible for financing) up to $3,000 in the costs of “extras” chosen by the
buyer. For Lower-Priced Homes subject to AHO subsidy recapture requirements, the
Comment [PW1]: Changes
suggested by Kevin Thane.
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sale price on the Settlement Disclosure statement at the real estate closing may differ
from the AHO Maximum Price for reasons explained in Section 8 of this Manual.
h. Eligible Buyer – A household meeting the AHO’s eligibility requirements to purchase a
home that is subject to the conditions of the AHO.
i. Housing Counseling Agency – An organization certified by the US Department of
Housing and Urban Development to provide housing counseling and education.
j. Liquid Assets – Assets such as cash and stocks, bonds or similar that can readily be
converted to cash with no significant loss in value, but excluding long term retirement
assets such as IRA accounts, 401K accounts, pension funds, etc.
k. Lower-Priced Home or LPH – Newly created dwelling for purchase, determined by the
city in accordance with the AHO to be affordable to a household with an income
between 65% and 80% of AMI.
l. Market-Rate Home – Any dwelling subject to the AHO that is not an affordable home,
including detached dwellings, attached town houses, and condominium units but not
including housing units that are developed for exclusive use as a rental. The number of
market-rate homes in a development is used to determine the required number of
Affordable Homes, as described in the AHO.
m. Moderate-Priced Home or MPH – Newly created dwelling for purchase, affordable to a
household with an income between 81% and 100% of AMI.
n. 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:
i. Before the improvement or repair is started; or
ii. If the structure has been damaged, and is being restored, before the damage
occurred. For the purposes 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 ensure safe living conditions; or any
alteration of a structure listed on the National Register of Historic Places or state
inventory of historic places.
Comment [PW2]: Kevin Thane
suggested this added language.
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2. Accessing Affordable Housing Incentives
Affordable housing incentives are available to developers who produce Lower-Priced or
Moderate-Priced Homes.
Affordable Housing Plan
To be eligible to receive AHO incentives, a developer must submit an Affordable Housing Plan
(AHP) for review and approval by the city, describing how the requirements of the AHO will be
met and the incentives requested by the developer. An Affordable Housing Plan will most likely
go through several draft iterations. Once the AHP is completed and approved by the city, it
constitutes a written commitment between the city and the developer.
The contents of an Affordable Housing Plan are shown in Exhibit A: Template for Affordable
Housing Plan. Exhibit A also includes directions and a step-by-step process for completing the
AHP.
Submission of Affordable Housing Plan. The AHP submission process begins with the completion
of Exhibit B: Proposed Project Description form, which must briefly describe the pertinent
details of the development such as the total number of units and which incentives the developer
wants to use. This form is submitted in advance of a meeting with city staff to discuss
preparation of the AHP. At this meeting, the developer and city staff review the Proposed
Project Description and city staff provides guidance on completing the AHP. City staff shall
provide the developer with a determination of application completeness within five (5) business
days of submittal.
City Technical Assistance. City staff is available throughout the process to assist with guidance
on drafting the AHP; however, the developer is ultimately responsible for drafting and
submitting the AHP to the city.
Timing of Affordable Housing Plan Preparation; Incentives. A developer may apply for incentives
at any stage of the development process, although applying at the point of subdivision plan
submission may provide the greatest benefit from incentives. In this way, developers can elect
to apply for incentives for a single unit or multiple units.
If an AHP is approved and incentives used, a condition of approval for any subdivision plat or site
plan will be imposed that requires recordation of the AHP. The city may also enter into a
separate agreement obligating the developer to meet the requirements of the AHO.
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Step 1 •Project Description: Developer completes and submits to the city a Proposed Project Description form which includes key project details and desired incentives to be accessed.
Step 2 •Consultation: Developer meets with city staff to obtain guidance on preparation of draft affordable housing plan.
Step 3 •Draft Affordable Housing Plan: Using the Affordable Housing Plan Template, Developer submits draft affordable housing plan for review by city staff.
Step 4 •Review and Comments: City staff reviews draft plan and accepts plan or provides comments for revision of draft to comply with AHO and manual.
Step 5
•Execution: Once the plan has been found by city staff to satisfy the AHO and manual requirements, the agreement is executed between the City of Bozeman and the developer.
Step 6
•Recording: After the agreement has been executed the agreement is recorded and affordable units or lots are noted on the plat or site plan for the development.
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3. Pricing of Affordable Homes
Schedule for AHO Maximum Home Price
The AHO establishes pricing tiers for Affordable Homes (Lower-Priced Homes and Moderate-
Priced Homes). The pricing tier for Lower-Priced Homes includes a category for an AHO
Maximum Price calculated based on household income of 70% AM, a category for an AHO
Maximum Price calculated based on household income of 80% AMI, and a category for and AHO
Maximum Price calculated based on household income of 90% AMI. The city will calculate the
Maximum Home Prices for each category on an annual basis using the formulas detailed below
and also contained in Exhibit C: Template for Maximum Home Price Schedule. The city will
publish the Maximum Home Price Schedule for the three price categories within 30 calendar
days of HUD’s annual release of income limits by household size derived from an annual
recalculation of the Area Median Income for Gallatin County, and become effective the date of
publication. The Director of Community Development is authorized to establish and publish this
schedule.
The formula for calculating the maximum prices at which Developers may sell Affordable Homes
is based on three factors: (1) assumptions about costs of home ownership; (2) the AMI and
fractions thereof for the size of household; and (3) the percentage of AMI that corresponds to
the category of Affordable Home. These factors are explained below.
Assumptions About Cost of Home Ownership. To calculate the maximum prices at which
Developers may sell Affordable Homes the city uses assumptions about the costs of
homeownership as authorized by the AHO. The Director of Community Development may make
de minimis exceptions to the application of these assumptions, and may recalculate the
maximum sale prices if prevailing mortgage interest rates have adjusted by 50 basis points or
more over the assumption used for the most recent schedule. The city may conduct a survey of
a sample of recent home sales and other data sources to determine if any changes have
occurred in housing payment cost assumptions used to determine affordable prices – such as
typical monthly costs of real estate taxes, insurance, association fees, and private mortgage
insurance. If the Director of Community Development determines any such changes materially
affect the schedule, the Director may amend the schedule.
AMI for the Household Size. The annual AMI figures for Bozeman will vary based on the number
of people who make up the household. The AHO establishes the size of home (number of
bedrooms) that corresponds to each household size. The AMI used to calculate the AHO
Maximum Price for an Affordable Home is as follows:
Home Size AMI Used:
Zero-Bedroom/Studio One-person household
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One-Bedroom Two-person household
Two-Bedroom Two-person household
Three-Bedroom or larger Four-Person household
Percentage of Area Median Income. The AHO establishes three levels of AHO Maximum Prices
for Affordable Homes, corresponding to 70% (effective), 80% (effective) and 90% of AMI.
(Except for the AHO Maximum Price for 80% AMI, the AMI benchmarks for pricing are set at 10%
below the corresponding maximum incomes in order to permit a wider range of buyers to
qualify for the purchases.)
Formula for Determining AHO Maximum Prices
The following is a summary of the formula used to determine the maximum effective sales price
of a two-bedroom, Lower-Priced Home priced at the 70% of AMI level. The example below uses
the AMI for Bozeman in effect as of February 1, 2016.
a) Multiply the annual AMI for the household size by the applicable percentage of Area
Median Income (AMI) (70, 80, or 90%):
AMI for a 2 person household is $54,900 x 70% = $38,400 (70% of AMI)
b) Divide by 12 to determine monthly income at that AMI level:
$38,400 divided by 12 = $3,203
c) Multiply monthly income by 33% to determine maximum affordable monthly housing
payment:
$3,200 x 33% = $1,057
d) Subtract from the total maximum monthly housing payment estimates for monthly
payments for real estate taxes, homeowner’s insurance, mortgage insurance and
homeowners association fees, in this instance a total of $366
$1,057 - $366 = $692
e) The resulting amount is the maximum principal and interest payment capacity, from
which a mortgage amount is imputed using the prevailing mortgage rate, which is
currently assumed to be 4.5% per annum.
Comment [PW3]: The Ordinance
requires that these costs be taken
into account but does not specify the
amounts to be assumed for each
component of monthly housing costs.
See Exhibit C for the current
estimated amounts.
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f) The resulting amount equals the AHO Maximum Price for a Lower-Priced Home at the
70% AMI price level. In this pro forma example, the resulting price is $136,404.
The above formula is used to determine the AHO Maximum Prices of Lower-Priced Homes at the
70% and 80% AMI price level, and for AHO Maximum Prices of Moderate-Priced homes at the
90% AMI price level.
Explanation of Elements of the Pricing Formula
Maximum Monthly Housing Payment. The maximum monthly housing payment for a buyer is
determined by multiplying a maximum housing expense ratio of 33% by 1/12th of the annual
Area Median Income for a given household size and income level.
Maximum Monthly Mortgage Payment Capacity. For each price tier, the maximum monthly
mortgage payment is calculated as the maximum monthly housing payment less the following
monthly expenses: estimated real estate taxes; homeowner’s insurance; homeowner
association fees; and private mortgage insurance payments. For each price tier and
subcategories of bedroom sizes of homes, the result represents the assumed typical amount of
the monthly payment available for principal and interest payments on a home purchase loan.
a) Real Estate Taxes. The assumed rate for monthly real estate taxes will be
.0833% of the maximum home price for each price level as determined by
sample survey of Bozeman home prices and corresponding real estate tax
assessments.
b) Homeowner’s Insurance. The assumed rate for monthly homeowners’ insurance
costs will be .0292% of the maximum home price for each price level, per a
sample survey.
c) Private Mortgage Insurance. The rate used for assumed mortgage insurance
premiums (PMI) cost will be based on the current rate used for Federal Housing
Administration first mortgages with minimum 3.5% down payment
requirements. It is assumed that a typical buyer of an AHO home will make a
low down payment and thus be required to obtain mortgage insurance.
d) Homeowner Association Fee. The rate used for homeowner/condo association
dues will be established using a sample survey of typical recent projects within
the City of Bozeman. The initial rate assumption used will be $25 per month.
Mortgage Loan Payment Assumptions. The assumed loan type will be conventional or
government insured 30-year (360 month), fixed-rate loan, with 3.5% of the home price as a
down payment. The interest rate used in the calculation of AHO Maximum Prices will be the
average of three current interest rates for 30-year fixed-rate conventional and government-
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insured mortgage loans offered by banking institutions loans in Bozeman. The assumed term will
be 30 years.
Formula for AHO Maximum Price (based on 70% of AMI)
The AHO Maximum Price will be based on the maximum monthly mortgage payment capacity at
70% of Area Median Income, adjusted for the number of bedrooms, and calculated at present
value based on 12 monthly payments, for a term of 360 months, and the current prevailing
mortgage interest rate. This formula is built into Exhibit C: Template for Maximum Home Price
Schedule.
Formula for AHO Maximum Price (based on 80% of AMI)
The AHO Maximum Price will be based on the maximum monthly mortgage payment capacity at
80% of Area Median Income, adjusted for the number of bedrooms, and calculated at present
value based on 12 monthly payments, for a term of 360 months, and the current prevailing
mortgage interest rate. This formula is built into Exhibit C: Template for Maximum Home Price
Schedule.
Formula for AHO Maximum Price of Moderate-Priced Homes (based on 80% of AMI)
The AHO Maximum Price for Moderate-Priced Homes will be based on the maximum monthly
mortgage payment capacity at 90% of Area Median Income, adjusted for the number of
bedrooms and calculated at present value on 12 monthly payments, for a term of 360 months,
and the current prevailing mortgage interest rate. This formula is built into Exhibit C: Template
for Maximum Home Price Schedule.
Updates to Pricing Schedule
HUD publishes updated Area Median Income calculations on an annual basis, typically in the
first quarter of the calendar year. Because changes in mortgage interest rates have an impact on
the buying capacity of lower-income homebuyers, the city, may update the Maximum Home
Price Schedule during the interim between HUD AMI annual updates if prevailing interest rates
adjust more than 50 basis point (0.5%). Developers with executed Affordable Housing Plans will
be notified of any changes to the Maximum Home Price Schedule.
Applicability of Revised Pricing Schedules
The pricing of Lower-Priced and Moderate-Priced Homes is subject to the Maximum Home Price
Schedule in effect at the time of issuance of building permit. A developer may request that a
newly published Maximum Home Price Schedule apply to a home subject to a previous
Maximum Home Price Schedule.
Limit on Buyer-Selected Upgrades That Are Additive to AHO Maximum Prices
Buyers of Lower-Priced Homes and Moderate-Priced Homes may include up to $3,000 of buyer
upgrades over the maximum home price as long as the buyer have evidenced sufficient
mortgage capacity at the time of Preliminary Certification.
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4. Timing of Delivery of Affordable Homes
The AHO requires that in each development in which more than one affordable home will be
sold, the Affordable Housing Plan must specify that affordable homes are to be sold
concurrently and in proportion to the sale of unimproved lots or market-rate homes.
Such timing will be represented in an affordable homes pricing and delivery schedule, to be
included in the Affordable Housing Plan.
A developer may always sell affordable homes earlier than required in an Affordable Housing
Plan.
If the city determines a development is out of compliance with the approved Affordable Housing
Plan with respect to its delivery of Affordable Homes, the city may require the developer to
immediately provide a written plan to remedy the non-compliance. If the developer fails to
describe and act on a satisfactory and timely remedy, the city may pursue enforcement actions
as provided for by AHO, which could include but are not limited to a stop-work order for all
construction in the development.
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5. Minimum Design and Construction Standards
Minimum design and construction standards below for Affordable Homes are intended to meet
the AHO requirement to “ensure livability and compatibility with nearby market-rate homes in
the development.”
Minimum Square Footage Requirements
Affordable Homes must provide the following minimum square footage of gross heated living
area (inclusive of partitions, closets, heated utility rooms, halls and stairways, but exclusive of
attics, porches, unfinished basements, garages and unheated storage space). Notwithstanding
these requirements, the Director of Community Development may grant exceptions to these
requirements for developments containing market-rate “small houses” that are smaller than
these minimums.
Detached Homes
Bedroom Size # Bathrooms Minimum Heated Area
1 Bedroom 1 800 square feet
2 Bedroom 1 1,000 square feet
3 Bedroom 1.5 1,250 square feet
4+ Bedroom 2 1,400 square feet
Attached Homes
Bedroom Size # Bathrooms Minimum Heated Area
Studio/1 Bedroom 1 500 square feet
2 Bedroom 1 650 square feet
3 Bedroom 1.5 800 square feet
4+ Bedroom 2 1,100 square feet
Mix of Bedroom Sizes
As described in the AHO, Affordable Homes must represent a mix of bedrooms per unit as
similar as possible to the mix of bedrooms per unit of the market-rate homes in the
development within which the Affordable Homes are located. If the bedroom composition in the
development as a whole is not known at the time of submission of the Affordable Housing Plan,
the following default distribution below may be used.
One-Bedroom 20%
Two-Bedroom 40%
Three-Bedroom 40%
In the case of Lower-Priced Homes, the developer may provide units with a different bedroom
mix than required under the approved Affordable Housing Plan if a different number of
Comment [PW4]: This entire
section is a refinement of Ordinance
section 38.43.070. The refinements
are based on this authority granted
by that section: “The city shall define
reasonable standards for the design
and construction of affordable homes
to ensure livability and compatibility
with nearby market-rate homes in the
development.” The standards
defined here are typical of programs
similar to AHO.
Comment [PW5]: Kevin Thane
commented: “Minimum Square feet
of heated area should not be defined
so that very small houses can qualify
under the AHO.” We do not believe
that developers should be able to
satisfy AHO requirements by building
very small homes in a development
with, on average, much larger
market-rate homes, since this would
thwart the intent of the Ordinance
language requiring “compatibility.”
But we did add language for
exceptions.
Comment [PW6]: Language added
in response to Mr. Thane’s comments
Comment [PW7]: The Ordinance
specifies this.
Comment [PW8]: This was not
specified in the Ordinance but was
deemed necessary to allow for
developments in which the bedroom
mix of a development is not known at
the time of submission.
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bedrooms better meets the needs of the next qualified purchasing household, subject to the
approval of the Community Development Director.
For both Moderate-Priced and Lower-Priced Homes, a developer may elect to build a home with
more bedrooms than the minimum number required under the AHO and Affordable Housing
Manual.
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, except that if
such equipment is not provided in market-rate homes, it does not have to be provided in AHO
homes.
Location within Neighborhood
Affordable Homes must be dispersed among market-rate homes in the development, to the
extent practicable. This distribution should be evidenced on the recorded plat for the
development.
Design and Materials
Affordable Homes must be designed, built and landscaped similar to market-rate homes in the
development, and with similar quality and type of materials, lighting, plantings, and irrigation
systems. Interior finishes may differ from market rate homes but should be functionally
equivalent and good quality.
Other Features
Features of Affordable Homes, such as garages, parking areas, and green-building features must
be functionally equivalent to market rate homes in the development. The extent of the features
of an AHO home do not need to be exactly the same as market-rate homes in the development;
however, if, e.g., garages are present in market rate units of the same bedroom size as AHO
units, at least one garage or carport bay must be included in the AHO home.
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.
Notwithstanding the foregoing standards, developers must use their own judgment about
possible additions of square footage and amenities over these minimums for the purposes of
marketing Affordable Homes and other homes in the development.
Comment [PW9]: Kevin Thane
recommended that these features be
deleted because the D/W may not be
wanted by some buyers and raised
the price of the home. And central
heating may not be required in a
highly energy efficient home. We
agree only in part. In our experience
the vast majority of even entry-level
homes have this minimum amount of
equipment and hookups.
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6. Applying for, Qualifying, Buying and Occupying Lower-Priced Homes
Background
The AHO establishes two types of Affordable Homes with unique buyer qualification criteria for
each type.
Lower-Priced Homes have AHO Maximum Prices significantly below market rate to make home
purchases more affordable, and may also have received cash and non-cash incentives from the
city at the development and construction stage. Because buyers of Lower-Priced Homes
therefore receive a substantial benefit in the form of below-market prices, the AHO limits the
availability of these homes to lower-income buyers, who generally could not afford to buy a
market-rate home. Besides income caps, buyers of Lower-Priced Homes also have to meet other
eligibility criteria.
This section of the Manual describes how lower-income buyers are qualified to purchase a
Lower-Priced Home and how those qualifications are certified.
The eligibility requirements of this section also apply to those buyers of Lower-Priced Homes
seeking down payment assistance.
Required Intake Form
A prospective buyer must complete Exhibit: D: Intake Application Form and participate in an
initial intake appointment with the City’s Agent selected to administer the AHO program.
Prospective buyers must meet all of the criteria described below. The intake form gathers all of
a buyer’s self-reported data needed to qualify the prospective buyer. As noted below, buyers
will need to provide additional documentation at the time of intake and possibly more
documentation later in the process for verification purposes.
Each intake form must be signed by the prospective buyer and any co-buyer(s), who must certify
in writing that the information is true and agree in writing to release certain documents to the
city or its agent upon request. Such documents include any future sales contract and Settlement
Disclosure statement related to the purchase of a Lower-Priced Home, as well as proof of
income, proof of residency, and financial documents as described in this section.
Income Limits
To qualify to purchase a Lower-Priced Home that is being sold at or under AHO Maximum Prices
established at 70% and 80% of AMI, the buyer’s total household income must be at or below
80% of the Area Median Income, adjusted for family size, as defined by HUD annually and
published by the city using Exhibit E: Template for Maximum Buyer Income Schedule.
Comment [PW10]: This section is
more specific than the Ordinance
language. The authority for defining
these policies and procedures comes
from 38.43.090 of the Ordinance,
which states: “Developers subject to
this article shall market and sell
affordable homes in accordance with
provisions described in the city’s
published instructions for preparing
affordable housing plans. These
provisions will address factors such as
waiting list management, marketing
materials, the city’s and the
developer’s respective responsibilities
for marketing affordable homes and
finding qualified buyers, actions to be
taken in the event of inability to
identify qualified buyers, procedures
for certification of buyer eligibility,
purchase contracts, and full
disclosures to buyers of their
obligations and rights under this
article.”
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Method of Income Verification. The income level of the Buyer’s household must be established
at the time of initial intake, placement on a waiting list and/or contract to purchase. The method
of verification will be the HUD Part 5 definition (24 CFR Part 5) as applied to the HOME program.
The CPD Income Eligibility Calculator (www.hudexchange.info/incomecalculator) or another
method acceptable to the city and evidenced using Exhibit F: Preliminary Buyer Certification
Form may be used to complete the certification.
Treatment of Assets
A buyer whose household liquid assets exceeds $25,000 at the time of closing on a Lower-Priced
Home is not eligible. Liquid assets are defined as cash or other investment assets that can be
readily converted to cash with little or no penalty. This is not intended to include personal
property of the buyer(s) or restricted retirement assets such as 401K accounts, IRA accounts, or
similar funds with tax deferred status. The Director of Community Development may waive
asset limit requirements in unusual circumstances for certain buyers, such as a person close to
retirement age or someone who is permanently disabled and dependent on cash assets for
ongoing living expenses.
Method of Verification. Initial verification will be determined through a review of the asset
information included on the Intake Application Form and verified through a review of all banking
and asset documentation provided in an in-person meeting with the City’s Agent. The total of
liquid assets will be entered into Exhibit F: Preliminary Buyer Certification Form.
Eligible Household Definition
The households of eligible buyers that will be occupying a Lower-Priced Home must meet the
following definition per AHO, as follows:
A person living alone, or any of the following groups living together as a single nonprofit
housekeeping unit and sharing common living, sleeping, cooking and eating facilities:
a) Any number of people related by blood, marriage, adoption, guardianship or other duly-
authorized custodial relationship;
b) Not more than four unrelated people; or
c) Two unrelated people and any children related to either of them.
d) Persons or groups granted a request for a reasonable accommodation to reside as a
single housekeeping unit pursuant to section 38.35.090.
e) "Household" does not include:
i. Any society, club, fraternity, sorority, association, lodge, combine, federation,
coterie, cooperative housing or like organization;
ii. Any group of individuals whose association is temporary or seasonal in nature;
or
iii. Any group of individuals who are in a group living arrangement as a result of
criminal offenses.
Comment [PW11]: Kevin Thane
recommended that this be exclusive
of the amount that would be spent on
a down payment. This would be
contrary to the Ordinance language,
which allows no such exception. And
there is the practical matter of
preliminary income certification
needing to be done before an AHO
home is identified by a buyer and
before the down payment
requirements of first mortgage
financing are known.
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Method of Verification. The applicant must complete a household disclosure as part of Exhibit D:
Intake Application Form. The City’s Agent will review the Intake Application Form and household
size as represented on the applicant’s most recent tax forms and enter the information in the
Exhibit F: Preliminary Buyer Eligibility Form. The applicant must disclose whether any changes in
household composition are anticipated prior to closing on the home.
Buyer Contribution
The AHO requires a buyer contribute at least $1,000 to either the down payment or closing
costs associated with the purchase of a Lower-Priced Home. These funds must be provided by
the buyer household and may not be a gift from someone outside the applicant’s household.
Method of Verification. The buyer must certify a minimum of a $1,000 buyer contribution will be
available at the time of closing. The City’s Agent must verify the buyer’s certification. Evidence
may include bank statements and income documentation. Final verification by the city or the
City’s Agent will be evidenced by the buyer cash contribution line in the Settlement Disclosure
statement for the closing.
First-Time Homebuyer
The AHO requires that buyers of a Lower-Priced Home meet the FHA definition of a First-Time
Homebuyer, which requires the household meet one of the following criteria:
a) An individual who has had no ownership interest in a principal residence during the 3-
year period ending with the date of purchase;
b) A single parent whose only prior home was owned with a former spouse while
married;
c) An individual who is a displaced homemaker and has only owned with a spouse;
d) An individual who has only owned a principal residence not permanently affixed to a
permanent foundation in accordance with applicable regulations; or
e) An individual who has only owned a property that was not in compliance with state,
local or model building codes and which cannot be brought into compliance for less
than the cost of construction a permanent structure.
Method of Verification. The applicants must self-certify they qualify as a first time homebuyer
using the form contained in Exhibit D: Intake Application Forms. The City’s Agent must verify
no ownership in the previous three years through a review of the applicant’s credit report for
presence of a mortgage credit line. If a mortgage credit line exists, the applicant must provide
evidence for meeting one of the other four criteria that constitute First-Time Homebuyer
status.
Comment [PW12]: Kevin Thane
recommended that this term be
replaced with “other individual” so as
not to discriminate against unmarried
partners. We didn’t make the change
because: A) we were asked to
incorporate the exact FHA definition
of “first-time homebuyer” and B) if it
were changed, we would change the
term to “former domestic partner.”
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First Mortgage Loan Requirements
The AHO requires buyers of Lower-Priced Homes use fixed-rate conventional or government-
insured mortgage financing with a term of no more than 30 years.
Method of Verification. The City’s Agent must verify the mortgage qualification type and
sufficient loan qualification amount at the time of contract through review of a mortgage
prequalification letter and note this in Exhibit F: Preliminary Buyer Certification Form. Final
verification will be evidenced through mortgage documents signed at closing and included in
Exhibit G: Purchase Transaction Certification Form.
Owner-Occupancy Requirement
Buyers of Lower-Priced Homes must occupy the home as their primary residence for at least
183 days per year. In addition, a buyer of a Lower-Priced Home may not rent the entirety of
the house to another household. The Director of Community Development may waive the
occupancy and no-rental requirements on a temporary basis for extraordinary circumstances,
such as a temporary relocation for work, a serious illness, or other compelling reasons.
If the Lower-Priced Home is not maintained as the primary residence of the original purchasing
household, any city liens on the property become due and payable unless the requirement is
waived temporarily. See Section 8 of this Manual, “Recordation and Subsidy Recapture for
Lower-Priced Homes”.
Method of Verification. The City’s Agent will mail letters to the buyer annually for the first two
years of ownership requesting certification that the buyer meets the owner occupancy
requirements of the AHO. The buyer must sign and return the certification within 30 days of
receipt.
Buyer Eligibility Certification. The City’s Agent is responsible for meeting with prospective
applicants for Lower-Priced Homes and determining initial eligibility. Prior to placement on a
waiting list, or the execution of a purchase contract, the City’s Agent must verify the applicant
meets all the criteria for purchase of a Lower-Priced Home as outlined in Exhibit F: Preliminary
Buyer Certification Form.
After closing, the City’s Agent must ensure all documents contained in Exhibit I: Homebuyer
Certification Checklist have been collected in the client file and provide the city with completed
copies of the Settlement Disclosure statement and Exhibit G: Purchase Transaction Certification
Form.
Waiting Lists for Purchase of Lower-Priced Homes. The City’s Agent must maintain a first-come
first-served waiting list for Lower-Priced Homes, which will be the sole waiting list for all
Affordable Lower-Priced Homes produced though AHO. To be placed on the waiting list, an
applicant household must provide all documentation required for preliminary verification as
Comment [PW13]: We didn’t
recommend or include a waiting list
requirement for Moderate-Priced
Homes because there is no price
discount or buyer certification. The
main purpose of this option is to
allow builders of higher volumes of
low-market-priced homes (30%) to
opt out of the more stringent 10%
requirement for LPHs.
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outlined in Exhibit F: Preliminary Buyer Certification Form including income and asset
documentation and a prequalification letter from a mortgage lender. This waiting list will be the
basis for referring eligible buyers to developers when a Lower-Priced Home becomes available.
Homebuyer Counseling and Training
To purchase a Lower-Priced Home, the buyer must attend at least one session with a housing
counselor, which can include the program intake appointment, as well as an eight-hour
homebuyer education class.
Buyer Disclosures and Assuring AHO Compliance by Sellers
Disclosures to Buyers. The City’s Agent will be responsible for discussing with applicants the
conditions of assistance required by the AHO during an in-person meeting prior to the buyer
executing a purchase contract for a Lower-Priced Home. At this meeting, the City’s Agent will
provide the applicant with a form copy of Exhibit H: Disclosure Statement for Buyers of Lower-
Priced Homes. The City’s Agent will also be responsible for assuring that sellers of each Lower-
Priced Home wishing to have the home count toward the number of affordable homes listed in
Section 10 of the AHO, append a buyer disclosure statement to each contract for purchase. This
standard contract addendum explains the City’s pricing, subsidy recapture, and owner
occupancy policies for Lower-Priced Homes. For purposes of assuring the proper AHO pricing,
the addendum will describe the numbers of bedrooms in the home. See Exhibit J: AHO
Disclosure Addendum to Purchase Contract for Lower-Priced Home.
Review of sales contract. Sellers of Lower-Priced Homes wishing to have the home count toward
the number of affordable homes listed in Section 10 of the AHO must provide the City’s Agent
with a copy of the executed sales contract. The City’s Agent will review the contract for
compliance with the AHO, including:
• That the home price does not exceed the AHO Maximum Price for a home with the
numbers of bedrooms described in the Disclosure Addendum to the sales contract; and
• Whether all other wording of the Disclosure Addendum conforms to AHO requirements.
If a disclosure addendum or other aspects of the purchase transaction as represented in the
contract do not comply with AHO requirements, the City’s Agent will report the circumstances
to the City’s Director of Community Development and the developer and developer’s sales
agent and provide the opportunity for them to correct any deficiencies.
Origination of AHO Lien Documents at Closing. The City’s Agent must originate documents
necessary to recapture the buyer subsidies per the AHO, as described in Section 8 of this
Manual, “Recordation and Subsidy Recapture for Lower-Priced Homes.”
Sales Price Verification. The City’s Agent will review the preliminary Settlement Disclosure
statement from the title company prior to the closing to determine that the AHO Maximum
Comment [PW14]: Not specified by
the Ordinance but a good practice
followed by most programs similar to
AHO. This requirement will aid both
buyers and sellers by assisting buyers
to become “mortgage ready” and
thus assure sufficient effective
demand for the Lower-Priced Homes.
Comment [PW15]: Not specifically
called for in the Ordinance but a
standard practice to inform and
protect buyers. It follows the intend
of federal truth-in-lending
regulations.
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Price for the home has been properly adhered to—i.e. the sales price on the Settlement
Disclosure statement minus the subsidy recapture lien amount plus buyer “extras” up to $3,000
does not exceed AHO Maximum Price for the size of the home and AMI level of the buyer. If a
buyer and any co-buyer’s identity) and the sales price do not comply with AHO requirements,
the City’s Agent will report the circumstances to the City’s Director of Community Development.
A copy of the final Settlement Disclosure statement for the closing be provided to the city to
evidence compliance and retained in the client file.
Post-closing Responsibilities of Seller. Sellers of Lower-Priced Homes wishing to have the home
count toward the number of affordable homes listed in Section 10 of the AHO must provide the
City’s Agent with all required documents evidencing the home was sold to an eligible buyer at
the appropriate qualifying price.
The following chart summarizes the process of certifying the eligibility of a buyer of a Lower-
Priced Home.
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Step 1 •Intake Appointment: The potential homebuyer household meets with
the City's agent to complete initial application forms and review income documentation.
Step 2 •Preliminary Certification: Once application forms are signed, income
documentation has been provided, and a prequalification letter is obtained, the City's agent will complete a Preliminary Certification.
Step 3 •Purchase Contract: Preliminary Certification is used to evidence
readiness to execute purchase transaction to a developer and qualification for any specialized income-restricted loan products.
Step 4 •Pre-closing Review: Prior to closing the City's agent will review all
purchase transaction documents for compliance and originate any city lien
documents needed for closing.
Step 5
•Closing: The CIty's agent will attend the closing to ensure no changes to
the CLOSING DISCLOSURE or mortgage documents, collecting copies for
the Final Certification and client file.
Step 6
•Final Certification: After all client documents have been obtained, the
Seller must provide the CIty's agent with all required documents regarding the sale. The City's Agent will then complete the Final Certification Form and provide that with the CLOSING DISCLOSURE to the
city, certifying the transaction as compliant.
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7. Marketing and Sales of Lower-Priced Homes
Marketing Guide for Developers and Sales Agents
The marketing and sales provisions of the AHO and this Manual are designed to ensure that AHO
requirements are met and that Lower-Priced Homes are marketed and sold as quickly and
efficiently as possible. The developer has the ultimate responsibility for marketing and selling all
Lower-Priced Homes in a development. The qualification of buyers to meet AHO requirements is
the responsibility of the City’s Agent. The City’s Agent, through the qualification process, may
also provide assistance to the developer in identifying potential buyers for the Lower-Priced
Homes. Successful implementation of the affordable housing program will require close
collaboration between the City, the City’s Agent and developers selling Lower-Priced Homes.
Steps in the process are as follows:
Step 1. Intent to Build. When a developer is ready to undertake construction of a Lower-Priced
Home, the developer must notify the City’s Agent and provide the City’s Agent with floor plans,
elevation drawings, location of the unit and an anticipated construction schedule so the City’s
Agent can make prospective eligible buyers aware of the buying opportunity and put them on
the City’s waiting list, if qualified.
Step 2. Coordination Meeting. If the Lower-Priced Home is the first such home being marketed
in a development, the City’s Agent will set up a face-to-face meeting with the developer and its
sales staff or sales agent to review AHO requirements for marketing, sales, and qualification of
buyers.
Step 3. Identifying Buyers from Wait List. If there are qualified buyers already on the City’s
waiting list, the City’s Agent will notify the first household of appropriate size on the waiting list
that a home is becoming available, and invite them to inform their housing counselor if they are
interested in buying the home. If the qualified buyer is not interested in the home, the next
potential buyer on the list will be notified, and so forth. The City’s Agent will refer the
prospective buyer to the developer. If an eligible buyer has refused two affordable homes that
fit the buyer’s requirement for the number of bedrooms needed then the eligible buyer will be
moved to the bottom of the waiting list. (Due to the fact that Moderate-Priced Homes are not
expected to have discounted prices, no waiting list will be required for those homes.)
Step 4: Marketing by the Developer. The developer may begin marketing the home to the
general public simultaneously with Step 3. If the developer finds an interested buyer who has
not yet had an intake appointment with the City’s Agent, the following procedures must be
followed:
Comment [PW16]: Not specified by
the Ordinance but a good practice to
make the home sales process as
smoothly as possible for developers.
We recommend that this section be
used additionally as a two-page
“guide,” a handout given to builders
who are commencing to build and sell
Lower-Price Homes.
Comment [PW17]: The steps below
are not specifically described in the
Ordinance, but in working closely
with the implementation of other IZ
programs, we have found these steps
make the marketing and sales process
easier and clearer for all concerned.
Comment [PW18]: Kevin Thane
suggested this added language, which
we do not recommend due to the fact
that the Agent can’t help find out
who among the prequalified clients is
interested without some graphic
description (e.g. a cut sheet) of the
home or homes being sold. Kevin’s
suggested addition: “Optionally, a
developer or builder may provide the
only the price of the house that will
be built to the City’s Agent who will
alert eligible buyers to the developer
or builders intent to build a house for
that price. The eligible buyer may
then meet with the developer or
builder to select the design options
that are most suitable to the eligible
buyer from among options available
through the developer or builder.”
Comment [PW19]: Kevin Thane
suggested this and we agree.
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• The developer or its sales agent must interview potential buyers who have not had an
intake appointment with the City’s Agent to determine if they believe they meet all of
the qualifications and give them a copy of AHO Buyers Guide (see Exhibit K) which
includes the current income limits and basic qualification criteria.
• All apparently qualified buyers must immediately be referred to the City’s Agent for
qualification and—if qualified—put on the AHO waiting list.
Step 5. Sales Contract. When a qualified buyer is prepared to sign a sales contract, the developer
wishing to have the home count toward the number of affordable homes listed in Section 10 of
the AHO will follow the requirements in Section 6 of this Manual for appending an AHO
Disclosure Statement to the purchase contract form. The developer or sales agent will explain
each element of the disclosures to the buyer.
Step 6. Transmit copy of sales contract to City’s Agent. Within three business day after execution
of a sales contract, the developer wishing to have the home count toward the number of
affordable homes listed in Section 10 of the AHO must transmit a copy to the City’s Agent for
review of compliance.
Step 7. Pre-Closing Tasks. No more than thirty days before the anticipated closing date, the
developer or a licensed sales agent wishing to have the home count toward the number of
affordable homes listed in Section 10 of the AHO will notify the buyer-under-contract and the
City’s Agent of the closing timeline. At this time the City’s Agent will notify the mortgage lender
that the home is nearing the closing date and request that the lender initiate an appraisal if it
has not already been undertaken.
The City’s Agent will originate the appropriate lien documents based on the sales price and the
market value of the home as detailed in Section 8: Recordation and Subsidy Recapture for
Lower-Priced Homes, and provide those documents to the city prior to closing. The City’s Agent
will be responsible for providing the completed documents to the title company prior to the
scheduled closing date.
Comment [PW20]: From past
experience with similar programs, we
have found that buyers are not
always well-informed early on of the
requirements that they will have to
meet, which that are never
encountered in open-market sales.
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8. Recordations and Subsidy Recapture for Lower-Priced Homes
Overview
The city will secure and recapture both its cash and non-cash investments in affordable housing.
Lower-Priced Homes as defined by AHO will generally be subject to three liens.
Type of Lien Purpose Repayment terms
A. Impact Fee Subsidy
Recapture Lien:
Promissory note and
mortgage deed from
the seller (developer)
to the city.
To recapture impact fees paid
by the city on behalf of the
seller.
Payable at 0% interest upon sale or
transfer only if the seller fails to
meet the AHO requirements.
Otherwise it will be extinguished
when eligible buyer executes lien #2
below.
B. Buyer Subsidy
Recapture Lien:
Promissory note and
mortgage deed from
the buyer to the city.
To recapture the difference
between 98% of the market
value and the AHO Maximum
Price of a Lower-Priced Home.
Payable at 0% interest upon sale,
transfer, cash-out refinance or
default on AHO requirements, such
as the requirement for owner-
occupancy.
C. Down Payment
Assistance Lien:
Promissory note and
mortgage deed from
the buyer to the city.
To recapture the City’s loan of
cash to an eligible buyer for
down payment assistance for
the purchase, up to $10,000.
Payable at 0% interest upon sale,
transfer, cash-out refinance or
default on AHO requirements, such
as the requirement for owner-
occupancy.
A. Impact Fee Recapture Lien for Developers of Lower-Priced Homes
Applicability. A subsidy recapture lien applies to instances in which city has made cash payments
to a developer as a subsidy for city payment of the impact fees.
Lien Extinguished. If a developer abides by the requirements of the AHO, the subsidy recapture
lien will be extinguished when a qualified buyer signs a Buyer’s Subsidy Recapture Lien payable
to the city.
Calculation of Lien Amount. The lien shall be equal to the total of all payments made by the city
on behalf of the developer.
Form of Lien. Such liens will be in the form of a mortgage deed and promissory note payable to
the city of Bozeman. The documents will be recorded at the Gallatin County Clerk and Recorders
office.
Comment [PW21]: The Ordinance
does not call specifically for a lien on
the developer. But it is the developer
or successor in title (builder) and not
the buyer who receives the city’s
subsidy. Otherwise, no one would be
obligated to repay the subsidy during
the construction period even if the
developer or builder defaulted on the
terms of the AHO Plan. If the lot were
sold before or during construction it
would have to be paid off or assumed
by the successor in title. The lien is
extinguished if the developer or
successor abides by the Plan.
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24
Terms of Lien. Full repayment is due only if: (a) the developer fails to sell a lower-priced home to
an eligible buyer within two years of the origination of this lien; or (b) otherwise breaches the
terms of the lien, which include full compliance with AHO requirements.
Responsibility for Origination. Documents will be prepared by the city or its agent using standard
forms (see Exhibits L, M and NN). The city or its agent will cause all necessary documents to be
recorded.
B. Subsidy Recapture Lien for Eligible Buyers of Lower-Priced Homes
Applicability. The subsidy recapture lien applies to eligible buyers of Lower-Price Homes: (i)
purchased at a discount to market value and/or (ii) that the developer of the home received
cash support in the form of funds from the city, including impact fee payment.
Lien Amount. The amount of this lien is difference between the 98% of appraised value and the
AHO Maximum Price of a Lower-Priced Home at the time of the initial sale
Lien Repayment. Repayment is required when the home is sold, transferred, refinanced, or
when the buyer fails to abide by the terms of the AHO.
Repayment Formula. The buyer agrees to repay most of the discount from market value
represented by the AHO price for a lower-priced home. The formula is as follows:
98% of the appraised value of the home at time of initial purchase (becomes the
contract sales price)
(Minus) AHO Maximum Price of Lower-Priced Home
(Equals) subsidy and dollar amount of lien
The formula uses 98% of appraised value in order to provide homebuyers with a small amount
of net equity. This criterion may also make it easier for lower-income buyers to qualify for
certain first mortgage products.
Appraisal and Calculation of Lien Amount. The appraisal used to calculate the amount of subsidy
may be the appraisal obtained by the buyer’s mortgage lender or, if that is not available, a
professional appraisal provided by the purchaser. The lien amount will be calculated using the
formula above.
Form of Lien. Such liens will be in the form of a mortgage deed and promissory note payable to
the city. The documents will be recorded at the Gallatin County Clerk and Recorders office.
Terms of Lien. Repayment is due only when the property is sold, transferred, refinanced for
reasons other than lower rate or shorter term, or when the initial buyer who qualified for the
Comment [PW22]: The “98% of
appraised value” formula is not
specified in the Ordinance but we
have found that this small reduction
is helpful in leaving buyers with a slim
margin of equity to start with, and in
some instances it can make it easier
for buyers to qualify for first
mortgage loans, since the this slightly
improves the buyer’s loan-to-value
ratio.
Comment [PW23]: These details
are not specified in the Ordinance,
but a note and deed of trust are the
most common methods of imposing
liens in programs like this.
Comment [PW24]: These are
standard terms of liens in programs
like this.
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25
subsidy has failed to abide by the requirements of the AHO as stated in the promissory note.
The interest rate will be 0%. The lien will be expressly subordinate to any first mortgage lien and
possibly other liens (such as the Board of Housing’s down payment assistance liens) in
accordance with the City’s written subordination policy (see section 12).
Responsibility for Origination
Lien documents will be prepared by the city or its agent using standard forms (see Exhibit L, M
and NN). The city or its agent will forward the documents to the title company that is managing
the closings of the real estate sale and loans.
C. Down Payment Assistance Lien for Homebuyers
Applicability. The City’s Community Housing Fund (AHF) provides cash assistance for some
lower-income AHO homebuyers based on availability of funds and other factors.
Calculation of Lien Amount. The lien amount will be equal to the amount of down payment
assistance provided to the buyer by the city for the purpose of financing the home purchase.
Form of Lien. Such liens will be in the form of a mortgage deed and promissory note payable to
the city of Bozeman. The lien will be expressly subordinate to any first mortgage lien. Any other
subordination will be made in accordance with the City’s written subordination policy (see
section 12). The documents will be recorded at the Gallatin County Clerk and Recorders office.
Terms of Lien. Repayment of the principal amount, at 0% interest, is due only when the property
is sold, transferred, cash-out refinanced or when the initial buyer who qualified for the subsidy
has failed to abide by the requirements of the AHO as stated in the promissory note. Failure to
maintain owner occupancy is a reason for a default and a demand of repayment. The lien will be
expressly subordinate to any first mortgage lien and possibly other liens (such as the Board of
Housing’s down payment assistance liens) in accordance with the City’s written subordination
policy (see section 12).
Commitment Letter. For the purpose of aiding homebuyers in qualifying for first mortgage
financing, the city or its agent will issue a commitment letter after a qualified buyer has signed a
purchase contract for a lower-priced home.
Responsibility for Origination. Lien documents will be prepared by the city or its agent using
standard forms (see Exhibit NN). The city or its agent will forward the documents to the title
company that is managing the closings of the real estate sale and loans.
Waiver of Timing of Repayment. The Director of Community Development may agree to waive
the timing of repayment for all cash and non-cash subsidies when on a case-by-case basis when
(i) refinancing is being proposed by a homeowner for purposes of acquiring a lower interest rate
or reduced term on the principal mortgage as long as the refinance does not include payment of
Comment [PW25]: The city’s
current down payment assistance lien
does not have these terms. It has a
form of “interest”—i.e. a share of
appreciation—and all principal and
shared appreciation are forgiven over
20 years. Because of the scarcity of
subsidies and the benefits of recycling
them, we recommend adopting the
terms in this paragraph.
Comment [PW27]: We understand
that you want to follow existing
processes of HRDC. We don’t know
whether this is a component of that
program but we do believe
commitment letters go a long way to
smoothing the process of getting a
first mortgage loan.
Comment [PW26]: Not specifically
in the ordinance but a good practice
to smooth the process of buyers
getting first mortgages. Without this,
the lender would not know that a
subordinate mortgage loan is being
made available.
Comment [PW28]: This is a
common-sense refinement of the
Ordinance requirements.
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26
cash to the homeowner; or (ii) the refinance is necessary for the homeowner to address a
medical emergency. In such a case, the lien is not extinguished.
In instances where a cash-out refinance or subordination is allowed, the combined loan-to-value
ratio of the home may not exceed 97% including all subordinate financing. Request for waiver of
under this provision must be submitted in writing for approval by the Director of Community
Development.
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9. Marketing and Sales of Moderate-Priced Homes
A developer desiring to construct Moderate-Priced Homes must comply with the requirements
of the AHO, as follows.
AHO Maximum Price
The Maximum Price for a Moderate-Priced Home is set at 90% of Area Median Income, adjusted
for household size. Maximum Prices for Moderate-Priced Homes will be published annually by
the Director of Community Development as discussed in Section 3.
Disclosure Addendum to Purchase Contract
The only qualification for purchase of a Moderate-Priced Home is that the home be purchased
and occupied as a primary residence for a minimum of two years. In the purchase contract for
each Moderate-Priced Home, a developer wishing to have the home count toward the number
of affordable homes listed in Section 10 of the AHO must include an addendum describing this
requirement. See Exhibit O: Disclosure Addendum to Purchase Contract for Moderate-Priced
Home.
Verification of Compliance
In order for the city to verify compliance with the AHO, the developer wishing to have the home
count toward the number of affordable homes listed in Section 10 of the AHO will provide to the
city:
a) A copy of the Settlement Disclosure statement for the closing so that the city may verify
that the sales price was at or below the AHO Maximum Price for the home as shown on
the pricing schedule in effect at the time of the issuance of the building permit. If the
pricing schedule changes after the permit issuance, the developer may elect to use the
updated price if it differs. A cover letter must be provided with the Settlement
Disclosure statement for the closing indicating the number of bedrooms in the home.
b) A copy of Exhibit P. Occupancy Affidavit executed by the buyer certifying that they will
occupy the home as a primary residence for the first two years of ownership.
The City’s Agent will mail letters to the buyer annually for the first two years of ownership
requesting certification that the buyer meets the owner occupancy requirements of the AHO.
The buyer must sign and return the certification within 30 days of receipt.
Comment [PW29]: Not specified in
the Ordinance but a good practice,
the reasons for which are explained
above.
Comment [PW30]: This is more
specific than the Ordinance. The
Ordinance states that the City
Manager “may create standards for
documentation the city will use to
verify the sale price of a home
created pursuant to this article.”
Comment [PW31]: The ordinance
does not specify this level of detail for
verifying compliance, but this is a
simple, common sense, and typical
way of verifying owner-occupancy.
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10. Administration, Subordination, Monitoring and Enforcement by the
City
Administration
The Director of Community Development or designee may promulgate and enforce all
reasonable rules and regulations and take all actions necessary to the effective operation and
enforcement of AHO and this Manual, including but not limited to:
a) Reviewing a developer’s Affordable Housing Plan for compliance with the AHO.
b) Adopting all forms and prescribing the information to be given therein.
c) Monitoring developers’ compliance with their approved Affordable Housing Plan,
notifying the developer of noncompliance, and ordering compliance.
d) Imposing any and all sanctions permitted by the AHO.
e) Calculating the annual pricing targets for affordable homes and causing a sales price
schedule to be published. The Director of Community Development may make de
minimis exceptions to the factors considered in calculating the price targets.
City’s Agent
The city may choose to retain an agent to undertake certain administrative duties. The City’s
Agent must follow the policies and procedures described this Administrative Manual and those
prescribed by the Director of Community Development.
The City’s Agent must be a HUD-Certified Housing Counseling Agency with sufficient staff to
provide individual and group housing counseling and education. The City’s Agent staff must be
trained to perform HUD-defined Part 5 income determinations and other certifications required
under the AHO and this Manual and have the required administrative capacity to maintain
secure records documenting purchase transactions.
Subordination of Subsidies
The city may use liens as a tool to recapture subsidies as described in Section 8, Recordation and
Subsidy Recapture for Lower-Priced Homes. The City’s lien shall be senior to all other liens, with
the exception of the first mortgage, and subordinate financing for the purpose of down payment
or principal reduction assistance provided by the Montana Board of Housing or through funds
provided by the US Department of Housing and Urban Development that require placement in
the second lien position.
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The city shall only subordinate the AHO liens in circumstances where a buyer of a Lower-Priced
Home refinances for a lower interest rate, or shorter term of first mortgage loan, also referred
to as a non-cash-out refinance.
The city may waive the prohibition on cash out refinance for unusual circumstances where funds
are needed for an essential emergency repair to a Lower-Priced Home that exceeds $5000.
Verification of Purchase Transactions
Compliance with provisions of the AHO and this Manual are ultimately the responsibility of the
city, although tasks that contribute to the completion of certification may be conducted by the
City’s Agent.
Review of Purchase Transaction Documents by City staff. Although buyer qualification and
certification of an eligible transaction may be carried out by the City’s Agent, city staff should
review the following prior to closing:
a) Subsidy lien documents – prior to closing
b) Exhibit G: Purchase Transaction Certification Form
c) The Settlement Disclosure statement from the closing of the transaction
The City’s Agent is required to maintain all detailed records relating to the transaction as
described in Exhibit I: Homebuyer Certification Checklist. These client files must be made
available for inspection at the request of city staff for purposes of auditing completed sales
transactions for compliance with all rules and regulations. Records of transactions must be
maintained pursuant to industry practices and the City’s record retention schedules.
The city or the City’s Agent will be responsible for verifying owner occupancy of Lower-Priced
and Moderate-Priced Home as described in this Manual.
Updates to Income, Pricing and Cash-In-Lieu Schedules
The city is responsible for publishing an update to Exhibit E: Maximum Buyer income Schedule
within 30 days of HUD’s publication of the annual Area Median Income for Gallatin County.
The update of the income schedules will trigger the update of Exhibit C: Maximum Home Price
Schedule. The Maximum Home Price Schedule may also be updated at the discretion of the
Director of Community Development if prevailing mortgage interest rates change more than 50
basis points (.5%) between annual updates as described in this Manual.
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30
Non-Compliance
If the city determines a developer subject to an Affordable Housing Plan has failed to comply
with any terms or conditions of the Affordable Housing Plan or the AHO, the Director of
Community Development or will notify the developer of the noncompliance in writing and order
compliance by the most effective and expeditious means as determined by the city. Notification
may describe a date certain by which the developer must be in full, and will describe: (i) the
exact nature of the noncompliance; and (ii) the possible sanctions for noncompliance with this
notification.
Cancellation of Incentives Provided. If a developer sells a home for a price not in compliance
with the approved Affordable Housing Plan or any other recorded documentation obligating
developer to comply with the AHO, the developer must, prior to the release by the city of the
dwelling from the Affordable Housing Plan or binding agreement, pay the city the difference
between the sales price and the price of the affordable home as set out in the approved
Affordable Housing Plan.
Sanctions for Noncompliance. In addition to other remedies available to the city pursuant to the
AHO, if on a date certain by which compliance has been ordered by the Director of Community
Development or authorized agent, the developer remains in noncompliance, the Director of
Community Development or authorized agent may notify the City Attorney of the
noncompliance and request that sanctions be imposed. The city has the authority to impose one
or more sanctions including but not limited to the following which the city deems most effective
and appropriate considering the nature of the noncompliance:
a) Withholding or revoking building permits.
b) Issuing stop-work orders.
c) Withholding certificates of occupancy.
Review of Program Effectiveness
The city will periodically review the program for effectiveness. The city will conduct periodic
audits of program files maintained by the City’s Agent for completeness and consistency. The
city may also periodically verify owner-occupancy of AHO homes, and gather information from
buyer about the impact and effectiveness of the program.
Periodic Updating of This Manual and Exhibits
The Director of Community Development may amend this Manual without approval of the
Commission if such changes are administrative or ministerial in nature. Such changes may
include authorizing adjustments to forms used by the City or City’s Agent.
Comment [PW32]: The Ordinance
does not specify this. This was
included as a common-sense
provision that authorizes staff to
make small changes to the
administrative manual and exhibits to
refine to operation of the program. If
changes to the manual are not
tenable, we recommend including the
update provision for the exhibits at a
minimum.
307
Development*name*and*parcel*identifer(s):
Applicant*name:*
Name*&*title*of*principal*contact*person*for*applicant:
Email*address*and*phone*number*for*contact*person:*
1.##Required#number#of#Affordable#Homes
Future#Phases
Condos Townhomes Detached Total All#Types
Total*number*of*homes*projected*for*development*20 32 40 92 110
Total*number*of*marketFrate*homes
Required*number*of*LowerFPriced*Homes*(10%)2 3.2 4 9.2 16.4
OR,*actual*number*of*ModerateFPriced*Homes*(30%)6 10 12 28 49
Note:&&Moderate+Priced&Home&option&is&rounded&to&nearest&whole&number;¬&allowed&for&Lower+Priced&Homes
Instructions&for:&&
Overwrite&the&example&numbers&in&the&top&row&with&actual&number&of&homes&projected&for&the&development.&
Required&numbers&of&homes&are&calculated&by&formulas&in&the&spreadsheet.&
2.##Actual#number#of#Affordable#Homes#to#be#built#
Condos Townhomes Detached Total
Total*number*of*homes*projected*for*development*20 32 40 92
Total*number*of*marketFrate*homes 0
Actual*number*of*LowerFPriced*Homes*(10%)2 3 4 9
OR,*required*number*of*ModerateFPriced*Homes*(30%)
Instructions&for:&
Choose&whether&to&provide&Lower+Priced&Homes,&Moderate&Priced&Home&or&a&mix&of&both.
Example&numbers&indicate&a&choice&of&only&Lower+Priced&Homes.&Delete&these&numbers&to&complete&the&table.
Round&down&Lower+Priced&Homes;&Round&Moderate+Priced&Homes&to&nearest&whole&number.
If&less&than&10%&Lower+Priced&Homes&are&provided,&substitute&3&Moderate&Priced&Homes&for&a&LP&Home
3.##Fractional#Requirement#for#LowerDPriced#Homes#0.2
Instructions&for&
Enter&the&fraction&that&was&subtracted&out&to&round&down.&This&will&determine&cash+in+lieu&owed&for&the&fractional&unit.
Alternatively,&add&one&Moderate+Priced&Home&in&Table&2.
4.##CashDinDlieu#owed#for#fractional#LowerDPriced#Home $1,769
Instructions&for:&
Multply&the&fraction&in&by&the&appropriate&average&payment&in&below.
In&this&example,&the&cash+in+lieu&amount&for&a&townhome&(the&source&of&the&fraction)&was&chosen.&Overwrite&that&formula.
5.##Home#type#and#bedroom#mix#of#LowerDPriced#Homes#to#be#Provided#(if#this#option#is#chosen)'
Condos Townhomes Detached
Studio*and/or*1*bedroom*homes
2*bedroom*homes 2 3 4
3+*bedroom*homes
Totals*
Instructions&for:&
Totals&must&match&the&numbers&in&Table&2&above.&&Overwrite&the&example&numbers.
City#of#Bozeman#Affordable#Housing#Program
Exhibit#A:##Template#for#Affordable#Housing#Plan
First#Phase#(Or#Entire#Project)
First#Phase#(Or#Entire#Project)
308
6.##Home#type#and#bedroom#mix#of#ModerateDPriced#Homes#to#be#built#and#sold#(if#this#option#is#chosen)
Condos Townhomes Detached
Studio*and/or*1*bedroom*homes
2*bedroom*homes
3+*bedroom*homes
Totals*
Instructions&for:&
Totals&must&match&the&numbers&in&Table&2&above.&&Overwrite&the&example&numbers.
7.###Current#maximum#home#prices#
Studio/1#
Bedroom 2#Bedroom 3+#Bedroom
LowerFPriced*Home $158,512 $176,978 $200,613
ModerateFPriced*Home $181,080 $204,301 $229,319
Note:&These&are&maximum&AHO&prices¤tly&in&effect.&
Actual&maximum&prices&for&this&development&will&be&those&in&effect&at&date&of&development&approval.
8.##Current#cashDinDlieu#amounts Editing*Note:*these*are*estimates,*not*final*numbers
Studio 1#Bedroom 2#Bedroom 3+#Bedroom Average#Fee
Condo***WE*NEED*TO*DISCUSS*INFLIEU*FOR*THIS*TYPE N/A N/A N/A N/A N/A
Townhome $1,488 $11,488 $8,022 $14,387 $8,846
Detached N/A N/A $23,022 $29,387 $26,204
9.##CashDinDlieu#alternative#D#for#LowerDPriced#Homes#only
Condos Townhomes Detached
Studio*and/or*1*bedroom*homes
2*bedroom*homes
3+*bedroom*homes
Totals*
Instructions&for	:&
Before&proposing&this,&discuss&with&city&staff.&This&alternative&is¬&automatically&allowed.
Multiply&the&numbers&of&units&required&in×&the&appropriate&dollar&amounts&in.&
10.##Land#donation#alternative#D#for#LowerDPriced#Homes#only
Instructions&for
:&
Before&proposing&this,&discuss&with&city&staff.&This&alternative&is¬&automatically&allowed.
City&staff&will&provide&requirements&for&proposing&land&donations&and&valuing&them&in&terms&of&
the&number&of&Lower+Price&homes&that&the&donation&would&offset.&
(Enter*the*descripaon*of*proposed*land*to*be*donated,*here)*
309
11.#Signature#and#certifications#(all*drafts*and*final*version*must*be*signed*and*certified)
I*hereby*cerafy*and*acest*to*the*following:*
I*am*an*authorized*representaave*of*the*property*owner.*
I*understand*that*this*AHO*Plan,*when*approved,*will*become*part*of*a*recorded*development*
agreement*in*which*I*will*agree*to*comply*with*all*requirements*of*the*AHO*Ordinance*and*
Administraave*Procedures*including*but*not*limited*to:**
Requirements*for*design,*aming*of*delivery,*markeang*and*sale*of*AHO*Homes,*
Indicaaon*of*the*locaaon*of*AHO*homes*on*the*plat*and/or*site*plan.***
Required*AHO*Prices*and*maximum*qualifying*incomes*of*buyers*that*are*in*effect*at*
the*ame*of*markeang*and*sale*of*the*homes,*and**
Requirements*for*aming*and*amounts*of*payment*of*cashFinFlieu*and/or*acceptance*
and*transfer*of*donated*property.*
Submiced*this*____th*day*of*_______,*2016*by*
***______________________________________*
***********Signature*of*Owner*or*Representaave*
***
***______________________________________*
********************Printed*or*typed*name*
***
*************************
City#Staff#Recommenda\on#for#Approval#(to*be*signed*only*for*final,*recomended*plan)*
*
I*hereby*recommend*this*AHO*Proposal*for*approval*by*the*City*of*Bozeman*
***______________________________________****************____________*
***********Signature*of*Community*Development*Director**********************Date*
***
***______________________________________*
********************Printed*or*typed*name*
**
**
*
310
Bozeman(Affordable(Housing(Program(
Exhibit(B:(Proposed(AHO(Project(Description(Form(
!
Location!(physical!address):_________________________________________________!
Primary!Contact:________________________________!
Phone:_______________!
Email:________________!
Mailing!Address:__________________________________________________________!
!
Total!Project!Size!(in!acres):__________!
Current!Zoning:__________!
Estimated!Number!of!Lots!to!be!Created:___________________!
Does!the!site!have!any!unusual!features!(terrain!etc.)!!
!
Will!the!subdivision!be!built!in!phases:!!YES!!!!!!!NO!
If!YES,!how!many!homes!in!each!phase________________________________________!
!
Do!you!anticipate!selling!finished!homes!or!just!lots?!!!!!!!!Homes!!!!!Lots!
If!homes,!what!mix!of!bedroom!types!do!you!anticipate?!
Studio!Phase!1!Phase!2!Phase!3!
1TBedroom!!!!
2TBedroom!!!!
3TBedroom!+!!!!
!
Are!there!any!other!special!features!within!the!development!(green!building!etc)?!
!
!
!
311
BOZEMAN(HOUSING(AFFORDABILITY(WORKSHEET
Data(Inputs(for(Exhibits(C(and(E(of(the(Administrative(Manual(for(the(Affordable(Housing(Ordinance,(City(of(Bozeman
*To$update,$enter$numbers$ONLY$in$yellow9shaded$cells.$$All$other$data$is$formula9driven*$
1.((Maximum(Household(Incomes(of(Buyers((current(HUDQderived(numbers)
Cells$B99I9$are$entered$from$the$HUD$Median$Income$limits$for$"Very$Low9Income"
Cells$B129I12$are$entered$from$the$HUD$Median$Income$limits$for$"Low9Income"
HUD$Income$Limit$Year 2015
HUD$HOME$Program$Income$Limits
Number(of(Persons(in(Household:
Percentage(Area(Median(Income 1 2 3 4 5 6 7 8
50%$24,050 $27,450 $30,900 $34,300 $37,050 $39,800 $42,550 $45,300
70%$33,670 $38,430 $43,260 $48,020 $51,870 $55,720 $59,570 $63,420
80%$38,450 $43,950 $49,450 $54,900 $59,300 $63,700 $68,100 $72,500
90%$43,290 $49,410 $55,620 $61,740 $66,690 $71,640 $76,590 $81,540
100%$48,100 $54,900 $61,800 $68,600 $74,100 $79,600 $85,100 $90,600
2.((Assumed(purchase(and(carrying(costs(of(lowQend(homes(in(the(Bozeman(market
Size(of(Unit Studio 1Q2(BR 3(BR+
Assumed$household$size*1 2 4
Assumed$"Low9market"$prices $150,000 $190,000 $230,000
Real$estate$taxes/month $124.95 $158.27 $191.59
Prop.$Insurance/month $43.75 $55.42 $67.08
HOA$fee/month $25 $25 $25
Total$monthly$costs $193.70 $238.69 $283.67
Assumptions:
Monthly$R.E$tax$rate 0.0833%times$home$value
Monthly$insur.$Rate$9$other 0.0292%times$home$value
Monthly$Homeowners$Association $25 monthly
312
3.((Charts(showing(assumptions(to(calculate(affordable(mortgage(
3a.((Buyer(Down(Payments Assumption:$$100%$of$buyer$down$payment$required$financed$with$2nd$mortgage
3b.(Monthly(Mortgage(Insurance(Amount Studio 1Q2(BR 3+(BR
Lower9Priced$Home 70%$114 $127 $161
80%$134 $150 $190
Moderate9Priced$Home 90%$154 $214 $225
$$NOTE:$$Enter$value$from$Chart$3c.$below$in$corresponding$cell$above.
The$Annual$MI$fee$used$in$both$charts$is:0.01115 Monthly:0.093%
(3c.((Worksheet(to(Derive(MI(based(on(affordable(first(mortgage(amounts
Price(Target Studio 1Q2(BR 3+(BR
Lower9Priced$Home 70%$AMI $113 $127 $161
80%$AMI$Pricing$Level 80%$AMI $134 $150 $190
Moderate9Priced$Home 90%AMI $155 $214 $225
3d.((Monthly(Taxes,(Insurance,(Condo/HOA(Fee((from(Section(2(above)
Studio 1Q2(BR 3+(BR
$194 $239 $284
3e.((Monthly(Incomes(of(Buyers(Assumed(for(Different(Bedroom(Sizes(of(Homes
Price(Target Studio 1Q2(BR 3+(BR
Lower9Priced$Home 70%$AMI $2,806 $3,203 $4,002
80%$AMI$Pricing$Level 80%$AMI $3,204 $3,663 $4,575
Moderate9Priced$Home 90%$AMI $3,608 $4,118 $5,145
3f.(Affordable(%(of(Mo.(Income(for(Housing(Payment(=(33%
Price(Target Studio 1Q2(BR 3+(BR
Lower9Priced$Home 70%$AMI $926 $1,057 $1,321
80%$AMI$Pricing$Level 80%$AMI $1,057 $1,209 $1,510
Moderate9Priced$Home 90%$AMI $1,190 $1,359 $1,698
313
3g.((Above(Numbers(Minus(MI,(Taxes,(Insurance,(and(Fees
Price(Target Studio 1Q2(BR 3+(BR
Lower9Priced$Home 70%$AMI $618 $691 $876
80%$AMI$Home 80%$AMI $730 $820 $1,036
Moderate9Priced$Home 90%$AMI $843 $906 $1,189
3h.((Affordable(Mortgage(Amount((proxy(for(affordable(price)
Price(Target Studio 1Q2(BR 3+(BR
70%$AMI $122,014 $136,404 $172,864
80%$AMI$$144,010 $161,824 $204,481
90%$AMI $166,331 $178,827 $234,697
Assumed$interest$rate 4.5%per$annum
314
1 2 3 4 5 6 7 8
$38,450 $43,950 $49,450 $54,900 $59,300 $63,700 $68,100 $72,500
$48,100 $54,900 $61,800 $68,600 $74,100 $79,600 $85,100 $90,600
City%of%Bozeman%Affordable%Housing%Program
Exhibit%E:%%Maximum%Buyer%Income%Schedule
The0following0represents0the0maximum0income0level0which0is0derived0
from0HUD's0published0AMI0income0limits0and0adjusted0for0family0size.0
LowerPPriced0Home080%0AMI
ModeratePPriced0Home0100%0AMI0
Household0Size
315
Exhibit'D:'Intake'Application'Forms'
AFFIDAVIT
The undersigned certify the following:
1. I/We have applied for homebuyer assistance through the City of Bozeman. In applying for this assistance, I/We
completed application material containing various information on the purpose of the loan, the amount and
source of the downppayment, employment and income information, assets and liabilities. I/We made no
misrepresentations in the application documents, nor did I/We omit any permanent information.
2. I/We fully understand that it may be a Federal crime and civil offense punishable by imprisonment,
forfeiture of benefits, or all the above, to knowingly make any false statements when applying for
assistance through the City of Bozeman affordable housing program.
3. There are the following people in my household for whom I am responsible and claim as a deduction on my
income taxes, annual income is only required for household members over 18 years of age:
Name Relationship
1._______________________ (Household Head) __Age $_________Annual Income __Gender
2._______________________ (Spouse) __Age $_________Annual Income __Gender
3._______________________ (Dependent) __Age $_________Annual Income __Gender
4._______________________ (Dependent) __Age $_________Annual Income __Gender
5._______________________ (Dependent) __Age $_________Annual Income __Gender
6._______________________ (Dependent) __Age $_________Annual Income __Gender
4. The following persons are full time residents in my home, but are not claimed as deductions on my income
taxes:
Name Relationship
1.______________________( ) __Age $_________Ann Income __Gender
2.______________________( ) __Age $_________Ann Income __Gender
5. Please check the following that applies:
__a) I have not owned a home in the last three years
__b) I have had interest in a home in the last three years but will not at the time of closing
__c) I have had interest in a home in the last 3 years but have divested as part of a divorce settlement
__d) The home I will purchase will be my primary residence
ALL APPLICATION INFORMATION IS TRUE AND COMPLETE TO THE BEST OF
MY KNOWLEDGE.
__________________________ __________________________ ____________
Borrower Co-Borrower Date
WARNING! Section 1001 of Title 18 of the U.S. Code makes it a criminal offense to
Make willful false statements or misrepresentations to any Department or Agency of the
United States (or their representatives) as to matters within its jurisdiction.
!
!
!
!
!
!
!
!
316
!
To Whom It May Concern:
1. I/We have applied for the City of Bozeman affordable housing program. As part of the application
process, I/we have authorized the city or it’s agent to verify financial information and other documents
required in connection with receiving assistance, either before the home is purchased, after closing or as
part of its quality control program.
2. I/We authorize you to provide to lenders for the purpose of receiving a first mortgage, any and all
information and documentation that they request. Such information includes, but it is not limited to,
employment history and income; bank, money market and similar account balances; credit history; and copies of
income tax returns.
3. I/We authorize the City of its agent to communicate with mortgage lenders and title company to obtain
documents related to the mortgage and purchase transaction for the purchase of a home through the City of
Bozeman affordable housing programs.
3. A copy of this authorization may be accepted as an original.
___________________________!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!___________________________!
Borrower’s!Signature! !!!!!!!!!!!!!!!Co2Borrowers!Signature!
!
___________________________!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!___________________________!!
SSN! ! ! !!!!!!!!!!!!!!!SSN!
!
___________________________!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!___________________________!
Date!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Date!
!
317
1 2 3 4 5 6 7 8
$38,450 $43,950 $49,450 $54,900 $59,300 $63,700 $68,100 $72,500
$48,100 $54,900 $61,800 $68,600 $74,100 $79,600 $85,100 $90,600
City%of%Bozeman%Affordable%Housing%Program
Exhibit%E:%%Maximum%Buyer%Income%Schedule
The0following0represents0the0maximum0income0level0which0is0derived0
from0HUD's0published0AMI0income0limits0and0adjusted0for0family0size.0
LowerPPriced0Home080%0AMI
ModeratePPriced0Home0100%0AMI0
Household0Size
318
City%of%Bozeman,%Affordable%Housing%Program
Exhibit%F:%%Preliminary%Buyer%Certification%Form
Appicant(Name
Co.Applicant(Name
Household(Size
Gross(Annual(Income
Percentage(of(Median(Income
Lender
Fixed(Rate(Loan yes
Prequalification(Amount
Length(of(Residency
Under(Asset(Threshold?yes
Signature(of(Counselor
Date
319
Appicant(Name
Co.Applicant(Name
Household(Size
Gross(Annual(Income
Percentage(of(Median(Income
Lender
Fixed(Rate(Loan,(term(<30(years yes
Loan(Amount
Interest(Rate
Length(of(Residency
Or,(Employed(in(Bozeman?
Total(Assets(After(Closing(
Address(of(Unit
Builder
Subdivision
Number(of(Bedrooms
Sales(Price(from(HUD.1
Effective(Price(from(HUD.1
Buyer(Subsidy(Lien(Amount
Down(Payment(Assist.(Amt.(or(N/A(
I(hereby(certify(that(the(information(above(is(true(and(correct(to(the(bests(of(my(knowledge
and(that(the(buyer(and(transaction(complied(with(the(requirements(of(Bozeman's(Affordable(Housing(Ordinance.
Signature(of(Counselor
Date
City%of%Bozeman,%Affordable%Housing%Program
Exhibit%G:%Preliminary%Buyer%Certification%Form
320
Exhibit'H:'Disclosure'Statement'for'Buyers'of'Lower;Priced'Homes'
!
An!AHO!Lower+Priced!Home!must!be!sold!subject!to!the!requirements!of!the!city!of!Bozeman’s!
Affordable!Housing!Ordinance,!including!but!not!limited!to!the!following!requirements.!
!
Income!Limits!–!To!purchase!a!Lower+Priced!Home,!you!must!have!a!household!income!at!or!below!the!
maximum!income!limits!published!annually!by!the!City!of!Bozeman!at!the!time!of!closing!on!the!home.!It!
is!recommended!that!you!speak!with!a!housing!counselor!to!establish!your!income!level!as!income!
certification!is!a!technical!process.!At!least!30!days!prior!to!the!closing!date,!buyers!must!submit!
complete!and!updated!financial!data!to!the!city!or!its!agent!in!order!for!an!income!certification!process!
to!be!completed.!
!
Maximum!Home!Price!–!The!price!of!an!AHO!home!may!not!exceed!the!maximum!allowed!price!in!the!
AHO!home!price!schedule!published!by!the!city!except!that!the!buyer!may!select!up!to!$3,000!of!buyer!
upgrades!over!and!above!the!Maximum!Home!Price,!as!long!as!they!have!evidenced!sufficient!mortgage!
capacity!at!the!time!of!Preliminary!Certification!by!the!city!or!City’s!Agent.!!!
!
Homebuyer!Counseling!Requirement!–!Buyer!must!have!completed!a!homebuyer!counseling!and!
education!program!approved!by!the!city!prior!to!closing!on!a!Lower+Priced!Home.!
!
Appraisal!Requirements!–!The!buyer!hereby!agrees!to!provide!an!appraisal!to!the!seller!and!the!city!at!
least!10!working!days!prior!to!closing—either!an!appraisal!ordered!by!an!institutional!lender!or!other!
professional!appraisal!acceptable!to!the!city.!!
!
Pricing!Requirements!–!At!the!closing,!the!contract!price!will!be!adjusted!to!98%!of!appraised!value!if!
that!amount!is!higher!than!the!ordinance+required!price.!!!!
!
Lien!Requiring!Repayment!of!Indirect!Subsidy!–!If!the!contract!price!(the!price!required!by!the!
Ordinance)!is!lower!than!98%!of!appraised!value,!then!buyer!will!receive!a!subsidy!of!the!home!purchase!
resulting!in!a!below+market!price.!Such!subsidy!will!be!due!at!least!in!part!to!incentives!provided!by!the!
city!to!the!builder!such!as!the!city’s!payment!of!impact!fees!and!filing!fees!on!behalf!of!the!seller.!The!
ordinance!requires!that!the!principal!amount!of!the!subsidy!be!subject!to!a!lien!imposed!at!the!closing!
of!the!sale—to!be!repaid!by!the!buyer!at!0%!interest!upon!resale!or!transfer!of!the!home,!or!buyer’s!
default!on!the!terms!of!the!lien.!!
!
Lien!Subordination!–!The!lien!imposed!for!subsidy!of!the!home!may!restrict!a!homeowner’s!ability!to!
borrow!money!against!a!Lower+Priced!Home,!including!home!equity!loans!or!refinancing!that!results!in!
cash!being!paid!to!the!borrower.!The!borrower!is!not!restricted!from!refinancing!for!a!lower!interest!
rate!or!a!shorter!mortgage!term.!This!restriction!may!be!waived!by!the!city!in!unusual!circumstances.!!
!
321
Owner+Occupancy!Requirement!–!The!buyer’s!household!must!occupy!the!home!as!a!primary!residence,!
during!which!time!the!home!may!not!be!rented!to!any!party.!The!city!may!waive!this!owner+occupancy!
requirement!for!reasons!of!hardship,!in!accordance!with!its!written!policy!for!such!waivers.!
!
!
!
!
!
______________________!
Borrower!Signature!
______________________!!!
Name!
___________!!!!!
Date!
!
!
!
______________________!
Co+Borrower!Signature!
______________________!!!
Name!
___________!!!!!
Date!
!
322
City%of%Bozeman%Affordable%Housing%Program%
Exhibit%I:%Homebuyer%Certification%Checklist%%%%%%%%%%
!
1__!Application!form!and!intake!documents!
2__!Income!tax!returns!(1040)!for!the!past!2!years!with!all!schedules!and!W@2.!
3__!Pay!stubs!for!the!most!recent!month!for!all!jobs!
4__!Employer!verification!of!employment!!!
5__!Three!months!most!recent!bank!statements!for!all!bank!accounts!listed!on!application!
6__!Documentation!of!all!real!estate!owned!and!other!assets!
7__!Residency!affidavit!
As%Applicable%
8__!Proof!of!additional!Income.!
9__!Divorce!decree!and!property!settlement!agreement,!proof!of!child!support!
paid/received.!
10__!Financial!statements!(including!profit!and!loss!statements!for!sole!
proprietor/corporation!signed!by!preparer)!if!own!business,!self!employed.!
Real%Estate%Documents%%%%
1__!Copy!of!purchase!contract!
3__!AHO!disclosure!addendum!to!purchase!contract!
4__!Appraisal!
5__!Hazard!insurance!binder!with!City!of!Bozeman!as!loss!payee!
6__!Title!binder!with!lien!endorsement!
7__!Copy!of!uniform!loan!application!for!first!mortgage!
8__!Copy!of!preliminary!settlement!statement!!
9__!Copy!of!first!mortgage!
10__!Copy!of!buyer!subsidy!recapture!mortgage!deed!and!promissory!note!!
11__!Final!settlement!statement!from!title!company!
323
Exhibit'J:'AHO'Disclosure'Addendum'to'Purchase'Contract'for'a'Lower>Priced'Home'
!
The!contract!price!must!be!stated!in!the!body!of!the!contract!as!“the!greater!of!the!contract!price!of!
$_______[the!Ordinance:required!price]!or!98%!of!appraised!value.!
2.!!The!following!standard!addendum!must!be!incorporated!in!the!contract!
!
ADDENDUM TO SALES CONTRACT
The property subject to this contract [agreement] must be sold subject to the requirements of the
City of Bozeman’s Affordable Housing Ordinance, including but not limited to the following
requirements:
Income Limits – The buyer must have a household income at or below maximum amounts
published by the city of Bozeman and made available to the buyer prior to executing this sales
contract. At least 30 days prior to the closing date, buyers must submit financial data to the city
or its agent in order for an income certification process to be completed.
Maximum Home Price – The price of an AHO home may not exceed the maximum allowed
price in the AHO home price schedule published by the city and previously given to the buyer by
the seller as part of the “AHO Guide to Buying a Moderate-Priced home; except that the buyer
may select up to $3,000 of buyer upgrades over and above the Maximum Home Price as long as
they have evidenced sufficient mortgage capacity at the time of Preliminary Certification by
NAME OF CITY’S AGENT.
Homebuyer Counseling Requirement – Buyer must have completed a homebuyer counseling and
education program approved by the city prior to closing on a Lower-Priced Home.
Appraisal Requirements – The buyer hereby agrees to provide an appraisal to the seller and the
city at least 10 working days prior to closing—either an appraisal ordered by an institutional
lender or other professional appraisal acceptable to the city.
Pricing Requirements – At the closing, the contract price will be adjusted to 98% of appraised
value if that amount is higher than the ordinance-required price.
Lien requiring Repayment of Indirect Subsidy – If the contract price (the price required by the
Ordinance) is lower than 98% of appraised value, then buyer will, in effect, receive a subsidy of
the home purchase resulting in a below-market price. Such subsidy will be due at least in part to
incentives provided by the city to the builder such as the city’s payment of impact fees and filing
324
fees on behalf of the seller. The ordinance requires that the principal amount of the subsidy be
subject to a lien imposed at the closing of the sale—to be repaid by the buyer at 0% interest upon
resale or transfer of the home, or buyer’s default on the terms of the lien.
Lien Subordination – The lien imposed for subsidy of the home may restrict a homeowner’s
ability to borrow money against a Lower-Priced Home, including home equity loans or
refinancing that results in cash being paid to the borrower. The borrower is not restricted from
refinancing for a lower interest rate or a shorter mortgage term.
Owner-occupancy requirement – The buyer’s household must occupy the home for as a primary
residence following the closing date of the purchase, during which time the home the home may
not be rented to any party. The city may waive this owner-occupancy requirement for reasons of
hardship, in accordance with its written policy for such waivers.
!
!!
______________________
Borrower Signature
______________________
Name
___________
Date
______________________
Co-Borrower Signature
______________________
Name
___________
Date
!
325
City%of%Bozeman%Affordable%Homes%Ordinance%(AHO)%
Thinking%of%Buying%an%AHO%Lower@Priced%Home?%
Some%builders%in%Bozeman%have%agreed%with%the%City%of%Bozeman%to%sell%“lower@priced%homes”%
at%discount%prices%to%comply%with%the%city’s%Affordable%Housing%Ordinance%(AHO).%If%you%are%
thinking%about%buying%one,%this%is%what%you%need%to%know.%
How$do$I$find$out$the$home$price$and$whether$I$might$qualify?$
For%each%AHO%home%that%is%available%for%sale,%the%builder%must%provide%a%flyer%listing%the%home%
price—which%may%not%exceed%the%AHO%maximum%price—and%the%maximum%household%income%
that%is%allowed.%%%%%
How$do$I$qualify$to$buy$a$discount:priced$AHO$home?$
1. The%[CITY’S%AGENT%NAME]%must%certify%your%income%and%other%qualifications.%See%the%
maximum%household%incomes%and%maximum%home%prices%on%the%other%side%of%this%page.%
%
2. If%you%prequalify,%[CITY’S%AGENT%NAME]%Lower@Priced%Homes%waiting%list.%You%may%not%
get%the%first%AHO%home%that%becomes%available.%%
%
3. You%must%complete%[CITY’S%AGENT%NAME]’s%homebuyer%counseling%and%training%
program%prior%to%closing%on%the%home,%which%can%take%up%to%45%days.%%%
%
4. To%complete%the%purchase,%you%must%be%able%to%qualify%for%a%conventional%30@year%fixed@
rate%mortgage.%[CITY’S%AGENT%NAME]%staff%will%help%you%get%qualified.%
Do$I$have$to$pay$back$the$discount?$
Yes,%but%only%when%you%sell%the%home,%or%it’s%no%longer%your%primary%residence.%
You%will%be%required%to%sign%a%deed%of%trust%and%promissory%note%that%pledges%you%to%pay%back%
the%discount.%There%will%be%no%interest%charges.%%
The%price%discount%you%receive%will%be%calculated%as%the%difference%between%the%appraised%value%
of%the%property%and%the%AHO%price.%%[CITY’S%AGENT%NAME]%will%explain%the%details.%Here’s%an%
example:% %
Appraised%value%of%home%$250,000%
AHO%price%$210,000%
Amount%to%be%paid%back%$40,000%
%%
If$you$have$more$questions$or$want$to$sign$up$for$homebuyer$training,$$
contact$the$[CITY’S$AGENT$NAME]$to$set$up$an$appointment.$
CALL$_________%%
326
City%of%Bozeman%Affordable%Homes%Ordinance%(AHO)%
%
[INSERT MAX. INCOME SCHEDULE FOR LOWER-PRICED HOMES]
%
[INSERT MAX. PRICE SCHEDULE FOR LOWER-PRICED HOMES]
%
327
Exhibit'O:'AHO'Disclosure'Addendum'to'Purchase'Contract'for'a'Moderate<Priced'Home'
The following addendum must be incorporated in the contract.
ADDENDUM TO SALES CONTRACT
The property subject to this contract [agreement] must be sold subject to the
requirements of the city of Bozeman’s Affordable Housing Ordinance, including the
following requirements.
Maximum Home Price – The price of an AHO home may not exceed the maximum
allowed price in the AHO home price schedule published by the city and previously
given to the buyer by the seller as part of the “AHO Guide to Buying a Moderate-Priced
home.
Owner-occupancy requirement – The buyer’s household must occupy the home for two
years following the closing date of the purchase, during which time the home the home
may not be rented to any party. The city may waive this owner-occupancy requirement
for reasons of hardship, in accordance with its written policy for such waivers.
!
328
Exhibit'P:'Occupancy'Affidavit'
'
OCCUPANCY AFFIDAVIT
The undersigned certify the following:
1. I/We are purchasing a home through the City of Bozeman affordable housing
program. We commit to occupying the purchased through the program as a
primary residence, defined as residing for six months plus 1 day a year, for a
minimum period of two years, commencing on the date of closing on the home.
2. I/We commit to notifying the city in writing if a situation arises where we cannot
occupy the unit as a primary residence.
3. I/We fully understand that it may be a Federal crime and civil offense
punishable by imprisonment, forfeiture of benefits, or all the above, to knowingly
make any false statements when applying for assistance through the City of
Bozeman affordable housing program.
Borrower___________________________
Co-Borrower________________________
Date_______________________________
!
329
Community Affordable Housing Advisory Board
Thursday, January 28, 2016, 10:30am, Stiff building 2nd Floor Conference
Room – 20 East Olive
A. Call meeting to order – Brian Lameres calls meeting to order
Sharon Southard – Present
Kevin Thane – Present
Anders Lewendal – Present
Hattie Baker – Present
Sean Maloney – Present
Brian Lameres – Present
David Magistrelli – Present
Commissioner I-Ho Pomeroy - Present
Welcome new member Sean Maloney. Board introduces themselves and provides background.
B. Changes to the Agenda – No changes to the agenda
C. Public Comment –
Brian Guy from HRDC – He is here in place of Heather Greenier from HRDC
who typically attends, but she is at a meeting.
Luke Howard – works for SWMBA – will provide comment later during review
of manual.
D. Approval of Minutes from January 13th, 2016 –
David Magistrelli moves to approve
Kevin Thane seconds
330
Discussion regarding to changes – Kevin Thane suggests to change the portion of the minutes about the
LED lights should note that the builder should install them, not that the property owner should install
them.
Board unanimously approves minutes with changes.
E. Action Items
1. Discuss Affordable Housing Manual
Wendy Thomas begins discussion on the Affordable Housing Manual. They created the manual to make
the affordable housing ordinance more flexible. She states that the copy the board has may have
changed slightly, but they do have the version that legal has reviewed. She suggested that when the
Commission Packet comes out, that they can review the changes that were made.
Wendy Thomas mentions that yesterday Community Development received the first affordable housing
application that will be utilizing the new ordinance to create 4 new homes.
Anders Lewendal questions the start date for the affordable housing program. Wendy Thomas states
that knowing the ordinance is beginning to go into effect; we can begin to count homes immediately.
Board decides to review the manual one section at a time. Wendy Thomas states that if they do not get
through the whole document, that she can take marked up copies of the manual and use them as public
comment.
Brian Lameres begins discussing the definitions.
Kevin Thane clarifies the definition of “Affordable Housing” and what 33% of income includes. Board
discusses consistency with Montana Board of Housing.
Anders Lewendal questions why homes need to be newly constructed. Wendy Thomas states that the
focus of the program was to construct homes. Anders Lewendal questions why they can’t just be newer
homes that are only 6 months to a year old. Wendy Thomas states that she understands what he’s
saying, but the goal was on new construction.
Kevin Thane states that the program also excludes affordable rentals, but he feels they should include
rentals as well.
Kevin Thane questions a redundancy with how the lots are recorded. Wendy Thomas clarifies that it was
to give options on how to record what lots are affordable housing.
Kevin Thane questions the time line to accomplish all the steps in the manual. Wendy Thomas stated
that aside from subdivision review, it is not a mandated process. Kevin Thane stated that it would be
helpful to add an expected turn-around time from staff.
331
Kevin Thane clarifies what is meant by “the agreement” in step 5. Wendy Thomas clarifies that it is the
affordable housing plan. Suggestion to clarify the wording.
Hattie Baker questions if the board should suggest a response time from city. Wendy Thomas stated that
she’s not sure it will make it in the manual, but she would like some suggestions. Hattie Baker agreed
with Wendy Thomas that the 5 day adequacy period that is in place for other applications sounds
reasonable.
Kevin Thane states that he thinks there should be a definition for the cost of home ownership.
Board discusses whether or not to include a definition. David Magistrelli states that he supports a
definition of ownership.
David Magistrelli states that the manual only accounts for 70, 80 and 90%. He questions how that works
for 40, 50 and 60% AMI. Kevin Thane suggests adding “70% and below” to the manual. Wendy Thomas
clarifies that the ordinance goal was to focus on 65-100%, but that if you come in lower, the incentives
still apply.
Anders Lewendal questions if a 60% AMI home would qualify towards the number of homes that need
to be built. Wendy clarifies that yes, it will count towards the count of homes created.
David Magistrelli comments that the builders won’t be aiming lower, if all they have to do is reach 65%.
Sharon Southard states that currently they are not building in the 65%-100%, so the fact that this will
provide homes in that range is a start.
Hattie Baker clarifies that the below 70% AMI is a group that needs to be addressed, but that is not what
the ordinance was aimed at directly and the goal today was to focus on the manual which was part of
the ordinance.
Kevin Thane states that in the section when discussing mortgage affordability, that it doesn’t actually get
to a total. Wendy Thomas states that it is highlighted in the manual because it is still a work in progress.
Board moves on to the section regarding building upgrades. Anders Lewendal stated that there is a cost
for builders to install upgrades and it would be helpful to clarify what is a standard upgrade mark up for
the builder, so that builders get paid and buyers don’t get over charged.
Anders Lewendal questions a stop work order applying to developers. Wendy Thomas clarifies that the
stop work order would only apply to a specific building and the term “builders” refers to builders,
developers, etc.
Luke Howard states that other phases should not be held up because one phase is not in compliance. He
states that he does not think it is very well clarified whether a project is out of compliance. He does not
think that builders can easily tell what it will take to fall out of compliance. He thinks some sort of time
line should be provided to the builder so he knows what he needs to do to stay in compliance.
332
Anders Lewendal clarifies what the requirements are for a bedroom. Wendy Thomas states that if it’s
not something people will buy, it will not count – so it will regulate itself. Wendy Thomas questions if
Anders Lewendal would like to make a suggestion on the square footage. Anders Lewendal stated that
he would like to keep it open.
Board discusses the requirement for the project to sell to count toward the ordinance. There is a
concern from some board members that the projects will be built, but not sell. Others clarify that there
is a demand for homes in this price range. If they build them, people will buy them.
Sean Maloney questions where the minimum heated square footage is derived. Wendy Thomas stated
that it is derived from national best practices.
Luke Howard states that he does not agree that the location of the homes should be dictated. The
builder should be able to build clusters of affordable homes – or they should not be required to make
the homes look a certain way if the city is telling them where to put them.
Kevin Thane states he supported getting rid of the minimum square footage.
Hattie Baker suggests suggesting to the commission to amend the wording of the ordinance to allow
homes built count even if they don’t sell, because the builders have met their requirements.
Kevin Thane states that “substantially similar” to other homes in the neighborhood is open to too much
interpretation.
Anders Lewendal states that he has rental that does not have a dishwasher – it should not be required in
an effort to keep the home affordable.
Sharon Southard stated that the landscaping should be required to fit with other homes in the
community.
Kevin Thane agrees with Anders Lewendal that dishwashers should not be required and that there
should not be a requirement for a certain type of heating. Board discusses affordability of various types
of heating.
Anders Lewendal commented on the way in which Impact Fees are addressed. He doesn’t think it should
fall on the builder. Wendy Thomas states that the lien transfers to the home owner at the time of sale.
Kevin Thane comments on the design materials required that they need to state “meet or exceed” the
standards to allow for upgrades.
Sharon Southard commented that the HUD1 is now a “closing disclosure” and should be changed in the
manual.
Hattie Baker questions the closing cost verification and how that corresponds to non-disclosure laws.
Wendy Thomas clarifies that information will be kept internal and retracted from public records.
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Kevin Thane suggests striking the portion about 4 or more unrelated individuals. Wendy Thomas states
that it’s city code. Kevin Thane said it will be opening it up to 4 students coming together and buying a
house – he does not think we should be marketing to that group.
Hattie Baker questions if the properties will be on MLS. Wendy Thomas states that it will be listed, but
we can also market to specific groups of individuals.
Anders Lewendal clarifies that it should not be the responsibility of the seller’s agent of the builder to
make sure the buyer understands the affordable housing contract.
Sean Maloney questions if HRDC covers the disclosures. Sharon Southard states that the lender
discusses disclosures at closing.
Luke Howard states that if the sale falls through, it should not fall on the builder to absorb the cost.
Anders Lewendal agrees that if the home doesn’t sell, that someone else should be responsible for the
lien.
Sharon Southard comments that 10 days should be 30 days on closing.
Hattie Baker comments on step 6 – she questions if they can change 1 day to 3 days.
Anders Lewendal states that the other homes in the area will increase to absorb the cost of the
affordable home. It will not lower the cost of the other homes in the area. Board discusses the effect of
affordability of other homes. Anders Lewendal feels that they do not need to comment in the manual.
Board decides to keep the comment based on City research.
Anders Lewendal states that we should adjust the ultimate price with the title company within two
weeks.
Luke Howard states that “extreme financial hardship” should be defined on page 34. He also thinks that
“continuous tracts” should be defined, to avoid developers not meeting their quota.
Anders Lewendal comments on the cash-in-lieu fee that builders should be able to provide cash-in-lieu
up front. David Magistrelli comments that would not be effective at providing affordable housing.
Wendy Thomas comments that the requirements for after the program becomes mandatory will be
removed from this manual and a new manual will be made if it is made mandatory. As a result, there is
no need to discuss that portion of the manual.
Kevin Thane commented that the commission should know that written comments were submitted
because of the short turn around required.
David Magistrelli makes a motion: I move to approve the Affordable Housing Manual with changes as
documented.
Second by: Sean Maloney
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Board Unanimously agrees.
F. FYI/Discussion
Wendy Thomas commented that she will not be at the next meeting.
G. Adjournment – Brian Lameres closes the meeting.
For more information please contact Alicia Kennedy at akennedy@bozeman.net
This board generally meets the second Wednesday of the month at 8:00am
Committee meetings are open to all members of the public. If you have a disability and require
assistance, please contact our ADA coordinator, James Goehrung at 582-3232 (TDD 582-2301).
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City of Bozeman
Affordable Housing Ordinance
Administrative Manual
Adopted by Resolution XXXX
February 8, 2016
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Table of Contents
Page numbers will be added later
Add a goal section
1. Definitions
2. Accessing Affordable Housing Incentives
3. Pricing of Affordable Homes
4. Timing of Delivery of Affordable Homes
5. Minimum Design and Construction Standards
6. Qualifying, Applying for, Buying and Occupying Lower-Priced Homes
7. Marketing and Sales of Lower-Priced Homes
8. Recordation and Subsidy Recapture for Lower-Priced Homes
9. Marketing and Sales of Moderate-Priced Homes
12. Administration, Monitoring and Enforcement by the City
Exhibits
A: Template for Affordable Housing Plan
B: Proposed Project Description
C: Template for Maximum Home Price Schedule
D: Intake Application Forms
E: Template for Maximum Buyer Income Schedule
F: Preliminary Buyer Certification Form
G: Purchase Transaction Certification Form
H: Disclosure Statement for Buyers of Lower-Priced Homes
I: Homebuyer Certification Checklist
J: AHO Disclosure Addendum to Purchase Contract for Lower-Priced Home
K: AHO Buyer’s Guide
O: AHO Disclosure Statement to Purchase Contract for Moderate-Priced Homes
P: Occupancy Affidavit
Q: Procedures for Analyzing, Accepting and Valuing Land Donation
R: Template for Cash In-Lieu Schedules
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Purpose
The purpose of this Administrative Manual is to describe the administrative procedures and
policies for administering Chapter 38, Article 43, Bozeman Municipal Code as created pursuant
to Ordinance 1922 (the Affordable Housing Ordinance or AHO). This Manual is intended to be
used as a guide for developers of affordable homes, administrators of the city’s affordable
housing program, and other interested parties.
Goals for the Creation of Affordable Housing.
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 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 priced 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 priced 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
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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% of Area Median Income (AMI).
1. Definitions
a. Affordable housing or affordable home – A dwelling for purchase by an owner-
occupant that requires no more than 33% of a household’s income for housing
payments, is subject to the City of Bozeman AHO, and meets the definition of a Lower-
Priced Home or Moderate-Priced Homeunder the terms of the CoB AHO.
b. Area Median Income or AMI – As calculated by the U.S. Department of Housing and
Urban Development (HUD), AMI is the median income for a family of four within a
specific geographical area, such as Gallatin County. For each such region, HUD adjusts
this AMI calculation for households of different sizes and updates the calculations
annually based on estimated changes in area incomes. For purposes of the AHO, the
city adopted HUD’s AMI calculations as an equitable and reasonable method to
determine affordability, based on percentages of AMI specified in the AHO.
c. Common Ownership or Control – “Common ownership or control” refers to property
owned or controlled by the same person, persons, or entity, or by separate entities in
which any shareholder, partner, member, or family member of an investor of the
entity owns ten percent (10%) or more of the interest in the property.
d. City’s Agent – Refers to a qualified entity selected by the city to carry out aspects of
the implementation of the AHO.
e. Developer – For purposes of the AHO, a developer is the person or legal entity, or
their successor(s) in interest who: (a) submits an Affordable Housing Plan for a subject
property along with other submissions required for land use approvals, zoning, or
permit reviews by the city, and/or (b) is the owner of property subject to the AHO
during the development phase or a successor in title, such as a builder, obligated to
implement the Affordable Housing Plan required by the AHO with respect to one or
more lots or parcels of land and/or (c) receives incentives for the production of
affordable housing.
f. Eligible Buyer – A household meeting the AHO’s qualification criteria for eligibility to
purchase a home that is subject to the conditions of the AHO.
g. Housing Counseling Agency – An organization certified by the US Department of
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Housing and Urban Development to provide housing counseling and education.
h. Liquid Assets – Assets such as cash and stocks, bonds or similar that can readily be
converted to cash with no significant loss in value, but excluding long term retirement
assets such as IRA accounts, 401K accounts, pension funds, etc.
i. Lower-Priced Home – Newly created dwelling for purchase, determined by the city in
accordance with the AHO to be affordable to a household with an income between 65%
and 80% of AMI.
j. Market-rate home – Any dwelling subject to the AHO that is not an affordable home,
including detached dwellings, attached town houses, and condominium units but not
including housing units that are developed for exclusive use as a rental. The number of
market-rate homes in a development is used to determine the required number of
Affordable Homes, as described in the AHO.
k. Moderate-Priced Home – Newly created dwelling for purchase, affordable to a
household with an income between 81% and 100% of AMI.
l. 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:
(1) Before the improvement or repair is started; or
(2) If the structure has been damaged, and is being restored, before the
damage occurred. For the purposes 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 ensure safe living conditions; or any
alteration of a structure listed on the National Register of Historic Places or state
inventory of historic places.
To be expanded as needed- please suggest any additions
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2. Accessing Affordable Housing Incentives
Affordable housing incentives are available to developers who produce Lower-Priced or
Moderate-Priced Homes. See 38.43.110.
Affordable Housing Plan
To be eligible to receive AHO incentives, a developer must submit an Affordable Housing Plan
(AHP) for review and approval by the city See 38.43.080 detailing how the requirements of the
AHO will be met and the incentives requested by the developer. An Affordable Housing Plan will
most likely go through several draft iterations. Once the AHP is completed and approved by the
city, it constitutes a written commitment between the city and the developer.
The contents of an Affordable Housing Plan are shown in Exhibit A: Template for Affordable
Housing Plan. Exhibit A also includes directions and a step-by-step process for completing the
AHP.
Submission of Affordable Housing Plan. The AHP submission process begins with the completion
of Exhibit B: Proposed Project Description form, which must briefly describe the pertinent
details of the development such as the total number of units and which incentives the developer
wants to use. This form is submitted in advance of a meeting with city staff to discuss
preparation of the AHP. At this meeting, the developer and city staff review the Proposed
Project Description and city staff provides guidance on completing the AHP.
City Technical Assistance. City staff is available throughout the process to assist with guidance
on drafting the AHP; however, the developer is ultimately responsible for drafting and
submitting the AHP to the city.
Timing of Affordable Housing Plan Preparation; Incentives. A developer may apply for incentives
at any stage of the development process, although applying at the point of subdivision plan
submission may provide the greatest benefit from incentives. In this way, developers can elect
to apply for incentives for a single unit or multiple units.
If an AHP is approved and incentives used, a condition of approval for any subdivision plat or site
plan will be imposed that requires recordation of the AHP.
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3. Pricing of Affordable Homes
Schedule for the Maximum Sales Price of Affordable Homes
The AHO establishes pricing tiers for Affordable Homes (lower-priced homes and moderate-
priced homes). The city will calculate the maximum sales prices for each tier on an annual basis
using the formulas detailed below and also contained in Exhibit C: Template for Maximum Home
Price Schedule. The city will publish the Maximum Home Price Schedule within 30 calendar days
of HUD’s annual release of the Area Median Income for Bozeman, and become effective the
date of publication. The Director of Community Development is authorized to establish and
publish this schedule.
The formula for calculating the maximum sales price of Lower-Priced Homes and Moderate-
Priced Homes is based on three factors: (1) assumptions about costs of home ownership; (2) the
AMI for the size of household; and (3) the percentage of AMI that corresponds to the category
of Affordable Home. These factors are explained below.
(a) Assumptions About Cost of Home Ownership
To calculate the maximum sale prices for Affordable Homes, the city uses assumptions about
the costs of homeownership as authorized by the AHO. The Director of Community
Development may make de minimis exceptions to the application of these assumptions, and
may recalculate the maximum sale prices if prevailing mortgage interest rates have adjusted by
50 basis points or more over the assumption used for the most recent schedule. The city may
conduct a survey of a sample of recent home sales and other data sources to determine if any
changes have occurred in housing payment cost assumptions used to determine affordable
prices – such as typical monthly costs of real estate taxes, insurance, association fees, and
private mortgage insurance. If the Director of Community Development determines any such
changes materially affect the schedule, the Director may amend the schedule.
(b) AMI for the Household Size
The annual AMI figures for Bozeman will vary based on the number of people who make up the
household. The AHO establishes the size of home (number of bedrooms) that corresponds to
each household size. The AMI used to calculate the maximum sales price for an Affordable
Home is as follows:
Home Size AMI Used:
Zero-Bedroom/Studio One-person household
One-Bedroom Two-person household
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Two-Bedroom Two-person household
Three-Bedroom or larger Four-Person household
(c) Percentage of Area Median Income.
The AHO establishes three levels of maximum sale prices for Affordable Homes, corresponding
to 70%, 80% and 100% of AMI.
The following is a summary of the maximum sales price formula illustrating how the formula is
used to set the maximum sales price of a two-bedroom, lower-priced home priced at the 70% of
AMI level. The example below uses the AMI for Bozeman in effect as of February 1, 2016.
1. Multiply the annual AMI for the household size by the applicable percentage (70, 80,
or 90%): AMI for a 2 person household is $54,900 x 70% = $38,400
2. Divide by 12 to determine monthly income: $38,400 divided by 12 = $3,200
3. Multiply by 33% to determine maximum monthly housing payment: $3,200 x 33% =
$1,056
4. Subtract from (c) the following assumed monthly housing costs (for purposes of this
example, $400):
Real estate taxes
Homeowners’ insurance
Mortgage insurance (assumed for all buyers)
Homeowner/condo association fees
5. Equals the amount available to pay principal and interest of the home loan: $1,056 -
$400 = $656
6. Calculate a loan amount from (e) and add a 3.5% down payment
7. Equals the maximum sales price
(d) Maximum Monthly Housing Payment.
The maximum monthly housing payment for a buyer is determined by multiplying a maximum
housing expense ratio of 33% by 1/12th of the annual Area Median Income for a given household
size and income level.
(e) Maximum Monthly Mortgage Payment Capacity.
For each price tier, the maximum monthly mortgage payment is calculated as the maximum
monthly housing payment less the following monthly expenses: estimated real estate taxes;
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homeowner’s insurance; homeowner association fees; and private mortgage insurance
payments. For each price tier and subcategories of bedroom sizes of homes, the result
represents the assumed typical amount of the monthly payment available for principal and
interest payments on a home purchase loan.
i. Real Estate Taxes. The assumed rate for monthly real estate taxes will be
.0833% of the maximum home price for each price level as determined by
sample survey of Bozeman home prices and corresponding real estate tax
assessments.
ii. Homeowner’s Insurance. The assumed rate for monthly homeowners’ insurance
costs will be .0208% of the maximum home price for each price level, per a
sample survey.
iii. Private Mortgage Insurance. The rate used for assumed mortgage insurance
premiums (PMI) cost will be based on the current rate used for Federal Housing
Administration first mortgages with minimum 3.5% down payment
requirements. It is assumed that a typical buyer of an AHO home will make a
low down payment and thus be required to obtain mortgage insurance.
iv. Homeowner/Condo Association Fee. The rate used for homeowner/condo
association dues will be established using a sample survey of typical recent
projects within the City of Bozeman. The initial rate used will be X.XX%.
(f) Mortgage Loan Payment Assumptions.
The assumed loan type will be conventional or government insured 30-year (360 month), fixed
rate loan, with 3.5% of the home price as a down payment. Interest rate used in the calculation
of maximum home price will be the average of three current interest rates for 30-year fixed-rate
conventional and government-insured mortgage loans offered by banking institutions loans in
Bozeman. The assumed term will be 30 years.
Lower-Priced Homes Maximum Sales Price Formula
The maximum home price for Lower-Priced Homes will be based on the maximum monthly
mortgage payment capacity at 70% of Area Median Income, adjusted for the number of
bedrooms, and calculated at present value based on 12 monthly payments, for a term of 360
months, and the current prevailing mortgage interest rate. This formula is built into Exhibit C:
Template for Maximum Home Price Schedule.
Moderate-Priced Homes Maximum Sales Price Formula
The maximum home price for moderate-priced homes will be based on the maximum monthly
mortgage payment capacity at 90% of Area Median Income, adjusted for the number of
bedrooms and calculated at present value on 12 monthly payments, for a term of 360 months,
and the current prevailing mortgage interest rate. This formula is built into Exhibit C: Template
for Maximum Home Price Schedule.
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Updates to Pricing Schedule. HUD publishes updated Area Median Income calculations on an
annual basis, typically in the first quarter of the calendar year. Because changes in mortgage
interest rates have an impact on the buying capacity of lower-income homebuyers, the city, may
update the Maximum Home Price Schedule during the interim between HUD AMI annual
updates if prevailing interest rates change by more than 50 basis point (.5%). Developers with
executed Affordable Housing Plans will be notified of any changes to the Maximum Home Price
Schedule.
Applicability of Pricing Schedules. The pricing of Lower-Priced and Moderate-Priced Homes is
subject to the Maximum Home Price Schedule in effect at the time of issuance of building
permit. A developer may request that a newly published Maximum Home Price Schedule apply
to a home subject to a previous Maximum Home Price Schedule.
Buyer Selected Upgrades. Buyers of Lower-Priced Homes and Moderate-Priced Homes may
include up to $3,000 of buyer upgrades over the maximum home price as long as the buyer have
evidenced sufficient mortgage capacity at the time of Preliminary Certification.
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4. Timing of Delivery of Affordable Homes
The AHO requires that in each development in which more than one affordable home will be
sold, the Affordable Housing Plan must specify that affordable homes are to be sold
concurrently and in proportion to the sale of unimproved lots or market-rate homes. 38.43.060.
Such timing will be represented in an affordable homes pricing and delivery schedule as
described in section 38.43.080, to be included in the Affordable Housing Plan.
A developer may always sell affordable homes earlier than required in an Affordable Housing
Plan.
If the city determines a development is out of compliance with the approved Affordable Housing
Plan with respect to its delivery of Affordable Homes, the city may require the developer to
immediately provide a written plan to remedy the non-compliance. If the developer fails to
describe and act on a satisfactory and timely remedy, the city may pursue enforcement actions
as provided for by AHO, which could include but are not limited to a stop-work order for all
construction in the development.
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5. Minimum Design and Construction Standards
Minimum design and construction standards for Affordable Homes ensure Affordable Homes
are substantially similar to market rate homes in the development, establish minimum livability
standards, and provide harmonious integration of AHO units into the greater neighborhood.
Minimum Design and Construction Requirements
Minimum Square Footage Requirements. Affordable Homes must provide the following
minimum square footage of gross heated living area (inclusive of partitions, closets, heated
utility rooms, halls and stairways, but exclusive of attics, porches, unfinished basements,
garages and unheated storage space):
Detached Homes
Bedroom Size # Bathrooms Minimum Heated Area
1 Bedroom 1
2 Bedroom 1
3 Bedroom 1.5
4+ Bedroom 2
Attached Homes
Bedroom Size # Bathrooms Minimum Heated Area
Studio/1 Bedroom 1
2 Bedroom 1
3 Bedroom 1.5
4+ Bedroom 2
Mix of Bedroom Sizes. As described in the AHO, Affordable Homes must represent a mix of
bedrooms per unit as similar as possible to the mix of bedrooms per unit of the market-rate
homes in the development within which the Affordable Homes are located. If the bedroom
composition in the development as a whole is not known at the time of submission of the
Affordable Housing Plan, the following default distribution below may be used.
One-Bedroom 20%
Two-Bedroom 40%
Three-Bedroom 40%
In the case of Lower-Priced Homes, the developer may provide units with a different bedroom
mix than required under the approved Affordable Housing Plan if a different number of
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bedrooms better meets the needs of the next qualified purchasing household, subject to the
approval of the Community Development Director.
For both Moderate-Priced and Lower-Priced Homes, a developer may elect to build a home with
more bedrooms than the minimum number required under the AHO and Affordable Housing
Manual.
Equipment and Equipment Hookups. Affordable Homes must, at a minimum, include a new
kitchen range and refrigerator, hookups for a clothes washer, dryer,
Location within Neighborhood. Affordable Homes must be dispersed among market-rate homes
in the development, to the extent practicable. This distribution should be evidenced on the
recorded plat for the development.
Design and Materials. Affordable Homes must be designed, built and landscaped similar to
market-rate homes in the development, and with similar quality and type of materials, lighting,
plantings, and irrigation systems. Interior finishes may differ from market rate homes but should
be functionally equivalent and good quality.
Features. Features of Affordable Homes, such as garages, parking areas, and green-building
features must be functionally equivalent to market rate homes in the development. The extent
of the features of an AHO home do not need to be exactly the same as market-rate homes in the
development; however, if, e.g., garages are present in market rate units of the same bedroom
size as AHO units, at least one garage bay must be included in the AHO home.
Amenities. 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.
Marketability. Notwithstanding the foregoing standards, developers must use their own
judgment about possible additions of square footage and amenities over these minimums for
the purposes of marketing Affordable Homes and other homes in the development.
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6. Applying for, Qualifying, Buying and Occupying Lower-Priced Homes
Background
The AHO establishes two types of Affordable Homes with unique buyer qualification criteria for
each type.
Lower-Priced Homes have maximum sales prices significantly below market rate to make home
purchases more affordable, and may also have received cash and non-cash incentives from the
city at the development and construction stage. Because buyers of Lower-Priced Homes
therefore receive a substantial benefit in the form of below-market prices, the AHO limits the
availability of these homes to lower-income buyers, who generally could not afford to buy a
market-rate home. Besides income caps, buyers of Lower-Priced Homes also have to meet other
eligibility criteria. See 38.43.120.
This section of the manual describes how lower-income buyers are qualified to purchase a
Lower-Priced Home and how those qualifications are certified.
This section also applies to those buyers seeking down payment assistance.
Required Intake Form
A prospective buyer must complete Exhibit: D: Intake Application Form and participate in an
initial intake appointment with the City’s Agent selected to administer the AHO program.
Prospective buyers must meet all of the criteria described below. The intake form gathers all of
a buyer’s self-reported data needed to qualify the prospective buyer. As noted below, buyers
will need to provide additional documentation at the time of intake and possibly more
documentation later in the process for verification purposes.
Each intake form must be signed by the prospective buyer and any co-buyer(s), who must certify
in writing that the information is true and agree in writing to release certain documents to the
city or its agent upon request. Such documents include any future sales contract and settlement
sheet related to the purchase of a Lower-Priced Home, as well as proof of income, proof of
residency, and financial documents as described in this section.
Income Limits
To qualify to purchase a Lower-Priced Home, the buyer’s total household income must be at or
below 80% of the Area Median Income, adjusted for family size, as defined by HUD annually and
published by the city using Exhibit E: Template for Buyer Maximum Income Schedule.
Method of Income Verification. The income level of the Buyer’s household must be established
at the time of initial intake, placement on a waiting list and/or contract to purchase. The method
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of verification will be the HUD Part 5 definition (24 CFR Part 5) as applied to the HOME program.
The CPD Income Eligibility Calculator (www.hudexchange.info/incomecalculator) or another
method acceptable to the city and evidenced using Exhibit F: Preliminary Buyer Certification
Form may be used to complete the certification.
Treatment of Assets
A buyer whose household liquid assets exceeds $25,000, excluding any amont pledged as a
downpayment on the home, at the time of closing on a Lower-Priced Home is not eligible. Liquid
assets are defined as cash or other investment assets that can be readily converted to cash with
little or no penalty. This is not intended to include personal property of the buyer(s) or restricted
retirement assets such as 401K accounts, IRA accounts, or similar funds with tax deferred status.
The Director of Community Development may waive asset limit requirements in unusual
circumstances for certain buyers, such as a person close to retirement age or someone who is
permanently disabled and dependent on cash assets for ongoing living expenses.
Method of Verifying Assets. Initial verification will be determined through a review of the asset
information included on the Intake Application Form and verified through a review of all banking
and asset documentation provided in an in-person meeting with the City’s Agent. The total of
liquid assets will be entered into Exhibit F: Preliminary Certification Form.
Eligible Household Definition
The households of eligible buyers that will be occupying a Lower-Priced Home must meet the
following definition per AHO section 38.42.1420, as follows:
A person living alone, or any of the following groups living together as a single nonprofit
housekeeping unit and sharing common living, sleeping, cooking and eating facilities:
1. Any number of people related by blood, marriage, adoption, guardianship or other duly-
authorized custodial relationship;
3. Two unrelated people and any children related to either of them.
4. Persons or groups granted a request for a reasonable accommodation to reside as a single
housekeeping unit pursuant to section 38.35.090.
5. "Household" does not include:
a. Any society, club, fraternity, sorority, association, lodge, combine, federation, coterie,
cooperative housing or like organization;
b. Any group of individuals whose association is temporary or seasonal in nature; or
c. Any group of individuals who are in a group living arrangement as a result of criminal offenses.
Method of Verification. The applicant must complete a household disclosure as part of Exhibit D:
Intake Application Forms. The City’s Agent will review the Intake Application Form and
household size as represented on the applicant’s most recent tax forms and enter the
information in the Exhibit F: Preliminary Buyer Eligibility Form.
the applicant must disclose whether any changes in household composition are anticipated prior
to closing on the home.
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Buyer Contribution
The AHO requires a buyer contribute at least $1,000 to either the down payment or closing
costs associated with the purchase of a Lower-Priced Home. These funds must be provided by
the buyer household and may not be a gift from someone outside the applicant’s household.
Method of Verification. The buyer must certify the $1,000 buyer contribution will be available at
the time of closing. The City’s Agent must verify the buyer’s certification. Evidence may include
bank statements and income documentation. Final verification by the city or the City’s Agent
will be evidenced by the buyer cash contribution line in the HUD-1 Settlement Statement.
First-Time Homebuyer
The AHO requires that buyers of a Lower-Priced Home meet the FHA definition of a First-Time
Homebuyer, which requires the household meet one of the following criteria:
• An individual who has had no ownership interest in a principal residence during
the 3-year period ending with the date of purchase;
• A single parent whose only prior home was owned with another individual;
• An individual who is a displaced homemaker and has only owned with a spouse;
• An individual who has only owned a principal residence not permanently affixed to
a permanent foundation in accordance with applicable regulations; or
• An individual who has only owned a property that was not in compliance with
state, local or model building codes and which cannot be brought into compliance
for less than the cost of construction a permanent structure.
Method of Verification. The applicants must self-certify they qualify as a first time homebuyer
using the form contained in Exhibit D: Intake Application Forms. The City’s Agent must verify
no ownership in the previous three years through a review of the applicant’s credit report for
presence of a mortgage credit line. If a mortgage credit line exists, the applicant must provide
evidence for meeting one of the other four criteria that constitute First-Time Homebuyer
status.
First Mortgage Loan Requirements
The AHO requires buyers of Lower-Priced Homes use fixed-rate conventional or government-
insured mortgage financing with a term of no more than 30 years.
Method of Verification. The City’s Agent must verify the mortgage qualification type and
sufficient loan qualification amount at the time of contract through review of a mortgage
prequalification letter and note this in Exhibit F: Preliminary Buyer Certification Form. Final
verification will be evidenced through mortgage documents signed at closing and included in
Exhibit G: Purchase Transaction Certification Form.
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Owner-Occupancy Requirement
Buyers of Lower-Priced Homes must occupy the home as their primary residence for at least
183 days per year
In addition, a buyer of a Lower-Priced Home may not rent the entirety of the house to another
household. The Director of Community Development may waive the occupancy and no-rental
requirements on a temporary basis for extraordinary circumstances, such as a temporary
relocation for work a serious illness, or other compelling reasons.
If the Lower-Priced Home is not maintained as the primary residence of the original purchasing
household, any city liens on the property become due and payable unless the requirement is
waived temporarily. See Section 8 of this manual, “Recordation and Subsidy Recapture for
Lower-Priced Homes”.
Method of Verification. he City‘s Agent will mail letters to the buyer annually for the first five
years of ownership requesting certification that the buyer meets the owner occupancy
requirements of the AHO. The buyer must sign and return the certification within 30 days of
receipt.
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Buyer Eligibility Certification. The City’s Agent is responsible for meeting with prospective
applicants for Lower-Priced Homes and determining initial eligibility. Prior to placement on a
waiting list, or the execution of a purchase contract, the City’s Agent must verify the applicant
meets all the criteria for purchase of a Lower-Priced Home as outlined in Exhibit F: Preliminary
Buyer Certification Form.
After closing, the City’s Agent must ensure all documents contained in Exhibit I: Homebuyer
Certification Checklist have been collected in the client file and provide the city with completed
copies of the HUD-1 Settlement Statement and Exhibit G: Purchase Transaction Certification
Form.
Waiting Lists for Purchase of Lower-Priced Homes. The City’s Agent must maintain a first-come
first-served waiting list for Lower-Priced Homes. To be placed on the waiting list, an applicant
household must provide all documentation required for preliminary verification as outlined in
Exhibit F: Preliminary Buyer Certification Form including income and asset documentation and a
prequalification letter from a mortgage lender. The waiting list will be the basis for referring
eligible buyers to developers when a Lower-Priced Home becomes available. If an eligible
buyer has refused 2 affordable homes that fit the buyer’s requirement for the number of
bedrooms needed then the eligible buyer will be moved to the bottom of the waiting list.
Homebuyer Counseling and Training. To purchase a Lower-Priced Home, the buyer must attend
at least one session with a housing counselor, which can include the program intake
appointment, as well as an eight-hour homebuyer education class.
Buyer Disclosures and Assuring AHO Compliance by Sellers
Disclosures to Buyers. The City’s Agent will be responsible for discussing with applicants the
conditions of assistance required by the AHO during an in-person meeting prior to the buyer
executing a purchase contract for a Lower-Priced Home. At this meeting, the City’s Agent will
provide the applicant with a form copy of the AHO disclosure statement (see below). The City’s
Agent will also be responsible for assuring that sellers of each Lower-Priced Home wishing to
have the home count toward the number of affordable homes listed in Section 10 of the AHO,
append a buyer disclosure statement to each contract for purchase. This standard contract
addendum explains the city’s pricing, subsidy recapture, and owner occupancy policies for
Lower-Priced Homes. For purposes of assuring the proper AHO pricing, the addendum will
describe the numbers of bedrooms in the home. See Exhibit J: AHO Disclosure Addendum to
Purchase Contracts for Lower-Priced Home.
Review of sales contract. Sellers of Lower-Priced Homes wishing to have the home count toward
the number of affordable homes listed in Section 10 of the AHO must provide the City’s Agent
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with a copy of the executed sales contract. The City’s Agent will review the contract for
compliance with the AHO, including:
• That the home price does not exceed the maximum AHO price for a home with the
numbers of bedrooms described in the Disclosure Addendum to the sales contract; and
• Whether all other wording of the Disclosure Addendum conforms to AHO requirements.
If a disclosure addendum does not comply with AHO requirements, the City’s Agent will report
the circumstances to the city’s Director of Community Development.
Origination of AHO Lien Documents at Closing. The City’s Agent must originate documents
necessary to recapture the buyer subsidies per the AHO, as described in Section 8 of this
manual, “Recordation and Subsidy Recapture for Lower-Priced Homes.”
Sales Price Verification. The City’s Agent will review the preliminary HUD-1 Settlement
Statement prior to the closing to determine that the final sales price does not exceed AHO
maximum price for the home. If the buyer’s name(s) and price do not comply with AHO
requirements, the City’s Agent will report the circumstances to the city’s Director of Community
Development. A copy of the final HUD-1 Settlement Statement m be provided to the city to
evidence compliance and retained in the client file.
Post-closing Responsibilities of Seller. Sellers of Lower-Priced Homes wishing to have the home
count toward the number of affordable homes listed in Section 10 of the AHO must provide the
City’s Agent with all required documents evidencing the home was sold to an eligible buyer at
the appropriate qualifying price.
The following chart summarizes the buyer certification process.
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7. Marketing and Sales of Lower-Priced Homes
Marketing Guide for Builders and Sales Agents
The marketing and sales provisions of the AHO and this Manual are designed to ensure that AHO
requirements are met and that Lower-Priced Homes are marketed and sold as quickly and
efficiently as possible. The developer has the ultimate responsibility for marketing and selling all
Lower-Priced Homes in a development. The qualification of buyers to meet AHO requirements is
the responsibility of the City’s Agent. The City’s Agent, through the qualification process, may
also provide assistance to the developer in identifying potential buyers for the Lower-Priced
Homes. Successful implementation of the affordable housing program will require close
collaboration between the City, the City’s Agent and developers selling Lower-Priced Homes.
Steps in the process are as follows:
Step 1. Intent to Build. When a developer is ready to undertake construction of a Lower-Priced
Home, the developer must notify the City’s Agent and provide the City’s Agent with floor plans,
elevation drawings, location of the unit and an anticipated construction schedule so the City’s
Agent can make prospective eligible buyers aware of the buying opportunity and put them on a
wait list, if qualified. Optionally, a developer or builder may provide the only the price of the
house that will be built to the City’s Agent who will alert eligible buyers to the developer or
builders intent to build a house for that price. The eligible buyer may then meet with the
developer or builder to select the design options that are most suitable to the eligible buyer
from among options available through the developer or builder.
Step 2. Coordination Meeting. If the Lower-Priced Home is the first such home being marketed
in a development, the City’s Agent will set up a face-to-face meeting with the developer and its
sales staff or sales agent to review AHO requirements for marketing, sales, and qualification of
buyers.
Step 3. Identifying Buyers from Wait List. If there are qualified buyers on a waiting list, the City’s
Agent will notify the first household of appropriate size on the waiting list that a home is
becoming available, and invite them to inform their housing counselor if they are interested in
buying the home. If the qualified buyer is not interested in the home, the next potential buyer
on the list will be notified. The City’s Agent will refer the prospective buyer to the developer.
Step 4: Marketing by the Developer. The developer may begin marketing the home to the
general public simultaneously with Step 3. If the developer finds an interested buyer who has
not yet had an intake appointment with the City’s Agent, the following procedures must be
followed:
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• The developer or its sales agent must interview potential buyers who have not had an
intake appointment with the City’s Agent to determine if they believe they meet all of
the qualifications and give them a copy of AHO Buyers Guide (see Exhibit K) which
includes the current income limits and basic qualification criteria.
• All apparently qualified buyers must immediately be referred to the City’s Agent for
qualification and—if qualified—put on the AHO waiting list.
Step 5. Sales Contract. When a qualified buyer is prepared to sign a sales contract, the developer
wishing to have the home count toward the number of affordable homes listed in Section 10 of
the AHO will follow the requirements in Section 6 of this manual for appending an AHO
Disclosure Statement to the purchase contract form. The developer or sales agent will explain
each element of the disclosures to the buyer.
Step 6. Transmit copy of sales contract to City’s Agent. Within one business day after execution
of a sales contract, the developer wishing to have the home count toward the number of
affordable homes listed in Section 10 of the AHO must transmit a copy to the City’s Agent for
review of compliance.
Step 7. Pre-Closing Tasks. No more than ten business days before the anticipated closing date, the developer (or its sales agent) wishing to have the home count toward
the number of affordable homes listed in Section 10 of the AHO will notify the buyer-under-contract and the City’s Agent of the closing timeline. At this time the City’s Agent will notify the mortgage lender that the home is nearing the closing date and request that the lender initiate an appraisal if it has not already been undertaken.
The City’s Agent will originate the appropriate lien documents based on the sales price and the
market value of the home as detailed in Section 8, Recordation and Subsidy Recapture for
Lower-Priced Homes, and provide those documents to the city prior to closing. The City’s Agent
will be responsible for providing the completed documents to the title company prior to the
scheduled closing date.
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8. Recordations and Subsidy Recapture for Lower-Priced Homes
The city will secure and recapture both cash and non-cash investments in affordable housing.
Lower-priced homes as defined by the Affordable Housing Ordinance (AHO) will generally be
subject to three liens.
Type of Lien Purpose Repayment terms
1. Seller Subsidy
Recapture Lien:
Promissory note and
mortgage deed from
the seller (builder) to
the city.
To recapture funds paid by the
city on behalf of the seller such
as impact fees and filing fees.
Payable at 0% interest only if the
seller fails to meet AHO
requirements. Otherwise it will be
extinguished when buyer executes
lien #2 below. Includes cash
penalties for failure to pay on time.
2. Buyer Subsidy
Recapture Lien:
Promissory note and
mortgage deed from
the buyer to the city.
To recapture not only the fees
paid by the city but the
remainder of the discount from
market value resulting from AHO
home price.
Payable at 0% interest upon sale,
transfer, cash-out refinance or
default on AHO requirements, such
as the requirement for owner-
occupancy. Includes cash penalties
for failure to pay on time.
3. Down Payment
Assistance Lien:
Promissory note and
mortgage deed from
the buyer to the city.
Available subject to
availability of funds.
To recapture the city’s loan of
cash to the buyer for the
purchase, up to $10,000—to
make AHO home purchases
affordable for homebuyers—
effectively lowering the cost of
home purchases below the AHO
prices. Smaller loans will be used
to augment buyer’s cash to
meet down payment and
settlement costs.
Payable at 0% interest upon sale,
transfer, cash-our refinance or
default on AHO requirements, such
as the requirement for owner-
occupancy. Includes cash penalties
for failure to pay on time.
1. Subsidy recapture lien for builders of lower-priced homes
Applicability
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A subsidy recapture lien applies to all builders of lower-priced homes on whose behalf the city
has made cash payments to subsidize city impact fees and/or filing fees.
Lien Extinguished
If the seller abides by the requirements of AHO, this lien will be extinguished when a qualified
buyer signs a Subsidy Recapture Lien payable to the city. The repayment amount of a buyer’s
Subsidy Recapture Lien is assumed always to exceed the amount of the Seller Recapture Lien.
See #2 below for calculation of a buyer’s Subsidy Recapture Lien.
Calculation of Lien Amount – The lien shall be equal to the total of all payments made by the city
on behalf of the builder.
Form of Lien – Such liens will be in the form of a mortgage deed and promissory note payable to
the city of Bozeman. The documents will be recorded at the Gallatin County Clerk and Recorders
office.
Terms of Lien – Full repayment is due only if: (a) the builder fails to sell a lower-priced home to
an eligible buyer within two years of the origination of this lien—typically immediately before
building permits are issued—or (b) otherwise breaches the terms of the lien, which include full
compliance with AHO requirements.
Responsibility for Origination – Documents will be prepared by the city using standard forms
(see Exhibit XX), then reviewed by the city attorney’s office, which will forward the documents
to the title company that is managing the closings of the real estate sale and loans.
2. Subsidy recapture lien for homebuyers
Applicability
The subsidy recapture lien applies to all buyers of lower-price homes, since AHO, in effect,
requires that these homes be sold at a discount to market value and that the discount be
recaptured. This lien does not apply to buyers of AHO moderate-priced homes, since the sellers
of these homes do not benefit from direct cash subsidies from the city, and their prices are
assumed to be “low market” but not below-market.
Qualification of Buyers
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See Section YY of this manual for qualification of buyers of AFO lower-priced homes. The
process and requirements are similar to those for down payment assistance, described below.
Lien Extinguishes
This lien extinguishes after 5 years.
Repayment Formula
The buyer agrees to repay most of the discount from market value represented by the APO
price for a lower-priced home. The formula is as follows:
98% of the appraised value of the home at time of sale (becomes the nominal sales price)
(Minus) price of lower-priced home
(Equals) indirect subsidy and dollar amount of lien
The formula uses 98% of appraised value in order to provide homebuyers with a small amount
of net equity as a buffer. This criterion may also make it easier for lower-income buyers to
qualify for certain first mortgage products.
Appraisal and Calculation of Lien Amount
The appraisal used to calculate the amount of subsidy may be the appraisal obtained by the
buyer’s mortgage lender or, if that is not available, a professional appraisal provided by the
purchaser. The lien amount will be calculated using the formula above.
Form of Lien.
Such liens will be in the form of a mortgage deed and promissory note payable to the city of
Bozeman. The documents will be recorded at the Gallatin County Clerk and Recorders office.
Terms of Lien
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Repayment is due only when the property is sold, transferred, refinanced for reasons other than
lower rate or shorter term, or when the initial buyer who qualified for the subsidy has failed to
abide by the requirements of the city’s Affordable Housing Ordinance as stated in the
promissory note. The interest rate will be 0%. The lien will be expressly subordinate to any first
mortgage lien and possibly other liens (such as the Board of Housing’s down payment assistance
liens) in accordance with the city’s written subordination policy.
Effect on Contracts for Sales of Lower-Priced Homes
Since the conveyance of homes at below-market prices, as required by the Ordinance, would
artificially depress home values in the vicinity of lower-priced homes, the city requires all
contracts for purchase of lower-priced homes to describe the contract price as the “higher of $X
(city-required price) or 98% of the appraised value of the home.” The city will provide a
standard sales contract addendum to each developer and builder of lower-priced homes which
describes these terms and explains both the city-required price and the indirect subsidy lien.
Responsibility for Origination
Documents will be prepared by the city using standard forms (see Exhibit XX), then reviewed by
the city attorney’s office, which will forward the documents to the title company that is
managing the closings of the real estate sale and loans.
Coordination with Title Company
The developer or builder of a lower-priced home will be required to inform the title company of
the ultimate contract price in advance of the closing—i.e. 98% of appraised value. On the
settlement sheet, the city-required home price will be represented by 98% of appraised value as
the sales price and the amount of the indirect subsidy lien as subordinate financing.
3. Down payment assistance lien for homebuyers
Applicability
The city’s Affordable Housing Fund provides cash assistance for some lower-income AHO
homebuyers. However, the city will endeavor to conserve AHF resource by referring buyers to
the Montana Board of Housing, which at times offers similar assistance.
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Qualification of Borrowers
To qualify for down payment assistance, a buyer of a lower-priced home must have an income
at or below 80% of Area Median Income and be otherwise qualified for the purchase per AHO
residency and other requirements. The city or its agent will examine and certify in writing
buyers’ incomes, assets, residency and other characteristics that determine buyer’s qualification
for this assistance. See Section YY of this manual for certification procedures.
Calculation of Lien Amount
The lien amount will be equal to the amount of cash provided to the buyer by the city for the
purpose of financing the home purchase.
Form of Lien
Such liens will be in the form of a mortgage deed and promissory note payable to the city of
Bozeman. The lien will be expressly subordinate to any first mortgage lien. Any other
subordination will be made in accordance with the city’s written subordination policy. The
documents will be recorded at the Gallatin County Clerk and Recorders office.
Terms of Lien
Repayment of the principal amount, at 0% interest, is due only when the property is sold,
transferred, cash-out refinanced or when the initial buyer who qualified for the subsidy has
failed to abide by the requirements of the city’s Affordable Housing Ordinance as stated in the
promissory note. Failure to maintain owner occupancy would be the primary reason for a
default and a demand of repayment.
Commitment Letter
For the purpose of aiding homebuyers in qualifying for first mortgage financing, the city or its
agent will issue a commitment letter after a qualified buyer has signed a purchase contract for a
lower-priced home. See Exhibit XX.
Responsibility for Origination
Loan documents will be prepared using standard forms (see Exhibit XX), then reviewed by the
city attorney’s office, which will forward the documents to the title company that is managing
the closings of the real estate sale and loans.
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Lien Position
The city’s lien shall be senior to all other liens, with the exception of the first mortgage, and
subordinate financing for the purpose of down payment or principal reductions assistance
provided by the Montana Board of Housing or through funds provided by the US Department of
Housing and Urban Development that require placement in the second lien position.
Subordination Policy
The city shall only subordinate the AHO liens in circumstances where a beneficiary of a lower-
priced home refinances for a lower interest rate, or shorter term of first mortgage loan, also
referred to as a non-cash-out refinance.
The Director of Community Development may waive this prohibition on non-cash-out refinance,
on a case-by-case basis for unusual circumstances such as when equity in the home is needed to
address a critical repair for the lower-priced housing unit; in the case of a medical emergency; or
for the funding of higher education expenses for an immediate family member of the resident
household. In instances where a cash-out refinance or subordination is allowed, the combined
loan-to-value ratio of the home may not exceed 97% including all subordinate financing.
Request for waiver of the subordination policy must be submitted in writing for approval by the
Director of Community Development.
9. Marketing and Sales of Moderate-Priced Homes
A developer desiring to construct Moderate-Priced Homes must comply with the requirements
of the AHO. The following apply to Moderate-Priced Homes.
Maximum Sales Price
The maximum sale price for Moderate-Priced Homes is set at the cost for a home affordable to a
household earning 90% of Area Median Income, adjusted for household size. Maximum sales
prices for Moderate-Priced Homes will be published annually by the Director of Community
Development as discussed in section 3 (above).
Disclosure Addendum to Purchase Contract
The only qualification for purchase of a Moderate-Priced home is that the home be purchased
and occupied as a primary residence for a minimum of two years. In the purchase contract for
each Moderate-Priced Home, a developer wishing to have the home count toward the number
of affordable homes listed in Section 10 of the AHO must include an addendum describing this
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requirement. See Exhibit O: Disclosure Addendum to Purchase Contract for Moderate-Priced
Home.
Verification of Compliance
In order for the city to verify compliance with the AHO, the developer wishing to have the home
count toward the number of affordable homes listed in Section 10 of the AHO will provide to the
city:
(a) a copy of the HUD-1 settlement statement so that the city may verify that the sales
price was at or below the maximum home price for the home as shown on the
pricing schedule in effect at the time of the issuance of the building permit. If the
pricing schedule changes after the permit is issued, the developer may elect to use
the updated price if it differs. A cover letter must be provided with the HUD-1
settlement statement indicating the number of bedrooms in the home.
(b) a copy of Exhibit P. Occupancy Affidavit executed by the buyer certifying that they
will occupy the home as a primary residence for the first two years of ownership.
Approximately 10 months and again 22 months after the purchase of a Moderate-Priced Home,
the city or the City’s Agent will send a letter to the buyer requesting the buyer indicate whether
they continue to occupy the home. If the letter is returned as “not at this address” or no
response is received from the buyer, the city or its agent will conduct a site visit to verify
residency.
.
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10. Mandatory Requirements for Providing Affordable Homes
Should targets set by the Bozeman City Commission for the production of Affordable Homes not
be met, the requirements of the AHO may become mandatory. The mandatory provisions of the
AHO are similar to the requirements which apply to developers seeking incentives through
voluntary compliance with the AHO.
Applicability of Mandatory Requirements to Provide Affordable Homes
If the mandatory provisions of the AHO go into effect, they will apply to:
Subdivisions. Applications for subdivisions which propose 10 or more for-purchase market rate
units, created either through new construction, Substantial Improvement or reuse.
Contiguous tracts may not be broken up into multiple tracts of 10 units or less to avoid
affordable housing requirements. At the time of the initial application for approval of a
subdivision or site plan, the developer will identify all contiguous property under common
ownership and control in the Affordable Housing Plan.
Annexations. Mandatory affordable housing requirements apply to annexations when the net
developable area of the annexing parcel, when considering the applicable zoning, could result in
10 or more for-purchase dwelling units.
Other developments. Developments not subject to the mandatory requirements under the
mandatory program may still apply for affordable housing incentives. Projects that propose
more Affordable Homes than required under the AHO may also apply for incentives for those
units.
Calculating the Affordable Housing Requirement
Developers have the option of either building and selling 10% of the total number of units in
their development as Lower-Priced Homes, building and selling 30% of the total number of
homes in the development as Moderate-Priced Homes, or producing a combination of both
Lower-Priced and Moderate-Priced Homes. Examples of the three options for compliance are
included below.
Fractional Unit Calculation. In situations where the calculation of the affordable housing
requirement results in a fraction of a unit, the developer has two options for compliance, either
paying a fractional cash-in-lieu, or building one additional Moderate-Priced Home.
If the developer elects the cash-in-lieu option, the fractional percentage is multiplied by an
average of the current cash-in-lieu fees for the home type (condo, townhome or detached), and
bedroom compositions present in the development.
Example of Affordable Home Requirement Calculations
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Example 1: Calculation for Lower-Priced Homes
Total Number of Units In Development 36
Percentage Requirement (10%) x .10
Resulting Number of Affordable Homes 3.6
Fraction Unit .6
Fractional Cash-In-Lieu Fee x $35,000 tk NUMBER
WILL CHANGE
Resulting Fraction Fee $21,000
*average of cash-in-lieu fee for unit types present in development
In this example the developer is proposing to build 36 units of new housing, which results in an
affordable housing requirement of 3.6 Lower-Priced Homes. The fraction of .6 can either be
satisfied by paying 60% of the average cash-in-lieu fee for the unit types present in the project
(meaning both attached/detached and the number of bedrooms present), by constructing an
additional Moderate-Priced Home, at the developer’s discretion.
Example 2: Calculation for Moderate-Priced Homes
Total Number of Units In development 36
Percentage Requirement (30%) x .30
Resulting Number of Affordable Homes 10.8
Fractional Unit .8
Round Fractional Unit to nearest whole 1
Total Unit Requirement 11
In this example where the developer has elected to produce Moderate-Priced Homes in a 36
unit development, the resulting requirement is to produce 10.8 homes. Because there is no
cash-in-lieu option for Moderate-Priced Homes, the resulting fraction is rounded to the nearest
whole number, with fractions less than .5 being rounded down to the next lowest whole
number, and fractions of .5 or greater being rounded up to the next greatest whole number.
Example 3: Calculation for MIX of Lower-Priced and Moderate-Priced
Homes
Total Number of Units In development 36
Percentage Requirement (10%) x .10
Resulting Number of Lower-Priced Homes 3.6
Number of Lower-Priced Homes Elected 2
Number of Moderate-Priced Homes to
substitute for Lower-Priced Homes not
provided
3
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Fraction Unit .6
Fractional Fee In Lieu Fee x $35,000 tk WILL
CHANGE
Resulting Fraction Fee $21,000
*average of cash-in-lieu fee for unit types present in development
In this example, the developer has elected to produce a mix of Lower-Priced Homes and
Moderate-Priced Homes in a 36 unit development. For each Lower-Priced Home required, the
developer may substitute three Moderate-Priced Homes. In this case the developer has elected
to replace on Lower-Priced Home. The resulting requirement is 2 Lower-Priced Homes and three
Moderate-Priced Homes. The fractional home (.6 units) can be satisfied by either paying the
cashin-lieu fee, or building an additional Moderate-Priced home.
Phased Developments. It is anticipated that in developments being built in phases, the number
of market-rate homes may not be certain at the time the developer submits the Affordable
Housing Plan. In such cases, the developer must estimate the number of market-rate homes and
number of affordable homes required for all phases. If the number of homes in the first phase of
such development is certain at the time of the city’s approval of the Affordable Housing Plan, a
separate affordable homes pricing and delivery schedule for that phase will be incorporated in
the Affordable Housing Plan. At the time of development or construction of each subsequent
phase, pricing and delivery schedules for that phase will be added to the Affordable Housing
Plan.
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12. Alternative Means of Compliance
The Bozeman City Commission may approve, at its discretion, alternative means of compliance
with the AHO.
Applicability
Alternative means of compliance may be approved to satisfy a developer’s obligation to provide
Lower-Priced Homes in a development.
Process for Applying for Alternative Means of Compliance
To be eligible to use an alternative means of compliance, the developer must demonstrate to
the satisfaction of the city that it meets at least one of the three criteria described below.
The developer must submit a formal request to use an alternative means of compliance to the
Community Development Department. The request should include the proposed alternative
means of compliance, a written explanation of why the alternative means of compliance is
needed, how the developer meets one of the three situations that warrant alternative means of
compliance, and any evidence to support the request. This request must be approved by the
Bozeman City Commission at a public hearing.
A request for an alternative means of compliance may be granted in cases of:
(1) Extreme Financial Hardship. Developers may propose an alternative means of
compliance if they can demonstrate that the provision of Affordable Homes required by
the AHO constitutes an extreme financial hardship that makes the development
financially infeasible.
(2) Compatibility of Affordable Units with the Development. Developers may provide cash-
in-lieu or land donation as previously described in this manual if they can demonstrate
that there is a fundamental incompatibility between the Affordable Homes required by
the AHO and the development as a whole. This is intended to protect potential buyers
of Affordable Homes from buying in a development where home ownership may be too
financially burdensome for the buyer. Issues affecting cost of long-term ownership in
the development may include the on-site terrain, distance to jobs and basic services, or
homeowner’s association dues that are anticipated to be very high.
(3) The Alternative Better Addresses Housing Needs. Developers may propose an
alternative means of compliance that better meets the documented housing needs of
low- and moderate-income households in Bozeman because the alternative will provide
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more housing than required under the AHO or will benefit people of lower income than
provided for in the AHO.
Alternative means of compliance with the AHO may include:
(1) Providing Cash In Lieu. The purpose of such payments is to enable the city to subsidize
the construction or purchase of a lower-priced market-rate home on the market in
Bozeman to make it affordable for a qualified lower-income buyer.
Payment of cash-in-lieu will be made to the city per a fee schedule adopted annually by
the city commission. For each required Affordable Home not built, the cash-in-lieu
amount will be the difference between the sales price of a Lower-Priced Home
according to the then-current schedule of affordable home prices and the sales price of
a market-rate home within the development subject to the AHO. Cash-in-lieu payments
will be paid prior to issuance of a certificate of occupancy for any dwelling or building in
the development subject to the AHO.
(2) Providing Land Donations In Lieu. The city may accept donations to a city-designated
community housing nonprofit entity of: (i) ready-to-build house lots; or (ii) parcels of
land suitable for construction of affordable single family or multifamily housing.
Restrictions on the donated lots or parcels will run with the land. The credit for
provision of land will be subject to Exhibit Q: Procedures for Analyzing, Accepting, and
Valuing Land Donations and will be generally determined as follows:
a. House lots. The value of the lot or lots, as determined by a professional appraisal
paid for by the developer, will be divided by the city’s then-current average of
cash-in-lieu payments for homes of different sizes. The product of that division to
two decimal points will constitute the credit against the otherwise required
number of Lower-Priced Homes distributed evenly among the composition of
various number of bedroom configurations.
b. Parcels of land. The city will periodically adopt a valuation for donation of parcels
of land intended for multifamily development, for purposes of determining credits
against the number of affordable homes that would otherwise be required in a
development subject to the AHO. The parcel of land must be zoned for the
development of multi-family housing, such as R-3, R-4 and REMU.
Timing of In Lieu Contributions. In-lieu contributions when permitted will be due and payable to
the city before the recordation of the Affordable Housing Plan. A developer may propose an
alternative to this requirement in which staged contributions are made upon the predicted
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occurrence of certain events, such as the sale of lots, which alternative may be approved at the
sole discretion of the city. A plan detailing the timing and justification for staged payment will be
prepared by the developer and submitted for review and approval by the city.
In the case of staged delivery of in-lieu contributions, when permitted, the city’s determination
of the value of each contribution will take into account the differential financial value of
payments that are made later than recordation of the Affordable Housing Plan using
conventional methods of discounting future cash flows to present value.
Formula for Calculating Cash-In-Lieu Contributions. The city will produce periodically a Cash-In-
Lieu Schedule following the form of Exhibit R: Template for Cash In-Lieu Schedule. This
spreadsheet contains a formula based on the previous two years of MLS sales data and
separated out by home type (condo, townhome, and detached) and then by the number of
bedrooms within each housing type. The median value for each housing type and size will be
established by calculating the median sales price of the lowest quartile of sales, by sales price,
over the previous two-year period.
In a situation where there are less than four sales in the previous two-year period for a specific
home and bedroom type, the median value of the next larger size will be divided by the median
square footage to establish a median square foot price. This median square foot price will then
multiplied by the minimum square footage for AHO units established in this manual to create a
median price for that category. The currently adopted price for Lower-Priced Homes will then be
subtracted from the median price to establish the cash-in-lieu amount.
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12. Administration, Subordination, Monitoring and Enforcement by the
City
Administration
The Director of Community Development or designee may promulgate and enforce all
reasonable rules and regulations and take all actions necessary to the effective operation and
enforcement of AHO and this Manual, including but not limited to:
1. Reviewing a developer’s Affordable Housing Plan for compliance with the AHO;
2. Adopting all forms and prescribing the information to be given therein;
3. Monitoring developers’ compliance with their approved Affordable Housing Plan,
notifying the developer of noncompliance, and ordering compliance;
4. Imposing any and all sanctions permitted by the AHO; and
5. Calculating the annual pricing targets for affordable homes and causing a sales price
schedule to be published. The Director of Community Development may make de
minimis exceptions to the factors considered in calculating the price targets.
City’s Agent
The city may choose to retain an agent to undertake certain administrative duties. The City’s
Agent must follow the policies and procedures described this Administrative Manual and those
prescribed by the Director of Community Development.
The City’s Agent must be a HUD-Certified Housing Counseling Agency with sufficient staff to
provide individual and group housing counseling and education. The City’s Agent staff must be
trained to perform HUD-defined Part 5 income determinations and other certifications required
under the AHO and this Manual and have the required administrative capacity to maintain
secure records documenting purchase transactions.
Subordination of Subsidies
The city may use liens as a tool to recapture subsidies as described in Section 8, Recordation and
Subsidy Recapture for Lower-Priced Homes. The city’s lien shall be senior to all other liens, with
the exception of the first mortgage, and subordinate financing for the purpose of down payment
or principal reduction assistance provided by the Montana Board of Housing or through funds
provided by the US Department of Housing and Urban Development that require placement in
the second lien position.
The city shall only subordinate the AHO liens in circumstances where a buyer of a Lower-Priced
Home refinances for a lower interest rate, or shorter term of first mortgage loan, also referred
to as a non-cash-out refinance.
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Verification of Purchase Transactions
Compliance with provisions of the AHO and this Manual are ultimately the responsibility of the
city, although tasks that contribute to the completion of certification may be conducted by the
City’s Agent.
Review of purchase transaction documents by City staff. Although buyer qualification and
certification of an eligible transaction may be carried out by the City’s Agent, city staff may
review the following:
• Subsidy lien documents – prior to closing
• Exhibit G: Purchase Transaction Certification Form
• The HUD-1 Settlement Statement of the transaction
The City’s Agent is required to maintain all detailed records relating to the transaction as
described in Exhibit I: Homebuyer Certification Checklist. These client files must be made
available for inspection at the request of city staff for purposes of auditing completed sales
transactions for compliance with all rules and regulations. Records of transactions must be
maintained pursuant to industry practices and the City’s record retention schedules.
The city or the City’s Agent will be responsible for verifying owner occupancy of Lower-Priced
and Moderate-Priced Home as described in this Manual.
Updates to Income, Pricing and Cash-In-Lieu Schedules
The city is responsible for publishing an update to Exhibit E: Maximum Buyer income Schedule
within 30 days of HUD’s publication of the annual Area Median Income for Gallatin County.
The update of the income schedules will trigger the update of Exhibit C: Maximum Home Price
Schedule. The Maximum Home Price Schedule may also be updated at the discretion of the
Director of Community Development if prevailing mortgage interest rates change more than 50
basis points (.5%) between annual updates as described in this manual.
The city will also update Exhibit R: Template for Cash-In-Lieu Schedule based on current housing
market data once completed market data for the previous calendar year is available from the
Gallatin Association of Realtors.
Non-Compliance
If the city determines a developer subject to an Affordable Housing Plan has failed to comply
with any terms or conditions of the Affordable Housing Plan or the AHO, the Director of
Community Development or will notify the developer of the noncompliance in writing and order
compliance by the most effective and expeditious means as determined by the city. Notification
may describe a date certain by which the developer must be in full, and will describe: (i) the
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exact nature of the noncompliance; and (ii) the possible sanctions for noncompliance with this
notification.
Cancellation of Incentives Provided. If a developer sells a home for a price not in compliance
with the approved Affordable Housing Plan or any other recorded documentation obligating
developer to comply with the AHO, the developer must, prior to the release by the city of the
dwelling from the Affordable Housing Plan or binding agreement, pay the city the difference
between the sales price and the price of the affordable home as set out in the approved
Affordable Housing Plan.
Sanctions for Noncompliance. In addition to other remedies available to the city pursuant to the
AHO, if on a date certain by which compliance has been ordered by the Director of Community
Development or authorized agent, the developer remains in noncompliance, the Director of
Community Development or authorized agent may notify the City Attorney of the
noncompliance and request that sanctions be imposed. The city has the authority to impose one
or more sanctions including but not limited to the following which the city deems most effective
and appropriate considering the nature of the noncompliance:
1. Withholding or revoking building permits,
2. Issuing stop-work orders, and/or
3. Withholding certificates of occupancy.
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Alicia Kennedy
From:Wendy Thomas
Sent:Monday, February 01, 2016 7:48 PMTo:Alicia KennedySubject:FW: Public Comment
Please load as public comment for AH manual.
From: Brit Fontenot
Sent: Monday, February 1, 2016 7:06 PM
To: Wendy Thomas <WThomas@BOZEMAN.NET>
Subject: Fwd: Public Comment
FYI
Begin forwarded message:
From: Agenda <agenda@BOZEMAN.NET> Date: February 1, 2016 at 7:04:17 PM MST
To: Brit Fontenot <bfontenot@BOZEMAN.NET>
Subject: FW: Public Comment
From: dzyn2architects@gmail.com
Sent: Monday, February 01, 2016 7:04:15 PM (UTC-07:00) Mountain Time (US & Canada)
To: Agenda
Subject: Public Comment
CommissionerGroupID: 103
First Name: Michael
Last Name: Pentecost
Email: dzyn2architects@gmail.com Phone Number: (406) 539-5067
Message: Commissioners, Next week, you will be reviewing the Affordable Housing Ordinance.
I'd like to propose that you re-consider the proposed 1000 sq. ft. minimum, 2 bedroom 1 bath house requirement that is currently in the ordinance. I don't believe the 1000 sq. ft. minimum is appropriate or in the communities best interest. I have designed a number of houses in Valley
West Subdivision that have been built and sold in the past year that were 840 square feet, 2
bedroom 2 bath. By reducing the square footage requirement, this allows the house to be sold at
a more affordable price. Currently we have built and sold 4 of these homes on Cottonwood in Valley West for $197,900. We have 2 more under contract at $205,000 also on Cottonwood. My
current residence that I designed and built is a 904 square foot 2 bedroom 2 bath home in Valley
West at 4212 Toole St. I would encourage you to look at these properties if you have the time as
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it will show you what is possible.
Form inserted: 2/1/2016 7:03:25 PM
Form updated: 2/1/2016 7:03:25 PM
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