By Martha A. Churchill

Looking for affordable housing for DD adults, even in the more expensive neighborhoods?

Marc Craig of Springhill Housing Corp. has some great ideas for parents to invest in a house, earn interest on the investment, and then have the investment paid back when the house is no longer being used as a residence for DD adults.

I told Marc that when an agency tries to purchase a home, the seller suddenly raises the price when he hears that the property will be used by an agency for DD adults.

I asked Marc if he knew a way around this problem, so that homes could be made available, even in the more expensive neighborhoods. We often complain about the high price of housing in Ann Arbor, but Oakland County also has its share of high-rent districts.

Marc sets up a corporation-- parents or other investors-- to own the house. Families who want to invest in the house can contribute to the down payment. A mortgage covers the rest of the cost. A nonprofit corporation, such as Spring Hill, manages the house. Several DD adults live there, and pay rent. The families actually receive interest while the house is in use.

When the house is no longer needed, it is sold, and the investors (families) get their money back, along with a portion of the increased equity if the house went up in value.

"We set up limited liability companies," Marc says, explaining how the house is acquired. "I get private investor capital for the equity requirement, then mortgage the rest, and make a nonprofit the managing member of the LLC."

The private investors are the families, or anyone else who wants to invest in the home.

A nonprofit agency becomes the manager of the LLC (limited liability company) but it does not hire staff for the house. Staff are contracted through other agencies. The residents of the house would decide who they want for staff.

Marc says that there are tax advantages to purchasing a house through an LLC of this kind. He told me that Spring Hill has established six houses this way. The nonprofit agency and the families who invest all come out ahead because they keep the equity and appreciation. Eventually, when the house is sold, it will probably be worth more than when it was purchased. At that time, the agency and the families divide up the equity according to whatever their original agreement says.

Everybody is a winner, and the DD adults get a place to live.

The operating agreement has to take advantage of tax consequences to the investors and the nonprofit agency. The nonprofit takes care of all the bookkeeping and administration.

I asked Marc how much the families have to invest in order to get started. He says that you need 25% of the purchase price of the house, which comes from the families (or their special needs trusts). He uses Fannie Mae’s community lending program.

I asked Marc to imagine a 4-bedroom house in Ann Arbor that might cost about $200,000. He said that we should raise $50,000 from the families or other investors, plus an extra $5,000 for closing costs. A mortgage would cover the rest of the purchase price.

The families would receive a return every year on their investment while the house is being used. The mortgage payment might be somewhere around $1,100 per month. If three people lived there, each person might pay about $600 per month in rent to cover his or her share of the mortgage, utilities, and other overhead. The nonprofit would keep a fund set aside to cover maintenance and repair costs.

When the house is sold, the families take half and the nonprofit takes half.

Marc is proud of the operating agreement he uses for these houses. It takes into account the tax consequences to both the nonprofit agency and the families who invest in the house.

Suppose Mr. and Mrs. Smith invest in a housing venture of this type, and their daughter moves into the house. A few years later, she decides to live someplace else. It wouldn’t matter because the Smiths will get their investment returned eventually when the house is sold. (If the Smiths had paid their money to a charity as a donation to buy the house for their daughter, they would never get their money back after she moved out. They would, however, be able to claim the contribution as a tax deduction.)

Renting a house is even more wasteful. Once the rent is paid, it is down the drain. The landlord can just increase the rent, and the DD adults have no recourse. A housing venture through an agency like Spring Hill would give the families control.

"I try to create and maintain a pool of housing that meets peoples’ needs," Marc says. "I’ve worked with the clinical staff (at the provider agencies) to figure out who’s going to live where as cost effectively as possible. I don’t concentrate people in pockets of low income just for the sake of making housing more affordable. People with disabilities should have a chance to live in diverse areas like everyone else."

Marc indicates he is busy right now making an application for federally subsidized Section 8 housing vouchers. This year, for the second time, nonprofit agencies can apply for the vouchers, and then distribute them to persons with disabilities.

There are some restrictions on Section 8 vouchers, though, he said. For example, the landlord cannot charge any more than the "fair market rent." The government decides what the "fair market rent" is, based on housing costs in the whole region. Right now, he has to work with $635 a month for a two-bedroom apartment. "That doesn’t get you much" in Oakland County, he says.

For more information about MORC, write to Morcinc@tir.com or call (810) 263-8748. To contact Marc Craig, call (248) 276-8011 or fax him at (248) 276-9280. Marc does not have e-mail. Or go to  www.morcinc.com

For information about a MORC group home designed for DD adults with severe medical issues, click on WESTLYN.