HomeMy WebLinkAboutE-mail-City Manager-Affordable Housing GuidelinesMartinez, Maribel
From:
Thompson, Priscilla
Sent:
Wednesday, January 06, 2010 7:10 PM
To:
Martinez, Maribel
Cc:
Hannon, Todd
Subject:
FW: Modification of Affordable Housing Guidelines
Attachments:
Affordable Housing Guidelines showing changes.docx
Importance:
High
Follow Up Flag:
Follow up
Flag Status:
Flagged
To be filed and brought to 1/14 meeting.
P�-1s611f 74, T� wo eor, mr
City Clerk
(305) 250-5370
fax (305) 858-1610
From: Westall, Lynn On Behalf Of Hernandez, Pedro G. (City Manager)
Sent: Wednesday, January 06, 2010 5:25 PM
To: Carollo, Frank (Commissioner District 3)
Cc: Regalado, Tomas (Mayor); Sarnoff, Marc (Commissioner); Suarez, Francis (Commissioner); Bru, Julie; Spring, Larry;
Thompson, Priscilla; Crapp Jr., Tony; Nelson, Ron; Llorente, Mike; Haramboure, Monica; Faerron, Judith; Alexander,
Koteles; Castaneda, Frank; Peter Ehrlich; Lago, Carlos; Mensah, George; Gomez, Marta; Duren, Reginald; Pina Ph.D.,
Michelle
Subject: Modification of Affordable Housing Guidelines
Importance: High
Commissioner Carollo - At the City's last commission meeting of December 17, 2009, Agenda Item PH2 regarding
modifications to the Affordable Housing Guidelines was continued pursuant to your request as you wished to see a
underlined version of the Affordable Housing Trust Fund Guidelines showing the changes made.
Please see attached the requested document. This item was deferred and will be heard at the January 14, 2010, City
Commission meeting.
If we can be of further assistance, pls feel free to contact Community Development Director George Mensah at 305-416-
1978.
Many thanks.
Lynn Westall
Senior Assistant to the City Manager
City of Miami
3500 Pan American Drive
Miami, Florida 33133
305-250-5407 (office)
305-250-5410 (fax)
o 0 35.5— E-rn0-i (-06LnQ3er_ AfforJo-��e g0vsl'02
EXHIBIT "A"
AFFORDABLE HOUSING GUIDELINES
BACKGROUND OF THE AFFORDABLE HOUSING TRUST FUND
A housing trust fund is a distinct fund established by legislation, ordinance or resolution
to receive dedicated revenues, which can only be spent on affordable housing.
Generally, affordable housing trust funds are established to provide financial resources
to facilitate the development of housing for low to moderate income households.
Affordable Housing Trust funds have proven to be an effective tool in many
municipalities throughout the United States for producing affordable housing.
The City of Miami Affordable Housing Trust fund was established to receive financial
contributions from private developers who desire to take advantage of the floor area
bonus provisions allowed in the City of Miami Zoning Ordinance in exchange for financial
contributions to the Affordable Housing Trust fund. The Zoning Ordinance allows for an
increase in the floor area permitted uses for new developments located in special
districts provided that the developer contributes an approved specified amount to the
Affordable Housing Trust fund for every square foot of increase.
STUDY ON AFFORDABLE HOUSING TRUST FUNDS
In an effort to effectively develop local policy and strategies that address the demand for
affordable housing as well as, to establish a program management system for its
Affordable Housing Trust Fund, the City of Miami Department of Community
Development requested a study conducted by Florida International University. The
purpose of the Study was to provide program guidelines and recommendations based
on best practice case study examples. The study included an assessment of fourteen
(14) cities housing trust fund programs from across the country that had been in
operation for many years and have proven successful in producing and preserving
affordable housing. The study focused on three specific areas of program management:
(1) target market (2) program administration and (3) program revenue.
TARGET MARKET
The Studies' affordability gap analysis concluded the following:
(1) Homeownership Housing: Homeownership becomes more feasible with the
support of manageable levels of gap financing for individuals with household
income up to 150% of the area median income.
(2) Rental Housing: The high proportion of the workforce that fall below 80 percent of
the AMI will require the formulation and design of rental housing production and
preservation programs. The affordability gap for this large segment of the local
workforce is extreme. Clearly, given the current shortage of affordable rental
housing in the City and the persistent lack of production, there is a need to target
the Affordable Housing Trust fund and other public and private resources to meet
this pressing need.
EXHIBIT "A"
PROGRAM ADMINISTRATION
Administrative staff capacity is essential for the effective management of housing trust
funds. The Study found that the administrative costs associated with a City's
management of the Affordable Housing Trust fund range from 5%- 10%. Based on this
recommendation, the City will utilize 10% of the Affordable Housing Trust Fund for
administrative costs. Administrative staff is responsible for: developing request for
proposals (RFPs), document preparation, loan underwriting, determining eligibility and
affordability, loan monitoring, and servicing, marketing and providing education to
developers and beneficiaries of the trust funds. The Administrative staff will work closely
with local banking institutions, as well as for- profit and not-for-profit developers in the
implementation of the Affordable Housing Trust Fund program.
PROGRAM REVENUE
In order to ensure the on-going solvency of the fund, Affordable Housing Trust funds
receive revenue from dedicated sources including but not limited to fees from developers
associated with Floor Area increases, interest paid on loans and any other
appropriations as determined by legislation action of the City Commission.
PURPOSE AND USE OF AFFORDABLE HOUSING TRUST FUND MONIES
The Affordable Housing Trust fund shall be used solely for housing programs and the
Trust's administrative support, to meet the housing needs of the community. Housing
programs will include providing assistance to for-profit and not-for-profit developers,
existing homeowners and first time homebuyers. All projects requesting Affordable
Housing Trust Fund funding assistance must be approved by the Housing and
Commercial Loan Committee (HCLC). HCLC recommendations can be appealed to the
City of Miami Commission. In an appeal process the City Commission will make the final
determination.
PROCESS OF APPLYING FOR AFFORDABLE HOUSING TRUST FUNDS
The City of Miami Department of Community Development will award Affordable
Housing Trust funds through the following two -processes:
1. T#FGug-h-flf he issuance of a request for proposals an RFP_rocess ; sr -or
2. Thmuq# City Commission diFec;#Yeapproval, or
3. To Projects requesting financing that qualified under prior RFP process.
Regardless of the process, all project funding must obtain approval by the Housing and
Commercial Loan Committee as to the terms and conditions of the loan. A project
presented to the Housing and Commercial Loan Committee -can be appealed to the City
Commission as to the terms and conditions imposed by the HCLC. In an appeal
process the City Commission will make the final determination.
-2-
EXHIBIT "A"
PROGRAMS
DEFINITIONS
1. Forgivable Loan — Funds provided in the form of a loan that is forgiven when certain
conditions are met.
2. Rent Regulatory Agreement — A written and recorded document limiting the
borrower's rent levels by unit size and renter income.
3. Multifamily Project — A residential property containing five (5) or more dwelling units.
4. Loan Term and Interest Rate — Loans will be amortized for a period of up to thirty (30)
years, with an interest rate of 0% to 3%. Terms will be negotiated individually by project
as per the feasibility study of the project.
5. Available Cash Flow — The City will use the State of Florida's definition of Available
Cash Flow which is defined as cash flow of a development as calculated in the
statement of cash flows prepared in accordance with generally accepted accounting
principles and as adjusted for items including but not limited to extraordinary fees and
expenses, payments on debt subordinate to the superior loan(s) and capital
expenditures.
6. Re -Sale Provision — The borrower is required to sell the unit to another income eligible
borrower approved by the City.
7. Share on Gain- The City shall be entitled to a pro- rated share in any gain by a
borrower when affordability restrictions are violated. The amount of gain is determined
by the numbers of years the borrower resides in the unit which is a percentage pre
approved by the City Commission through resolution.
8. 150 % of Area Median Income — Applicant's household income can not exceed the
limits specified below: (See chart)
# of
persons in
1
2
3
4
the
household
150%
income
$58,"870 781
$67 3480,813
$715;46990.938
$83,813101,063
limit
Households in excess of 4 members will be calculated using the same income limit as reflected In the table
" Income limits are established by HUD and are subject to change on a yearly basis
-3-
EXHIBIT "A"
9. Maximum Subsidy- See chart below
# of bedrooms
1
2
3
Non -Elevator Building
$5247057.917
$63,27969.849
$9099 9.409
Elevator Building
$54-139760.597
$6445573,686
$8x 95.325
ASSISTANCE FOR HOMEBUYERS
Assisting low income homebuyers in the purchase of a home by providing down
payment, closing costs and/ or second mortgage financial assistance for the purchase of
a newly constructed or existing residential property within the City of Miami. First Time
Homebuyers are eligible to receive this assistance in the form of a forgivable loan, after
the affordability period of thirty (30) years. Resale restrictions apply.
-4-
HOMEOWNERSHIP POLICY- BUYERS
1. In the case of sale or transfer of the property, the borrower
will be required to sell the unit to an income eligible borrower
approved by the City.
2. In the case of sale or transfer of the unit the City will share in
the gain realized by the borrower.
a. 0 to 3 years — City receives 100% of the City's pro
rata share of the gain generated.
b. 3 — 20 years —On the 3`d year, City receives 85°% of
the City's pro rata share of the gain generated and
borrower receives 15%. Thereafter, the borrower
Repayment Requirements
receives an additional 5% of the City's prorated share
per year reducing the City's share by the same
percentage until year 20.
c Year 20 and above: The borrower receives 100% of
the gain.
-rhe above gain sharing proposal will terminate in foreclosure;
however, the city will require lenders to provide us a right of first
refusal to purchase the loan at a negotiated price.
3. Forgivable loan after the affordability period of 30 years
Minimum/
Maximum as defined by Maximum Subsidy Cha 1,000i $40,000
Maximum Subsidy
(above on Page 4)
Affordability Period
30 Years
Affordability period to be enforced by a restrictive covenant that
Security
will run with the land as well as a mortgage.
Income
Household income cannot exceed 150% of median income
Minimum Down Payment
$500.00
-4-
EXHIBIT "A"
Type of Assistance
Down payment assistance and closing costs
Maximum Purchase
Price/Value of Property
$300,000
ASSISTANCE FOR DEVELOPERS:
(1) HOMEOWNERSHIP DEVELOPMENTS
Assisting developers with the construction of new affordable homeownership units. Units
can be condominiums, town homes or single family scattered site developments. The
financial assistance will be a forgivable loan converted to a second mortgage for the
buyers once project is completed. Second mortgage to buyers will have the same terms
as the Homeownership Policy- Buyers, as approved by City Commission. There is a 30
year affordability period Resale restrictions and Share on Gain provisions apply.
- 5 -
HOMEOWNERSHIP POLICY- DEVELOPER
Forgivable Loan converted to a forgivable second mortgages for the
buyers once project is completed. In the case of a Developer default
(incomplete project) full payment of construction loan and accrued
default interest at the maximum rate allowed by law.
Repayment
In addition, the developer and all principals with a minimum of 100/0
Requirements
share in the development will be barred from participating in any City
of Miami Housing programs for a minimum of five (5) years.
Second mortgage to buyer will have the same terms as the
Homeownership Policy- Buyers, as approved by the City Commission.
Minimum/
$1,000 per-ua�J-Maximum as defined by the Maximum Subsidy chart
Maximum Subsidy
-jge 4)
Affordability Period
30 year affordability period for the second mortgages.
There will be a restrictive covenant and mortgage on the property.
Upon completion of the project, the total debt of the developer is
Security
transferred in pro rata share to each assisted unit. In the event of a
developer default, the restrictive covenant will remain on the property
and applicable interest rates will be due.
Up to16% of total project costs. Disbursements based on percentage
Developer Fee
of construction completion.
Minimum Ratio of City
Funds to other Funds
1:2 Desirable on a project by project basis
in the Project
- 5 -
EXHIBIT "A"
Type of Assistance
Construction soft costs and hard costs or set-aside for homebuyer
assistance after completion.
Maximum Purchase
(3) percent determined by the City on a project by project basis
PriceNalue of
$300,000
Property
affordability period will be required.
Income
Household income cannot exceed 150% of median income
(2) RENTAL DEVELOPMENTS
Assisting developers with the construction, rehabilitation, preservation or refinancing of
multifamily developments containing five (5) or more units. The financial assistance will
be in the form of a loan conditioned on a cash flow analysis of the project as defined by
the City. A mortgage will be placed on the property and a rent regulatory agreement
controlling the allowable rent. The rent regulatory agreement would restrict the rent
amounts, preserving the unit as an affordable housing unit
-6-
Loan Terms will include an interest rate between zero (0) to three
Repayment
(3) percent determined by the City on a project by project basis
Requirements
based on the project's feasibility study. A thirty (30) year
affordability period will be required.
Minimum/Maximum
$1,000 per unit/ Maximum as defined by the Maximum Subsidy
Subsidy
chart
Affordability Period
_years
Recorded mortgage on the property. In addition, affordability
period to be enforced by a restrictive covenant that will run with
Security
the land. In the case of phased developments, the covenant will
run with the land making up all phases of the development_ In the
case of a developer default, the restrictive covenant will continue
throughout the affordability period
i Full payment of construction loan (total disbursed amount)
and accrued default interest at the maximum rate allowed by
law depending on loan amount.
Default penalties
ii. Developer and all principals with a minimum of 10% share in
the development will be barred from participating in any City
of Miami programs for a minimum of five (5) years
iii. Recorded covenant will not be removed upon sale of the
property.
1 % of City Loan up to a maximum of $15,000 will be due and
Service Charge
payable as good faith commitment fee for for-profit developers, 30
days after funding approval. No commitment fee for non -profits
Gross income received by the project directly generated from the
Program Income
use of funds. When program income is generated by housing, the
income shall be prorated to reflect the percentage of funds used.
-6-
EXHIBIT "A"
Type of Assistance
Construction soft costs, hard cost (predevelopment), or first
mortgage refinancing
Maximum Rent
Fair Market Rent
1. Income of renters must be at or below 80% of Area
Median Income as published by HUD
Miscellaneous
2. Annual compliance monitoring for duration of affordability
period.
-7-