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Aligning Policy and Housing Outcomes
Rental Unit Inspections

Phase in Rental Registry and Inspection Process

Issues/Opportunities Addressed:

Timeframe for Action: Inspection Process - Long Term

Over time, RKG recommends that the rental registry be
combined with a regular inspection requirement to
ensure all rental housing in Nashua is code compliant
and safe for residents. The RKG Team recommends
the City require inspections every 3 years, or every 10
years for units that retain the same tenant, whichever
is longer. The City will likely need additional code
enforcement staff and more comprehensive tracking
software to monitor compliance and progress on
rehabilitation projects to accomplish this. As identified
in the previous recommendation, the registration fee
is intended to cover these increased costs to the City.
Further, the City should ensure there are penalties for
landlords that fail to register for the program, are
repeat offenders to code compliance violations, and
fail to complete required repairs in a timely manner.
That said, the City will need to strategize about how to
administer initial violations under the program to
avoid potentially overwhelming both landlords and the
contractors that serve this market. RKG recommends
the City consider a longer grace period for a first
inspection (i.e. six months rather than a standard of
three months).

Nashua Housing Study - 69

In coordination with addressing the impact of
requiring rehabilitation efforts to gain code
compliance, the City could consider creating a stand-
alone repair program for code compliance for
landlords that can income-verify tenants. The City’s
new rental rehabilitation program could serve as a
vehicle for providing funding to landlords who cannot
afford to address code compliance violations on
their own. Creating and capitalizing the rehab
program most likely will increase compliance while
enabling landlords to retain lower rents despite the
repair costs. The City could add to the existing
funding with any remaining registry and inspection
fees.

Any financial assistance to landlords should require
a minimum commitment to affordability. The City
could create a sliding scale for how much a landlord
can receive based on the income level of the verified
tenant and location in the City. The City could
establish bonuses or offer forgivable loans (with a
minimum 5-year commitment) for serving lower
income households (i.e. under 50% AMI) or in
neighborhoods with greater housing condition
issues. Revenues from the rental registry could be
used to assist landlords with income verification.

ASSOCIATES INC

Concurrent with the proposed policy and program
changes to protect tenants, the City should directly
engage with landlords through a landlord roundtable to
discuss policy and program development and
implementation. Simply put, the City should be
proactively soliciting feedback from those directly
impacted by these new/revised approaches to better
understand and address challenges/issues that
currently exist/may arise due to new approaches to
addressing housing needs. Listening to the concerns
of landlord during the policy/program development
process can address potential impacts before
finalization and build buy-in through two-way
communication and coordination. The Landlord
Engagement Forum should include a diverse mix of
landlords (i.e. small and large landlords, racially
diverse, investors from different areas of the City,
student landlords...) to help identify market changes
that affect existing/proposed policies

Aligning Policy and Housing Outcomes

Registry and Inspections

Phase in Rental Registry and Inspection Process

Case Study — Rental Registry, Burlington, VT

The Code Enforcement Department has the responsibility
of maintaining an annual apartment registry of
approximately 10,000 rental dwelling units, billing and
collecting rental unit registration fees, inspecting rental
housing units, enforcing minimum housing standards,
issuing certificates of compliance to landlords, and
funding tenant and landlord advocacy services. The City
requires landlords to submit a rental registration
application annually.

Individual rental property owners must provide their name,
address, date of birth, phone number, email, and military
status (active or not). For properties owned by a
corporation, partnership, or LLC, these entities are required
to provide the official name, principal business address,
date of incorporation, phone number, email, and military
status of the corporation president and general partners.

To ensure more robust compliance with both property
registrations and code enforcement, the city has a
requirement that if the owners of a rental property are not
located within Chittenden County, they are required to
have a designated local property manager.

Nashua Housing Study - 70

The fee schedule for rental property owners is as
follows. New rental property owners must pay a
one-time $50.00 Transfer of Ownership Fee if the
property was previously registered as a rental and
will continue to be so. This is for transferring
records from the previous property owner to the
current property owner and should be included
when registering the property. Additionally, annual
rental registration fees are billed in February every
year and due by 01 April. The fee is $110.00 per
rental units, and $80.00 for properties which are
owner-occupied duplexes.

ASSOCIATES INC

Recommendations

RECOMMENDATIONS
INVEST IN NEW AND EXPANDED HOUSING PROGRAMS

RKG

Nashua Housing Study - 71

New and Expanded Housing Programs
Rehabilitation Programs

Expand Rental and Owner Rehab Programs

Issues/Opportunities Addressed:

Timeframe for Action: Short to Mid Term

The City of Nashua currently offers two separate
residential rehabilitation programs through the City's
CDBG Housing Program. The first is an owner-occupied
Housing Improvement Program (HIP) which provides 0%
interest loans to correct code, safety, health, or
accessibility issues. Examples of eligible activities include
roofs, electrical, plumbing, wheelchair ramps and more.
The loans are up to a maximum of $40,000 for the first
unit and $5,000 for each additional unit. Eligibility for the
program is restricted to owner-occupied properties, the
owner must be of low-moderate income (at or below 80%
of AMI), and the structure cannot contain more than four
units.

The City also began offering a rental rehab program to
assist landlords with correcting serious code, safety,
health, or accessibility issues. This program is targeted to
addressing critical structural needs such as roofs, heating,
and structural code deficiencies. The loans are up to a
maximum of $20,000 for the first unit and $5,000 for each
additional unit. Eligibility for the program is restricted to
owners who DO NOT reside at the property, tenants must
be low-moderate income, and the structure cannot contain
more than 8 units. Property owners must contribute 10%
of the total contractual cost as well.

Nashua Housing Study - 72

Given the estimated rehabilitation needs of property
just in the Downtown area alone (estimated at $12
million), these two rehabilitation programs are of
critical importance to improving and maintaining
higher quality affordable housing across the City.
Currently the City is funding between 4 and 13 units
per year with average loan amounts between $8,500
and $15,900. The program is funded through the City’s
annual allocation of federal CDBG funds which is good
use of those funds, but the flexibility of those funds
can create competing priorities potentially lowering the
amounts available for rehab. CDBG funds, along with
many federal funding sources, have been shrinking
leaving entitlement communities with less money.
Relying on these funds alone may leave the City with
fewer dollars for not only the rehab programs, but
other City programs and priorities too.

Keeping this programs in place and making them
financially sustainable over time should be a priority
for the City. One way to do that is to find ways to either
leverage other funding sources or find ways to require
payment of the loan over time to build a revolving
source of capital.

ASSOCIATES INC

The City should convert the current deferred home repair
loan programs into a 0% amortizing loan program, which
will allow the City to leverage additional resources before
properties turn over — expanding the pool of capital that can
support further home repairs. Other programs that have
converted from home repair grants or deferred loans to
repayable loans have proven to have similar demand levels
and higher productivity while still serving very-low, low, and
moderate-income level households. The City may also
consider charging a small interest rate (1%-2%) for
moderate income households and 0% for low to extremely
low-income households.

The City could also consider using the Affordable Housing
Trust as a leveraged funding source to pair with CDBG,
Bond Funds, philanthropic grants, and private capital to
deploy more resources in a consistent manner for home
repair programs. Coupling the rehab programs with
owner/investor education and conversations around the
long-term affordability of units could be helpful in early
identification of property sales or conversions of affordable
units to market rate. Early identification of these issues
could help the City approach other funders such as local
banks looking to use Community Reinvestment Act (CRA)
funds to keep units affordable over time.

New and Expanded Housing Programs
First Time Homebuyer Program

ASSOCIATES INC

Reintroduce First Time Homebuyer Program

Issues/Opportunities Addressed:

Timeframe for Action: Short Term

Downpayment and closing cost assistance helps low- and moderate-income
families overcome one of the most common barriers to homeownership—
accumulating sufficient savings to make a downpayment and pay for closing
costs on a mortgage.

Assistance can be offered in a variety of forms, including as a grant, a no- or
low-interest amortizing loan or a deferred loan in which repayment is not due
until the resale of the home. The assistance is often provided by a local
housing agency, a nonprofit organization or a state or local housing finance
agency, sometimes through a participating private lender. Program details
differ across jurisdictions, but in general borrowers must fall within income
and home purchase price limits and must comply with other eligibility
requirements, including being a first-time homebuyer, using the home as a
primary residence, and completing a homebuyer education course and/or
participating in housing counseling.

The City of Nashua did offer a first time homebuyer program using federal
HOME dollars which creates some challenges in housing markets with rapidly
rising purchase prices. HOME funds are limited to properties at or below 95%
of the median area purchase price and there must be resale provisions
established which safeguard the property's continued affordability or
recapture all or part of the HOME subsidy investment. This tends to favor a
forgivable loan structure often treated as a second mortgage which can
require partnership with a bank.

Nashua Housing Study - 73

RKG recommends the City of Nashua revisit the feasibility of offering first time
homebuyer assistance in the form of downpayment assistance and closing cost
assistance. These two barriers to homeownership are becoming more acute as
home prices continue to escalate year over year making it more difficult for
households to purchase homes for the first time and have some ability to move
from rental to ownership housing.

The City will need to evaluate the type of program they would like to offer and the
most effective way to fund that program. There are several approaches to
structuring an assistance program, which include:

A lump sum grant which avoids the longer-term administrative costs of a loan
and tracking and processing repayment. These are most effective for small
assistance amounts of less than $5,000.

A forgivable loan which requires the homeowner to meet milestones such as
living in the home for a period of time before the loan is partially or completely
forgiven.

A low- or no-interest rate loan which could require repayment over a certain
period or at sale or refinance of the home. Establishing some level of repayment
could also help recapitalize the loan fund over time and serve more households.
A shared-appreciation loan which is typically used for high downpayment
assistance amounts ($15,000-$25,000) where when the home is sold the City
would have the loan repaid in full plus a percentage share of the home
appreciation.

Recommendations

RECOMMENDATIONS
EXPANDING PARNTERSHIPS

RKG

Nashua Housing Study - 74

Expanding Partnerships

Leveraging Capital

Leveraging Capital from Housing Partners

Issues/Opportunities Addressed: C)

Timeframe for Action: Mid to Long Term

Over the last two decades, private corporations such as
financial institutions, major employers, and anchor
institutions such as hospitals and universities have played
an increasingly important role in improving and expanding
affordable housing. Investments in low-income housing
tax credit projects have been a primary contributor to
building multi-family affordable rental units across the
country. The City of Nashua has a need to expand both the
amount and type of affordable housing as well as the pool
of funding available for such projects. The challenge now
is for the City to take charge of those challenges and begin
seeking a larger partnership between government,
philanthropy and the private sector. This is a best practice
in many cities across the country who are working
collaboratively to invest in larger, more complex
community and economic development solutions.

The concept of leveraged capital, when a small amount of
initial capital is made available to attract additional
resources, is not new to the affordable housing industry.
Most affordable housing built since the early 1990s has
been financed by private equity investments seeking low-
income housing tax credits and market rate returns. What
is new to the community development sector are the
innovations cities have created through co-investment
opportunities between the public and private sectors.

Nashua Housing Study - 75

Gathering and deploying a larger group of housing
affiliates and a larger pool of resources involves the
following steps:

¢ Education of and outreach to key stakeholders
¢ Representatives from across City
departments
¢ Members of the housing and community
development ecosystem
« External partners from across sectors

¢ Assessment and pursuit of innovative financing
tools and models

¢ Leveraging City funds to grow available
capital

¢ Designating one or more targeted
investment areas

¢ Aggregating capital into a long-term fund
supported by diverse partners to offer low
cost capital

¢ Shaping an effective program to finance
and incentivize a wide spectrum of
affordable housing

This group of housing affiliates may include banks,
hospitals, community development financial
institutions, and any community-based development
corporations.

ASSOCIATES INC

Some early action items the City should consider in
assessing the feasibility of creating a larger pool of
resources and partners include:

Engage with City decision makers to deepen
understanding of the need, complexity, and
opportunity of public-private partnerships to fund
housing programs

Engage with likely nonprofit and private sector
implementation and funding partners to improve the
effectiveness of the community development service
delivery system

Convene likely partners to assess innovative
financing solutions and develop a shared value
proposition, to increase financial participation in new
funding strategies

Formalize new public-private partnerships to
accelerate quality affordable housing development
and promote access, equity, and justice, especially for
the City’s most vulnerable residents

Engage with homeowners and small landlord
stakeholders

Expanding Partnerships
Leveraging Capital ASSOCIATES INC

Leveraging Capital from Housing Partners

Case Study — Housing Opportunity Investment Fund, Charlotte, NC

As arecent example, Charlotte, North Carolina brought

together 11 funders, 6 government agencies, 2 community
organizations and together they created a $200M Housing USC Strategy to Maximize Impact
Opportunity Investment Fund (Figure 8). They had
identified a challenge they wanted to address, that among
America’s 50 largest cities, Charlotte ranked 50th in terms City HTF: With CHOIF: Plus:
of residents’ potential for economic mobility. With many Two Deals (4% LIHTC)* | Two Deals (4% LIHTC) Housing Authority
Charlotte residents severely cost burdened and struggling cundin cundi vouchers Produce nearly twice the
. . . . : unaing: :
to find affordable housing in areas of opportunity, partners 6 6 * Increase 30% AMI number of units
mobilized around an immediate action to produce more is Sr, units Get twice as much for
mixed-income housing for low-to-moderate income £ $9.7M City j ene , row cost debt each dollar of HTF
oye . . . . : : : : . ncrease Tinancin
households as a critical first step to improving economic i HIF ‘a ecssensseecsecssssssast , 6 Increase supply of very
mobility i. é Rae st low-income units
. a Areas o
opportunity Poe enone
Collectively, the partners are financing 1,500 units to crsene - Improved ousing locations
house families with a range of incomes. The housing is in economic mobility Improve economic
. . for residents mobility for Charlotte
areas of opportunity, thereby upending a key structural a: on
. we . . $9.7 million $9.7 million residents
barrier to health equity, in which the factors that determine a
people’s health is predicated on where they live. The paved $4.7 million in
example below shows one example of a leveraged, low- vesampl
cost capital investment model in which partnerships

enabled the city to maximize its impact with two deals by Source: Corporate FACTS, 2020
accessing the Charlotte Housing Opportunity Investment

Fund (CHOIF) instead of relying solely on its Housing Trust

Fund (HTF).

Nashua Housing Study - 76

Expanding Partnerships
Housing Authority ASSOCIATES INC

Continue the Partnership with the Housing Authority
Issues/Opportunities Addressed: C) CO) —.-

Timeframe for Action: On-Going ly 2

|

|
The Housing Authority owns and operates some of the only From the City side, continued assistance with expedited
deeply affordable housing in the City and has the knowledge permitting through the Zoning Board of Appeals and
and experience to be a valuable partner on public/private Planning Board will be very helpful to keep approval :
partnerships to produce additional units at a variety of times shortened. City engagement early in the design “4
income levels. The City of Nashua and the Housing process and site plan layout are also helpful to limit i

iterations which cost time and money. Lastly, the City's
participation as a funder in these projects is also very '
helpful. Participating using HOME funds or other funding |
sources can add to the development capital stack

increasing financial feasibility.

Authority have already shown the value of partnering on
affordable housing projects such as the redevelopment of
the Bronstein Apartments. The City and Housing Authority
are not only expanding the total number of affordable units
but are also bringing additional market-rate rental housing
units to the City which are desperately needed.

Going forward, the City can continue to bring value in its
financial resources, access to city-owned land, and staff
resources that could help augment the Housing Authority's
knowledge of affordable housing funding, programs,
construction, and operations and maintenance. The City and
Housing Authority should continue to have open
communication and discussions involving the purchase/use
of land, pooling of resources, and engaging private sector
developers to look for ways of creating additional mixed-
income housing as way to both modernize and expand
affordable housing across Nashua.

Nashua Housing Study - 77

Expanding Partnerships
Right of First Refusal

Right of First Refusal Policy

Issues/Opportunities Addressed:

Timeframe for Action: Mid to Long Term

Much of Nashua’s affordable housing stock (whether
deed-restricted or naturally-occurring) are rental housing
units. Over time as housing pressure increases and prices
escalate, there may be a strong desire on the part of
landlords to let affordability requirements lapse and begin
renting at market rates. If the City does not play a
partnership role, these units may come off the inventory of
affordable housing and leave lower-income households
with limited options.

One way the City could play a stronger partnership role in
affordable housing would be to implement a right of first
refusal policy. This type of policy can help preserve the
ongoing affordability of dedicated affordable rental
housing by giving priority consideration to mission-
oriented buyers when the owner of a subsidized rental
property decides to stop participating in a subsidy
program. Second, they can be applied to unsubsidized
rental properties, helping to preserve the availability of
rental units and in some cases facilitate conversion to
dedicated affordable rentals. Eligible buyers may include
tenant associations, nonprofit and for-profit developers,
and/or state or local government agencies. Right of first
refusal policies may give these buyers an exclusive period
within which to make an offer on the property, or the
option to match any offer made by a private buyer.

Nashua Housing Study - 78

This policy is especially effective in strong and/or
growing housing markets where right of first refusal
policies help to preserve rental housing and prevent
the conversion of subsidized rental properties to
another use by enabling their sale to stakeholders
who are committed to long-term affordability.

There can be a wide range of restrictiveness in the
policy depending on how far the City wishes to go.
This can include:

¢ Providing advance notification, during which the
city has a non-exclusive right to identify a buyer,
but seller has no obligation to sell to that party.

¢ Offering a true “right of first refusal,” in which
eligible purchasers are given the option to match
an existing purchase offer.

¢ Establishing a “right to make an offer” that gives
eligible purchasers exclusive rights to make an
offer for a designated period of time; if no offer is
accepted, eligible purchasers are typically then
given the right of first refusal to match any.
subsequent purchase offer that the owner accepts

¢ Preempting private sales and requiring owners to
sell the property at fair market value to a
designated buyer; in this case the price is typically
determined by independent appraisers.

ASSOCIATES INC

The City may want to explore some lighter touches and
early steps such as requiring advance notice of sale for
any rental property which currently has affordability
restrictions or has benefitted from/participated in any
subsidy programs. This provision is already in place for
properties utilizing Low Income Housing Tax Credits
(LIHTC) which gives a right of first refusal to non-profit
organizations if at the end of the compliance period the
owner wishes to sell or convert the property to another
use.

If Nashua’s housing availability and affordability
continue to be a challenge, the City could consider
taking the policy a step further and applying it to all
rental properties which can be a step to help prevent
displacement of residents over time. Clear guidance is
needed on which properties are subject to the policy and
must be communicated effectively to all rental property
owners. In some cases, communities have chosen to
limit the policy to older units as those may have a higher
tendency to offer below-market rents and comprise a
larger share of the community's naturally-occurring
affordable housing stock.