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HomeMy WebLinkAboutHousing & Redevelopment Authority Minutes 07-22-2010APPROVED MINUTES PLYMOUTH HOUSING AND REDEVELOPMENT AUTHORITY JULY 22, 2010 PRESENT: Chairman Jeff Kulaszewicz, Commissioners Steve Ludovissie, Paul Caryotakis and Bob Stein ABSENT: Commissioner David Miller STAFF PRESENT: Housing Program Manager Jim Barnes and Office Support Specialist Laurie Lokken OTHERS PRESENT: Grace Management Representative Jody Boedigheimer 1. CALL TO ORDER Chairman Kulaszewicz called the Plymouth Housing and Redevelopment Authority meeting to order at 7:00 P.M. 2. CONSENT AGENDA Commissioner Stein requested to pull item 2. C. from the consent agenda for further discussion. Housing Program Manager Barnes stated that item would be placed under new business as item 3. C. A. Approve HRA Meeting Minutes from May 25, 2010. B. Plymouth Towne Square. Accept May and June 2010 housing reports. D. 2009 Community Development Block Grant (CDBG) Consolidated Annual Performance and Evaluation Report (CAPER) and Notice of Annual Citizens' Participation Meetings. MOTION by Commissioner Caryotakis, seconded by Commissioner Ludovissie, to approve the amended consent agenda. Vote. 4 Ayes. MOTION approved unanimously. 3. NEW BUSINESS A. Vicksburg Crossing. May and June 2010 Marketing Reports. Grace Management Representative Boedigheimer reported that there are only two apartments not spoken for at Vicksburg Crossing. She said that three moved in last month and there are four empty apartments now, so two deposits have not moved in yet for July. She said there has been steady activity with more repeat visitors than first time visitors. She said that the repeat visitors are making the move and starting to sell their homes. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 2 Chair Kulaszewicz asked if they may be realizing what their houses are worth. Grace Management Representative Boedigheimer responded that was probable. She said that they may need to make some kind of change and have a different environment for themselves. She said that they also had new people attending the Cinco-de-Mayo open house they held. Commissioner Ludovissie asked if there was an explanation for that. Grace Management Representative Boedigheimer replied that it was changes in the season and the time as the event was held during an evening in the middle of the week. Grace Management Representative Boedigheimer said that the next event is scheduled for September 19, 2010 and will be held in conjunction with the crazy days/block party in the Lowes shopping center. She added that they have started a business group and Vicksburg Crossing Managing Director Sara Paquette is active with that and attending those meetings. Grace Management Representative Boedigheimer confirmed for Commissioner Ludovissie that there was an excellent chance that they will see 100 percent occupancy this year. Commissioner Stein asked if the E units might be renting because the rents were dropped. Grace Management Representative Boedigheimer responded that absolutely makes it easier and the two units that are available are E units. Housing Program Manager Barnes added that there were five E units available when the rents were lowered. Grace Management Representative Boedigheimer said that it becomes a little bit more of a sense of urgency when there's less to pick from. She said that this is still one of the newest senior apartment buildings in the city. Commissioner Stein asked if the new construction in Maple Grove is subsidized. Grace Management Representative Boedigheimer responded that it is most likely going to be market rate based on who owns the building. She said that they have a full continuum from independent living to assisted living and memory care. Housing Program Manager Barnes added that development will have services as well, even in their independent living section, so the rents will probably be a little bit higher than our moderate rate units. Commissioner Stein said that as they are a different market, they wouldn't be much competition then. Grace Management Representative Boedigheimer said that we are a different market. She said that we are age -restricted apartments and our rents are lower, even in the moderate rate units, because we don't have all those services. She said that we have, by far, a lower average age than any of the communities out there. She said that when they offer services, the average age is 10 years higher than what we have. Commissioner Ludovissie complimented Grace Management on their consistent and successful marketing program. Chair Kulaszewicz concurred. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 3 B. First Time Homebuyer Program. Request To Alter Terms Of Mortgage. Housing Program Manager Barnes gave an overview of the staff report. He added that there was a correction to the staff report in that the report states that it must be sold to a First Time Homebuyer and that is incorrect. He said that the new buyers do not have to be a First Time Homebuyer; they simply need to be at 80 percent median income or below. Commissioner Stein asked if the $12,500 HRA loan is due and payable when the house is sold. Housing Program Manager Barnes replied that it is due and payable upon the earliest of either being sold or it ceases to be the primary place of residence or the 30 years. Mikhail Feynberg said that under the terms of the loan, the loan will start to be forgiven after 20 years as well. Commissioner Stein asked if the purpose of making payments is so that they can rent it out and not default under the terms of the loan. Housing Program Manager Barnes replied that they want to move earlier than the house may sell. He said that at that point, they would trigger a default in the loan documents. He said that they are looking for the HRA to restructure the loan to allow them to be able to rent it out and then they would make payments on the loan. Commissioner Caryotakis said that we have talked about this type of situation before to allow people to rent their homes and asked if that has happened in any other case to date. Housing Program Manager Barnes responded that with borrowers who have approached us and requested that, we have not had anybody go out and rent their unit. He said that we have found, through our cross checking of rental properties throughout the years, that there have been people that have rented without telling us. He said that at that point, we sent letters and tried to correct the situation or if it was currently on the market, we allowed them to continue renting. Commissioner Stein asked if it had been just the income requirements that the couple that came to the Board last fall wanted changed and if we had allowed that or if they have sold their property. Chair Kulaszewicz responded that they wanted to have the 80 percent median income requirement removed for the buyer. Housing Program Manager Barnes added that they had not been allowed to do that and no money has been received nor has the property been sold. He said that they had also asked for forgiveness of the loan. Chair Kulaszewicz said that we had asked them to continue their efforts and to come back to us if they wanted. Housing Program Manager Barnes said that the Board's direction was that if they found a buyer above 80 percent median income and a valid purchase agreement, that the Board would consider it at that point in time. Commissioner Stein said that he was not too concerned about the payment but asked if they could stipulate who they could rent to. Housing Program Manager Barnes responded that the Board could require that they rent to somebody who would meet a certain percent of median income. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 4 Commissioner Stein asked if the MHFA funding was strictly a grant or does that have to be paid back. Housing Program Manager Barnes replied that he is not sure what the terms of their mortgage are but it is in their hands. He said that they would have to negotiate directly with the MHFA and he is not sure if they have. David Sewell said that there has been no conversation with MHFA at this point in time. Commissioner Ludovissie asked if the terms of the first mortgage restrict them from renting out the property. Mr. Sewell replied no. Chair Kulaszewicz asked if they know if the $12,500 mortgage for MHFA has a covenant that would prohibit them from renting. Mr. Sewell said that in relating to the mortgage requirements, the intent and the thought would be that the new tenant that would be in the property would have to adhere to the same guidelines. He said that the long term intent would be for his real estate management company to manage this as a rent -to -own property and not just as a rental property. He said the client would get a monthly benefit to make this their primary residence at some point. He said that they help them over the term of their lease to rebuild their credit with the hope that they will also be buying the property with their rent. He said that this plan just doesn't go away and in years down the road, that particular tenant would be encouraged to come to the city and reapply. He said the Feynbergs would be paid back and the tenant would qualify to help them buy the home. He said the intent would be to get a tenant with reasonable credit and three times their rent for income so that they would also qualify for this program at some point. He said the renters that they are seeing now are people who have lost their homes. He said that the reality is that they will be homeowners again; it's just that they can't qualify again for three years in today's market. Chair Kulaszewicz asked that to meet the income guidelines he is suggesting, they would find a tenant that would match the same 80 percent median income guidelines. Mr. Sewell responded affirmatively. He said his understanding from the city was that number was around $57,000. Chair Kulaszewicz asked that if in fact you can find a renter who would meet the 80 percent median income limit the same as Mr. Feynberg had to purchase the property, would you be able to collect enough rent to support a payment on the current first mortgage and the amount on our mortgage if we were to allow you to do that. Mr. Sewell replied that there would be some subsidy with it. He said that Feynbergs would have a small negative cash flow but that they are willing to accept that. He said that they can still qualify to buy another home that is well within their means. Commissioner Stein asked if they were trying to stay in Plymouth. Mr. Feynberg said that they are trying to. Commissioner Ludovissie said that the tricky part here is the precedence setting part of it. He said that each individual situation is a little bit different. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 5 Housing Program Manager Barnes read the language from the MHFA document regarding the transfer of property under their mortgage. He added that basically they have the same requirements as the city. Mr. Sewell said that they are first approaching the city because they originated the program. He said that he thought that if they came to terms with the city, that MHFA would follow. He said that if they didn't, then they are still at square one. Mr. Sewell said that if that property ultimately ends up with the bank and if the bank sells it, the terms are that they could sell it to anybody the first time. He said that was not the Feynbergs intent. Commissioner Stein asked if there was a method or means that we could set something up as a temporary or conditional program that doesn't set a precedent. Chair Kulaszewicz said he didn't know if we would rewrite the mortgage. Commissioner Caryotakis said that we would still need to do it on a case by case basis because there are so many specific facts to each request. Mr. Sewell said that banks are doing it every day and they are doing it one at a time. Commissioner Ludovissie said that this is a public entity. He said that we don't have the flexibility to arbitrarily make decisions like that without creating a precedent for future requests. He said that he liked the concept of doing something during this difficult time. Commissioner Caryotakis said that it could be a couple of years before we get out of this mess. Commissioner Ludovissie said that we have raised very valid points and we have probably only seen the beginning of this type of thing. Commissioner Caryotakis said that if we can figure out how it works, a positive side is that it might be a way of preserving some of the affordable housing that we are trying to build. Commissioner Stein asked if one of these units is foreclosed, we are out our money. Housing Program Manager Barnes replied yes. Commissioner Stein said that this is a way to try and recoup some of our money and keep the property in the program. Chair Kulaszewicz asked if we were receiving a payment on our mortgage anyway. Housing Program Manager Barnes responded that we do not receive any payments on our mortgages until someone sells their property or the property is no longer their primary residence. Chair Kulaszewicz said that we are not out of a monthly payment or revenue at this time because our mortgage does not require monthly payments. He said that if they had tenants who were qualified under the 80 percent of median income, we could still possibly preserve an affordable house (whether owned or rented, which is one of our mandates). He said that in contrast, if it gets foreclosed and the mortgages are gone, then it is out of our control if the home remains affordable. Housing Program Manager Barnes said that there are very few homes that have the restrictive covenants. He said that those covenants stay in effect for 20 years but if in the event of a foreclosure, banks are allowed to sell to whomever. He said then subsequent buyers would be Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 6 held to the covenants. Commissioner Stein asked if those buyers know it at that time they buy it. Housing Program Manager Barnes replied that we can only hope that the industry is providing that information. Chair Kulaszewicz asked if the restrictive covenants are gone at that point. Housing Program Manager Barnes responded that whoever buys the home from the bank through foreclosure does not have to meet the 80 percent of median income guidelines. He said that once they buy it and they go to sell it, then their new buyer needs to meet those requirements. Commissioner Stein asked if they can rent it out. Housing Program Manager Barnes replied that it must be owner occupied again. Commissioner Stein asked that if they do rent it, would we make them give us documentation that the renter is qualified. Housing Program Manager Barnes replied affirmatively. Commissioner Stein asked if the $12,500 is forgiven after 20 years. Housing Program Manager Barnes responded that it begins declining in year 21. He confirmed for Commissioner Stein that they don't have to pay anything right now. He said that if they stay in the unit for 30 years, it would be forgiven. Commissioner Stein said that if they were to sell the property on the 364th day of the 19th year, it would be due and payable. Housing Program Manager Barnes stated that 100 percent would be due and payable. Commissioner Stein asked if it were to be allowed to be rented out, would it be necessary to have them start making payments on the $12,500 loan or just leave it as it is and if and when it is sold before the 20 years, we would get our money like a normal program. He said that if it's rented, they move back in or if somebody buys it, we could just roll it over. Housing Program Manager Barnes responded that that we could allow that if the Board wanted with the exception of rolling over the mortgage. He said we would need to satisfy the old mortgage and issue a new one to a qualifying buyer. Commissioner Ludovissie said that would make sense to not require monthly payments. Commissioner Stein said that would maybe help them to get somebody that's more qualified to rent it. Mr. Sewell said that one of the criteria would be that we would have to provide to the city staff the documentation showing the person's income. Housing Program Manager Barnes said that there are two different programs that we want to keep separate. He said that if you are asking for financial assistance through our loan program, we look at household size and the income adjusts. He said that with the restrictive covenants, we use the state-wide median income for a family of four and we don't adjust it for family size. He said that a four -person household is at $64,400 right now. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 7 Mr. Feynberg said that in Plymouth there are not more than four to five people in a two bedroom house. Housing Program Manager Barnes said that we have allowed people in the past, who are renting and have purchased a home already, to continue to rent as long as they are trying to sell the home. He said that was somewhat similar to what they are proposing; however, they are proposing something that might be for a longer term if it is a rent -to -own type program. He said that the reason people get into rent -to -own homes is because they are not mortgageable right away. He said that if the Board believes that a rent -to -own program is acceptable, it might be a longer term. Commissioner Ludovissie said that adding to that point is also the fact that it's more difficult to sell a home that's being rented than if it is owner occupied. He said that's a detriment to selling the property so the rent -to -own is probably the most likely way to deal with that rental issue. Mr. Sewell said that the price is not determined today, the price is determined at the point in time when the person is qualified. He said that they would not charge an upfront down payment or hold or contract for deed. He said that they would charge a standard deposit and of that, they would get a credit towards the future purchase of the home. He said that after two to three years, they have built up enough down payment and fixed their credit that they would be able to purchase the home. He said that if the people move out of the property in two years, they don't get the money that was set aside for the down payment from their rent. He said the incentive is for them to stay. Chair Kulaszewicz said that he doesn't think that as a public body, we should be in the business to help people to become landlords and to cash flow our property that has a no interest, no payment loan on it. He said that we talked about them not making any payments on our loan but he also is not interested in them turning that home into an income property at our expense. He asked what the monthly rent might be coming in versus their first mortgage. Mr. Sewell said that they are looking at about $1,200 or conservatively $1,150. He said that his management fee is $120 per month so they would be at $1,030 to $1,080 per month gross. Mr. Feynberg said that he has not refinanced because he is in the process of selling. He said he pays around $1,100 to $1,250 per month total. Chair Kulaszewicz asked that the Feynbergs provide the information that they perceive as the revenue coming in under the scenario they are suggesting in which we don't ask for any payment on our mortgage, if in fact we were willing to amend our mortgage to allow for non -owner occupancy. Commissioner Ludovissie said that he did not feel that it would become an income generating situation. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 8 Commissioner Stein said that in order not to try to set precedence, we deal with each one on an individual basis and individual circumstances. He asked if a cap should be considered, such as that it could be rental property for three years and if it isn't sold by then, we could have the option to review it. Commissioner Ludovissie said that puts them at a disadvantage because the rules change again for them down the road. He said that there are a lot of issues, such as people who want to manage it themselves versus outside management, etc. He said another concern is with MHFA and whether they are going to buy into this at all. Mr. Sewell asked who to send an income spreadsheet to. Housing Program Manager Barnes confirmed that this information should be provided to city staff. Commissioner Stein asked for the timeline for getting a decision. Mr. Sewell responded that as soon as a decision could be made would be appreciated. He added that the Feynbergs were very clear that they did not want to do this, as did he, without having the Boards approval. Commissioner Stein said that under the right wording, circumstances and conditions, he would be willing to let them rent. He said that he was willing to give city staff the authority to develop something that benefits them and the city. Housing Program Manager Barnes said that staff would work with the city attorney to structure something that would address the concerns that the Board would have in how renters are documented and allowed and on how payback would occur. He asked if this would be something that the Board would want to do for a pilot program, as Commissioner Ludovissie suggested, if similar requests come in. Commissioner Ludovissie said that based on the validity that we may see this issue more frequently; the Board needs to get started on some possible alternatives for dealing with them. Commissioner Caryotakis said that it is also recognizing that this is a very difficult time for people who we have encouraged to use this program and to the extent that we can help them, if that's possible, without harming the program itself. He said that he liked the idea of setting up criteria for the tenants because that's something that we can't do if someone goes behind our backs and rents their property. Commissioner Stein asked that once a person qualifies at 80 percent of median income and if their salary increases, they don't have to move out and they don't have to repay. He said it is just qualifying to get in. Housing Program Manager Barnes responded that we qualify the buyer at the point of purchase; however, if they come back and ask for a refinance, there is a cap of 125 percent of median income. Commissioner Stein said that the tenant that comes in would have to qualify under the program and then subsequently, any new tenant that they would get. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 9 Mr. Sewell said that he would suggest that under each new lease, they would have to continue to qualify. He said that would encourage them into a longer lease, which makes them a more viable buyer. MOTION by Chair Kulaszewicz, seconded by Commissioner Stein, to direct city staff to work at their discretion with the city attorney to amend the mortgage to allow for renters under certain conditions set up under a program directed by city staff on a case-by-case basis. Commissioner Ludovissie said that it should be clear that this is a pilot program and not a Board policy. He asked how that would be done. Housing Program Manager Barnes responded that at this point in time, you are making a decision on one particular loan. He said that after the documents are set up, they will be brought back to the Board. He said that if further requests are received, you will be able to determine if it is a case-by-case situation still being seen or is it truly something that we need to have a program to be able to address the situation. Commissioner Ludovissie said that he was comfortable moving forward with this and to start looking at some alternatives for dealing with these situations. Commissioner Caryotakis said that there are a lot of details that will not be able to be flushed out. Commissioner Stein said to write this so it is specific for this circumstance so that it doesn't become precedent setting and then we can look at establishing a program. Vote. 4 Ayes. MOTION approved unanimously. C. Vicksburg Crossing. Accept May and June 2010 housing reports. Commissioner Stein asked if we would be cash flow positive now that we are at this point of only two units left. Housing Program Manager Barnes responded that we should be able to manage what is going on with the expenditures and the revenues going forward. He said that when the budget was completed, it was built on certain units at certain rent levels and if leased earlier or later. He said that if that didn't hold true, we might be behind. Commissioner Ludovissie asked how reducing the rents earlier this year affected the financials. Grace Management Representative Boedigheimer responded that we are short $8,400 in year-to- date revenue going forward. Commissioner Stein said that he thought that once we were at 95 percent, we would be cash flow positive. Housing Program Manager Barnes said that they do need to manage the expenditures going forward. He said that this week staff had worked with the city finance department to get a clarification on noncash items. He said that the finance department does a unique report for the Section 8 program for staff on a monthly basis. He said that they are going to start doing something similar to that for HRA. Approved Plymouth Housing and Redevelopment Authority July 22, 2010 Page 10 Commissioner Stein asked for this report at the next meeting, as well as a new cash flow forecast spreadsheet going forward based on the current occupancy. Housing Program Manager Barnes replied that these will be attached to the staff report next month. Grace Management Boedigheimer responded to queries from Commissioners that the nonsmoking policy at both Vicksburg Crossing and Plymouth Town Square has been positive. She said that there have not been any issues and it has not been a hindrance so far in new rentals. 4. ADJOURNMENT MOTION by Chair Kulaszewicz to adjourn the meeting at 8:15 p.m.