Eran Pehan with Community Planning, Development and Innovation presented on the Affordable Housing Development Agreement with Pupaw LLC/Cade LLC to construct permanently affordable homes. Property location will be South 4th Street East and Ronald Avenue. This item was heard before council in January 2020. A right-of-way vacation and an application to rezone was approved by Council at that time.
As a condition to close and vacate the public right-of-way, Council required the developer to address housing affordability by including a voucher preference for new multi-family rental units or by constructing permanently affordable home ownership units for a minimum of 20% of the total dwelling units for purchase. The developer has elected to construct the latter. Additional conditions applied to this subject property were reviewed.
Today's subject applies to condition number 5 related to the creation of affordable housing. The development agreement was reviewed, including what responsibilities lie with the developer and which lie with the City.
Pricing for the dedicated affordable homes will not exceed affordability for households earning up to 120% area median income (AMI). Affordable homes may not exceed the sale prices shown in the presentation.
Montana Jones, Community Development Manager, reviewed Missoula's A Place to Call Home, its values and strategies to meet Missoula's housing needs.
The committee asked about the covenant around owner occupancy, if it's just for these particular rentals or for the building itself. The covenant for short term rentals will apply to the entire building.
The number of units that would be included in this project has not been determined at this point, but Cole Bergquist on behalf of the development team stated that it's looking like it will be 7-8 units.
The 120% of AMI is calculated using data from Housing and Urban Development (HUD) to determine what is affordable based on median household income. That percentage is nationally identified as a number that captures the workforce, or what everyday working Missoulians can afford. It was identified in the housing policy as part of Missoula's tiering system for housing incentives.
Ms. Pehan stated that they focused on workforce percentages because they're typically individuals who have the income to purchase a home but struggle with down payments. With opportunities like this, the City can set a condition and can help households who have the income to sustain a home but just need a little push into the market. Primary barriers to homeownership include competition, so having these units be income qualified ensures that that competition is reduced and that only income qualified households can purchase the units.
The homeowner association (HOA) fees have been included in the income qualified process.
Ms. Pehan explained that the City of Missoula is not the seller of these units. The City is responsible for qualifying the households and making sure that a contract is in place so that with a subsequent sale, the unit will be sold to an income qualified owner. Mr. Bergquist further stated that his team will work with the Housing department to see value in different offers, and that with the market-rate side of the development, he plans to sell on a first-come-first-serve basis.
If this agreement doesn't pass today, the building permits for this project cannot be issued until the developer agreement is authorized and executed.
In regards to a question about the HOA fees, Ms. Pehan explained that when underwriting a loan, total cost is looked at, and that can vary from home to home based on variable factors. When income qualifying households, the City does make sure those households can afford that unit. The homeownership association in and of itself has the authority to change those fees at any time, so any assumption can change at any point in time. The focus is to ensure that any household purchasing that unit has shown that they can afford that HOA fee at the time.
Ms. Pehan stated that the AMI numbers were locked in at the time the condition was set, but she doesn't think there will be a decrease in median income in the near future.
Mr. Bergquist spoke to the HOA question and said that these 7-8 affordable units are in a separate building that's much more efficient than the market rate building.
Ms. Pehan, in response to a question, stated that she will send the committee the AMI numbers. She said that the rates were set in the City's housing policy in a tiering system for individuals earning under 120% AMI in our community. These are AMI numbers for 1 and 2 individuals, not a large household. HUD has determined that based on their income, they can afford homes at this price. The metric used to determine affordability is complicated and includes taking a look at debt factors and debt-to-income ratio.
The committee asked for clarification on Mr. Bergquist's statement about a more efficient building. Mr. Bergquist said that each development will have access to a shared outdoor area.