October 18, 2008

Part 2: Low Mod Housing Project

Quick Review. There is approximately a $1,060,000 loan to BankNorth, $650,000 of various grants for owner-occupancy invested, 3 units sold and 9 units remaining.

We all know the current real estate market is soft. A private developer might consider renting the remaining 9 units, until the market turns. This is not an option here since the grants were for owner occupancy!! If these units are rented then the $650,000 has to be paid back by the PJ (presiding jurisdiction which means whoever gave the grants), since it violates the terms of the grants for owner-occupancy.

Bottom line these units not only have to be sold, but they need to be sold to a person of low- mod income, another requirement of the grants. In other words, we need to find 9 people of low-mod income to buy these units for owner-occupancy at average price of approximately $118,000 per unit to pay off the 1st bank loan to BankNorth.

Problem is that I only see these units appraising out no more then $75,000 per unit and that is with an extremely aggressive appraiser. What next? Answer: Try to get more grants to lower the price on the remaining units.

Lets say we were able to get another $225,000 in grants ($25,000 per unit times nine units) then we could lower the price to $93,000 per unit (118,000 break-even less the new subsidy of $25,000). I still not sure these units would sell even at $93,000, maybe 2 or 3 but not 9, since the credit markets for low-mod income (sub prime) is not good.

If something like this were to happen, then the new total of our tax monies (you and my money) invested in this project would be $975,000 ($650,000 plus the new $225,000 in extra subsidies).

Part 3 tomorrow--final thoughts on Cambridge/Hacker Street.

7 comments:

Paulie's Point of View said...

it's the same failed economic policy that the Dems have been blaming the Repubs for..no difference except in their minds they are helping people regardless of the expense:>)

Jahn said...

I wonder whats going on over on Mason St at the old Institutional Linens site.............low income constr there was supposed to start in Sept 2005.....all I see there are millions of 3 foot weeds.............nuisance ordinance says ya cant have vegetation taller than 12 inches.........Should Ms Haller be inforemd of this nuisance?.......time to call Worc Common Ground and /or drop a dime ...would the powers that be over at WGC allow this in their hoods??

Bill Randell said...

The truth is there is alot of validity in the fact owner-occupied houses tend to solidify the neighborhood.

I can tell you that after some $2,050,000 has been spent on Cambridge/Hacker Street with potentially more money needed to be invested that this has not helped the neighborhood one single bit.

Bill Randell said...

Don't believe me drive by check it out...

Jahn said...

Could HC students be considered low income and buy up the reamining units for 50 cents on the dollar, get a mortgage w/a down payment from Daddy down in Greenwich, Ct and then live there for 2 yrs with daddy funding the morgage payments.......and then stop paying the mortgage some time in their JR. year and wait 18 months until the bank kicks them out.


Either that or HC can keep paying the 140,000 annual interest tab that they are on the hook for until the market turns which will be the better part of a decade IMO.......HC "Indirect Pilot payments" going to subsidized low income housing......wonder what teachers union or the IAAFF or IBPO would have to say if they knew that ?

Also some deep pocket is paying their property taxes as well on this project b/c they just prepaid their Nov 1 taxes 2 weeks early. Wonder if HC is funding the taxes too ........even tho they dont own the place?... they look to be running about 1400-1500 per unit anuually........

BTW are the parties that hatched this project still on the payroll or have some heads rolled..............or do they now have another project in the pipeline....nothing quite like "getting on" a non profit payroll....where there is little/no accountablity.

Paulie's Point of View said...

does anyone live in these houses??I always drive down there to check out the progress and I never see anyone out and about..no one walking, running, working around the house..like a neutron bomb was dropped down there..left everything in tact but killed all the humans??

Same with project at Piedmont & Chandler...beautiful job on the renovation but I never see anyone..I eat across at La Sazon all the time and all I see going in and out of the building are pizza delivery folks..

Bill Randell said...

Camrbidge/Hacker does have three people living there. It does not look that way driving by since nine of the units are empty....


Bill