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HomeMy WebLinkAbout1990 Resolution No. 009RESOLUTION NO , q SERIES OF 1990 / A RESOLUTION AUTHORIZING THE CITY OF ENGLE\'l:JOD, THROUGH ITS DEPARTMENT OF COMMUNITY DEVELOPMENT, TO FILE AN APPLICATION FOR THE URBAN HOMESTEADING PROGRAM AllD TO NAME THE ENGLEWOOD HOUSING AUTHORITY AS THE DESIGNATED LOCAL URBAN HOMESTEADING AGENCY (LUHA) TO ADMIN ISTER THE URBAN HOMESTEADING PROGRAM FOR THE CITY OF ENGLE\'IOOD, \'IHEREAS, the Urban Homestea d ing Program provides grants to local governments to purchase foreclosed properties from the Housing and Urban Development Department (HUD) and the Veteran's Administration (VA); and l'IHER EAS , t o compete in the Urban Homesteading Program, l oca l ~ov ernments must submit an application; and HHEREAS, the City of 'Snglewood has received a notice of fund ava ilability; and WHEREAS, the City of Englewood must. name a designated local urban homesteading agency to administer the program; and WHEREAS, the De partment of Community Development desires to apply for these funds for the Urban Homesteading Pro gram; llOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ENGLE\'IOOD, COLORADO: Section 1. That the Department of Community Development is hereby authorized to file an application for the Urban Homesteading Program for the City o f Englewood , Colorado. Section 2. That the Englewood Housing authority is named as theLo,,al Urban Homesteading Ag~ncy (LUHA) for the City of Englewood, Colorado. Section 3. That the Mayor and the City Clerk are auth o rized to s ign and attest all necessary forms, documents, assurances and certifications for the Urban Homesteading Program for and on behal f of the City Coun cil and the City of Englewood. AD OPT ED All D APP ROV ED this 5th da y of February, 1990. ~~.;~~ ~st: 1ilt.c.:a #. ~ atricia II, Crow, City Clerk -1 - I, Patricia H. Crow, City Clerk for the City of Englewood, Colorado, hereby certify that the foregoi ng is a true copy of Resolution No. ~q_, Series of 199°!2. r ~-,.___#-~ PatrlcaH. Crow DATE February 5, 1990 INITIATED BY STAFF SOURCE ISSUE/ACTION PROPOSED COUNCIL COHHUNICATION AGENDA ITEM 11 (b) SUBJECT 1990 Urban Home- stead i ng Program Appl 1cat1on Department of Co mm unity Development -Housing Division Richard S. Wanush, 01 rector of Commun i ty Development To approve the resolution to apply for 1990 Urban Homesteading Program funds 1n the amount of $125,000 and to appoint the Englewood Housing Authority as the Local Urban Homesteading Agency (LUHA). PREVI DUS COUNCIL ACTION Approved submittal of Letter of Intent to apply ft,' 1990 Urban Homesteading Program funds. The Council reviewed this program at a study ses s ion on December II, 1989. There was considerable debate and discussion c.oncerning the "fairness " of such a program . There was also co ncern that these houses should be demolished instead of sold since they were in su ch poor condition . These issues are explained in the at- tached memo and a recommendat i on is made concern1 ng the demol i tion of sub standard housing. STAFF ANALYSIS Funding will allow the de velopment of a program to prov i de ho meownership opportuni- ties to fir st-time hom eowners by purchasing foreclo sed propert i es from HUD and the VA and at the same time eliminate potential neighborhood eyeso r es . BACKGROUND The 1990 Urban Homestead i ng Program will be for $125 ,000 .00 to purchase 5 foreclosed properties for a maximum of $25,000 each . This 1s a new program that .wards funds to city and county governments to purchase foreclosed properties within t.ileir jur1s- dict1ons directly from HUD and the VA . These homes are then sold for $1.00 to f1rst-t1me homeowners only after the homeowner has been approved for a rehab loan by the Rehab Loan Co11111ittee. The Ci ty's application w111 require that the property be fully rehabbed by a licensed general contractor prior to the family occupying the unit. The rehab funds would be supplied from the existing bank line of credit pro- vided by First Interstate Bank of Englewood, First National Bank of Englewood, Re- public National Bank and International Bank of Englewood. The minimum income limit will be set for no less than $12,000 annual income for a one-person household, but a famil:1 will need closer to $20,000 annual income to com- fortably qualify for a $25,000 re ll ab loan. This rehab amount is based on an inspec - tion of eight eligible Urban Homest eading units located within the proposed target area . This amount would allow each homeowner to substantially rehabilitate the property 1 ncl udi ng bringing the unit 1 nto comp 1 i ance with ex 1st 1ng codes and ordinances. Families would be carefully screened prior to being selected for a home. They will be required to have at least a two -year employment history, plus a good credit rat- i ng . Their total debt ratio must fall within acceptable limits . The program will probably require personal references as well as require a reference from their cur- rent 1 andl ord. An 1 nspect 1 on of their current home could a 1 so be required. The program does not allow a preference for residents, but a resident may be given a priority . The Urban Homesteading Selection Committee will finalize the selection pol 1 cy . The Urban Homestead1 ng Select 1 on Committee w111 be comprised of the three- member Rehab Loan Committee, plus Richard Wanush, Director of Community Development, and Paul Ha 11 nowsk1, Executive 01 rector of the Englewood Hous 1 ng Authority. The familie~ •1111 be required to comply with at least the following conditions for a five-year ~eri od fol 1 owl ng occupancy: 1) Property inspections every 6 months to insure proper maintenance and housekeep- ing; 2) No rehab payments delinquent for more than 30 days to the EHA; and 3) The property must be owner-occupied . If the family does not comply with the required conditions, then the ownership of the property will automatically revert to the City or its designated Local Urban Homesteading Agency (LUHA). The Englewood Housing Authority is the best agency to act as the LUHA . Selected homeowners will be required to participate in a maintenance workshop to be sponsored by Rehab staff. Each family will be instructed on the proper preventive maintenance of the home and how to fix minor household repairs . Community Development Block Grant (C0BG) funds can be combined with the Urban Home- steading Program to assist eligibl e applicants. These funds can be used in two pri- mary ways : 1) To blend the interest rate downward from the current pass-thru rate of 10.8%; and 2) To be used to purchase units that exceed the $25,000 limit. Any CDBG funds used in combination with the Urban Homesteading Program would be re- paid by the eligible applicant . FINANCIAL The City budgeted $103,770 to administer hous ing related activities in 1989, and has budgeted approximately $78,000 in 1990. ------- The price should be lower to justify the necessary rehabilita- tion. These properties are likely to stay vacant until the price drops. At the same Study Session, Council was clear that they wanted to look at al - ternath~s that would lead to homeownership. It occurred to me as I was vis- iting the eight HUD and VA homes that I mentioned ea rl ier, that no single pro - gram could address the variet,v of housing problems we have identified, While I strongly believe that the Urban Homesteading program should be a part of our housing strategy, it has 1 imitations both in quantity (5 homes per year) and in effectiveness (it cannot address homes that cannot be rehabilitated). There are two programs that we can implement almost immediately that would complement Urban Homesteading: I. We should develop a system of identifying people who purchase the HUD or VA homes on the market and make them aware of our exis t ing rehabilitation loan program. 2. We should begin a program of purchasing the HUD and VA homes that we determine should be demolished, and offering lots for sale to home builders . I have spoken with Paul Malinowski and his staff, and with single-family home builders in Englewood. The basic program outline would be as follows: I. Property Identificat i on : a. All HUD and VA residential properties will be inspected to determine if they are appropriate for rehabilitation or demolition. b. Other properties identified through code enforcement or comp 1 a i nts wi 11 be added to our l i st of properties suitable for condemnation . 2. Financing: The properties wil1 be purchased using money available through Fund 72, Housing Rehabilitation . This fund contains reha b loan repayments and can be spent at the discretion of City Council. Approximately $100,000 could be made available to purchase and demo 1 i sh . Using HUD and VA figures, this would a.mount to ap- proximately $25,000 per home, plus $3,000 for demolition . 3. Subsidy : There are various pl aces in the process that coul'1 include a subsidy. We h•ve not yet narrowed the decision since we are still talking ,., home builders to try and determine what would make them participate in the program . Some possibilities are: a. Write down the $28,000 cost of land and demolition to SIS,000 to $20,000 . This means that each property would entail a cash cost of $8,000 to $13,000 not including • 2 • staff. Our initial fund would be depleted after 7 t o 12 units . b. Work with lending i nstitutions to provide low cost con - struction loans to bvllders . We could also use our money to provide no -cost c,,·,struct 1on 1 oans . This would involve $40,000 to $60,000, out would be repa id when the home wu sold. c . Market the program and develop a waiting list of eligible appl 1cants . Provide them with long term permanent financ- ing through local institutions or through the mortgage revenue bond program . This would insure that the builder had a buyer befo re he would co nrn it to construction . d . A combi nat i on of the above . The program 11ould operate as follow s : I. City identifies property . 2. Ci ty and builders would agree that property is su i table. 3. City would purchase property and demolish structures. 4. Va cant lot would be made ava il able to builders on a bi dding system . 5. City and builder id ent ify eli gible applicant . 6. Builder builds house . 7. House sold to elig i ble applicant. This system will work well wi th HUD or VA homes as long as we can make the purchase for SZS,000 or less . The same holds true for other derelict proper- ties, except we cannot force a sale . lie can r equire demolition, but we cannot be assured of acquiring the property i n every case without a wi lling seller. Eminent domain would have t o be used . I belf eve th i s varied app r oach of Urban Homestead i ng pl us demo 1 i t i on and new construction is sound. I reconrnend th at Council autho ri ze an application fo r Urban Homesteading and direct staff to put together more deta il s on the de-molition and new constr uction program . gw • 3 • RECOHHENDATION The Department of Community Development recommends that the Council authorize the submfssfon of a Urban Homesteading Program application In the amount of $125,000 and name the Englewood Housing Authority as the designated Local Urban Homesteading Agency. ~ V. HEHORAHDUH TO: Roger Fraser, City Manager FROH: Ri chard S. Wanush, Di r ector of Community Development DATE: Janua ry 25 , 1990 SUBJECT: Urban Homesteading Attached is a Council Communication r egard i ng the establishment of an Urban Homesteading program in the City of Englewood. At the Council Study Session on December 11, 1989, this program was discussed at length and no firm deci- sion was r eached. I am request i ng that this program be scheduled for the regular Council meeting on February 5, 1990, so that we can submit an appl !ca- tion by the requested date of Feb r uary 15 , 1990 . At the Study Session, there were some ob j ections to this program based on the equity of "giving away" a house to some people while others had to struggle to make payments . I certainly und erstand this argument, but offer the following observations : I. There are famil tes and individuals who, while making a rea- sonable I ncome, ar e not financially able to make their first hom e purcha se. Th i s program gives them an opportunity t o become homeowners . 2. Whi1 e the homes are "given away ", the potent i a 1 property owners do not acquire them for "free". They must reside in the homes for a period of five years before the title is turned over. In addlti.on, they must rehabilitate the ho me at an estimated cost of $25,000. This would require a monthly nayment of S255.00 We also estimate that the typical family of four who would take advantage of this program would have an income of approximately $28,000 . 3. If we choose the alternative of not participating , it i s likely the homes will eventually be purchased by an investor who will maintain the home as a rental. We will lose one more tool In our desire to create more homeownership s I tuat ions . 4. I vis I ted eight of these homes and none were In great shape. Five required at least $20,000 to $25,000 to make them habit- able. Three should be demolished. All were priced by HUD or the VA at more than $40,000 . At that price, it is unlikely that anyone would make both the purchase and the needed Improvements . • I - Ii ! ; l 1 j } •~fl' a l • I I c,.Z: "~• ~ """'' 15 .t f s) f H '"" t I -I -.: Ji I j3 • "' ~1,;: ::) •• ~ <IS '< .i l ~ B.! -•• ,. 1700 •• f ,:;,r, . I / j Ll ~~rt1rt'lt1r111rn D"lmo"h r===--,,-------17 a _ /'.;~-I iii t 1 -a HOO I . 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