082107 Workforce HousingWORKFORCE HOUSING
WORKFORCE HOUSING
Six Steps
Six Steps
Virginia Beach City Council
Virginia Beach City Council
August 21, 2007
August 21, 2007
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STEP 1: Application
STEP 1: Application
1.Land or existing Developer submits
2.
development that can Workforce housing
be developed or re-application–requests
developed “by right”density bonus
with 100 units of
housing
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Slide 2
amf1 afriedma, 8/20/2007
Bonus Density Calculation for Land
Bonus Density Calculation for Land
30% Bonus Density for 100 Base Units Creates
30% Bonus Density for 100 Base Units Creates
22 New WFH Units and 8 New Market Rate Units
22 New WFH Units and 8 New Market Rate Units
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22
Base units
New WFH Units
New Market
Units
100
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STEP 2: Application Review
STEP 2: Application Review
1. Developer’s complete application
2. Planning and Housing Staff Review
3. Planning Commission review
4. Council review –approval
5. Approved WFH rezoning and development plan
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STEP 3: Begin Work
STEP 3: Begin Work
Approved
Workforce
Housing
Plan
City &
Developer
VBCDC
Builds 130
Advertise for Units
Eligible
Buyers
Pool of Eligible 22 WFH 108 Market Price
BuyersUnits($240,000) Units
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Step 4: Sale of Units to Eligible
Step 4: Sale of Units to Eligible
Buyers
Buyers
Eligible BuyerLocates WFH Obtains Bank
UnitFinancing for
WFH
Discounted
Price
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Step 5: Initial Sales
Step 5: Initial Sales
City contracts City assigns We have a
with builder to contract to WFH OWNER!
buy WFH Uniteligible buyer
EXAMPLE:
•City/Agent assigns purchase contract to eligible
EXAMPLE
:
buyer for
Developer and City/Agent
•(i) WFH Discount Price [$180,000] +
enter into purchase
•(ii) no-interest note to secure WFH Discount
contract at WFH Discount
[$60,000] and a share of any net appreciation on
Price [$180,000].
resale, and
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•(iii) a 1 st right to repurchase/assign unit on resale
Financing of Initial WFH Sale
Financing of Initial WFH Sale
Buyer’s HUD 1
Buyer’s HUD 1
EXAMPLE
EXAMPLE
Buyer’s CostsSources of Funds
Buyer’s CostsSources of Funds
Purchase Price = $240,000First Mortgage$180,000
Purchase Price = $240,000First Mortgage$180,000
Taxes, etc $5,000WFH 2 nd mortgage$60,000
nd
Taxes, etc $5,000WFH 2mortgage$60,000
(WFH Discount, no interest note)
(WFH Discount, no interest note)
WFH Fee ***Down payment $5,000
WFH Fee ***Down payment $5,000
(by buyer)
(by buyer)
Total $245,000Total$245,000
Total $245,000Total$245,000
***Fee amounts are to be discussed by the WFH board and brought back to Council for decision
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Summary
Summary
End of “First Sale”Process
End of “First Sale”Process
This concludes the initial sales process.
This concludes the initial sales process.
The original buyer has the right to keep the house
The original buyer has the right to keep the house
forever, or to sell at anytime.
forever, or to sell at anytime.
The original contract and 2deed of trust on the
nd
nd
The original contract and 2deed of trust on the
property define what the original buyer must do if they
property define what the original buyer must do if they
desire to sell.
desire to sell.
The following slides define how the “2”and any
nd
nd
The following slides define how the “2”and any
subsequent sales take place.
subsequent sales take place.
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“Second Sales”
“Second Sales”
Sale by the Original Owner
Sale by the Original Owner
There are threepossible options for the second sales; in two of them,
There are threepossible options for the second sales; in two of them,
we preserve future affordability.
we preserve future affordability.
1) Allow another eligible buyer to repurchase. Since we have the
1) Allow another eligible buyer to repurchase. Since we have the
right to repurchase, we would normally re-assign that right to a
right to repurchase, we would normally re-assign that right to a
buyer in the pool of eligible buyers.
buyer in the pool of eligible buyers.
2) If there were no buyers at the time, we might buy and hold the
2) If there were no buyers at the time, we might buy and hold the
unit for a short time and then re-sell.
unit for a short time and then re-sell.
3) If the unit was determined to be unaffordable, we could permit a
3) If the unit was determined to be unaffordable, we could permit a
sale on the open market.
sale on the open market.
All sales are at market value determined either by appraisal or by
All sales are at market value determined either by appraisal or by
the market.
the market.
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Step 6A: Resale of WFH Unit
Step 6A: Resale of WFH Unit
(if owner wishes to sell and city wishes to preserveaffordability)
(if owner wishes to sell and city wishes to preserveaffordability)
5. Eligible buyer purchases at FMV [$300,000],
1.Owner notifies City
of Intent to Sell
•less WFH Discount [$75,000] or
[$225,000],
•secured by a no-interest note to the City
2. City/Agent contracts with seller
for the discount [$75,000] plus shared net
at appraised FMV [$300,000]
appreciation, and
•grants City first right to repurchase
3. City/Agent assigns contract to
new eligible buyer for FMV,
NEW WFH
Owner
4. City recalculates workforce
housing discount at same
percentage of discount to
sales price of initial sale
($75,000 in this example)
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FINANCING OF A WFH RESALE
FINANCING OF A WFH RESALE
-EXAMPLE-
-EXAMPLE-
ItemNotes
ItemNotes
Sale Price is fair market value based
300,000
Sale Price is fair market value based
300,000
FMV Sale Price $
FMV Sale Price $
on appraisal
on appraisal
For this example, first mortgage payoff
$180,000
For this example, first mortgage payoff
$180,000
Less: 1 st Mortgage
st
Less: 1Mortgage
is assumed to be original amount –
is assumed to be original amount –
actual will be remaining balance
actual will be remaining balance
This is the original value of the WFH
$60,000
This is the original value of the WFH
$60,000
Less: WFH 2 nd Mortgage
nd
Less: WFH 2Mortgage
lien
lien
Less: 25% of Shared Appreciation is difference between
Less: 25% of Shared
original WFH price and current price or
$15,000
$15,000
Appreciation
Appreciation
$300,000 -$240,000 = $60,000. City
recaptures 25% of appreciation or
$15,000.
Seller’s Net Proceeds$45,000Cash to seller. Will vary depending on
Seller’s Net Proceeds$45,000Cash to seller. Will vary depending on
actual FMV and 1 st mortgage balance
st
actual FMV and 1mortgage balance
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nd
Step 6A: 2Buyer’s Costs and Sources
nd
Step 6A: 2Buyer’s Costs and Sources
Purchase Price = $300,000
Purchase Price = $300,000
CostsSources
CostsSources
Purchase Price$300,000WFH 2 nd Mortgage $75,000
nd
Purchase Price$300,000WFH 2Mortgage $75,000
(based on appraised fair market value)Based on 25% discount
(based on appraised fair market value)Based on 25% discount
Taxes, etc$5,000Down payment $5,000
Taxes, etc$5,000Down payment $5,000
Assumed amount required
Assumed amount required
First mortgage $225,000
First mortgage $225,000
Must be obtained by 2 nd buyer
nd
Must be obtained by 2buyer
TOTAL $305,000TOTAL $305,000
TOTAL $305,000TOTAL $305,000
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Step 6A: City’s Finances
Step 6A: City’s Finances
Resale to Eligible Buyer
Resale to Eligible Buyer
Recaptured from Original Paid on Behalf of 2Buyer
nd
nd
Recaptured from Original Paid on Behalf of 2Buyer
Eligible Buyer
Eligible Buyer
Original WFH 2 nd Mortgage
WFH 2Mortgage
nd nd
Original WFH 2Mortgage
nd
WFH 2Mortgage
$60,000
$60,000
$75,000
$75,000
City’s Share of Net Appreciation (25%)
City’s Share of Net Appreciation (25%)
$15,000
$15,000
Total $75,000Total $75,000
Total $75,000Total $75,000
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nd
Step 6B: 2Sale
nd
Step 6B: 2Sale
(If Owner Wishes to Sell and City Does Not PreserveAffordability)
(If Owner Wishes to Sell and City Does Not PreserveAffordability)
1.City releases owner from repurchase requirement.
•City would release where FMV appreciation of unit less WFH
Discount and Shared Appreciation exceeds affordability for eligible
buyers.
•In such cases, City must decide whether to supplement the discount
or release unit to open market.
2.Owner sells unit to private buyer at whatever sale price is agreed to
3.Owner pays off WFH 2 ND Mortgage plus Shared Appreciation from sale
proceeds.
4.Funds received by City are deposited in WFH Revolving Fund.
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WFH Rental Developments
WFH Rental Developments
A developer wanting to develop rental housing with WFH units as
A developer wanting to develop rental housing with WFH units as
1.
1.
part of it goes through the same application and review process
part of it goes through the same application and review process
as a for-sale development.
as a for-sale development.
2.The developer/owner and City enter into a compliance agreement
2.The developer/owner and City enter into a compliance agreement
defining the below market rents and eligibility requirements for
defining the below market rents and eligibility requirements for
renters of the WFH units.
renters of the WFH units.
3.Eligible renters must locate and qualify for units on their own,and
3.Eligible renters must locate and qualify for units on their own,and
sign their own lease agreements with the developer/owner.
sign their own lease agreements with the developer/owner.
4.The developer/owner provides annual reports and the City does
4.The developer/owner provides annual reports and the City does
on-site monitoring to verify compliance with WFH market rents
on-site monitoring to verify compliance with WFH market rents
and eligibility requirements.
and eligibility requirements.
5.This is very similar to many existing rental housing programs.
5.This is very similar to many existing rental housing programs.
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WFH Program Principles
WFH Program Principles
Minimize costs while insuring protection of all parties
Minimize costs while insuring protection of all parties
Transparency of all program actions via advisory board
Transparency of all program actions via advisory board
review and Council approval
review and Council approval
Semi-annual adjustment of income and cost tables, as
Semi-annual adjustment of income and cost tables, as
well as review of any program issues via advisory board
well as review of any program issues via advisory board
and council
and council
Effective oversight and compliance to insure quality
Effective oversight and compliance to insure quality
outcomes for all
outcomes for all
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WFH Additional Steps
WFH Additional Steps
City Council appoints Advisory Board
City Council appoints Advisory Board
Ordinance to establish WFH Revolving Fund
Ordinance to establish WFH Revolving Fund
Development of agreement with city’s agent for
Development of agreement with city’s agent for
program operation and fees
program operation and fees
Development of all forms, procedures, and legal
Development of all forms, procedures, and legal
documents
documents
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Workforce Housing Program
Your Questions and Comments
Your Questions and Comments
Thank you!
Thank you!
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