HomeMy WebLinkAboutIR 7620 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7620
To the Mayor and Members of the City Council June 23, 1992
Subject: CITY COUNCIL HOUSING RETREAT, MAY 2, 1992 HOUSING UPDATE
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On May 2, 1992 at the City Council retreat, the City Council
discussed at length the vacant housing problem in the City's
inner-city neighborhoods. Staff addressed the Council's
concerns with a report given to the City Council Housing Programs
Committee, which met to follow up on issues discussed at the
retreat. The report was entitled "Addressing the Problem of
Vacant Properties in Our Target Neighborhoods." This report
outlined one option for dealing with vacant property by using all
discretionary funds available in the City's housing programs to
subsidize rental property development through a non-profit
organization. The assumption was that rental development of
vacant property would be less expensive than ownership programs.
After looking more closely at this option, staff determined that
rental development was about the same cost as ownership
development and it is staff's professional opinion that
homeownership has the most stable affect on neighborhood
revitalization.
Therefore, in addition to the report listed above, staff
discussed with the Housing Programs Committee a mix of housing
programs which address the vacant housing problem in Fort Worth
and which has three program elements, homeownership being one of
the three elements. First, the homeownership programs would
continue with HOME and Community Development Block Grant funds.
Maintenance of homeowner rehab programs provide funds critical to
homeowners who have remained in the target area. In staff's
opinion, this mainstay population provides the neighborhood with
needed stability. Second, rental housing is addressed with
continuation of the rental rehabilitation program and
capitalization of a new rental development program run by
non-profits. The new rental development program will
considerably enhance on-going rental rehabilitation. Homes
rehabbed by the non-profit will be primarily vacant housing.
Finally, providing a program for new homeowners wishing to live
in the target area rounds out the three elements of the program
mix. Critical to the successful revitalization of any
neighborhood are new families who bring with them new investment
and vitality to the area.
An important point made by the Housing Programs Committee is the
need for regular housing production reports. A mechanism is
being developed to provide a monthly report to the City Council
Housing Programs Committee and a quarterly report to the full
City Council. Reports will be inclusive of programs operated by
the Housing and Human services Department, Tarrant County Housing
Partnership, Inc. , Neighborhood Housing Services of Fort Worth,
Inc. , Liberation Community, Inc. , the Texas Wesleyan Initiative,
the Fort Worth Housing Authority and other housing non-profits
with whom we have a relationship or who have a presence in the
targeted neighborhoods. The expressed concern of the Housing
Programs Committee was that there was not enough coordination
among housing providers, that efforts appeared diffused and
unfocused. The process of compiling monthly reports from the
key housing providers and sharing that information with all
providers and Council will begin a larger process of focusing and
coordinating projects.
ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7620
To the Mayor and Members of the City Council June 23, 1992
Page 2 of 2
! f
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Subject: CITY COUNCIL HOUSING RETREAT, MAY 2. 1992 HOUSING UPDATE
The Housing Programs Committee reviewed and approved the
expenditure of HOME, Community Development Block Grant, HOPE 31
and Rental Rehabilitation funds in broad concept. Specific
programs funded by these resources will be reviewed and approved
by the City Council on a project-by-project basis. Generally,
the funds will be spent for the following:
Owner-occupied rehabilitation, (both for very low-income and
moderate-income families) , $3,189,570
Non-profit single-family rental development for very
low-income families, (Tarrant County Homes) , $900,000
Non-profit multi-family rental development for very
low-income special populations, i.e. mentally ill, HIV,
frail elderly, handicapped, $400,000
For profit single and multi-family rental development,
$1,200, 000
Expanded Urban Homesteading Program, (HOPE 3 funds) ,
$3,304,000
First-time low-income homeownership, $5,726,930 (Includes
$4, 500,000 in Housing Finance Corporation Mortgage Revenue
Bonds)
Closing Cost Assistance Program for First-Time Low-Income
Home Buyers, $611,204
With the program mix listed above, the City Council's priority to
"get people into vacant houses in the cheapest way possible, " is
addressed in the most expedient and economical way possible.
Vacancies are prevented from occurring through our homeowner
property improvement programs. Funds are directed toward
subsidizing low-income buyers who want to purchase vacant houses
in the target areas. Rental housing development funds are
directed toward development which deals directly with currently
vacant housing units in the target neighborhoods. In addition,
non-profit housing resources focus on vacant single-family houses
in the target neighborhoods in a much more sustained manner.
The City Council, through the guidance of the Housing Programs
Committee, can monitor housing production more closely through
the reporting system which will soon be developed. Thus,
Council's housing priorities, as stated at the retreat and later
at the Housing Programs Committee meetings, can be communicated
direr y.
B6b Terre
Acting Cit Manager
SG:cr
ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS
June 2, 1992
a
ADDRESSING THE PROBLEM IN VACANT PROPERTIES
IN OUR TARGET NEIGHBORHOODS
Vacancy rates in the last ten years increased throughout the City of
Fort Worth (from 8% in 1980 up to 13% in 1990) , but the vacancy rate
in the ten CDBG target neighborhoods increased twice as much as
city-wide (8% in 1980 up to 18% in 1990) .
There are about 8, 500 vacant units in the ten target neighborhoods .
There is no data to tell us how many of these units are detached
single-family and how many are multi-family apartment complexes.
At the Council Retreat on May 2, 1992, the members present indicated
that the priority is to "'get people into vacant houses in the cheapest
way possible." It seemed at that point that rental housing
development would be the most inexpensive per unit method of dealing
with vacant houses. Therefore, city staff researched and developed
„. the following information regarding rental development as an approach
to addressing vacant properties in Fort Worth target neighborhoods.
REXTAL DEVELOPMENT: TARRANT COUNTY SOUSING PARTNERSHIP MODEL
After gathering additional information it appears that in order to
complete rental housing development on a significant scale in our
target areas will require more investment per unit than initially
anticipated. The Tarrant County Housing Partnership, Inc. (TCHP) has
calculated that , on average, it will cost them about $28,719 per unit
to develop and rehabilitate a single-family rental unit in our target
neighborhoods. (See the attached draft Pro-Forma for Tarrant County
Homes . ) Their calculations indicate that in order to keep the rents
affordable to renters in the area and to be competitive with
multi-family complexes, they will rent their units for $250/month.
The cash flow from this rent will support about $5,719 in conventional
mortgage financing. Added to this is about $5,000 in tax credit
equity and you have the need for about $18,000 in "soft” financing
from the City of Fort worth or some other source of "virtual no cost"
funds. This would be a total grant or a deferred, no monthly payment ,
due on sale loan.
The Tarrant County Housing Partnership, Inc. is in the process of
creating a non-profit subsidiary organization that will purchase,
develop, rehabilitate, rent, and manage single-family (and some
multi-family) housing in low-income neighborhoods in Fort Worth. The
long-range projections are for the organization to complete about 350
single-family units over the next 5 to 8 years. If they get involved
in multi-family, the number of units would go up considerably. Their
calculations indicate that they could complete about 50 houses in the
first year of operation, with subsidy funds of about $18,000 for each
unit. This means the TCHP would need about $900,000 to complete the
Addressing the Problem of Vacant Properties in Fort Worth
June 1992
50 units they anticipate they can do in the first year and another
$900,000 to complete 50 more rental units in the second year, for a
total need of $1,800,000 for two years. (see attached chart.)
I!ORT WORTH HOUSING AUTBORITY
The Fort Worth Housing Authority is another significant actor in the
rental development process in Fort Worth. The Fort Worth Housing
Authority currently owns 82 units of public housing in the Butler
Housing Project which will be demolished over the next three years to
make way for the new interstate exchange in downtown Fort Worth. The
Texas Highway Department has agreed to pay the Fort Worth Housing
Authority $3.2 million in compensation for these demolished units.
The Fort Worth Housing Authority has submitted a plan to HUD in which
they would use the $3. 2 million to purchase, rehabilitate, rent, and
manage 82 scattered site single-family units in Polytechnic Heights
and other close areas to replace the 82 demolished units. The current
executive director of the Fort Worth Housing Authority believes that
this process will occur over the next two to three years.
The Director also indicated that if the development of the 82 units is
successful , it 's possible that the Fort Worth Housing Authority would
continue this type of rental development beyond the 82 units. The
indication was that if they did start this type of development the
Fort Worth Housing Authority could complete about 30 to 40
single-family units per year. The Fort Worth Housing Authority is
also looking at purchasing, developing, rehabilitating, renting and
managing semi-market rate multi-family complexes in Fort Worth.
CITY_ QF PORT WQRTH HOUSING RESOURCES: ONE OPTION
In order to address the City Council directive regarding the vacant
property problem staff has developed one option for Council 's
consideration.
To maximise reduction of vacant property, the City of Fort Worth could
direct all housing resources into four areas : (1. ) Non-profit rental
development; (2. ) Rehabilitation for houses at risk for demolition;
(3. ) For-profit rental development; and (4. ) Rehabilitation of vacant
owner-occupied houses.
Page: 2
Addressing the Problem of Vacant Properties in Fort Worth
June 1992
What follows is a description and potential allocations for such
programs .
1. Non-Profit Rental Development (Tarrant County Homes/Tarrant
County housing Partnership)
Large scale rental development and management program for very
low-income families in selected targeted areas. Allocation
reflects a two-year expanded program from current production
projections .
278 units at $18,000 per unit $5,000,000
2. Rehabilitation for houses at risk for demolition
Public subsidy for owner-occupied low- to moderate-income home
owners whose property has been tagged by Code Enforcement , is
scheduled for demolition but is able to be rehabilitated.
Rehabilitation costs would be to bring the structure up to City
code requirements .
33 units at $20,000 per unit $ 660,000
3. Rehabilitation of vacant owner-occupied houses
Public subsidy for owners of vacant properties purchased but
unable to secure Certificate of Occupancy because of City code
violations. This estimate assumes that the new owners would be
able to borrow from a private lender some of the costs of purchase
and rehabilitation.
20 units at $19,785 per unit $ 395,704
4. For-profit rental development
Specialised program for for-profit developers providing incentives
to rehabilitate vacant single-family detached properties with
conditional deed restrictions requiring affordable rents over a
long period. This assumes the developer would finance some of the
repair with private conventional financing.
30 units at $14,000 per unit $ 420,000
TOTAL UNITS: 361 TOTAL RESOURCES: $ 6,475,704
__ 3
Addressing the Problem of Vacant Properties in Fort Worth
June 1992
EVALUATING RENTAL DEVELOPHE11T
The City Council has discussed rental development as the way to
"quickly address" the issue of high vacancy rates in the targeted
areas. The option listed above allocates all housing funds available
to the City of Fort Worth yet it only addresses 355 units. This does
not "quickly address" the City's problem of 8,504 vacant units. There
would be no tremendous visual difference. There is really a limited
impact which can occur as long as the area's economy is in a slump,
school dropout rates continue to rise, and unemployment rates stay
high. These problems are long-term issues that must be addressed
holistically bringing to bear other social service programs.
There are advantages and disadvantages to utilizing rental development
as a major strategy. What follows is a summary of some of the
advantages and disadvantages .
Advantages:
- Low-income family does not have to qualify for a mortgage loan.
- Generally speaking, families are more willing to enter into a
rental arrangement than a purchase arrangement.
- The Enterprise Foundation (along with t:he Tarrant County Housing
Partnership) has considerable expertise available in inner-city
rental development, rehabilitation, and management . We have a
window of opportunity to expand their current proposal in order
to take advantage of the available expertise,
Disadvantages:
- Renters do not have the personal investment in the house or the
neighborhood, so rental properties have a tendency to
deteriorate faster.
- Higher turnover in the occupants means the social structure of
the neighborhood itself is not as strong. More difficult for
people to meet and work with each other on neighborhood
projects, crime watch, clean ups, etc. because they don't know
each other as well .
- It's easier for renters to move out of the neighborhood when
something occurs which needs the community to band together to
deal with a problem.
- In many of the target areas for--profit developers are not IN
willing to make private risk investment. So it must be done
through non-profits and often with larger subsidies.
Page. 4
Addressing the Problem of Vacant Properties in Fort Worth
June 1992
- In order to complete large numbers of units, you create the
requirement for property management of properties over a large
scattered area.
- Standards for rehabilitation are usually not as high with rental
as with homeownership therefore requiring less initial
investment, but it usually needs to be repaired again sooner or
more often.
RON-PROFIT HOUSING ORGANIZATIONS APROXIMATE PRODUCTION FIGURE
A summary of housing non-profit organizations and what they intend to
complete over the next year is provided here.
Tarrant County Housing Partnershic, Inc.
in the first two years of operation, the TCHP plans to complete the
following housing programs:
- First-Time Homebuyer's Program: 75 loans in the City of Fort
Worth
- Assistance to non-profit groups to develop housing: 215 units in
Fort Worth.
- Single-Family Rental Developer subsidiary (Tarrant County
Homes) : 100 units in Fort Worth.
Assuming TCHP can raise all of the funds they plan to raise, they will
complete about 390 units in the first two years of their operation.
We can assume that a large percentage of the units they will be
addressing are currently vacant.
Neichborhood Housinc Services, Inc. (NHS)
NHS has no plans at this point to do any rental housing development.
All of their programs are directed toward first-time homeownership and
rehab of existing owner-occupied housing in the two neighborhoods in
which they are working, (Polytechnic Heights and Near North) .
First-time Homebuyer 12
Owner-occupied Rehabilitation 20
: r
Addressing the Problem of Vacant Properties in Fort Worth
June 1992
Liberation Community, Inc.
Liberation Community is working in the Polytechnic Heights
neighborhood exclusively developing homeownership opportunities for
low-income families. They have no plans at this point to do any
rental housing development. They plan to complete about 40 home-
ownership properties each year. All houses with which they are
working are currently vacant properties.
Mental Health Housing Development Corporation (MHHDC)
This non-profit is a sister organization to the Tarrant County Mental
Health Association and was created exclusively to develop housing
which will be affordable and appropriate for people with chronic
mental illness who can live on their own with limited oversight . They
are working on their first project: a 32-unit multi-family complex on
South Jennings. City of Fort Worth Rental Rehabilitation funds are
supporting this project with about $160,000 in rehabilitation funds.
MHHDC is working on plans for a second multi-family project at this
time. They have no plans for single-family development.
Go d. Samaritan Housin
This non-profit organization is developing a 35-unit complex on the
northside which will be utilized for housing for low-income HIV
positive individuals. They have no plan to develop single-family
rental development.
(Prepared by Housing and Human Services Department)
Page: 6
i
TARRANT COUNTY HOMES DEVELOPMENT PRO FORMA
a2-a:+-va
��aci'aci►:r3��1 ii.PEt�aC ga r��Miil�`.��. ::.:,.
hN OF,Fi OF VACANT UNIT$: 104
NUMBER OF 00CUPiED UNIT$: 0
SOURCES: LZ
INTEREST' YEAR.. E: :7 "
Cenwntiatal 10% 30 $6.710 $571.9m.
Doisrrad talon(NOME i CG 15 $18.000 1.000.000
90U(TY:Uslnp Lew k cw*Tax Credit ardlar F"wal 6 kwo a Lam 5.000 500.000
Bar4c 0-429!' =Gant Pt6WGfn
TOTAL SOURCES i $29.740{$,2,671,34914
USES: 1!E► Y*T PEFt tArt :i 331117 it istlt
";VACANT: cccii'��6: -AVEt#A61!flbTAi.ia
46 16N t7f3STS i FEES....
Build! sltien !6.000 $8,0001 $600.000
1 Fags ISO ISO 15.000
Savoys and t 400 i 400 40.000
Appraisal FNs 178 178 17500
Two a C306bv cl t#s 400 1. 404 48.400
sUt3TDTAL ACQt1tt3JTOM S7.tZ5 SG i =7,128 $712.300
-
DlrNCi Construction 114,000 $1#.040 $1.#08.000-
Contingoncy ACowarkaa 4400 i 000 60.000
Yand&Esm Allawanft ISO• 3ao 96.000
Conatruo0on Owwhaad Fsa 900 I 300 3D,000'
Cbr%truetlbn Mam Fee 500 500 30,008
SUSTOrAL CONSTRUCT ON ti 6.050 SO $16.050 S1.603.000;
131�i.CiP'Nf~tYZt1i'0°i':RiEe- ::xi;: : yn;ss::�r.
Spoetllcation a Das F.a $330 llra8 $13.008
U WCW i Fist ISO 150 13.000
!MlFom- 173 179 17.500
PaOAgiiVRocossi F** 76 75 ?.SW'
Mark*t (R*M— FNS 300 3001 90.000
Fuwrt6 Fos 2% 5741 974 57.4 4.
AwoumVV and Audit FM 100 100 10.000'
a Farr 2.200 2,200 IMAM:
D&vw 't c4mrobmq 320 1 320 32.000,It
Opstatrq Le"DLw Inv Ow»L 1.300 1.3001 1''30.000'
i BUBTOTAt DEVELOPMENT $5.644 S0 55,544 5554 430
TOTAL.USES 526.744 $8 $26.740:0.671AS4
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