Homes at Willow Bend
Homes at Willow Bend is a project dedicated to the creation of a mixed-income traditional neighborhood consisting of 80 homes in the Walker Park area of South Fayetteville. The developer is Partners for Better Housing (PfBH), a non-profit housing organization dedicated to building high quality homes people can love and afford in neighborhoods that strengthen the bonds of community. Board members of PfBH are all Fayetteville residents, and many of them live in South Fayetteville.
Partners for Better Housing was formed in 2009 as an offshoot from the Fayetteville Housing Authority but quickly separated itself and became a private 501c3. Also in 2009, PfBH purchased the 7 acre tract that was to become Homes at Willow Bend. In 2010, PfBH received $137,000 for master planning, site design, and engineering. The money came from a half million dollar grant from the Home Depot Foundation that was given to the City of Fayetteville. During the planning process, PfBH hosted several community meetings and administered a survey to determine what kinds of socioeconomic goals residents wanted to see and what their preferences were for how they wanted the houses in Willow Bend to look. An Ozark vernacular style was the strong preference, and has guided the architecture since.
After the master planning was completed, the project languished for a few years because of how inherently difficult it can be to finance and develop affordable housing, especially in a down real estate market after the crash of 2008. In late 2014, PfBH hired a consultant, John Anderson. John brought fresh perspective and inspiration to the project. He proposed the mixed-income neighborhood model utilizing a tool called the soft-second mortgage as gap financing, which I explain below. He also secured the cash needed from Fayetteville-based, mission-driven investors with patient capital to start funding the project. The cash injection allowed the project to move forward again with engineering and construction documents, and it created the business structure needed to secure a construction loan. Needless to say, the Homes at Willow Bend project has been a team effort.
The City of Fayetteville has also committed to investing in the neighborhood through a cost-share agreement for infrastructure in the public right-of-way. The City commonly makes cost-share agreements with builders and developers for water and sewer lines, so the cost-share agreement for Willow Bend is not a new concept. There are, however, two factors that make this cost-share agreement unique: one is the amount of money committed, up to $1 million for infrastructure in the public right-of-way; the other is the City Council’s expectation, as written in the cost-share agreement, that Partners for Better Housing will administer a minimum of $1 million in soft-second mortgages to qualified homebuyers over the course of the project.
The goal is to create a diverse neighborhood based on income. The plan for Homes at Willow Bend is that one-third of the houses will be sold at market rate prices with no income stipulations for buyers. The remaining two-thirds will be marketed and sold only to qualified buyers at low and moderate income levels. There are two tiers of income classifications—people who make 50-80% of Area Median Income (AMI) of Washington County, and people who make 80-100% of AMI. Latest data show that AMI for a family of 4 in Washington County is $58,200. Buyers in these demographic cohorts, particularly the lower income tier, may qualify for a soft second mortgage if the market rate price exceeds their mortgage qualifications. We base affordability on the assumption that families should not pay more than one-third of their income toward housing costs.
A soft second mortgage is a forgivable loan that fills the gap between the cost of a home and the amount of money for which a buyer qualifies in a conventional, FHA, or VA mortgage. The soft-second mortgage will be fully forgiven after 12 years as long as the home buyer lives in that house for all 12 years.
In the case of Willow Bend, the soft-second mortgage is gap financing that will function more like a grant than a loan. Homeowners must first qualify for a primary mortgage and then can determine if they qualify for the secondary financing. The program offers unique avenues for families to build wealth, giving them the opportunity to live in a new home in a great neighborhood at a price they can afford. It allows qualified buyers to receive a subsidy without distorting sale prices for future appraisals in the neighborhood. Gap financing is a tool that can create the opportunity for working class families to build equity and slowly increase overall net worth.
As an example (And please remember, it is just an example. The actual amounts of money will vary depending on the buyers), let’s say a homebuyer qualifies for a $140,000 mortgage, and the house that meets their needs costs $175,000. If the borrowers meet specified income requirements, PfBH could fill the $35,000 gap with a soft-second mortgage. The recorded sale price of the home would be $175,000, but the buyer would only need to borrow $140,000 minus the down-payment amount. The $35,000 soft-second mortgage will be forgiven gradually over a 12-year period. The homebuyer will not be responsible for paying back principal or making interest payments on the soft-second mortgage, provided they live in the home for 12 years. If they sell prior to 12 years, they must repay a pro-rated amount that remains on the soft-second mortgage balance. Additional information about the soft-second mortgage program and the Willow Bend neighborhood is available upon request.
A Sense of Place
Affordability requirements, gap financing, mixes of income, and a non-profit developer are all essential ingredients of the success of Willow Bend. However, without good design, the success of the financing tools would be limited. Design and civic engagement are needed to foster community. PfBH has recognized from the beginning the crucial role of design in creating the type of neighborhood that residents will love and want to call home. Design encompasses not only the look and feel of the houses (large porches, pitched roofs, softened details, simple floor plans), but also the entirety of the site itself. Sidewalks are wide, lots are small, driveways are shared, walking is encouraged.
The physical space of Homes at Willow Bend will guide the way neighbors communicate and interact. People will feel inspired to have morning coffee on the porch and chat with neighbors walking their dogs or biking to the park. Cars will be forced to drive slowly because houses sit close to the sidewalk and cars park on the street. Preserved green spaces will be left largely untouched, retaining as much of the wooded landscape that had been there as possible. Our hope is that families who purchase a home in Willow Bend will feel not only pride and inspiration for their own home, but a pride and inspiration for continuously improving the neighborhood as a whole.