The current median sales price limit as established by the U.S. Department of Housing and Urban Development (HUD) for acquisition in the Billings Metro Area has increased nearly 40 percent from 2011 to 2017. However, the purchase price contract limits for the City’s Foreclosure programs has not increased since the inception of the program in 2010. Likewise, construction costs have increased over the past seven years and contract limits have remained static.
 
The original 2010 Resolution (10-18921) established City Administrator signature authority to sign contracts to: purchase homes up to $150,000; rehabilitate homes up to $25,000; and demolish blighted structures up to $20,000. In September 2010, Resolution 10-18984 increased the City Administrator's authority for rehabilitation contracts to $80,000.
 
To date, the Community Development Division has acquired, rehabilitated and sold seven vacant, foreclosed properties: three homes in 2010; one home in 2012; one home in 2013; and two homes in 2015. An eighth property was acquired earlier this year and is currently being rehabilitated. City staff will continue to prioritize highly dilapidated properties in / near the City’s lower income neighborhoods requiring substantial rehabilitation.
 
City staff requests the City Council approve the attached Resolution to adopt standardized and data-driven funding limits reflecting current local market conditions to preserve the viability of the City’s Foreclosure programs; and continue City Administrator authority to sell properties acquired through the program to qualifying low-income households.
 
Industry percentage increases are based on HUD median sales data and national construction cost history indexes. Estimate details were provided in a separate memo through the Friday packet and are also attached.
 

	2010 Limits	Industry % Increases	Current Pricing Estimates		Current Area Median Sales Price	$220,000
Acquisition	$150,000	38.49%	$207,735		95% Acquisition Limit	$209,000
Rehabilitation	$80,000	15.70%	$92,560		50% Rehabilitation Limit	$110,000
Demolition	$20,000	15.70%	$23,140		15% Demolition Limit	$33,000

 
 

City Council may:

• 1) Approve the Resolution to utilize data-driven, standardized contract limits reflecting current local market conditions and to continue selling properties acquired through the Foreclosure programs.
   
  2) Disapprove the Resolution to utilize data-driven, standardized contract limits reflecting current local market conditions. This will result in severely limiting future acquisition of properties through the program and would discontinue the City’s ability to sell properties acquired through the Foreclosure programs.

Establishing standardized funding limits that automatically adjust to current local market conditions will help ensure the sustainability and viability of the City’s foreclosure programs. A greater number of housing units would be eligible for acquisition and would expand quality affordable housing options throughout the City. This would also assist the City in meeting current and future CDBG expenditure deadlines.

Staff recommends that the City Council approve the Resolution adopting data-driven, standardized funding limits reflecting current local market conditions to preserve the viability of the Neighborhood Stabilization and Foreclosure Acquisition / Rehabilitation programs for as long as funding is available and allocated to the programs named herein.