October 21, 2008

Part 5: Low to Mod Housing Projects

Grants...


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.

8 comments:

David Z. said...

All the more reason Worcester should get out of the low to moderate income housing business especially seeing that we're well over the affordable housing threshold set by the Commonwealth.

Bill Randell said...

Dave:

You are absolutely right. Problem is that this has become a big business in the City of Worcester and we can not stop it.

Bill

Jahn said...

Bill I am hoping this subprime fiasco will at least if not reduce the flow of McGovern low income housing $$$$ from Washington.

I want to add to your explanation of these home fund "grants" which are really loans to the city during the 15+ year affordability period. If a bank forecloses, for examlpe, and buys the underlying real estate....the bank is a "NON LOW INCOME PERSON/BUYER"....SO AT THE AT POINT THe low income owner clause has been violated and Worc must pay back "grant"/Home funds. Same thing if a speculator were to buy the real estate inquestion at an auction

I know I am repeating some points you have put across....but I think its imperative to those bloggers who may visit here only on occasion and not really grasp the underying mechanics of this money from Washington.

Bill Randell said...

Jahn:

The City of Worcester is a silent partner in these low to mod income projects. In the event any of these projects go belly up and the affordabiolity period is violated, the City (not the developer) has to pay back the monies.

It is a huge risk.

Bill

John said...

What leverage does the city have to make sure they are sold low income?

Paulie's Point of View said...

it should be "what leverage does it have to sell to the free market"..

Bill Randell said...

Pretty much none. Other then you will never get another grant if you do not follow the terms of the first grant

Jahn said...

So let's say I bought one of these properties in 2003 w/a 15 yr affordablity period & a 100%mortgage. Then 12 yrs later i decide to sell and I am forced per the terms of the agreement to sell to another low income person and b/c the person I am selling to is low income I cant get the true FMV for my house.

Then 3 yrs later this second owner decides to sell and the afforadablity period (15yrs) is lapsed so he (2nd owner) can sell to who ever he wants and makes a fair piece of change on the place, while Me, the 1st owner of the property basically makes squat on the place for 12 yrs of ownership b/c I was forced to sell to a low income person whose purchasing power was limited.

Just how does this fact pattern help me, the 1st buyer, financially. Basically I was a serf to the fuedal trappings of Home Funds.

Lets us also not forget that many of these CDC/Home Funds/Worc Common Grounds/low income deals sell only the house to the low Income home buyer. The buyer then has to rent to underlyling land from CDC owner.

Take all those fancy duplexes they built on Beacon st.......20 units........they sell 1/2 the duplex (a townhouse), but the low income owner has to rent the land from the CDC. Whats th e difference between this a trailer park on Rte 20 or middle ages sharecroppers who owns his crop but has to rent the land from the land lord/owner

I fail to see how this motis operandi lifts people out of poverty and/or enriches them via so called real estete ownership........what it does is guarantee the continued viablity of CDC's as land owners into perpetuity and it also guarantees a lifetime salary to those who work for these CDCs and these other non profit builders.

Echoing Bill here, CDC's, etc are huge business in Worcester and it's suffocating the true market place and those who arent part of the CDC (Comm Dev'ment Cartels).

I hope everyone remebers this next time jim McGovern is on the ballot.