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40 C-1 • 0 011 ul 11 yon uu: uj 'Jd4a53kaas4 FAV I a --It 1, EXHIBIT 1-$1) EXPLANATIQN OF CALCUL.,ATlg—N/—QUAibLT FI AATiC�N OF POTS TIAL IMPACT OF NOME F.QUITY MDS has conducted an analysis giving consideration to the impact of horns equity Potential on Senior household incornes in the Primary Market Area (refer to Exhibit 1- 4a). I his analysis assumes that the minimum cash flour income threshold could be reduced (for those Seniors selling their homes) due to the additional annual cash flow that would result from the sale of a home and the reinvestment of the not after- tax sales Proceeds, 'flies analysis was acCOMpiished as follows: MDS assumed that the nut equity (after closing costs) earned from the sale of these Seniors' horries would be equal to 90% of the sales value and that this equity could be invested at 6% (average over a three to four year period), which would generate an additional cash flow of $5,130 per year. MDS then reduced the minimum income criteria of $40,000 by the amount of the additional cash flow that would be generated from the sale of the home and calculated the new percentage of age qualified households that would qualify at the new reduced income ievel (the percenqige of those who would qualify between $34,870 and $40,000). 3. MDS again reduced the new age and income qualified households to reflect only that percentage that area estimated to be homeowners (versus renters) in the Primary Market Area. Based on the 1990 census, approximately 86,8% of Seniors live in owner -occupied units. As can he aeon from Exhibit'1-torr, over 250 additional age 75+ households (whose income is below $40,000) would be qualifiers at this level, providing they could sell their home and Invest the net equity at 6%, thereby supplementing their existing annual cash flow income. Ii