Those charged with administering the balance of the city’s Affordable Housing Trust Fund made headway this week in determining future allocations, and agreed to hold 20% of the fund in reserve each year for unexpected projects.
The trust fund, established as part of Missoula’s nascent housing policy, saw its first allocation last month with a $26,000 award to the United Way of Missoula County for consumer housing services.
But the fund holds a current balance of $3.1 million, and the Affordable Housing Resident Oversight Committee is planning for the next two funding rounds, including one expected this winter and another anticipated next summer.
A 20% reserve would be retained in each round.
“The reserve balance would be held for projects that are essentially initiated by the city,” said Emily Harris-Sheers, the city’s Affordable Housing Trust Fund administrator. “Most likely, they’d be reserved for urgent acquisitions.”
While the committee wants applicants proposing major projects to apply during the two funding rounds, circumstances have risen when an affordable housing project goes up for sale and urgent action is needed – and can’t wait for a funding round to open.
That was the case with the Bridge Apartments in September, when the owner opted to place the property up for sale. Had the city not stepped in to purchase the property using funding from the Missoula Redevelopment Agency, a private entity would have bought it and likely converted the apartments to market rate housing.
That in turn would have displaced the residents, who are low income and have special needs. The reserve balance could be used for such unexpected occasions, and for bridging small funding gaps to make other affordable housing projects a reality.
“From some of the work I’ve done in the affordable housing world, things pop up really fast, and they’re not big-dollar projects,” said committee member Paul Herendeen. “A matter of a couple tens-of-thousands of dollars may be all that’s needed to bridge a gap and bring a project into permanent affordability.”
After tweaking the language, the committee agreed that the reserve balance will be held for “urgent or emergent acquisitions” that will preserve or protect affordability for residents. Applications will be vetted by the city’s housing office and brought to the oversight committee for consideration.
“This is an emergency fund that allows folks to skip the application process where, if it took too long, the opportunity would be lost,” said Harris-Sheers. “Staff can evaluate it, bring its recommendation to this committee, and this committee can make its recommendation.”
With a balance of $3.1 million, holding 20% of the Affordable Housing Trust Fund in reserve for urgent acquisitions amounts to around $634,000. But other funds must be directed to the preservation of existing affordable housing, the construction of new affordable housing, and incentives that help bring more affordable units to the market.
“There is no cheaper housing than housing that’s already built. That’s the least expensive affordable housing we’re going to be able to create or maintain,” said Mayor John Engen. “But that stock is limited. This is an inventory problem. I would suggest some lion’s share of the allocation is about construction. I would tend to go light on preservation, just because I don’t think there’s that many opportunities.”
Members of the committee agreed and placed around 70% of the remaining funds into the construction of new affordable housing. The first funding round will include $832,000 for new housing construction and the second will include $1.19 million.
The oversight committee has yet to vote on the recommended allocations.
“The priority right now has to be creating new construction of units,” said Lori Davidson, executive director of the Missoula Housing Authority. “When I look at our voucher holders, for the first time in 25 years they aren’t able to find a unit to rent, even with their voucher. We just need new construction.”
Housing preservation was also important to committee members, even if the opportunity to do so may be limited. In the first funding round, they allocated $153,000 toward preservation and $198,000 in the second round.
But funding for incentives remains light. Harris-Sheers said regulations around that funding bucket are still in the works and won’t be ready until later next year. With that in mind, the committee recommended $0 for incentives in the first round and just $100,000 in the second round.
Funding for incentives could help subsidize the cost of land in a private development in exchange for some affordable housing units. It could also subsidize development fees for the applicant, also in exchange from some affordable units.
“These will also help with the development of housing,” said Harris-Sheers.
“Those are fine examples of incentives that are practical,” he said.
The city’s housing policy set a goal of growing the Affordable Housing Trust Fund to $10 million in the first five years. Neither the committee nor the city has said how it will reach that goal if it uses all available funding each year.
Under the funding recommendations, the balance of the fund would be $0 after the two funding rounds run their course.