As part of efforts to create and preserve affordable housing, Montgomery County may add another funding tool to its offerings.
On Monday, the Council's Planning, Housing & Economic Development (PHED) committee agreed to recommend the council approve a proposal to create a Housing Production Fund (HPF). Projects that use this financing would be required to have at least 20% of residential units affordable to households earning up to 50% of area median income (AMI), and 5-10% of units affordable to households earning up to 65% of AMI. There could also be deeper affordability levels if other financing options were combined with the HPF.
The Housing Opportunities Commission (HOC) would use the funds for bridge financing of mixed-income developments, whether initiated by HOC or in partnership companies or nonprofits, during the first five years of each project. The County would pay HOC $3.4 million annually (following the first year, when it would be $2.8 million) to help cover debt service for $50 million in bonds issued by the Housing Opportunities Commission (HOC) on a 4-to-5-year revolving basis. The funds would be repaid, plus an assumed 5% interest rate, after permanent financing is secured.
Additionally, the transactions would enable HOC, either alone or within a partnership, to take possession of the units after lease-up to ensure the units remain affordable in perpetuity. Because the Housing Production Fund leverages the current process for developing moderately priced dwelling units (MPDUs), PHED is aiming to have the first deal close by the end of the year.
The resolution approved yesterday would permit two $50 million issuances during the first two years, which could potentially deliver an estimated 8,375-8,750 units over 20 years if interest from the repaid financing is reinvested into the HPF.
HOC currently has 5,445 units in its ten-year pipeline, and if approved, the HPF would provide financing for roughly 1,750 of those. Typically, HOC has to secure financing via the county's Housing Initiative Fund, Low Income Housing Tax Credits, and/or other sources for each project; the HPF would create a ready pool of funds for HOC to tap into more efficiently.
Moving forward, the Council is expected to introduce an amendment to the Capital Improvements Program in the next few weeks to budget funds for the HPF; there will also be a public hearing.
The HPF proposal is the first of an upcoming series of initiatives that the housing committee is working on, which are expected to include partnerships with nonprofits to acquire and preserve affordable housing along the Purple Line, and to build housing on WMATA-owned sites.
This article originally published at https://dc.urbanturf.com/articles/blog/montgomery-county-may-try-new-affordable-housing-financing-option/16989.
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