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Home My WebLink About8.6 Afford Hous Implem PlanCITY CLERK FILE # 430-80 AGENDA STATEMENT CITY COUNCIL MEETING DATE: February 6, 2001 SUBJECT: Affordable Housing Implementation Program Report Prepared by Carol CirellL Senior Planner and Regina Adams, Assistant Planner ATTACHMENTS: Resolution adopting the Affordable Housing Implementation Plan (EXHIBIT A) Supplemental Affordable Housing Report Letter from Allied Housing RECOMMENDATION: 1. 4. , Receive staff presentation for the Affordable Housing Implementation Plan : Approve and adopt the Affordable Housing Implementation Plan (EXHIBIT A) Direct staff to undertake a Nexus Study for the Commercial Linkage Fee Direct staff to allocate $6,500 of in-lieu fees to fund the rental subsidy portion of Allied Housing, Inc. 's Tri-Valley Housing Scholarship Program for Fiscal Year 2000-2001 Direct staff to return with a revised Inclusionary Zoning Ordinance and resolution for doubling the in-lieu fees Direct staff to return with specific guidelines and procedures that will incorporate the strategies and funding allocation methods mentioned in the Affordable Housing Implementation Plan for acquisition-rehabilitation, assistance in constructing new affordable multi-family units, down- payment assistance, and rental assistance programs FINANCIAL STATEMENT: The cost for the study will be estimated once staff completes the Request for PropOsal (RFP) process for the proposed Commercial Linkage Fee Nexus Study. The Tri- Valley Housing Scholarship Program (TVHSP) will require $46,000 per year to provide case management and housing assistance for three (3) Dublin residents. The City is proposing in Fiscal Year 2001-2002' that $10,000 from CDBG funds be allocated to the TVHSP for case management while the remaining $36,000 for housing subsidies would come from HOME funds and Dublin's housing in-lieu fees. DESCRIPTION: During the previous Affordable HoUsing Workshop held on October 3, 2000, the Dublin City Council directed staff to research two affordable housing funding options and four program options for leveraging the in-lieu fees that have been collected to date. COPIES TO: In-House Distribution ITEM NO. ___~ This report will detail the funding and program options previously selected as well as recommendations for target groups. Target groups were introduced during the October 3, 2000 workshop, but the discussion was postponed until program options were refined. This report will also address funding for Allied Housing' s Scholarship Program. Allied Housing, Inc., (Allied Housing) the agency sponsoring the Tri-Valley Housing Scholarship Program (TVHSP) is requesting a maximum of $36,000 of the City' s housing in-lieu funds for the 2001/2002 Fiscal Year to provide tenant-based rental assistance for the TVHSP (see Attachment 3). An overview of Allied Housing' s Scholarship Program and services are presented later in this staff report. BACKGROUND Dublin's Affordable Housing Implementation Plan recommends revisions to the current Inclusionary Regulations, including the addition of new funding options, programs, and target groups. At the previous workshop, the City Council chose to consider specific funding and program options over others. The affordable housing funding and program options presented during the last workshop are listed below. The affordable housing programs and funding options that were not selected for further consideration are shaded. Affordable Housing Program Options · ' Provide Down Payment Assistance for Inclusionary Units (silent second mortgage or assistance with closing costs ). · . Subsidize ~eW:i.e~nS~ction orSmall lot,' for~s:ii!e ~!~gle~!~amily residences;.:..': · Acquire and rehabilitate existing rental properties. · Subsidize new construction of multi-family housing° · Provide short-term rent subsidies via grants. Affordable Housing Funding Options · Continue requiring a per square foot in-lieu fee but double the amount. fees$' ~Ol:l"~cted · Implement a commercial linkage fee. Options for Strengthening Dublin's Current Inclusionary Regulations · Removing ithe. in~'lieu fee option: ~diie~iiiri~g developers to .buii;di ~ifs ..... :.~" '.': · · "Ch~ging .the percentage: 6~ ifielu~ionary units requirefl $to' :.ifi~re:~e the nmbe~: iof units produCe:.d$~ ~d' requiring i~ffti.developerS proy~de$. the. ~u~its.' ..:: . .,.i.: ,: · .,.$'..:: :" SUPPLEMENTAL AFFORDABLE HOUSING REPORT The funding and program options listed above that were not shaded and the target groups initially proposed are detailed in the attached Supplemental Affordable Housing Report, which is an evaluation of potential programs and target groups. The 'information in this report was used as a basis for recommending program and funding options, devising program strategies, and designating target groups. Program options were explored using samples of existing program types for the down payment and rental assistance options and examples of completed projects for acquisition-rehabilitation and new construction of affordable muki-family housing developments. Dublin could either duplicate the down-payment assistance and rental assistance programs or use certain characteristics of those program models presented to create its own programs in the future. Page 2 of 7 Program Options In the Supplemental Affordable Housing Report, Staff profiled completed acquisition-rehabilitation and 'new construction of affordable multi-family projects that were funded, in part, by cities. The feasible characteristics under which the cities funded these projects are also noted. Potential sites for acquisition- rehabilitation and new construction of affordable multi-family projects with reference to target groups, e.g. seniors, are also available in the Supplemental Affordable Housing Report (Attachment 2). Dublin's opportunities for acquisition-rehabilitation projects at these sites will depend on the market conditions, the owners' willingness to sell, and developers' chances for securing complete financing for these projects. The opportunities to construct new affordable multi-family units for the referenced sites will also depend on market conditions, e.g. the cost of land and whether or not the units can be financed. Since the opportunities vary for both acquisition-rehabilitation and new construction of affordable multi-family housing units, it is difficult to predict when projects will be or could be executed in Dublin. However, two (2) for-profit developers who are in negotiations with property owners to purchase apartment complexes for acquisition-rehabilitation have already approached the City for possible funding. If successful, these developers could add 60 affordable multi-family units and preserve about 40 affordable multi-family units. New Funding Options for the Affordable Housing Programs Funding options chosen for consideration include implementing a commercial linkage fee and doubling Dublin' s current in-lieu fees. These options are explained in the Supplemental Affordable Housing Report (Attachment 2) with emphasis on the commercial linkage funding option. This option requires a special nexus study to justify its necessity prior to its adoption° Staff recommends that the City undertake a nexus study required for implementing a commercial linkage fee and adoption of a resolution doubling the current residential in-lieu fees. THE AFFORDABLE HOUSING IMPLEMENTATION PLAN Staff has prepared a proposed Affordable Housing Implementation Plan (EXHIBIT A). The Affordable Housing Implementation Plan outlines actions the City should take to increase its affordable housing stock and shows what target groups will be served by the programs. Funding Allocation Process In order to successfully link the types of chosen programs to selected target groups and to ensure that the intent of the programs are met, Staff recommends that the City Council adopt a priority program list and allocate funds on a project-by-project basis for acquisition-rehabilitation and new construction of affordable multi-family units. For the down-payment assistance and rental assistance programs, Staff recommends that the City Council annually allocate in-lieu fees to selected agencies' programs. Other methods of allocation were considered, but this method was considered the most feasible way to distribute funds based on the programs' characteristics. Staff recommends the following processes for allocating housing in-lieu fee funds. Priority 1: Acquisition-Rehabilitation. Units count toward State requirements for permanent affordability if deed restricted for a minimum 25-year period but do not count toward meeting ABAG's Regional Housing Needs Determination numbers. Acquisition- rehabilitation as a program option generates the most units while incurring the least costs, so acquisition-rehabilitation projects would receive first priority. As opportunities for acquisition-rehabilitation projects arise, S~aff could determine the amounts necessary for each project and make funding recommendations to the City Council for approval. Page 3 of 7 Priority 2: New Construction of Affordable Multi-Family Units~ This option assists Dublin in meeting ABAG's Regional Housing Needs Determination numbers for creating new affordable units. Whenever new residential developments are under consideration for approval, Staff could negotiate with the developers to either create or set aside affordable units for purchase by target households. The amounts of subsidy provided to the developers and/or deferred or zero-interest loans to target households purchasing the set aside units would be approved by the City Council during the Planning Department's new residential project application review process. Creating new affordable multi-family units is the most costly option. However, opportunities to negotiate with developers to either produce and/or set aside permanently affordable multi-family units will be readily available due to the 5% inclusionary requirement that will be applied toward new residential developments projected over the next five years. Priority 3: Down Payment Assistance Programs. Providing down-payment assistance exclusively will not satisiS? ABAG's Regional Housing Needs Determination numbers, unless the assistance is used in conjunction with the purchase of inclusionary units. Programs under this option help to reduce down-payment costs thereby increasing affordability for first- time homebuyers that would ordinarily be priced out of Dublin' s real estate market. The City Council could annually or at other determined intervals determine the amount to allocate towards the CASA and the California Housing and Loan Insurance Fund Loan 97& 3 programs. The allocations could be scheduled according to the City's fiscal cycle. The East Bay Delta Lease-Purchase Program requires no funding from the City. Staff is recommending an initial annual allocation of $200,000 for CASA and $10,000 to insure the 3% silent seconds provided by the California Housing and Loan Insurance Fund Loan 97& 3 Program. Priority 4: Rental Assistance Programs. Although programs under this option do not count toward meeting ABAG's Regional Housing Needs Determination, they do meet State requirements for the General Plan's Housing Element. Various rental assistance programs exist to prevent homelessness or assist households in transition. Similar to allocating funds for the down-payment assistance options, the City Council could annually or at other determined intervals determine and approve the agencies and corresponding amounts and have the allocations correspond with the City's fiscal cycle. Staff recommends that the City allocate a maximum of $36,000 toward Allied Housing' s Tri-Valley Scholarship Program and a maximum of $20,000 for ECHO 's Rental Assistance Program for the 2001/2002 Fiscal Year. Echo Housing's and Allied Housing's rental assistance programs, the programs recommended under this option, have excellent track records for helping families and individuals avert homelessness and achieve self-sufficiency. Proffram Strategy Recommendations The strategies summarized below provide an overview of Staff s recommendations for program implementation. Specific guidelines and procedures will be provided when Staff returns with the revised inclusionary ordinance (See Recommendation 6). Priority 1: Acquisition-Rehabilitation Strategy. Staff recommends that the City inventory possible sites, send RFP's, and in general be ready to negotiate with developers, support their applications for federal and state financing, and, if necessary, provide additional City financing. Page 4 of 7 Priority 2: New Construction of Affordable Multi-Family Units Strategy. Staff recommends the following strategy for new residential projects in Dublin: 1) negotiate and offer developers (non-profit or for-profit) of five or more units a per-unit subsidy toward the development of inclusionary units and/or provide loans on a deferred or zero interest basis to target households toward the purchase of inclusionary units; (this step would be executed during the Planning Department's application and review process for new residential developments); 2) provide additional subsidies as needed to serve the target groups' income levels; and 3) develop a system for recording a deed restriction on City-subsidized affordable units for a minimum 60-year period. Priority 3: Down Payment Assistance Programs. As suggested in the Supplement HOusing Report, Staff recommends that the City continue to fired the Alameda County Mortgage Credit Certificate Program and initially fund the following Down Payment assistance Programs: 1) Community Assisted Shared Appreciation (CASA) Program, 2) East Bay Delta Lease Purchase Program, 3) California Housing Loan Insurance Fund (CaHLIF) Home Loan 97 & 3 Program, and postpone participation in CHFA's HELP Program and other down payment assistance programs until the City gains experienced in administering the in-lieu fee funding process. Priority 4: Rental Assistance Programs~ Staff recommends that, in addition to funding Allied Housing' s Scholarship Program, the City provide a grant to Echo Housing' s Rental Assistance Program. After one year of participation, the City would distribute RFP's to other agencies that provide rental assistance. Staff would assess the RFP's and make recommendations to the City Council for approval of the agencies and corresponding funding amounts. As previously noted, funding could be allocated on an annual basis. TARGET GROUPS The target groups under consideration by the City Council are 1o Seniors 2o Members of Dublin' s workforce 3. First-Time homebuyers 4o Low-Income renters 5. Teachers A complete evaluation of the proposed target groups is available in the Supplemental Affordable Housing Report (Attachment 2). Target Group Designation Programs that Staff recommends are tailored to meet the target income levels noted in the Inclusionary Regulations: very low-income (below 50% of the County median income), low-income (between 50% and 80 % of the County median income), and Moderate-income (between 80% and 100 % of the County median income). The exception is the East Bay Delta Lease-Purchase Program (a down-payment assistance program) that allows income levels up to 140% of the area median income. In order to specifically match target groups to the program options, staff "tiered" the target group requirements. Tiering the target groups allowed staff to integrate Dublin' s residency requirements with realistic target group choices. For instance, acquisition-rehabilitation would not serve first-time homebuyers and best serves households at low-income and very low-income levels, so for acquisition-rehabilitation staff suggested the following target groups: Page 5 of 7 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) Dublin Residents who are seniors Residents of Dublin who are permanently disabled Residents of Dublin who are members of Dublin' s City workforce (City personnel, Dublin police officers, Dublin fire fighters, etc) Residents of Dublin who are teachers in Dublin' s school district Families with children that currently reside in Dublin Seniors Members of Dublin' s workforce (non-City personnel such as retail clerks, bank tellers, grocery clerks, and others in the retail and customer service industries for employers in Dublin) Teachers Other Dublin Residents Non-Resident Seniors Non-Resident Disabled Persons Other Non-Residents Conversely, down-payment assistance options would not typically serve low-income households whose incomes fall between 50% and 80% of the County median income and therefore can not afford to purchase a home, so only target groups with income levels that are moderate and above-moderate were considered. TRI-VALLEY HOUSING SCHOLARSHIP PROGRAM (TVHSP) - POLICY DECISION FOR IMMEDIATE AND FUTURE USE OF IN-LIEU FUNDS With funding provided by a City $10,000 CDBG Grant, Allied Housing has been working extensively with three Dublin residents offering case management services this Fiscal Year. These services involve personal counseling; housing information; and job training linkage, which would enable participating low- income families to obtain full-time employment and become self-sufficient. All clients are full-time students preparing for full-time employment. One of these Dublin clients has been approved for rental subsidies and the remaining two are prospective clients for housing. In order to implement the rental subsidy portion of the TVHSP, additional fimds are necessary, and they cannot be CDBG funds. The funding sources for providing rental subsidies can be HOME funds, the City' s in-lieu funds, or other City funding sources. The City did not apply for 2000/2001 Fiscal Year HOME funds, so Allied Housing is requesting that the City contribute housing in-lieu funds to provide a rental subsidy of $6,500 for the remainder of this Fiscal Year. The $6,500 rental subsidy would cover the immediate housing needs of a Dublin resident who is currently participating in the TVHSP Program. If Allied Housing does not receive $6,500, by February 28, 2001, to cover the rental subsidy request portion of the program, the Dublin client in question will not be able to retain affordable housing and achieve self-sufficiency. Allied Housing is aware of the next HOME funding application schedule for Fy 01-02 and will work with the City's Planning staff to apply for this additional funding. Allied Housing will need a maximum of $36,000 to assist three Dublin clients with housing subsidies during the 2001/2002 fiscal year. Page 6 of 7 However, applying for next Fiscal Year's HOME funding does not guarantee that funds will be awarded for the TVHSP project. The City competes for HOME funds with other public agencies as part of the Urban County - HOME Consortium. In addition to Dublin, Pleasanton and Livermore also use HOME funds to pay for Allied' s TVHSP, e.g. the City of Pleasanton uses $65,000 of HOME funds to pay for six (6) clients per year. In order for the TVHSP to be successful, supplemental funding for rental subsidies must be provided so that the TVHSP can operate successfully for Dublin residents. If the City wants to provide rental · subsidies to its residents who are low-income students working to become self-sufficient, a long-term funding strategy needs to be considered. The City Council may want to consider providing a supplementary amount of in-lieu funds every year in the event that HOME funds are severely limited or not available. This option is explored in the City' s proposed HOusing Implementation Plan. RECOMMENDATION: 1. Receive staff presentation for the Affordable Housing Implementation Plan 2. Approve and adopt the Affordable Housing Implementation Plan (EXHIBIT A) 3. Direct staff to undertake a Nexus Study for the Commercial Linkage Fee 4o Direct staff to allocate $6,500 in in-lieu fees for the rental subsidy portion of Allied Housing, Inc.'s Tri-Valley Housing Scholarship Program 5o Direct staff to return with a revised Inclusionary Zoning Ordinance and resolution for doubling the in- lieu fees 6. Direct staff to retum with specific guidelines and procedures for implementing the affordable housing programs: acquisition-rehabilitation, assistance in creating new affordable multi-family units, down- payment assistance, and rental assistance programs Page 7 of 7 RESOLUTION NO. -01 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN ADOPTION OF THE AFFORDABLE HOUSING IMPLEMENTATION PROGRAM WHEREAS, the State mandated local jurisdictions, including cities$ provide housing for all income levels; and WHEREAS, the Association of Bay Area Governments issued a 2000 Regional Housing Needs Determination for bay area cities 'and counties and assessed that Dublin would need to provide 5,436 additional units (percentages of which must be affordable to very low-income, low income, moderate- income and above moderate-income households); and WHEREAS, the City of Dublin has collected in-lieu fees from developers dedicated to funding affordable housing programs to provide housing for all income levels, including very low-income, low- income, and moderate-income levels; and WHEREAS, on April 4, 2000, the Dublin City Council held a workshop to examine 1) possible funding options for affordable housing programs, 2) programs on which to spend the in-lieu fees that are collected, and 3) potential target groups toward which the programs could serve; and WHEREAS, on October 3, 2000, the Dublin City Council directed Staff to research specific programs, funding options, and target groups for the purpose of allocating Dublin' s in-lieu fees; and WHEREAS, the programs options researched included down payment assistance, acquisition- rehabilitation, City assistance for creating new affordable multi-family units, and rental assistance; and WHEREAS, the funding options that were researched were 1) implementing Commercial Linkage Fee and 2) doubling the in-lieu fees; and WHEREAS, the target groups studied consisted of 1) seniors, 2) teachers, 3) first-time home buyers, 4) low-income renters, and 5) disabled persons; and 6) members of Dublin's Workforce, including City and non-City personnel WHEREAS, guidelines were developed for implementing the fore-mentioned programs, funding options, and target groups in the attached document referenced as the Affordable Housing Implementation Plan, Exhibit A; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin hereby adopts the Affordable Housing Implementation Plan (EXHIBIT A). Attachment 1 PASSED, APPROVED AND ADOPTED this 6th day of February 2001. AYES: NOES: ABSENT: ABSTAIN: ATTEST: Mayor City Clerk g:\housing\implementation programXcc reso adopting HIP Attachment 1 AFFORDABLE HOUSING IMPLEMENTATION PLAN EXHIBIT A PURPOSE A serious shortage of affordable housing exists in the State, Bay Area and in the Tri Valley. The State Legislature has stated that "the lack of affordable housing" is a critical problern which threatens the economic, environmental, and social quality of life in California" Of particular concern is the shortage of housing for low-income and moderate-income households. (Government Code Section 65589.5) The Legislature has enacted policies to encourage more affordable housing: requiring cities to address the issue in their housing elements, provide for density bonuses and second dwelling units, limiting the grounds on which affordable housing developments may be disapproved, and others. (Government Code Sections 65583, 65589.5(d), 65852.150, 65913, 65915.) In response to a demonstrated need for affordable housing and State mandates, the City of Dublin will implement funding policies and program approaches to serve selected target groups. This Affordable Housing Implementation Plan contains policy guidelines that, once implemented, will assist residents in the Community and Tri-Valley area in meeting their housing needs and provide a range of housing opportunities for all income levels. These guidelines will be incorporated into Dublin' s Inclusionary Regulations know as Section 8.68 of the Dublin Zoning Ordinance and enacted through corresponding resolutions and staff action. II. FUNDING AFFORDABLE HOUSING PROGRAMS Intent. The City of Dublin shall implement policies designed to generate adequate funding for affordable housing programs referenced in Section IIIoA of this report and in correlation with the purposes and intent of the Inclusionstry Regulations, Funding Options Funding options are as follows: In-lieu Fees. Pending final approval from the City Council, Dublin' s in-lieu fees shall be increased to $2.00 per square foot for single-family developments and $1.50 for multi-family development. 2o Commercial Linkage Fee. a. Nexus Study. Pending final approval from the City Council, staff will have the Nexus Study prepared that is required to implement a commercial linkage fee. b. Fee Determination. The Commercial linkage fee shall be calculated using a formula determined by the results of the required Nexus Study and adopted via ordinance and existing in-lieu fee resolution by the City Council. Page 2 of 8 IlL PROGRAMS A. Intent, The program options proposed in this section will assist in providing affordable housing for specified target groups in the City by assisting in the development and preservation of private and non-profit affordable owner and rental housing for lower-income households and related programs that help residents to enter or remain in low-cost housing. These program options include down payment assistance, acquisition-rehabilitation, rental assistance, and new construction of affordable multi- family units. Approved Program Types. Dublin could collect approximately $21 million in in-lieu fees based on projected development over the next five years, if a commercial linkage fee is implemented and the current in-lieu fees are doubled (assuming that developers continue to pay the in-lieu fees instead of providing units under the 5% inclusionary requirement). Dublin currently has collected about $5.1 million in housing in-lieu fees to date. The City Council could adopt the priority program list below and leverage the collected affordable housing in-lieu and commercial linkage fees in order of processing priority. For acquisition- rehabilitation and new construction of affordable multi-family unit projects, the City Council could approve funding on a project-by-project basis. The agencies and amounts of in-lieu fees allocated to down-payment assistance and rental assistance programs could be determined and approved annually by the City Council and distributed according to the City' s fiscal year cycle. Priority 1: Acquisition-Rehabilitation (satisfies State's Housing Element requirements for creating permanently affordable units but does not count toward meeting ABAG's Regional Housing Needs Determination Numbers) This option deals primarily with housing for low-income tenters many of who may be designated target group members, e.g. seniors, teachers, and some members of the workforce. Based on the projects profiled in the Supplemental Affordable Housing Report, City assistance for each acquisition-rehabilitation project could potentially range from $230,000 to $750,000. Primary costs to the City for acquisition-rehabilitation leveraging will occur in matching Federal and State funds and initially supporting developer applications for state and federal financing. AcquisitiOn-Rehabilitation demonstrates the best opportunity to produce the most affordable units with the least cost, because there are no land development or construction costs. Additional benefits for acquisition- rehabilitation include the ability to keep the units affordable via a deed restriction, thus satisfying the State's requirements for permanent affordability. Page 3 of 8 a. Strategy At least once every five years, the City shall inventory potential acquisition-rehabilitation sites by compiling a list of property owners interested in selling their multi-family units, so that if and when the City is approached by interested developers the City can distribute this list to them. Annually, the City shall issue a Request for Qualifications (RFQ) to for-profit and non-profit developers for the purposes of maintaining a viable contact list of non-profit and for-profit developers in the event the City is approached by a multi-family unit property owner wishing to sell. To initiate possible acquisition- rehabilitation projects, the City shall also annually issue an RFP that indicates available funding and request that developers identify possible properties and submit a development proposal. Once an appropriate site has been identified and contact established with the property owners, the developers would negotiate with those property owners and apply for additional state and federal financing. The City would support the developer's proposal by Contractually dedicating the necessary funds to an escrow or some other holding account until the developer can secure complete financing. In cases where the City has dedicated funding toward an acquisition:rehabilitation project and the developer can not secure complete or adequate financing, the funding shall be shifted back into the housing in-lieu fee fund. b. Target Groups This option will serve the following target households whose income does not exceed 80% of the County median income. If more than one request for funding is received at a time, priority will be given to applications/proposals that best serve the target groups and order of preference listed below: 1. Dublin Residents who are seniors ~ 2. Residents of Dublin who are permanently disabled 3. Residents of Dublin who are members of Dublin's City workforce (City personnel, Dublin police officers, Dublin fire fighters, etc) 4. Residents of Dublin who are teachers in Dublin's school district 5. Families with children that currently reside in Dublin 6. Seniors 7o Members of Dublin's workforce (non-City personnel such as retail clerks, bank tellers, grocery clerks, and others in the retail and customer service industries for employers in Dublin) ' 8. Teachers 9. Other Dublin Residents 10. Non-Resident Seniors 11. Non-Resident Disabled Persons 12. Other Non-Residents Page 4 of 8 Priority 2: Construction of new affordable multifamily units (satisfies State's Housing Element requirements and counts toward meeting ABAG's Regional Housing Needs Determination Numbers) This option is the least affordable due to high land and construction costs. Primary costs to the City would occur in having to buy down (subsidize) the cost of the units either to the developer or through deferred or zero interest loans to the target household or both. However, possibilities exist for creating permanent affordable housing by constructing new affordable multi-family units each time a new residential housing development application is under consideration by the City, increasing the opportunities fo~ multi-family unit construction, unlike acquisition-rehabilitation, where the opportunities are scarce. a. Strategy The City shall on a project-by-project basis negotiate and offer developers of five or more units a per-unit subsidy toward the development of inclusionary units and/or offer loans on a deferred or zero interest basis to target households that purchase inclusionary units. If necessary, the City shall provide additional subsidies to bridge the affordability gap between target income groups for both rental and ownership units. The City Council shall approve the subsidy amounts and target income group levels for each project. The units subsidized by the City shall be recorded at the County Clerk's office with deed restrictions indicating their affordability for a period no less than 60 years. Staff will negotiate the terms and conditions of the subsidy on a project-by-project basis. b. Target Groups This option is governed by the Inclusionary Regulations stipulation that 40% of the units will be dedicated to very low-income households, 40% to low-income households, and 20% to above moderate-income households. 'In addition to the inclusionary requirements and if more than one request for funding is received at-a time, priority will be given to applications/proposals that best serve the target groups and order of preference listed below: i.) Rental Units 1. Dublin Residents who are seniors 2. Residents of Dublin who are permanently disabled 3. Residents of Dublin who are members of Dublin' s City workforce (City personnel, Dublin police officers, Dublin fire fighters, etc) 4o Residents of Dublin who are teachers in Dublin' s school district 5. Families with children that currently reside in Dublin 6. Seniors 7. Members of Dublin's workforce (non-City personnel such as retail clerks, bank tellers, grocery clerks, and others in the retail and customer service industries for employers in Dublin) 8. Teachers Page 5 of 8 9. Other Dublin Residents 10. Non-Resident Seniors 11. Non-Resident Disabled Persons 12. Other Non-Residents Priority 3: ii) For-Sale Units 1. Residents of Dublin who are First-Time home buyers and teachers in Dublin's school district 2. Residents of Dublin who are First-Time home buyers and members of Dublin' s City workforce (City personnel, Dublin police officers, Dublin fire fighters, etc) 3. Residents of Dublin who are teachers in Dublin' s school district 4. Residents of Dublin who are members of Dublin's City workforce 5. Teachers 6. Members of Dublin' s workforce (non-City personnel such as retail clerks, bank tellers, grocery clerks, and others in the retail and customer service industries for employers in Dublin) 70 Residents of Dublin who are First-Time home buyers 8. Other Dublin Residents 9. Non-Residents of Dublin who are First-Time home buyers Down Payment Assistance (Does not satisfy State Housing Element Requirements or counts toward meeting ABAG's Regional Housing Needs Determination Numbers) Programs funded under this option would typically range in subsidy from $15,000 to $50,000. Estimates for the number of households served would be determined by the amount allocated. For instance, if25% of the estimated $21 million (~ $5.25 million) that could be collected from in-lieu and commercial linkage fees over the next five years were allocated to down-payment assistance programs, about 105 to 350 households could be served. Although units produced under this option will not satisfy ABAG's requirements as permanently affordable unless in conjunction with the purchase of an inclusionary unit, it has the capability of assisting members of the workforce and households lacking money for down-payment and closing costs the chance to own units in Dublin. a. Strategy Annually staff will inventory and review available down payment assistance programs, administer program funding, and evaluate the City' s down-payment assistance programs. 'The City Council will, via resolution, annually approve and allocate funding for the City's down-payment assistance programs. For now, the City should continue to participate in the Alameda County Mortgage Credit Certificate Program and begin participation in the following down-payment assistance programs: · Community Assisted Shared Appreciation (CASA) Program--S200,000, · Ehst Bay Delta Lease Purchase Program--No funding required, · Califomia Housing Loan Insurance Fund (CaHLIF) Home Loan 97 & 3 Program-- $10,000 Page 6 of 8 Priority 4: The City shall consider expanding its participation to other programs, such as CHFA's ~ HELP Program and the School Facility Fee Down Payment Assistance Program, after a period of one year (when staff gains experience and exposure to the programs and funding processes). b. Target Groups This option will serve the following target groups that are listed in preferential order: 1o Residents of Dublin who are First-Time home buyers and teachers in Dublin's school district 2o Residents of Dublin who are First-Time home buyers and members of Dublin' s City workforce (City personnel, Dublin police officers, Dublin fire fighters, etc) 3. Residents of Dublin who are teachers in Dublin' s school district 4. Residents of Dublin who are members of Dublin' s City workforce 5. Teachers 6. Members of Dublin' s workforce (non-City personnel such as retail clerks, bank tellers, grocery clerks, and others in the retail and customer service industries for employers in Dublin) 7. Residents of Dublin who are First-Time home buyers 8. Other Dublin Residents 9. Non-Residents of Dublin who are First-Time home buyers Rental Assistance (satisfies State~s Housing Element requirements for preventing homelessness and providing housing assistance to lower income households) The City would provide rental assistance in the form of short-term grants to agencies. The funds would be allocated annually or another period of frequency set by the City Council to agencies that are working to prevent homelessness, and provide interim and or transition support for target households. The City should continue funding Allied Housing' s Scholarship Program that will require a maximum $36,000 in in-lieu fees for the 2001/2002 Fiscal Year (depending on HOME funds allocation for housing subsidies) and begin funding Echo Housing' s Rental Assistance Program with an initial annual allocation from in-lieu fees of $20,000. a. Strategy The City will distribute annually a Notice of Fnnds Availability (NOFA) that lists the criteria and deadline for applying for available rental assistance funds. The City Council will annually award the grants to chosen agencies. Staff will monitor the grants for compliance and administratively distribute funds. b. Target groups 50% of the funds allocated to rental assistance programs shall serve those persons whose income level falls below 50% of the area median income. The remaining 50% of allocated funds shall serve those persons whose income level is between 50% and 80% of the County median income. Page 7 of 8 C. Method of Allocation. For each acquisition-rehabilitation and new construction of affordable unit project, the City Council shall, via a resolution, determine the amount of in-lieu fees to be allocated. For down-payment assistance and rental assistance programs, the City Council shall, via a resolution, annually select participating agencies and determine the amount of in-lieu fees allocated to those programs at least once annually from the date that this Housing Implementation Plan takes effect. D. Amendments to Program Types and Funding Allocation. The City Council may amend program types, funding allocation, and/or target group priorities through adoption of a resolution on an annual basis. Page 8 of 8 SUPPLEMENTAL AFFORDABLE HOUSING REPORT Evaluation of Potential Programs and Target Groups Attachment 2 B, Report Outline Affordable Housing Program Options PROVIDE DOWN PAYMENT ASSISTANCE FOR INCLUSIONARY UNITS (SILENT SECOND MORTGAGE OR ASSISTANCE WITH CLOSING COSTS). 1. Community Assisted Shared Appreciation (CASA) Program, a. Description b. Example: Pleasanton's CASA Program c. Assessment East Bay Delta Lease Purchase Program, a. Description b. Participating Cities c. Assessment' CHFA's HELP Program a. Description b. Example: Livermore's HELP Program c. Assessment California Housing Loan Insurance Fund (CaHLIF) Home Loan Program a. Description b. Example: Pleasanton's CaHLIF Program c. Assessment Other State-funded programs. a. Description b. Example: The School Facility Fee Down Payment Assistance Program c. Assessment SUMMARY: Guidelines for choosing down-payment assistance options SUBSIDIZE NEW CONSTRUCTION OF AFFORDABLE MULTI-FAMILY UNITS 1. Leveraging New Development 2. Exclusively Affordable Housing Developments TABLE 1: New Construction for Affordable Multi-Family Units 3. Mixed Affordable and Market Rate Housing Development a. Description b. Examples of Multi-Family Unit Developments in Nearby Cities TABLE 2: Summary Of Greenbriar / Bernal Property Affordable Housing Component c. Assessment 4. Potential sites for affordable housing development either exclusively or scattered among market-rate units. Page 2 of 3 0 C. ACQUISITION REHABILITATION 1. Description 2. Examples a. Menlo Park b. Fremont c. Richmond d. Antioch e. San Leandro TABLE 3: Acquisition Rehabilitation Models 3. Assessment 4. 5. Guidelines for Formulating Dublin's Acquisition-Rehabilitation Program Potential Sites for Acquisition-Rehabilitation Projects (either exclusively or scattered among market-rate units). D. PROVIDE RENTAL ASSISTANCE IN THE FORM OF A GRANT (NON-PERIODIC PAYMENT) 1. Description 2. Examples of Rental Assistance Programs a. ECHO Housing, Inc. 's Rental Assistance Program (RAP) b. Allied Housing, Inc.'s Affordable Housing Scholarship Program (HSP) 3o Possible Strategy for Implementing Short-term Rental Assistance in Dublin 4. Guidelines for Choosing Agencies to Allocate Dublin' s Short-term Rental Assistance funds II. Affordable Housing Funding Options A. CONTINUE REQUIRING A PER SQUARE FOOT IN-LIEU FEE BUT DOUBLE THE AMOUNT. B. COMMERCIAL LINKAGE FEE. 1. Introduction 2. Application 3. The Need for a Nexus Study 4. Possible Implications of a Commercial Linkage Fee a. Staff and City resources in implementing a linkage fee policy b. Potential impacts of such a fee on new commercial development. 5. What Steps must be taken to conduct a Nexus Study Necessary for Implementing a Commercial Linkage Fee? IIl. Proposed Target Groups for Affordable Housing Programs A. FIRST-TIME HOMEBUYERS B. SENIORS C. PERSONS WITH DISABILITIES Do LOW-INCOME RENTERS E. DUBLIN'S WORKFORCE 1. Income Cate. gories in relation to the proposed target groups TABLE 4: Proposed Target Groups' Income Levels TABLE 5: Summary Table of Housing Programs' Target Income Groups Page 3 of 30 I. Affordable Housing Program Options Staff has researched affordable housing program types that could be used as models. The types of housing program options are presented beginning with a brief program description followed by an example (if applicable) of the program's implementation by a neighboring jurisdiction and, finally, a general assessment. PROVIDE DOWN PAYMENT ASSISTANCE FOR INCLUSIONARY UNITS (SILENT SECOND MORTGAGE OR ASSISTANCE WITH CLOSING COSTS). The City could adopt a program based on existing down-payment program options or create and adopt its own program using existing program types as models. The benefits of adopting a program based on existing down-payment options are twofold: 1) Leveraging funds towards existing programs is cost- effective, because the administrative costs are lower and 2) The City could get the opportunity to gain experience in funding down payment assistance programs. Examples of existing down payment assistance programs are listed below. 1. Community Assisted Shared Appreciation (CASA) Program, 2. East Bay Delta Lease Purchase Program, 3. California Housing Loan Insurance Fund (CaHLIF) Home Loan Program, 4. CHFA's HELP Program, and 5. Other State-funded programs. 1. CASA Program a. Description CASA, which stands for "Community Assisted Shared Appreciation," is an innovative homeownership program developed and administered by North Bay Ecumenical Homes (NEH). There are several aspects of the CASA Program that meet the City's objectives. These include the following: The Program assists homebuyers to qualify for financing by providing "silent seconds" (from participating lender) and "silent thirds" (from participating city) loans. These loans decrease the amount of income that a borrower must have to purchase a home because the borrower qualifies for a loan based on ability to make monthly mortgage payments on a lower first mortgage. The borrower does not have to pay interest or principal on the second and third loans. Page 4 of 30 Buyers make a 5 % down payment and cover closing costs. 15 Vaq' · The Program leverages the local (City) contribution with an equal contribution from a participating lender. Thus, the City's funds are leveraged one for one. NEH partners with a local lender and NEH then administers the program, which minimizes City resources once the program is in place. The primary ongoing City responsibility is publicizing and marketing the program to its residents. These silent seconds and thirds are recorded on the property deeds and recouped when the home is sold. When a home bought under the Program is sold, the City's loan is repaid and the funds can be used for another loan or be deposited back to the Housing Fund. In addition, the City receives a small share of the house's appreciation in value from the time of purchase to the time of sale. The City receives its share of the appreciation in lieu of interest on its "silent third" loan, which is also collected when the home is sold. The City can set some of the program parameters, such as the income limits. There are some restrictions in that one of the incentives for the participating lender is that the loans qualify in meeting lenders' Community Reinvestment Act (CRA) requirements. The CASA Program is a "turn-key" program for cities that can be implemented with minimal effort on the part of participating banks and cities. NEH has developed borrower and program participant documentation as well as program procedures and guidelines, which have been approved by Fannie Mae. Cities participating in the CASA Program include the following: Livermore, Pleasant, n, San Ram,n, Campbell, San Mate,, Alameda and Vallejo. bo Example: Pleasanton's CASA Program The City of Pleasanton allocated $250,000 to fund its program initially. Tracy Federal Bank is its parmer in the program, and interested applicants contact the bank directly. The City publicizes the program on its web site and works with local employers to market the program as well. The City targets its program to households at 100% of median income or less. The buyer makes a down payment of 5 %. Both Tracy Federal and the City each make "silent" loam of 10% of the purchase price with a cap of $15,000. The balance (75 %) is a conventional first mortgage loan from Tracy Federal, increasing the likelihood that the buyer can qualify for the loan. Page 5 of 30 c. Assessment The City of Pleasanton is already participating in this program, as are other cities in Alameda and Contra Costa County. There appears to be minimal risk to the City in joining with NEH to customize a program for Dublin. As indicated, the maximum City contribution per buyer under the current NEH program guidelines is $15,000. A City allocation of $300,000 to $450,000 for CASA could assist from 20 to 30 homebuyers, assuming maximum "silent thirds" from the City. The major difficulty will be for potential buyers to find housing in Dublin that they can afford, even with the CASA · assistance. Allocated funds that are not used could be shifted back into the affordable housing fund. Staff is recommending that the City participate in CASA. CASA can be customized to fit Dublin using the considerations below: · The income level for the families that the City wants to serve, · The availability of homes in the price range that potential participants could afford~, · The amount of funds that the City would like to invest in the CASA program, and · Timing for implementing the program. East Bay Delta Lease-Purchase Program Staff is recommending that the City participate in the EBDHFA. a. Description The East Bay Delta Housing & Finance Agency (EBDHFA), in association with Freddie Mac and Bank of America, administers a new lease-to-own purchase program. The program is for individuals and families who desire homeownership, but lack a down payment or do not have acceptable credit for a traditional home loan. EBDHFA purchases homes on behalf of the lease-purchasers and rn,3nages the lease agreements. The lease-purchasers lease their homes for a maximum thirty-eight (38) month period during which they gradually pay the down payment and closing costs. At the end of the lease period, the lease converts to a mortgage with 27 years remaining. Program parameters include the following: · No cash is required for down payment. · Closing costs are limited to 1% of the purchase price, which is the participation fee. This amount is forfeited if the lease-purchaser drops out before assuming ownership. ~ Based on information received in September 2000 from local real estate broker, in Dublin the low end of the market for single-family detached homes has been $300,000 to $329,000, although small town homes and condominiums sell for less. Such prices mean that participation would be limited for those with incomes at 100% of area median income. Page 6 of 30 Higher income to debt ratios (up to 45 % of income for housing and debt) were allowed than under 'most conventional lending programs. There are flexible credit guidelines for applicants willing to re-establish a good credit standing and repay old debts, The current purchase price limit is $283,000. The current income limit is 140% of median income. · The program allows a potential buyer to "buy" a home at today's prices even though he or she will not actually be purchasing the home until three years from now. · Participants are required to participate in one of the lease-purchase homeownership workshops The program is publicized on its web site (www.eastbaydeltahousing.com). In addition, program staff holds lease-purchase workshops locally so that potential applicants can learn more about the program and its requirements. b. Participating Cities To make the program possible, seven jurisdictions joined together to form EBDHFA, a Joint Powers Agency (JPA). The original members include the CRies of East Palo Alto, Fremont, Livermore, Oakland, Pleasanton and Richmond as well as Contra Costa County. A major benefit of this program. is that the cities are not required to provide funding, nor are they financially obligated in any way. Cities only need to add their names to the participating list and offer space to host the informational workshops. All legal fees, bond issuance cost and insurance fees will be paid by EBDHFA and repaid through the lease-purchase arrangements. c. Assessment There are no risks or administrative costs, or financial contributions that the City would bear if Dublin were to participate, because the program is funded with bond proceeds. Other cities are already participating in EBDHFA and by doing so Dublin could make this program available to its residents. Although the current purchase price ceiling ($283,000) will limit potential participation, there may be townhouses and condominiums that could be purchased within that limit. California Housing Finance Agency'S HELP Program (Housing Enabled by Local Partnerships) Staff recommends that the City postpone participation in the HELP Program for two years. Participation in the Help Program can be reassessed at that time. Page 7 of 30 a. Description /~' ( CHFA has committed to provide $100 million of HELP Program funds during the period 1998/99 - 2003/2004 for local programs that address unmet affordable housing needs and directly provide affordable housing units. There are two funding cycles each year (fall and' spring), where jurisdictions compete for $10 million in funding. Program proposals are limited to $2 million per proposal. This 2 million in HELP funds can be used toward funding down-payment assistance programs. CHFA gives priority to proposals that are: · Readily implementable (including agency experience and capacity), · Competitive in relative impact, · Comprehensive in design, and · Innovative/original. The focus of the program is on local government involvement in the program. This may include financial contributions, fee waivers, density bonuses or other direct involvement by a participating city. HELP funds are available to a city as an unsecured loan from CHFA for up to 10 years at 3 % simple interest per year and carry minimal restrictions and conditions. Repayment in full is required no later than 10 years from the date of the commitment/loan agreement signed with CHFA. b. Example: Livermore's HELP Program An example of how HELP funds can be used toward down-payment assistance is demonstrated by Livermore. Livermore's program offers low-interest, deferred loans to qualifying households. The parameters of Livermore's program include the following: · Participants must be first-time homebuyers. · Loan amounts are limited to 20% of the purchase price and can be used for down payment assistance and closing costs. · Participants must provide funds equaling at least 3% of the purchase price for adown payment. · The maximum amount of down payment assistance that the City provides is based on the participant's household income as follows: Low Income - $40,000 Median Income - $25,000 Moderate Income - $10,000 · Total purchase price may not exceed $240,000. · Participants must qualify for a first mortgage from a City approved lender. · Applicants who currently live or work in Livermore are given priority over other applicants. Page 8 of 30 submitted to the City' s Housing Division, and the Housing Coordinator determines eligibility and issues a Certificate of Program Eligibility. c. Assessment CHFA's HELP program offers the City an opportunity to leverage funds for down payment assistance or other affordable housing programs. However, considerable Staff time would be required in designing a program and preparing an application for funding. Also, because the application process is fairly competitive, funding is not guaranteed. This program, although' worthy, may be a more viable option in one or two years after the City becomes familiar with administering down-payment assistance programs. 4. California Housing Loan Insurance Fund (CAHLIF) Home Loan Program Staff recommends that the City participate in the CaHLIF 97 and 3 Program and insure CaHLIF's 3% silent seconds to first-time homebuyers. a. Description The California Housing Loan Insurance Fund (CaHLIF) is a self-supporting public enterprise fund operating under the Califomia Housing and Finance Agency (CHFA). Its mission is to insure mortgage loans of first-time homebuyers in Califomia. With participating lenders, CaHLIF has developed a number of special programs to assist first-time homebuyers: 1) The FHLMC 100 provides a 100% loan for eligible borrowers. However, the borrower is required to have on deposit the equivalent of two monthly payments of principal, interest, 'taxes and insurance in reserve. The borrower's income may be as high as 120% of area median income. 2) The CaHLIF 97 & 3 program provides a standard Fannie Mae/Freddie Mac 97% Community Homebuyer loan in combination with a 3% CaHLIF "sleeping second" with a combined loan-to-value ratio of 100%. The "sleeping second has a 3% simple interest rate with payments deferred for the life of the first mortgage. The borrowers must have a minimum of 1% of the sale price of their own fimds to contribute toward closing costs and have reserve funds on deposit as outlined above. For high cost counties such as Alameda County, the borrower' s income may be as high as 140 % of area median income. The City could allocate funds to CaHLIF to insure loans made to first-time homebuyers for either or both of the FHLMC 100 and/or CaHLIF 97 & 3. An amended guideline takes effect this January that increases the maximum purchase price to about $340,000 making this program applicable to first-time homebuyers of some of Dublin' s condominiums and townhomes. Page 9 of 30 b. Example: Pleasanton's CaHLIF Program ~D ~ The City of Pleasanton approved its CHFA-CaHLIF 97% Home Loan Program to provide homeownership opportunities for families currently renting or working in Pleasanton. In cooperation with CHFA, the City has created a "pledge pool" of funds, which enable participating lenders to provide 97% financing to eligible first-time buyers. The program provides insurance as a guarantee against loan default by the borrower. Participants also receive a 30% reduction in the cost of mortgage insurance. The underwriting criteria are more flexible, so applicants with credit problems may qualify. The program serves households with incomes at or below 100% of area median income. Pleasanton contributed $10,000 to initiate its pledge pool. Participating lenders include Norwest Mortgage, Inc., North American Mortgage Company, and GMAC Mortgage Corporation. Pleasanton has insured the 3% silent seconds for four (4) households during this 2000/20001 Fiscal Year to date. The City could mimic Pleasanton's CaHLIF program or expand it to insure 100% financing by the participating lenders in the FHLMC 100 program. c. Assessment The City could consider participating in one of the CaHLIF programs, especially the new version of the CaHLIF 97 & 3 Program that is expected to be available in January and would increase the maximum loan amount to approximately $340,000. Participation in CaHLIF would provide another opportunity for joint marketing and coordination with Pleasanton and Livermore, cities that are already participating. In addition, the City would have the option of choosing the income groups to target, whether or not to limit the program to first-time homebuyers, and whether or 'not to use the program in combination with additional down payment assistance from the City. 5. Other Programs a. Description There are a number of other programs offered by CHFA and other lenders that provide down-payment assistance for homebuyers in Dublin but that do not cost cities any money to administer. The City could advertise these programs to developers prior to the planning application process. Some of the programs are competitive, but others, like the School Facility Fee Down Payment Assistance Program, are not. b. Example: The School Facility Fee Down Payment Assistance Program The School Facility Fee Down Payment Assistance Program is an example of a program that the City could publicize to insure that any resident' who can benefit applies. The program does not require any participation by the City and is available through CHFA to eligible buyers. The City could work with Livermore and Pleasanton, cities that are actively involved in marketing the program, to make potential participants aware of the program° The School Facility Fee Down Payment Assistance Program provides down payment assistance by providing full or partial rebate of the school facility fee paid by the builder when the building permit Page 10 of 30 family of four in Alameda County the maximum income limit to be eligible to participate in the program is $81,100. c. Assessment The School Facility Fee Down Payment Assistance Program has not been used widely in Alameda and Contra Costa Counties due to the income restrictions. The high prices of new houses currently on the market generally mean that households must have incomes above the moderate-income limits. HoweVer, the program may work better if it is used in conjunction with other ownership and down payment assistance programs, including purchase of inclusionary units, which are below-market rate. CHFA is publicizing the program through builders, realtors and lenders. In addition, some cities are helping to make the program known and providing application packets to interested buyers. Staff recommends that the City postpone participation until staff reviews the feasibility of other programs that CHFA offers. SUMMARY: Guidelines for choosing down-payment assistance options Staff' s recommendations were based the list of criteria that the City Council could use in determining the doWn-payment assistance programs and their corresponding parameters. The considerations below offer a range of criteria foi~ assessing the merits of the down-payment options presented, Ease of administration - Another agency or lender administers the program, so the City's role is limited to monitoring once the program is established. This is important due to the City's limited staff resources. Targeted groups - The programs are usually limited to specific income groups because of restrictions imposed by the funding sources, such as the federal restrictions for mortgage credit certificates. Similarly, many programs are limited to first-time homebuyers. It is our understanding that the City is interested particularly in assisting moderate-income households. · Shared appreciation - Since the City Council expressed an interest in shared appreciation, we identified a program that. included this component. 2 Note that as of January 2000, Dublin Unified School District impact fees range from $3,009 (for attached units with a gross density greater than 25 units to the acre) to $6,437 (for single family detached units on lots less than 4,000 square feet, or attached units with a gross density greater than 6 units to the acre and less than or equal to 14 units to the acre). The fee for Single Family/Low Density Residential (single family detached units on lots 4,000 square feet or greater in size) is $11,910. However, we assume that such units would be out of the price range of buyers within the income limits for the School Facility Fee Down Payment Assistance Program. Page 11 of 30 Track record - The program iS established and in operation in other areas so that start-up problems have already been addressed. Tri-Valley coordination - Similar programs are already operating in Livermore and/or Pleasanton, allowing the three cities to advertise and monitor the programs jointly. B. SUBSIDIZE NEW CONSTRUCTION OF AFFORDABLE MULTI-FAMILY UNITS 1. Leveraging New Development Leveraged financing for affordable multi-family housing projects is similar to leveraged financing used for market rate real estate transactions with one major exception: Most affordable projects cannot pay much in the way of debt service because of the lower rents charged, so they must use rental income primarily to pay for operating expenses. Thus, affordable housing projects must utilize grants, which do not need to be repaid, below market rate interest loans, and deferred interest loans to minimize debt service. In most cases, several different financing sources are needed to minimize debt service payments, including City financing. The role of the City would be to support the developer' s application and likely provide a local contribution (grant), which is often a funding requirement. These grants can be used to provide up front funds necessary to apply for other State and local sources or gap financing to expand affordability to target income households. The next two (2) sections of the report will provide examples of how neighboring cities leveraged funds toward exclusively affordable multi-family housing developments and mixed affordable and market rate housing developments. The City could duplicate other cities efforts in providing support and/or grams for affordable multi-family construction or use other cities existing programs as model, for crafting its own program. 2. Exclusively Affordable Housing Developments Table 2 presents examples of four recent multifamily developments, including two in Livermore: one under construction (Oroysom Village) and one completed in September 2000 (Owl's Landing). Interestingly, even though these projects serve different target groups, for three out of four projects, per unit costs were about the same @$175,000. Also, all four projects are serving very low-income and low- income tenants, in most cases at or below 50 % of area median income. Regarding project f'mancing, three out of the four projects utilized six or more financing sources. The one exception is Arbor VistaI in Livermore, which received a large Section 202 Senior Housing grant from the Federal government. In general, federal programs, Low Income Tax Credits, and city funds provided the bulk of the capital needed for these projects. Page 12 of 30 Sources of permanent financing for these projects were as follows: City Financing - A term used to include redevelopment funds and in-lieu fees. County/City CDBG - Funds provided by the federal government. For entitlement cities, funds are provided directly by the CDBG program to the jurisdiction. For non-entitlement cities, such as Dublin, the State of California allocates funds on a competitive basis. City HOME Funds - the federal government also funds The HOME program. As part of the Alameda County HOME Consortium, Dublin would apply to Alameda County for HOME Funds, again, on a competitive basis. · County HOME Funds - In addition to distributing funds to cities, Alameda County has its own allocation of HOME funds that can be used for projects. Federal Funds - Although CDBG and HOME are federally funded programs, they are allocated by a lower level jurisdiction, such as the County or the State. The federal government (HUD) also operates its own affordable housing funding programs, such as Section 202 for senior housing and Section 811 for disabled housing. Two of the projects listed here used Section 202 and one utilized Section 811. Low-Income Housing Tax Credits - The State or federal government can provide tax credits, but the California Tax Credit Allocation Committee allocates the funds. There is a limit to the amount of tax credits authorized on an annual basis; so, again, this is a competitive program. However, the 9 % tax credits are more competitive than the 4 % tax credits, which offer fewer tax benefits to investors. Tax credits provide equity to the project and do not require debt service. SAMCO and AItP - Lenders provide these below market rate funds. SAMCO represents several savings and loan associations that have pooled resources, whereas AHP is the Federal Home Loan Bank's Affordable Housing Program. Again, obtaining funds from SAMCO and AHP involve a competitive process. CHFA - This is the California Housing Financing Agency that provides loans for affordable housing at an interest rate that is slightly below market rate. Often 4 % tax credits are paired with CHFA financing to reduce financing expenses. · Other - This category includes other public grant sources, such as public agencies, e.g., Alameda County Waste Management Authority, and private sources. Page 13 of 30 Developer Equity - Developers will put their own funds into projects when there is a shortfall from other sources or if it is a condition for receipt of other funds, particularly city funds. State of California - Recently, the State passed an omnibus housing bill that provides for $500 million in funds. These affordable projects were approved and funded prior to the passage of the State Housing Bill. For construction of new affordable projects in Dublin, applications would need to be submitted to the loan sources listed above. However, the developer would be responsible for the actual application process. TABLE 1: New Construction of Affordable Multi-Family Housing Units Project Name Oroysom Village Arroyo Commons Arbor Vista Owl's Landing Location Fremont Livermore Livermore Livermore Date 2000 1998 1998 2000 Number of U nits 101 12 80 72 Form of Ownership Non-Profit Non-Profit Non-Profit Non-Profit Target Group Families and Seniors Develop. Disabled Seniors Families Total Development $18,027,445 $2,146,000 $10,995,000 $12,530,000 Costs Price per Unit $178,490 $178,833 $137,438 $74,028 Financing County/City CDBG $70,000 City Financing $5,465,000 $300,000 $2,300,000 $4,200,000 City HOME funds $400,000 County HOME funds $417,000 Federal Funds $3,275,300 $800,000 $8,600,000 Tax Credits $6,791,447 $5,300,000 SAMCO $1,290,045 AHP $295,000 $58,000 $95,000 $120,000 CHFA $2,385,000 Other $106,000 $25,000 Developer Equity $910,653 $500,000 Leverage of City Funds3 Affordability Level 3.3 7.2 4.8 3.0 30-60% for Fam. Units Below 50% Seniors 30% AMI 50% AMI 50% AMI 3 Numbers in this column indicate the funding ratios received per invested dollar from the various cities. For example, for every $1, the City of Fremont leveraged toward the Oroysom Village Project, $3.3 was produced from other financing sources. Page 14 of 30 3. Mixed Affordable and Market Rate Housing Development Staff recommends that the City encourage developers to build inclusionary units by offering per-unit subsidies and/or deferred or zero interest loans to target households purchasing inclusionary units. If necessary, the City should provide additional subsidies to bridge the affordability gap between target income groups for both rental and ownership units. a. Description In Dublin, affordable multifamily housing grants could be administered through private developer agreements for affordable multifamily units required under the 5 % Inclusi, onary Regulations., b. Examples of Multi-Family Unit Developments in Nearby Cities Both the Cities of Livermore and Pleasanton have developed affordable, multifamily units by working with private developers° · In Livermore, Hal Porter developed 30 affordable rental units off-site to satisfy the BMR requirements for 300 single-family homes that were constructed. In Pleasanton, as part of the Greenbriar/Bernal property housing development, the developer is providing 31 affordable rental units and 56 Below Market Rate duet ownership units, as part of the development agreement resulting in an overall 15% affordability rate for the total 581 units sold and rented. The rental units will be included in the 100-unit Village Commons. 'Twenty of the rental units will be for households earning 50% of median income, and 11 units will be for those at 80 % of median income. The remainder (69 units) will be market rate. (See TABLE 2: Summary of Greenbriar/Bernal Property provided by Pleasanton.) Twenty-eight of these homes will be sold at a price affordable to households earning 80 % of median income and 28 homes will be affordable at 80% of median income or $191,000, whichever is greater. TABLE 2 Summary Of Greenbriar / Bernal Property Affordable Housing Component The property will include a total of 581 housing units, broken down as follows: Unit Type No. Single-Family 481 Market rate 425 Multi-Family 100 Market rate 69 Total Units: 581 Page 15 of 30 BMR Ownership Units: The BMR ownership units will consist of 56 duets (Slightly under 12% of the 481 total ownership units) to be sold at two different affordability levels: 1) 80% of AMI (28 homes), and 2) 80% of AMI or $191,100, or whichever is greater (28 homes). The duet homes will be approximately 1,250-1,350 sq. ft. in area with three bedrooms, two bathrooms, and two-car garages. The units will feature building materials of high quality consistent with the surrounding neighborhoods. Lots will include front landscaping (if offered with the market units, rear landscaping will also be included). Construction on the units is projected to begin in 2001. BMR Rental Units: Greenbriar will construct one 100-unit apartment complex within the "Village Commons" section of the project. A total of 31 units (31% of the total 100 rental units) will be part of a below-market set-aside at two different affordability levels: 1) 50% of AMI (20 units); and 2) 80% of AMI (11 units). The remaining 69 units will be market-rate. The BMR units will include one, two, and three-bedroom units, with the breakdown to be comparable to the overall unit mix for the project. The affordability provisions will apply in perpetuity. c. Assessment One way that the City can work with private developers to provide rental units that are affordable to very low-income and low-income households is to provide a subsidy to the developer based on a per- unit cost, so that the rents charged to the target families are lower than market-rate rents. The City could also get the developers to set aside units for sale to target households. The City could then offer deferred or zero interest loans to the purchasing target households. The City subsidies could be recorded with the deeds and when the project is sold, the funds could return to the City's Housing In- Lieu fee Fund. Additional per-unit subsidies may be'necessary to bridge the affordability gap between target income groups, For example, if developers are required to provide rental units affordable to an 80.% median income target group, but the City wishes to serve the 50% median income group, then the City can provide funding to bridge the affordability gap (The amount of funds necessary will be much lower than in the developments presented in Table 2, which were 100% affordable projects and not part of larger development plans.) The necessity of the per-unit subsidies could be determined at the time the project is under review for such affordable housing considerations. Page 16 of 30 4. Potential sites for affordable housing development either exclusively or scattered among market-rate units. The locations of current suitable sites for new construction of medium to high-density affordable housing are provided in Figure 1 below: 1 ) Plumbery (southwest intersection of Dublin Boulevard and Donlon Way) 2) San Ramon Village Plaza Shopping Center (southeast intersection of Alcosta Boulevard and San Ramon Road) 3) Dublin/Pleasanton BART Station 4) West Dublin BART Station 5) Dublin Ranch Town Center 6) Vacant lot northeast of the intersection at Starward Drive and Amador Valley Boulevard 2 These sites can accommodate either exclusively' affordable housing or mixed developments of affordable and market rate housing for selected target groups (seniors, disabled persons, etc). FIGURE 1 Page 17 of 3 1 C, ACQUISITION-REHABILITATION Staff recommends that the City implement an acquisition-rehabilitation program to obtain affordable units when opportunities become available using the strategy noted in Section C. Assessment, below. 1. Description Acquisition/rehabilitation represents an alternative to new construction as a mechanism to provide affordable rental units. A for-profit or non-profit developer acquires existing multi-family buildings. Generally, some rehabilitation work is performed on these properties for a number of reasons, including the following: · To bring the property up to commonly accepted housing quality standards, for example, by replacing the roof or replacing plumbing fixtures. · To change room configurations, for example to increase the number of two- and three-bedroom units. · To make cosmetic improvements, e.g., repainting and replacing windows, etc. The total development costs for acquisition/rehabilitation projects include both the initial acquisition costs as well as the rehabilitation expenses. Finally, if the rehabilitation extends the useful life of the property, then, units that are acquired and rehabilitated, become income restricted for a period of time help Dublin to retain affordable housing units. The City could leverage housing in-lieu funds to assist developers in acquiring and rehabilitating the properties. The assistance may come in the form of initial backing to support the developers' application for tax credits, mortgage bond financing, and other financing sources. Typically, other funding sources will match cities funding, so developers may be able to receive anywhere from $2 to $12 in total funding for every $1 that the City allocates. 2. Examples Table 3 presents examples of acquisition/rehabilitation projects for other cities in the San Francisco Bay Area. Since the strategy of acquisition/rehabilitation is not used as frequently as new construction as a means to provide affordable housing construction, there are fewer recent examples from neighboring cities to present. Therefore Table 3 presents project examples from a wider geographic range. a. Menlo Park b. Fremont c. Richmond do Antioch e. San Leandr, Page 18 of 30 With the exception of Fremont's transitional homeless program, per unit costs are substantially lower than new development costs. In fact, for the three projects developed with a limited partnership (a non- profit teamed with a for-profit developer), per unit costs are under $75,000, less than one-half the per- unit cost for the construction of new affordable units. Various funding sources were utilized among the projects listed in Table 3. For the first two affordable projects, which were owned by non-profit organizations, multiple financing sources were needed, similar to the financing of new construction projects: These sources included county CDBG funds, city financing, and HOME funds. In contrast, the Limited Partnership projects utilized CHFA financing primarily, which provides below market interest rate loans. The debt service for this financing is supported by rental income. The 4% Low Income Tax Credit program was also an important funding source for the Limited Partnership projects. Since city financing was an important component of total financing for the Menlo Park and Fremont projects, leverage of city funds was relatively low. For every city dollar invested, the developer was able to leverage two to three dollars from other sources. In comparison, the two tax credit projects that used some city financing, leveraging was much higher. For every dollar that the city invested, the developer of the Richmond and San Leandro projects was able to leverage between eight and twelve dollars. Finally, target income groups vary somewhat. For the two non-profit projects, rents are at or below the 50% median income level. For the Limited Partnership projects, rents are primarily at the 60% median income level (the top income bracket that applies in tax credit projects). Furthermore, in the case of one project, one-fourth of all the units are offered at market rates. 3. Assessment During the course of Staff's investigation in Summer 2000, we confirmed that there was strong demand for rental housing in Dublin, There have been few sales of multifamily buildings, so acquiring these properties in Dublin under current market conditions may be difficult. Additionally, Staff did not discover any properties that were currently for sale that satisfied the size criteria presented above. If the City decides to adopt an acquisition/rehabilitation strategy, it could issue a developer RFQ (Request for Qualifications) to advertise its intent to assist an acquisition/rehabilitation project. This RFQ should be sent to both for-profit and non-profit developers. When RFQ's are issued, it is frequently the case that specific sites have already been identified by the jurisdiction. By identifying the sites in advance, developers responding to the RFQ can provide detailed answers regarding estimates of rehabilitation costs and other project specific elements. Page 19 of 30 4. Guidelines for Formulating Dublin's Acquisition-Rehabilitation Program Prior to implementing an Acquisition-Rehabilitation Program, the City Council would need to decide on the following: · What Form of Ownership is preferred? (For-profit, non-profit, or combined limited partnership of for-profit and non-profit organizations) The primary distinction among various ownership options is generally what market segment is served. The limited parmership is more likely to target to the upper end of the affordable housing group. However, for the purposes of encouraging an acquisition/rehabilitation project, staft recommends that the City be open to all types of organizational entities, as long as they are experienced. · Property Size Limits (The number of units) A larger property, 50 or more units, is preferable so that fixed management and operating costs are spread over a larger number of units. However, if several small multiples located adjacent to one another can be acquired and rehabilitated, then, it is possible to retain some of the cost effectiveness associated with larger properties. · Target Income Groups (expressed as a percentage of area median income) Deciding what income groups to target influences the choice of funding sources and possibly form of ownership. Since acquisition/rehabilitation is less costly than new construction, it could be seen as a more cost-effective way to serve very low-income renters. 5. Potential sites for acquisition-rehabilitation projects either exclusively or scattered among market-rate units. As previously noted, Dublin has few existing apartment complexes and only a handful of these complexes are suitable. for acquisition rehabilitation. Most of these sites are concentrated along a stretch of Areadot Valley Boulevard between Donahue Drive and Starward Drive (See Figure 2 Below). The remaining possible acquisition-rehabilitation project is located at the intersection of Amador Valley Boulevard and San Ramon Road. Private for-profit developers have approached the City and requested funding for two of the sites: 1) The Springs Apartments located at 7100 San Ramon Road and 2) Greenwood Apartments located at 7323 Starward Drive. However, City staff informed the developers that funds could not be allocated until the City's program options for leveraging in-lieu fee funds were adopted. Page 21 of 30 FIGURE 2 1} Map {}~ h~; ~ ~ ~ PROVIDE RENTAL ASSISTANCE IN THE FORM OF A GRANT (NON- PERIODIC PAYMENT) Description Rental assistance in the form of lump sum grants or short-term assistance was another program option for leveraging Dublin's in~lieu fees that was supported by the City Council at the 2nd Dublin Affordable Housing Workshop on October 3. This program could entail the City providing grants that could be usedto retain or create short-term affordabie housing. The grants could provide via non-profits or local agencies short-term rental assistance to households in Dublin. The examples in the next section are administered by non-profit organizations that offer short-term rental assistance to eligible households. Examples of Rental Assistance Programs a. ECHO Housing, Inc.'s Rental Assistance Program (RAP) The Rental Assistance Program (RAP) is a delinquent rent and rental deposit guarantee service' operated by ECHO Housing. The program is currently available to residents in Livermore and Pleasanton as well as Fremont, Hayward, Oakland and San Leandro. Last year the program assisted 200 families. The program has been in operation since 1987 and has served as a model for simijar programs throughout the country. Page 22 of 31 The program is designed to help people in the following situations: · They need help paying the required security deposit and last month' s rent in order to move into housing, or · They have had a temporary setback causing them to get behind in paying their rent. The program is not a subsidy program. The RAP does not pay the amount owed. The goal is to assist tenants in solving their problems. For example, a tenant who is delinquent in paying rent because he or she had been sick and cannot work calls ECHO. An ECHO counselor meets with the tenant to discuss the situation. The counselor and tenant review the tenant' s budget to determine how much money would be available at the end of each month to pay off the delinquent rent. The ECHO counselor then calls the landlord to negotiate the repayment plan. If the plan is acceptable to the landlord, the tenant enters into an agreement to repay the rent. ECHO guarantees payment of the funds to the landlord and will pay if the tenant defaults on the payments. (The default rate under the program is low, ranging from 1% to 4%.) In working with a family, an ECHO counselor is able to draw on other programs for which a client may be eligible. For example, in conjunction with Alameda County Social Services, ECHO has started a revolving loan program (funded by Social Services) to assist CalWorks participants to obtain housing. The program pays the landlord the move.in expenses (security deposit and last month' s rent). Then the participant enters into an agreement to repay the program. ECHO also has some grant funds that can be used to pay deposits or delinquent rental payments for families who do not have enough money to work out a payment plan. The City CoUncil, if it chooses to participate in this program, could decide to allocate some additional funds for a grant fund for Dublin participants if needed. For delivery of ks delinquent rent and rental deposit guarantee services, ECHO estimates that the cost per client (Completion of a guarantee) is around $1,100 to $1,200. Establishing a grant fund to pay for deposits or delinquent rents for those who are unable to make repayments would require additional funds. For example, the City could decide to allocate $10,000 to $25,000 to establish such a fund for Dublin residents b. Allied Housing, Inc.'s Affordable Housing Scholarship Program (HSP) Dublin currently participates in Allied Housing' s Scholarship Program (HSP). Allied Housing administers this program in the Tri-Valley area as well as Fremont, Newark and Union City. Low- income individuals and families participate in theprogram. The goal is to encourage self-sufficiency by the end of the program. Participants are in job training programs. As part of the program, Allied Housing establishes relationships with landlords and encourages property managers and owners to set aside a specific number of rental units at below-market rental units for HSP participants while they are in the training program. Page 23 of 30 The Cities of Livermore, Pleasanton and Fremont have provided additional funds for the program (using federal HOME funds from the Alameda County HOME Consortium). These funds can be used to subsidize a participant' s rent during the one to two year period of the program. These are not ongoing subsidies. As the participant' s income increases when moving from training to a better job, the subsidies phase out. The City of Dublin has been participating in the Housing Scholarship Program through its contribution of CDBG funds for case management, counseling, and landlord outreach. However, it has not allocated additional funds that can be used for short-term subsidy of rental payments. This means that eligible Dublin residents cannot'receive these rental subsidies, as can eligible residents in Livermore and Pleasanton. The City could use its affordable funds to provide housing assistance grants for families who are participating in the Housing Scholarship Program or it apply to the Alameda County HOME Consortium for HOME funds for this purpose. Allied Housing estimates that approximately $12,000 to $13,000 per participant is required for a rental subsidy. Allied Housing has already screened and approved at least one Dublin resident for participation in the program if funds are available and has other applications pending. 3. Possible Strategy for Implementing Short-term Rental Assistance in Dublin The City could consider allocating a small portion of its affordable housing funds to Echo' s Rental Assistance Fund, continue funding Allied' s Housing Scholarship Program, or fund another agency's rental assistance program for a trial period of one year. Neither Echo's nor Allied's program requires large sums. At the end of the one-year period the allocations could be reviewed, and the City Council could decide whether or not to renew funding° If the City decides to fund these programs, it should request proposals from both ECHO Housing and Allied Housing and then negotiate contractual agreements that detail the how the money will be used to assist families in Dublin. By participating in these two programs, the City of Dublin will be joining with the Cities of Livermore and Pleasanton to make these programs available to residents throughout the Tri-Valley area of Alameda County. 4. Guidelines for Choosing Agencies to Allocate Dublin's Short-term Rental Assistance funds Staff recommends that the City adopt the following guidelirfes for assessing the merits of agencies requesting rental assistance funds. Staff further recommends that the City adopt these guidelines for implementing the program: Does the program offer temporary band-aid or permanent solutions? Does the agency help those in need to solve their problems? Does the program help families and individuals that are experiencing temporary difficulties and are in danger of loosing their housing, thus helping to prevent homelessness? Page 24 of 30 · Does the Program require a large allocation of funds? · Does the agency implement a rental assistance program that has been tested and proven successful? · Is the agency an experienced and respected local organization? ECHO Housing' s Rental Assistance Program in particular appears to be a particularly good match in meeting the guidelines listed above with small funding provided by cities. II. Affordable Housing Funding Options A. CONTINUE REQUIRING A PER SQUARE FOOT IN-LIEU FEE BUT DOUBLE THE AMOUNT. By doubling the in-lieu fee to $2.00 per square foot for single-family residences and $1.50 per square foot for multi-family units, the projected amounts of funding that could result are $10,873,484 and $5,209,281 respectively. Doubling the in-lieu fees requires no additional'staff time or resources, since it can be adopted via City Council Resolution and implemented administratively through the City' s current development agreement process. If Dublin were to double the current in-lieu fee requirements, the $2.00 per square foot for single family residences and $1.50 per square foot for multi~family units could generate approximately $21 million over the next five years. Given the competition for development of Dublin' s limited supply of land, it is assumed that doubling the in-lieu fee would not hinder the development of market-rate units. Staff recommends that the City Council adopt a resolution that doubles the current in-lieu fees. COMMERCIAL LINKAGE FEE. 1. Introduction Many Califomia cities have implemented commercial linkage fees to mitigate housing impacts that result from commercial development. The assumption is that expansion in commercial development results in employment growth. Some of the commercial developments' new employees will move to the city in which the employment growth occurs. A percentage of the new employees' households will need affordable housing, since their incomes will be inadequate to pay for market rate housing, particularly in high cost housing .market areas. Since commercial development is indirectly responsible for this increase in demand for affordable housing, cities impose linkage fees on commercial development to help pay for the additional supply of affordable housing that is needed due to employment growth in the new space developers have built. Page 25 of 30 2. Application Commercial linkage fees are generally assessed on a per square foot basis of the building area, possibly exempting smaller projects. Since commercial development spans a variety of uses, such as office, warehouse, retail, etc., linkage fees may vary according to property use due to differences in the number of square feet per employee (employment densities). For example, in a building consisting of 10,000 square feet, the number of office workers would be higher than if the same size building were used as a warehouse. Consequently, some communities establish a variable fee structure, depending on property use, In this way, developers of workspace built for uses that employ a higher density of workers pay higher fees than do developers of lower density space. Based on an estimated 5,644,449 square feet of commercial development that will be built over the next five years in Dublin, potential revenues from a commercial linkage fee range between $2.8 million and $5.6 million, depending on whether a $.50/square foot or a $1.00/square foot fee is adopted. Since this represents a sizeable contribution to the $4.6 million inclusionary housing funds already collected, adopting a Commercial Linkage Fee could aid affordable housing programs substantially. 3. The Need for a Nexus Study In order to determine the maximum fee that can be imposed, it is necessary to quantify the relationship between new development and the demand for affordable housing. Fees must also be roughly proportional to the actual impacts. Before the City can adopt an ordinance to establish such fees, a Nexus Study is required to establish the necessary linkage between non-residential development, increases in employment, increases in the numbers of residents in Dublin, income distribution, and demand for affordable housing. A Nexus Study must be designed to address the legality and basis for establishing a rational nexus or connection between development activities and fees or mitigation requirements, pursuant to California Government Code Section 66001 and court case decisions such as Nollan v. Califomia Coastal Commission, 483 U.S. 825 (1987). In. addition, any fees that are established on the basis of a such a nexus must be roughly proportional to a development's impact, as established in Dolan v. City of Tigard, 512 U.S. 374 (1994). The basic approach in quantifying housing impacts from new development is to estimate the number of additional housing units that will be needed to accommodate growth in employment. Housing units at all price levels are needed and are linked to the occupations (and hence salaries) of the new employees. Given anticipated incomes, there may be affordability "gap," between what households can pay (to rent or to buy) and the actual costs of new development. This "gap" provides the basis for the fee calculation. Although this full "gap" exceeds what communities generally adopt as the fee structure, the Nexus Study establishes the maximum extent of such a fee. Nexus Studies, however, do not guide additional policy decisions such as exemptions for smaller properties (e.g. smaller than 10,000 square feet in size) or exemptions for non-profit property development, such as the Boys and Girls Club, or the number of different commercial property categories (e.g., retail, entertainment, office, manufacturing, R&D, etc.)' Page 26 of 30 Instead, cities base these additional policies on their local priorities and development trends. For fl/0 ( ~/~-- example, the City of Dublin could elect to waive fees for smaller developers and businesses by establishing a property threshold size that triggers the fee, e.g. businesses under 10,000 square feet in size. The City could also implement a sliding scale where smaller firms pay a smaller fee, while large firms pay a larger fee. These types of policies are based on the premise that smaller parcels are developed and occupied by relatively smaller firrns. 4. Possible Implications of a Commercial Linkage Fee There are two implications of adopting a commercial linkage fee for the City of Dublin to consider: Staff and City resources in implementing a linkage fee policy The primary burden to City staff and resources would fall under executing the Nexus Study. The tasks for completing the Nexus Study are listed in Attachment 1. Once the Ordinance is written and adopted, however, staff involvement would be reduced to administratively implementing the linkage fee through the development agreement process and the periodic assessment and adjustment of the linkage fee amount. Potential impacts of such a fee on new commercial development. The Nexus Study or a separate economic study could examine potential impacts on development. Generally, a commercial linkage fee does not substantially impact development if one or more of the following conditions apply: · Fee is very low, so that it represents only a small fraction of total development costs. · Surrounding communities have similar fees, so that the imposition of the fee does not put Dublin at a competitive disadvantage. · Market demand for commercial space is strong enough so that the increased costs of development due to the fee can. be passed along to tenants. A general role of thumb is that a developer needs to receive an extra ten cents in rent per square foot per month in order to offset an increase in development costs of one dollar. So, in areas where rents are high, an increase of $. 10/sq.ft. is not a problem. However, if rents are lower, then increased development costs due to commercial linkage fees cannot be passed on to tenants and therefore could negatively impact future development. At the time that the Nexus Study is conducted, the City could conduct an analysis of current commercial rents and development costs in the property submarkets of interest to determine if there could be a negative impact on development. Interviews with local commercial developers could also provide valuable information regarding the impact of a commercial fee on development feasibility. Staff recommends that the City take the following steps to conduct a Nexus Study necessary for implementing a commercial linkage fee? a. Develop and distribute a Request for Proposals (RFP) for a Nexus Study. A sample outline of an RFP issued by the City of Oakland listing the elements of a Nexus Study is attached. b. Choose the firm and complete a Nexus Study. Page 27 of 30 C, Consider findings of the Nexus Study, with regards to maximum potential fee and potential impact of fee on future development. Determine-ordinance parameters, including the following: Recommended fee. Which property types to assess (e.g., easiest approach would be two categories -- office/R&D and all other commercial). · The situation in which fee is triggered; will it include both new construction and conversion from a lesser employment density to a greater density? · Exclusion/Exemption of specified developments (size and form of ownership). IlL Proposed Target Groups for Affordable Housing Programs The selection of target groups will help dictate how the housing program options are implemented. Proposed target groups previously mentioned included the following: FIRST-TIME HOMEBUYERS A key obstacle for first-time homebuyers is that they lack savings for down payments, although they may have adequate incomes to pay for monthly mortgage costs. First-time homebuyers are typically workforce members, police officers, retail clerks, teachers and other service employees. The down-payment assistance programs detailed earlier could provide first-time homebuyers with the opportunity to secure a mortgage. SENIORS Based on the 1990 Census, there were 438 Dublin households considered senior households, households that are headed by persons over 65 years of age.' This represented 6.4% of Dublin' s population. When the 2000 census results are tallied, it is likely that this percentage will be higher.s Factors that should be · taken into consideration when planning for senior housing needs include: 1. The supply of market rate, smaller units (e.g., townhomes, patio homes, etc.). 2. Housing affordability, and supportive housing that enables seniors to remain independent. Oftentimes, the senior household requires both affordable and supportive housing. According to 1990 Census data, there are approximately 82 renter households headed by a senior, in comparison to 356 senior owner households. Dublin seniors that rent could most benefit from possible rental assistance and acquisition-rehabilitation programs. Existing programs such as the Minor Home and Rehabilitation 5 The 1990 Census may not reflect current conditions in Dublin .due to the rapid growth of the City during the past ten years. Between 1990 and 1999, the population in Dublin is estimated to have increased from 23,229 persons to 28,707 persons, for an increase of 24%. Page 28 of 30 program that allow persons to retrofit and repair their homes with low-interest loans and Dublin' s Second Unit Regulations ordinance, could better serve senior homeowners. PERSONS WITH DISABILITIES There are approximately 420 persons with disabilities living in Dublin according to 1990 Census data. The 1990 Census identified these persons as those of working age that experienced either a mobility or self-care limitation. Similar to seniors, for disabled tenters paying more than 30% of their income toward housing, rental assistance programs could best serve this..group. LOW-INCOME RENTERS 1990 Census data indicated that there were about 295 households in Dublin that pay more than 30% of their income toward rent. Due to rent increases in Dublin over the past decade, this number has probably increased. Rental assistance programs and new affordable rental construction best serve low-income and vet low-income houseliolds. For-Sale housing and ownership programs are not economically feasible, because the affordability gap for persons earning below 80% of the Alameda County median income is very high. DUBLIN' S WORKFORCE Dublin' s workforce as a target group is comprised of City personnel (police officers, fire fighters, and other City employees) and general retail and customer service industry workers for Dublin employers (retail clerks, bank tellers, cashiers, grocery clerks, etc). Dublin' s workforce members fall into the very low-income, low-income, and moderate:incOme categories. TEACHERS Teachers comprise those who teach in Dublin Unified school District adnd those who teach in other districts; but choose to reside in Dublin. INCOME CATEGORIES IN RELATION TO THE PROPOSED TARGET GROUPS The Median income for a family of four with a single wage eamer in Alameda County is $67,600. Household income category thresholds are as follows: · Very low-income is defined as the 50% median income group. This group does not earn more than $33,800 for a household of four. Low-income is defined as the 80% median income group. This group does not earn more than $50,200 for a household of four. Moderate-income is defined as the 120% median income group. This group does not earn more than $81,120 for a household of four. Page 29 of 30 TABLE 4: PROPOSED TARGET GROUPS' INCOME LEVELS Income Categories Very Low-Income 'Low-Income Moderate-Income Possible Target Groups First-time home buyers Seniors Persons with Disabilities Teachers Low-Income Renters Workforce members X X X X X X X X X X X X X X X A sample of programs is given below under "Housing Program Options" followed by a summary table that notes which income groups best suit the programs listed. TABLE 5: SUMMARY TABLE OF HOUSING PROGRAMS' TARGET INCOME GROUPS Housing Programs RENTAL HOUSING Affordable Rental Housing Construction Acquisition/Rehabilitation Existing Housing Rental Assistance FOR-SALE HOUSING Down Payment Assistance Affordable Housing Construction Income Target Groups Very Low-Income Lower-Income (50%) (80%) Moderate-Income (120%) X X X X X X X X X X Page 30 of 30 ALLIED HOUSING Inco Affordable Housin.q with Job Linkaqes Board of Directors Louis Chicoine, Board Chair Tri-City Homeless Coalition Paul Dezurick, Esq., Vice President Robbins, Palmer, & Allen Nancy Schluntz, Secretary,Treasurer Family Emergency Shelter Coalition Mark Anderson Hewlea Packard Lea Eaglin Housing Authority of Alameda County Doug Ford Consultant Melissa Harris Linkages Program Graduate John Klein San Leandro Shelter Ruby Munoz Chiron Corp Celeste Williamson Prime Management Carp Joel Ko McCabe Executive Director 22245 Main SL, Suite 200 Hayward, CA 9454f 510/881-73f0 fax 510/88f-7320 Carol Cirelli Senior Planner 100 Civic Plaza Dublin CA 94568 January 31, 2001 Dear Ms, Cirelli, The Dublin City Council unanimously approved to use $10,000 in CDBG money for case management for Dublin participants in the Tri- Valley Housing Scholarship Program for the fiscal year 2000-2001. We have entered into an agreement with the city for CDBG funds, but still need funds for rent subsidies for the clients. There are limited resources to pay rent subsidies for the Housing Scholarship Program. Two sources identified include HOME Funds (which are currently used in Livermore and Pleasanton) and "in-lieu" funds. Our plan is to work with the city when Dublin applies for HOME funds for fiscal year 2001-2002. For this fiscal year, 2000-2001, we 'are asking that "in-lieu" funds be utilized to provide a $6,500 rental subsidy for one Dublin resident with whom the TVHS program has closely worked. This amount will be utilized to cover the estimated security deposit of $2,500 and a rental subsidy of up to $1000 per month for March 2001 through June 2001. Our goal is to help support families who want to stay in the City of Dublin and support a strategy for reducing their housing cost to income ratio so that they can manage their family needs. We anticipate that Allied Housing will serve three (3) families from Dublin, and project needing $36,000 for rent subsidies for the 2001/2002 Fiscal Year. Our average annual rent subsidy cost per family is $12,000 for market rents between $720 and $1300. A CDBG application for the case-management portion for services and program operations *has been submitted for this fiscal year. The "in lieu" and/or HOME funds will only be used for rental subsidies and deposits for Attachment 3 City of Dublin residents. For the entire Tri-Valley area, including Dublin, we intend to service 12 families during the next fiscal year, Students approved for the program are in progressive job skill classes at Las Positas College, Chabot, Westem Career College, and Hayward Adult School. The Housing Scholarship model is only successful with a commitment for tenant subsidies and case management working together. Dublin can make a difference in helping our families at poverty level who are trying to better themselves. We respectfully request that "in-lieu" funds be approved for rental subsidies for this program. Sincerely, A, rogrMam hlanager Allied Housing Inc. Attachment 3