HomeMy Public PortalAboutMemo on Municipal Affordable Housing Trust HumSer
To: Economic Development & Planning and Human Services Committees
From: Steve Magoon, Director of Community Development and Planning and
Assistant Town Manager, Larry Field, Senior Planner
Date: March 31, 2021
Re: Framework for Municipal Affordable Housing Trust
This memo recommends a framework for a municipal affordable housing trust under M.G.L.
Chapter 44, Section 55C. In particular, it: 1) discusses a proposed role for a Watertown
housing trust, 2) describes those elements required under the statute, 3) discusses certain
choices provided by the statute, and 4) lays out a possible timeline for further consideration.
Proposed role for a Watertown housing trust
As you know, a municipality is authorized by state statute to create a municipal affordable
housing trust (“housing trust”) to create and preserve housing for low- and moderate-income
households. A housing trust can initiate or fund projects. Massachusetts Housing Partnership’s
manual for housing trusts says that most are a “hybrid,” i.e., they do both. We strongly
recommend that Watertown plan for a “hybrid” model. This means the housing trust should
have a framework that allows for effective project implementation and timely deployment of
its financial resources.
While there a variety of ways that a housing trust can create or preserve affordable housing,
the core mission should be to promote a pipeline of projects that use the Town’s limited
resources to leverage substantial federal, state, non-profit and/or private investment. Such
100% affordable or mixed-income projects should qualify for federal and state tax credits,
grants, and loans. The Town should aim to win one or two awards from the Department of
Housing and Community Development (DHCD) every five years. Depending on the project, the
housing trust might contribute funding to a project, partner with a non-profit, or even be the
lead developer. The housing trust should have the ability to evaluate the feasibility and value
of projects proposed by others. It should build the capacity to do anything from pre-
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development planning through project completion. It should be able to move promptly to
acquire property, borrow funds and/or enter into partnerships.
The housing trust should also look for opportunities to create or preserve affordable housing on
a smaller scale. These opportunities could include buying small multi-family properties, “buying
down” affordability on existing units, providing home ownership or home rehab loans,
operating a rental assistance program or other strategies that support the Town’s housing plan.
We expect a housing trust will start with some or all of the Town’s existing affordable housing
funds, which consist of:
• Federal HOME Investment Partnerships program. Watertown is allocated around
$90,000/year from the HOME program as a sub-recipient to Newton, which is the lead
community in the WestMetro Consortium. The Town also has program income (around
$262,000) earned through past HOME activity.
• Community Development Block Grant (CDBG) program income. The Town has program
income earned through past CDBG activity. This account has less than $36,000
remaining because of commitments to the emergency rental assistance program.
• Affordable Housing Trust Fund. The Town has been accumulating funds paid by
developers “in lieu of” inclusionary units where the total number of homes in the
proposed development are between 6 and 10. There is approximately $269,000 in this
fund.
The housing trust will likely apply for funding each year from the Community Preservation
Committee (CPC) and apply, as needed, to DHCD for CDBG and WestMetro “pooled monies” to
fund particular initiatives.
Although we see a robust role for a housing trust, it will take time for the trust to build the
necessary capacity. Accordingly, it is important that proponents have realistic expectations
about what a trust can achieve in the short run.
What is required under housing trust statute?
Formation of a housing trust under M.G.L. Chapter 44, Section 55C requires a majority vote of
the municipality’s legislative body, and execution and recording of a declaration of trust. While
each municipality has choices regarding the trust’s governance (discussed in the next section),
these elements are required:
• There must be a board of trustees consisting of no less than 5 members.
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• The chief executive officer (here, Town Manager) must be a trustee.
• The chief executive officer (here, Town Manager) appoints the other trustees, subject to
“confirmation” by the legislative body (here, Town Council).
• Board members serve terms up to 2 years (they can be reappointed).
• Funds can go directly into the Trust, e.g., from “in lieu” payments owed by a developer,
without needing to go through the general fund, and unused funds at year’s end remain
in the trust.
• The public character of the housing trust is established in the statute: it is an entity
covered by M.G.L. c. 258 (public employer), c.268A (municipal agency), c. 39
(governmental body) and board members are special municipal employees. The trust is
tax exempt under chapters 59 and 62.
• While the trust is subject to Chapter 30B and section 15A of chapter 40, agreements and
conveyances between the trust and other municipal entities is exempt from
procurement restrictions.
• The books and records of the trust must be audited annually.
Choices to make in structuring a housing trust
The statute provides latitude in the board’s composition and terms of its members. We are
neutral on whether the board should consist of 5 or 7 members (the most common choices).
We recommend against “allocating” membership to certain categories (e.g., that a member of a
certain board or committee always be represented). However, we like the idea of including
language—as some communities have done—that sets an expectation that trustees have
“expertise” relevant to the trust’s work. We think that it is good to stagger terms by appointing
initial trustees to either a two-year or one-year term. We recommend against term limits.
The statute lists sixteen specific powers of a housing trust. Examples are the power to hold real
or personal property, the power to employ professionals such as accountants and lawyers, and
the power to borrow money and mortgage or pledge trust assets. It allows municipalities to
“omit or modify any of these powers and may grant to the board additional powers consistent
with this section.” We recommend that the housing trust be provided with all the statutory
powers. Limiting these powers would undercut the trust’s ability to engage in real estate
activities promptly and confidently.
The Town should include several provisions that will protect the Town and/or facilitate the
trust’s work. These are:
• Specifying that the trust does not have authority to bind the Town, except as authorized
in the establishing document.
• A required annual report to the Town Council.
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• The trust should use the municipal accounts through the treasurer.
• Once the trust is operational, the Watertown Housing Partnership (WHP) should wind
down and be terminated. There are arguments going both ways; some communities
have kept their housing partnerships to have a local committee that advocates for
affordable housing. On balance, we think one body would avoid any disagreement or
confusion about their respective roles. WHP members agree.
• Most of the Town’s existing affordable housing resources (HOME and CDBG program
income and the Affordable Housing Fund) should be put under the trust’s control. The
annual HOME allocation should stay under the Town’s control. The inclusionary zoning
ordinance should be amended so that “in lieu” payments go directly to the trust.
• Assuming that the WHP is eliminated, its existing role in reviewing developer proposals
on inclusionary units (location, bedroom configuration, etc) should be transferred to the
housing trust.
With respect to any CPA funds going to the trust, we expect that Watertown’s plan will require
a housing trust, just like any other organization, to apply for funding when it has a specific
project. However, it is also possible that the CPC will be comfortable in providing a modest
amount of annual funding to support the trust’s work between funding rounds. If and when
the CPC makes an award, we expect that it will ask the trust to execute a “grant agreement.”
Such agreements, which have become “best practice” for CPCs include specific language on use
of funds for CPA-eligible activities and spell out how the funds will be tracked and reported to
the CPC.
Timeline for further consideration
Should the Council wish to create a housing trust, it would pass an ordinance accepting Chapter
44, Section 55C and providing for implementation, including either an attached trust
instrument or setting forth its material provisions in the ordinance’s text. Once trustees are
chosen, they would execute and record the Declaration of Trust.
A draft declaration of trust is attached for discussion at the April 12 meeting. When your
committees are ready, we can also propose language for an ordinance. Both the proposed
declaration of trust and proposed ordinance should be reviewed by Town Counsel before
consideration by the full Council.