Deed Restrictions Housing Subsidy Covenants

1
Deed Restrictions Housing Subsidy Covenants

• Arts Quarter Lofts 26th and Nicollet
• Master Civil and Construction Engineering
• City of Lakes Community Land Trust

2
City of Lakes Community Land Trust

• Background/Mission
• Minneapolis City-wide
• Complementary to Community Developers
• Support low/mod income homebuyers/homeowners
• Focus on long-term/perpetual affordability
• Ground Lease
• 25 Appraisal-based, improvements land
• 100 Appraisal-based, Capital Improvements
• Deed Restriction Housing Subsidy Covenant
• Similar Ground Lease Language and Restrictions
• Aligns with CLCLT mission

3
Arts Quarter Lofts the Project

• Project
• 29 total units 2 units affordable at 50 MMI
• Project price points initially 182k - 430k
• Affordable units priced at 102k and 107k
• Association Fees - approx. 185
• History
• Master Civil and Construction Engineering
• Affordability Funding HC-AHIF (50 MMI)
• Ground Lease to Covenant change
• Marketing
• Unit sizes
• First CLCLT, then MLS (Master Broker)

4
Housing Subsidy Covenant

• Deed Restrictions (a.k.a. Covenants, Conditions)
• Appended to the unit deed on a Condo
• Deed Restrictions control the Price, define the
  Eligibility, and require the Occupancy of owner.
• Perpetual Deed Restrictions are considered
  invalid (restraint on alienation/rule against
  perpetuities)

5
Housing Subsidy Covenant

• MN specifically limits to no more than 30 years
  (some states have enacted laws explicitly
  sanctioning perpetual deed restrictions)
• Once expired, restrictions are removed
• Needs to be monitored and enforced
• CLCLT right to re-purchase

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Similarities to the CLCLT Ground Lease

• Requires similar homebuyer education process
• Utilizes same appraisal-based resale formula to
  ensure future affordability
• CLCLT right to re-purchase
• CLCLT will monitor and enforce restrictions in
  same manner as ground lease
• Homeowners pay property taxes
• Lease fee of 15/month
• Post-purchase education benefits

7
Benefits

• CLCLT focus
• long-term affordability
• supportive homeownership
• Assuming 40k increase over 10 year.
• Able to resell condo for 112k vs. 228k
• Utilizes existing CLCLT homebuyer education
  process
• CLCLT will monitor and enforce
• Similar restrictions as CLCLT Ground Lease
• Lenders are familiar with deed restrictions
• Applying a tool to a Community need

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Opportunities/Challenges

• Numerous Condo developments in Mpls.
• Deed restrictions are not self-enforcing
• Only 30 years, potentially longer
• Requires CLCLT to repurchase unit to restart
  30-year Covenant Clock
• Requires Fannie Mae/lender approval
• Project approval
• Make the tool(s) more effective

9
Arts Quarter Lofts 26th and Nicollet

• Jeff Washburne
• City of Lakes Community Land Trust
• 612-721-7556 x17
• jeff_at_clclt.org