AGENDA #4i

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:       Purchase of House for Transitional Housing Program

DATE:             May 29, 2002

This memorandum describes an opportunity to take a first step in implementing the Town’s Transitional Housing Program for Public Housing residents.   Adoption of the attached resolution would authorize use of $17,500 from the Town’s Housing Loan Trust Fund for purchase of a house to be used in the program.  Of this amount, $13,000 would be program income and $4,500 would be reallocated from the second mortgage activity. 

BACKGROUND

The Town Council has approved implementation of a Transitional Housing Program.  The program is intended to assist Public Housing residents in moving out of Public Housing and into private (ideally homeownership) opportunities.  A copy of the Council-approved program is attached.  (Attachment 1: Copy of Memorandum from April 23, 2001.)

The Town has $100,000 available for purchase of a dwelling to be used in this program.  The funds come from the HOME program, a federal grant program that the Town participates in along with Carrboro, Hillsborough and Orange County.   Funds for the Transitional Housing Program were approved by the Council and the other participating jurisdictions in as part of the 2000-2001 HOME Program.

An opportunity has surfaced to purchase a home in the Tandler neighborhood, a housing development on Merritt Mill Road that was built using a combination of the Town’s  Community Development and local funds to provide homeownership opportunities to low-moderate income families.  The Town holds a deferred-payment second mortgage on each Tandler home, which had the result of bringing purchase of these homes within reach of low-moderate income households. 

DISCUSSION

The Town entered into a contract with the owner of the property for $119,000 subject to the house appraising for this amount, as required by federal regulations.   An appraisal has estimated the value of the home to be $117,500.  The Town’s revised offer of $117,500 has been accepted by the seller. 

At time of sale of the home, repayment of the second mortgage of approximately $45,000 is due to the Town of approximately $45,000.  Of this amount, we estimate that $13,000 is to return to the Town’s Housing Loan Trust Fund, and $32,000 is to return as program income to the Town’s Community Development Program.   We recommend that the Council authorize re-use of the $13,000 to acquire this property.  We also recommend that the Council budget an additional $4,500 to assist with the cost of acquiring the house.  We suggest reallocating funds from the second mortgage assistance budget in the Housing Loan Trust Fund for this additional expense. There are currently funds available in the second mortgage assistance budget for this expense. 

We  believe  that  the purchase of  this home for the Transitional  Housing  Program is a good idea because it meets the requirements of  public housing residents  who have  expressed interest  in participating in the Program.  This is a single-family two-bedroom home, located near the downtown area and a bus route. This is an attractive home in good condition and would not require extensive repairs. We believe this home would be an ideal stepping -stone to help a public housing family transition to the private housing market.   We currently have four public housing families on the Transitional Housing Program waiting list.  We believe that this home would meet the needs of one of these families.

We note several policy implications associated with this proposed purpose.  First, implementation of this idea would remove a Tandler home from the homeownership situation for which all Tandler homes were intended.  We believe that an acceptable policy consideration that makes this purchase reasonable is that the structure would still be used in a manner that promotes homeownership, even though the house will actually become a rental unit owned by the Town.  In addition, if this house had been sold on the open market, as would have been the right of the owner, the house would have been lost from the Town’s affordable housing stock.  If the house is purchased in the manner proposed, though it would not be used for homeownership, it would continue to be used as affordable housing. The second policy consideration is that use of $17,500 from the Housing Loan Trust Fund for this purpose will permanently remove that amount from the Fund. Predominant use of the Fund for loans, rather than grants, has meant that the Fund is continually being replenished and dollars are re-circulated. 

On balance we believe that use of $17,500 from the Fund for this purpose can be justified because of the policy objectives that would be achieved by a successful Transitional Housing Program.

Regarding the need for $10,000 for necessary repairs:  We recommend use of 2002-2003 Community Development Neighborhood Revitalization funds for this purpose. On April 22, 2002, the Council approved use of $168,500 for activities in the Pine Knolls, Northside and public housing communities.  The house is located within the boundaries of the Pine Knolls neighborhood.  Rehabilitation of housing would be an eligible activity under this program.   Funds would be available for use in mid-July. We note that the Council has granted the Manager the authority to approve specific Neighborhood Revitalization projects.  We believe that use of these funds for rehabilitation in this area is consistent with the objectives of the Community Development Program and the Neighborhood Revitalization activity, and would reduce the amount that would be needed from the Housing Loan Trust Fund.

RECOMMENDATION

We recommend that the Council adopt the attached resolution, authorizing use of $17,500 from the Housing Loan Trust Fund for purchase of a Tandler home for the Town’s Transitional Housing Program. 

ATTACHMENTS

1. Description of Transitional Housing Program (p. 5).

A RESOLUTION AUTHORIZING USE OF $17,500 FROM THE HOUSING LOAN TRUST FUND FOR PURCHASE OF A HOUSE FOR THE TOWN’S TRANSITIONAL HOUSING PROGRAM (2002-05-29/R-7.1)

WHEREAS, the Town intends to use $100,000 of 2000-2001 HOME Program funds toward the purchase of a house on Merritt Mill Road for the Town’s Transitional Housing Program; and

WHEREAS, an additional $17,500 of funds are needed to acquire the property; and

WHEREAS, upon sale of this house, the Town will receive $13,000 of program income;

NOW, THEREFORE, BE IT RESOLVED that the Council authorizes use of the $13,000 of program income to be received for acquisition of the property.

BE IT FURTHER RESOLVED that the Council authorizes use of $4,500 from the Housing Loan Trust Fund second mortgage budget for acquisition of the property. 

BE IT FURTHER RESOLVED that the Town will use an additional $10,000 of 2002-2003 Community Development Neighborhood Revitalization funds to renovate this property.

This the 29th day of May, 2002.