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ADOPT A RESOLUTION APPROVING LOAN AND/OR GRANT AWARDS TO ELIGIBLE RESPONDENTS TO THE 2024 AFFORDABLE HOUSING PROPERTY ACQUISITION NOTICE OF FUNDING AVAILABILITY
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving a $1,500,000 Community Development Block Grant (CDBG) loan and/or grant award to Parents by Choice, Inc. for the purpose of acquiring property located at 523 E Main Street, Stockton CA for development of a Transitional Housing for Youth affordable housing project;
2. Approving a $1,891,000 Pro-Housing Incentive Program (PIP) loan and/or grant award to Delta Community Developers Corp. (DCDC) for the purpose of acquiring property located at 645 W. Harding Way, Stockton CA for development of the Harding Way Apartments affordable housing project;
3. Approving the allocation of 36-units of affordable housing through the Transitional Housing for Youth and Harding Way Apartments projects pursuant to Article XXXIV of the California Constitution;
4. Awarding and Allocating Pro-Housing Incentive Program Grant Funds and/or Community Development Block Grant Funds not to exceed a combined total of $3,391,000.00 to the projects that best strategically meet grant expenditure deadlines; and
5. Authorizing the City Manager, or designee, to execute all documents and take all necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
In July 2024, the City of Stockton’s Economic Development Department (EDD) released the 2024 Real Property Acquisition Notice of Funding Availability (NOFA). The NOFA announced the availability of approximately $4,551,524. This NOFA sought project proposals from qualified nonprofit housing developers and/or housing or service providers to provide CDBG and PIP funds to acquire real property to be used for the development of affordable housing.
In addition, due to the proposed public financing, the development of the project must be approved pursuant to Article XXXIV (34) of the California Constitution, which requires a local election to approve affordable housing projects. In 2010, local voters gave the City Council the authority to approve up to 500 units per year. The proposed units are within this limit.
Acquisitions are subject to a final Community Development Block Grant agreement being issued by HUD and an update to the PIP Grant agreement.
DISCUSSION
Background
The City receives annual allocations of Community Development Block Grant (CDBG) funds from the U.S. Department of Housing and Urban Development (HUD) for the purpose of advancing the City’s affordable housing and community development needs of low-income residents. CDBG funds are used for a wide variety of activities that benefit low-income residents, including but not limited to the provision of public services, property acquisition for affordable housing purposes, and economic development activities. In addition, in 2023, the State of California designated the City of Stockton as a Pro-Housing City, recognizing Stockton for committing to policies and practices that will help them remove barriers to housing production. Being designated as a Pro-Housing City, the State of California awarded Pro-Housing Incentives Pilot (PIP) Program funds to the City of Stockton in 2023 to be used for the Development of affordable housing.
In July 2024, the City of Stockton’s Economic Development Department (EDD) released the 2024 Real Property Acquisition Notice of Funding Availability (NOFA). The NOFA announced the availability of approximately $4,551,524 in funding of CDBG and Pro-Housing Incentive Pilot (PIP) program for the purpose of property acquisition leading to the development of affordable housing.
The NOFA resulted in the submittal of five applications requesting $10,015,714.
The City of Stockton is held to stringent regulations by its state and federal funding agencies. As such, the City must conduct a risk assessment of each applicant and its proposal and impose rigorous experience and capacity requirements, in addition to an assessment of the project, to ensure the selected applicant has the ability to comply with the stringent funding requirements. With this consideration, EDD’s project recommendations are being made after considering several project proposal factors, including but not limited to:
• Applicant’s timely response to the NOFA
• Responsiveness to project details as outlined in the NOFA
• Overall project characteristics
• Target population to be served
• Number of units to be developed
• Developer & team capacity and experience including the ability to meet stringent state and federal regulatory requirements (assessed by the applicant’s past performance and/or information and details provided (or lack of) in the project proposal
• Project funding leverage (amount of non-City funding to be contributed)
• Conformance with the City’s Housing Element, Consolidated Plan, Council Goals, and Homeless Strategic Plan
• Ability to spend funds in a timely manner (based on past performance and/or information/details provided in the project proposal)
• Consideration of certain CDBG/PIP limitations in relation to the project proposals (e.g. any evident environmental review considerations/concerns)
Present Situation
After careful review and analysis of each proposal, EDD recommends funding awards to the following projects:
TRANSITIONAL HOUSING FOR YOUTH
Applicant: Parents by Choice, Inc.
Co-Applicant: Pacific Development Group
Project Address: 523 E. Main Street, Stockton CA 95202
Funding Request: $1,500,000
Funding Recommendation: $1,500,000
Estimated Total Development Cost: $3,700,000
Est. Cost Per Unit: $308,333
Use of Funds: Property Acquisition
Estimated Number of Housing Units: 12
Council District: 5
Previous Award (if any): $0.00
Target Population Served: Former foster care, justice involved individuals, probation, low income, or at risk of homelessness
Target AMI Level: At or Below 80% of the Area Median Income (AMI)
Parents by Choice (PBC) proposes to use City funds to acquire the Ruhl Building at 523 E. Main Street. The Ruhl Building is a three-story historic building in Downtown Stockton. The project concept is to maximize the number of affordable units created, while preserving the quality of the project design. PBC is initially estimating 12 units, with ten 2-bedroom units and two studios to be created. The ground floor has four renovated commercial units of approximately 2,500 square feet each. The two upper floors have completed some construction, with the steel beams and wood framing completed for ten 2-BR units and two Studios. Most of the framing work for the lofts has been completed and paid for, as have the engineering and architectural design and the PG&E design and engineering for electrical service.
According to PBC, one of the four retail spaces is leased to a tenant. The other three spaces will be used for program space and to develop additional social enterprises (small businesses with a mission) to support youth employment and the needs of this growing neighborhood. PBC has created four successful social enterprises in Downtown Stockton. The opportunity for development of the Ruhl Building, if funded, will allow PBC to do more of this work in Downtown.
Once completed, the building would offer 12 units which would house up to 22 individuals. These individuals have life barriers such as involvement in the foster care system, probation, mental health, and/or at risk of homelessness. Through this project, eligible individuals would receive housing, case management, and other supportive services from PBC to help them achieve independence. This housing project would work hand in hand with the services available at the Courthouse Plaza (306 E. Main Street) to create a community of care where they could live, work, and engage in the services they need to thrive.
This project includes Pacific Development Group, Inc as a co-partner and developer. According to the project proposal, Pacific Development Group has successfully completed multiple affordable housing projects throughout California and across multiple states, many of which have been Public-Private Partnerships that have created and/or preserved thousands of affordable and workforce housing units using state and federal resources in compliance with related funding regulations.
HARDING WAY APARTMENTS
Applicant: Delta Community Developers Corp.
Co-Applicant: N/A
Project Address: 645 W. Harding Way, Stockton CA 95204
Funding Request: $1,891,000
Funding Recommendation: $1,891,000
Estimated Total Development Cost: $11,935,186
Est. Cost Per Unit: $497,299
Use of Funds: Property Acquisition & Predevelopment Costs
Estimated Number of Housing Units: 24
Council District: 4
Previous Award (if any): $0.00
Target Population Served: Justice-involved mental health consumers at risk of homelessness
Target AMI Level: At or Below 50% of the Area Median Income (AMI)
The 645 W. Harding Way Apartments property, located at 645 W Harding Way, Stockton, CA 95204, is a strategic acquisition and adaptive reuse project aimed at transforming a former medical office building into a thriving community for residents with a history of justice-involvement or who have mental health challenges. The property sits on a 1.02-acre lot and features a single-story building with a basement. The ground floor spans 16,414 square feet, while the basement adds an additional 2,466 square feet, providing ample space for the planned rehabilitation efforts.
The intended use of the property includes creating a permanent, supportive, and stable living environment for its residents that will support their mental health, act as misdemeanor diversion, reduce recidivism, and promote long-term housing stability. The Housing Authority of the County of San Joaquin will provide tenants with Housing Choice Vouchers, ensuring that this vulnerable population has access to secure, affordable housing. In addition, the integrated clinical office space will facilitate on-site delivery of essential mental health services, fostering a holistic approach to care that addresses both the immediate and long-term needs of the residents.
According to DCDC, the current zoning allows for this transformation, and all necessary zoning requirements and site preparations will be adhered to, ensuring compliance with local regulations and enhancing livability and safety of the residents. This adaptive reuse approach will follow all relevant laws and regulations, ensuring a smooth transition to its new residential purpose.
The redevelopment of 645 W. Harding Way Apartments will result in the creation of 24 units, specifically designed to serve the justice-involved mental health residents. The unit breakdown includes:
• 24 one-bedroom apartments
• 4 clinical offices utilized by San Joaquin County Behavioral Health Services
• Community room
• Laundry room
This project will undergo significant rehabilitation, as the building is currently a former medical office. The entire structure will be gutted and converted into residential units, which includes 24 affordable one-bedroom apartments and 4 clinical offices that will be utilized by San Joaquin County Behavioral Health Services. The scope of work involves a comprehensive overhaul of the building’s interior, including the replacement of electrical, plumbing, and the addition of modern amenities to meet the specific needs of the senior population. DCDC has estimated the cost of rehabilitation to be approximately $10.3 million. DCDC has identified potential funding sources to conduct rehabilitation work, and the rehabilitation start date is tied to securing the funding sources.
Compliance with Article XXXIV
Article XXXIV of the California Constitution requires a local election to approve affordable housing projects when the majority of the units are financed in whole or in part by the local government. In November 2010, local voters gave the City Council the authority to approve the development of up to 500 publicly assisted low-income housing units each year for a ten-year period. The Council is being asked to allocate 110 of the authorized units to this project. The units being proposed by DCDC are within the limit approved by the voters.
FINANCIAL SUMMARY
The proposed resolution will have no financial impact on the General Fund or any other unrestricted fund. The $1,500,000 of CDBG funding will be payable from fund 230, sub-fund 231. The $1,891,000 of PIP funding will be payable from special grant fund 280, sub-fund 281. In the event that a project cannot meet funding requirement obligations, the project will not move forward or funding source may be shifted between projects as outlined in the actions.