AGENDA #4g
to: Mayor and Town Council
from: The Council Committee on Affordable Housing
Council Member Greene, Chair
Council Member Kleinschmidt
Council Member Strom
Council Member Czajkowski
subject: Recommendations from the Council Committee on Affordable Housing Regarding the Culbreth Park Program
date: May 19, 2008
The purpose of this memorandum is to provide the Council with recommendations for a Culbreth Park maintenance assistance program.
The attached resolution would:
(1) authorize the staff to prepare an application to request Orange County Affordable Housing Bond funds to renovate three homes in the Culbreth Park Program; and
(2) authorize exceptions to the income guidelines of the Town’s Affordable Housing Fund to serve the remaining Culbreth Park Program homeowners with repairs to their homes.
In 1990, the Town and the Culbreth Park Development Corporation entered into an agreement for the development of the Culbreth Park subdivision. Eligible households had to earn less than 80% of the area median income to qualify for homeownership in this development. Twenty-seven of thirty houses constructed by the Corporation were sold to qualified buyers. The Town provided $14,000 in deferred second mortgages from the Housing Loan Trust Fund to each of the twenty-seven households that become due to the Town upon sale of the house. The amount to be repaid to the Town is determined by terms in a Shared Equity Agreement executed by the buyers at the time of initial sale.
There are currently eight original homebuyers living in Culbreth Park with second mortgages from the Town. Fourteen of the houses have been sold by the original homebuyers on the open market or the owners chose to repay the Town’s second mortgage and remain in the home. Five of the homes were purchased by Orange Community Housing and Land Trust and sold to qualified buyers. The original buyers repaid the Town’s funds according to the terms of the Shared Equity Agreement that was executed by the buyers at the time of initial sale. These funds were returned to the Housing Loan Trust Fund and used for other eligible affordable housing projects.
On September 10, 2007, a Culbreth Park homeowner submitted a petition to the Council requesting that the Town review the Culbreth Park Shared Equity Agreement to “establish a fair and amicable union” between the Town and Culbreth Park homeowners with second mortgages from the Town. On October, 22, 2007, the Council decided not to modify the Shared Equity Agreement and referred this petition to the Council Committee on Affordable Housing for further discussion. The Council also asked Robert Dowling, Executive Director of Orange Community Housing and Land Trust, to participate in this discussion.
On April 14, we provided the Council with a status report on the Committee’s discussions with the Culbreth Park homeowners. At that time the Council also enacted a budget ordinance that would allocate up to $3,000 to perform home inspections on eight Culbreth Park homes.
The Committee has met four times to discuss this petition and other concerns raised by Culbreth Park residents. Robert Dowling and Culbreth Park program homeowners also participated in the meetings. After review of the original documents and discussion, the Committee agreed that we did not want to recommend changes to the Shared Equity Agreement. However, we recommend that the Council assist the remaining owners with maintenance expenses for their homes. We believe that without assistance from the Town, necessary maintenance may not occur on some of the homes.
Based on the results of the home inspections conducted, the Land Trust estimates that repairs could cost between $40,000 and $50,000 per home. The Land Trust will develop a detailed work write-up and cost estimate for each house to determine the actual cost for repairs.
Recommended Program
We recommend that the Town establish a home maintenance repair program for the remaining Culbreth Park Program homeowners as follows:
Funding Sources
We recommend using a combination of funding sources for a Culbreth Park home maintenance program:
Rehabilitation is an eligible use of the Affordable Housing Fund for households earning less than 80% of the area median income. This is a local funding source and the Council has the authority to modify or make exceptions to the regulations. We recommend that the Council grant an exception to the guidelines to use this source of funds to pay for the renovation expenses for the five households that do not meet the 80% of the area median income requirement.
Pending adoption of a budget ordinance that is on tonight’s agenda, $504,799 is available in the Affordable Housing Fund. In addition, the Council has approved payments-in-lieu of providing affordable housing for two projects that have not yet been received, Chapel Watch Village ($300,000) and The Residences at Chapel Hill North ($330,000). We anticipate receiving the first installment of the payment, $60,000, from Chapel Watch Village soon. The balance will be paid in installments every six months thereafter. Funds for The Residences at Chapel Hill North will be received prior to the issuance of the first Certificate of Occupancy. We do not expect this payment until 2009. As these funds are received, the Council could direct them to be used for this program, if needed.
We note that the Affordable Housing Fund has been the source used by the Land Trust to purchase Culbreth Park houses that become available for sale, are in need of repair, or require homeownership assistance to reduce the sales price. Since funds would be provided to homeowners as a grant, allocating funds to the Culbreth Park maintenance program would decrease the amount of funds available for the Town to exercise its right-of-first-refusal on Culbreth Park homes. Our recommended program assumes that the Council is also making a commitment to provide funding to the Land Trust to purchase homes as they become available for sale. Otherwise, if the Town did not purchase a Culbreth Park home that was renovated through this recommended program, there is not a mechanism to recapture the Town’s funds.
2. Orange County Affordable Housing Bond Funds
In 2001, Orange County voters approved a four-million dollar Affordable Housing Bond referendum. A wide range of projects is eligible for bond funding including rehabilitation of substandard property. We recommend that the Town staff initiate the County’s process to prepare an application for funds for a maintenance program for the three households earning less than 80% of the area median income. This process includes a pre-application meeting with a Review Committee that consists of Orange County staff and staff representatives from Chapel Hill, Carrboro, and Hillsborough, and members of the Orange County Affordable Housing Advisory Board. Housing and Neighborhood Services Manager Loryn Clark has served as the Town’s representative to this Committee. We note that this is a competitive process. If the Town is not awarded funds through this program we would recommend using the Affordable Housing Fund for these homeowners.
Additional Comments
Over the past several years, the Land Trust has purchased five Culbreth Park homes. The Town has provided the Land Trust with funds to purchase the properties that were repaid upon sale of the homes to qualified buyers. The Town also provided funds to the Land Trust to renovate and/or reduce the sales prices of the properties. The Town provided between $40,000 and $50,000 to the Land Trust for these expenses. It is our goal to continue to work with the Land Trust to purchase Culbreth Park properties as they become available for sale. We believe that if the Town provides funds to homeowners to renovate their properties now, it would reduce the amount of funds the Town would have to later re-invest in these properties if/when they are sold by the original buyer to the Land Trust.
We also note that if Council approves this program for Culbreth Park homeowners, there may be other homeowners that have participated in other Town-sponsored homeownership assistance programs that may request similar assistance. We recommend that we evaluate such requests as they are presented to the Council.
We recommend that the Council adopt the attached resolution to:
(1) authorize the staff to submit an application to request Orange County Affordable Housing Bond funds to renovate three homes in the Culbreth Park Program; and
(2) authorize exceptions to the income guidelines of the Town’s Affordable Housing Fund to serve the remaining Culbreth Park Program homeowners with repairs to their homes.