Item Description:
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Terminate and forgive AHIF Agmts A091088 and A101057, with Alliance Housing for the Scattered Site 8 Portfolio in Mpls
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Resolution:
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BE IT RESOLVED, that the Executive Director be authorized to terminate Affordable Housing Incentive Fund (AHIF) Grant Agreement A091088 with Alliance Housing Incorporated for the Alliance Scattered Site 8 Portfolio in South Minneapolis with a not to exceed amount of $578,000; accept repayment of the pro-rata share of approximately $251,496 related to three of the eight properties in the portfolio; forgive the pro-rata share of up to $326,504 related to five of the eight properties in the portfolio; remove rental affordability restrictions on at least three of the eight properties; and remove and replace rental affordability restrictions on up to five of the eight properties with homeownership restrictions requiring purchase by owner occupants with incomes at or below 80 percent of the area median income; that following review and approval by the County Attorney’s Office, the Chair be authorized to sign any related documents to effectuate forgiveness, grant termination and release of declaration on behalf of the Authority; and that the Controller be authorized to accept and disburse funds as directed; and
BE IT FURTHER RESOLVED, that the Executive Director be authorized to terminate AHIF Grant Agreement A101057 with Alliance Housing Incorporated for the Alliance Scattered Site 8 Portfolio in South Minneapolis with a not to exceed amount of $75,000; accept repayment of the pro-rata share of approximately $32,634 related to three of the eight properties in the portfolio; forgive the pro-rata share of up to $42,366, related to five of the eight properties in the portfolio; remove rental affordability restrictions on at least three of the eight properties; and remove and replace rental affordability restrictions on up to five of the eight properties with homeownership restrictions requiring purchase by owner occupants with incomes at or below 80 percent of the area median income; that following review and approval by the County Attorney’s Office, the Chair be authorized to sign any related documents to effectuate forgiveness, grant termination and release of declaration on behalf of the Authority; and that the Controller be authorized to accept and disburse funds as directed.
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Background:
The Alliance Scattered Site 8 portfolio is comprised of eight properties in South Minneapolis: seven duplexes, and one building containing eight single-room occupancy units. Between 2007 and 2009, the Hennepin County Housing and Redevelopment Authority (HCHRA) approved two Affordable Housing Incentive Fund (AHIF) grant awards totaling $653,000 to the project ($578,000 through Agreement A091088, $75,000 through Agreement A101057). Both AHIF agreements were executed in 2010 and supported rehabilitation and stabilization of the eight properties making up this scattered-site portfolio. AHIF mortgages and declarations were recorded against the properties to secure the debt and the affordability.
In the current cost environment, operating scattered-site affordable housing has proven financially unsustainable for many affordable housing providers, both locally and across the nation. After ongoing efforts to stabilize the properties, including covering the gap between the cost of operating the property and the rental income collected, Alliance Housing has determined that it must sell its Scattered Site 8 portfolio. After extensive capital needs assessment, partnership development, and consultation with funders, Alliance Housing proposes to convert up to five duplexes to affordable homeownership. The other three properties are not optimal for conversion to affordable homeownership, due to building size, location, or condition.
Alliance Housing has partnered with the City of Lakes Community Land Trust (CLCLT) to structure this innovative rental-to-homeownership conversion. Recognizing the severe shortage of properties affordable to lower- and moderate-income home buyers, CLCLT will first seek renovation funding, then purchase the five duplexes from Alliance and perform a comprehensive rehabilitation of each property to set homebuyers up for success. To ensure ongoing affordability, the duplexes will be part of the land trust and each property will have a recorded Declaration requiring sale to an owner-occupant household with income at or below 80 percent of the area median income (AMI), while the other unit in each duplex will not have restricted rents. Buyers will be recruited from a training program for aspiring homeowners who are interested in duplex ownership.
To support this rental-to-homeownership conversion, Alliance Housing has requested the HCHRA consider:
• To facilitate conversion to homeownership for the five duplexes (3033 Oakland Avenue South, 3037 Oakland Avenue South, 3231 Elliot Ave South, 3327 Elliot Ave South, and 3823 Columbus Avenue south):
o Provide early forgiveness of a pro-rata share (up to $326,504) of Agreement A091088 and a pro-rata share (up to $42,366) of A101057 and document satisfaction of the related mortgages and note(s);
o Remove rental affordability restrictions; and
o Add homeownership affordability restrictions requiring one owner-occupant unit per address with income or below 80% of AMI.
• To address the remaining three properties (2103 2nd Avenue South (8 units), 2413 10th Avenue South, and 3038 Bloomington Avenue South):
o Accept repayment of the pro-rata share (approximately $251,496) of Agreement A091088 and a pro-rata share (approximately $32,634) of A101057, document satisfaction of the related mortgage and note, and release of the related declaration.
Staff have worked extensively with staff from Alliance Housing, Minnesota Housing, City of Minneapolis, and CLCLT to structure this conversion program. Staff recommend approval of the requested actions to ensure Alliance Housing can maintain its portfolio of larger apartment buildings as quality affordable housing into the future, and to provide affordable homeownership opportunities for low-income households through this rental-to-homeownership conversion.
Current Request: This request is for authorization to terminate, provide early forgiveness of a portion of, and accept repayments of the remainder of, AHIF Grant Agreements A091088 and A101057 with Alliance Housing Incorporated for the Scattered Site 8 portfolio, and to release the notes, mortgages, and declarations associated with these agreements. New homeownership requirements will be recorded against five duplex properties to ensure ongoing affordability.
Impact/Outcomes: Approval of this request will facilitate an innovative conversion of up to five scattered-site rental properties to affordable homeownership and help to stabilize Alliance Housing so that they may continue to provide affordable housing to households at or below 50 percent of AMI.
Housing Disparity Outcomes: Households of color are disproportionately left out of homeownership. This request creates homeownership opportunities for households with incomes at or below 80 percent of AMI.
This request funds services that are: core services
recommendation
Recommendation from County Administrator: Recommend Approval