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HomeMy WebLinkAboutExhibitEXHIBIT "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 processes: 1. The issuance of a request for proposals (an RFP process); or 2. City Commission approval; or 3. To Projects requesting financing that qualified under a 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. PROGRAMS -2- EXHIBIT "A" 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 Proiect —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 the household 1 2 3 4 150% income limit __ 170,781 13 $90,938 $101,063 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 9 of bedrooms 1 2 3 Non -Elevator Building $57,917 $69,859 $89,409 Elevator Building $60,597 $73.586 $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'tl 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. The above gain sharing proposal will terminate in foreclosure: however, the arty 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 Chart 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 "K Type of Assistance Down payment assistance and closing costs Maximum Purchase $300,000 Price/Value of Property buyers once project is completed. In the case of a Developer default 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 10% 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. Minimumf Maximum as defined by the Maximum Subsidy chart Maximum Subsidy (above on Page 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. Developer Fee Up to16% of total project costs. Disbursements based on percentage of construction completion. Minimum Ratio of City Funds to other Funds 1:2 Desirable on a project by project basis in the Project Type of Assistance Construction soft costs and hard costs or set-aside for homebuyer assistance after completion. Maximum Purchase PriceNalue of $300,000 Property Income Household income cannot exceed 150% of median income -5- EXHIBIT "A" (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. 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. Minimunvmaximum $1,000 per unit/ Maximum as defined by the Maximum Subsidy Subsidy chart Affordability Period 20 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. 1. 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- roperty.1% 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. Type of Assistance Construction soft costs, hard cost (predevelopment), or first mortgage refnancing 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.