HomeMy WebLinkAbout2025-10-09; Housing Commission; 01; Additional Funding Request of $500,000 from the Housing Trust Fund for West Oaks Apartments
Meeting Date:
Oct. 9, 2025
To: Housing Commission
From: Christian Gutierrez, Housing Services Manager
Staff Contact: Nicole Piano-Jones, Senior Program Manager
nicole.pianojones@carlsbadca.gov, 442-339-2191
Subject: Additional Funding Request of $500,000 from the Housing Trust Fund for
West Oaks Apartments
District: 2
Recommended Action
Adopt a resolution recommending that the City Council approve an additional loan request of
$500,000 from the Housing Trust Fund to Chelsea Investment Corporation for construction of
the West Oaks affordable apartments.
Executive Summary
In 2021, the West Oaks project received approval from the Planning Commission which includes
192 apartment units on the south side of Palomar Airport Road and west of Palomar Oaks Way.
Forty-two of the units are to be affordable to lower-income households. Chelsea Investment
Corporation (CIC) has partnered with Integral Communities to build the affordable housing
portion of the West Oaks residential project.
On Dec. 7, 2021, the City Council approved Resolution No. 2021-267 approving a $1.5 million
loan to Chelsea from the city’s Housing Trust Fund (HTF). The project experienced delays
related to sewer connection outside of the developer’s control and a loan extension was
requested in 2023. On Nov. 7, 2023, the City Council approved Resolution No. 2023-272,
approving a two-year extension of the $1.5 million HTF loan to CIC. Since the initial loan request
was made in 2021, the total estimated project cost has increased approximately four million
dollars. Because of increased costs CIC is requesting an additional $500,000 from the city’s
Housing Trust Fund for a total of $2,000,000.
Explanation & Analysis
Project Background
The West Oaks project was approved by the Planning Commission on Jan. 20, 2021, receiving a
General Plan Amendment and Zone Change to the R-30 Residential designation and approval
Oct. 9, 2025 Item #1 Page 1 of 13
for excess dwelling units in accordance with City Council Policy No. 43 to provide 192
apartments, with 42 affordable to lower-income households. CIC partnered with project
developer, Integral Communities, to construct the affordable housing portion of the West Oaks
project. To provide additional public benefit to the Carlsbad community and to secure tax-
exempt bond and tax credit equity financing, the project will provide three additional
affordable units and deepen the project’s affordability by providing more housing units to
extremely low and very low-income households.
To help achieve these goals, CIC received a loan commitment of $1.5 million from the city’s
Housing Trust Fund on Dec. 7, 2021. However, the project was delayed because of challenges
associated with the project’s sewer connection. As a result, on Nov. 7, 2023, the City Council
approved a two-year loan extension. The developer and the city spent the last few years
identifying a solution for the project to receive sewer service to the site. The project can now
move forward, and the developer has submitted construction drawings for review.
Project Cost Increase
The economic environment has changed since the city awarded a $1,500,000 loan in December
2021. Changes include but are not limited to increased construction costs, increased interest
rates and increased insurance costs. The most significant line-item changes to the project
budget are: construction costs have increased by about 14%, infrastructure improvements by
39%, and financing costs by 94%. Along with other cost increases, the total development cost
increased by almost $4 million, or approximately 25%.
As a result of increased costs and rising interest rates, the project’s financing details have
significantly changed over the last year. The value of the land being contributed by Integral
Communities and the cost of the infrastructure and site work being completed by Integral
Communities benefiting the affordable site have increased. The land is a donation, and a
portion of the infrastructure improvements are repaid through project proceeds starting in
approximately year 10. While some other financing sources have increased, the developer has
requested an additional $500,000 to assist with the financing.
Oct. 9, 2025 Item #1 Page 2 of 13
Below is a summary of the change in the proposed sources and uses of funds:
SOURCES OF FUNDS 2021 TOTAL 2025 TOTAL CHANGE
Senior loan $5,977,000 $7,520,000 $1,543,000
Soft loan-interest 74,459 263,475 189,016
Tax credit equity 7,052,873 8,877,540 1,824,667
Deferred developer fee 599,307 1,032,114 432,807
Housing Trust Fund loan 1,500,000 2,000,000 500,000
Integral Communities Loan (master developer) 1,654,626 1,125,000 (529,626)
TOTAL SOURCES $16,858,265 $20,818,129 $3,959,864
PERMANENT USES OF FUNDS 2021 TOTAL 2025 TOTAL CHANGE
Construction $9,650,149 $11,025,000 $1,374,851
Infrastructure, Offsite Costs 1,956,085 2,714,724 758,639
Impact and Permit Fees 1,039,000 1,146,600 107,600
Financing costs 895,970 1,736,394 840,424
Other transaction costs 598,654 1,000,905 402,251
Architecture and engineering 619,100 634,700 15,600
Developer fee 2,099,307 2,559,805 460,498
TOTAL USES $16,858,265 $20,818,128 $3,959,863
The project went through a review of City Council Policy No. 90 guidelines in 2021, which were
presented to the Housing Commission and City Council. The project remains the same and the
increase in HTF request is proportionate to the increase in project costs. If the request to
increase the Housing Trust Fund loan by $500,000 is approved, the City Council will have
assigned the total recommended loan amount of $2,000,000 from the city’s Housing Trust
Fund, which is restricted to affordable housing and homelessness-related projects, programs
and services. The Housing Trust Fund had an available balance of $11.5 million as of June 2025.
The loan will be a 55-year residual receipts loan at 3% simple interest per year. The loan would
be secured by a promissory note and deed of trust and repaid in annual installments from
surplus cash generated by operations.
Fiscal Analysis
The recommended $2,000,000 loan would be drawn from the city’s Housing Trust Fund which is
restricted to affordable housing and homelessness-related projects, programs and services.
Through the end of June 2025, the Housing Trust Fund has an available balance of $11.5 million.
Next Steps
The Housing Commission recommendation and staff analysis of the financial assistance request
will be forwarded to the City Council for their consideration. If the request is approved by the
City Council, staff will prepare and execute all appropriate documents necessary to provide the
loan.
Environmental Evaluation
The proposed action to provide financial assistance to this project is not a “project” as defined
by CEQA Section 21065 and CEQA Guidelines 15378(b)(4) and does not require environmental
Oct. 9, 2025 Item #1 Page 3 of 13
review under CEQA Guidelines Section 15060(c)(3) because the creation of funding mechanisms
is a government fiscal activity which may not result in a potentially significant impact on the
environment. The activities or projects for which this funding is intended have already been
reviewed in accordance with CEQA and CEQA Guidelines and the Planning Commission certified
an environmental impact report and adopted findings of fact and mitigation monitoring and
reporting program on Jan. 20, 2021. The proposed action will not foreclose review of
alternatives or mitigation measures by the public as part of the environmental review process.
Exhibits
1. Housing Commission Resolution
2. Location Map
3. City Council Policy No. 90
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Exhibit 2
WEST OAKS
LOCATION MAP
Oct. 9, 2025 Item #1 Page 8 of 13
90 {cityof Carlsbad Policy No.
Date Issued:
Effective Date:
Resolution No.
Cancellation Date:
12-08-2020
12-08-2020
2020-233
Council Policy Statement
Category: AFFORDABLE HOUSING
Specific Subject: Administration of the Housing Trust Fund
PURPOSE:
Supersedes No. N/A
Pursuant to Carlsbad Municipal Code (CMC} Sections 21.85.llO(D) and 21.85.120, all fees collected under
the lnclusionary Housing Ordinance shall be deposited into a Housing Trust Fund and expended for the
affordable housing needs of lower-income households, consistent with the General Plan Housing Element
and the CMC.
21.85.110 In-lieu fees. (D) All in-lieu fees collected hereunder shall be deposited in a
housing trust fund. Said fund shall be administered by the city and shall be used only for
the purpose of providing funding assistance for the provision of affordable housing and
reasonable costs of administration consistent with the policies and programs contained
in the housing element of the general plan.
21.85.120 Collection of fees. All fees collected under this chapter shall be deposited into
a housing trust fund and shall be expended only for the affordable housing needs of
lower-income households, and reasonable costs of administration consistent with the
purpose of this chapter.
Funding from the fund, which should be leveraged to the extent feasible with state, federal and private
sector subsidy capital, is intended to aid in the production, acquisition, rehabilitation and preservation of
housing affordable to extremely low-, very low-and low-income households, and those experiencing
homelessness.
BACKGROUND:
The city's lnclusionary Housing Ordinance was established in April 1993 and requires that all residential
developments greater than six units restrict 15 percent of the total number of homes in a project as
affordable to lower income households. This obligation is fulfilled through construction of a variety of
rental or ownership units, both on-and off-site. Some developments have the option to satisfy a portion or
all of their affordable housing obligation through payment of inclusionary housing in-lieu fees or by
purchasing affordable housing credits, when available.
For the city to receive and use these fee payments, an implementation mechanism was needed to ensure
that the funds collected were applied appropriately. As a result, the Housing Trust Fund was established to
confirm that fees collected were applied only towards the affordable housing needs of lower income
households, and for reasonable costs of administration consistent with the purposes of the General Plan
Housing Element and lnclusionary Housing Ordinance (Carlsbad Municipal Code Sections 21.85.110 and
21.85.120). The Housing Trust Fund receives revenue from other sources, including interest from loans,
housing credit purchases, housing impact fees, and interest earned on the fund balance.
Page 1 of 5
Exhibit 3
Oct. 9, 2025 Item #1 Page 9 of 13
Policy No. 90
Over the past 20-years, the Housing Trust Fund has been used to support a variety of affordable housing
development and services for lower income and homeless individuals and families. As a local fund, the City
Council determines how Housing Trust Fund money can be spent, provided expenditures are consistent
with the purposes of the lnclusionary Housing Ordinance and the policies and programs in the General Plan
Housing Element.
POLICY:
It is the policy of the City Council that the Housing Trust Fund shall be administered as follows. It is the
expectation of the City Council that contractors and vendors who receive monies from the HTF shall also
comply with these policies, as appropriate.
1.Use of the Funds
a."Affordable housing" as used in this policy shall have the same meaning as in CMC Section
21.85.020(A).
b.Housing Trust Fund dollars may be used for new construction, acquisition and/or
rehabilitation, subsidy or other means to assist other governmental agencies, nonprofit groups
and private organizations or individuals in creating or maintaining affordable housing.
c.For new construction and acquisition/rehabilitation projects, Housing Trust Fund dollars are
intended to offer "gap" financing. The subsidy required should be the minimum amount
necessary to both ensure the feasibility of a project and the affordability of the units. Projects
are expected to support as much debt as feasible and to attract as much equity investment as
is typical for similar projects.
d.Low-interest loans are the generally preferred form for distributing housing trust fund dollars
for work in all stages of housing development. However, grants may also be considered.
e.Housing Trust Fund dollars may be used to provide new affordable rental or ownership housing
units.
f.Housing Trust Fund dollars shall not be used to satisfy a development's inclusionary housing
requirement but may be used to assist in exceeding the requirement by increasing the number
of affordable units and/or expanding affordability to very low-or extremely low-income
households, or to encourage a preferable product type.
g.Financial assistance requests will be evaluated by the Affordable Housing Policy Team and
presented to the Housing Commission for review and recommendation to the City Council. The
City Council is the final decision-maker for financial assistance requests.
h.Housing Trust Fund dollars may be used to cover reasonable administrative costs1 that are
necessary to administer the fund. The level of administrative expenses will be determined by
the City Council as part of the annual budget. However, administrative expenses shall not
exceed 5% of the available housing trust fund balance as of the end of the prior fiscal year.
1 Administrative costs include, but not limited to personnel expenses and maintenance and operational (M&O)
expenses that are specifically related to the administration of the HTF. Funds may also be used to supplement
administrative and operational support for other housing programs such as Section 8 and CDBG. Housing Trust Fund
dollars shall not be used for the following M&O costs: travel and training.
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Policy No. 90
i.The annual budget process for the housing trust fund shall be guided by General Plan Housing
Element policies and programs, the lnclusionary Housing Ordinance, and the following general
affordable housing priorities, in descending order:
1.Construction of new affordable housing
2.Preservation of housing at-risk of conversion to market rate
3.Acquisition/rehabilitation of distressed/at-risk affordable housing
4.Rental assistance and homelessness programs2
5.Land acquisition for future affordable units
6.Conversion of market rate units to affordable housing
j.City HTF dollars must be expended within 24-months following fund commitment.
2.Housing Trust Fund Annual Report
a.Staff shall provide a Housing Trust Fund Annual Report to the City Council. The report shall
include the following:
1.Summary of the use of the funds consistent with this policy
2.Summary of the projects assisted with Housing Trust Fund dollars over the past year
3.Financial status of the Housing Trust Fund
4.A summary of administrative and non-project expenses made in the prior year
5.Review of prior year funding priorities and accomplishments
6.Summary of pending assistance requests and confirmation of upcoming year funding
priorities
7.Summary of denied assistance requests, if any, and brief statement of reasons for the
denial
b.The Housing Trust Fund Annual Report shall be reviewed by the Affordable Housing Policy
Team and the Housing Commission. The Housing Commission shall make a recommendation
to the City Council.
3.Affordable Housing Project Evaluation
a.In addition to the review requirements and evaluation criteria specified under CMC Sections
21.85.130, and 21.85.140 and City Council Policy 57 -Off-site and Combined lnclusionary
Housing Projects, projects that provide the following will be given additional consideration
when ranked against other projects.
1.Projects that provide the greatest benefit per dollar of funds spent towards the lowest
household income groups. Priority shall be given to projects that best assist the
following income categories, reflected in priority order.
•Extremely low-income households
•Very low-income households
•Low-income households
•Moderate-income households
2 "Rental assistance and homelessness programs" include, but not limited to programs and services that provide
short-term rental assistance, short-term shelters, food delivery, and social services to vulnerable populations.
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2.Projects that demonstrate higher equity in the project.
3.Projects that demonstrate a lower loan-to-value ratio.
4.Projects that have other funding sources identified and committed.
Policy No. 90
5.Projects that benefit the highest percentage of lower income families, provide the
lowest affordability, include the greater percentage of affordable units or maintain
longer periods of affordability.
6.Projects that use Housing Trust Fund dollars as a match or to leverage other
conventual and below-market resources, including tax credits, state and federal
funding programs and other funding sources.
7.Projects proposed by an applicant with a successful history of project development
and/or property management, as appropriate.
4.Affordability Covenant and Form of Financial Assistance
a.Whenever Housing Trust Fund dollars are used for the creation, acquisition, and/or
rehabilitation of affordable housing, the city shall impose enforceable requirements on the
owner of the housing units that the units remain affordable for a period of not less than 55
years for rental units, or 30 years for ownership units, in accordance with CMC Chapter 21.85.
1.When Housing Trust Fund dollars are used to create affordable rental housing, long
term affordability shall be enforced by restricting rents that may be charged to
tenants.
2.When Housing Trust Fund dollars are used to create affordable ownership housing,
long-term affordability shall be enforced by imposing resale restrictions that maintain
an equitable balance between the interests of the owner-occupant and the city.
3.When Housing Trust Fund dollars are used to fund programs which are not described
above, the city shall develop appropriate mechanisms to ensure ongoing affordability.
b.The affordability restriction requirements described in this section shall be enforced by a
covenant running with the land.
c.The financial assistance structure may take several forms and is tailored to the financial needs
of the individual projects and is negotiated on an individual basis depending upon project cash
flow and the senior lender's underwriting guidelines. Example forms of assistance may include:
fixed interest rate loans, interest-only, deferred payment and/or residual receipts loans, land
acquisition and ground lease-back.
5.Administration
a.The annual Housing Trust Fund budget shall be administered by the Community Development
Director or designee, who shall have the authority to govern the fund consistent with housing
element policies and programs, CMC Chapter 21.85, and this policy.
b.Housing Trust Fund dollars are held in a separate account until disbursed consistent with this
policy.
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Policy No. 90
c.The Community Development Director, in coordination with the Finance Director, shall ensure
that Housing Trust Fund dollars are awarded, encumbered or otherwise obligated for uses
consistent with General Plan Housing Element policies and programs, CMC Chapter 21.85, and
this policy, and in a manner consistent with the city's financial policies and ordinances.
6.Related Policies
a.City Council Policy No. 57 -Off-site and Combined lnclusionary Housing Projects
b.City Council Policy No. 73 -City Option to Purchase Resale Affordable Housing
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West Oaks
Housing Trust Fund Request
Nicole Piano-Jones,
Senior Program Manager
Housing Commission
Oct. 9, 2025
1
TODAY’S PRESENTATION
•Project background and history
•Additional funding request
•Recommended action and next steps
ITEM 1: West Oaks
2
SITE
CHARACTERISTICS
192 apartments
Designated for high density
residential
ITEM 1: West Oaks
+12.5 acres
Onsite community space
& services
3
AFFORDABLE SITE
CHARACTERISTICS
42 units
1-3 bedrooms
Integrated on site
3 stories
Affordability mix
30% - 70% AMI
ITEM 1: West Oaks
4
Rancho Carillo Apartments
116 affordable apts.
Applicant Background
•Extensive experience
•Positive local project
history
ITEM 3: West Oaks
5
ITEM 1: West Oaks
History
•$1,500,000 HTF loan
–Approved by HC 2021
–Approved by CC in 2021
•Loan Extension approved 2023
•Issues outside of developer’s
control
6
Item 1: West Oaks
CHANGE2025 TOTAL2021 TOTALSOURCES OF FUNDS
$1,543,000 $7,520,000 $5,977,000Senior loan
189,016 263,475 74,459Soft loan-interest
1,824,667 8,877,5407,052,873Tax credit equity
432,807 1,032,114 599,307Deferred developer fee
500,000 2,000,0001,500,000Housing Trust Fund loan
(529,626)1,125,0001,654,626Integral Communities
Loan (master developer)
$3,959,864 $20,818,129$16,858,265TOTAL SOURCES
7
SUBSIDY ANALYSIS
City Council Policy 90
Public benefit
Housing Element
Risk
Item 1: West Oaks
8
NEXT STEPS
TAX CREDIT &
BOND
ALLOCATION
AWARD
LOAN & BOND
DOCUMENTS CONSTRUCTION
CITY COUNCIL
CONSIDERS
REQUEST & LOAN
EXTENSION
Item 1: West Oaks
9
STAFF RECOMMENDATION
•Approve Resolution recommending that
the City Council approve an additional
$500,000 loan to Chelsea Investment Corp.
for the development of West Oaks Apts.
Item 1: West Oaks
10