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Ideas from other states… Michigan

Ideas from other states… Michigan. Indiana Conference on Housing & Community Economic Development September 13, 2005. Michigan Context. Michigan State Housing Development Authority (MSHDA) is the state’s: Housing Finance Agency—both single family and multi-family lending

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Ideas from other states… Michigan

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  1. Ideas from other states…Michigan Indiana Conference on Housing & Community Economic Development September 13, 2005

  2. Michigan Context Michigan State Housing Development Authority (MSHDA) is the state’s: • Housing Finance Agency—both single family and multi-family lending • HOME Participating Jurisdiction • CDBG Housing recipient—25% of total CDBG • LIHTC Allocating Agency • Public Housing Authority — $120M in vouchers • Emergency Shelter Grant recipient

  3. Keep in mind… • Michigan’s budget has been structurally imbalanced for the last several years and economic recovery is lagging other states… • MSHDA rolls its own profits into grants supporting a variety of initiatives; however, we do not receive a state budget appropriation for programs or operations… • Our new programs have focused on making the most of limited resources or identifying creative applications of resources already available…

  4. Office of Community Development • CDBG County Allocation program for non-entitled county governments—biannual allocation mostly for homeowner rehabilitation • Housing Resource Fund provides competitive grants to local units of government and nonprofit organizations using HOME, CDBG, and MSHDA funds • Technical Assistance Program pays for direct training for nonprofits and local units of government • Other Initiatives include Cool Cities, Homebuyer Construction Loan, and other special projects • Inter-divisional Projects such as Employer Assisted Housing, ADR/DPA program, Links to Homeownership

  5. Housing Resource Fund • Our competitive funding activity is driven by the following goal: • All communities will be vibrant, affordable, sustainable, diverse environments where people choose to live and stay. • Affordable Housing is a given, and • The impact of housing investment in local market is equally important.

  6. Ideas worth sharing… • Cool Cities program • Neighborhood Preservation Program • Homebuyer Construction Loan • Employer Assisted Housing • Community Land Trusts

  7. What is Cool Cities? • Governor’s Initiative • “This is about creating hot jobs in cool citiesthroughout Michigan. It’s about attracting and encouraging people – especially young people – to live, work and play in the cool cities we are working hard to create.” - Governor Granholm

  8. So what’s it really mean? According to participants in survey of college students, attendees at state kickoff conference, and local advisory committees, Cool Cities should … • have a 24/7 atmosphere, dynamic, vibrant • be a revitalized, energized downtown with “3rd places” • provide creative opportunities (a “thick” job market), diverse housing, and wired for technology • be a well-designed and cared-for public space • have respect for historic structures

  9. So where is the program? • $100,000 Cool City “Catalyst Grants” to local projects bringing more residents and/or more activity to mixed use neighborhoods • Michigan Main Street designations and technical assistance from national experts • Blueprints for Downtown matching grants for downtown market analyses and 5 year action plan • Blueprints for Neighborhoods provides neighborhood redevelopment analyses and action plans • “Priority access” to a Tool Box of over 150 state grants, loans, and assistance programs for Cool Cities designated projects and neighborhoods

  10. Cool Cities Funding • Not really a lot of money, about $1 million per year in catalyst grants mostly pieced together from very tight budgets of flexible state funds • Better coordination of other state resources around “tipping point” neighborhoods—have you ever seen so many bureaucrats excited at once? • The bully pulpit effect is free—drawing attention to vibrant urban neighborhoods, changing attitudes, attracting investment

  11. Neighborhood Preservation Program (NPP) • Most non-NPP grants cover one activity—homeowner rehab, rental rehab, or homebuyer projects—and are targeted to achieve both affordable housing and community impact • NPP program provides funding for several activities at one time to address multi-faceted neighborhood needs simultaneously • Includes up to 40% of total funding for non-housing costs associated with beautification, infrastructure, and neighborhood marketing

  12. NPP • Focus on creating “neighborhood of choice” • Experienced grantees with proven capacity • True buy-in by neighborhood is critical • Often multiple phases over several 2 year grant cycles

  13. NPP Funding Sources • Housing activities supported by HOME, CDBG, and MSHDA funds • Non-housing activities supported with CDBG or MSHDA funds

  14. Homebuyer Construction Loan • Brand spanking new program • Provides mezzanine debt at attractive rates to small/midsize urban pioneer developers • Actual construction loan—not subsidy—to facilitate market rate development in “tipping point” neighborhoods

  15. Interesting Features • New underwriting process compared to MSHDA’s traditional multi-family lending programs • Significant reliance on due diligence reviews of primary lender • Goal is processing time—exclusive of developer responses periods—of 60 days from intake to commitment • Willingness to finance mixed use projects without requiring split ownership

  16. Homebuyer Construction LoanFunding Sources • $10 Million in MSHDA reserves to capitalize the initial revolving loan fund • Fannie Mae American Communities Fund may provide additional capital as program ramps up

  17. Employer Assisted Housing (EAH) • Matched DPA for employer assisted housing programs—currently in 3 pilot cities, hoping to expand to 20 largest cities • Providing up to $5,000 of non-amortizing, no interest DPA ($10,000 including employer portion) and MRB financing at discount rates to buyers up to MSHDA income limits ($69,800 in most cases) • Focused on encouraging employees to invest in neighborhoods near their job—“walk to work” programs with some participants

  18. EAH Participants • Initial focus of pilot program is on large institutional employers including medical, higher education, financial services, and local government • Detroit Medical Center, Sparrow Hospital, City of Lansing, Lansing Board of Water & Light • Currently working to roll out more broadly across the state

  19. EAH Funding Source • MSHDA portion of DPA is financed from MRB bond proceeds • Small interest rate premium (25 basis points) is applied to EAH-DPA loans to maintain returns—current rate is 5.375% fixed for 30 years • Expansion of program has been limited by administrative demands of marketing to multiple employers and managing those relationships…

  20. Community Land Trust (CLT) • A mechanism for providing permanently affordable homeownership by separating the ownership of the land from the house • Limited equity/appreciation formula provides home for less than market value and passes on benefit to subsequent buyers • Provides supply of affordable units in otherwise high-cost markets, especially along west Michigan lakeshore in resort areas such as Traverse City, Charlevoix, Petoskey, and Mackinac Island

  21. CLT Example • Locally based nonprofit CLT receives grant funding to help develop a home with a market value of $150,000. • CLT identifies eligible buyer and sells home for $90,000. • CLT retains ownership of the underlying land which is leased back to the buyer • After five years, for example, the market value of the house is $200,000 and the buyer is ready to move on. • CLT has pre-emptive option to repurchase house for original sales price plus 20% of market appreciation ($90K plus $10K)—$100,000 • If studies and projections are accurate, $100K is equally affordable to a similarly situated family in five years.

  22. CLT Caveats • Legal implications of the ground lease model are complex and significant • Application of property tax code to CLT model is still murky and handled differently by each jurisdiction • Financing leasehold mortgages is less readily available, though Fannie Mae helps • Assumes high capacity, stable, well-established nonprofit sponsor • MSHDA is proceeding cautiously and seeking outside legal advice on possible alternative mechanisms to accomplish extended affordability

  23. CLT Funding Sources • CLT projects are HOME eligible using resale requirements • Some projects funded with MSHDA funds • Significant technical assistance investment

  24. For more information… Stephen Lathom Homebuyer Development Specialist MSHDA Office of Community Development 735 East Michigan Avenue, PO Box 30044 Lansing, Michigan 48909 517-373-8853 lathoms@michigan.gov www.michigan.gov/mshda

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