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The Condominiums at 1421 Eaton Street
Missoula, Montana

Careful desgin and landscaping help to create a sense of community at 1421 Eaton Street.

In the early 1990s, Missoula, Montana, like several other western cities, faced a severe housing shortage. Rental vacancy rates fell to below 1 percent from 1991 through 1994, and rents increased at about 15 percent per year. The staff of the Missoula Housing Authority (MHA) was acutely aware of this shortage as its waiting list grew to 1,500 families--in an urban area of about 80,000 people. The concomitant increase in the cost of homeownership--the average sales price increased more than 35 percent between 1991 and 1994--made it nearly impossible for many families to make the transition from rental housing to homeownership. Another result of the housing shortage was that people with special needs, particularly those with mental or physical disabilities, were being forced out of their housing.

Development of new affordable housing was the best solution to these problems. The staff of the Western Montana Mental Health Center (WMMHC) had noted that many of their clients had an exceedingly difficult time finding safe and affordable housing. The center had established a Community Housing Development Organization--the Garden City CHDO--to access HOME funds and assist in developing such housing.

The MHA and the WMMHC thus entered into a joint development partnership to develop for sale units for first-time, low-income home buyers, including the mentally ill.

The solid experience of the housing authority, combined with the expertise of the WMMHC, was crucial to the competitiveness of the grant proposals. The center was responsible for land acquisition and subdivision approval, grant-writing, and developing condominium and resale documents. The housing authority provided expertise in construction management and screened applicants to verify income and eligibility as first-time home buyers.

By 1995, a convenient, appropriately zoned site was acquired and subdivided, and construction began on The Condominiums at 1421 Eaton Street--36 units of affordable, for-sale housing. The project was completed in May 1996, and all of the units were sold by February 1997, following a joint marketing effort by the MHA and the WMMHC. Seven of the units were sold to individuals with mental illness, who receive support services from the WMMHC and who earn 26 percent or less of the area median income. The remaining 29 units were purchased by households with incomes ranging from 32 to 78 percent of median income.

The units are affordable to very low income buyers through a combination of down-payment assistance and "silent" second mortgages. The actual purchase price for each buyer was based on the household debt-to-income ratio, adjusted for family size, which resulted in an "adjusted purchase price." The difference between the FHA appraisal and the adjusted purchase price determined the amount of the "silent" second mortgage. Repayment of these mortgages is deferred until resale of the unit and may be forgiven if the unit is not sold during the term of the first mortgage.

The Montana Board of Housing made available a $1.7 million set-aside to fund the mortgage loans. Thirty-year mortgages were available at a fixed 6-7/8 percent interest rate. Buyers with disabilities were able to obtain mortgages at 2-3/4 percent.

By joining together, the Missoula Housing Authority and the Western Montana Mental Health Center helped solve a very difficult problem facing the community and gained invaluable development experience. The Condominiums at 1421 Eaton Street demonstrate that by using a variety of public and private resources, it is possible to achieve affordable homeownership for a very low income and disabled population.

* Separate grants were provided from the City of Missoula and from the
County of Missoula.

Contact: Edward S. Mayer, Chief Executive Officer, Missoula Housing Authority, 406/549-4113

Copyright 1998 - 1999 - 2000
Affordable Housing and HOME
National Association of Housing and Redevelopment Officials (NAHRO)
630 Eye Street, NW
Washington, DC 20001-3736
Telephone: (202) 289-3500
Fax: (202) 289-4949