TO: Mayor and Members of City Council
THRU: Kelly Olivera, Assistant City Manager
FROM: Christopher Cauley, MPA, Economic & Community Development Director
DATE: November 27, 2023
RE:
Title
Approval of Single Family Housing Development Loan for Kingdom CDC’s Rosehill Road Project
end
COUNCIL DISTRICT(S):
Council District(s)
District 3 - Mario Benavente
b
Relationship To Strategic Plan:
Goal 3: City Investment in Today and Tomorrow
Objective 3.1: Increase City homeownership through programs for down payment assistance, working with developers to increase affordable housing options, efficient processes for home-building and home-buying, and through incentives which encourage home ownership.
Executive Summary:
Kingdom Community Development Corporation (Kingdom CDC) is a nonprofit developer proposing to develop 16 single family homes on a 3.5 acre site on Rosehill Road. City Council is asked to authorize a loan commitment letter and subsequent loan documents in the amount not to exceed $725,000 from the City’s American Rescue Plan Act funds allocated for housing to support the acquisition and infrastructure of the site. This commitment will be good until June 30, 2024 with a six month extension allowed at the Director’s discretion.
Background:
Kingdom CDC is a nonprofit community development corporation that specializes in single family housing development, homebuyer education, and leveraging Federal, State, and Local down payment assistance programs to create home ownership opportunities. The organization will be the developer for this project and will be the general contractor for the infrastructure and the development of 9 or more homes. Kingdom CDC will develop the land into 16 single family parcels with a road and infrastructure that meets the City’s standards. Kingdom CDC has a long history of single family housing development both within the County and the City limits of Fayetteville. They have also secured other financing from the National Institute of Minority Economic Development a Community Development Financial Institution. Of the 16 developed lots, 9 or more will be required to be sold to first time homebuyers with a household income defined as low and moderate by the Department of Housing and Urban Development.
Issues/Analysis:
A requirement of the funding is that at least 51% or 9 out of 16 homes are sold to qualified homebuyers. The remaining 7 lots will be sold to market rate developers at appraised value or developed by Kingdom CDC as market rate housing. These lots will have no restriction on the income requirements of the buyers and may be eligible for City, State, and Federal down payment programs.
Individuals who take Homebuyer Education courses will be recruited and developed into first time homebuyers for these proposed properties and any properties not sold within nine months, they may be rented to families with incomes at 50% to 60% of the Area Median Income and be required to maintain affordability for a 20 year period. The proceeds from the sale of the homes will be reinvested in the development of subsequent housing on site. As the project closes, the City’s funds will be transitioned into down payment assistance for the qualified households. This down payment assistance will be in an amount that is required to keep the primary mortgage affordable to each household and take the form of a loan based on amount of assistance, forgivable over 5 to 15 years. Any funds not required for down payment assistance will be returned to the City and invested in future projects.
The contents of this memo and other underwriting documents will be used to draft the commitment letter and other legal documents to secure the City’s investment. These documents will be executed at loan closing where the City will be represented by Banks Law Firm as outside legal counsel.
Budget Impact:
Funds for this project are available from the City’s American Rescue Plan Act funding allocated for housing programs. The total of $4M as allocated and $1.25M was approved for rehabilitation of Fayetteville Gardens, $2M for a proposed permanent supportive housing project with Step Up, and the remainder of $750k could be allocated to this project. Of that $750k, $25k has been allocated for consultants to help develop this project and monitor the progress.
Options:
• Authorize a loan commitment letter and subsequent loan documents in an amount not to exceed $725,000 from the City’s American Rescue Plan Act funds allocated for housing to the proposed Rosehill Road Development.
• Do not authorize a loan commitment letter and subsequent loan documents in an amount not to exceed $725,000 from the City’s American Rescue Plan Act funds allocated for housing to the proposed Rosehill Road Development.
• Direct Staff to some other action.
Recommended Action:
Staff recommends that Council move to authorize a loan commitment letter and subsequent loan documents an amount not to exceed $725,000 from the City’s American Rescue Plan Act funds allocated for housing to the proposed Rosehill Road Development.
Attachments:
Rosehill Road Single Family Housing Development Presentation