Lottery for eight income-restricted Reed condos approaching as construction ends
(Missoula Current) The developer behind the Reed condominium project near downtown Missoula is finalizing construction and, with it, a lottery slated to determine the buyers of eight deed restricted units is quickly approaching.
The city anticipates the eight affordable units included in the Rowe condominium building, which sits on the larger Reed condo campus on Fourth Street, will attract more qualified buyers than there are units available.
Still, they suggest the arrangement with the developer Cole Bergquist represents a positive step forward in finding unique solutions to the city's affordable housing issue.
“The purpose of conducting the lottery is to ensure the eight condos are sold to existing community members who cannot otherwise access market-rate ownership,” said Brittany Palmer with the North Missoula Community Development Corp, which will conduct the lottery. “We want these homes to provide a unique opportunity for a segment of our community that's currently excluded from home ownership.”
In exchange for a sliver of right-of-way, the Missoula City Council two years ago required the developer to dedicate 20% of the project's housing units as affordable housing. The development includes several dozen market-rate units in the Reed building and eight income-restricted units in the Rowe building.
“We don't have a role in Reed market-rate condos,” said Emily Harris-Shears, the city's housing policy specialist. “This project benefits from that project, absolutely, but our focus has been on the creation of the eight income-restricted units in the Rowe condominium building.”
As required by the city, the price of the eight units cannot exceed 120% of the area median income, which amounts to $68,640 for one individual and $78,360 for a family of two.
Based on those figures, the maximum price the developer could ask for each deed-restricted unit is $302,000. The developer however settled on a sales price of $299,000. The units are each one-bedroom and future sales will be price restricted to retain affordability.
Harris-Shears said that along with the area median income, the pricing formula also considered comparable sales of similarly sized units in the Missoula market. Insurance, property taxes and Home Ownership Association fees were also added since the owners will be responsible for their own maintenance.
“You have to add all those things on. We include those in what was the percentage of affordability,” Harris-Shears said. “Households within that income limit of 120% are still able to afford a monthly mortgage and not pay more than 30% of their income at this price.”
The project was initially controversial for the change it would bring to the southern edge of downtown Missoula, which is slated for future redevelopment. However, as time has passed, the development has emerged as a model of ways the city can extract affordable housing from private developers.
Council member Mirtha Becerra said the city will use the tool again in the future.
“Right-of-way vacations are a fairly new tool we're using in terms of requiring affordable housing,” she said. “It's a tool we're refining and a tool we'll use to set expectations to have some predictability, but at the same time being flexible enough to allow for innovation and have it be opportunistic whenever possible, with the goal of having as much affordability for as long as possible.”
The city has required other developers to include affordable housing in exchange for a right-of-way vacation. Most recently, it agreed to vacate a portion of Sussex Avenue and, in exchange, it required Casa Loma LLC to include 20% of its project's 107 units as affordable housing for a term of 35 years.
However, that project is entirely rental and doesn't compare to an owner-occupied building, such as the Rowe, which has a period of affordability of 75 years.
“The big difference being that the developer is only involved up front on a project where there's ownership opportunities, so their not financially tied to that building for 75 years. It's the people who own it,” said council member Mike Nugent. “Whereas if it's a rental, the developer is forever responsible for maintenance and all that. Those are two entirely different conversations.”
The Reed and the Rowe were also designed in a way to ensure HOA fees were split between buildings, so those in the Rowe don't pay for the higher amenities in the Reed, and vice-versa.
Eligibility requirements for the eight deed-restricted units include income qualifications and $2,500 for closing cots. The city also is considering an asset limit.
Buyers can't own any other real-estate assets and must use the home as their primary residence, Palmer said.
“The homeowners do build equity in the shared equity model,” she said. “These eight deed-restricted condos will help us as a community move toward housing for everybody.”