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APPROVE BY MOTION A SINGLE FAMILY HOUSING REHABILITATION LOAN FOR 27 WEST CHURCHILL STREET
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RECOMMENDATION
It is recommended that the City Council by motion:
1. Approve a $110,000 CalHome Loan to Jerry Ruff for repairs to his home located at 27 West Churchill 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
Jerry Ruff owns a home located at 27 West Churchill 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, energy and water saving features will be installed in the home to reduce on-going costs. The repairs will be funded with a $110,000 CalHome loan, provided as a 30-year, one percent (1%) interest loan, with payments deferred until the end of the loan term. The City received the CalHome funds from the State of California specifically for these type of projects.
DISCUSSION
Background
The City of Stockton offers several housing assistance programs for low and moderate 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 which offers comprehensive repair of 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 Investment Partnerships (HOME) Program, and the State CALHome Program.
The Single Family Repair 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.
If a homeowner would like to participate in the program, they complete an application and then meet with City staff who explain the program requirements and the process. To qualify for a rehabilitation loan, the homeowners 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 in 2008. 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 inspect 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 over $150,000.
Present Situation
The subject residence, located at 27 West Churchill Street, was built in 1951, and is 970 square feet in size with two bedrooms and one bathroom with an attached single car garage. A City staff inspection of the house revealed very few, if any, improvements have been completed since it was built. A number of deficiencies that are eligible for repairs under the CalHome Loan Program include, but are not limited to:
• Replacing the roof and leaking rain gutters
• Completing all violations cited by Code Enforcement notices, including removing illegal additions
• Repairing dry rot and water damaged siding and trim
• Correcting numerous electrical and plumbing code violations
• Abating lead based paint and obtaining a clear termite report
• Replacing water damaged bathroom floor and tub/shower surrounds
• Removing and replacing the water damaged walls and ceilings
• Replacing all windows with double pane glass windows
• Replacing all exterior doors
• Repairing exterior areas and completely re-stuccoing exterior walls
• 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 attic insulation
Staff provides assistance to homeowners in obtaining contractor bids. Bid request notices were given to six contractors selected by Mr. Ruff and three bids were received. Prices range from $69,925 to $84,136; staff’s estimate was $75,560. The received bids are shown below:
|
Firm |
Bid Amount |
|
Alan Spragg and Associates |
$69,925 |
|
ARM Construction |
$78,922 |
|
RMCI Builders |
$84,136 |
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 temporarily relocated. A relocation allowance for rental, moving, and storage costs is included in the total loan amount, which consists of the following:
|
Construction Costs |
$69,925 |
|
Construction Contingency |
$27,075 |
|
Relocation Allowance |
$10,000 |
|
Impound Set-Up |
$2,000 |
|
Appraisal, title, recording, etc. |
$1,000 |
|
Total Loan Amount |
$110,000 |
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% of their income. As determined by Carey and Associates, a licensed appraiser, the after-rehabilitation value of this home will be $185,000. The homeowner does not have an existing mortgage; therefore, the proposed City loan will be the only loan on the property and will be 59% of the appraised value. Including the proposed loan, the household’s debt to income ratio will be 50%.
As required by the Housing Program Guidelines, the loan will be provided as a 30-year, one percent (1%) interest loan, with payments deferred until the end of the loan term.
This loan will be evidenced by a CalHome Loan Agreement (Attachment D - CalHome Loan Agreement), 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 CalHome funds which are restricted to affordable housing uses. Sufficient funds are available in account 060-8535-640 (CalHome Loan Program Fund) to provide the $110,000 loan from the HOME program.
Attachment A - Vicinity Map
Attachment B - Photos
Attachment C - Housing Program Guidelines
Attachment D - CalHome Loan Agreement