RFP for Loan Fund Feasibility Study

HomeownershipSF RFP for Loan Feasibility Study

HomeownershipSF (HSF), San Francisco’s innovative consortium of leading homeownership counseling organizations, seeks to not only help low-to-moderate (LMI) households purchase homes but, importantly, to maintain homeownership in the face of external impediments such as rising home owners association (HOAS) dues and unexpected special assessments.

To address several current challenges to sustainable homeownership in San Francisco, HSF seeks to develop and implement a multi-source (public and private) loan fund to 1) assist below-market-rate (BMR) homeowners to stay in their homes and 2) to help very low-income San Franciscans purchase homes through San Francisco Community Land Trust’s co-op model. While these two opportunities are identified as top priorities, HSF may be open to exploring additional ways to provide assistance to San Francisco’s LMI homeowners that may be revealed by this process.

HSF seeks a well-qualified consultant to conduct a feasibility study analyzing all aspects of the development and implementation of a loan fund to meet the above needs. The selected consultant will work with HSF staff and Board of Directors to:

Assess the scope of need for the above-described loan fund
Assess capital requirements to meet current and projected need
Identify potential sources of capital and conduct interviews with associated decision makers to determine interest level and, ideally, secure commitment from capital sources
Analyze potential financial structures for the loan fund and recommend optimal structure
Determine implementation and management requirements for establishing and successfully running the loan fund

HSF expects this feasibility study to be conducted in a four-to-six month timeframe.

The ideal candidate will have in-depth knowledge of San Francisco’s affordable housing landscape including institutional players, financing options and funders. Said candidate will have extensive experience in industry analysis, forecasting and financial modeling and excellent communication skills.

Please submit a proposal detailing past experience and qualifications to undertake the described feasibility study along with projected costs and timeline by September 7, 2011. Please limit initial proposals to three pages and submit by email to HSF’s Executive Director, Josie Ramirez at josie@homeownershipsf.org.

For questions, please contact Josie at the email address above.

Background Info:
HomeownershipSF’s (HSF’s) mission is to help diverse and underserved households achieve and sustain homeownership in San Francisco through a coordinated network of member organizations.
HSF promotes affordable housing opportunities for low- to moderate-income (LMI) households in San Francisco and believes strongly in scaling permanently affordable housing through shared equity and deed-restricted homes. In San Francisco, maintaining and expanding the availability of such homes presents both challenges and opportunities. HSF would like to contribute to the sustainment of affordable homeownership opportunities by overcoming the following challenges:
Sustaining Ownership of Below Market Rate Homes
There are approximately 2,000 below marker rate (BMR) ownership units in San Francisco - 850 through the Mayor’s Office of Housing (MOH) Inclusionary Housing Program; approximately 300 monitored through MOH’s Condo Conversion BMR Program; and approximately 850 units monitored by the San Francisco Redevelopment Agency. Nearly 100% of MOH’s units are condominiums. Owners of these units face two potentially perilous financial obligations that could place their ownership at risk: 1) rising homeowners’ association (HOA) dues and 2) special assessments.

HOA Dues - LMI BMR homeowners in San Francisco have seen HOA dues increase up to 6% per year, well outpacing inflation. In one building, fees have gone up more than 51% since 2002. These creeping fees represent a very real challenge to many LMI families in BMR residences. Some communities have taken steps to build in long term supports which help ensure that LMI families are able to sustainably maintain homeownership. For example Chapel Hill, NC has established a transfer fee mechanism that assesses a 1 percent fee on the sale of market-rate units in inclusionary developments and dedicates the proceeds to a special fund used to reduce HOA dues for affordable units within the development. HSF is proposing to lead local efforts to conduct research and propose innovative ways to supplement rising HOA dues and/or legislation to protect the owners of affordable units from large HOA dues increases and assessments, discussed next.

Special Assessments – Another great concern facing SF BMR owners is the potential for special assessments to be levied on the units. These special assessments pose a particularly strong threat as they can range in the thousands of dollars. Special assessments are most often levied after the developer’s liability period of 10 years has ended. To that end, it is important to note the age of MOH’s Inclusionary Housing units. Approximately 109 units were built before 2002 and have exceeded their 10-year developer liability period. Approximately 743 units were built after 2002 and could begin levying special assessments on their owners as the buildings age and as the ability to seek remediation from the developer diminishes. To date, there is no legal ground for an owner to challenge the assessment allocation based upon fairness or equity.

Responses Under Consideration by HSF
Advocacy - Launching a legislative advocacy effort in coordination with other housing advocates across California to a) research other community’s efforts and innovative solutions to address both rising HOA dues and special assessments and b) create and implement more equitable assessment allocation process. HSF would seek to work with local affordable homeownership advocates such as Housing California, Non Profit Housing (NPH) and Cornerstone Partnership and seek guidance from others such as the nonprofit Land Trust in Chapel Hill, NC that administers the “transfer fee” mechanism noted above.

Loan Fund – Founding a publicly and privately funded loan fund to help LMI BMR homeowners pay for special assessments. These loans would be small with a range to be determined but likely not to exceed $10,000. Loans would have favorable terms and would be designed to be flexible enough to meet clients’ needs. For example, the interest rate could mirror interest rates offered by CalHFA for low to moderate income families, which is currently 3.25%.

Increasing the Number of Permanently Affordable Housing Units
Other than inclusionary BMR units such as those discussed above, the primary source of anticipated new affordable housing stock had until recently been the efforts of the SF Redevelopment Agency. However, with the current climate’s political and economic uncertainty, it is not at all clear that California’s redevelopment agencies will continue operations at all, let alone oversee the development of a significant number of new affordable homes. However, the SF Community Land Trust (SFCLT) has launched a powerful co-op model that could produce as many as 500 new permanently affordable units for very low-income San Franciscans (40% AMI). Under SFCLT’s model, residents form a limited equity housing cooperative (LEHC) which purchases a building that is at risk of losing its affordability (due to condo conversion, demolition, foreclosure or private sale), while the Land Trust maintains ownership of the land under the building. The newly formed housing cooperative signs a 99-year ground lease with SFCLT, which ensures that the units will remain affordable in perpetuity. Each resident or household buys in with an affordable co-op share purchase negotiated with the residents prior to the purchase. The co-op share price in the one building converted to co-op thus far was $10,000. While a small amount compared to down payments necessary for market rate homes, a down payment of this size can represent an obstacle for households living at 40% of AMI.

HSF’s Proposed Response
Loan Fund – HSF would like to explore founding a public/private loan fund that would not just help LMI BMR homeowners pay for special assessments, as described above, but would also assist low-income households with their co-op share purchase in the case of a co-op conversion in SFCLT’s model. Preliminarily HSF envisions a loan structure that would require the household to pay a sizeable amount (tbd) of the required share purchase price so that loans would be relatively small, likely under $5,000. Pending appropriate analysis, loans would be structured as flexible as possible to meet clients’ needs.

If successful, HSF would propose helping to scale the loan fund regionally beyond or offering technical assistance to other localities to launch similar funds if that is deemed appropriate.

HSF believes that the above approaches 1) Legislative Advocacy to cap BMR HOA fees and make assessments more equitable and 2) creating a public/private loan fund to help LMI households afford special assessments and share purchases for co-op conversions in the SFCLT model, represent essential steps to be taken to preserve and expand affordable housing opportunities in San Francisco.