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Home My WebLink About082107 Workforce HousingWORKFORCE HOUSING WORKFORCE HOUSING Six Steps Six Steps Virginia Beach City Council Virginia Beach City Council August 21, 2007 August 21, 2007 1 1 amf1 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 2 2 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 8 22 Base units New WFH Units New Market Units 100 3 3 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 4 4 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 5 5 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 6 6 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 7 7 •(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 8 8 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. 9 9 “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. 10 10 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) 11 11 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 12 12 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 13 13 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 14 14 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. 15 15 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. 16 16 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 17 17 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 18 18 Workforce Housing Program Your Questions and Comments Your Questions and Comments Thank you! Thank you! 19 19