title
APPROVE THE 2019 AFFORDABLE HOUSING LOANS PROGRAM ALLOCATION
recommendation
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Approve the following loans for three (3) affordable housing activities:
a. $435,000 to Central Valley Low Income Housing Corporation, Housing Authority of County of San Joaquin, and Stocktonians Taking Action to Neutralize Drugs for the Partnership in Housing for the Homeless project;
b. $450,000 to Domus Development for the Casa Manana Inn project;
c. $1,000,000 to Housing Authority of San Joaquin County for the Sierra Vista Apartments, Phase III project; and
2. Approve the allocation of 42 low-income housing units to the Sierra Vista Apartments, Phase III and the Partnership in Housing for the Homeless projects pursuant to Article XXXIV of the California Constitution; and
3. Authorize the City Manager, or his designee, to take actions that are necessary and appropriate, including the execution of loan documents, to carry out the intent of the resolution.
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Summary
In November 2018, the City issued a Notice of Funding Availability (NOFA) of approximately $2.148 million of affordable housing funds to provide gap financing for new construction and rehabilitation activities that will result in the provision of housing affordable to households with incomes at or below 80 percent of the Area Median Income (AMI). Two applications were received for affordable housing projects, one application was received for permanent housing for the homeless. Staff reviewed applications for eligibility and presented them to a four-member committee for evaluation and recommendation.
Staff recommends funding for the following projects: Partnership in Housing for the Homeless ($435,000), Casa Manana Inn ($450,000), and Sierra Vista Apartments Phase III ($1,000,000).
DISCUSSION
Background
In previous years the City allocated funds to affordable housing projects on a first-come, first-served basis. However, due to the limited funds available and the number of organizations requesting financial assistance, the City began using a NOFA process. Through this process, the City’s HOME Investment Partnership (HOME), Low-to Moderate Income Housing Fund (LMIHF), and Community Development Block Grant (CDBG) funds will be allocated to specific projects. A summary of these funding sources follows:
• HOME funds. The City receives an annual allocation of HOME funds from the U.S. Department of Housing and Urban Development (HUD) which may only be used to provide housing affordable to households with incomes at or below 80 percent of the AMI ($50,950 for a family of four).
• LMIHF funds. In 2019, the Successor Agency to the former Redevelopment Agency of the City of Stockton (Successor Agency) made payment on loans owed to the City’s LMIHF. The payment of $665,114 was approved by the Stockton Successor Agency Oversight Board and the State Department of Finance on the annual Recognized Obligation Payment Schedule (ROPS 19-20). The funds must be used for affordable housing activities within the City of Stockton and are not restricted to a project area.
• CDBG funds. The City receives an annual allocation of CDBG funds from HUD which may be used to provide housing affordable to households with incomes at or below 80 percent of the AMI.
A NOFA was released on November 1, 2018, notifying interested parties of the availability of these funds. It was sent to 23 organizations and posted on the City’s website. The NOFA stated that funds were available to provide gap financing for affordable housing projects and that applications would be scored based on the following criteria:
• Project Readiness
• Leveraging (amount of non-City funding in the project)
• Capacity and experience of developer/team
• Conformance with other City policies and the City’s Housing Element
The NOFA resulted in the submittal of three (3) applications. One application requested funds for permanent housing for the homeless, and two requested funds for multi-family rental projects. In total, the applications requested $2.51 million for their projects. Per the 2018-19 Annual Action Plan approved by Council in June 2018, available funding for homeless housing totaled $435,000; another $2.148 million in funding was identified for affordable housing projects. The following is a brief description of the projects being recommended for funding (Attachment A - Vicinity Maps):
• Partnership in Housing for the Homeless - Central Valley Low Income Housing Corporation (CVLIHC), Housing Authority of County of San Joaquin (Housing Authority), and Stocktonians Taking Action to Neutralize Drugs (S.T.A.N.D.) formed the Partnership in Housing for the Homeless. The Partnership in Housing for the Homeless was formed as a collaborative effort to address the needs of the homeless in the City. They are requesting $435,000 to assist with funding the acquisition and rehabilitation of units to house homeless households. The $435,000 will be used as a down payment and will help secure additional funding. The parcels have been identified andare located at: 1314 East Sonora, 105 West Park, 927 Sierra Nevada, 2265 Peralta, 629 West Park, 421 East 1st Street and 1602 Turnpike. CVLIHC will provide the rental subsidies, and the average assistance payment is expected to be $627 per month. The rental subsidies will have a fifteen-year value of $112,860 per unit. The project will leverage more than $5.5 million of non-City funds.
• Casa Manana Inn - Domus Development, LLC and Stockton YMI Elderly Housing submitted a request for $625,000 to assist with the rehabilitation of a 163-unit multi-family project located at 3700 North Sutter Street (approximately $3,987 per unit). One hundred sixty-three (163) units will be affordable to elderly households with incomes at or below 80 percent of the AMI, and the remaining will be a manager unit. There have been no major renovations to the building since it was constructed in 1964. The building needs major repairs, upgrades, and systems improvements to ensure safety for the residents and ongoing operations. This funding will assist with the preservation of affordable housing units. The Casa Manana Inn project is leveraged with other non-City funds.
• Sierra Vista Phase III Apartments - Housing Authority submitted a request for $1.45 million to assist with the construction of 90 multi-family rental units. The project will consist of 89 units for households with incomes at or below 80 percent of the AMI, and the remaining will be a manager unit. The project is located at 2436 Belleview Street. This project is the final phase of the redevelopment of Sierra Vista Homes. The project is leveraged with other non-City funds.
Based on the committee’s recommendations and limited funding available, all projects received funding at some level. Both Sierra Vista Apartments Phase III and Partnership in Housing for the Homeless received less than there requested amount of funding.
Present Situation
The NOFA includes $435,000 in funding for projects that provide permanent housing for the homeless, and $263,000 for nonprofit CHDO for eligible housing-related activities, $1,250,000 from the Low to Moderate Income Housing Fund (LMIHF) and $200,000 of HOME Investment Partnership (HOME) funds. Since there were no CHDO applications received, no CHDO funds will be awarded at this time.
Staff reviewed applications for eligibility and presented them to a four-member committee for evaluation and recommendation. The committee included representatives from community development, finance, and the public. The committee made recommendations for funding based on four criteria: project readiness, leveraging, capacity and experience of the developer/team, and conformance with City Housing policies.
Two applications for affordable housing and the one application for permanent housing for the homeless were recommended to receive funding. These projects will accomplish goals of the City’s Housing Element and Consolidated Plan and are proposing a significant amount of non-City funds for the projects. It is recommended that funding be allocated to the three projects (Exhibit 1 to the Resolution) as follows:
|
Project |
Applicant |
Est. # of Units |
Est. Project Cost |
Funds Requested |
Proposed Funding |
Source |
|
Partnership in Housing for the Homeless |
CVLIHC, Housing Auth., S.T.A.N.D. |
20 |
$ 4,413,000 |
$ 435,000 |
$ 435,000 |
CDBG |
|
Casa Manana Inn |
Domus Development |
163 |
$20,898,666 |
$ 625,000 |
$ 450,000 |
LMIHF |
|
Sierra Vista Apartments Phase III |
Housing Authority |
89 |
$41,401,297 |
$1,450,000 |
$1,000,000 |
HOME, LMIHF |
|
TOTAL |
|
|
$66,712,963 |
$2,510,000 |
$1,885,000 |
|
It is recommended that the loan to CVLIHC, Housing Authority and S.T.A.N.D. be a subordinate 15-year, zero percent interest, forgivable loan. A Deed of Trust will be executed to secure the City’s investment. The funds will be used for a down payment on the property and will assist in securing additional financing for acquisition and rehabilitation costs. The proposed properties are located at: 1314 East Sonora, 105 West Park, 927 Sierra Nevada, 2265 Peralta, 629 West Park, 421 East 1st Street and 1602 Turnpike.
Funding for the Domus project is recommended to be a 15-year, three percent interest subordinate loan, with payments of fifty percent of residual receipts. Residual receipts are the amount of revenue remaining, after all operating expenses are paid. If the annual residual receipt payments do not pay off the loan, the remaining balance is due at the end of the 15-year term. A Deed of Trust will be executed to secure the City’s investment and the funding is contingent on them receiving all the other funding.
Consistent with the terms of loans made for previously funded multi-family housing projects, it is recommended a subordinate loan to Housing Authority for the Sierra Vista Apartments Phase III project be approved contingent upon the project receiving all necessary funding. Housing Authority owns the property and expects to complete construction of the project by May 2021. It is further recommended that the loan terms be 55-year, three percent interest, with payments of fifty percent of residual receipts. A Deed of Trust will be executed to secure the City’s investment. If the annual residual receipt payments do not pay off the loan, the remaining balance is due at the end of the 55-year term.
Compliance with Article XXXIV
Article XXXIV of the California Constitution requires a local election to approve affordable housing projects when most 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 22 of the authorized units to the Sierra Vista Phase III project and 20 units for the Partnership in Housing for the Homeless. The proposed units are within the limit approved by the voters. In 2016, 30 of the 500 units authorized by the voters were approved by Council. No units were allocated in 2017, 36 units were approved in 2018 and 42 will be allocated in 2019.
FINANCIAL SUMMARY
No General Funds dollars will be used for these projects.
CDBG Program funding in the amount of $435,000 is available in account number 054-8523-640 which would fund the Partnership in Housing for the Homeless project.
HOME funds in the amount of $200,000 are currently available in account number 058-8530-640 which will partially fund the loans for Sierra Vista Apartments Phase III project.
LMIHF funds in the amount of $1,250,000 are currently available in account number 329-7380-640 which will partially fund the balance of the loans for the Sierra Vista Phase III and the entire loan for Casa Manana Inn projects.
Attachment A - Vicinity Maps