Community Preservation Act

Affordable Housing Restrictions

Community Preservation Coalition

Wayne Feiden, AICPDirector of Planning & Development

City of NorthamptonWFeiden@NorthamptonMA.gov

Why affordable housing?

Median Sales Price of Existing Single Family Homes,US and Boston Metro Area

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

Mar

-75

Mar

-77

Mar

-79

Mar

-81

Mar

-83

Mar

-85

Mar

-87

Mar

-89

Mar

-91

Mar

-93

Mar

-95

Mar

-97

Mar

-99

Mar

-01

Median Sales Price of Existing Single Family Homes,US and Boston Metro Area

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

Mar

-75

Mar

-77

Mar

-79

Mar

-81

Mar

-83

Mar

-85

Mar

-87

Mar

-89

Mar

-91

Mar

-93

Mar

-95

Mar

-97

Mar

-99

Mar

-01

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

Mar

-75

Mar

-77

Mar

-79

Mar

-81

Mar

-83

Mar

-85

Mar

-87

Mar

-89

Mar

-91

Mar

-93

Mar

-95

Mar

-97

Mar

-99

Mar

-01

US Price Boston Price

Source: Bonnie Heudorfer

• Needed for people AND jobs

• Local control under MGL 40B< 10% state goal= lose local control

• CPA requirement

SRO & retail

Homeless shelter, condo & offices

Mixed Use

Habitat

Affordable Housing Restrictions:What are they about?

• Ensure conditions of approval remain• Customize for any need (in theory)

• Rental versus home ownership

Affordable housing restrictions versus other restrictions

• More complicated

• Generally not permanent

• Homeowner equity

• Proper maintenance

Affordable Housing RestrictionAs Percent of Market Rate

Method A - Market Rate

0

50000

100000

150000

200000

250000

Present Resale

Hom

e V

alue

($)

Homeowner Subsidy (CPA, Other)

X %

Cons:• Not affordable to

new buyer when housing goes up fast

Pros:• Simple to

understand• Easy to implement• Homeowner can

recapture some of equity

Method A - Market Rate

0

50000

100000

150000

200000

250000

Present Resale

Ho

me

Va

lue

($

)Homeowner Subsidy (CPA, Other)

X %

Keeping affordable housing affordable – AMI

MethodMethod B - Area Median Income

0

50000

100000

150000

200000

250000

Present Resale

Ho

me

Va

lue

($

)

Homeowner Subsidy (CPA, Other)

X %

Cons:• Marginal equity

Pros:• Property remains

subsidized in same income bracket

• Slight equity gain

Method B - Area Median Income

0

50000

100000

150000

200000

250000

Present ResaleH

om

e V

alu

e (

$)

Homeowner Subsidy (CPA, Other)

X %

Variations

• Balance affordability and equity• Community Land Trust• Limited Equity Housing Cooperative

Local Median Family Income

Basic Structuring Issues

• Length of restriction

• Ownership restrictions – Target eligibility (maximum income)– Minimum income– Resale (future buyer, resale price)– Foreclosures

Other Issues• Subordination – banks often do

NOT subordinate • Monitoring – Whose job is it?• Owner/Tenant Selection

- Affirmative marketing- Lottery

MassHousing/Fannie Mae Model

• For Fannie Mae mortgages only

• Home ownership

• NO subordination to mortgage required

• Carefully reviewed and proven language

• Less flexibility to change terms

Challenges• Limited models

– DHCD and Fannie Mae

• Very complicated• CPA housing usually gap, bridge, and

component funding– Primary lender/funder’s restriction governs

• Monitoring• Local preference, marketing, lottery