Local Housing Incentive Account Deferred Loan Program

PURPOSE

These funds aim to incentivize owners of Naturally Occurring Affordable Housing (NOAH), new or existing affordable rental properties (apartments), that are unsubsidized by any federal program, to maintain lower rents compared to the regional housing market.

The guidelines outlined below will determine eligibility and criteria for future deferred loans. The funds must be used for purposes consistent with Minnesota Statutes section 473.25(a), and should address at least one of the following criteria:

• Preserving existing affordable housing stock.
• Providing workforce housing choices.
• Exhibiting strong implementation partnerships.
• Identifying significant leveraged resources.
• Demonstrating a high degree of readiness.
• Achieving comprehensive community support.
• Complying with the missions of the funding partners.
• Using land efficiently.
• Locating developments within walking distance of public transit stations and stops.

FUNDING SOURCE

The Metropolitan Council originally awarded the City of Chanhassen $300,000 from the Metropolitan Livable Communities Fund, Local Housing Incentives Account, on February 14, 2006. Any repayment of these funds will be used towards this deferred loan fund program.

ELIGIBLE USES

Certain projects, applicants, activities, and costs are eligible for deferred loan funds:

• Gap financing costs, including land acquisition.
• Property (structure) acquisition.
• Demolition.
• Site preparation or rehabilitation of water, sewer, and/or roads
• General construction and/or structural additions, alterations, or rehabilitation.
• Interior and exterior finishing.
• Roofing.
• Electrical, plumbing, heating and/or ventilation.

INELIGIBLE USES

Certain applicants, projects, activities, and soft costs are ineligible for deferred loan funds:

• Administrative overhead.
• Bonds and insurance.
• Legal fees.
• Permits.
• Travel.
• Grant or bid preparation costs

LOAN TERMS AND CONDITIONS

The city shall make available to eligible applicants a deferred loan for purposes consistent with Minnesota Statutes section 473.25(a).

1. Loan amount of $6,250 per unit that meets the income requirement of 60% Area Median Income (AMI). The AMI Guidelines will be updated annually.

2. As affordable units turn over, the property owner is responsible for verifying the incomes of new renters in affordable units at the time of move‐in.

• The property owner does not need to verify the income of existing residents, as they are exempt from verifying their incomes.

3. The borrower will maintain residents’ verification information and will submit this information to the city, which will complete an annual progress report to the METC until the loan term is complete. 

4. The loan will be set at zero-percent interest and will be structured as a deferred loan. 

5. Total borrower contribution for the project must equal 50% of the total costs for the project. 

6. From the date of closing on the deferred loan through the date on which the loan is repaid or the resale limitation date, whichever is later, the 60% AMI per until affordability requirement is required.

• The repayment terms will be negotiated between the city and the borrower but will not exceed fifteen (15) years. 

7. The loan term will be tied to the resale limitation of no more than fifteen (15) years. This limitation is placed on the property to protect the public investment in the project and to ensure that a proportion of the affordability gap provided by the public investment in the form of a deferred loan is recaptured for reuse in conjunction with other affordable housing efforts and does not become a windfall for any purchaser who might sell the property before the predetermined resale limitation period. 

• If the property is sold before the expiration of the resale limitation period, the funds will be recaptured by the city and used towards another eligible housing project.