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SINGLE FAMILY HOUSING REHABILITATION LOAN FOR 2131 SOUTH SACRAMENTO STREET
recommended action
RECOMMENDATION
It is recommended that the City Council by motion:
1. Approve an $82,555 Home Investment Partnerships (HOME) Loan to Naomi C. Hau for repairs to her home located at 2131 South Sacramento Street; and
2. Authorize the City Manager, or his designee, to take necessary and appropriate actions to carry out the purpose and intent of the motion.
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Summary
Naomi C. Hau owns a home located at 2131 South Sacramento Street (Attachment A - Vicinity Map, Attachment B - Photos) that is in need of repairs to correct deferred maintenance issues, water damage, and building code violations. In addition, it will benefit from installation of energy and water saving components reducing the ongoing costs to maintain. The repairs will be funded with an $82,555 HOME loan, provided as a 30 year, one percent (1%) interest loan, with payments deferred until the end of the loan term. Funding for the repairs will come from HOME funds, which the City receives from the U.S. Department of Housing and Urban Development (HUD) specifically for these types of projects.
DISCUSSION
Background
The City of Stockton offers several housing assistance programs for low income persons to either purchase a house or to repair one they already own. One of the programs is the Single Family Housing Repair Loan Program for comprehensive repairs to owner-occupied single family homes with the goal of preserving and modernizing the existing housing stock. Funding for this program comes from a variety of Federal grant funds such as the Community Development Block Grant (CDBG), HOME, and the State CalHome program.
The City’s program is structured to carry out the intent of the State and Federal grant programs, which is to provide decent, safe, and sanitary housing for lower-income persons that could not otherwise afford to undertake repairs on their own. The program is voluntary and applications are processed on a first-come, first-served basis, subject to funding availability. Homeowner’s become aware of the program through a variety of means, including the City’s website, advertisements, housing fairs, and Code Enforcement. This homeowner was referred to the Economic Development Department by Code Enforcement, which is how many of the rehabilitation projects begin. If a homeowner would like to participate in the program, they complete an application and then meet with City staff who explains the program requirements and the process. To qualify for a rehabilitation loan, the homeowner must be low-income, as defined by HUD, and meet the requirements of the City Housing Program Guidelines (Attachment C - Housing Program Guidelines), which were last approved by the City Council on November 18, 2008 (Attachment D - Resolution 08-0460). The Guidelines require that the total value of all loans secured by the property not exceed 105 percent of the appraised value of the home and that the owner’s total debt (housing and non-housing debt) not exceed 55 percent of their income.
If the homeowner is qualified and wishes to proceed, staff then inspects the home to determine the scope of the rehabilitation. The rehabilitation projects are intended to bring the homes up to current codes, while also incorporating other requirements, such as energy efficiency and water conservation. The costs of the rehabilitation projects can vary widely, with some prior rehabilitation projects costing $155,000.
Present Situation
The subject residence, located at 2131 South Sacramento Street, was built in 1972, and is 1,072 square feet in size with three bedrooms, one and a half bathrooms, and an attached two car garage. A City staff inspection of the house revealed very few, if any, improvements have been completed since it was built. The repairs that will be made include, but are not limited to:
• Replacing the roof and leaking rain gutters
• Repairing dry rot and water damaged siding and trim
• Correcting numerous electrical and plumbing code violations
• Treating for termites and obtaining a clear termite report
• Replacing water damaged bathroom floors and tub/shower surrounds
• Installing a handicap walk-in bathtub.
• Replacing all windows with double pane glass windows
• Replacing all doors
• Repairing exterior areas and completely painting all walls, eave, and trim
• Completely repairing, retexturing, and painting all interior walls and ceilings
• Replacing worn and damaged floor coverings
• Installing new kitchen and bathroom cabinets and counter tops
• Installing new Energy Star kitchen appliances
• Installing a new water heater with earthquake straps
• Installing a new central heating and air conditioning system
• Installing smoke and carbon monoxide detectors
• Installing additional attic insulation
• Clearing all debris and overgrown vegetation in all yard areas as per Code Enforcement Citations.
Staff provides assistance to homeowners in obtaining contractor bids. Bid request notices were given to five contractors selected by Ms. Hau and three bids were received. Prices range from $67,955 to $116,859; staff’s estimate was $77,165.
The received bids are shown below:
|
Firm |
Bid Amount |
|
Alan Spragg and Associates |
$67,955 |
|
Delta-Bay Construction & Roofing |
$81,736 |
|
A.R.M. Construction |
$116,859 |
The lowest bid was submitted by Alan Spragg and Associates, a Stockton-based company, who will be awarded the contract if the loan is approved.
Due to the nature of repairs, the household will need to be relocated temporarily. A relocation allowance for rental, moving and storage costs is included in the total loan amount, which will consist of the following:
Construction Costs $67,955
Construction Contingency $5,600
Relocation Allowance $8,000
Appraisal, title, recording, etc. $1,000
Total Loan Amount $82,555
Staff analyzed the homeowner’s loan-to-value and debt-to-income ratios and determined that they are within the limits established by the City’s Housing Program. As previously noted, the Guidelines require that the total value of all loans secured by the property not exceed 105 percent of the appraised value of the home and that the owner’s total debt (housing and non-housing debt) not exceed 55 percent of their income. As determined by Carey and Associates, a licensed appraiser, the value of the home after the rehabilitation project is completed will be $125,000. The homeowner does not have an existing mortgage; therefore the proposed City loan will be the only loan on the property, and will be 66 percent of the appraised value. Including the proposed loan, the household’s debt to income ratio will be 32.5 percent.
As required by the Housing Program Guidelines, the loan will be provided as a 30 year, one percent interest loan with payments deferred until the end of the loan term.
This loan will be evidenced by a Home Loan Agreement (Attachment E) and a Promissory Note and will be secured against the property by a Deed of Trust. In the event of a transfer of the property, the loan becomes due and payable in full. Subordination to a new loan is not allowed.
FINANCIAL SUMMARY
No General Fund dollars will be used for this project. This rehabilitation loan will be funded with HOME funds which are restricted to affordable housing uses.
Sufficient funds are available in account 058-8530-640 (Home Loan Program Fund) to fund the $82,555 loan.
Attachment A - Vicinity Map
Attachment B - Photos
Attachment C - Housing Program Guidelines
Attachment D - Resolution 08-0460
Attachment E - HOME Loan Agreement