Affordable Homeownership Programs In Revitalization Communities

Transcription

1 Affordable Homeownership Programs In Revitalization Communities Item 8 July 17, 2014 Building and Investment Committee To: Building and Investment Committee Report: BIC: From: President and Chief Executive Officer Date: July 3, 2014 Page 1 of 7 Strategic Plan Priority: Quality Homes: Maximize Land Value and Expand Housing Options for Current and Future Residents Vibrant Communities: Neighbourhood Building and Improved Community Safety Economic Opportunities Strengthening Communities and Resident Leadership Supporting Housing Stability PURPOSE: To seek approval from the Building and Investment Committee to enter into contribution agreements with the City of Toronto s Affordable Housing Office for funding to expand Toronto Community Housing s affordable homeownership program for residents of Regent Park ( the Foundation Program ) to other revitalization communities. RECOMMENDATIONS: It is recommended that the Building and Investment Committee: 1. Authorize the President and CEO or his designate to enter into contribution agreements with the City of Toronto to administer currently available and future affordable homeownership funding for Toronto Community Housing communities. 2. Authorize the Directors of the Toronto Affordable Housing Fund (TAHF), a Toronto Community Housing Subsidiary which is currently managing the affordable homeownership funding for Regent Park residents, to expand the fund s scope to receive, manage and administer funds for all affordable homeownership programs for Toronto Community Housing residents.

2 Report: BIC: Page 2 of 7 3. Authorize the President and Chief Executive Officer (or designate) and the Directors of the Toronto Affordable Housing Fund to take the necessary action to incur capital commitments, and execute any and all documents as may be necessary in connection with the implementation of affordable homeownership programs for Toronto Community Housing residents in accordance with recommendations 1 and 2 above. Such arrangements shall include, but not be limited to, contribution agreements with the City of Toronto, agreements with lending partners, mortgage agreements with purchasers, and other ancillary contracts required to give effect to the above recommendations. REASONS FOR RECOMMENDATIONS: One of the priorities for all Toronto Community Housing revitalizations is to diversify the range of available housing options, from almost entirely rent-geared-to-income to include a mix of affordable rental, affordable ownership and market ownership. Residents have also strongly advocated for programs to support resident ownership within the new market buildings being built in revitalization communities. In support of the revitalization goals, in 2009 the City of Toronto committed $1,610,000 in Federal affordable housing funding to support resident purchases of new market housing in Regent Park (the Foundation Program). The program offers downpayment assistance of up to 35% of the purchase price through a no interest, no payment, second mortgage. To date, about fifteen households have purchased their first home through the Foundation Program. The amount of each Foundation loan was between $74,028, and $179,690 and units ranged from bachelors to three bedroom townhouses. The average loan was approximately $121,000. The Foundation Program was run parallel to a broader, 10% downpayment assistance program which was available to eligible purchasers from the general public and funded by the Federal / Provincial Affordable Housing Program. Without Foundation loans, very few Toronto Community Housing residents would qualify for a mortgage large enough to purchase a home in the revitalization communities. The Development Division has been working closely with the City of Toronto Affordable Housing Office to secure additional funding and develop a program that will expand resident ownership opportunities beyond Regent Park. Market sales for the Allenbury Gardens, Alexandra Park and Lawrence Heights revitalizations are all underway in 2014, which is opportune timing for expanding the Foundation Program. The Affordable Housing Office has identified $1 million in Federal Provincial affordable home ownership program funding that has returned to the City after the initial loan recipients have paid back their loans. This funding will be made available to Toronto Community Housing to expand the Foundation Program to other revitalization communities. Further, the Affordable Housing Office will make its best efforts to provide up to an additional $500,000 over the next two years to support new homeownership opportunities for Toronto Community Housing residents. This funding will support approximately Foundation loans, or about 4-5 units in each of Allenbury Gardens, Alexandra Park and Lawrence Heights.

3 Report: BIC: Page 3 of 7 We will continue to work with the City to seek opportunities to increase funding for homeownership for Toronto Community Housing residents across the City. Toronto Community Housing will use the framework and authorities set out in this report to receive and administer any future funding for affordable homeownership. Program Specifications The expanded Foundation Program is to provide downpayment assistance to Toronto Community Housing residents so that they can purchase their first home in one of the revitalization communities. Eligible residents must qualify for a first mortgage from a conventional lender of at least 65% of the purchase price, provide a minimum deposit of 5% of the price and complete a financial planning program before applying. For more detail, see Attachment 2. The downpayment assistance is provided through a second mortgage of up to 35% of the purchase price. The mortgage is registered on title. The second mortgage is interest free and does not require monthly payments. It is only repaid at the time the purchaser resells their unit or chooses to prepay the loan. At that time, Toronto Community Housing will receive repayment of the loan, as well as a share of the appreciated value of the home that it is equal to the share of second mortgage. For example, if the second mortgage value was 30% of the purchase price, then the repayment would include the full outstanding amount of the mortgage as well as 30% of the appreciated value of the home based on fair market value. If the homeowner lives in the unit for 20 years or more, the second mortgage is forgiven. Toronto Community Housing, working with its developer partners, will administer the program and raise awareness of the opportunity with residents at no cost to the City. The revitalization partnerships will also provide benefits and supports to eligible residents such as: o priority selection of available units; o waiving brokerage fees (typically 3%-4% of purchase price); o reducing deposit requirements to 5% payable in monthly increments over the construction period vs. standard 20% deposit; o delivering financial planning and buyer education/ homeownership preparedness programs to help the new purchasers successfully transition into homeownership; and o working with lenders to support the Program and potential purchasers. Administrative Structure Toronto Community Housing administers any funds contributed to the Foundation Program on behalf of the City. This relationship is formalized in a contribution agreement. The key terms are set out in Attachment #1. Administration of the funds will be through the Toronto Community Housing subsidiary Toronto Affordable Housing Fund (TAHF), which is currently administering the Regent

4 Report: BIC: Page 4 of 7 Park affordable ownership program. TAHF is managed by a Board of Directors, consisting of Toronto Community Housing s Chief Development Officer, Chief Financial Officer and a Development Director. The expanded TAHF will continue to be a revolving fund, and all funds for the program will be deposited into the account and made available for Foundation loans, including: o All funds received from the City for the Program. o All funds received as a result of the sale of a unit, repayment of Foundation loans, capital appreciation from loans or payments from default. o All other sources of funding that Toronto Community Housing may secure, including interest earned on funds. Any funds revolving back to the fund from sale, repayment or default, including those from Regent Park Foundation Loans, will be made available to all TCH revitalization communities. Audited financial statements for TAHF are prepared annually and reported to the City as per the Shareholder Direction. Staff will report to the Building and Investment Committee and the Board on the status of the fund through the Development Dashboard. Allocation Funds It is expected that demand for Foundation loans will exceed available funding. The process allocation of the available funding to Toronto Community Housing residents will be based on the following order of priority: 1. Eligible residents of the revitalization community in which the new unit being offered for sale. For example: units sold in Allenbury Gardens will be made available to Allenbury Gardens residents first. 2. Eligible residents living in other revitalization communities. 3. All other Toronto Community Housing residents. 4. If there are more eligible residents than available loans at any stage of the process, then loans will be allocated based on a random selection. IMPLICATIONS AND RISKS: Objective #2 of Toronto Community Housing s Strategic Plan speaks to expanding housing options for current and future residents. It includes a specific objective to explore partnerships that enable some residents to purchase houses from Toronto Community Housing. With the City s financial support for expanding the Foundation Program and by working with our developer partners, Toronto Community Housing will provide about residents with an opportunity to purchase their first home. The program will provide a broader range of housing choices within revitalization communities, which supports stronger neighbourhoods. Expanding the Foundation Program also supports Council priorities set out in the Putting People First Report and community-specific revitalization plans.

5 Report: BIC: Page 5 of 7 The financial risk to Toronto Community Housing for this program is low. In the event of a purchaser default prior to or after final closing, the unit can be resold and any unused or returned funds can be made available to another eligible resident. Reduced deposit requirements for Foundation Program participants may also mean that those sales will not qualify as a pre-sold unit under traditional financing rules. Given the small number of units being sold through the Foundation Program, the impact on the revitalization program is not material. The potential positive implications of an expanded Foundation Program in terms of facilitating resident purchases, fostering strong communities and supporting Toronto Community Housing s strategic goals far outweigh the risks. Next Steps Communications, financial literacy / buyer education programs and implementation of the Foundation Program will begin in the Alexandra Park, Lawrence Heights/Neptune and Allenbury Gardens communities almost immediately. Eligible residents who are offered a Foundation Loan will secure the purchase of a unit through a standard agreement of purchase and sale. Purchasers will begin contributing to deposits once the agreement and purchase and sale is executed. Sales will close once construction is completed, which will be approximately 2 years after construction start. The second mortgage is not registered until the time of closing. Greg Spearn Greg Spearn Interim President and Chief Executive Officer Attachments: 1: Summary of Terms for Contribution Agreement with the City of Toronto 2: Eligibility Criteria and Conditions Staff Contact: Laurie Payne Development Director Laurie.payne@torontohousing.ca

6 Report: BIC: Page 6 of 7 Attachment 1: Summary of Terms for Contribution Agreement with the City of Toronto The Contribution Agreement between the City of Toronto and Toronto Community Housing for the Foundation Program will cover $1 million in repaid Federal Provincial affordable home ownership program funding that the City has collected to date, as well as the $1.61 million previously provided by the City for the Foundation Program at Regent Park in The Agreement will also provide an umbrella structure whereby new funding can be added as it is available. It will anticipate up to an additional $500,000 needed within the next two years to support Foundation loans for the Allenbury Gardens, Alexandra Park and Lawrence Heights revitalizations. It is expected that the total new funding of up to $1.5 million will result in loans. The Contribution Agreement will detail Toronto Community Housing's financial administration and program delivery responsibilities outlined in the Program Specifications and Administrative Structure sections earlier in this report. The Agreement will include such Federal Provincial affordable home ownership program rules as follows: the maximum home price (currently $542,075) and maximum household income (currently $85,800); the shared appreciation approach and a forgiveness formula should a home sell at a lower value than it was originally purchased; the basic terms of the application form, the mortgage loan agreement between the purchaser and TAHF, correspondence with purchasers, and that the mortgage must be secured on title of the home; Under the Agreement Toronto Community Housing will be responsible for buyer education programs and determining purchaser eligibility. All agreements of purchase and sale and mortgage charge documents will be provided to the City with verification of eligibility for the purchaser and home. This documentation will also be addressed under record keeping protocols. Toronto Community Housing will be required to provide the City with a final summary of all Foundations loans and recipients at the point of sales closing. In addition, the Agreement will outline the process for requesting funds from the City and the security that is to be provided for those loans. Thereafter, Toronto Community Housing will provide annual reports on any resales, loan repayments, or other activity. The Contribution Agreement will also incorporate the homebuyer Eligibility Criteria and Conditions at Attachment 2.

7 Report: BIC: Page 7 of 7 Attachment 2: Eligibility Criteria and Conditions Eligibility for the Foundation Program is limited to Toronto Community Housing residents who are named on the lease, with at least 12 months tenure and a lease in good standing. Eligible residents must qualify for a first mortgage from a conventional lender of at least 65% of the purchase price, provide a minimum deposit of 5% of the purchase price and complete a financial planning program before applying. All other applicable eligibility criteria for the CMHC Ontario Investment in Affordable Housing Program (IAH) will apply. Foundation Program loans may only be applied to unit purchases in Toronto Community Housing revitalization communities. Additional eligibility criteria may be applied based on requirements of the funding source. Purchasers taking advantage of the Foundation Program will be required to make a nonrefundable deposit of $1,000, which will be held in trust in an interest earning account. Purchasers will also contribute monthly instalments toward a deposit of 5% of the purchase price, starting 1 month after execution of the agreement of purchase and sale and ending at final close. The funds will be held in trust in an interest earning account. The amount of the payment will be determined by allocating the total deposit amount over the estimated number of months between execution of the agreement and final close. The portion of deposits, with the exception of the initial $1,000 deposit, is refundable to the purchaser, if they are unable to complete final close on the unit. Deposits will be applied to the downpayment and/or closing costs at the time of final close. Conditions related to the Foundation loan will be set out in a mortgage agreement between the purchaser and TAHF, and the mortgage will be secured on title of the home.