100 Homes Background Materials — File 205675

To: Honorable Members of the Board of Aldermen From: Kristen Stelljes, CPA Manager and Michael Feloney, Housing Director Re: Bonding for Community Preservation Act Projects Date: April 11, 2018 The Community Preservation Committee appreciates the Board of Aldermen’s unwavering support for the Community Preservation Act (CPA) in Somerville. Your commitment to this program and the projects it supports is a key part of what has made CPA so successful in Somerville. On April 12, 2018, the Board will be asked to vote on a funding recommendation from the Community Preservation Committee to bond $6 million for the Somerville Community Corporation (SCC) 100 Homes program. This recommendation was approved by the Board’s Finance Committee on April 10, 2018. The $6 million bond will be used to retire a $4.4 bridge loan that was used to purchase 27 units. The remaining $1.6 will be used for future purchases. SCC anticipates this will purchase approximately 9 units, estimating an average per unit subsidy of $173,000. The Community Preservation Act enabling legislation (MGL 44B) enables CPA communities to issue general obligation bonds or notes for CPA projects (section 11). The Department of Revenue is very clear that Community Preservation Committees must budget each year to cover the debt service on any CPA bonds out of the CPA fund. The enabling legislation also requires that if a community were to vote to terminate the Community Preservation Act in their community, the surcharge would need to continue to be collected until the debt is fully paid (section 16b). Community Preservation Committees count their debt service payments towards the annual minimum allocation for the relevant CPA category (ie affordable housing, historic resources, and open space/recreation land). We estimate the debt service would be 17.5% of the annual CPA revenue at its peak. Since the program began in FY15, the Community Preservation Committee has allocated 45% of the CPA revenue to affordable housing. This decision is made annually through the Community Preservation Plan process. The FY19 Community Preservation Plan hearing is scheduled for Wednesday, April 25 at 7:00pm at the Visiting Nurse Association office. The attached packet contains the following items: • Summary of the 100 Homes Program from the CPA 5th Anniversary celebration (2017) • Special Report on the 100 Homes Program from the Massachusetts Housing Investment Corporation’s 2016 Annual Report JOSEPH A. CURTATONE MAYOR CITY OF SOMERVILLE, MASSACHUSETTS COMMUNITY PRESERVATION COMMITTEE

• Description of 100 Homes Program from memo to the Planning Board from George Proakis as part of the FRIT Inclusionary Zoning payout calculation discussion • Sample commitment letter between the Somerville Affordable Housing Trust and the Somerville Community Corporation for a 100 Homes property

tinyurl.com/SCCMemberPicnic2017 To date, the 100 Homes program has acquired 20 homes in seven buildings. In the case of the 100 Homes Program: Cash + Commitment = Permanent Affordability 100 Homes Program In order to address the affordability crisis in Somerville we need to look at existing housing, not just new housing. Now that Somerville is in the early stages of a new building boom in places like Assembly Square, we also need to look at the 35,000 homes that existed in Somerville at the beginning of that boom. Roughly 3,500 of those homes are protected as affordable – with public housing, large developments like Clarendon Hill Towers and Cobble Hill, and Somerville Community Corporation’s housing making up the lion’s share of those 3,500 homes. But that’s only 10% of all the housing in the City. That leaves 31,500 homes up for grabs, and they are increasingly priced out of reach for most of us. 100 Homes is Somerville Community Corporation’s attempt to capture some of those homes for permanent affordability. Much of our old housing stock in Somerville is in 2-4-family buildings. 100 Homes aims to get some of those properties off the speculative market. There are three elements that make 100 Homes work: Cash Buying – In order to compete in the Somerville marketplace, SCC simply must be able to make cash offers for properties. We have been assisted mightily in this effort by Mass. Housing Investment Corporation (MHIC) which has provided SCC a Line of Credit enabling us to make such cash offers. Subsidy – It takes some form of public subsidy to turn homes purchased on the market into affordable homes. In this case Somerville’s Community Preservation Act (CPA) funds have been committed to provide that affordability. The CPA funds act as both SCC equity in the permanent financing of 100 Homes properties and as the subsidy needed to rent to households at or below 100% of the Area Median Income (currently $103,400 for a 4-person household). Permanent Affordability – SCC commits to deed restrictions, evidence of SCC’s commitment to long-term affordability as a way to achieve a diverse community. This ensures the permanent affordability of apartments acquired through 100 Homes, as SCC also does in new construction projects we build. Learn more about Somerville Community Corporation: www.somervillecdc.org/