11-25-2002 Council Packet - Laserfiche WebLink

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( ( bancorp. National Account Services, LLC TO; FROM: RE: Terry Dahlstrom Don Solie Affordable Housing Units In Orono Project 8/20/2002 In response to your question about affordable housing units In your proposed development In Orono I would like to break my answer / information Into several parts. As we have discussed several time there are numerous definitions of “affordable housing” depending on whether you are discussing existing or new construction homes, what geographic area (urban, suburban or rural) you are In, what agency you are dealing with (state, federal, city, county or redevelopment area). The general information relates to: Definition of affordable housing by sale price 2. Definiti v.^ of low and moderate-income buyers. 3. Generic outline of currently available financing programs for low to moderate income buyers. 4. Reasonable expectations of what will be available In 2004 when units will be closing. 1. For the sale price limitations for affordable housing for your development in Orono we will use the limits for Minnesota Housing Finance Agency (MHFA) Community Activity Set Aside (CASA) Program. That maximum sale price is currently $199,000 for the 11 county metro areas. This is the most likely type of financing to be used for purchasers for these homes so we will use this limit for simplicity. It also needs to be noted that the various allowable sale price maximums for different programs change, normally, but not always on an annual basis. Because of the cost of land development and construction in toda/s metro area it is very difficult to produce units at or below the referenced maximum sale price. 2. Like maximum sale prices there are also numerous definitions of what is the maximum allowable income for low to moderate-income buyers. One of the most commonly used is again the limit for MHFA - CASA mortgages. This is basically 80% of the median income for a family of four In the Minneapolis - St. Paul metro area. As a note to tie number 1 above together with maximum income we need to look at the relationship between income and maximum sale price. In general it should be noted that if the maximum income used for new construction affordable housing units is less than the previously mentioned MHFA - CASA limit it is exceedingly difficult if not impossible for a purchaser to qualify for a mortgage unless they have a 30% to 40% down payment. Obviously low to moderate income buyers will probably not have a $50,000 to $65,000 down payment, therefore it Is imperative that there be a reasonable relationship between the income limits and sale price limits.