Lottery for 8 Reed limited-income condos nears completion of construction

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MISSOULA — The developer behind the Reed condominium project near downtown Missoula is finalizing construction, and with it, a planned lottery to determine buyers for eight restricted-deed units is fast approaching.

The city predicts that the eight affordable units included in the Rowe condominium building, which sits on the larger Reed condo campus on Fourth Street, will attract more qualified buyers than there are units available. .

Still, they suggest the arrangement with developer Cole Bergquist represents a positive step forward in finding unique solutions to the city’s affordable housing problem.

“The purpose of the lottery is to ensure that all eight condos are sold to existing members of the community who cannot otherwise access homeownership at market rates,” said Brittany Palmer of the North Missoula Community Development Corp, which will organize the lottery. “We want these homes to provide a unique opportunity for a segment of our community that is currently excluded from home ownership.”

In exchange for a strip of right-of-way, the Missoula City Council two years ago asked the developer to dedicate 20 percent of the project’s units to affordable housing. The development includes several dozen market-priced units in the Reed building and eight limited-income units in the Rowe building.

“We have no role in Reed’s market-priced condos,” said Emily Harris-Shears, the city’s housing policy expert. “This project benefits from this project, absolutely, but we have been focused on creating the eight limited income units in the Rowe condominium building.”

As required by the City, the price of the eight units cannot exceed 120% of the median income of the sector, ie $68,640 for an individual and $78,360 for a family of two.

Based on these numbers, the maximum price the developer could charge for each restricted-act unit is $302,000. The promoter, however, has set a sale price of $299,000. Units are one bedroom each and future sale prices will be limited to remain affordable.

Harris-Shears said that in addition to area median revenue, the pricing formula also considered comparable sales of similarly sized units in the Missoula market. Insurance, property taxes and Home Ownership Association fees have also been added since owners will be responsible for their own maintenance.

“You have to add all these things. We include them in the affordability percentage,” Harris-Shears said. “Households within this 120% income limit are still able to afford a monthly mortgage and pay no more than 30% of their income at this price.”

The project was initially controversial for the change it would bring to the southern edge of downtown Missoula, which is slated for future redevelopment. However, over time the development has become a model of how the city can extract affordable housing from private developers.

Council member Mirtha Becerra said the city will use the tool again in the future.

“Right-of-way vacancies are a relatively new tool that we are using to demand affordable housing,” she said. “It’s a tool that we’re refining and will use to set expectations to have some predictability, but at the same time flexible enough to allow for innovation and for it to be opportunistic whenever possible, with the aim to have as much affordability for as long as possible.

The city asked other developers to include affordable housing in exchange for vacancies on the right-of-way. More recently, he agreed to vacate part of Sussex Avenue and, in exchange, he demanded that Casa Loma LLC include 20% of the 107 units in his project as affordable housing for a term of 35 years.

However, this project is entirely rental and does not compare to an owner-occupied building, such as the Rowe, which has an affordability period of 75 years.

“The big difference being that the developer is only initially involved in a project where there are ownership opportunities, so they are not financially tied to that building for 75 years. The people own it,” said board member Mike Nugent. “Whereas if it’s a rental, the developer is still responsible for maintenance and all that. They are two totally different conversations.

The Reed and Rowe were also designed in a way to ensure that HOA fees are split between buildings, so that those in the Rowe do not pay for the higher amenities in the Reed, and vice versa.

Eligibility requirements for the eight restricted deed units include income qualifications and $2,500 for closing costs. The city is also considering an asset limit. Buyers cannot own any other real estate and must use the home as their primary residence, Palmer said.

“Owners accumulate equity in the shared capital model,” she said. “These eight restricted-deed condos will help us as a community move towards housing for everyone.”

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