May 21, 2022

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Edina HRA considers sale of home for $1 to nonprofit | Edina

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The city of Edina is looking to sell a home for $1 to a nonprofit as part of a program to preserve affordable houses for 99 years.

The home, located on the 400 block of Jefferson Avenue, is currently owned by the city’s Housing and Redevelopment Authority. In order for the home to be upgraded and later available to an income-restricted family, the city seeks to sell the property for $1 to the West Hennepin Affordable Housing Land Trust as part of the nonprofit’s Homes Within Reach program.

In 2021, the HRA acquired the home for $150,000. The board bought it because it was vacant, deemed a nuisance and could provide affordable housing, city documents said.

The property had caused “disruption and discontent in the neighborhood for the past two years,” according to the minutes of a February 2020 HRA meeting. City Manager Scott Neal, acting as executive director for the HRA, told the board then that he hoped the property would be “rehabbed and disposed for management by an affordable housing organization.”

The minutes say the board was “pleased” the city could take advantage of the property and suggested going through the route of securing a land trust for the property.

Since 2007, the city has partnered with the West Hennepin Affordable Housing Land Trust on the allocation of the city’s Community Development Block Grant funds. Between then and 2020, the city had placed a total of 16 houses into the land trust as part of the nonprofit’s Homes Within Reach program so that they remain affordable for 99 years, Stephanie Hawkinson, the city’s affordable housing development manager, told the Sun Current.

“It’s a great partnership and has proven to work,” she said.

Homes Within Reach’s work in Edina is facilitated by the city’s Housing Preservation Program, which looks to hold on to smaller single-family homes to ensure affordability and prevent them from being torn down and turned into luxury homes.

When the city launched its Housing Preservation Program in 2020, it saw limited interest, Hawkinson noted. To increase awareness of the program, the city sent postcards to the owners of homes valued at up to $425,000 in the spring of 2021. About 3,200 postcards were sent to homes, asking owners: “Do you want to sell your home, but not for a teardown?”

“All of a sudden there was a flood of interest,” Hawkinson said, prompting city staff to ask the HRA for additional funds in August. The program has since garnered responses from 45 people, which means interest now exceeds current capacity, she added.

Since the spring, six additional homes have been added to the land trust, Hawkinson said. Two purchase agreements have also been secured, she said.

Since its inception, the city’s Housing Preservation Program increased the land trust’s portfolio in the city by 56%, Hawkinson said.

The city and the West Hennepin Affordable Housing Land Trust began conversations after the city reached out about the home last summer, Executive Director Brenda Lano-Wolke told the Sun Current. Then, in January, Lano-Wolke sent an official letter to Hawkinson telling her the nonprofit sought to purchase the title of the property for $1 as part of its Homes Within Reach program.

The nonprofit noted that the program is intended to “create and preserve affordable homeownership in the western suburbs of Hennepin County, using the land trust practice.”

In the letter, Lano-Wolke added that the organization would look to acquire the property, do upgrades as needed and sell to income-eligible homebuyers, who earn between 50-80% area median income.

“We see the purchase … as another positive partnering experience between Edina and (Homes Within Reach),” the letter said.

City Councilmember James Pierce, acting as an HRA member, asked Hawkinson during her March 3 presentation what the process was for finding an eligible homebuyer. Hawkinson responded that it takes from an already-long waiting list of families.

Because the West Hennepin Affordable Housing Land Trust cannot tear down the walls now, it is unable to commit to just a rehabilitation of the structure, though that is the intent, Lano-Wolke said. If not feasible, the land trust would look to demolish the home and rebuild, the letter said.

The letter also states that the home is expected to hold three bedrooms, two bathrooms and a two-car detached garage.

Because of the way community land trust practices work, the land trust holds on to the title of the property. This eliminates land value from affecting the calculation of a mortgage, ensuring initial affordability, city documents show. The homebuyer signs a ground lease for rights and responsibility to the land, including payment of real estate taxes for the land and house, according to the city’s community engagement website, Better Together Edina.

But in the case the homeowner wanted to sell the house, they could only sell to an income-eligible buyer. The selling price, established through a market-based formula, allows the buyer to recoup the cost of the original home with a “modest profit” equal to the home’s appreciation, the city website says.

This mechanism ensures a home’s affordability for 99 years, likely to serve between seven and 12 families, city documents said.

The nonprofit estimated that the property would need about $365,000 in funds for rehabilitation. This expense is why the city is offering to sell the home for only $1, Hawkinson noted.

Selling a home in need of significant upgrades for $1 isn’t uncommon. In 2009, the city of St. Paul looked to sell a series of vacant homes ranging from $50,000 to $1. But at the time, the homes failed to garner interest due to the extensive repairs required and a lack of off-street parking, according to a 2009 Pioneer Press article.

In more recent years, other cities in the U.S., including San Diego and Philadelphia, also looked to sell dollar homes.

“A significant amount of work … needs to happen to the property,” Hawkinson said. The price point is also intended “to help close the gap between what it is going to cost to renovate the home and how much they can actually sell it for,” she said.

According to a financial statement in city documents, the nonprofit would expend about $435,750 on the project. Revenue from the homebuyer is estimated at $200,000 and $236,000 is expected from Edina housing preservation funds.

Hawkinson said selling the property to West Hennepin Affordable Land Trust has several benefits, including offloading the vacant home from the city’s account and having an upgraded and affordable home, benefiting the new homebuyer, neighborhood and general community.

Lano-Wolke’s letter states the organization hopes to acquire the property early this spring. Remodeling or construction is expected to be complete by the end of this year.

Though the public hearing date was already held, public input remains open on bettertogtheredina.org until March 28. Action on the potential sale will occur at the April 7 Housing and Redevelopment Authority meeting.

– Follow Caitlin Anderson on Twitter @EdinaSunCurrent

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