HRA Meeting Date: November 2, 2023
To: Members of the Housing and Redevelopment Authority
From: Melissa Hanson, Housing Coordinator
Title
HRA to Consider Northcountry Cooperative Foundation’s Request to Enter into a Memorandum of Understanding.
Body
Action Requested:
HRA is being asked by Northcountry Cooperative Foundation to enter into a Memorandum of Understanding to pursue a development opportunity on HRA-owned land in the Southbridge area.
Summary Report:
The HRA’s mission is to be a partner in providing a sufficient supply of affordable, adequate, safe and sanitary dwellings in Northfield. Our goal is to create a community with housing opportunities available along the entire housing spectrum: from renters to homeownership, first-time homeowners, to senior living, workforce housing and empty-nesters. We strive to create affordable housing opportunities and strengthen our neighborhoods utilizing:
• Sustainability
• Innovation
• Partnerships
• Community Input
Northcountry Cooperative Foundation (NCF) presented a single-family neighborhood concept using facility-built homes and a resident-owner cooperative model to the HRA at the May 4, 2023 meeting. The initial concept was shown on a combination of 7.27 acres owned by the HRA and approximately 4 acres, including land dedicated for parkland through multiple platting processes, owned by the City at Southbridge. At that time, the HRA directed staff to move forward with the creation of a limited, non-binding, exclusive development agreement that does not hold the HRA to a commitment to NCF if the HRA does not believe the project is a good fit. After initial neighborhood concerns were raised, staff research into past land dedication actions, research into prior renderings of how the property could be developed, attorney reviews and negotiation, NCF is proposing the attached Memorandum of Understanding (MOU) for HRA consideration.
NCF is requesting that for a period of one year (365 days) that the HRA not negotiate with or entertain offers from other parties with respect to the property.
Staff recognizes that there are still many unanswered questions by the HRA Board that can only be fully answered once NCF is able to do their due diligence to determine, at its own expense, the feasibility of developing the property for the proposed cooperative neighborhood. This MOU provides the assurance that NCF needs in order for NCF to invest in site-specific design and engineering work, as well as continue to pursue funding sources for the full plan. Without having some period of exclusivity, those efforts become risky beyond the comfort levels of the NCF organization and its governance for expending limited resources. Additionally, potential funders become less likely to participate in a project without certainty regarding the site control.
Under this agreement, if the HRA chooses to move forward with the proposed NCF development, the HRA and NCF would then negotiate a mutually acceptable purchase agreement in compliance with applicable law using the HRA form purchase agreement for the sale of the property by HRA to NCF via quit claim deed, and subsequent consideration of approval of such negotiated purchase agreement by the Board of Commissioners of the HRA at a future duly noticed public meeting of the HRA.
Under this agreement, if the HRA does not move forward with the proposed NCF development, the MOU automatically terminates at the end of 365 days without penalty to either party.
As staff noted previously, the HRA would be out of the “time” resource of up to a year. In the agreement the term is highlighted and can be adjusted to meet the needs of both organizations, if desired. One basis for an adjustment to the one-year-term would be the due diligence that NCF has already completed in terms of drafting a site plan, discussing home siting issues, working with federal and state agencies to change policies and procedures related to mortgage lending and titling of factory-built homes, and applying for grant funding. For example, earlier this year NCF applied to the 2023 round of Enterprise Community’s Housing Affordability Breakthrough Challenge Grants funded by Wells Fargo Bank, NA. While the $2 million application was ultimately not successful, the application was one of 42 semi-finalists out of 430 applications. The lack of specific site control has been cited as a potential reason for the application not moving forward to the final round.
The HRA has seen concept plans presented by Habitat for Humanity for this parcel and hired an engineering firm in 2018 to develop different lot configurations. The HRA is familiar with the product that Habitat for Humanity offers along with the subsidized financing model that is needed to make homeownership possible for their customers. Habitat’s proposal included production of up to 31 single-family homes produced over the course of four to five years. Staff notes that the proposed development would, in all likelihood, require subsidization on the front end, likely in the form of land, that is not tied to a “repayment” of any subsidy that would be needed at time of sale. The NCF opportunity is designed to not ever require any repayment of subsidy, such as any subordinate mortgages, and would not require the mortgage (principal+interest+escrow) to be subsidized to meet the income needs of the owner with the potential for that mortgage payment to increase if/when the family’s income increases, as is the case in many subsidized home-ownership options, including the model currently used by the Rice County Habitat for Humanity affiliate.
During the time the MOU is in place, if authorized, staff will work with NCF, advocacy groups, and the closest neighbors, through neighborhood meetings in order to inform community members about the proposed project and housing needs in Northfield, as well get input from the broader community about their thoughts, opinions and fears about this type of development model.
Related to those initiatives, in the last part of this year Enterprise Communities Advisors will again work with the Northfield Promise collaborative to facilitate four different “Housing Solutions Teams” to be convened in November 2023 to help inform both the cradle to career housing stability work initiated by Northfield Promise in 2019, and the City’s 2045-horizon Comprehensive Plan regarding Northfield-specific housing needs and demand for the existing population. Consideration in those teams is also given to those who have lived or would like to live in Northfield, particularly those who already hold jobs in the city, in order to learn more about why (or why not) Northfield-based workers are not living in the city.
The combination of efforts underway regarding the development and redevelopment outlook for the City of Northfield, a facet of which the HRA is inherently important, along with current economic uncertainties related to interest rates, material, and labor costs suggest to staff and local, state, and national housing experts that 2024 is likely a good time to be thorough and thoughtful in vetting and pursuing innovative solutions to the housing shortage. Additional relevant information may be found in the staff report associated with the NCF presentation also taking place at this meeting.
Alternative Options:
The HRA could choose not to sign an MOU with NCF, at which point the project will not be able to move forward and NCF will stop their efforts working with City and HRA staff.
The HRA could choose to amend the agreement as presented in multiple ways including:
• length of time of the agreement
• adding specific checkpoints for decision-making
• adding benchmarks to guide NCF and the HRA
Financial Impacts:
Total financial impacts have yet to be determined. Potential impacts include: loss of the $300,000 appropriation to the City via the tax bill from the state legislature; loss of increased tax base; loss of workers; and related continuing negative impacts of a housing supply shortage, including costs borne by the City and HRA to mitigate existing unsafe or unhealthy housing units. Other financial impacts could be related to adding infrastructure. Positive financial impacts could include: increased tax base; reduced housing cost burden for existing residents; additional grant opportunities to write down costs such as infrastructure.
Tentative Timelines:
November 2023 - finalize agreement
December 2023 to June 2024 - due diligence, including site investigation, community meetings
June 2024 to December 2024 - additional due diligence as needed
Spring 2025 - potential to break ground