lis 217 stemming the tide - LISC

Owner Assessments. Assessment of theowner's intentions and needs, and the capacityand interest of potential nonprofit purchasers.Legal Analysis. Analysis of potential legalclaims: notice requirements, existing userestrictions, HUD prepayment approval requirements,HUD-held or HUD-sold mortgage status,Enhanced Voucher legal requirements, and fairhousingissues. Minnesota law requires a oneyearnotice, including a Tenant ImpactStatement for all subsidized mortgage prepaymentsand subsidy contract opt-outs. 36 BecauseHUD-subsidized projects are disproportionatelyoccupied by minority residents, owners' actionsare often subject to fair-housing claims.Financial Analysis. Analysis of the feasibility ofretaining affordability under existing ownershiparrangements or through a sale to a nonprofitpurchaser. Each year, Minnesota appropriatesstate funds for preservation which are availablefor both existing owners and new purchasers.Publicity. Contacts with media, elected representatives,and government agencies focuspublic attention on the project.Resolution. Wherever possible, development ofa preservation-oriented alternative throughnegotiation. Litigation is a last resort, althoughthe threat of litigation is often necessary andhelpful. In most cases, threatened litigation hasresulted in a favorable settlement.Case Study #1: Franklin Lane ApartmentsThis 66-unit project financed under Section 236is located in an integrated suburb outsideMinneapolis and is occupied primarily by elderlyand disabled residents. Historically, theSection 236 rents have been substantiallybelow market. A few years ago, the owner soldto a private purchaser who intended to prepaythe subsidized mortgage and convert the propertyto market-rate.StrategiesPreservation advocates and attorneys initiallypressured HUD to deny the Transfer of PhysicalAssets application, but this tactic failed. Withstrong political support from community groupsand local officials, tenants then launched ayear-long media and advocacy campaign.Tenants threatened litigation based on fairhousingclaims and potential violations of federaland state notice laws, and prepared topicket the owner's new restaurants downtown.OutcomeThese actions brought the new owner to thenegotiating table and ultimately resulted in thetransfer of ownership to a community-basednonprofit purchaser. Resources for the transactionincluded federal Low Income Housing TaxCredits, state preservation funds, county HOMEfunds, retained IRP subsidy, and project-basedcertificates through the PHA for all of the units.No tenants were displaced and long-termaffordability was secured.Case Study #2: Hopkins VillageThis 161-unit Section 236 project located inanother integrated suburb of Minneapolis isoccupied primarily by elderly and disabled personsas well as some families of color. The projectis partially-assisted with a Section 8 LMSAcontract covering 64 units. The owner notifiedthe tenants of his intention to prepay the mortgageand opt out.StrategiesInitial negotiations with HUD, the local housingfinance agency, and the tenants were unsuccessful.After the owner rejected the housingfinance agency's offer of state preservationfunds, as well as a purchase offer from a nonprofit,residents and advocates sued the ownerand HUD for failing to comply with fair-housingand federal and state notice laws. 37 The preservationcampaign received widespread publicityand community support.OutcomeAlmost immediately, HUD called a settlementconference, and the owner ultimately agreed tosell to a nonprofit. Resources for the transactionincluded federal Low Income Housing TaxCredits, state preservation funds, retained IRPsubsidy and project-based Section 8 subsidies.26 chapter three: State and Local Preservation Tools and Strategies