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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- 2 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. 3 • 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. 4 • 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.