Committee Report CR-8
The Housing Committee held a public meeting on May 2, 2006 beginning at ten o’clock and fifteen minutes A.M. in the Ackermann Room. The meeting was held for the purpose of receiving an update on Trolley Square and other affordable housing projects in the pipeline, to discuss the selection process for residents for affordable housing and to discuss the agenda for the Housing Committee for this term.
Present at the meeting were Councillor Anthony D. Galluccio, Chair of the Committee, Councillor Henrietta Davis, Councillor Marjorie C. Decker, Councillor Craig Kelley, Councillor Brian Murphy, Councillor E. Denise Simmons, Councillor Michael A. Sullivan and City Clerk Margaret Drury. Also present were Robert W. Healy, City Manager, Beth Rubenstein, Assistant City Manager of Community Development, Christopher Cotter, Housing Director, Community Development (CDD), Peter Daly, Executive Director of Homeowners Rehab, Inc. (HRI) and Jane Jones, HRI. The attendance of members of the public who participated in the meeting is noted below with their remarks.
John Serwecinski, 175-4 Harvey Street, stated that he is the owner of an affordable homeownership condominium and discussed issues of affordable housing. He thanked Councillor Galluccio and the City Council and Ms. Rubenstein, Christopher Cotter and the CDD for their help with the issue of increases in condominium fees. He said that in the course of resolving this issue they have had many hours of discussion. He noted the issue of condo fee, which by law can be apportioned two ways, by square footage and by sales price. He recommends avoiding the allocation by square foot. The other issue is the incomes for occupants of affordable units. Over time, as incomes go up, other residents grumble about whether the owners of the affordable units still deserve their units.
Ken Thompson, 195 Harvey Street, Cornerstone Co-Housing, submitted written material and summarized the issues in the letter (Attachment):
Councillor Davis said that she has heard about these issues over time and is very happy that they will be taken up at the committee. She asked if they would be forwarded to CDD Housing Division for policy recommendations and Councillor Galluccio answered in the affirmative. Councillor Davis submitted the following order:
ORDERED: That the City Manager be and hereby is requested to confer with the Assistant Director of Community Development to report back to the Housing Committee on what progress has been made to address the issues that have been raised with regard to affordable condominium units.
Councillor Galluccio then moved to an update on current affordable housing projects in the pipeline, including Trolley Square.
Ms. Rubenstein began with a general overview. She noted the following acquisitions for affordable housing development by the City’s housing nonprofits:
Ms. Rubenstein reported that this has been a very good year on the middle income housing front, which provides low interest loans of up to $130,000. Through this program, the City has assisted more than 25 families.
Councillor Galluccio asked if CDD is still looking for new opportunities. Ms. Rubenstein replied in the affirmative. She described the partnership with the Cambridge Housing Authority. The City provides funds to the CHA for scattered site acquisition.
Councillor Simmons expressed her interest in addressing the issue of the people who are just below the income level needed for affordable homeownership. Mr. Cotter said the housing staff is also interested in this issue.
Mr. Cotter then provided an up date on Trolley Square, which includes 32 affordable rental units and eight three bedroom homeownership units. The development also includes both retail and community space near the corner of Massachusetts Avenue and Cameron Avenue. The final piece is the open space that the City will construct at the corner. He expects that the homeowner units will be completed by the end of the summer and retail units a little before that.
Councillor Simmons asked what the criteria would be for who gets the retail space. Mr. Daly said that first of all, they hope for a tenant, because most prospective businesses do not see this site as yet being a strong area for siting a business.
Councillor Kelley asked who would receive the rental payment from the retail space. Mr. Daly said the development would get the money and use it to defray operating expenses for the development.
Councillor Davis noted the problems with the Putnam Café, a retail space that Whole Foods constructed as community-based retail space when Whole Foods was permitted and built. HRI is not in a position to market retail space and should turn it over to a broker. Mr. Daly said they have done this. The broker is Diamond Brokerage.
Councillor Galluccio agreed with Councillor Davis, and noted that this is a difficult area with respect to marketing; however, that does not mean that it cannot go to a nontraditional business. He urged Mr. Daly to look at nonprofits.
Councillor Kelley asked if it will be fit out. Mr. Daly said not until there is a tenant, and then there can be adjustments particular to that tenant’s needs.
Mr. Daly said that the community space will be on the second floor, the same size as the retail downstairs, with about 200 square feet reserved for an office for an office for this on site manager. Mr. Daly said that he expects it will be ready for use by the end of the summer. Regarding us of that space, HRI will be surveying the North Cambridge neighborhood. Once HRI has received the needs assessment and established community usage, there will be an opportunity to make minor modifications to address the community users’ needs.
Ms. Jones, HRI, said that they have met with a few nonprofits that have the most interest. She said that there are modifications that can be accommodated, for example, the North Cambridge Art Association (NOCA) wants special traps in the sink..
Ms. Jones said that HRI’s resident services coordinator will be in charge overall. HRI will oversee public space and scheduling.
Laura Booth, CEOC, asked what the income requirements would be for the home ownership units. Mr. Daly said that five units will be targeted for persons with incomes up to 80 percent of median income and three for persons with incomes of up to 100 percent of median income. The renal units will be affordable to families with incomes within the Section 8 limits.
Councillor Galluccio said his idea would be for affordable housing that allows for transition from public housing to subsidized rental to affordable housing ownership. With regard to Section 8 holders, they have some good opportunities to find rentals in the private market because rents have come down. Mr. Cotter said that CDD staff does see these transitions being made from CHA and affordable rental units to affordable homeownership units. Councillor Galluccio asked if the CHA is cooperating. Mr. Cotter answered in the affirmative.
Councillor Galluccio said that the more neighbors see people from their neighborhoods moving into those units, the better it is for the neighborhood and the residents. Councillor Simmons said that she would like to see people who have been forced out of Cambridge have an opportunity to live in affordable units in Cambridge. Councillor Davis noted that at the roundtable meeting there was discussion about allowing eligibility based on “Cambridge ties”. Councillor Galluccio said that the bottom line is that if you are not a Cambridge resident, you are not getting one of these units.
Councillor Davis asked why families with children under the age of six are awarded an extra point in the application process. Mr. Cotter said that these families have kids who will spend the most time in the school system and they are families with young children who need lead free units. Mr. Rubenstein said that the City has added more affordable units, and, as a result, there are more opportunities for families who do not have children under the age of six.
Councillor Galluccio stressed his hope that CDD is keeping track of interested applicants who have applied in the past. Mr. Cotter assured him that CDD is doing this. He also noted that for the Financial Assistance Program, which provides up to $130,000 for acquisition, there is no lottery. There is a limited equity restriction. People find their own units. Ms. Rubenstein said that several people who have not succeeded in the lottery have been able to take advantage of this program to purchase homes. Mr. Cotter said that the program has helped a lot of families with incomes under 80 percent of median; most have incomes of just under 80 percent. Councillor Davis noted that these units have the same issue as the inclusionary units with regard to increases in condominium fees, etc.
Councillor Galluccio said they face that issue even more than with the inclusionary units because the inclusionary units are new, while units purchased in the $130,000 program may have significant capital needs. Ms. Rubenstein said that when an affordable unit is being resold, the City steps in to make sure the capital needs of the unit are dealt with.
Councillor Kelley asked about whether the affordable housing programs are restricted to Cambridge residents. Mr. Cotter said that state and federal regulations require that 30% of the affordable units be non-restricted, so 30% could potentially be occupied by non-residents. However, CDD has been very successful in getting all Cambridge residents for all the units.
Councillor Galluccio moved the discussion to follow-up from the City Council round table discussion with the Affordable Housing Trust. Ms. Rubenstein said that members of the CDD staff have met with trust members about the issues raised. They want to digest the material and then send their follow-up report and recommendations back to City Council in the fall.
Councillor Galluccio said that the meeting led to consensus on the concerns. He does not believe that there consensus on the City Council with regard to solutions. For example, in his opinion, zoning is the big picture. That is where the City Council must insist on provisions that will result in family-sized units. Inclusionary zoning should mandate that three bedroom units be built. He understands that the City’s nonprofits are building family-sized units, but it is the private market that is producing the most units.
Councillor Davis said perhaps this committee should deal with the elderly units and CHA needs. The City Council is very good at the advocacy with the state. Ms. Rubenstein said that the Affordable Housing Trust members feel very strongly that the City should work hard in the advocacy role.
Ms Rubenstein said it is important to see demographic data on what the population looks like now, what are the present projections, and what do we really want to see for the future of Cambridge.
Councillor Davis said that the universities should be housing more of their middle-income workers. Councillor Murphy said that the universities are operating in a time warp. They are slowly coming around to the point of offering housing to their students; the next issue is housing their workers.
Councillor Galluccio said that much more would be achieved if Cambridge could speak with one strong voice to the universities, for example, “if you want a law school, build housing for your workers and you will get it.”
Councillor Galluccio said that in the end it would come to a negotiated deal density. He then invited discussion regarding the Housing Committee’s agenda for this council term. He noted his interest in
Mr. Healy said that he has been talking to MIT about some kind of partnership at the former California Paint site, which MIT owns.
Councillor Galluccio said that he would like to see efforts to get the university to agree that anytime they build housing for students they will commit to voluntarily abiding by the guidelines for inclusionary units, and not make that part of other negotiations for particular projects.
Councillor Galluccio clarified that the CHA issues he wants the committee to deal with are the senior housing, state funding issues, and issues regarding the reconfiguration and renovations of the LBJ project.
Councillor Kelley noted that no one from the Housing Authority was in attendance and said that it is important to make sure the CHA is invited. He expressed his hope that the housing people can learn to build housing that helps kids succeed in schools. Councillor Davis said involving CHA in discussions is a good idea. Councillor Galluccio agreed their customer base is so impacted by housing issue, he will send a letter to the chair. He also noted the importance of listening to developers.
Councillor Kelley asked if there are any artist units. He also expressed interest in information about a way to build affordable housing while minimizing the on street parking impacts.
Councillor Davis said there is no agreement on the issue of how you count the available street parking. Councillor Davis said that it would be useful to have some agreement on how to determine whether there is on street parking available.
Councillor Galluccio thanked all those in attendance for their participation, and said that this discussion would be helpful in setting the future agenda for the Housing Committee.
The Income, Equity, Fairness Task Force has been discussing a number of options regarding payments into the maintenance reserve fund and expenditures for capital improvements at Cornerstone. While there is a range of opinion on these issues, there is one area we could all agree upon: the need to encourage specific changes in the City’s affordable program itself.
Cornerstone was one of the first development projects in the city to be covered by the newly enacted inclusionary zoning law and the affordable housing guidelines it established. The program has been an outstanding success in creating more affordable housing in the city. There are several consequences of the program, however, that were overlooked at the time and need to be addressed now to make the program effective in providing a home ownership opportunity for those otherwise unable to afford their own home. The problems lie in a fair increase in equity for the owners of properties covered by the program, timely certification of expenditures that apply to this equity, and support to enable a low income homeowner to maintain his/her home.
The task force feels it would be useful for the Cornerstone community to develop a united position behind several principles for reform of the City’s affordable housing program. These changes would both strengthen the program’s ability to carry out its objectives, and benefit all residents in communities and condominium associations throughout the city. Existing guidelines can create divisiveness in the associations; the changes we propose would help maintain a more “level playing field” and foster the development of communities working together toward common goals.
That Cornerstone will advocate for the following changes in the Affordable Housing Program of the City of Cambridge at the departmental and City Council levels:
1) Payments made by Affordable Housing owners toward reserve funds properly established under Massachusetts Condominium law, and toward capital improvements that would qualify as additions to cost basis of the home under federal capital gains tax regulations, should be credited by the City as additions to the allowable sales price of the unit.
2) The City should review the expenditures of each Affordable Housing owner on a yearly basis, certify those which qualify as increases in the owner’s equity and additions to the sales price, and report those findings to the owner.
3) The City should provide the necessary support to allow low income owners of Affordable Housing to pay the reasonable and necessary costs to maintain their home. At a minimum, the city should provide a subsidy to any Affordable Housing owner whose total home ownership costs for any given year exceed 1/3 (33%) of the owner’s total income for that year.
An additional possibility, which we would like to pursue, is whether the restriction on inheritability of the property might be modified. As it stands now, the property must be sold back to a qualified person in the city’s affordable housing program within a year of the death of the current owners. Would it not be preferable to allow the children of those owners who lived there to gain title by paying the difference between market and affordable rates to the city, with the proceeds to used toward purchase of another affordable property? Other nearby cities seem to have such a provision in their affordable housing programs.
At the last General Meeting, people asked for a brief summary of the program as it exists now to better understand the changes we are advocating. Here it is:
1. The Affordable Homeownership program is available only to residents which meet certain specific income and asset guidelines that would normally put market-rate units out of their reach. Available homes range from one to four bedroom units depending on family size.
2. As individual homes become available within the program, buyers are chosen by the city from the pool of those who have qualified. The process usually involves a lottery among those qualified and interested in that particular home.
3. The buyer must also qualify for their own mortgage from a lending institution, although some downpayment-assistance programs are also available.
4. Each buyer must sign a resale restriction agreement that becomes part of the deed for the home. The buyer must occupy the unit as their principal residence, and agree to sell their unit only to another income-eligible buyer.
5. The future resale price is fixed by the city. It is calculated from the original purchase price plus an annual return on equity based on the buyer's downpayment and principal payments on the mortgage as well as allowances for eligible capital improvements. For example, if the buyer has only a twenty percent equity in a unit, and the allowed annual return averages, for example, four percent, the maximum sales price is 20% x 4% = 0.8% per year (plus capital improvement allowances) above the purchase price.
A) In the current guidelines, the allowance for capital improvements is rather arbitrary and uncertain. For example, if a affordable homeowner puts money into a maintenance reserve fund each year, that money is not counted toward capital improvements until it is actually spent on the intended purchase. In this case, even though the homeowner has put money into a reserve fund toward a new roof for twenty years and then sells his/her home in the twenty-first year, none of that counts if the roof is actually replaced only in the twenty-second year.
Our proposal would count all annual contributions to an appropriate reserve fund in the formula for allowable sales price.
B) Which funds qualify as “capital improvements,” and which do not, is difficult to determine. It mainly seems to be up to the discretion of city administrators. And apparently they won’t commit to qualifying funds until the actual time of sale, even if that is forty years from the time the costs were incurred.
Our proposal would encourage a generous interpretation of what homeowner expenditures would qualify as additions to “cost basis” and therefore to sales price. Certainly, at minimum, expenditures which would increase the “cost basis” under federal capital gains tax law should be allowed. This is particularly important since inflation-based allowances can be so minimal. In addition, we are proposing that the city commit, in writing, to the costs they allow on a yearly basis so the homeowner can know where they stand.
Obviously, not all costs can be allowed. For example, in the case of a single family home, if the homeowner comes into some money and chooses to double the size of the house with extensive and lavish additions, the objectives of the affordable housing program may not be advanced by fully reimbursing those expenses. A certain discretion by city officials makes sense, but under most circumstances it should be generous and under all circumstances timely.
C) All of the above only deals with the final sales price allowed in the program. In addition, many low income homeowners may have trouble meeting the cost of maintaining a home. If the city wants to make home ownership more widely available to those who cannot buy a home on their own, this needs to be taken into consideration. We are proposing that funds be set aside by this city for this eventuality. If an affordable home buyer’s income falls below a specified level, or more appropriately, if the housing costs for that person expand beyond a third of their total income, we feel the city should step in and make up the difference. The alternative is that the buyer might lose their home entirely, or in a condominium situation, force their neighbors to raise their costs to cover the deficit. Neither of these alternatives are reasonable.
The Cambridge affordable housing program is doing a great job of providing an initial home purchase opportunity for hundreds of residents. We feel the city now needs to follow through to match the economic realities that these residents face. The result can be a program that fulfills all its objectives over the long term, and helps build stronger communities throughout the city.