I have received some e-mails on this so let me explain. The Commonwealth of Mass and City of Worcester gets various monies from the Federal Government whereby they give grants to help developers build housing, either rental or ownership, for low to mod income housing.
The Federal Government does not want these grant monies be given out for low to mod income then the underlying project to become market housing. How do they protect themselves? Answer: affordability period!
In other words the money will be given the the project under the condition that the project remains low to mod income for a certain stipulated period of time. I have seen most often 15 years, but it can vary.
Here is the big key. What happens if there is a violation during the affordability period? The money has to be paid back not by the developer by the PJ (Presiding Jurisdiction) that gave the money.
Lets take an example:
- City of Worcester gives $250,000 in grants for a low to mod housing project
- Developer goes under and the units are bought by non low to mod income people during the affordability period.
- City of Worcester owes the Feds $250,000
Now I simplified the explanation, but it is pretty close. Bottom line is that when the City of Worcester gives out these grants, there is a certain amount of risk back on the City that they may have to pay this money back.