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CAPITAL EXPENDITURES COMMITTEE REPORT TO STM 2022-3 Article 14: LEXHAB REORGANIZATION Funds Committee Requested Funding Source Recommends Not Not Applicable Approval 6-0 Applicable "To see if the Town will vote to authorize the Select Board to petition the General Court for legislation reorganizing the Lexington Housing Assistance Board (LexHAB) as an independent nonprofit housing corporation; and further to authorize the Select Board to approve amendments to said act before its enactment by the General Court that are within the scope of the general objectives of the petition; or act in any other manner in relation thereto." "(Inserted by the Select Board at the request ofLexHAB" "DESCRIPTION: The purpose of this article is to allow the Select Board to petition the General Court for special legislation that will reorganize the Lexington Housing Assistance Board (LexHAB) as an independent, nonprofit housing corporation. This will allow LexHAB to more efficiently and effectively carry out its mission of developing,managing and preserving affordable housing in Lexington." (Town Warrant) Our Committee supports LexHAB's petition to reorganize from a quasi-municipal entity to an 5016 independent nonprofit housing corporation. Founded in 1983,LexHAB has been,along with the Lexington Housing Authority(LHA),responsible for developing and managing affordable housing units in Lexington (excluding those units associated with Chapter 40B developments). While affordable housing has become a top Town priority, LexHAB's effectiveness has diminished due to challenges posed by Lexington's competitive,fast-moving housing market and the requirement to use the public-procurement process for its capital projects. Its most recent initiative to construct six units of Affordable Housing at 116 Vine Street (2022 ATM, Article 10(k)) had to be Indefinitely Postponed due to concerns over the high development costs. By contrast,the Housing Corporation of Arlington(HCA),which was started 3 years after LexHAB, has 150 units as a result of its 5016 non-profit status. If Town Meeting approves this Article and the State legislatures concur, LexHAB could deploy financial resources more effectively as it would not be bound to use the public-bidding process, which contributed to a 2.4x increase in the development cost per unit since 2017.With inflation substantially higher,LexHAB needs more flexibility to choose construction partners that can fulfill Lexington's affordable housing objectives. As an independent 501c3 non-profit,we believe that LexHAB can diversify its revenue sources beyond the contributions from the Town,which are primarily by the CPC,and,if approved by Town Meeting,the new Affordable Housing Trust (see Article 12). A 501c3 is more attractive to private donors seeking clear tax incentives. If LexHAB takes a further step and becomes a Community Development Housing Corporation, it would be eligible to access further funds from a Community Investment Tax Credit Program and can pursue State and Federal grants, and partner with larger developers. We also believe it is appropriate that LexHAB seek approval at this STM given the importance of affordable housing development to the Town. By having Town Meeting approve the petition and submit proposed legislative changes to the State legislatures by January 2023, there is a chance to expedite the customary two-year legislative cycle. 6