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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/14/2013 - REVISING THE MASTER COVENANT OF THE AFFORDABLE HOUDATE: May 14, 2013 STAFF: Joe Frank Beth Rosen Pre-taped staff presentation: available at fcgov.com/clerk/agendas.php WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Revising the Master Covenant of the Affordable Housing Units in the Provincetowne Condominium Development. EXECUTIVE SUMMARY A series of issues have arisen regarding the Master Covenant the City placed on certain housing units in the Provincetowne Condominium development to guarantee that the units would remain affordable for low-income individuals and families. The purpose of this work session is to review the history, issues and results of the implementation of the Master Covenant, and seek the City Council’s direction as to which options the City should pursue to preserve affordability, if any. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Should the City continue to maintain a Master Covenant with provisions requiring long-term affordability for low-income households of the restricted housing units located in the Provincetowne Condominium development? 2. If the Master Covenant is to be maintained, what provisions should be included? BACKGROUND / DISCUSSION History In the mid-1990s, the City of Fort Collins received ownership of the Provincetowne property, consisting of approximately 330 acres, through the financial failure of two special improvement districts (SIDs). The SIDs financed the construction of certain public improvements within the overall Provincetowne development and along Lemay Avenue. The contractual obligations to pay the District’s bonds were to be satisfied by the collection of special assessments against the properties in the entire Provincetowne development. The owners failed to pay the special assessments, and subsequently, the City took ownership of the property and the debt to the bond holders. Through March 1, 1996, the City had incurred $3,897,661 in costs for the two special improvement districts. The City Council’s goals at that time were to sell the SID property and recover the City’s costs, while meeting community goals for affordable housing and preservation of land for public facilities. In 1995, the City Council directed staff to market 170 acres of the Provincetowne SID property with an affordable housing “demonstration component.” The remaining approximately 160 acres was separately purchased by the City’s Department of Natural Resources for $1,035,422 to be used as a natural area, later known as Pelican Marsh. May 14, 2013 Page 2 The City used a “request for proposal” process to market the 170 acre property and eventually sold the property to PrideMark Development Company, LLC for $1,800,000, with an agreement that at least 30% of the housing units in the development project would be affordable for 25 years. To partially satisfy this requirement, 90 of the 120 townhome condominium units in Provincetowne PUD Filing No. 2 (aka. Provincetowne Condominium) were designated to be affordable. The balance of the Provincetowne affordable housing commitment was satisfied by CARE Housing’s Provincetowne Greene project, which consists of 151 affordable townhome and ranch housing units; 85 townhome units have been constructed, and the final phase of the project will include 66 townhome and ranch housing units. The final phase is currently in the preliminary development phase. In 1998, Kaufman and Broad (K-B Home) acquired PrideMark and started building the required affordable housing units as part of the Provincetowne Condominum development. (See Attachment 1 for a map showing the location of the Provincetowne Condominium development). Provisions of the Provincetowne Master Covenants There were 120 units total in the Provincetowne Condominium development; 90 units were to be affordable and the remaining 30 units were not restricted (e.g., market rate). The three major provisions of the Master Covenant are as follows: 1. Limited the sale of the units to “Eligible Buyers”, meaning a person, family or household whose annual income is no more than 80% of the Area Median Income, and whose housing expenses would not exceed 38% of their income. Currently, a family of four making $60,650 is 80% of Area Median Income. 2. Restricted the future sales price of the units to the maximum amount that Eligible Buyers would be able to finance with a 30 year loan at market rate interest, so that the units would remain affordable to low income families. 3. Restricted the units to be owner occupied (again, the City’s subsidy was to provide affordable homeownership opportunities and create an owner-occupied development/ neighborhood, not to allow investors to purchase the units as investment rentals). As each of the 90 affordable housing units were purchased (and resold), the original owners were required to sign the Master Covenant. Each housing unit has its own covenant. As each was resold, the subsequent owner were required to sign a Memorandum of Acceptance of Master Covenants for the occupancy and resale of the purchased unit. By signing the Memorandum, the buyers acknowledge having “carefully read” and having had the “opportunity to consult with legal and financial counsel” concerning the Master Covenant. The buyers also acknowledge that “resale is restricted by the Master Covenant.” In 2006, the Master Covenant was revised at the request of FHA to correct some provisions that were not consistent with federal regulations. Owners of Provincetowne affordable units were then notified of the Revised Master Covenant, which would replace the original Master Covenant, and asked to sign it before putting their units on the market (see Attachment 4, 2006 Revised Master Covenant). May 14, 2013 Page 3 The selling price of the original units ranged from $100,000 - $148,000. There is no verifiable information that the restricted units were sold at less than “market” or with any incentives. Several of the properties did receive City financial assistance through the Homebuyer Assistance Program. The Master Covenant contains specific provisions about the transfer of each affordable unit, including that the owner must provide a 10-day notice to the City of their intent to sell the property; and, within 3 days after contract acceptance, the owner must submit information to the City for its determination that the income, sales price and owner occupancy requirements have been met or not. The Covenant contains remedies in the event that a unit owner violates the covenants. The Covenant runs with the land and with subsequent owners, unless a unit is foreclosed on, in which case the Covenant is released. Under Colorado case law, if a document affecting title to real property, such as a covenant, if properly recorded, a purchaser of real property is deemed to have constructive notice of it. It is the duty of the purchaser to investigate. The purchaser’s title work should disclose the existence of the covenant. The affordable units were intended to be kept affordable for 25 years. The 25-year restriction starts at the date the original purchasers signed the covenant ; therefore the expiration period is unique for each restricted housing unit. Most of the original covenants were signed between 2002 and 2005; therefore the restrictions will expire between 2027 and 2030. The implementation of the Covenant was set up with the intention of being self-regulating and requiring little administration on the part of the City. The unit owners, potential buyers, and their realtors, were expected to be aware of the Covenant and were supposed to understand and follow the procedures, submitting the necessary information to the City. Based upon information provided by the seller/buyer, City staff would certify whether the conditions of affordability of resale have been met or not. (Note: The Provincetowne Condominium development is the only affordable housing project that the City has property interest in that has this form and kind of restrictions.) By executing the Master Covenant, the original Provincetowne Condominium homeowners agreed to restrict the use and resale of their units, and gave the City the power to enforce those restrictions. This constitutes an interest in the Provincetowne Condominiums that is owned by the City. Section 23-111 of the City Code requires City Council authorization by ordinance before the City can sell, convey or otherwise dispose of any interest in real property owned by the City. So, if the City Council decides to amend the covenant to reduce the restrictions on resale of the units, Council would have to approve the change by ordinance, as the City would be giving up part of its property interest in the units. Current Problems It has come to staff’s attention that the covenants have not been working as intended. The chief complaints of homeowners and realtors are as follows: • Some homeowners claim that they did not know of the covenants and/or did not understand the requirements and implications of the covenants. • Some have said that they never agreed to the covenants. May 14, 2013 Page 4 • Some realtors have complained that it is not readily apparent which units are designated as “affordable”; and, determining the advertised selling price for a unit is difficult as it depends upon the income of a purchaser. • Some complain that it is difficult to market the units because of the restrictions, particularly the “eligible buyer” provision citing it hard to find income-qualified buyers. There have been fewer complaints about the owner occupancy restriction. • Some complain that the owners of the restricted units are at a competitive disadvantage with the unrestricted units in the condominium development in terms of resale. • The City’s enforcement/administration of the covenants has been significantly more than originally expected, in particular, in having to explain the requirements of the covenants to owners, realtors, and prospective purchasers. The results of the “demonstration” project are mixed, as follows: • 23 units have gone into foreclosure. While it is impossible to say if this was a result of the covenants or other factors, anecdotal information indicates that some of the foreclosures were due to the inability of owners to find “eligible buyers” that met the income restrictions; or the inability of owners to find eligible buyers who were willing to agree to the restrictive covenants. Unfortunately, in the event of foreclosure, the affordability covenants are lost completely. • One unit was originally designated “affordable” but no covenant was ever filed, for reasons unknown. • Only a handful of properties are known to have actually submitted the necessary certification information to the City when they were resold, although more than 1/2 of the units have resold (not counting foreclosures). Most of the City certifications have occurred recently as awareness about the covenants has increased by owners and realtors. • 66 of the original 90 housing units are still restricted by the Master Covenant (23 lost to foreclosure and one covenant never filed). • 56 units remain owner occupied. Thirty-six units remain in the ownership of the original purchasers. A recent search of the County Assessor records indicates that another 10 restricted affordable units may be rental (non-owner occupied). The previous owners of the ten rental units apparently did not follow the steps they were supposed to take in terms of notifying the City before they sold their unit, they did not tell the purchaser about the covenant, and did not income-qualify the purchaser. So they violated the terms of the covenant, but that is something that the City could not have known about or protected against. The City has awaited enforcement of the covenants pending Council direction on the Master Covenant. • The Provincetowne Condominium project is currently FHA “certified” for insured mortgage financing, which is an important financing mechanism for low income homebuyers. If more May 14, 2013 Page 5 than 51% of the housing units in the Provincetowne Condominium development turn rental, the overall project could lose its “certification”. • One of the restricted affordable units was granted an exemption by City staff from having to meet the eligible buyer provision at resale, for reasons of unique hardship. • Based upon recent sales information, all of the restricted units are considered “affordable” based upon price, and market forces will most likely ensure the continued affordability. The current affordable definition from HUD is: “Purchase price may not exceed 95% of the median purchase price in the area”. In the Fort Collins area, a housing unit selling for $225,000 is considered to be affordable. The HUD definition does not distinguish affordability based upon the housing type (for example, attached versus detached single family units). Recent sales information for the Provincetowne Condominium development over the past 12 months indicate an average sales price of $125,677, with a maximum selling price of $143,100. Appreciation in the value of the homes over time has been mixed; slightly more than half of the affordable units resold depreciated in value in comparison to their original purchase price. Options In 2012, the Affordable Housing Board appointed a subcommittee to work with staff to review the 2006 Revised Master Covenant and see if further changes were warranted. City staff met with local real estate industry professionals to discuss problems they were having with the covenants. Also, City staff and Board members reviewed “best practices” in other communities. In March, the City Council considered an ordinance that would have revised the covenants. During that meeting, the Council had questions and concerns about the revised covenants and directed that the issue be scheduled for a work session. Subsequently, the Affordable Housing Board and staff revisited the issue and identified some potential options for Council to consider. See Attachment 2, which provides a summary of the options in matrix form. The options are as follows: Option A – Release Master Covenant Description: Release the Master Covenant which removes the deed restriction upon sale of the property. Considerations: • Current homeowners may have a better likelihood of selling their property and possibly avoiding foreclosure • City loses its interest in the property. • Long-term affordability may be lost; owner occupancy may be lost. However, the properties are selling well within affordable ranges. • Relieves City staff from enforcement/administrative responsibility. Option B – Revise the Master Covenant May 14, 2013 Page 6 Description: There are choices that the Council could consider in revising the Master Covenant. The Council could choose to eliminate any one or more of the following conditions, or offer new ones: • Option 1: Keep or eliminate the owner occupancy restriction? • Option 2: Eliminate the maximum purchase price restriction or establish a different and more predictable maximum purchase price restriction? The Affordable Housing Board recommends using 95% of area median purchase price. Another method would be for the City to establish its own area median purchase price for “attached housing” (townhomes). • Option 3: Eliminate the eligible buyer restriction or broaden the eligible buyer restriction to include low and moderate income purchasers, e.g., allow buyers up to 100% (currently $75,800 for a family of four) or 120% (currently $90,960 for a family of four) of area median income. Considerations: • The owner occupancy restriction retains commitment to “homeownership”. This helps keep the overall project certifiable by the FHA for owner financing. Most believe that maintaining owner occupancy is the highest priority. (Option 1) • Modifying the maximum purchase price to be 95% of the area median income price (currently $225,000) or the City developing its own median purchase price for “attached housing (price to be determined) sets clear, identifiable, and understandable maximum purchase price of the units for City staff, current homeowners, realtors and buyers. However, keeping a maximum purchase price at all may be an unnecessary and artificial constraint as units are currently selling at prices affordable to low income buyers. (Option 2) • Eliminating the eligible buyer requirements or expanding the range of income of eligible buyers may provide current homeowners a better likelihood of selling their property and possibly avoiding foreclosure. (Option 3) • Continued level of tension between current homeowners, realtors, buyers and the City. (All options) If changes to the covenants are approved, Provincetowne homeowners whose units are currently restricted would be contacted and encouraged to execute the new covenant at their earliest convenience or prior to the sale of their units. (All options) • All of the options create enforcement/administrative responsibilities for City staff beyond original expectations, and may require additional resources. Option C – Keep the Master Covenants as is Description: Keeps the current eligible buyer, purchase price, and owner occupancy restrictions. There are some housekeeping changes to the agreements that need to be made regardless. This can be done administratively. May 14, 2013 Page 7 Considerations: • Maintains affordability of units as originally envisioned. • City may continue to lose its interest in the property if some of the current owners are unable to sell and to the units are foreclosed. • Continued tension between current homeowners, realtors, buyers and the City. • If changes to the covenants are made administratively, Provincetowne homeowners whose units are currently restricted would be contacted and encouraged to execute the new covenant at their earliest convenience or prior to the sale of their units. • Enforcement/administrative responsibilities for City staff beyond original expectations and would require adding resources. Awareness Building If the Council decides to keep the Master Covenants in some form, there is a need to implement a proactive program for raising awareness of the covenants by the homeowners association, current homeowners, realtors, and buyers. Some ideas include staff holding informational meetings with homeowners, realtors, and the homeowners association; sending annual reminders to the current homeowners; and, filing a notice of “restrictions” on the properties that clearly describe the restrictions and responsibilities of the affordable units. This would require added resourcing. Enforcement of Existing Violations of the Covenants It has come to staff’s attention that there may be existing violations of the covenants, in particular, 10 of the restricted units may not be owner-occupied (rentals). Staff has awaited direction from Council on the covenants before taking enforcement action. Enforcement is likely to displace current tenants, and/or force the resale of the rental units. Enforcement will be staff intensive and will require adding resources. AFFORDABLE HOUSING BOARD RECOMMENDATION On April 4, 2013, the Affordable Housing Board (AHB) revisited the proposed changes to the Provincetowne Condominium Master Covenants and recommended that City Council consider the following amendments. The recommendations are based on factors including evaluation of market conditions since neighborhood inception and the City’s role in managing home ownership restrictions. The recommendations are as follows: • Maintain the owner occupancy restriction. • Amend the definition of maximum purchase price to be 95% of the Area Median Purchase Price as published quarterly by the National Association of Home Builders, rather than being based on the maximum amount that a low-income buyer can finance. May 14, 2013 Page 8 • Remove the eligible buyer requirement to make it easier for owners to sell their units. If the Council decides to keep this restriction, the AHB recommended that the income qualification be expanded to include persons or families with income no greater than 120% of area median income. The AHB recommended that Council consider additional budgeted staff time to administer this restriction. Please see Attachment 3, the April 11, 2013, memorandum from the Affordable Housing Board; and Attachment 5, Affordable Housing Board minutes April 4, 2013. NEXT STEPS If Council provides direction to pursue either Option A or B, the next steps will be for City staff to complete its research, revise the covenants, and prepare an Ordinance for Council review and approval. The staff will provide written notice to the current owners and homeowners association of the proposed changes; and, will be available to answer their questions. Staff anticipates that this will take an additional 2-3 months; with a final Council consideration in July or August. ATTACHMENTS 1. Provincetowne Condominiums Location Map 2. Matrix of Options 3. Affordable Housing Board memo, April 11, 2013 4. Copy of 2006 Revised Master Covenant 5. Affordable Housing Board minutes April 4, 2013 6. Powerpoint presentation Hawke y e St Arrow Crooked Ln Kyle Ave S toney Br o ok Rd Fi n ch C t Bev e rl y G le n n L n Rumford Ct Northdale Ct Colony H ills Ln Candlew o od Dr Bens o n Ln Ivy Glenn W a y Deerhurst Ct Shady B e nd Dr Nassau Way Aruba Dr Creek Stanton Dr Victoria Rd Bellewood Ln Vivian St Cro w n Ridge Ln Province Rd E Option Description Considerations AHB Recommendation A. Release Master Covenant Release the Master Covenant • Homeowners have better chance of selling their property and avoiding foreclosure • City loses ownership interest in the property • Long‐term affordability and owner occupancy lost • Least administrative burden Not recommended B. Revise the Master Covenant The Council may choose from one or more of the following options: (1) Keep or eliminate the owner occupancy restriction, and/or (2) Eliminate the maximum purchase price restriction or establish a more predictable maximum purchase price restriction such as 95% of median purchase price; or the City establishes its own area median purchase price for “attached housing”, and/or (3) Eliminate the eligible buyer restriction or broaden the eligible buyer restriction to include buyers in higher income brackets. (1) The owner occupancy restriction retains commitment to “homeownership” (2) Sets clear and understandable maximum purchase price, but is it necessary? (3) Expands the range of income of eligible buyers (4) Continued tension between homeowners, etc. and City. All of the options create additional administrative responsibilities (1) Maintain the owner occupancy restriction (2) Amend the definition of maximum purchase price to be 95% of the Area Median Purchase Price (3) Remove the eligible buyer requirement . If Council decides to keep this, expand to include families with income no greater than 120% of area median income. Budget additional staff time to administer. C. Keep the Master Covenant as is Keeps the current eligible buyer, purchase price, and owner occupancy restrictions • Maintains affordability as envisioned • May continue to lose affordability to foreclosures • Continued tension between homeowners, etc and City. • Administration need resourcing Not recommended Attachment 2. Matrix of Options ATTACHMENT 2 Social Sustainability 281 W. Maple Street PO Box 580 Fort Collins, CO 80522 970.221.6758 MEMORANDUM DATE: April 25, 2013 TO: City Council FROM: Affordable Housing Board (AHB) RE: Recommendation to Modify Provincetowne Master Covenant The Affordable Housing Board has re-visited the proposed changes to the Provincetowne Master Covenants. The AHB passed a motion at its April 4, 2013 meeting to recommend that Council remove the eligible-buyer provision of the Provincetowne Master Covenant. The board further recommends that if the eligible buyer portion of the Covenant were to remain, that Council would consider budgeting for the additional staff time required to administer and enforce the Covenant, and that Council re-defines an eligible buyer at persons or families with income no greater than 120%, or less, of area median income. All other areas of our original recommendation to the Council regarding the Provincetowne Master Covenant remain as recommended. Specifically, the AHB continues to recommend that the Owner-Occupancy requirement in the Covenant remain in place, and that the maximum purchase price as defined in the Covenant be 95% of the Area Median Purchase Price, as published quarterly by the National Association of Home Builders. Comments related to these recommendations are as follows:  The eligible buyer and owner-occupied provisions of the current Master Covenant have not been well enforced to date. It may have been unrealistic to think that they would have been, given current staff constraints, and the reliance on title companies and the real estate community to enforce them. It may be difficult to retro-actively enforce the eligible buyer restriction if it has not been well enforced previously. ATTACHMENT 3 2  Currently, a family of 4 with income at 80% of AMI would make $53,350 annually. If they spent 38% (max) of that income on housing expenses, as allowed by City Code and the current Master Covenant, they would be able to spend $1,689/mo. on housing related expenses including taxes, insurance, HOA, and utilities. An estimate of monthly non-mortgage housing expenses related to these units is: Taxes $67 (roughly $800/yr.) Insurance $50 HOA $50 Utilities $150 (water, electric, gas) Total $317/mo. Spending $317 on these items would leave $1,372/mo. to spend on their mortgage. The family could then qualify for a $287,380 mortgage at 4% interest rate over 30 years. This analysis assumes limited other debt for the family.  The last 10 sales in Provincetown in 2012-13 averaged $125,677. Clearly, the eligible buyer provision would not inhibit an 80% AMI family from purchasing one of these units.  The current Maximum Purchase Price in the Covenant, which limits the Maximum Purchase Price to the maximum amount which an Eligible Buyer can finance with a 30 year, 97% loan at market interest rates has had no effect on limiting the purchase price of these homes. Per the data above, the current market prices for these units are well below what an eligible buyer could finance.  Replacing the current Maximum Purchase Price criteria in the Covenant with a Covenant that ties the Maximum Purchase price to some real market data would be much more realistic and identifiable. Area Median Purchase price is data that is accessible to realtors.  The eligible buyer provision of the covenant has had more of an effect on these units by limiting the available pool of prospective buyers. Realtors have suggested that they have had difficulty finding buyers at <80% AMI. Raising the Covenant to 120% of AMI would allow a family of 4 to have an increased annual income of $83,040.  The AHB felt strongly that the owner-occupied provision of the covenant should remain. The intent of this covenant was that these units should be available to individuals or families as owner-occupied units. Additionally, if a majority of the units were owned by investors, the entire complex could lose the ability to obtain financing through FHA, the primary loan used by low-income buyers. 8/11/2006 1 Attachment 4 REVISED MASTER COVENANT FOR THE OCCUPANCY AND RESALE OF UNIT ___, PROVINCETOWNE THIS MASTER COVENANT FOR THE OCCUPANCY AND RESALE OF UNIT ____, PROVINCETOWNE (the "Covenant") is made and entered into this _________ day of ___________, 200__, by ___________________ (the "Declarant"), and enforceable by the CITY OF FORT COLLINS, COLORADO, a municipal corporation, or its designee (the "City"). WITNESSETH: WHEREAS, Declarant owns the real property described as follows: Condominium Unit _____, according to the Condominium Declaration for Provincetowne recorded October 16, 2001, under Reception No. 2001092980, and Condominium Map No. ___ of Provincetowne P.U.D. Filing No.2, recorded __________, under Reception No. ____________, in the real estate records of the County of Larimer, Colorado. (hereinafter an "Affordable Unit"). WHEREAS, Provincetowne is subject to a certain Provincetowne Affordable Housing Plan dated April 10, 2001, and WHEREAS, Declarant agreed to restrict the acquisition, resale or transfer of the Affordable Units to Eligible Buyers as that term is defined in this Covenant. In addition, the Declarant agreed that this Covenant shall constitute a resale restriction setting forth the Maximum Purchase Price for which each Affordable Unit may be sold, the amount of appreciation and the terms and provisions controlling the resale of the Affordable Units should a subsequent owner of an Affordable Unit desire to sell his or her interest in the Affordable Unit at any time after the date of this Covenant. Finally, by this Covenant, the Affordable Units shall be restricted against use and occupancy inconsistent with this Covenant. NOW, THEREFORE, for consideration hereby acknowledged by Declarant, Declarant hereby represents, covenants and declares as follows: 1. Definitions. The following terms shall have the following meanings when used in this Covenant: a. "Eligible Buyer" means a natural person, family or household with a (1) Maximum Gross Annual Income that is no more than 80% of the Area Median Income for Fort Collins, and (2) whose proposed Monthly Housing Expense(s) (principal, interest, taxes, insurance, utilities, HOA expense) for a Maximum Loan at the Market Interest Rate does not exceed 38% of the Maximum Gross Annual Income adjusted to a monthly income. This 8/11/2006 2 definition of Eligible Buyer is to be used solely to calculate the maximum income level of buyers eligible to purchase an Affordable Unit and shall not be construed as in any way limiting the type of lending program or loan terms (except that such terms or conditions shall not be predatory) which an Eligible Buyer may accept to finance the purchase of an Affordable Unit. A person, family or household who at the time of purchase qualified as a Eligible Buyer shall continue to be deemed so qualified until such time as the Affordable Unit is Transferred. The following is the method of determining an Eligible Buyer and a hypothetical example of the determination of the Maximum Purchase Price, based on the identified assumptions and estimates: Example: 1. Maximum Annual Gross Income of Eligible Buyer: The Area Median Income ("AMI") as determined by U.S. Department of Housing and Urban Development Income Limits ("HUD"). -- Year 2003 person Household = $50,687.40 x 80% = $40,549.92 2. Monthly Housing Expense: 38% ($40,549.92 +12 x.38) = $1,284.08 Assumptions: Initial Sales Price 2 Bedroom Unit: $127,724.80 Loan Amount (97%): $123,893.05 Interest Rate: 8% Monthly Housing Expenses: Monthly Principal and Interest: $ 909.09 Est. Monthly H.O.A. Dues 60.00 Est. Gas 50.00 Est. Property Insurance 25.00 Est. Water and Sewer 30.00 Est. Monthly Real Estate Taxes 130.00 Est. Monthly Electrical 35.00 Est. Private Mortgage Insurance 45.00 Total: $ 1,284.08 Monthly Housing b. "Market Interest Rate" means the Fannie Mae yield on 30-year mortgage commitments (priced at par) for delivery within thirty (30) days, rounded up to the nearest .125 of 1.00% as of the first business day of the month (printed in the Wall Street Journal). c. "Maximum Gross Annual Income" means no more than 80% of the Area Median Income for Fort Collins as determined by the U.S. Department of Housing and Development Income Limits ("HUD"). Income shall mean the pre-tax income from all 8/11/2006 3 acceptable sources as defined in the Fannie Mae Seller/Servicer Guide which income shall be verified in one or more of the following methods: i. Obtain two (2) paycheck stubs from the proposed Eligible Buyer's two (2) most recent pay periods. ii. Obtain a true copy of an income tax return from proposed Eligible Buyer for the most recent tax year in which a return was filed. iii. Obtain an income verification from the employer of the proposed Eligible Buyer. iv. Obtain an income verification certification from the Social Security Administration and/or the Colorado Department of Social Services if the proposed Eligible Buyer receives assistance from such agencies. v. Obtain an alternate form of income verification reasonably requested by the City. d. "Maximum Loan” means 97% of the purchase price for the applicable Affordable Unit. e. "Owner" means the Declarant and any subsequent buyer, devisee, transferee, grantee, owner or holder of title of any Affordable Unit. f. "Proposed Monthly Housing Expense" means the monthly total of the principal and interest, private mortgage insurance, homeowners association dues, l/12th of estimated real property taxes and estimated gas, property insurance, water and sewer and electricity expenses. g. "Transfer" means any sale, assignment or transfer that is voluntary, involuntary or by operation of law (whether by deed, contract of sale, gift, devise, bequest, trustee's sale, deed in lieu of foreclosure, or otherwise) of any interest in an Affordable Unit, including, but not limited to a fee simple interest, a joint tenancy interest, a tenancy in common, a life estate, or any interest evidenced by a land contract by which possession of an Affordable Unit is transferred and the Owner obtains title. h. "Acquisition Date" means the date of Transfer of an Affordable Unit. i. "Contract Date" means the date of contract for the proposed Transfer of an Affordable Unit to a new Owner. 2. Transfer Subject to Covenant. Declarant and each subsequent Owner of each of the Affordable Units hereby covenants and agrees that the Affordable Units shall be used, occupied and Transferred strictly in conformance with the provisions of this Covenant for so 8/11/2006 4 long as this Covenant remains in force and effect with respect to each such Affordable Unit. Each Owner who takes title from Declarant and every subsequent Owner of each Affordable Unit shall execute and record the Memorandum of Acceptance attached hereto as Exhibit A (completed with the appropriate information relating to the Affordable Unit and such Owner) with such Owner's deed to his or her Affordable Unit in the real property records of the County of Larimer, Colorado. 3. Use and Occupancy. An Owner (other than Declarant), in connection with the purchase and ownership of an Affordable Unit, must: a. occupy the Affordable Unit as his or her sole, exclusive and permanent place of residence during the time that such Affordable Unit is owned by such Owner. A permanent residence shall mean the home or place in which one's habitation is fixed and to which one, whenever he or she is absent, has a present intention of returning after a departure or absence therefrom, regardless of the duration of the absence. In determining what is a permanent residence, the following circumstances relating to the Owner shall be taken into account: business pursuits, employment, income sources, residence for income or other tax purposes, age, marital status, residence of parents, spouse and children, if any, location of personal and real property, and motor vehicle registration; b. not engage in any business activity on or in such Affordable Unit, other than permitted under applicable zoning ordinances and the condominium declaration governing the Affordable Unit; and c. not permit any use or occupancy of such Affordable Unit except in compliance with this Covenant during the period of such Owner's ownership of the Affordable Unit. 4. Maximum Purchase Price. Every Transfer of an Affordable Unit by Declarant or subsequent buyers to a purchaser shall be for a purchase price which does not exceed the Maximum Purchase Price as set forth herein and in the Plan. The Maximum Purchase Price shall be the maximum amount which an Eligible Buyer can finance with a 30-year, 97% loan at Market Interest Rate (as defined herein). In the event Developer conveys an Affordable Unit for a sales price less than the Maximum Purchase Price and Developer is required to pay any commission to transactional or buyer real estate agents or brokers upon the sale of any Affordable Unit, Developer may increase the purchase price for the sale by the amount to be paid to such real estate agents or brokers in connection with such sale, provided the total of the purchase price and any commission does not exceed the Maximum Purchase Price and the commission does not exceed 3% of the Purchase Price. The Sales Price for a two bedroom Affordable Unit shall be based upon the Eligible Buyer's total income equaling the 3 persons Median Income in Fort Collins as determined by the U.S. Department of Housing and Urban Development Income Limits ("HUD") and the Sales Price for a three bedroom Affordable Unit shall be based upon the Eligible Buyer's total income equaling the 4 person Median Income for Fort Collins as determined by the HUD. Each such sales price is subject to increase with respect to sales occurring in the year(s) following the year of this Agreement by the increase, if any, in 8/11/2006 5 the 3 and 4 person, respectively, Area Median Income for the City of Fort Collins as determined by the HUD for the year in which the closing actually occurs. 5. Maximum Purchase Price. a. A selling Owner shall not permit any prospective buyer to assume any or all of the selling Owner's customary closing costs nor accept any other consideration which would cause an increase in the purchase price above the Maximum Purchase Price, and all such additional consideration, in any form, shall be considered by the City when determining whether the purchase price for the Affordable Unit exceeds the Maximum Purchase Price. THE MAXIMUM PURCHASE PRICE IS ONLY AN UPPER LIMIT ON PRICE APPRECIATION FOR EACH AFFORDABLE UNIT, AND NOTHING HEREIN SHALL BE CONSTRUED TO CONSTITUTE A REPRESENTATION, WARRANTY OR GUARANTEE BY THE DECLARANT OR THE CITY THAT UPON TRANSFER THE OWNER SHALL OBTAIN THE MAXIMUM PURCHASE PRICE. FURTHER, NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO PREVENT AN OWNER FROM SELLING A UNIT FOR LESS THAN THE MAXIMUM PURCHASE PRICE. 6. Transfer of Affordable Unit. a. In the event that an Owner desires to sell the Affordable Unit owned by such Owner, the Owner shall provide notice to the City of such Owner's intent to sell at least ten (10) days prior to engaging a broker to list the Affordable Unit for sale. The City may keep a list of interested purchasers and may provide same to any selling Owner in the City's discretion. b. After providing the notice required in Subsection 6.a, the selling Owner may list the Affordable Unit for sale with a real estate agent licensed in the State of Colorado or the selling Owner may market the Affordable Unit as a so-called "for sale by owner," and may enter into a contract for the sale of the Affordable Unit upon such terms and conditions as the selling Owner shall, in the selling Owner's sole discretion, deem acceptable, provided, however, that: (i) the purchase price shall not exceed the Maximum Purchase Price; (ii) the selling Owner must believe in good faith that the purchaser is an Eligible Buyer and that the purchase price does not exceed the Maximum Purchase Price; and (iii) the contract must state as a contingency that the purchaser will submit the application described in Subsection 6.c below to the City within three (3) days after contract acceptance, and that the selling Owner's obligations under the contract are expressly contingent upon the City's determination that the purchaser is an Eligible Buyer and that the purchase price does not exceed the 8/11/2006 6 Maximum Purchase Price as evidence by issuance of the Certificate described in Subsection 6.c below. c. Within three (3) days after contract acceptance (defined as the date of last execution of the contract by the purchaser or the selling Owner), the purchaser shall complete and submit an application form to the City requesting a determination that the purchaser is an Eligible Buyer and that the purchase price does not exceed the Maximum Purchase Price. The City shall promulgate the form of such application, which shall request only such information as is necessary to determine whether the purchaser is an Eligible Buyer and whether the purchase price exceeds the Maximum Purchase Price. The City shall make its determination within five (5) days for sales by Declarant and within fourteen (14) days in the event of any other sale after receipt of the completed application, as evidenced either by (A) the issuance of a certificate, signed by the City and in recordable form, stating that the purchaser is an Eligible Buyer, the amount of the purchase price and that the purchase price does not exceed the Maximum Purchase Price (the "Certificate"); or (B) delivering a notice to seller and purchaser that a Certificate cannot be issued and stating the reason(s) therefore. Failure by the City to make its determination and deliver the Certificate or the notice as described above within the applicable 5 or 14-day period will be deemed an approval of the purchaser and the purchase price, and the City shall thereafter issue a Certificate with respect to the transaction immediately upon request therefore by the selling Owner or the purchaser. Delivery of the Certificate shall not be construed as a representation or warranty that the Eligible Buyer will in fact qualify for purchase money financing for the acquisition of the Affordable Unit. d. Upon the Transfer of the Affordable Unit, the Certificate shall be recorded by the Eligible Buyer in the real estate records of the County of Larimer, Colorado, along with the deed for the Affordable Unit, and if the Certificate is not so recorded, then the Transfer shall be voidable at the option of the City. 7. No Rental of Affordable Units. An Owner may not rent or lease such Owner's Affordable Unit for any period of time. The requirements of this Section shall not preclude an Owner from sharing occupancy of the Affordable Unit with non-owners on a rental basis provided Owner continues to reside in the Affordable Unit and to meet the obligations contained in this Covenant. 8. Remedies in the Event of Breach. a. In the event that the City has reasonable cause to believe that an Owner is violating the provisions of this Covenant, the City, by its authorized representative, may inspect the Affordable Unit owned by such Owner between the hours of 8:00 a.m. and 5:00 p.m., Monday through Friday, after providing such Owner with no less than twenty-four (24) hours advance written notice. b. In the event a violation of this Covenant is discovered, the City shall send a notice of violation to the Owner detailing the nature of the violation and allowing the Owner fifteen (15) days to cure such default. Said notice shall state that the Owner may request a hearing before the City within fifteen (15) days to determine the merits of the allegations. If no 8/11/2006 7 hearing is requested and the violation is not cured within the fifteen (15) day period, the Owner shall be considered in violation of this Covenant. If a hearing is held before the City, the decision of the City based on the record of such hearing shall be final for the purpose of determining if a violation has occurred. c. There is hereby reserved to the City the right to enforce this Covenant, by the following remedies and any other means that are lawful to the City under HUD rules: i. disgorgement of profits received by the selling Owner over the Maximum Purchase Price; and/or ii. obtaining a court order requiring sale of an Affordable Unit by the Owner thereof to either the City or a third party under a purchase right designed to preserve the affordability of the property for persons of low or moderate income. The costs of such sale shall be assessed against the proceeds of the sale with the balance being paid to the Owner. In the event the City resorts to litigation with respect to any or all provisions of this Covenant and the City prevails, the City shall be entitled to recover damages and costs, including reasonable attorney's fees. d. In order to preserve the affordability of the property as an Affordable Unit, if the Owner intends to transfer title to the property, the Owner must, at least forty-five (45) days before any transfer is effected, notify the City of its intent to sell, whereupon, the City shall have the right to purchase the property ("Purchase Right") at the "Maximum Purchase Price" as calculated in paragraph 4. If the City elects to purchase the property, it shall exercise the Purchase Right by notifying the Owner, in writing, of such election ("Notice of Exercise of Right") with thirty (30) days of the receipt of notice of the Owner's intent to sell, or the right shall expire. Having given such notice, the City may either proceed to exercise the Purchase Right directly by purchasing the property, or may assign the Purchase Right to an eligible buyer. In either case, the City or its assignee shall enter into a contract to purchase the property within seven (7) days of exercising the Purchase Right. The purchase (by the City or the City's assignee) must be completed within forty-five (45) days of the City's Notice of Exercise of Right, or the owner may sell the property as provided in paragraph 6 above. The time permitted for the completion of the purchase may be extended by mutual written agreement of the Owner and the City. If the City assigns its Purchase Right to an eligible buyer, the Maximum Purchase Price shall be increased by the amount set annually by the City Manager as necessary to cover the administrative costs of assigning its Purchase Right and the City shall be entitled to these additional sales proceeds in order to cover the administrative costs associated with assigning its Purchase Right. If the Purchase Right has expired or if the City, or its assignee, has failed to complete the purchase within the forty-five (45) day period allowed above, the Owner may sell the property according to paragraph 6, or nor more than the Maximum Purchase Price as calculated according to paragraph 4. 8/11/2006 8 9. Release of Covenant in Foreclosure. The City shall release this covenant of record and waive its ability to enforce the provisions of this Covenant with respect to a particular Affordable Unit in the event of foreclosure or the acceptance of a deed in lieu of foreclosure or assignment of the insured mortgage to HUD, with respect to such Affordable Unit by a holder of a first priority deed of trust against the Affordable Unit (the "First Lien Holder") (which shall be the only party entitled to take the Affordable Unit free of this Covenant pursuant to the provisions of this Section 9). 10. Covenant Running with Land; Duration of Covenant. a. The terms of this Covenant shall constitute covenants running with the Affordable Units, as a burden thereof, for the benefit of, and shall be specifically enforceable by the City and its successors and assigns, as applicable, by any appropriate legal action including but not limited to specific performance, injunction, reversion or eviction of non-complying Owners and/or occupants. b. This Covenant shall terminate, expire and be of no further force and effect with respect to a particular Affordable Unit following the first Transfer of said Affordable Unit that occurs more than twenty-five (25) years after the date of first sale. 11. Miscellaneous. a. Notices. Any notice, consent or approval which is required or permitted to be given hereunder shall be given by mailing the same, certified mail, return receipt requested, properly addressed and with posting fully prepaid, to any address provided herein or to any subsequent mailing address of the party as long as prior written notice of the change of address has been given to the other parties to this Covenant. Said notices, consents and approvals shall be sent to the parties hereto at the following addresses unless otherwise notified in writing: To Declarant: __________________________ To the City: The City of Fort Collins, Colorado 300 LaPorte Avenue, City Hall West, Second Floor Fort Collins, Colorado 80521 Attn: City Manager with a copy to: The City of Fort Collins City Attorney's Office 300 LaPorte Avenue, City Hall West, Second Floor Fort Collins, Colorado 80521 8/11/2006 9 b. Exhibits. All exhibits attached hereto are incorporated herein and by this reference made a part hereof. c. Severability. Whenever possible, each provision of this Covenant and any other related document shall be interpreted in such a manner as to be valid under applicable law; but if any provision of any of the foregoing shall be invalid or prohibited under said applicable law, such provisions shall be ineffective to the extent of such invalidity or prohibition without invalidating the remaining provisions of such documents. d. Chose of Law. This Covenant and each and every related document are to be governed and construed in accordance with the laws of the State of Colorado. e. Successors. Except as otherwise provided herein, the provisions and covenants contained herein shall inure to and be binding upon the heirs, successors and assigns of the parties. f. Section Headings. Paragraph or section headings within this Covenant are inserted solely for convenience of reference, and are not intended to, and shall not govern, limit or aid in the construction of any terms or provisions contained herein. g. Waiver. No claim of waiver, consent or acquiescence with respect to any provision of this Covenant shall be valid against any party hereto except on the basis of a written instrument executed by the parties to this Covenant. However, the party for whose benefit a condition is inserted shall have the unilateral right to waive such condition. h. Gender and Number. Whenever the context so requires herein, the neuter gender shall include any and all genders and vice versa and the use of the singular shall include the plural and vice versa. i. Personal Liability. Owner agrees that he or she shall be personally liable for any of the transactions contemplated herein. j. Further Actions. The parties to this Covenant agree to execute such further documents and take such further actions as may be reasonably required to carry out the provisions and intent of this Covenant or any restriction or document relating hereto or entered into in connection herewith. k. Modifications. The parties to this Covenant agree that any modifications of this Covenant shall be effective only when made by writings signed by the Declarant (or its successors) and the City and recorded with the Clerk and Recorder of Larimer County, Colorado. 1. Owner and Successors. The term Owner shall mean the person or persons who shall acquire an ownership interest in an Affordable Unit in compliance with the terms and provisions of this Covenant; it being understood that such person or persons shall be deemed an Owner hereunder only during the period of his, her or their ownership interest in the Affordable 8/11/2006 10 Unit and shall be obligated hereunder for the full and complete performance and observance of all covenants, conditions and restrictions contained herein during such period. 8/11/2006 11 IN WITNESS WHEREOF, the parties hereto have executed this instrument on the day and year above first written. DECLARANT: ___________________________________ By: ________________________________ Date:_______________________________ STATE OF COLORADO ) ) ss. COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ____day of _______2006, by Witness my hand and official seal. My commission expires: [SEAL] ____________________________________ Notary Public 8/11/2006 12 ACCEPTANCE BY THE CITY OF FORT COLLINS, COLORADO The foregoing Master Covenant for the Occupancy and Resale of Unit _______, Provincetowne, and its terms are hereby accepted, approved, agreed to and adopted by the City of Fort Collins, Colorado. THE CITY OF FORT COLLINS COLORADO, a municipal corporation By: _______________________________ Darin A. Atteberry, City Manager ATTEST: _________________________________ City Clerk APPROVED AS TO FORM: ________________________________ Deputy City Attorney STATE OF COLORADO ) ) ss. COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ____day of _______2006, by Darin A. Atteberry, as City Manager of the City of Fort Collins, Colorado, a municipal corporation. Witness my hand and official seal. My commission expires: [SEAL] ____________________________________ Notary Public ATTACHMENT 5 CITY OF FORT COLLINS AFFORDABLE HOUSING BOARD MINUTES BOARD MEETING 281 N. College Ave. Fort Collins, Colorado Apr. 4, 2013 4 to 6 p.m. Chair: Dan Byers Staff Liaison: Joe Frank 970-221-6752 City Council Liaison: Lisa Poppaw Board Members present: Tatiana Martin, Troy Jones, Terence Hoaglund, Dan Byers, Jeffrey Johnson, Curt Lyons Board Members absent: Karen Miller Staff present: Joe Frank, Director, Social Sustainability Department; Beth Rosen, Affordable Housing Administrator; Michele Dunlop, Note Taker Council Members present: None Guests: Marilyn Heller, League of Women Voters Meeting called to order with a quorum present at 4:00 p.m. by Chair Dan Byers. AGENDA REVIEW Chair Dan Byers queried the Board for additions or subtractions to the agenda. No commentary. PUBLIC COMMENT Marilyn Heller reminded the Board that the League of Women Voters’ affordable housing team will be hosting a public panel on Tuesday, April 9 at 7:00 p.m. at the Harmony Library. She distributed a financial advice pamphlet relevant to affordable housing, and Director Joe Frank suggested it might be a great resource to add to the Social Sustainability Department website. Chair Dan Byers added that 2-1-1 and the City of Fort Collins might also find the information useful. 2-1-1 is United Way’s telephone answer/referral service regarding community services. APPROVAL OF MINUTES The minutes of the meeting of March 7, 2013 were approved as presented on a motion from Troy Jones, seconded by Tatiana Martin, with 4:0 in favor. Jeffrey Johnson abstained. NEW BUSINESS MEETING RELOCATION Director Joe Frank proposed relocating meetings of the Affordable Housing Board to the Council Information Center at City Hall (300 Laporte Ave), beginning May 2, 2013. He suggested that the building could provide better parking, access and security. The Board agreed to the change. COMPETITIVE PROCESS Chair Dan Byers thanked the Board for its involvement in the CDBG’s competitive process review. Beth Rosen also expressed appreciation for the Board’s clear presentation of rankings and consensus. The Affordable Housing Board’s final recommendations have been relayed to the CDBG. PROVINCETOWNE Director Joe Frank provided an update on the status of Provincetowne Condominiums Master Covenant. Recommended revisions to the Provincetowne covenant were tabled at the March 19, 2013 meeting of the City Council. The Council wanted to guarantee a public benefit from the money the City of Fort Collins invested in the project, and additionally expressed concern over possible violations of the covenant. The Council suggested maintaining owner occupancy of Provincetowne units as well as a price cap. Some members of the Council were amenable to removing income and eligible buyer restrictions. Joe noted that a work session has been scheduled with the City Council for April 23, 2013 to discuss potential options. Beth Rosen offered additional background on Provincetowne. Provincetowne Condominiums consists of 120 town house condominium units. Of those 120, 90 were originally designated as affordable housing and sold with deed restrictions, 20 were foreclosed, and one was never properly recorded. This leaves the City of Fort Collins with an interest in the remaining 69 Provincetowne units. The first issue, Beth explained, is administrative. The current covenant was set up to be self-regulating, with very little involvement from City staff – but that hasn’t been working. Units have been sold without disclosure of the covenant, and new owners claim not to have known about restrictions. The City of Fort Collins was expected to qualify and approve eligible buyers, but that system was never put in place and that process hasn’t been happening. Keeping the existing covenant and overseeing compliance would require additional resources from City staff to design a process, create forms, reach out to realtors, monitor and enforce the covenants, and address violations. The second issue is on the side of the owners. Beth described hearing from current owners and realtors who have been unable to sell Provincetowne units in the current market. Prospective buyers won’t agree to the covenant. Owners in financial hardship can’t turn their units into rentals. Units are devalued and lost to foreclosure – and as soon as a property is foreclosed, the affordability covenants are lost completely and the City loses its interest. In an effort to address these two issues, Beth distributed a hand-out with information on different tracks the City could pursue, ranging from least to most restrictive. Possibilities with an emphasis on assisting current owners include: releasing the master covenant, scaling the master covenant down to only require owner occupancy, and maintaining both owner occupancy and a maximum purchase price in the master covenant. Possibilities with an emphasis on protecting future affordability include: enforcing the provisions of the current master covenant and revising the covenant to include maximum purchase price. Beth noted that enforcing the current master covenant may force more owners into foreclosure. Artificial restraints are turning away potential home buyers. With these issues in mind, Joe Frank and Beth Rosen requested feedback and recommendations from the Affordable Housing Board. Over the course of discussion, the Board raised a number of points:  Current covenant restrictions prevent owners from taking advantage of market appreciation.  Loosening covenant restraints may not have a negative impact on affordability, as the units are already on the low end of the market.  Fort Collins doesn’t have the kind of cost affordability gap (as seen in Aspen) that would require a maximum purchase price provision.  The cumulative impacts of the current covenant make it difficult to find new owners. If a property goes into foreclosure, the City loses its interest in the unit. This is lose-lose.  Removing the owner occupancy restriction could change the character of the neighborhood by bringing in investors and renters.  There may not be a market for units with restrictive covenants. Provincetowne units may be undesirable due to artificial restraints, when other housing options are available on the market.  The City could offer a new covenant, but home owners would not accept a more restrictive one.  The City could remove all provisions and market forces might still make it difficult for owners to sell their units.  Guaranteeing that owners, realtors and prospective buyers are kept informed of Provincetowne covenants is important. A suggestion was made for the City of Fort Collins to send out yearly reminders. Additional facts and points of interest brought to the table:  The original covenant received FHA approval in 2006.  Around 9-10 Provincetowne units are currently estimated to be in violation of the covenant.  If no changes are made to the covenant owners will be released from restrictions as early as 2023.  An eligible buyer is currently someone at or below 80% of area median income (AMI).  80% of AMI for a family of four is $53,350. 80% of AMI for one person is $38,750. Realtors are struggling to find income eligible buyers who want and can afford Provincetowne units. Buyers purchasing a home through home buyer assistance aren’t choosing units under $150,000. They’re purchasing within the $180,000 - $230,000 range. After a lengthy and engaging discussion, the Board concluded that the eligible buyer restriction may be the most problematic issue. Chair Dan Byers pointed out that the realtors may be right – there may not be many income eligible buyers, as defined by the master covenant, interested in Provincetowne units. Beth Rosen observed that there are buyers interested in Provincetowne units, whose incomes look too high on paper. The reality of their financial situations, however, is that they do need affordable housing. Director Joe Frank recommended the option of raising the eligible buyer restriction to 110% or 120% of AMI. Chair Dan Byers agreed that this might open a door to families who need affordable housing, but are currently disqualified based on income. Jeffrey Johnson pointed out that opening the units to a broader market may also assist owners in violation of the master covenant, who are going to need an exit strategy when the City begins to enforce restrictions. Director Joe Frank asked the Board if it would be appropriate to request input from the neighborhood before changing the master covenant. Tatiana Martin answered that it would be a very good idea to get a feel for the neighborhood and its wants. Troy Jones suggested that it would also offer the City an opportunity to educate the neighborhood and explain the issue. The Affordable Housing Board continued to discuss the drawbacks and benefits provided by different restrictions. Members of the Board agreed that it would be ideal to maintain owner occupancy requirements and eliminate eligible buyer restrictions. Failing that, the Board agreed that the eligible buyer restrictions – if kept in place – should be loosened to around 120% AMI. Troy Jones moved that the Board recommend to Council that the eligible buyer element of the Provincetowne covenant be removed. However, in the event the Council chooses not to remove it, the Board recommends that additional staff time be budgeted for enforcement of the covenant. If the eligible buyer restriction remains in the covenant, the Board recommends that an eligible buyer be defined as 120% of AMI. Terence Hoaglund seconded the motion, which was approved 6:0. Following the motion, the Affordable Housing Board reached a consensus to send a memo to Beth Rosen with an updated recommendation for the Provincetowne project. GUEST SPEAKERS Troy Jones brought up previous guest speaker Bruce Hendee and suggested bringing him back to discuss the City of Fort Collins’ triple bottom line focus in greater detail with the Affordable Housing Board. Chair Dan Byers agreed that it would be a good idea to invite him back. He also suggested inviting speakers from Neighbor to Neighbor, Habitat for Humanity, CARE and the Fort Collins Housing Authority to address new members of the Board. Jeffrey Johnson added that it might also be valuable to invite City Council Liaison Lisa Poppaw to join the Board for another meeting. CLOSING COMMENTS Chair Dan Byers announced that Jeffrey Coon, Chair of the Commission on Disability, is forming a subcommittee to address the affordability of accessible housing. The subcommittee will meet on Thursday, April 11 from 1-2 PM in the Council Information Center at City Hall. Dan encouraged members of the Affordable Housing Board to attend the meeting. Afterwards, Chair Dan Byers requested liaison reports. Curt Lyons reported a mixed development project planned for the Foothills Fashion Mall with 800 units (studio, one, two, and three bedroom) and underground parking. He speculated on the impact this development might have on affordable housing. – Meeting adjourned at 6:03 PM by Chair Dan Byers. – The next meeting of the Affordable Housing Board is scheduled for: May 2, 2013 at 4:00 PM Affordable Housing Board meetings have a new location! Fort Collins City Hall Council Information Center 300 Laporte Ave 1 11 Revising the Master Covenant of the Affordable Housing Units in Provincetowne City Council Work Session May 14, 2013 Beth Rosen, CDBG/HOME Administrator, Social Sustainability Department 22 Direction Sought 1. Should the City continue to maintain a Master Covenant with provisions requiring long-term affordability to low-income households of the restricted housing units? 2. If the Master Covenant is to be maintained, which provisions should be included? ATTACHMENT 6 2 33 Background Discussion 44 Brief History • Failed Special Improvement District • Serve the public good with affordable home ownership component • RFP to local developers – ultimately KB Homes • 120 Townhome Units built - 90 restricted as affordable through Master Covenant 3 55 Provisions of Master Covenants • Each unit has a separate Master Covenant • In effect for 25 years from date of 1st purchase (2003- 2005) • Released only in the event of foreclosure • Require units to be “Owner-Occupied” • Limit the sale to “Eligible Buyers” <80% AMI • Limit purchase price based on what an “Eligible Buyer” can afford 66 Current Status • 66 Affordable Units Remaining • 23 Units lost to foreclosure • 1 Covenant never recorded • 36 Units occupied by “Original” purchaser • 10 Units possibly “Non-owner Occupied” • 2 Units for sale 4 77 Current Issues 1. Administrative • Initially set up to be self-regulating, “not working” • Some units being sold without disclosure of Covenant • Some new owners claim they “didn’t know” about deed restrictions at time of purchase • Keeping existing covenant would require additional resourcing & enforcement 88 Current Issues (continued) 2. Impact on Homeowners • Difficulty selling units (finding “eligible buyers”) • Unable to rent to avoid foreclosure (while waiting for market to recover) • Complaints that units are devalued • Units lost to foreclosure • Unanticipated consequence of financially damaging low-income homebuyers 5 99 Options • Option A: Release Master Covenant • Option B: Revise Master Covenant • Option C: Retain Master Covenant 1010 Continuum of Options Release Retain Income Restricted Buyer Max Purchase Price Owner Occupied + + Burden on Homeowners & City Resources Revise 6 1111 Option A: Release Covenant Considerations: • Relieves current burden on City & homeowners • Property owners may have a better likelihood of selling • No guarantee of long-term affordability • Loss of “owner occupancy” & eligibility for FHA financing (50% owner occupied) 1212 Option B: Revise Master Covenant Revised Covenant could eliminate or include any, or all, of the following provisions: • Owner Occupancy Requirement • Maximum Purchase Price • Income Eligibility Requirement 7 1313 Option: Eliminate Considerations: • Benefit to current owners • Units at risk of being purchased by investors • Potential loss of FHA Eligibility Option B: Revise Master Covenant Owner Occupancy Requirement 1414 Option: Retain Considerations: • Retains commitment to affordable home- ownership • Keeps project FHA eligible • City would need to monitor & enforce Option B: Revise Master Covenant Owner Occupancy Requirement 8 1515 Option: Eliminate Considerations: • Units would be better positioned to compete with the market • Ease the burden on current homeowners • Potential loss of affordability Option B: Revise Master Covenant Max Purchase Price 1616 Option: Revise Considerations: • AHB recommendation of 95% current median sales price ($225,000) • Establishes a maximum purchase tied to market conditions • Realtors could easily ascertain a listing price Option B: Revise Master Covenant Max Purchase Price 9 1717 Option: Retain (based on income of buyer) Considerations: • Maximum purchase price may be an artificial constraint • Continued difficulty determining a listing price • City would need to certify affordability based on income of the buyer Option B: Revise Master Covenant Max Purchase Price 1818 Option: Eliminate Considerations: • Relieves burden on current owners • No guaranty that units are being purchased by buyers who need the affordability component • Relieves tension between City, realtors & owners Option B: Revise Master Covenant Eligible Buyer Requirements 10 1919 Option: Revise Considerations: • Could expand the range of eligible buyers • Reduced tension between City, realtors & owners • City would need to verify income and approve buyers Option B: Revise Master Covenant Eligible Buyer Requirements 2020 Option: Retain Considerations: • Realtors are currently reporting difficulty finding eligible-buyers • Continued tension between City, realtors & owners • City would need to verify income and approve buyers Option B: Revise Master Covenant Eligible Buyer Requirements 11 2121 Option C: Retain Current Covenant Considerations: • Wouldn’t address concerns of current owners • Ongoing tension between homeowners, realtors, buyers and the City • Units may remain difficult to sell and be lost to foreclosure • Enforcement may displace current renters & force sales of existing unit • Administrative burden to the City will require additional resourcing 2222 Direction Sought 1. Should the City continue to maintain a Master Covenant with provisions requiring long-term affordability to low-income households of the restricted housing units? 2. If the Master Covenant is to be maintained, which provisions should be included? den R id g e L n D e ser t Wi l low W a y Ru m ford Ln Brit t an y St Biscay Ln E d geware St Buc h an a n C t Quaking Aspen D r Coyote Trail Dr Co u rte n a y Cir Vivian C t Prescott St Rosemont Ct De e rhurst C ir S omerly Ln P or t n e r Rd Heather G len Ln C o mpt o n R d Autu m n Ri d ge Dr Sa n Juan Dr B u c ha n an St Brittany Dr Woodglenn Ln Bow C r e e k Ln F a ir b ou r n e W a y R o se C r eek Way Westbourn Cir Batts f ord Cir Sparrow Pl E Trilby Rd S Lemay Ave Provincetowne Condominiums Fort Collins, CO 80525 Printed: March 08, 2013 Parcels Buildings Provincetowne Condominiums 0 250 500Feet ©Scale 1:6,000 ATTACHMENT 1