Vermont Shared Equity Program Presented by Bruce Whitney Lending and Shared Equity Manager, Windham & Windsor Housing Trust November 2, 2017

WWHT uses Shared Equity What’s in a name? Homeland Community Land Trust Model Shared Equity Shared Appreciation WWHT uses Shared Equity

Program basics Program began in 1991 A pool of grant funds (subsidies) are held and distributed annually by the Vermont Housing and Conservation Board (VHCB) Distributed to 9 Vermont non-profit organizations Used to subsidize the purchase of single family homes throughout the state One time investment from State of Vermont upon initial purchase Subsequent re-sales remain affordable Subsidy rolls over to the next buyer Seller ‘shares’ a portion of the equity with the next buyer

VT’s Housing Crisis - Ownership Affordability gap: The median household income in Vermont is $51,566. That income would be enough to purchase a home in the neighborhood of $163,000. Median priced home in Vermont for is $190,000 for condominium; $200,000 for single family home; and $270,000 for new construction home. A Vermont household would need an annual income of $63,000 as well as $14,000 in cash to purchase a $200,000 home. 61% of Vermonters have incomes below $63,000

Affordability over the years

9 participating non-profits Addison County Community Land Trust Champlain Housing Trust Downstreet Housing & Community Development Rural Edge NeighborWorks of Western, VT Shires Housing Twin Pines Housing Windham & Windsor Housing Trust

Who can participate Mortgage Ready Buyers Minimum/Maximum Asset Requirements Incomes up to 120% of Area Median Income (AMI) This varies among the programs Households intending to occupy the home year round Those who have completed a Home Buyer Education Program

120% Median Income Limit Example 2017 Household Size Maximum Income Windham County Maximum Income Windsor County Maximum Income Vermont 1 $55,188 $60,984 $58,212 2 $63,072 $69,696 $66,528 3 $70,856 $78,408 $78,844 4 $78,840 $87,120 $83,160 5 $85,147 $94,090 $89,813 6 $91,454 $100,059

Program details VHCB provides grants of 20% of the purchase price UP TO $44,000 Grant serves as down payment Buyers avoid PMI Buyers enjoy lower monthly mortgage costs Non-profit retains ownership of land, buyer takes ownership of the leasehold improvements. Ground lease give owner full rights and responsibility for the use of land Ground lease fee Owners pay taxes on land

No free Lunch Upon re-sale, subsidy is passed on to next buyer Seller ‘shares’ 75% of their equity with program/next buyer Must live in the house year round

So how does it really work? 1. Value At Purchase: Original value $200,000 Subsidy - 40,000 Net Price $160,000 3. Sale Price Back to Program Original Purchase Price $200,000 Plus 25% of appreciation 12,500 Minus Original Grant 40,000 Seller’s Option Price $172,500 2. Calculating Equity New Value $250,000 Original Value -200,000 Appreciation $50,000 % of Equity X .25 Owner Equity $12,500 4. Price to New Buyer Purchase Price $172,500 Transaction Fee $ 7,500 Total $180,000 Market Value $250,000 Original Subsidy ($ 40,000) Shared Equity ($ 30,000) NET PRICE $180,000

Who benefits? Seller Next Buyer Community Lower monthly costs for duration of homeownership (Mortgage Payment, No PMI, Lower Taxes) Increase wealth Possible graduation to market rate housing Next Buyer All of the above 25% increase in value of home 10% increase in price of home Community Retention of younger families Minimal community investment Community character of housing is preserved Economic Diversity is maintained

Two ways to participate Buyer Driven Buyer Qualifies House Qualifies All major systems in good working order Structurally sound Broad marketability Right priced Re-sales WWHT Underwrites new buyer WWHT Coordinates closing

Marketing re-sales Online Marketing (Trulia, Realtor.com, Zillow) Organizational Website Facebook Ads Craig’s List Email blast to Stakeholders, graduates of HBE program Sometimes newspaper ads

Vermont shared Equity homes County # of homes Addison 69 Orange 25 Bennington 28 Orleans 4 Caledonia 1 Rutland 43 Chittenden 550 Washington 132 Franklin and Grand Isle 61 Windsor 84 Lamoille 11 Windham 85 Totals 1,093

Permanent Affordability CLT has 1st option to purchase Option price set by resale formula in land lease (SFH) or deed restriction by covenant (condo) Formula balances a fair return for current homeowners with creating affordability for future homeowners The CLT takes a fee at resale –provides revenue stream CLT resells to another eligible household at an affordable price Formulas can be appraisal-based, index-based, or mortgage- based (WWHT uses appraisals)

Example: Brookline VT Year Appraised Value Original Grant Shared Equity NET price to buyer 1993 $80,000 $12,000 NA $68,000 2000 $88,000 #1 - $4,500 $71,500 2005 $180,000 $17,000 #1 – 4,500 #2 - 57,800 $93,300

Marsh Drive: Appraised Value and Net Price

Example: Circle Drive, Chester Year Appraised Value Original Grant Shared Equity NET price to buyer 1995 $80,000 $17,000 NA $63,000 2005 $109,000 #1 - $15,210 $76,790 2017 For Sale $139,000 #1 – 15,210 #2 - 12,590 $94,200

Circle Drive: Appraised value and Net Price

Proven results 2009 Davis & Stokes “Land in Trust: Homes That Last” Champlain Housing Trust homes become more affordable over time! Permanent affordability = deeper affordability. Average home, affordable to 56.6% AMI at initial sale, was affordable to 53.4% AMI at resale Neighborhood stability: 96.7% of 465 units of housing developed by CHT between 1984 and 2008 has remained owner-occupied and permanently affordable

Proven results 2009 Davis & Stokes “Land in Trust: Homes That Last” 67.4% of WWHT homeowners went on to buy market-rate housing Rate of return for homeowners out performs investing in the stock market. Of 465 buyers over past 25 years, only 9 land trust loans went through foreclosure and all were saved and eventually sold to another buyer with a subsidy