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HomeMy WebLinkAboutExhibit A Housing GuidelinesEXHIBIT "A„ ': tttu _, AFFORDABLE HOUSING GUIDELINES BACKGROUND OF THE AFFORDABLE HOUSING TRUST FUND �LC 15 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 one of the following two processes: 1. Through the issuance of a request for proposal (RFP); or 2. Through Commission directive 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. The Administration will provide a report to the City Commission on annually basis. -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 the household 1 2 3 4 150% income limit $58,688 $67,031 $75,469 $83,813 * 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 9. Maximum Subsidy- See chart below lfiet✓blsdr3aARiing $541897 $66?155 $867358 Non- Elevator Building $52,470 $63,279 $80,998 3 EXHIBIT "A" 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. HOMEOWNERSHIP POLICY- BUYERS Repayment Requirements Minimum/ Maximum Subsidy 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.... In the case of sate 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 ` rats share of the:gain generated. 3 2Q years - On the year, City receives 85% of the City's pro rata share of the gain generated and borrower receives 15°/ci: Thereafter, the borrower receives an additional 5%0 of the,City's prorated share. per year. reducing the City's share by the same percentage until: year2Q:: Year 20;and above: The borrower receives .100% of the gain. The above gain sharing proposal will: terrninate in foreclosure;: however, the city will require tenders.to provide vs a right of first refusal to purchase the loan�at a negotiated. price. 3. Forgivable loan after the affordability period of 30 years Affordability Period 30 Years Security Affordability periodto be enforced by a restrictive covenant that will run with the land as well as a mortgage. Income Household income cannot exceed 150% of median income • Minimum Down Payment Type of Assistance Maximum Purchase PriceNalue of Property Developers Down payment assistance and closing costs Preference for Local Participation -4- EXHIBIT "A" 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. HOMEOWNERSHIP POLICY- DEVELOPER Repayment Requirements 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. In addition, the developer and all principals with a minimum of 10% share inthe 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/ Maximum Subsidy $1,000 per unit/ Maximum as defined. by the Maximum Subsidy chart Affordability Period $0 year affordability period for,the second mortgages. Security There will be a restrictive covenant and mortgage on the property. Upon completion of;the project the total.debt of thedeveloper is 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. Di• sbursements based on percentage, • of construction completion. Minimum Ratio of City Funds to other Funds in the Project 1:2 Desirable on a project by project Type of Assistance Construction soft costs and hard costs or set -aside for homebuyer • assistance after completion• Maximum Purchase PriceNalue of 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. Repayment Requirements Loan:. Terms wilt include an interest rate between zero (0) to three. (3) percent determined by the Cityon a project by project basis based on the projects feasibility study_ A thirty (30) year affordability period wilt: be required Minimum/Maximum Subsidy $1000 per unit/ Maximum as defined by the Maximum Subsidy chart Affordability Period Security Recorded mortgage on the property. In addition, affordability period to be enforced by a restrictive covenant that will run with the land In the case: of phased developments, the covenant will run with the land making up'alt phases of the development. in the case of a developer default, the restrictive covenant will continue throughout the affordability period Default penalties Full payment of construction loan;(totat disbursed:amount) and accrued default interest at the maximum rate 'allowed by taw depending on loan amount Developer and ail principals with a minimum of 10% share in the development: will .be;barred from participating: in any.Ciity of Mi property... grams for a. minimum of five ;(5) years iii. Recorded covenant wilt not be removed upon sale of the property.( Service Charge 1 % of City Loan up to a maximum of $15,000 wilt be due and payable as good faith commitment fee for for -profit developers, 30 days after funding approval. No commitment fee for non -profits Program Income Gross income received by the project directly generated from the 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:(predevelopmen mortgage refinancing or first' Maximum Rent Miscellaneous Fair Market Rent Income of renters must be at or below 80a/0 of Area Median Income as published by HUD Annual compliance monitoring for duration of affordability period. EXHIBIT "A" AFFORDABLE HOUSING GUIDELINES BA i(GROUND OF THE AFFOFPAPLE HOUSING TRUST FUND A housing trust nd is a distinct fund established by legislation, ordinance or resolution to receive dedic led revenues, which can only be spent on affordable housing, Generally, affords b'f housing trust funds are established to provide financial resources to facilitate the development of housing for low to moderate income households. Affordable Housing rust funds have proven to be an effective tool In many municipalities througho the United States for producing affordable housing. The City of Miami Affor ble Housing Trust fund was established to receive financial contributions from private eveiopers who desire to take advantage of the floor area bonus provisions allowed in he City of Miami Zoning Ordinance in exchange for financial contributions to the Affordab 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 dev(oper contributes an approved specified amount to the Affordable Housing Trust fund fo \every square foot of increase. STUDY ON AFFO3A_01_.g HOUSING TRUST FUNDS In an effort to effectively develop local'oticy and strategies that address the demand for affordable housing as well as, to est blish a program management system for its Affordable Housing Trust Fund, the City of Miami Department of Community Development requested a study condu ed by Florida International University. The purpose of the Study was to provide prog m guidelines and recommendations based on best practice case study examples. The tudy included an assessment of fourteen (14) cities housing trust fund programs fro across the country that had been in operation for many years and have proven kuccessful in producing and preserving affordable housing, The study focused on three pacific areas of program management: (1) target market (2) program administration and ( ) program revenue. TARGET MARKS The Studies' affordability gap analysis concluded the following: (1) Homeownership Housing: Homeownership beesmore feasible with the support of manageable levels of gap financing for Individuals with household income up to 150% of the area median income, (2) Renter Housing: The high proportion of the workforce th t fall below 80 percent of the AMI will require the formulation and design of renta housing production and preservation programs. The affordability gap for this lar segment of the local workforce is extreme. Clearly, given the current shortag of affordable rental housing in the City and the persistent lack of production, the Is a need to target the Affordable Housing Trust fund and other public and private esources to meet this pressing need. .i. EXHIBIT "A' PROGRAM ADMINISTRATION AdrninistraNe 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 recommendatio'h, the City will utilize 10% of the Affordable Housing Trust Fund for administrative cysts, 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 benef siaries of the trust funds, The Administrative staff will work closely with local banking instit\tions, as well as for- profit and not -for -profit developers in the implementation of the Affofdable Housing Trust Fund program. \i PROGRAM REVENUE In order to ensure the on-going\olvency of the fund, Affordable Housing Trust funds receive revenue from dedicated sources including but not limited to fees from developers associated with Floor Area increkses, interest paid on loans and any other appropriations as determined by legissttion action of the City Commission. PURPOSE AND USE OF AfFORpABLE 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 td,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 recorr nendations can be appealed to the City of Miami Commission. PROCESS OF APPLYING FOR AFFQRDABLE HOSING TRUST FUNDS The City of Miami Department of Community Develop e'1yt will award Affordable Housing Trust funds through one of the following two processes,'\ • 1, Through the issuance of a request for proposal (RFP); or 2, Through Commission directive Regardless of the process, all project funding must obtain approval by thAsHousing and Commercial Loan Committee as to the terms and conditions of the toar A project presented to the Housing and Commercial Loan Committee can be appeatec;to the City Commission as to the terms and conditions imposed by the HCLC. - 2 - EXHIBIT "A" PROGRAMS DEFINITIONS 1. Foraivabie Loan — Funds provided in the form of a loan that is forgiven when certain conditions'are met. 2. Rent Recfulatory Agreement — A written and recorded document limiting the borrower's rent`iTveis 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 rye of 0% to 3%. Terms will be negotiated individually by project as per the feasibility study f the project. 5. Available Cash Flow — Th City will use the State of Florida's definition of Available Cash Flow which is defined s cash flow of a development as calculated in the statement of cash flows prepar in accordance with generally accepted accounting principles and as adjusted for item 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 regtred to sell the unit to another income eligible borrower approved by the City. 7. Share on Gain- The City shall be entitled sts a pro- rated share in any gain by a borrower when affordability restrictions are vtolata,d. 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 resoiutlon. \ 8. 159 % o1 Area Median income — Applicant's househpld income can not exceed the limits specified below: (See chart) # of persons in the household 150% income limit \ '' $58,e68 $87,031 $75,489 83,813 • Households in excess of 4 members will be calculated using the same income Limit as ne,ilected in the table -" income limits are established by HUD and are subject io change on a yearly basis \ 9, Maximum Subsidy- See chart below 1i or bedrooms 1 2 3 Non- Elevator Building $82,470 $83,279 $80,998 Elevator Building $54,897 $66,756 $86.368 -3- EXHIBIT "A" ASSISTANCE FOR HOMEBUYERS Assisting low income homebuyers in the purchase of a home by providing down payment; Nosing costs and/ or second mortgage financial assistance for the purchase of a newly co'etructed or existing residential property within the City of Miami. First Time Homebuyers"are eligible to receive this assistance In the form of a forgivable loan, after the affordabilltjrperiod of thirty (30) years. Resale restrictions apply. .. ' HOMEOWNERSHIP POLICY- BUYERS , Repayment Requirements 1. in the case of sale or transfer of the property, the borrower. will be required to sell the unit to an income eligible borrower approved by the City. ‘ 2.Nn the case of sale or transfer of the unit the City will share in the gain realized by the borrower. , 0 to 3 years — City receives 100% of the Cfty's pro \ rata share of the gain generated, \ b. 20 years — On the 3td year, City receives •e5% Of the Cfty's•pro rata share of the gain generated and. `• bo�iwer receives 18%, Thereafter, the borrower •rece s an additional 5% of the Clty's prorated share per yea reducing the City's share by the same percents until year 20, . c. Year 20 a above: The borrower receives 100% of the gain. • The above gain sharing pr sal will terminate In foreclosure,: however, the city will require lenders to provide us a right of first refusal to purchase the loan at`s negotiated price. 3. Forgivable loan after the afordabllfty period of 30 years Minimum/ Maximum Subsidy 0 �1' oO/$.40 ' Affordability Period 30 Years \ Security Affordability period to be enforced by a reef(lcttve covenant that will run with the land as well as a Mortgage. income Household income cannot exceed 150% of inedian Income Minimum Down Payment $500.00 . Type of Assistance Down payment assistance and closing costs Maximum Purchase PrioeNafue of Property $300,000 -4- ASSISTkNCE FOR DEVELOPERS; (1) HO EXHIBIT "A" ERSHIP DEVELOPMENTS Assisting develop s with the construction of new affordable homeownership units. Units can be condominiu G, town homes or single family scattered site developments. The financial assistance w be a forgivable loan converted to a second mortgage for the buyers once project is cipleted. Second mortgage to buyers will have.the same terms as the Homeownership Po ' y- Buyers, as approved by City Commission. There is a 30 year affordability period Rest le restrictions and Share on Gain provisions apply. \HOMEOWNERSHIP POLICY- DEVELOPER \. Repayment Requirements Forgivable Loa converted to a forgivable second mortgages for the buyers once proj t Is completed. In the case of a Developer default (incomplete proj full payment of construction loan and accrued default interest at the iiaximum rate allowed by law. In addition, the develop e�r( and all princlpals'with a minimum of 10% share in the developmenhNII be barred from participating In.any,Ctty I of Miami Housing program or a minimum of five (5) years. Second mortgage to buyer wm have the same terms as the • Homeownership Policy- Buyers, s approved by the City Commission. Minimum/ S Maximum Subsidy $1,000 per unit/ Maximum as defin \by the Maximum Subsidy chatt Affordability Period 30 year affordability period for second mortgages. Security There will be a restrictive covenant and ortgege on the property.. Upon completion of the project, the total bt of the developer la transferred in pro rata share la each assists nit. In the event:of e developer default, the restrictive covenant will r sin on the property and applicable interest rates wilt b ue, Developer Fee Up to16% of total project costs. DIsburserrmente based on percentage of construction completion. Minimum Ratio of City Funds to other Funds in the Project \ 1:2 Desirable on a project by project basis Type of Assistance Construction soft costs end hard costa or set -aside for homebuF6r assistance after completion. • .. Maximum Purchase PriceNelue of Property $300,000 Income Household Income cannot exceed 150% of median income - 5 - EXHIBIT "A" (2) R'ENTAL DEVELOPMENTS Assistingedevelcpers with the construction, rehabilitation, preservation or refinancing of multifamildevelopments 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 ortgage will be placed on the property and a rent regulatory agreement controlling the [towable rent. The rent regulatory agreement would restrict the rent amounts, prese ng the unit as an affordable housing unit. N. Repayment \ Requirements \ Loan Terms will include an interest rate between zero (0) to three (3) percent determined by the City on a project by project basis based on tree project's feasibility study. A thirty (30) year affordability period will be required. Minimum/Maximum Subsidy 1,000 per unit! Maximum as defined by the Maximum Subsidy art Affordability Period \ 30 years Security Record d mortgage on the property. In addition, affordability period to a enforced by a restrictive covenant that will run with the land. the case of phased developments, the covenant will run with theeNand making up ell phases of the development In the ease of a developer default, the restrictive covenant will continue throughout 1he` ffordablfity period. Default penalties I. Full payme lot construction loan (total disbursed amount) and accrue efault Interest al the maximum rate allowed by law dependin on loan amount. II. Developer and principals with a minimum of 10% share in the development III be barred'frotn participating in any City of Miami programa'tpr a minimum of five (5) years Ili. Recorded covenant II not be removed upon safe of the property. Service Charge 1 % of City Loan up to a maxi m of $16,000 will be due and payable as good faith commItm t fee for for -profit developers, 30 days after funding approval. No mItment fee for non -profits Program Income Gross Income received by the prole directly generated from the use of funds. When program Income generated by housing, the Income shall be prorated to reflect the rcentaga of funds used. Type of Assistance Construction soft costs, herd cost (pr evelopment), or first mortgage refinancln Maximum Rent Fair Market Rent Miscellaneous 1, Income of renters muss be at or below tad of Area Median income as published by HUD 2. Annual compliance monitoring for duration o%flordebiiity period. -6-