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HomeMy WebLinkAboutItem 8.1 - 2681 Overview of the City’s Affordable Housing P Page 1 of 9 STAFF REPORT CITY COUNCIL DATE: June 4, 2019 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager SUBJECT: Overview of the City’s Affordable Housing Programs Prepared by: Jim Bergdoll, Senior Planner - Housing EXECUTIVE SUMMARY: The City Council will receive a report on the City’s Affordable Housing Programs, methods to finance affordable housing, and a presentation by Eden Housing about their organization and the production of affordable housing through public/private partnerships. STAFF RECOMMENDATION: Receive the report. FINANCIAL IMPACT: There is no fiscal impact associated with receiving this report. DESCRIPTION: On April 16, 2019, the City Council requested that Staff provide an overview of the City’s affordable housing programs, methods to finance affordable housing developments, and a presentation by Eden Housing about their organization and the production of affordable housing through public/private partnerships. Housing Affordability Housing is typically defined as affordable when a household pays no more than 30% of its gross income on housing expenses. Every year, the State of California Housing and Community Development Department (HCD) issues annual area median incomes (AMI) and corresponding income limits that are used to calculate the maximum affordable rental and sales prices for all affordable housing units in the City. These affordable units within Dublin are each restricted towards certain income categories: very low, low, or moderate income. Table 1 below illustrates the City of Dublin’s 2019 income limits for those categories. Page 2 of 9 Table 1: 2019 Income Limits for Alameda County Income Category % of Area Median Income (AMI) Household Size 1 2 3 4 5 6 7 Very Low 50% $43,400 $49,600 $ 55,800 $ 61,950 $ 66,950 $ 71,900 $ 76,850 Low 80% $69,000 $78,850 $88,700 $98,550 $106,450 $114,350 $122,250 Moderate 120% 93,850 $107,250 120,650 $134,050 144,750 155,500 $166,200 Source: California Department of Housing and Community Development, 2019 These income limits are then used to calculate the amount of rent that a household in each income category can afford. Please refer to Table 2 below for the amount of rent that a household in each of the income category can afford. Table 2: 2019 Rent Limits for Alameda County Number of Bedrooms Number of Persons in Household Maximum Allowable Rents by Income Category Very Low (<50% AMI) Low (<80% AMI) Moderate (<120% AMI) Studio 1-2 $1,085 $1,725 $2,151 1 1-2 $1,240 $1,971 $2,457 2 2-3 $1,395 $2,218 $2,765 3 3-4 $1,549 $2,464 $3,072 4 4-5 $1,674 $2,661 $3,318 Source: City of Dublin Housing Division, 2019 The City’s housing programs focus on creating and preserving ownership and rental housing opportunities that are affordable to all income categories. These programs are managed by the City’s Housing Division within the Community Development Department. The following programs and policies discussed below are ways the City creates and preserves affordable housing. Inclusionary Zoning Ordinance The City of Dublin’s Inclusionary Zoning Ordinance (IZO) was adopted in 2002, and serves to enhance the public welfare and assure that further housing development contributes to the attainment of the City’s Housing Element goals by increasing the production of residential units affordable by households of very low, low, and moderate incomes. In addition, the IZO assures that the limited remaining developable land in the City is utilized in a manner consistent with the City’s housing policies and needs. The Inclusionary Zoning Regulations are briefly described below: All new residential development projects of 20 units or more shall construct 12.5% of the total number of dwelling units within the development as affordable Page 3 of 9 deed restricted units. The affordability level of the required number of deed restricted units shall be consistent with the City’s ordinance. o Rental developments require 50% moderate income, 20% low income, and 30% very low income units. o Ownership developments require 60% moderate income and 40% low income units. An Affordable Housing Agreement shall be recorded on the property title prior to issuing a building permit. Payment of a fee in-lieu for constructing up to forty percent of the required inclusionary units is an option available to developers, at the discretion of City Council, and is paid at the time of building permit. The current in-lieu fee rate is $190,527 per required affordable unit and adjusted annually based on the larger of the increases in either the HUD Fair Market Rent Limits for the Oakland - Fremont Metropolitan Area, or the change in the Bay Area Urban Consumer Price Index. Affordable Housing Inventory As of May 17, 2019, a total of 1,383 affordable units currently exist which are reserved for households making less than 120% AMI. These include the categories below: Figure 1: BMR Affordable Housing Inventory Page 4 of 9 Figure 2: Income Distributions of all BMR units The City’s inclusionary housing program is designed to provide a balance of housing types to satisfy the housing needs of the community. The number and type of units in the City’s current stock of affordable housing units and the qualifying household income categories are illustrated in Figures 1 and 2 above. Rental units make up the largest portion of the affordable housing stock. The majority of these rental units are available to low and very low income households, while the ownership units are predominantly available to moderate income households. Affordable housing for lower income households require significant subsidies, and there are more funding sources available to produce rental housing in this income category. Additionally, rental units are often better suited for lower income households tha t may not have the financial resources to produce a down payment, or to pay property taxes, homeowner’s association fees, and the cost of ongoing maintenance associated with homeownership. Ownership (164 units) The sales price for deed restricted affordable ownership units is established using current incomes based on unit size and family size from the chart above. Of these 164 affordable ownership units, 146 are condominiums/townhomes and 18 are single -family detached homes. 94% of the units are restricted to moderate income households earning less than 120% AMI, 3% are restricted to low income households earning less than 80% AMI, and 3% are restricted to very low income households earning less than 50% AMI. Each affordable ownership unit is deed restricted to a specific income category for between 30 and 55 years, depending on the Affordable Housing Agreement. City staff monitors these units annually to be sure that they are owner occupied and compliant with any refinancing or resale requirements. Each new purchaser of an affordable ownership unit goes through a homebuyer education course at the time of purchase. Rental (1,097 units) The affordable rental unit stock in Dublin totals 1,097 units. All affordable rental units Page 5 of 9 are managed by a community m anager and/or non-profit organization -- the City does not own or manage any units. The City monitors rental units annually to ensure compliance with the community’s Affordable Housing Agreement. This includes a review of tenant income certification, rent prices, and waitlist procedures. The largest share (43%) of these affordable rental units are deed restricted for households categorized as very low income making less than 50% AMI. The rest of these units are split between low income households earning less than 80% AMI, and moderate income housdholds earning less than 120% AMI. Please refer to Attachment 1 for a list of all the rental communities with affordable rental units. Since 2002, most privately constructed rental projects include a mix of market rate and affordable units. The 100% affordable rental communities have been built by non -profit developers with a combination of government funding sources, including money allocated from the City’s Affordable Housing Fund and tax credit financing (as discussed later in this report), and often with the contribution of land. Local Dublin and Alameda County funding sources are summarized below. Please refer to Attachment 2 for federal and state funding descriptions. Second Units (122 units) Certain developments have satisfied their affordable housing requirement through the production of deed restricted Secondary Units or “Accessory Dwelling Units” that can be rented to qualified very low, low or moderate income households. There are a total 122 deed restricted secondary units that satisfy affordable housing requirements (18% very low income, 71% low income, and 11% moderate income). These units are located in Positano, Schaefer Ranch, and Tassajara Hills neighborhoods (32 additional units are anticipated at buildout of Tassajara Hills). If homeowners were to rent one of these units (not mandated), tenants’ rent and income levels are restricted to a level prescribed in the Affordable Housing Agreement for that development. First Time Homebuyer Loan Program The City of Dublin offers a first time homebuyer loan program (”FTHLP”) to households earning less than 120% AMI. The City allocates up to $100,000 in Housing Funds per fiscal year for new loans. All FTHLP loans have a 30-year deferred payment loan term and a 3.5 percent simple interest rate; deferred principal and interest are due in full at time of sale or after 30 years, whichever is earlier. Households may pay off the loan at any time without penalties. Households must be first time homebuyers or no t have owned property in the last three years to qualify for the loan. Eligible households purchasing a qualified BMR home can apply for a loan up to 15 percent of the purchase price with a maximum loan amount of $40,000. Eligible households purchasing a market rate home can apply for a loan up to 10 percent of the total purchase price, with a maximum loan amount of $40,000. Since 2006 when the program was established, over $2.8 million in loans have been awarded to 59 households. Twenty-six of those loans have been paid off in full due to sale or refinance of the home, leaving 33 loans in our portfolio. In the last five years, five homebuyers have taken utilized this loan program. Page 6 of 9 Figure 3: FTHLP Homeowners by Income Category Local Funding Sources for Affordable Housing Development The development of 100% affordable housing projects requires a significant amount of government subsidy which often comes from a combination of local, regional, state and federal sources. Local and regional sources include the City of Dublin’s Affordable Housing Fund, and the Alameda County Measure A1 bond. Additionally, affordable housing projects typically rely on federal and state programs such as tax credits, bond money, and money allocated to facilitate development of housing for special needs populations. The following is a brief overview of local and regional funding. Please refer to Attachment 2 for information regarding a variety of federal and state programs. Dublin Affordable Housing Fund The City’s IZO provides developers with the option to pay a fee in lieu of developing up to 40% of their inclusionary housing requirement, or even more at the City Council’s discretion. These in lieu fee payments are collected in the City’s Inclusionary Zoning In - Lieu Fees Fund also known as the Housing Fund. The City also has a Commercial Linkage Fee program that is charged to non-residential development at permit issuance based on the building type and size. These f unds are also deposited into the Housing Fund. Currently, the Housing Fund balance is approximately $12 million. The majority of the funds in the City’s Housing Fund are used to award loans to non- profit affordable housing developers to build or preserve affordable housing; these City funds are crucial towards leveraging millions of dollars in low income housing tax credits and other federal funding sources. These funds are also used to administer the City’s affordable housing program and fund the First Time Homebuyer Loan Program. Since the City’s Inclusionary Housing Program was established in 2002, the City has awarded over $15 million in grants and loans, in addition to facilitating land acquisition, to create new affordable housing. Money from this fund helped facilitate development of 306 affordable rental units in the following projects: Wicklow Square, Carlow Court and Wexford Way at Emerald Vista, and Valor Crossing. Alameda County Measure A1 Funds Measure A1, a $580 million countywide housing bond , was passed in November 2016. The bond has five main components, with two programs already underway to increase the affordable rental housing inventory. The two existing programs are discussed Page 7 of 9 below. Regional Pool $200 million of the bond is allocated to specific regions for the development of affordable rental housing (“Regional Pool”). Funds within this Regional Pool are distributed geographically, with Dublin being part of the East County Regional Pool (along with Livermore and Pleasanton) and an allocation of $27.3 million. Funds in this category will be awarded to developers with City-approved development projects through a competitive application process administered by Alameda County Housing and Community Development. There has been no East County Regional Pool application process developed to date, but HCD hopes to award all Regional Pool funds by December 2023. Unspent funds in regions will eventually be moved to regions with feasible projects requesting funds. Most of the A1 Awards to the most recent North-County and Mid-County Regional Pool allocation are between $2 million and $10 million per project. • Greater local city financial contribution toward the project will increase a project’s ranking in this competitive selection process through HCD. Base City Allocation $225 million is allocated among each Alameda County city for new affordable housing projects (“Base City Allocation”); Dublin’s Base City Allocation is $7,948,319, which will be awarded for specific development projects in Dublin as they prepare to commence construction. City allocations were determined based on a formula which incorporates population and percentage of assessed property value. The City must commit these A1 funds by December 31, 2021 and those projects must start construction within three years of their funding commitment date. Any uncommitted funds by each city on January 1, 2022 will be moved into the Regional Pool. Additional Housing Resources Mortgage Credit Certificates Alameda County Department of Housing and Community Development (County HCD) oversees the Mortgage Credit Certificate (MCC) program which is funded by the State of California. MCC provides income eligible first-time home buyers with an opportunity to receive a tax credit on the first 20% of their annual mortgage interest payments. The home buyer may either adjust their federal income tax withholdings and increase their income available to pay the mortgage or receive a lump sum tax credit each year. Approximately $15 million is usually available for the MCC program annually. Alameda County AC Boost AC Boost is a $50 million Down Payment Assistance loan program available to first -time homebuyers and funded through the A1 Bond. The program that is projected to expend the initial funds over the next seven years. Similar to Dublin’s FTHLP, when a homeowner sells the home in the future, any sale proceeds return to the fund which Page 8 of 9 extends the life of the program. Dublin residents have access to these funds with educators and first responders being given priority to access this program. Renew Alameda County (Renew AC) Low-Income Home Repair/Rehab This program was also launched in March 2019 with County A1 Bond funds totaling $45 Million reserved over eight years for housing preservation. Renew AC helps low income homeowners, like seniors and those with disabilities, to access affordable, low-interest deferred payment loans for home improvement projects that maintain safe housing, increase accessibility, and ultimately prevent homeowner displacement. Dublin’s low income homeowners are now able to access this funding, and information is on the City’s website. Community Development Block Grant (CDBG) The County HCD administers a home repair and improvement program for the City using CDBG Capital Improvement funds. This program is being phased out and replaced by the Renew AC program (described above). In 2018/2019 year to date within Dublin, seven Minor Home Repair cases have been completed, two new cases were started, and all remaining or new home repair/rehab cases are being referred to the new Renew AC program administration. HUD Section 8 (Housing Choice Voucher Rental Assistance) The Housing Choice Voucher Program (commonly referred to as Section 8), extends rental subsidies to extremely low and very low income households, including families, seniors, and the disabled. The program offers a voucher that pays the difference between the current fair market rent (FMR) as established by the U.S. Department of Housing and Urban Development (HUD) and what a tenant can afford to pay (i.e. 30 percent of household income). The Housing Authority of the County of Alameda administers the program in Dublin. A total of 404 vouchers are currently being used in rental properties in Dublin. Most of these are awarded to individual households by the Housing Authority and used as part of rent payment at the discretion of the rental units’ owners. Some vouchers are “Project-based vouchers” that were assigned to three of Dublin’s affordable rental projects (Carlow Court, Wexford Way, and Valor Cro ssing) at the time of development to assist with the financing of the project. Efforts to Facilitate Affordable Housing Over the course of the next year, Staff will be working on initiatives to further efforts to produce affordable housing in Dublin, updating policies to comply with recent changes to State law and enhancing existing programs. This includes placing a priority on creating a public/private partnership with a non-profit housing developer and leveraging local funds to produce an affordable housing development for a special needs population. Staff will return to the City Council with additional information on this effort and seek direction from the City Council by late summer or early fall. Additionally, Staff is also looking at ways to help facilitate the private development of accessory dwelling units through a variety of different means. The City Council will receive a report this summer on this effort and be asked to provide feedback and Page 9 of 9 direction to help guide this effort. Staff will also be evaluating the City’s First Time Homebuyer Loan Program for ways to improve the program and to better coordinate this funding with other sources such as the Alameda County loan programs and State programs. Staff is also updating the City’s Density Bonus Ordinance to comply with State law, reviewing the Emergency Shelter Ordinance and the Transitional Housing Ordinance to ensure that they comply with State Law, and monitoring proposed legislation that could be impactful to Dublin. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Affordable Rental Projects in Dublin 2. Federal and State Affordable Housing Funding Sources Attachment 1 Affordable Rental Projects in Dublin As of 5/2019 Community Name Year of Agreement/ Effective Date Year Restrictions Expire Total Affordable Units Total Units Property Manager Mixed Income Projects with both Market Rate and Affordable Rental Units: Park Sierra* 1999 2029 57 283 Shea Properties Avana (Archstone) Apartments 2001 2031 2 177 Greystar Dublin Ranch Pine Grove Senior + Oak Grove Family (Fairway) 2006 2061 535 626 FPI Management Dublin Station by Windsor (aka Avalon Eclipse - 5300 Iron Horse) 2007 2062 30 305 Windsor Property Management Company Tralee Village 2011 + 55 16 130 Bell Partners Inc. Avalon at Dublin Station (5200 Iron Horse) 2013 2068 50 505 AvalonBay Communities, Inc. Subtotal: 690 2,026 100% Affordable Rental Unit Projects by Non-Profit Developers with Funding and Land Dedication by the City: Wicklow Square 2006 2061 53 54 Eden Housing Camellia Place 2007 2062 111 112 EAH Housing Wexford Way 2012 2067 129 130 Eden Housing Carlow Court 2012 2067 49 50 Eden Housing Valor Crossing 2016 2071 65 66 Eden Housing Subtotal: 407 412 Grand Total 1,097 2,438 *At Park Sierra, 14 of the affordable units are very low income units required & funded by other sources. 1 of 2 Attachment 2 Federal and State Affordable Housing Funding Sources Federal and State Tax Credits: The low-income housing tax credit (LIHTC) program is one of the federal and state governments’ primary policy tools for encouraging the development and rehabilitation of affordable rental housing. A number of the 100% affordable rental developments in Dublin have received tax credits, such as Wicklow Square, The Groves at Dublin Ranch, and Valor Crossing. These nonrefundable federal housing tax credits are awarded to developers of qualified rental projects via a competitive application process administered by state housing finance authorities. Developers typically sell their tax credits to outside investors in exchange for equity in the project. Selling the tax credits reduces the debt developers would otherwise have to incur and the equity they would otherwise have to contribute. With lower financing costs, tax credit properties can potentially offer lower, more affordable ren ts. Tax credits often finance 50- 75 percent of a project’s permanent costs. State of CA --Other Funds: Affordable Housing and Sustainable Communities (AHSC “Cap and Trade”): Administered by the Strategic Growth Council and implemented by the Departmen t of Housing and Community Development (HCD), the AHSC Program funds land-use, housing, transportation, and land preservation projects to support infill and compact development that reduce greenhouse gas ("GHG") emissions. Funding for the AHSC Program is provided (with a competitive RFP annually) from the Greenhouse Gas Reduction Fund (GGRF), an account established to receive Cap-and-Trade auction proceeds. Fifty (50) percent of the available funds are set aside for Affordable Housing Developments, and 50 percent of the available funds are set aside for projects benefitting Disadvantaged Communities. In the last annual round, HCD awarded seven projects between $10 Million and $20 Million each. “No Place Like Home” (NPLH) Started in 2018 with $2 billion in dedicated bond proceeds to invest in the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness, or who are at risk of chr onic homelessness. The bonds are repaid by funding from the Menta l Health Services Act (MHSA). The eligible uses of the funds are to acquire, design, construct, rehabilitate, or preserve permanent supportive housing for persons who are experiencing homeles sness, chronic homelessness or who are at risk of chronic homelessness, and who are in need of mental health services. Populations served include: adults with serious mental illness, or children with severe emotional disorders and their families , and persons who require or are at risk of requiring acute psychiatric inpatient care, residential treatment, or outpatient crisis intervention because of a mental disorder with symptoms of psychosis, suicidality or violence and who are homeless, chronically homeless, or at risk of chronic homelessness. Veterans Housing and Homeless Prevention Program (VHHP) HCD anticipates awarding approximately $300 million in subsequent years funding rounds. 2018 Round awarded 15 projects between $2 Million and $10 Million each. Eligible uses include: Acquisition, construction, rehabilitation, and preservation of affordable multifamily housing for veterans and their families to allow veterans to access and maintain housing 2 of 2 Attachment 2 stability. At least 50 percent of the funds awarded shal l serve veteran households with extremely low incomes. Of those units targeted to extremely low-income veteran housing, 60 percent shall be supportive housing units. Permanent Local Housing Allocation (PLHA) This is a new funding source authorized by SB2 in 2017 that creates a dedicat ed revenue source for the Building Homes and Jobs Trust Fund. 70% of the estimated $250-300 Million collected starting in 2019 to be distributed to local governments mostly using the federal CDBG allocation formula within California. Eligible uses of the se funds include: affordable housing development as well as necessary operating subsidies; affordable “workforce” rental or ownership housing for incomes up to 150% AMI in high co st areas; provision of rapid rehousing, rental assistance, navigation centers, emergency shelters. 20% of this new Trust Fund is required to be expended for affordable owner-occupied workforce housing. Note that HCD is currently preparing guidelines for implementation of this program. Multifamily Housing Program (MHP) and Supportive Housing Multifamily (SHMHP) The purpose of this State program is to provide low-interest loans to developers of permanent affordable rental housing that contain supportive housing units. SHMHP funds are for permanent financing only, and may be used for new construction or rehabilitation of a multifamily rental housing development, or conversion of a nonresidential structure to a multifamily rental housing development. Eligible use of funds may include, but are not limited to, real property acquisition, refinancing to retain affordable rents, necessary on-site and off-site improvements, reasonable fees and consulting costs, capitalized reserves, facilities for childcare, after-school care, and social service facilities integrally linked to the restricted supportive housing units. A minimum of 40 percent of total units must be supportive housing units, whichever is greater, and must have associated supportive services for the intended target population living in the restricted units . In 2018 California HCD awarded approximately $77 Million for this program to housing developers.