Affordable Housing

Q: What steps can Lexington take to increase affordable housing?

A: Housing costs are rising rapidly. Lexington’s total residential property values rose from $1 billion to $12 billion over the last 25 years. The average selling price for a single-family home in Lexington is now $1.5 million, a $500,000 increase over the last 5 years. It has become increasingly difficult for affordable housing developers like the Lexington Housing Assistance Board (LexHAB) to purchase the land needed for new affordable housing units in this red-hot housing market.

LexHAB has been required to secure Town Meeting approval for funds to purchase land and build homes. Since Town Meeting can approve funding only once or twice a year, many promising properties are sold to commercial developers before LexHAB can secure funding. Based on a recommendation from Lexington’s Affordable Housing Trust Study committee, Town Meeting approved the creation of an Affordable Housing Trust to address this problem.

Q: What does an Affordable Housing Trust do?

A: An Affordable Housing Trust acts as a financing partner for affordable housing developers who would otherwise need to wait for funding from Town Meeting. The Trust receives funds from multiple sources and can act quickly to provide financing for time sensitive opportunities. An Affordable Housing Trust could purchase and sell property, fund new construction projects, rehabilitate existing homes or apartments, provide grants or loans to increase the number of affordable housing units in a project, convert market rate housing to affordable housing, or create programs to assist low and moderate income homebuyers.

Q: Where does the money come from?

A: The Community Preservation Act (CPA) is the most common source of municipal funding for Affordable Housing Trusts. The Community Preservation Committee has recommended that Town Meeting approve $1.5 million in initial CPA funding for the Trust. For every dollar of CPA funds Lexington taxpayers contribute this year, the state matches with an additional 40 cents.

Q: Who will be managing the trust?

A: The Select Board is currently seeking applicants for 7 positions on the Affordable Housing Trust. The Select Board is looking for individuals who have sustainability, racial equity, and accessibility experience, for affordable housing advocates, for realtors, property managers, bankers, or lawyers with experience in affordable housing, for developers or architects who have designed or built affordable housing, and for at least one Lexington resident currently living in affordable housing.

Q: How can we build homes more affordably?

A: State law currently requires LexHAB to follow municipal procurement rules, which can increase construction costs as much as 30 or 40%. The Lexington Affordable Housing Trust Study committee recommended that LexHAB reorganize to become an independent 501(c)(3) organization. Town Meeting has approved the reorganization. LexHAB is now waiting for final approval from the state legislature.

This reorganization accomplishes two goals. As an independent nonprofit organization, LexHAB would be able to develop affordable housing more efficiently and cost effectively. Community development corporations, like the reorganized LexHAB, could use a combination of private donations, plus state and federal grants to leverage local funds, so the Town does not need to provide 100% of the project cost. This should dramatically increase the number of homes built with the same resources. Some neighboring towns are producing 10x more affordable homes, dollar for local dollar, compared to funding 100% of each project with local funds and following municipal procurement rules.

Q: That sounds like a big change. What will and won’t change?

A: LexHAB will still have the same mission of expanding Lexington’s environmentally sustainable, thoughtfully designed, and community focused affordable housing. LexHAB will have the same board of directors and staff. They will own and manage the same properties and all affordability restrictions will remain in place.

But because LexHAB will be a 501(c)(3) organization, donations to LexHAB will be fully tax deductible, LexHAB will have access to federal and state funding, and have the flexibility to partner with larger affordable housing developers as a co-owner or co-manager.

By creating an Affordable Housing Trust and restructuring LexHAB as a non-profit housing development corporation, we are expecting to dramatically increase the availability of truly affordable housing in Lexington.