TO: SHA Commission
FROM: Commissioner Shane Matthews, Ward 3
SUBJECT:
title
Motion from Commissioners Shane Matthews directing staff to evaluate the Salem First Keys Fund as an alternative to below-market disposition of Salem Housing Authority properties.
City Attorney’s note: This item is placed on the June 22, 2026 Housing Authority Commission agenda, consistent with SHA and Council rules, for Commissioners’ awareness. No action is anticipated on this motion at the June 22nd meeting. The item will be placed on a future SHA Commission agenda for potential action.
Ward(s): All Wards
Commissioner(s): All Commissioners
Neighborhood(s): All Neighborhoods
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MOTION:
I move to direct staff to reevaluate the current proposal for liquidating SHA scattered housing assets against a longer term endowment fund model
DISCUSSION:
The analysis shall evaluate selling the identified properties at fair market value, depositing net proceeds into a restricted interest-bearing fund, preserving the principal, and using annual interest earnings to provide zero-interest silent second homebuyer assistance loans for eligible buyers purchasing owner-occupied homes inside Salem city limits.
The purpose of this motion is to make sure the Housing Authority Commission has a full comparison before deciding whether to dispose of a large portfolio of public housing assets at a substantial discount.
Based on the staff-provided property list, the identified 79 units will be liquidated at an 8 unit per year rate and appear to have an estimated market value of approximately $24,831,000. 33 of those units are valued at $8,761,000 and proposed to be sold to a third party provider at a discounted value of $1,314,150. If those figures are confirmed, the proposal would transfer the properties at 15% of market value, or an approximate 85% discount.
The remaining 46 units valued at $16,070,000 are expected to be sold direct to consumer for approximately 28.6% of market value or a total of $4,600,000.
|
Category |
Units |
Fair Market Value |
Proposed Sale Price |
% of Market Value |
Approximate Discount |
Discount Amount |
|
Third Party Provider |
33 |
$8,761,000 |
$1,314,150 |
15% |
85% |
$7,446,850 |
|
Direct to Consumer |
46 |
$16,070,000 |
$4,600,000 |
28.6% |
71.4% |
$11,470,000 |
|
Total |
79 |
$24,831,000 |
$5,914,150 |
23.8% |
76.2% |
$18,916,850 |
The question is whether the City and Salem Housing Authority can create a greater long-term public benefit by preserving the value of these assets instead of transferring most of that value in a one-time transaction.
The Salem FirstKeys Fund would take a different approach. The properties would be sold at or near fair market value, subject to legal review and any applicable restrictions. The net proceeds would be placed into a restricted interest-bearing fund. The principal would be preserved, while annual interest earnings would be used to help eligible Salem buyers purchase homes inside city limits.
The buyer assistance would be structured as a zero-interest silent second loan. The loan would require no monthly payment. It would be repaid when the home is sold, transferred, refinanced, converted to a rental, or no longer used as the buyer’s primary residence. A deed restriction would prohibit rental conversion unless the silent second is repaid.
The program would have a maximum assistance amount of up to $100,000 per household, but that amount would be a cap and not an automatic award. Some buyers may only need $25,000, $40,000, $50,000, or $75,000 to make a purchase work. The assistance amount should be based on actual need, lender qualification, household income, purchase price, and the amount necessary to close the affordability gap.
Using the approximate $24.8 million market value shown in the staff materials, a 4% annual return would generate close to $993,000 per year. At the maximum assistance level of $100,000, the fund could help roughly 9 to 10 households annually. If the average assistance amount is lower, the program could help more households each year. For example, an average assistance amount of $50,000 could help approximately 18 to 20 households per year, and an average assistance amount of $25,000 could help approximately 36 to 40 households per year.
All repaid silent seconds should be returned to the principal balance of the fund. This is an important part of the proposal because it allows the fund to grow over time and helps protect the value of the fund against inflation. Without reinvesting repayments into principal, the purchasing power of the fund will decline over time.
The program would also create broader economic benefits inside Salem than a single discounted property transfer. Because all assisted purchases would have to occur inside Salem city limits, the program would support local sellers, real estate brokers, lenders, title and escrow companies, appraisers, inspectors, insurance agents, and contractors. The activity would be spread throughout Salem’s housing market rather than limited to one portfolio of properties.
As with any proposal, administrative cost and staff capacity are always a concern. The program should be designed to avoid the City or Salem Housing Authority acting as a mortgage lender. Instead, the program should be local lender-driven. Participating local lenders and underwriters would prequalify buyers, verify income, review credit, determine first mortgage eligibility, and identify the amount of assistance needed. Only complete and prequalified files would be sent to SHA for final verification and approval.
In that model, the Salem Housing Authority would verify program compliance rather than perform full mortgage underwriting. The City or Salem Housing Authority would confirm the buyer meets program rules, the property is inside Salem city limits, the assistance amount is within the cap, funds are available, and the silent second and deed restriction are properly recorded through title and escrow.
This motion asks staff to determine whether this alternative is legally and financially workable before final action is taken on the proposed below-market disposition. If the current proposal is the best public policy option, the comparison should show that. If the Salem FirstKeys Fund produces a greater long-term benefit, the Commission should have that information before making a final decision.
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Attachments:
1. First Keys comparable programs