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2025-004 ISR - Affordable Housing Bond Program November 1,2024 Report No. 2025-004 INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Affordable Housing Bond Strategy and Timeline BACKGROUND: Affordable Housing Strategic Toolkit In February 2022, The City of Denton adopted the Affordable Housing Strategic Toolkit (ID 22- 090), which outlined 17 actions to increase affordable housing in Denton. The toolkit identified a need for 4,314 new homes for households earning below the Area Median Income by 2030, with a target of producing 1,740 homes through these actions. The 2023 Affordable Housing Bond program, as proposed, is estimated to produce 401 affordable homes, leveraging $5.68 private dollars for every bond dollar invested. HOUSING GOALS Total Need: 4,314 RENTAL HOUSING HOMEOWNERSHIP 1600 — 1000 400 900 627 574 800 1200 LLI LI 700 m 1000 m Q Q 600 Qe 800 Of 500 4 O O 31 LL LL 400 363 LL 600 LL 344 � 300 (L 400 (L z z 200 200 • 235 100 p 0 Very Low Income Low-Income Moderate Income Very Low Income Low-Income Moderate Income (<50%AMI) (50-80%AMP (80-100%AMP (�50%AMI) (50-80%AMI) (80-100%AMI) *Toolkit Goal Remaining Need *Toolkit Goal -.Remaining Need Figure 1 2023 Bond Election On November 7, 2023, residents approved an Affordable Housing Bond for $15.0 Million. The funds will be released in three annual installments of$5.0 Million, starting in Fiscal Year 2024- 25. November 1,2024 Report No. 2025-004 Affordable Housing Bond Priorities Work Session On August 6, 2024, during a Council Work Session (ID 24-287) the City Council gave direction to proceed with developing the proposed bond program activities for Council review and consideration Proposed Budget—Housing Bond M Proposed Activities and Programs FY2024-25 FY2025-26 FY2026-27 TOTA L Impact AIL -Z Direct Project Financing $2,500,000 $2,500,000 $2,500,000 $7,500,000 201 Homes Small Developer Financing $500,000 $500,000 $500,000 $1,500,000 40 Homes Community Land Trust $1,500,000 $1,500,000 $1,500,000 $4,500,000 120 Homes Accessory Dwelling Unit Program $400,000 $400,000 40 Homes Homebuyer Assistance Program $200,000 $200,000 $400,000 8 Households (Expansion) Housing Choice Voucher Homebuyer $200,000 $200,000 $400,000 8 Households Program Access to Counsel Program $100,000 $100,000 $100,000 $300,000 530 Households Figure 2 During the Work Session, Council requested additional information on the following: • The capacity of proposed programs to meet housing production goals • Land Acquisition Activities • Eviction Prevention(Access to Counsel)program management and eligibility • Similar programs managed by other Cities • Definitions of affordable housing and affordability DISCUSSION: Overview of Planned Activities and Their Alignment with Council's Questions Below is an overview of the planned activities, their purposes, timeline, and targeted actions that directly address the questions raised by the Council during the Affordable Housing Work Session. Each section below has been organized to align with the Council's specific requests, showing how each program will support the toolkit goals and contribute to affordable housing development. Each program includes targeted production estimates contributing to the citywide goal of producing affordable homes. 1. Housing Finance Corporation Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Establish a Housing Finance Corporation (HFC) to manage affordable housing projects and support housing development, ensuring Denton can meet housing production goals through organized financing and project oversight (Exhibit 1). November 1,2024 Report No. 2025-004 Funding and Program Management • Establishment of HFC: The HFC model is a common approach among Texas cities for affordable housing project financing and is authorized under Chapter 394 of the Texas Local Government Code. • Program Management: The HFC will manage and approve applications for key bond programs, such as Direct Project Financing Programs, Land Acquisition, and Community Land Trust, among others. Estimated Timeline: • Work Session: January 2025 • Council Consideration: January 2025 • Initial Board Meeting: March 2025 • Applications Open: April 2025 Planned Actions: • Form an HFC to facilitate financing options, oversee affordable housing initiatives, and manage bond program applications. 2. Direct Financing Toolkit Activity Proposed Budget Estimated Home Production 3.0 $7,500,000 201 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Provide seed funding for a low-interest revolving loan fund to finance the production of affordable homes, enabling Denton to meet its affordable housing production goals (Exhibit 2). • Impact: This program is expected to produce 201 affordable ownership and rental homes, leveraging an additional $42,633,048 in private funds for a broader public benefit. Program Eligibility and Management • Eligibility: Applicants must have a residential development proposal within Denton City limits, serving: o At least 50% low-income household, including 0 25%very low and/or extremely low-income households. Funding and Monitoring Measures • Funding: $7,500,000 ($2,500,000 per fiscal year) • Measures/Contract: o Rental developments must submit annual rent approval sheets to monitor compliance and demographic data. on an annual basis. November 1,2024 Report No. 2025-004 o Ownership homes will report demographic data and sales price at the time of sale. o All data, including home production and private funds leveraged, will be reported on the City's website and in an annual report to Council. Estimated Timeline • Work Session: January 2025 • Council Consideration: January 2025 • Applications Open: April 2025 Planned Actions • Funding Cycle: Issue annual Notice of Funding Opportunity each year for three years. 3. Small Developer Finance Toolkit Activity Proposed Budget Home Production Estimate 3.A $1,500,000 40 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Provide targeted financing for local developers to build and preserve affordable housing, supporting Denton's goal of increasing affordable housing production(Exhibit 3). • Impact: The program is expected to produce 40 affordable ownership and rental homes built and to leverage $8,526,610 in private funds for broader community benefit. Program Eligibility and Management • Eligibility: Eligible Applicants must: o Be local to Denton, TX o Bea 501(c)(3) or a small for-profit developer o Have a residential development proposal within Denton city limits, serving: ■ At least 50% low-income household, including ■ 25%very low and/or extremely low-income households. Funding and Monitoring Measures • Funding: Total program budget of$1,500,000 distributed as $500,000 annually over three year) • Measures/Contract Compliance: o Rental developments must submit annual rent approval sheets to monitor compliance and demographic data. on an annual basis. o Ownership homes will report demographic data and sales price at the time of sale. o All data, including home production and private funds leveraged, will be reported on the City's website and in an annual report to Council. November 1,2024 Report No. 2025-004 Estimated Timeline: • Work Session: March 2025 • Council Consideration: March 2025 • Grant Cycle Open: April 2025 • Awards: June 2025 Planned Actions: • Funding Cycle: Issue annual Notice of Funding Opportunity each year for three years to support the ongoing development of affordable housing. 4. Community Land Trust(CLT) Toolkit Activity Proposed Budget Home Production Estimate 4.A $4,500,000 120 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Establish a CLT authorized under Chapter 373B of the Texas Local Government Code to ensure long-term affordability by separating land ownership from homeownership (Exhibit 4). This program aims to secure affordable homeownership for low-income households with a focus on long-term affordability. • Impact: The CLT is projected to produce 120 affordable homes,with funding allocated to sustain and expand affordable housing stock. Program Funding and Management • Funding: The program is allocated a budget of$4,500,000, with annual disbursements of $1,500,000 over three years. • Measures/Reporting: o The CLT will report annually on the number of homes produced, sales prices, and a basic demographic overview of homeowners. o This information will be published on the City's website and included in an annual report to Council to ensure transparency and compliance with program goals. Estimated Timeline: • Work Session: April 2025 • Council Consideration: May 2025 • Request for Proposals (RFP) Open: June 2025 (If applicable) • Ordinance and Award: September 2025 Planned Actions to Ensure Long-term Affordability: November 1,2024 Report No. 2025-004 • Establish a CLT to preserve affordable housing prices for future buyers, maintaining long-term affordability for homes rehabilitated or newly constructed for low-income homeownership. • Utilize shared ownership structures to ensure affordability through the CLT framework, following Chapter 373B of the Texas Local Government Codes. 5. Accessory Dwelling Unit(ADU) Program Toolkit Activity Proposed Budget Home Production Estimate LB $400,000.00 40 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Develop `Permit Ready' design plans for ADUs and offer forgivable loans to property owners who rent ADUs to low-income tenants, contributing to the city's affordable housing stock(Exhibit 5). • Impact: The program is projected to facilitate the construction of 40 ADU's, leveraging $2,273,763 in private funds to maximize public benefit. Program Funding and Management • Funding: The program has a total budget of$1,500,000, allocated as $500,000 per fiscal year. • Eligibility: o Eligible Applicants must be licensed engineers or architects and must design an ADU that complies with the Denton Development Code, International Building Code, and other site-specific requirements. Measures and Reporting • Measures/Reporting o Community Services and Development Services will coordinate to report the number of ADU's built using the ADU catalog. o Data on program uptake and ADU production will be made available on the City's website and included in an annual report to Council. Estimated Timeline: • Council Consideration: May 2025 • Request for Proposals (RFP) Open: June 2025 • Catalogue Released: September 2025 • Financing Program Open: October 2025 Planned Actions to Support ADU Development: November 1,2024 Report No. 2025-004 • Issue an RFP to invite architects to submit `Permit Ready' ADU design plans. The plans will be compiled into an accessible catalog, providing homeowners with streamlined, cost-effective design options. • Offer$10,000 forgivable loans to homeowners who agree to build an ADU and rent it to low-income tenants for a minimum of five years. 6. Homebuyer Assistance Program Toolkit Activity Proposed Budget New Homeowners 4.D $400,000.00 8 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Expand the down payment assistance program to support low-income buyers in purchasing their first homes, helping Denton increase homeownership opportunities for underserved residents (Exhibit 6). • Impact: The program aims to assist at least 8 low-income households in purchasing their first home,contributing to the city's affordable housing goals. Program Funding and Management • Funding: Total budget of$400,000, with $200,000 allocated for each fiscal year in 2026 and 2027) • Eligibility: Applicants must: o Be purchasing a home within Denton City Limits • Not have owned a home in past 3 years • Be a low-income household Measures and Reporting • Measures/Reporting: o Community Services staff will report annually on the number of homebuyers served,providing transparency on the program's impact. Estimated Timeline: • Funds available: October 2025 • Renewed Marketing Strategy: Begins February 2025 Planned Actions to Support Homeownership: • Expand marketing efforts, including targeted outreach to employees of major local employers. • Increase down payment assistance amounts to make more homes accessible to low- income buyers. • Allocate funds for home repairs to ensure homes meet current safety standards and are accessible to low-income buyers. November 1,2024 Report No. 2025-004 7. Housing Choice Voucher Homebuyer Program Toolkit Activity Proposed Budget New Homeowners 3.1) $400,000.00 8 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals • Purpose: Provide down payment assistance for Housing Choice Voucher holders to support homeownership (Exhibit 7). • Impact: Assist at least 8 Housing Choice Voucher holders with the purchase of their first home Program Funding and Management • Funding: $400,000 ($200,000 each in fiscal years 2026 and 2027) • Eligibility: Applicants must: o Be purchasing a home within Denton City Limits o Hold a Housing Choice Voucher issued by the Denton Housing Authority o Not have owned a home in the past 3 years o Be a low-income household Measures and Reporting • Measures/Reporting: o Community Services staff will report annually on the number of homebuyers served,providing regular updates on the program's outcomes. Estimated Timeline: • Funds Available: October 2025 Planned Actions to Support Homeownership for Voucher Holders: • Partner with Denton Housing Authority to provide down payment assistance specifically for Housing Choice Voucher holders, ensuring that this group has access to dedicated support for purchasing a home. 8. Access to Counsel Program Toolkit Activity Proposed Budget Households Stabilized 5.A $300,000.00 530 Council Question: Capacity of Proposed Programs to Meet Housing Production Goals November 1, 2024 Report No. 2025-004 Purpose: Provide legal assistance to residents facing eviction, to promote housing stability and ensure legal compliance in eviction processes, helping to reduce housing stability in Denton(Exhibit 8). • Impact: The program aims to stabilize housing fort at least 530 households by assisting them in remaining in their home or securing additional time to relocate. • Funding: The program has a total proposed budget of$300,000 with annual allocations of $100,000 over three years. • Eligibility: o Organization applying to manage the program must: ■ Be a 501(c)(3) ■ Have experience providing same-day legal assistance to residents facing eviction ■ Commit staff to attend eviction proceedings for City of Denton residents. o Households assisted must: ■ Be a Denton resident ■ Have an income below AMI Measures and Reporting • Measures/Reporting: o The managing organization will report: ■ The number of households served and their outcomes ■ Household Income and demographic data (e.g., race, disability status, female head of household) ■ Geographic data(Zip Code data) o Data will be reported on the City's website and in an annual report to Council. Estimated Timeline: • Work Session: Early February 2026 • Council Consideration: Late February 2026 • RFP Open: March 2026 • Award: June 2026 Planned Actions to Support Eviction Prevention: • Allocate funds to a nonprofit organization for legal representation, which includes supporting residents through legal eviction processes, dispute resolution, and securing alternative housing if needed to enhance housing stability for Denton residents. November 1,2024 Report No. 2025-004 Final Summary The Affordable Housing Bond initiatives outlined are designed to address Denton's critical housing needs by increasing affordable housing options. With a combined funding of$15 million allocated over three years, the proposed programs include diverse strategies such as direct financing for new affordable developments, support for small local developers, establishment of a Community Land Trust for long-term affordability, expansion of accessory dwelling units, expanding homebuyer assistance, and targeted support for Housing Choice Voucher holders. Additionally, an Access to Counsel Program will provide access to legal assistance to residents facing eviction,promoting housing stability and preventing displacement. For a more detailed exploration of each initiative's potential impact on housing affordability, please refer to the attached exhibits. These provide an in-depth look at the strategies funded by the Affordable Housing Bond, allowing for a clear, detailed understanding that will assist Council in making informed decisions about these affordable housing efforts. Examples of similar programs used by other Texas cities are referenced to provide comparative insights, showing how Denton's approach aligns with best practices in affordable housing.Finally,Exhibit 9 offers clear definitions of "affordable housing" and "affordability" to ensure consistent understanding, specifying the income levels served (e.g., extremely low, very low, and low incomes) in relation to the area median income (AMI). Each program will be brought individually to the City Council for consideration. The estimated timeline is in Exhibit 10, and detailed information on each program is provided in the attached exhibits. Regular updates will be provided to the Council and the public to ensure transparency and responsiveness to evolving housing challenges in Denton EXHIBITS: 1. Exhibit 1 —Housing Finance Corporation 2. Exhibit 2—Revolving Loan Fund 3. Exhibit 3 —Small Developer Finance 4. Exhibit 4—Community Land Trust 5. Exhibit 5 —Accessory Dwelling Unit 6. Exhibit 6—Homebuyer Assistance Program 7. Exhibit 7—Housing Choice Voucher Homebuyer Program 8. Exhibit 8—Access to Counsel 9. Exhibit 9—Affordability in Denton 10. Exhibit 10—Estimated Timeline Overview STAFF CONTACT: Leia Atkinson, Housing Programs Coordinator REOUESTOR: City Council November 1, 2024 Report No. 2025-004 STAFF TIME TO COMPLETE REPORT: 46 hours PARTICIPATING DEPARTMENTS: N/A 41-11.gcw� DENTON Housing Finance Corporation What is a Housing Finance Corporation? A Housing Finance Corporation (HFC) is a nonprofit instrumentality of the government office that sponsored its creation,to finance development that will provide decent, safe, and sanitary housing at affordable prices for residents. Most Texas cities which finance housing do so through a Housing Finance Corporation. This tool is authorized by Chapter 394 of Texas Local Government Code. How Does It Work? • Board of Directors: Often the board of directors for a City's Housing Finance Corporation is made of that City's council members. Meetings are typically held prior to City Council meetings as needed or on a monthly schedule. • Limited Liability: Bonds issued by a Housing Finance Corporation are limited obligations of the Housing Finance Corporation, and not the local government which created it. This protects the financial interests of the City. Why is this Important? The Housing Finance Corporation is crucial as a tool for dispersing housing investments in a fiscally responsible way.This tool also helps to streamline decision making. By creating a separate entity with its own meeting schedule dedicated to housing investment, decisions on large investments can stay with City leadership without needing to take time from regular City Council meetings. What's the difference between an HFC and a PFC? Although both an HFC and a PFC are non-profit corporations and public instrumentalities for the purpose of creating affordable housing, they operate in different ways.While a PFC has the ability to partner on developments and offer tax benefits, an HFC has the ability to offer financing to developments providing affordability. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Housing Finance Corporation Next Steps for establishing an HFC: 1. Ordinance: City Council could vote in favor of a resolution establishing Denton City Housing Finance Corporation, including approving the articles of incorporation. 2. Filing with Texas Secretary of State: City staff would file for a non-profit status, registering the HFC with the Texas Secretary of State. 3. Initial Meeting: The initial meeting of the HFC would be held before City Council, voting to establish by-laws and procedures for the initial direct project financing program. Similar Housing Finance Corporation Programs Reviewed: • Austin, TX: Austin has used an HFC to successfully implement housing solutions for four decades. They have used this program to disperse bond funding, as well as other funding sources. Through their HFC, they have financed rental housing, ownership housing, managed a Community Land Trust, and much more. • Fort Worth, TX: Fort Worth has also operated an HFC for four decades and used this tool to finance rental and ownership housing. Since its establishment, Fort Worth Housing Finance Corporation has leveraged other funding sources and public-private partnerships to construct 1,771 new homes. Considerations: • Determine the level of involvement and direct decision-making power City Council would like to maintain for each program for each program under the HFC balancing oversight with program flexibility. • Consider the frequency and format of regular updates Council would like to receive on program accomplishments during HFC meetings, ensuring transparency and accountability. • Establish decision making priorities that promote equitable, successful, and sustainable partnerships with developers and stakeholders, ensuring that programs align with the City's long-term housing goals. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Homebuyer Assistance Program Revolving Loan Fund What is a Revolving Loan Fund? A revolving loan fund allows Cities to offer financing to developers for the construction of housing affordable to residents.The financing is low interest, making it preferable to financing from a bank and allowing the cost savings to be passed along to residents. However, the financing is still a loan that will need to be repaid over time, ensuring that the funding will remain available for development for as long as it's needed, making it a sustainable tool for the City. How Does It Work? • Application: Developments apply with the City for financing from the revolving loan fund. City staff will present any application(s) to the Housing Finance Corp. at the next available meeting. • Criteria: HFC will approve, deny, and prioritize applications based on written standards agreed upon to advance the City's goals. Criteria can include, but is not limited to: The Developer's experience, supportive services offered, special populations served, amount of leverage provided, etc. • Post-Award: A third-party partner will manage the loan services for the Housing Finance Corporation while City staff monitor the development's affordability. Why is this Important? Development is expensive. Of the five Housing Tax Credit Resolution of Support applications the City received in 2024, cost per unit estimates ranged from $223,430 to $327,492 per unit. Revolving loan funds are used by many cities to help affordable developments get built in a competitive market. They are an effective tool to leverage private investment for the benefit of residents. Next Steps for Establishing a Revolving Loan Program: 1. Housing Finance Corporation:The City could forma Housing Finance Corporation (HFC), a separate non-profit instrumentality of the City to provide financing through, limiting the financial liability to the City and setting aside separate time for the HFC board,which would Community Services —Affordable Housing Bond Strategy 1 Informal Report on Revolving Loan Fund be composed of City Councilmembers, to make decisions outside of regular City Council meetings. 2. Establish Criteria: The Housing Finance Corporation will establish an investment policy, criteria for applications, and standards for procedures. This allows for funding decisions to be made in a transparent, equitable way. Similar Revolving Loan Programs Reviewed: • Houston, TX: Houston Housing Finance Corp was established in 1979 and has financed 560 affordable single-family homes and 1,251 rental homes, in addition to historic rehab projects such as converting the Rice Hotel and Texaco building into affordable housing. • Austin, TX: Austin Housing Finance Corporation was established in 1979 and has invested in countless developments since then. With 2013 and 2018 General Obligation bonds alone,the city leveraged $5.68 from the private sector for every dollar invested.With these two bonds, the city produced over 3,700 affordable homes, with the cost to the city averaging $37,397 per home. • Dallas, TX: Dallas Housing Finance Corporation was established in 1984 and manages a portfolio of approximately 20 developments. In 2023, the HFC approved and closed five projects, creating 1,240 units with $304,000,000 of City funding. Considerations: • Identify the priorities and criteria Council would like to see included in the investment policy and any application scoring matrix, such as affordability targets, project sustainability, community impact, or developer capacity. • Explore other ways Council can support affordable development, such as considering zoning amendments, density bonuses, or streamlining the approval process to encourage the creation of affordable housing units. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Revolving Loan Fund Small Developer Fund What is a Small Developer Fund? A small developer fund is much like a revolving loan fund, only reserved for local, small and non- profit developers. The funds may be more flexible, and financing may be a zero-interest or even forgivable loan. The fund is still used exclusively for the development of affordable housing, but with the secondary purpose of supporting small and non-profit developers that operate locally. This way funds stay in the City, and local expertise is built among developers invested in Denton. How Does It Work? • Application: Developments apply with the City for financing from the small developer fund. City staff will present any application(s) to the Housing Finance Corp. at the next available meeting. • Criteria: HFC will approve, deny, and prioritize applications based on written standards agreed upon to advance the City's goals. Criteria can include, but is not limited to: The Developer's experience and history serving Denton, supportive services offered, special populations served, amount of leverage provided, etc. • Post-Award: A third party partner will manage the loan services for the Housing Finance Corporation while City staff monitor the development's affordability. Why is this Important? Small and non-profit developers are important contributors to infill development, often integrating smaller projects into established neighborhoods while being mindful of neighborhood character and residents' needs. Supporting the growth and expertise of local organizations has long-term benefits for Denton's community and economy, ensuring that the City can collaborate with stronger partners to achieve its future goals. Next Steps for establishing a Small Developer Fund: 1. Revolving Loan Fund: A Small Developer Fund would function within the framework of an existing Revolving Loan Fund, leveraging much of the same infrastructure. However, it would focus on a different target applicant and include slightly adjusted criteria to cater to small and non-profit developers. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Small Developer Fund 2. Establish Criteria: The Housing Finance Corporation will develop specific criteria for the Small Developer Fund to ensure it meets the unique needs of this developer group. Considerations: • Consider priorities and criteria Council would like to see incorporated into a application scoring matrix for Small Developer Fund, such as project affordability, community impact, and developer experience. • Explore other ways the City can assist small and non-profit developers such as providing development catalogues, offering technical assistance, or facilitating connections to resources that support project success. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Small Developer Fund Community Land Trust (CLT) What is a Community Land Trust? A Community Land Trust (CLT) is a nonprofit organization that creates long-term affordable housing by separating the ownership of land from the buildings on it. The homeowner owns the house, while the CLT owns the land. This model helps maintain affordable housing prices by removing the cost of land from the home purchase, significantly reducing the price and ensuring homes remain affordable over time. This tool is authorized by Chapter 373B of Texas Local Government Code. How Does It Work? • Shared Ownership Model: Homeowners purchase a home but lease the land from the CLT under a long-term, renewable, and inheritable lease (typically 99 years). This lease allows them to use the land exclusively while keeping the cost of purchasing the home lower. • Permanent Affordability:The CLT retains ownership of the land, and when a homeowner decides to sell, the home must be sold at a price affordable to another low-income buyer. This arrangement prevents market forces from driving up the price, preserving the affordability of the home for future generations. • Property Tax Benefits: Under Texas law, CLT homeowners benefit from stabilized property taxes. The property is appraised based on its use as affordable housing rather than market value, reducing the property tax burden for homeowners and helping maintain affordability. The property tax benefits are established by Subtitle C.11.1827 and Subtitle D.23.21 of Texas Property Tax Code. Why is this Important? The CLT model ensures permanent housing affordability by offering long-term solutions that protect residents from displacement due to rising property values and gentrification while also promoting community stability by allowing low-income families to build equity without the burden of escalating housing costs. Next Steps for establishing a CLT: Community Services —Affordable Housing Bond Strategy 1 Informal Report on Community Land Trusts Considering two options for establishing a CLT: 1. Partnering with a Nonprofit: The City could provide start-up funding to a nonprofit organization interested in creating and managing a CLT. This option leverages the expertise of established housing organizations and minimizes the need for city staff to manage the CLT directly. 2. City-Managed CLT under the Housing Finance Corporation (HFC): Alternatively, the City could manage the CLT directly through the Housing Finance Corporation (HFC), providing more control over the properties and ensuring alignment with broader city goals. City Council will discuss these options in upcoming work sessions and decide on the most viable path forward. The chosen option will involve releasing a Request for Proposals (RFP) for nonprofit partners or developing internal infrastructure for a city-managed CLT. Similar Community Land Trust Programs Reviewed: • Austin, TX: The Austin CLT has successfully preserved affordable housing for over a decade, providing a sustainable model for affordability amidst rapid urban development. • Houston,TX:The Houston Community Land Trust focuses on keeping housing affordable in high-opportunity neighborhoods, ensuring economic diversity. Considerations: • Assess the initial costs and ongoing funding requirements necessary to support a CLT, including staffing, maintenance, and operational needs. • Explore the potential for leveraging public, private, and philanthropic investments to maximize the financial sustainability of the CLT and reduce reliance on City funding. • Evaluate the capacity of existing nonprofits to manage a CLT compared to the potential administrative burden on City staff, ensuring the most efficient and effective approach to long-term oversight. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Community Land Trusts 41.&IMMOM DENTON Accessory Dwelling Unit (ADU) Catalogue What is an Accessory Dwelling Unit? An Accessory Dwelling Unit (ADU) is a subordinate dwelling unit added to, created within, or detached from a single-family residence that provides basic requirements for living, sleeping, cooking, and sanitation. It is often called a "Backyard Cottage". What is a Permit-Ready Catalogue? A Permit-Ready Catalogue is a collection of design plans that satisfy both the local Development Code and International Building Code. These designs are created with the intention of being practical in many different lots. It remains up to the individual builder to determine site-specific details. Permit-Ready Catalogues are offered in many cities to increase affordability and efficiency. Across the country, Permit-Ready Catalogues are used for many different types of housing products, but the most common is ADU's. How Does It Work? • Cost Reduction: By saving homeowners the cost of attaining design plans and permitting time, the City can make ADU construction more accessible than ever. Not only will this increase the housing stock overall, but those cost savings can be passed along to the resident that rents the ADU, creating an affordable option. Why is this Important? Accessory Dwelling Units are a way of introducing 'gentle density' — increasing housing stock without disrupting the character of an established neighborhood.They are a great option for both young adults and seniors, who account for 36% of Denton when combined. Next Steps for establishing an ADU Catalogue: 1. Request for Proposals: The City would release a Request for Proposals (RFP) for licensed architects and engineers to design Permit-Ready ADU's for the catalogue. 2. Selection: The City will select a variety of ADU designs from the RFP, intentionally including different sizes and architectural styles. These designs will be compiled into a catalogue and published on the City website. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Accessory Dwelling Unit (ADU) Catalogue Similar ADU Catalogues Programs Reviewed: • San Diego, CA: The County of San Diego, California has six building plans available, ranging from 600-1200 sq ft. In addition, they have a 24-page guidebook to ADU construction for Homeowners. Since publishing the catalogue in late 2019, more than 8,539 permits have been issued for the construction of ADU's. In 2023, 3,374 ADU permits were issued, triple the amount issued in 2019. • Seattle, WA: Seattle, Washington published 10 pre-approved ADU plans which could be purchased directly from the local architect who designed them. In the 2 years following their release, those plans were permitted 130 times. Considerations: • Determine whether the RFP should be structured so that the City pays upfront for design services, allowing homeowners to access these designs at no cost, or if homeowners should pay local architects directly. Any remaining funds could be allocated for grants to support ADU construction when the unit is leased at an affordable rate. • Explore additional ways the City can promote ADU construction, such as adjusting parking requirements in the Denton Development Code, developing a guidebook to streamline the process, or hosting information sessions to educate the public about ADU benefits and requirements. Community Services —Affordable Housing Bond Strategy Informal Report on Affordability in Denton Homebuyer Assistance Program What is the Homebuyer Assistance Program? Denton's Homebuyer Assistance Program has been in operation since 1991, providing financial support to help low-income families purchase homes. The program offers down payment assistance and, under the new bond funding, could expand to cover home repairs and safety improvements.The program aims to increase homeownership rates among low-income residents by making homes more affordable and addressing barriers such as upfront costs. How Does It Work? • Down Payment Assistance:The program currently offers up to $50,000 in down payment assistance to eligible low-income buyers. This amount is expected to increase with bond funding, allowing more families to afford homes. • Targeted Outreach and Marketing: The program will enhance its outreach efforts to ensure more eligible residents are aware of and can access the assistance. This includes targeted marketing to employees of major local employers, who may benefit from stable housing. • Funding for Home Repairs: The program plans to allocate part of the bond funds for essential repairs to ensure that homes purchased under this program meet current safety standards. This will help preserve the housing stock and make more homes viable for purchase. Why is this Important? Homeownership is a crucial pathway to financial stability and wealth-building for families. However, with rising home prices, many low-income residents find it increasingly difficult to purchase homes, even with assistance. The enhanced Homebuyer Assistance Program addresses these barriers by: • Increasing the amount of down payment assistance. • Providing funds for necessary repairs to make more homes eligible. • Expanding awareness through targeted marketing efforts. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Homebuyer Assistance Program Challenges and Opportunities: • Market Constraints: The current housing market in Denton, with an average home price of $370,044, makes it difficult for low-income households to find affordable options. Enhancing this program will require careful targeting and potentially additional funding to bridge the affordability gap. • Collaborative Opportunities: Partnering with local employers and community organizations can help identify eligible buyers and expand the program's reach. Similar Homebuyer Assistance Programs Reviewed: • Chicago, IL: Chicago's Homebuyer Assistance Program has significantly increased homeownership rates in targeted neighborhoods by offering substantial down payment assistance combined with financial education. • San Francisco,CA:The city has used down payment assistance programs to retain middle- income residents, demonstrating the broader potential of such initiatives. Considerations: • Determine the appropriate level of financial assistance to maximize the program's impact, balancing effectiveness with available resources. • Evaluate the program's reach to ensure equitable access for all eligible Denton residents, prioritizing inclusivity and addressing potential barriers. • Assess potential partnerships with community organizations, nonprofits, or private entities to enhance the delivery and effectiveness of the program. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Homebuyer Assistance Program Housing Choice Voucher (HCV) Homebuyer Program What is the HCV Homebuyer Program? A Housing Choice Voucher Homebuyer Program operates similarly to the main Homebuyer Assistance Program, only serving a special population.The Denton Housing Authority(DHA) offers residents Housing Choice Vouchers (HCV), which allow a very low-income household to spend no more than 30% of their household income towards their rent, while the voucher covers the remainder. DHA offers a special Homeownership program to allow those vouchers to pay towards a mortgage for 15 years. However, the transition from renting to homeownership can be challenging for very low-income households due to strict mortgage qualification requirements. Down payment assistance can help bridge this gap. A program designed to provide down payment assistance for HCV households would support the existing homeownership program and target a population facing higher barriers to homeownership. How Does It Work? • Progressive Engagement: A HCV Homebuyer program operates using a 'Progressive Engagement' model, meaning that a household with higher barriers may require additional support to reach their goal. In this program, the City can offer higher amounts of assistance to ensure households can successfully transition into homeownership. • Collective Impact: The program also adopts a 'Collective Impact' model, where responsibility and commitment to success are shared across multiple organizations. This collaborative effort includes the Denton Housing Authority(DHA), along with stakeholders such as lenders and real estate agents, working together towards a common goal of supporting homeownership for HCV participants Why is this Important? Homeownership is a key pathway to financial stability and wealth-building for families. While Housing Choice Vouchers (HCV) offer a long-term rental solution, they require ongoing investment from DHA. By supporting a family's transition into homeownership, DHA can pass the voucher to another household in need,while the new homeowners benefit from long-term wealth building. However, despite assistance, rising home prices make it increasingly difficult for very- low and extremely-low income households to qualify for mortgages. The HCV Homebuyer Program addresses these barriers by: Community Services —Affordable Housing Bond Strategy 1 Informal Report on Homebuyer Assistance Program • Offering increased down payment assistance. • Providing funds for necessary repairs to make more homes eligible. • Expanding awareness through targeted marketing efforts. Considerations: • Explore strategies to engage lenders and real estate agents to expand opportunities for very-low income homebuyers, ensuring they have access to the support needed throughout the homebuying process. • Identify opportunities to increase the availability of housing naturally affordable to very- low income homebuyers, such as cottage courts, small homes, and community land trusts, to create more accessible options for these households. • Consider additional opportunities to collaborate with and strengthen DHA, ensuring the long-term success of the HCV Homebuyer Program and similar initiatives aimed at increasing homeownership among very-low income residents. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Homebuyer Assistance Program Access to Counsel What is Access to Counsel? An Access to Counsel program provides no cost same-day legal assistance to households facing eviction. The goal is to ensure that tenants' rights are observed during the eviction process and prevent illegal evictions. Often, this results in tenants having more time to resolve the issue with property management or identify another housing option, diverting them from homelessness. How Does It Work? • Non-Profit Partnership:The City would partner with a local non-profit that is experienced in assisting households facing eviction. The non-profit would attend eviction court in the three Denton County courts that hear cases from City of Denton and offer their services to City of Denton Residents at no cost to them. • Regular Reporting: On a quarterly basis, the non-profit will report to the City the number of households served as well as basic demographic overview of recipients. Why is this Important? In 2023, 1,769 Denton households faced eviction filings.Only 1.6% had legal representation.When unrepresented, tenants lost 57% of cases. An Access to Counsel study in Oklahoma and Tulsa counties found that 94% of clients avoided eviction judgments, and 98% secured more time to move when represented. For every dollar invested, $2.63 was saved in city, shelter, school, and public healthcare costs. Access to Counsel program can offer benefits to landlords as well: 1. Encourages Mediation and Settlements: With legal representation, tenants and landlords are more likely to engage in mediation or reach settlements, which can lead to mutually agreeable outcomes without the need for prolonged court proceedings. 2. Reduces Costs and Delays: By resolving disputes more efficiently, the program helps landlords avoid the costs associated with lengthy legal processes, such as court fees, legal fees, and extended vacancies. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Affordability in Denton 3. Ensures Legal Compliance: Landlords benefit from the program's focus on ensuring that all parties follow proper legal procedures. This can prevent future legal disputes and maintain a fair and predictable process. 4. Stabilizes Tenancies: In some cases, access to counsel can result in tenants staying in their homes with a payment plan or rental assistance, ensuring landlords continue to receive rental income rather than face the cost and uncertainty of finding new tenants. Next Steps for establishing an Access to Counsel Program: 1. Notice of Funding Opportunity:The City would release a Notice of Funding Opportunity (NOFO) for non-profits experienced in provide legal assistance to households facing eviction. 2. Selection: The City will select and secure a contract with a non-profit. The non-profit will manage the program and provide services, reporting regularly to the City. Similar Access to Counsel Programs Reviewed: • Cleveland, OH: Cleveland, Ohio enacted an Access to Counsel program in July 2020 and has continued running the program since. In 2023 alone, the program was able to prevent evictions for 884 clients and secure an additional 30 days to move for 599 clients. • San Francisco, CA: San Francisco implemented a program in July 2019 based on a progressive engagement model — offering households only the level of assistance that household needed — ranging from answering a question to limited scope and full scope representation. In April 2024, they reported that 92% of clients represented through the program avoided homelessness. Of their clients, 83% were Extremely Below Income, or below 30% of the Area Median Income. Only 2% were above 80% of the Area Median Income. Considerations: • Identify the basic demographic information Council would like to see in program reporting, such as age, income level, household size, race/ethnicity, and tenure in the city, to better understand the population served. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Affordability in Denton • Explore additional ways the City can empower tenants, such as offering tenant rights workshops, landlord education programs, or creating accessible resources to help tenants understand their rights and responsibilities. Community Services —Affordable Housing Bond Strategy 3 Informal Report on Affordability in Denton 41%,1000M DENTON Affordability in Denton Understanding Housing Affordability in Denton Affordability in Denton is a growing concern as housing costs rise faster than incomes, particularly for low-income families. The U.S. Department of Housing and Urban Development (HUD) defines "affordable" as housing that costs no more than 30% of a household's income. Denton has a significant proportion of low-income households, many of which are severely cost-burdened, meaning they spend more than 50% of their income on housing. Key Statistics: • 48% of Denton households are low-income: These households earn less than 80% of the Area Median Income Cost Burdened (AMI), adjusted for household size. 007 • Severe Cost Burden: 38% of low-income households are 00 severely cost-burdened, spending over half their income00000 on housing. Among extremely low-income households (0- 30% of AMI), 88% face severe cost burdens. Why is this Important? High housing costs lead to financial instability and can force families to choose between housing and other essential needs like healthcare, education, and food. Ensuring affordable housing is crucial to: • Preventing Displacement: Rising costs can force long-term residents to move out, disrupting communities. • Promoting Economic Diversity: Affordable housing enables a mix of incomes and occupations, contributing to a vibrant, diverse community. • Supporting Workforce Retention: Housing affordability is critical for retaining essential workers, such as teachers, healthcare workers, and first responders. Community Services —Affordable Housing Bond Strategy 1 Informal Report on Affordability in Denton Denton's Strategy to Improve Affordability: • Affordable Housing Bond: The $15 million bond approved by voters is a significant step toward addressing these challenges. It funds initiatives like the CLT, Homebuyer Assistance Program, and Access to Counsel Program, which collectively aim to reduce the housing burden for low-income families. • Data-Driven Approaches:The City is leveraging data on income levels, cost burdens, and housing needs to strategically allocate resources and maximize impact. Considerations: • Develop strategies that address immediate housing needs while ensuring the sustainability of long-term affordability initiatives, ensuring both short-term relief and future stability. • Identify optimal distribution of resources to effectively support residents across all income levels, ensuring equitable access to assistance. • Establish a regular review process to evaluate the effectiveness of funded programs, using data-driven adjustments to enhance program impact and ensure continued alignment with community needs. Community Services —Affordable Housing Bond Strategy 2 Informal Report on Affordability in Denton Complete Tasks Start Date End Date Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Bond Funding Cycle 1 10/01/24 09/30/25 Cycle 1 Cycle 2 10/01/25 09/30/26 U Cycle 3 10/01/26 09/30/27 ❑ Units Created 77 7 Development ] ❑+ 1:A Small Home Communities Program 1 11/01/24 07/31/26 ❑ * 1:13 ADU Program 03/03/25 1 10/01/25 1:13 A U Prog am Strategy 2:Zoning Relief * 2:A Affordable Housing Overlay District 06/25/27 06/29/29 * 2:13 Create Marketing Materials&Outreach to 11/03/23 10/11/24 2:13 Create Marketing Materials&Outreach to Development Community Development Community n 2:C Staff Training 09/26/23 02/29/24 2:C St ff Traini g Strategy 3:Investment in Housing 3.A Small/Non-Profit Developer Financing 01/01/25 03/28/25 3.A Sm II/Non- rofit De eloper inancin ±I 3.13 Developer Affordable Housing Incentive 10/26/23 10/31/24 3.6 Developer Affordable Housing Incentive Package(Toolbox) Package(Toolbox) ❑+ 3.0 Financing Program 08/26/24 07/31/25 3.0 Financing Program * 3.D Low Income Homeownership Program w/ 10/01/25 12/31/25 3.D L w Inco a Horn wners ip Progr m w/ A DHA PreservationStrategy 4: of Affordability ❑ 4.A Community Land Trust Incentive Program 02/03/25 08/30/25 4.A Cor imunity and Tr st Ince tive Program ❑ 4.13 Landlord Rental Maintenance Grant ❑ 4.0 Employee Homeownership Program 08/03/26 07/09/27 Development ❑ 4.D Down Payment Assistance Program 10/01/25 01/30/26 4.D D wn Pay ent As t istance Progra Strategy 5:Education ❑ L1 5.Access to Counsel Program 10/06/25 05/29/26 5.Acce s to Co 0 5.6 Interactive Mapping Tool(GIS) 12/01/22 05/01/23 N 5.0 Denton Housing Authority Landlord 10/05/26 06/25/27 Education Program for HCV 04 01 02 03 04 01 02 03 04 Q1 02 03 04 01 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ----------------------------------------- ----------------------------------------- ----------------------------------------- ----------------------------------------- ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ ----------------------------------------- ----------------------------------------- Estimated Timeline for Council Consideration of Housing Bond Activities Activity Action Date Housing Finance Corporation & Work Session January 2024 Direct Financing Council Consideration January 2024 Small Developer Finance Work Session Early March 2025 Council Consideration Late March 2025 Community Land Trust Work Session April 2025 Council Consideration May 2025 ADU Program Council Consideration May 2025 Access to Counsel Program Work Session Early February, 2026 Council Consideration Late February, 2026