MacRo LTD Blog

Affordable Housing Capitalizes on Foreclosures

The Frederick Affordable Housing Council (AHC) has identified a unique way to harness Frederick County’s Moderately Priced Dwelling Units (MPDU) Program as a source of funds to purchase foreclosed properties and rehab them as sustainable affordable housing.

Affordable Housing Capitalizes on Foreclosed Frederick Homes

Affordable housing remains a struggle for many Frederick County residents despite the decline in home values in the area and the glut of foreclosed properties on the market.  Tightened credit restrictions on mortgage financing blocks many from home ownership, and average rents on a family-sized apartment are on average $1,400 per month–well above the rate that families earning below the median income can afford.

“Much of our workforce has to commute into Frederick from places like Pennsylvania and Washington County because they can’t afford to live here,” said Bryan Lyburn, Vice President of Business Operations with Interfaith Housing Alliance and a member of the AHC.

The MDPU Program in Frederick County requires the production of affordable housing units in all new housing developments with 25 or more units. Until recently, home builders were responsible for building a certain percentage of new homes in those developments as MPDUs.

Given the high level of foreclosures on the market and the dramatic drop in home prices, the county management and members of the AHC came to a mutual agreement that sufficient moderate income housing currently exists and building new MPDUs is not necessary and could even be risky.

Tapping into the foreclosure inventory seemed to make more sense to everyone involved.

“We have had a great group collaborating on solutions to this since last spring,” said Jennifer Short, Director of the Department of Housing and Community Development.  “People from county housing, planning and legal staff, the Frederick County Builder’s Association, the Affordable Housing Council, the Land Use Council, and the development community have all worked together and all agree on this idea.”

This past September, the Board of County Commissioners of Frederick County (BOCC) approved an ordinance to amend the MPDU code to allow developers to make payments in lieu of building MPDU units.  MPDU fees will help replace funding sources for affordable housing that were previously provided through the county.

In addition, in 2010 the Affordable Housing Land Trust was created.  The purpose of the Land Trust is to take partial ownership of MPDU’s in Frederick County so that there is a more permanent inventory of workforce and affordable housing. Members of the AHC will act as the initial board of directors of the Land Trust.

Local nonprofit affordable housing developers like Habitat for Humanity and Interfaith Housing Alliance will partner with county staff to guide the process of obtaining and maintaining foreclosed properties, as well as finding qualified low-income buyers.

This is a win for everyone,” said Mr. Lyburn.  “This new program will allow home builders to focus on what they do best as opposed to dedicating resources to affordable housing.  Reducing the foreclosures on the market will help stabilize pricing of new and resale housing.  And it will be a huge benefit to neighborhoods to rehab foreclosed properties and put those homes back in use.”

This terrific idea will help resolve two significant issues faced by Frederick County’s housing market today—high foreclosure inventory and a lack of sustainable affordable housing inventory.

Currently, about 35% of houses on the market in Frederick County are foreclosures.  While that number is down significantly from 50% last year, it’s high enough to dampen home sales and appraised values.

Sustainability of affordable housing, particularly when MPDUs are new-build homes by private developers, is difficult when properties change hands.  In Montgomery County, where MPDUs are sitting within high-end communities like Avenel Farm, they provide a one-time benefit for the first owner, but are no longer remotely affordable once sold at market price to subsequent owners.

In Frederick, MDPU properties typically stay in the affordable housing inventory for about 10-15 years, but the Affordable Housing Council thinks they can do even better.

“The Housing Land Trust wants to step back in and buy back properties to keep these homes in the affordable housing inventory for 100 years or more,” said Ron Cramer, Executive Director of Habitat for Humanity of Frederick County and Chair of the AHC.

“Organizations like Habitat can partner with Frederick County government to lend expertise in qualifying homebuyers, training them to be good stewards, and maintaining properties,” said Mr. Cramer.  “We really understand how to find highly qualified affordable housing buyers.  Only about 7% of Habitat for Humanity homes wind up in foreclosure.”

Currently the Land Trust Steering Committee is looking at a couple of financing models for these properties.  The most promising appears to be a possible 25/75 equity share split between the homeowner and the Land Trust.

How will shared ownership impact the first-time homebuyer under these proposed changes to Frederick County’s affordable housing program?

“Affordable housing programs in Frederick County should be a hand up versus a hand out,” said Mr. Cramer.  “These homes will be so much less expensive, around $400-$600 per month, versus about $1,200-$1,300 in rent.  Between that advantage and a 25% share in equity, homeowners should be in a good position when they have outgrown their first home and are ready to purchase another.”

How many foreclosed homes could this program effectively take off the market annually?

Habitat for Humanity’s case statement claims that the organization would need to build 355 new affordable homes per year to keep up with local need for affordable housing.  According to Ms. Short, projections on funding and estimates of how many foreclosed homes will be purchased won’t be available until spring of 2012.

“We expect to see the final details of the policy in place by January or February of 2012,” said Frederick County Commissioner Mr. Billy Shreve.  “After that we hope to have the program up and running by mid-summer.”

The proposed working relationship between the BOCC’s Affordable Housing Council and well-run nonprofits like Habitat for Humanity and Interfaith Housing Alliance is a great example in the Frederick community of public-private partnership.

“As nonprofits, we need to work to find ways where we can help our local government,” said Mr. Cramer.  “Our county commissioners have been very supportive of this idea, I think because of the approach we take with local government.  We are always asking ‘How can we help this community out?’  We offered Habitat volunteers help maintain Frederick County’s Parks and Rec facilities.  We can work together on so many of these things.”

Could this be a model for the type of public/private partnerships that truly benefit our entire community … or better yet a model for communities throughout the nation?

Become a MacRo Insider

Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes for

Leave a Reply

Your email address will not be published. Required fields are marked *