Transcript Ideas from other states… Michigan

Ideas from other states…
Michigan
Indiana Conference on Housing &
Community Economic Development
September 13, 2005
Michigan Context
•
•
•
•
•
•
Michigan State Housing Development Authority
(MSHDA) is the state’s:
Housing Finance Agency—both single family and
multi-family lending
HOME Participating Jurisdiction
CDBG Housing recipient—25% of total CDBG
LIHTC Allocating Agency
Public Housing Authority — $120M in vouchers
Emergency Shelter Grant recipient
Keep in mind…
• Michigan’s budget has been structurally
imbalanced for the last several years and economic
recovery is lagging other states…
• MSHDA rolls its own profits into grants
supporting a variety of initiatives; however, we do
not receive a state budget appropriation for
programs or operations…
• Our new programs have focused on making the
most of limited resources or identifying creative
applications of resources already available…
Office of Community Development
• CDBG County Allocation program for non-entitled county
•
•
•
•
governments—biannual allocation mostly for homeowner
rehabilitation
Housing Resource Fund provides competitive grants to
local units of government and nonprofit organizations
using HOME, CDBG, and MSHDA funds
Technical Assistance Program pays for direct training for
nonprofits and local units of government
Other Initiatives include Cool Cities, Homebuyer
Construction Loan, and other special projects
Inter-divisional Projects such as Employer Assisted
Housing, ADR/DPA program, Links to Homeownership
Housing Resource Fund
• Our competitive funding activity is driven
by the following goal:
• All communities will be vibrant, affordable,
sustainable, diverse environments where
people choose to live and stay.
• Affordable Housing is a given, and
• The impact of housing investment in local
market is equally important.
Ideas worth sharing…
•
•
•
•
•
Cool Cities program
Neighborhood Preservation Program
Homebuyer Construction Loan
Employer Assisted Housing
Community Land Trusts
What is Cool Cities?
• Governor’s Initiative
• “This is about creating hot jobs in cool
cities throughout Michigan. It’s about
attracting and encouraging people –
especially young people – to live, work and
play in the cool cities we are working hard
to create.”
- Governor Granholm
So what’s it really mean?
According to participants in survey of college
students, attendees at state kickoff conference, and
local advisory committees, Cool Cities should …
•
•
•
•
•
have a 24/7 atmosphere, dynamic, vibrant
be a revitalized, energized downtown with “3rd
places”
provide creative opportunities (a “thick” job
market), diverse housing, and wired for technology
be a well-designed and cared-for public space
have respect for historic structures
So where is the program?
• $100,000 Cool City “Catalyst Grants” to local projects
•
•
•
•
bringing more residents and/or more activity to mixed use
neighborhoods
Michigan Main Street designations and technical
assistance from national experts
Blueprints for Downtown matching grants for downtown
market analyses and 5 year action plan
Blueprints for Neighborhoods provides neighborhood
redevelopment analyses and action plans
“Priority access” to a Tool Box of over 150 state grants,
loans, and assistance programs for Cool Cities designated
projects and neighborhoods
Cool Cities Funding
• Not really a lot of money, about $1 million per
year in catalyst grants mostly pieced together from
very tight budgets of flexible state funds
• Better coordination of other state resources around
“tipping point” neighborhoods—have you ever
seen so many bureaucrats excited at once?
• The bully pulpit effect is free—drawing attention
to vibrant urban neighborhoods, changing
attitudes, attracting investment
Neighborhood Preservation
Program (NPP)
• Most non-NPP grants cover one activity—
homeowner rehab, rental rehab, or homebuyer
projects—and are targeted to achieve both
affordable housing and community impact
• NPP program provides funding for several
activities at one time to address multi-faceted
neighborhood needs simultaneously
• Includes up to 40% of total funding for nonhousing costs associated with beautification,
infrastructure, and neighborhood marketing
NPP
•
•
•
•
Focus on creating “neighborhood of choice”
Experienced grantees with proven capacity
True buy-in by neighborhood is critical
Often multiple phases over several 2 year
grant cycles
NPP Funding Sources
• Housing activities supported by HOME,
CDBG, and MSHDA funds
• Non-housing activities supported with
CDBG or MSHDA funds
Homebuyer Construction Loan
• Brand spanking new program
• Provides mezzanine debt at attractive
rates to small/midsize urban pioneer
developers
• Actual construction loan—not
subsidy—to facilitate market rate
development in “tipping point”
neighborhoods
Interesting Features
• New underwriting process compared to MSHDA’s
traditional multi-family lending programs
• Significant reliance on due diligence reviews of
primary lender
• Goal is processing time—exclusive of developer
responses periods—of 60 days from intake to
commitment
• Willingness to finance mixed use projects without
requiring split ownership
Homebuyer Construction Loan
Funding Sources
• $10 Million in MSHDA reserves to
capitalize the initial revolving loan fund
• Fannie Mae American Communities Fund
may provide additional capital as program
ramps up
Employer Assisted Housing (EAH)
• Matched DPA for employer assisted housing
programs—currently in 3 pilot cities, hoping to
expand to 20 largest cities
• Providing up to $5,000 of non-amortizing, no
interest DPA ($10,000 including employer
portion) and MRB financing at discount rates to
buyers up to MSHDA income limits ($69,800 in
most cases)
• Focused on encouraging employees to invest in
neighborhoods near their job—“walk to work”
programs with some participants
EAH Participants
• Initial focus of pilot program is on large
institutional employers including medical, higher
education, financial services, and local
government
• Detroit Medical Center, Sparrow Hospital, City of
Lansing, Lansing Board of Water & Light
• Currently working to roll out more broadly across
the state
EAH Funding Source
• MSHDA portion of DPA is financed from MRB
bond proceeds
• Small interest rate premium (25 basis points) is
applied to EAH-DPA loans to maintain returns—
current rate is 5.375% fixed for 30 years
• Expansion of program has been limited by
administrative demands of marketing to multiple
employers and managing those relationships…
Community Land Trust (CLT)
• A mechanism for providing permanently
affordable homeownership by separating the
ownership of the land from the house
• Limited equity/appreciation formula provides
home for less than market value and passes on
benefit to subsequent buyers
• Provides supply of affordable units in otherwise
high-cost markets, especially along west Michigan
lakeshore in resort areas such as Traverse City,
Charlevoix, Petoskey, and Mackinac Island
CLT Example
• Locally based nonprofit CLT receives grant funding to help
•
•
•
•
•
develop a home with a market value of $150,000.
CLT identifies eligible buyer and sells home for $90,000.
CLT retains ownership of the underlying land which is
leased back to the buyer
After five years, for example, the market value of the
house is $200,000 and the buyer is ready to move on.
CLT has pre-emptive option to repurchase house for
original sales price plus 20% of market appreciation ($90K
plus $10K)—$100,000
If studies and projections are accurate, $100K is equally
affordable to a similarly situated family in five years.
CLT Caveats
• Legal implications of the ground lease model are complex
•
•
•
•
and significant
Application of property tax code to CLT model is still
murky and handled differently by each jurisdiction
Financing leasehold mortgages is less readily available,
though Fannie Mae helps
Assumes high capacity, stable, well-established nonprofit
sponsor
MSHDA is proceeding cautiously and seeking outside
legal advice on possible alternative mechanisms to
accomplish extended affordability
CLT Funding Sources
• CLT projects are HOME eligible using
resale requirements
• Some projects funded with MSHDA funds
• Significant technical assistance investment
For more information…
Stephen Lathom
Homebuyer Development Specialist
MSHDA Office of Community Development
735 East Michigan Avenue, PO Box 30044
Lansing, Michigan 48909
517-373-8853
[email protected]
www.michigan.gov/mshda