Evanston, IL, September 4, 2019 – Tomorrow evening, the City of Evanston’s Housing and Homelessness Commission will vote on a loan, issued by the City to the property owners at 1118 Sherman Avenue, for the purpose of constructing an affordable 2-bedroom coach house.
Under the terms of a memo written by City staff, the property owners at 1118 Sherman will rent the coach house for 20 years at or below 80% of the Area Median Income (AMI), as determined in the Illinois Housing Development Authority’s Schedule of Maximum Monthly Gross Rents in Chicago (Cook, DuPage, Lake, Kane, McHenry, and Will Counties).
In exchange for the owners’ provision of an affordable home, the City of Evanston will issue a loan of up to $220,000 for the owners to construct their coach house. The owners may draw from the line of credit until coach house construction is completed. Funds from the line of credit may be used for site work, construction, architectural fees, engineering fees, permit fees, maintenance, and other costs explicitly related to coach house construction. The City’s memo states that the issuance of a line of credit is contingent upon the owners’ decision to hire the Evanston Development Cooperative as the general contractor for coach house construction.
Once construction is completed, the final loan amount will be recorded as a second mortgage on the property, and the City will become a lien holder. The owners shall begin making loan payments to the City during the first month in which they collect rental income or 90 days after the issuance of a Certificate of Occupancy - whichever of these two items comes first.
The annual interest rate on the loan issued by the City shall be fixed at 1%, and the owners shall make monthly principal and interest payments to the City. Within five years of loan issuance, if the owners sell their property, transfer ownership of their property, or rent the coach house above 80% AMI, they will be required to pay the City back the full principal balance of the loan. Additionally, if the owners break the terms of the loan within this initial five year period, they shall be required to pay the City a flat sum payment equal to a 5% interest rate of the total loan amount.
Prior to loan issuance, the City will carry out a credit check and income verification of the owners at 1118 Sherman. Additionally, the City shall ensure that the owners are current with all City of Evanston and property accounts, including property taxes, water bills, mortgages, and property insurance.
The owners at 1118 Sherman Avenue reached out to EDC in mid-May after hearing about its community dialogue on affordable housing at Backlot Coffee from another community member. EDC had no relationship with the owners prior to receiving their inquiry. The owners signed a contract for preconstruction services with EDC in early July to explore the feasibility of constructing an affordable coach house.
During the rental period, the owners shall follow the written “Policies and Procedures” for affordable rental housing established in the City of Evanston’s Inclusionary Housing Ordinance. Therefore, they shall provide Community Partners for Affordable Housing (CPAH) with the rights and responsibilities to carry out tenant outreach, income verification, and screening procedures for qualified applicants via the City of Evanston’s Centralized Waitlist for affordable housing units.
With the momentum of a pilot project, EDC aims to develop the capacity to finance affordable coach houses without reliance on city subsidies. Looking onto 2020, EDC will aim to identify financial partnerships that help low or moderate-income homeowners build a coach house. Through coach houses, EDC believes that priced-out homeowners can receive necessary rental income, increase property value, and afford to stay in their home. EDC believes that this model could support traditionally disenfranchised Evanston neighborhoods without displacing current residents.
As a cooperative that is democratically owned and governed by Evanston residents, EDC recognizes the need to responsibly utilize scarce City of Evanston resources for affordable housing. A cost-effective pilot project for an affordable coach house which is deemed successful by all parties can ensure that EDC, the City of Evanston, and our residents continue to collaborate in the coming years to find innovative solutions to address the rising cost of living in our town.
“As a decade-long Evanston resident raising children in our community, I see it as EDC’s duty to be an ethical, communicative, and collaborative partner with our City government,” said Dr. Dick Co, EDC President.
After its pilot project, EDC will explore the following finance opportunities to build coach houses for Evanston property owners across the socioeconomic spectrum:
- Financial products from Community Development Financial Institutions (CDFIs)
- Programs to access federal financing from the Department of Housing and Urban Development (HUD)
- Loans or grants from national banks that receive Community Reinvestment Act (CRA) Credit
- • Loan programs established privately by Evanston residents
“Based on the annual requests for our City’s limited funds, EDC will need to develop partnerships that pull in outside resources from other partners to appropriately address our community’s housing needs. This pilot project can demonstrate Evanston’s capacity to provide livable, affordable homes to residents in all neighborhoods, with the goal of multiplying the effect of the City’s financial support as EDC engages additional public and private partners to expand Evanston’s affordable housing supply,” Co said.
Based on EDC meetings with City staff, the City of Evanston sees 1118 Sherman Avenue as a project that can effectively demonstrate how coach houses can expand Evanston’s affordable housing options. In recent months, several other property owners have reached out to EDC, stating the desire to build an affordable coach house without having the resources to finance their projects.
“Joining Forces is excited to see a pilot project like the 1118 Sherman Affordable ADU Project moving forward and believes that the City’s investment in supporting an early adopter of a new affordable housing solution makes a lot of sense,” said Sue Loellbach, Director of Joining Forces for Affordable Housing and Advocacy Manager at Connections for the Homeless.
With its coach house loan, Evanston would follow the lead of U.S. city governments that have recently developed similar programs for affordable housing. In early April of 2019, the City of Boston announced a $650,000 pilot lending program for affordable coach houses. In mid-May, the City of Denver allocated $500,000 from its Affordable Housing Fund to issue loans to moderate-income homeowners that seek to build coach houses.
EDC presented before the City’s Housing and Homelessness Commission on August 1, 2019 to positive reception. EDC spoke about its cooperative governance model, workforce development plan, and environmentally sustainable construction techniques. Additionally, EDC presented several models to finance affordable coach houses. Based on the Commission’s support for these new housing opportunities, EDC advanced conversations with City staff to discuss the viability of a pilot project at 1118 Sherman Avenue.
“While the ADU solution is unlikely to provide affordability for people with very low incomes, it has potential to be a great ‘missing middle’ strategy. Incentives for landlords to make their units affordable are necessary and will need to be part of the Affordable Housing Plan. EDC is taking the first steps to implementing policy changes and programs that are both necessary and inevitable,” Loellbach said.
EDC will utilize its environmentally sustainable construction methods at 1118 Sherman Avenue. Through its exclusivity agreement with Eco-Panels, it will use Eco-Panels’ structural insulated panels to build a resilient, energy efficient homes which aligns with the City of Evanston’s Climate Action and Resilience Plan (CARP) goals.
Given EDC’s vision of a local construction workforce, it will take steps to hire local residents as worker-owners of its cooperative for work at 1118 Sherman Avenue. Based on EDC’s grant support from the City of Evanston and Cook County’s CDBG Economic Development Funds, 1118 Sherman Avenue will help EDC work towards its goal of providing two low and moderate-income (LMI) residents with full-time construction jobs by the end of 2020.
“It is important to employ young people in processes like this. EDC is a new economic force that will be around for a long time, and we need to involve as many disenfranchised and disconnected residents as possible. They are the future of Evanston, and that’s why the co-op is a smart idea for green construction jobs,” said Lonnie Wilson, lifelong Evanston resident and community activist.
Through a coach house at 1118 Sherman Avenue, EDC aims to take its first step towards tangible, sustainable, and affordable homes in the Evanston community. EDC believes that its cooperative, democratic model provides a new mechanism for all residents to determine the quality, cost, and fairness of Evanston’s homes in the coming decade. When looking onto 2020, EDC is excited to partner with community members and organizations of all neighborhoods, races, ethnicities, genders, identities, and lived experiences to build housing that works for every Evanston neighborhood.
This loan will be voted on by the Housing and Homelessness Commission during their meeting in Room 2402 of the Morton Civic Center, on September 5 at 7 p.m. If the Commission votes to move this project forward, it will be voted on by Evanston City Council on September 16.
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