HomeMy WebLinkAbout1977-08-02; City Council; 5149; Residential Rehabilitation Loan ProgramCITY OF "RLSBAD
W-ENDA BILL NO.
DATE: August 2, 1977
DEPARTMENT: PLANNING
SUBJECT:
Residential Rehabilitati-en loan Program
ST TEMENT OF THE td TTER
Initial:
Dept. Hd.
City Atty
City Mgr.
T
At the City Council meeting of April 19, 1977, the Council directed staff
to work with County staff to prepare a specific residential rehabilitation
program proposal for utilizing the City's share of third year CDBG funds,
subject to future Council and Board of Supervisors approval.
The Board of Supervisors, earlier this month, approved a residential
rehabilitation program (see attachment). The program is a standard
rehabilitation loan program much the same as most entitlement cities are
implementing. The program offers the following two types of assistance
to lower income owners:
1. Five percent loans made through commercial lenders with CDBG funds
utilized to write the interest down from current market levels.
2. Deferred loans for non -bankable applicants. Under this provision
the loan is to be paid at no interest, with the principal due in
full upon change of title.
The area of concentration recommended for Carlsbad includes the resi-
dential areas peripheral to the central business district and as such
serves to complement any future revitalization effort.
Exhibi.s
County Rehabilitation Loan Program
Recommendation
That the Council approve, by minute action, the County Rehabilitation
Loan Program subject to execution of an appropriate implementation
contract.
Council action
8-2-77 ' Council instructed staff to contact the Board of Supervisors on
behalf of the City Council expressing concerns and 'requesting
re-evaluation of the income limits provided.
FORM PLANNING 73
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To:
FROM:
SUBJECT:
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COUNTY OF SA;\ DIEGO JUL. 1.1 i977
INTER•DEPARTMEr4TAL CORRESPONDEN 1jY or
Kanning DE#)arx...��„
Board of Supervisors
CLIFFORD 11. GRAVES
Assistant CAO-OMB
D..TE June 29, 1977 _
(A45)
(A214 )
Residential Rehabilitation Loan Program
On April 26, 1977 (#p26) your Board approved submission of the
Third Year Community Development Block Grant application to
the U..S. Department of Housing and Urban Development. Of the
$5.7 million requested, $1 million was designated for residen-
tial rehabilitation in the Urban County Loan program. After
considering several alternative approaches, staff has developed
a pilot program for consideration by your Board. This program
would provide low interest loans to approximately 500 home
owners who wish to make major improvements to their property.
It is my
RECOMENDATION: that your Board
1. Approve the Residential Rehabilitation Loan Program described
herein (page 2);
2. Designate the areas defined in this report as residential -
rehabilitation target areas fbr purposes of this program
(page 6) ;
3. Approve in principle the delegation of responsibility for
implementation of the Residential Rehabilitation Loan Pro-
gram in the Urban County to the County's Housing Authority
(CHA), and direct CHA staff to proceed with program imple-
mentation (page 8);
DISCUSSION:
Accotding to the Urban County Housing Assistance Plan (HAP)
approved by your Board as part of the Third Year Community Devel-
opment Block Grant (CDBG) application, there are over 5,400
Board of Supervisors
'" 2 - June 29, 1977
deteriorating housing units in the Urban County in need of reha-
bilitation. The Residential Rehabilitation moan Program is
designed to arrest the deterioration by:
1. Ensuring that lower income families have access to resources
needed to maintain and improve their homes.
2. Extending the useful life of existing residential units,
thereby maintaining and supplementing the amount and variety
of the County's total housing stoc1c.
3. Stimulating neighborhood revitalization in specified com-
munities in the County.
Under this program, the County will provide up to $1 million in
CDBG funds for interest suAsidies :jfor home improvement loans
made by private lenders to lower income home owners in speci-
fied areas of the urban county.
REHABILITATION PROGRAM:
The program proposed is a two year pilot program. Within the
first 18 months of operation, this program will be evaltated and
adjusted to best meet the County's needs, and, if deemed appro-
priate by your Board, expanded in future CDBG applications to
address a greater number of the County's deteriorating residen-
tial units.
Operating Agency
?t is proposed that the County Housing Authority operate the
3ehabilitation program under the powers provided in the Health
and Safety Code. An explanation of these powers and a discus-
sion of other alternatives is presented in Attachment I.
~ehabilitation Fund
The rehabilitation fund for the Urban County over the two year
Period is $1 million dollars from the Third Year CDBG. Of this
^ount, the City of La Mesa has indicated its intention to
request your Board's approval of $170,OOO.for a locally operated
rehabilitation program. The Indian tribes have requested $59,000
for residential rehabilitation on three reservations. The
_xpenditure of rehabilitation funds for the Indians and for
La Mesa's program must be subtracted from the overall rehabilita-
Lion lean fund.
2oard of supervisors - 3
June 29, 1977
As a result, a balance of $771,000 in Third Year -funds are avail-
able, plus $80,000 from Second Year funds within the City of
Escondido. The total. available for the Loan fund in the Urban
County is therefore $851,000.
It is proposed that this amount be used for two rehabilitation
purposes: 1. Below market interest rate loans; and 2. Deferred
loans. A detailed description is presented in Attachment II,
with a summary below.
1 Below Market Interest Rate Loans
.after reviewing several options, staff recommends that a moderate
"leverage" rehabilitation loan fund be created with approximately
$551,000 of the total available funds. This amount of CDBG
monies can be applied as an interest subsidy to loans made under
the Federal Housing Administration's (FHA) Title I home improve -
:tent loan program.
Title I loans currently have an interest rate of 11 percent per
annum. It is proposed that this interest rate he subsidized
down to 5 percent with the use Of CDBG funds. The County will
;:repay a portion of the interest on the loans which will sub-
stantially reduce the monthly payments to be paid by the home
owners. The full loan amount will be supplied -by the lending
:restitution and the County must only use the CDBG funds for the
interest- write down.* This method "leverages" the CDBG funds
to almost four times ($2,000,000) the amount possible under a
::_rect loan program.
ssuli.ng an average loan of $5,000, this will provide approxi-
na tely 400 home owners with a home improvement loan at substan-
tially below conventional market rates.
_'ne maximum loan amount proposed for this program is $10,000 with
.:aximum term of 15 years.
Deferred Loan
maximum of $300,000 of the CDBG Rehabilitation funds is pro-
posed for use as deferred loans. Under this aspect of the pro-
gram, when borrowers are found to be it for part or
:.1l'of`a needed rehabilitation loan, they will be permitted to
-:.tain a deferred loan. Deferred loans are to be repaid at no
_:::serest. However, when the property changes title the loan
...rincipal is due in full. A maximum loan amount of $5,000 is
_acommended for deferred loans.
':e County Housing Authority will contract with (a) Commercial
Lank(s) for this arrangement.
Board of Supervisors - 4 - June 29, 1977
If the average deferred loan amount is $3,000, 100 households
would receive assistance.
If either loan fund is not being used as anticipated, funds
should be reprogramed to the other fund.
ELIGIBILITY:
Eligible Participants
rll property to be assisted under any aspect of the program
must be located within a designated rehabilitation target area.
As required by the Housing Authorities Law (Health and Safety
Code), property owners to be assisted must have annual incomes
which fall within prescribed limits. Since assets are commonly
i credited as income to some degree, most absentee owners of
rental property will be disqualified. Unless appropriate income
limits are chosen, many owner -occupants might also face dis-
qualification as well.
For this reason it is recommended that the income limits utilized
by HUD in the Section 235 program be utilized in the County's
rehabilitation loan program. As such the income limits recom-
mended for this program reflect net incomes (after taxes and
unusual expenses such as large medical bills) are as follows:
INCOME LIMITS
Family Size Maximum Net Income
1 person $ 9,500
2 persons 10,925
3 persons 12,250
4 persons 13,650
I
' 5 persons 14,500
6 persons ,
� 15,326
7 persons 16,150
8 or more 17,100
In addition to the above eligibility criteria, participants
must have had title to the property on which the rehabilitation
loan is taken for a miiimum of one year prior to application.
Board of Supervi sor s -
5 -
June 2.2, 1977 ,
Eligible Improvements
It is proposed that any improvement which is allowable under
the FFiA Title T loan be eligible under the County's program.
i::'=-Ples of eligible repairs include:
1. Additions and alt^rations to increase the livability or use-
fulness of existing rooms, porches, stairways, closets,
bathrooms, and entrances.
Z. Exterior work, which preserves or protects the structure,
such as painting, roofing, and siding.
3. Interior work which improves livability, such as painting,
papering, plastering, new flooring, and tile work.
4. Repairs, restoration, or replacement of major systems, struc-
tures, such as heating, plumbing, electrical or structural
repairs.
The following improvements are not eligible:
Barbeque Pits
Bathhouses
Burglar Alarms
Burglar Protection Bars
Durnbwaiters
Fire Extinguishers
Flower Boxes
Hangars (Airplane)
Kennels
Kitchen appliances which are designed and manufactured
to be free-standing and are not built-in and permanently
affixed as an integral part of the kitchen in a reside%:
tial structure
f Outdoor fireplaces or Hearths
} Penthouses
Photo Murals
Radiator Covers or Enclosures
Stands
Steam Cleaning of Exterior Surfaces'
Swimming Pools
Television Antennae
Tennis Courts
Tree Surgery
Valance or Cornice Boards
Recoi.unended Target Areas
The following neighborhoods are recommended as priority areas
:or initiation of the rehabilitation program. A detailed
1
0
Board of Supervisors - 6
June 29, 1977
description of these areas and the selection process -ised to
designate them is presented in Attachment III.
1) Unincorporated Area with a total of $603,000 in allo-
cated Third Year CDBG funds.
a. Woodlawn Park (portion of Census Tract 133.04)
b. Santee (Fanita Section of Census Tract 166.02)
2) Carlsbad with a total of $103,000 in Third Year CDBG
funds.
a. Census Tract 179.00 (southern portion)
3) Escondido with a total of $145,000 in CDBG funds, of
which $80,000 are from Second Year funds and $65,000
are from Third Year funds.
a. Census Tract 205.00
With your Board's approval of these neighborhoods, staff will
hold community meetings this summer to solicit neighborhood
response to the Rehabilitation Program. A windshield survey
Of housing conditions in these areas on a rouse -by -house basis
Will also be conducted. Based on this information, specific
target area boundaries will be proposed for your Board's approval
Prior to the beginning of program operation.
Alternative Target Areas
.he following areas are proposed as alternative target areas
-n the event that loan and grant funds are not expeditiously
absorbed in the priority areas.
1) Unincorporated Areas
a. Fallbrook (townsite portions of Census Tracts 189.01
and 189.02)
b. Lincoln Acres (portion of Census Tract 122.00)
••'c. Lakesid portions of Census Tracts 168.03, 168.04,
and 1' 6% Jj
d. San Dieguito (portions of Census Tracts 173.01, 174.01,
and 175.00) 1i7. a.o
e. Harbison -Crest (portion of Census Tract 155.00)
I
Board of Supervisors ' - 7
June 29, 1977
2) Carlsbad (Census Tract 179.00 - northernportion)
3) Escondido (Census Tract 201.01 and 206.02)
PROGRADI OPERATION:
Process
Property owners will apply by phone, mail or in person to the
County. A Rehabilitation Specialist will be assigned to handle
each application. Specialists will interview applicants at the
home site and will determine the extent of needed improvements.
A discussion of the economic feasibility of making these needed
repairs and alterations will be conducted.
If a home owner decides to participate in the program the
Specialist will assist owners in determining the work to be
done, in filling out loan applications and in soliciting bids
from building contractors. The Specialists will function as
the owner's primary contact for Rehabilitation work to be
achieved under the program.
The Rehabilitation Specialist and the home owner must both
approve the completed rehabilitation work before payment is
released to the contractor. It is anticipated that contractors
will be paid in installments as predetermined milestones are
completed. (A complete explanation of this process is contained
Ln Attachment IV.)
Staffing Requirements
The positions needed to operate this program are included in
the proposed General Fund budget for OMB and have been presented
=or final approval in that context. In order to complete the
cork outlined in the previous section, the recommended staff is:
Five Housing Specialists: Specialists will work directly with
loan applicants, discussing the benefits of this and other pro-
grams, and assisting them in determining what needed rehabilitation
work as well as the economic feasibility of -financing rehabilitation
of the structure. Specialists will also help prepare work estimates,
loan•applications and other documents, and act as a liaison, where
::ecessary, between the home owner and contractors.
One Senior Housing Specialist: The Senior Specialist will
directly supervise the Housing Specialists, scheduling assign-
ments and reviewing the accuracy of work performed. In addition,
-:he Senior Specialist will assist Housing Specialists in finalizing
# construction work specifications and cost estimates, ane in
{ obtaining bids from private contractors.
One Rehabilitation Unit Chief: The Rehab Chief will coordinate
the program with HUD, other County agencies, and banks. The
major responsibility of the Chief is to monitor expenditure of
Board of Supervisors - 8•- June 29, 1977
funds, supervise drawdowns and to maximize CDBG fund use.
The Rehabilitation staff will be assisted by three clerical
workers, assigned part time to the program. Clerical staff
will take inquiries from home owners as well as provide
necessary typing and filing support.
Program Implementation
1) Formal contract between the County of San Diego and
the San Dieao County Prmcinri at-, f hnr; a.. —V, .. ,
gates responsibility for implementation of the
Residential Rehabilitation Loan Program.
2) Official uoundaries of the target areas selected and
refined after thorough citizen input and analysis.
3) Environmental Impact Report submitted for both State
and federal reviews.
4) Agreement negotiated with the Cities that wish to have
the County administer their rehabilitation programs.
S) Contract negotiated with the Commercial Bank(s) selected
to process the loan applications.
6) Request for Release of Funds from HUD and appropria-
tion of specific amounts of CDBG dollars to the various
loan programs.
Staff will continue working on these and other details of pro-
gram operation through the summer.
�FF0RD 11. GRAVES
Assistant CAO - 01-IB
Fiscal Impact Statement:
r
Program: Community Development
I
T
Board of Supervisors - 10 -
Juno 29, 1977
Recommended Proposal: 1977-7i1"
1978-79 Inc/Dec Percept
Direct Cost $493 000
$675,600 $182.600 37
Indirect Cost 12,000 � 13,000 11000 0.08
Total Cost 505,000 688,600 183,600 36
Earned Revenue 502,000 685,350 183,350 � 37
Staff Years 9.5 10.0
0.05
Amount Budgeted
:or this Proposal 505,000
Remarks: Estimated implementation time for this
Pro
years, covering Fiscal Year's 1977-78 and 78-79. Totalm is 1.75
cost during this two year fiscal$1.2 million.
p
Of this approximately 28 percent ($119,�000)estimated isallocatedtomillion.
administrative and indirect costs. The proportion of administra-
ive costs to total costs is expected to go down from 32 percent in the
first fiscal year to 25 percent in the second reflecting the shift
from the "startup phase" to an "ongoing phase" An estimated 40
Percent ($340,000) drawdown is planned in the,first year for loans.
A net County cost of $3,000 is estimated for the first fiscal year
and $3,250 in the second year
�•. These amounts represent non-reim-
�rsable indirect costs. The remaining total of $1,187,350 (99
percent) for the two fiscal years is the estimated amount to bu
=ully reimbursable by HUD.
=.iC: KC: im
James s. Wilson, Jr.
Karla Cohn
Attachments
I
d
ATTACHMENT I
AUTHORITY TO CONDUCT REHABILITATION
Authority to expend public funds to stimulate tion of privately owned dwelling units residential rehabilita-
r
Health and Safety Code. `label I followrests in two sections of the
these provisions, g this attachment summarizes
%arks-Foran Act
wither C the County or the Housin
under pthe - g Authority can undertake rehabilitation
37910 and of the Marks-Foran Act (Health and Safety Code Section
The maj
ing• Procedures"or emphasis of the Act
are specified is neighborhood uperad-
for preparation of a Rehabilitate
nancing Plan which includes designation of specific target areas. S:ethen
the target area, an on -
_-provement loan. LocalpagenciesemayJchooseble to f�nanceothinterest ore t'?rough bond proceeds or state and federal
tievelopment Block Grant. Also included in thentinsuch
inas the Communety
Public Improvements Plan detailing services and facilities which the
.ounty must promise to provide in the target area. In addition to finar-
ca.ng guidelines such as maximum loan amounts and periods of repayment,
the Act also requires that rehabilitation standards be enforced in 95
?ercent of all residences in each rehabilitation target area, This
:.mans that mandatory, door-to-door code enforcement is requires'.
qinn
'e powers to rehabilitate residential units is
:?using Authority in the Health and Safety Code Section 34312. Because
yF granted to the County
y•:e emphasis in this portion of the Code is on individual dwelling units,
-et areas are not required, nor are requirements on the provision of
::blic in or mandatory housing or rehabilitation code erfarce-
=nt.
::ac,ever, the Housing Authority is empowered to
provide assistance only
lower income households. This requires imposition of income liz,,;ts
=� certify that households are eligible to receive assistance throu
Authority's residential rehabilitation program.
:!though the Housing Authorities Lacy does :Fines for low interest loans, it doesrequiretthatlude the County
financing
Authority
Obtain a trust deed as collateral for the guice-
,rehabilitation loan.
Staff Analysis and Recommend�on
c::search indicates that mandatory enforcement of rehabilitaticn stan-
t, or codes throughout a target area, as required by the Marks-Foran
:act, would be de_riMental to the success of residential rehabilitatior,
San Diego County. Due to the nature of residential deterioration
i:i most parts of the Count
;•::.ong standard, well maintainedlunits. Doots r-to rldoorlinspections a
be an unnecessary and costlyintationspections
are scattered
"'1be property owners. The use of staff and would be u, c:e appear r
Primary disadvantage of mandatory code
•e �1
I,
-z-
�nforc�"'ent, however' is the
!v,-,* cannot afford
Program' a loan potential for displacement of
Programs loan maximum. °r Cannot make all needed home Ownersrepairs with the
� •• r�'s4'-t� a voluntar
==:fitted Y rehabilitation
through thL t:ousin Authority
_t is recorunended that g Program such as
—'s investment target area boundaries be adopted
How-
'--�'-e and effectivOf the Community nevelo adopted in
=rt;al structuresminner� In this Pment Block Grant fund in
a confined areaPmaach, the rehabilitation of
upgrading of the neighborhood as Y stimulate
a whole, private invest -
it is recommended
that the:- ent Block Grant rehabilitation Count
AuthorityY implement its Community
• •�•�'nt this utilizing the Housing through the County
++e Count reCpm'mendation, it is necessary Law. to
` Y Housing Authority ..safe to enter intonaorcontract
Y to this effect,
I
TAar,%- I
Comparison of
Rehabilitation Powers
housing Authority
'
Authority;
Housing
County or Ftousin g Authority
Recommended Program;
Program Emphasis:
Authorities LRro
Marks Foran Act
Ffousing Authority
p
Improvement of individual
dwellingunit
Improvement
UOusing Authorities
of neighborhoods
Improvement of dcvellin_
:n
Required Components,
•
Income limits
units within specifi ed.•
areas
Second Trust Deed as loan
collateral
Approved rehabilitation
Financing Plan,
Public
Hearing on Plan.
Specified boundaries
Guaranteed provision of pub-
lic improvements
fIouse-by-house code enforce-
ment
Requirements by Law;
Limit on extent of repairs
Income Limits
Requirements by Second Trust Deed as
HUD Regulation: Loan collateral
Specified Area boundari
.j
ATTACli.MENT II
REHABILITATION FINANCING PROGRAMS
The primary goal of local rehabilitation programs is to assist
property owners to obtain financing who previously were not
interested in or could not afford a home improvement loan. This
is accomplished by making the loan terms more attractive, and
reducing the monthly cost of repaying the loan (in some cases
reducing the cost to zero). A corollary goal is to "leverage"
the limited CDBG funds set aside for rehabilitation to reach
as many households as possible. This can be accomplished by
supplementing the fund with private capital. This attachment
reviews the techniques which are currently available to meet
these goals.
Principal
Three components of loan financing affect the burden of repaying
a loan:
1) principal (amount of loan)
2) term (length of time to repay loan)
3) interest (cost of loan)
The more money borrowed the higher the monthly cost of repay-
ment. One method being used by jurisdictions involved in local
rehabilitation programs is to provide a grant for a fixed per-
centage of a Loan (usually about 20 percent), up to a maximum
dollar amount. For example, if $5,000 worth of repairs is
required, the local agency would grant the homeowner $1,000 and
the owner would borrow and repay $4,000. Given a constant rate -
of interest and term of loan, monthly payments on a $4,000 loan
would be substantially less than payments on a $5,000 loan.
Term
The second factor which can be manipulated to vary the cost of
a loan is the length of time specified for repayment. Most f
conventional home improvement loans .require repayment between ' ••5 and 7 years. FHA Title I home improvement loans have a 12 =(( to 15 year maximum term. If -55,000 is borrowed at 11 percent,
monthly payments over 5 years ($log) is significantly greater
than the same loan repayed over 12 years ($63). Most CDBG
rehabilitation loan programs utilize a 12 year term, modeled
after the FHA loan. In some instances, however, loans up to !
30 years are allowed, depending on the economic life of the
property.
!i
Interest
The third approach to reducing borrowers' monthly
payments is
to reduce the amount of interest charged by the lender. This
can be done by reducing the risk of the loan for the lender
who passes on a lower rate to the borrower, or by actually
subsidizing the loan's interest rate.
I.
d
Attachment II (Contd)
a) Loan Guarantee
When a government agency insures a loan,
Of some degree lenders are assure:;
of repayment• and can charge borrowers less
interest. FHA Title I home improvement
available through most loans, whic^ are
institutions, exemplify this principle.
ment loans currently
"bile the interest rate for conventional bank home improve-
20 percent of the prfor
about 15 percent, FHA insures
averages
of Title I loans, thereby lowering
the interest rate to 11 percent.
If a greater portion of the loan is insured, a lower interest
rate can be effected. CDBG rehabilitation funds can be
used to guarantee a loan in full. can reduce interest to 3 3/4 percene bankt. The differIn this instance, th
tiieen repaying an FHA loan at 11 percent and a 3 difference perbe-
cent cent CDBG guaranteed loan is almost ce per month on a
twelve year, $5,000 loan.
A program of this type was developed by.the Bank of America.
L'ssentially, the bank agrees to perform all processing and
credit checking on 3 3/4-percent rehabilitation loans, usinc
the CDJ3G fund as loan collateral. The County refers eligible
borrowers to the bank. If a loan is to be made, the County
bearingsan account,�nand,luas thethe
borrowerprincipal in a non -interest
the bank repays the County from this acceunt,the bank,
County insures the loan 100 percent, it can alsoecause
the Bank of America to issue loans to specific borrowers
who are hon-bankable for conventional loans
income or credit ratings would normally disqualifylthemose,
for bank loans., even at 3 3/4 percent.
There is no leverage of the CDBG fund under this scheme,
but the loan fund revolves back to the County. Theoretical,::,
the revolving nature of the fund allows the County
more loans over time, but long term staffinto make
g and other
administrative costs as well as devaluation of the dollars
in the fund must also be weighed.
Another disadvantage to this program is, the.
ility
of default. The Bank of America has essentiallylbloaned"
the County's money. If a borrower defaults on the loan,
the bank confiscates the security account and the County
is left with the loan papers. It is up to the County
to
foreclose on the Loan. To do so may cause ublic
problems, but to sit on -the loan ties up therehabiliaation
loan fund.
Attachment II (Contd)
This loan guaranteeProgram is of significant vaue inaopubliclyffers component which
tation program. This componentY endorsed loan.
rehabili-
tation in areas of very is the deferred loan. Of
owners Y low-income and/or elderly hone
a deferred loan le made at no interest and becomes
to
oneloeholds
woortfixeder Of incomestoften tthe
property. afford loan srepay-
even for a low interest loan to repair unsafe
conditions or to upgrade their property to neighborhood
standards. Under certain conditions, the County can
loan the principal and expect repayment at some future
date when the property changes ownership.
Experience of other publicly assisted rehabilitation
grams has shown that the average loan amount is pro-
grams to $8000. generally
b) Interest Subsidy
Rather than guaranteeing thecipal to he
thereby reducing the inerestlrateptonthe borrower,lthee��
County can directly reduce the borrower's interest gat,
Security Pacific National Bank modeled an interest subsidy
program on federal and state rehabilitation payment.
Again, eligible borrowers are referred b programs,
bank representatives. If bankable, the bankemakestanto
o percent FHA Title I home improvement loan to the bor-
rower, and the County arranges to pay a portion of the
11 Percent interest directly to the lender,
ing the borrower's monthly payment. The Counter e
criteria for subsidizing the loan and ow fartodown the interest. chooses hsets
If, for example, the Count
rower's interest on a Y chooses to subsidize the bor-
interest (effecting$5,000 twelve year loan to 3 3/4
guarantee Program)
the same woulontlily d payment as the loan
Bank a lump sum of approximate) pay Security Pacific
to 7a,percent interest), Y $1SS0 (an amount equal
The County may choose not to subsidize 'the interest so
deeply. Having the borrower repay
•xather than 3 3/4 percent interest increasesa}iis or hert
monthly payment by about 3
but reduces the cost to the
County by $250. This allows
households and increases the leverage tfactor y to stosalmost
4 to 1.
61,
chment II (Contd)
T;e advantage of an interest subsidy Program is the greater lever-
`,,nd doe Thforis is one-time only,, leverage since the
tc the banks loaolveSecurr�-use. Another advantage is that this
Security Pacific maintains all follow-up and
n.
_s responsible in case of default. The primary disadvantage to
interest subsidy program is that it do
_oGns to assist the very low es not provide deferred
income home owners. The borrower must
be bankable (be able to repay the loan at the reduced interest rate),
as determined by the bank, to receive any assistance.
::XDED PROGRA,4
co'�ended financing program is a combination of the loan
-"wrest subsidy programs. It is suggested guarantee
(5 percent interest to the borrowgesteder for aha a moderate interest
to bankable applicants. Responsible individuals who mare edeter-
be non -bankable should be considered for deferred loans. Cor,•-
:-oz loans may be made as well, Borrowers will repay as much of the
S percent as the }dank determines they can afford, and the balance
::(,s required to make needed repairs can be loaned on a deferred basis.
j
ATTACIDIMT I I T
TARGET AREAS
criteria were used in initial selection of census tract areas
=h a potential need -for rehabilitation. The two factors were
percent or more low income households and 20 or more deteric-
=_:.ing dwelling units. A total of 37 census tracts were identified
:Nine these criteria and these were included in the third year CDBG
:Dlication. Since submission of the application, staff has further
refined and ranked the rehabilitation areas as follows:
,_ corporated Area
:c7enteen census tracts in the unincorporated area were identified
..z potential areas for rehabilitation in the Community Development
=ock Grant application. A variety of additional criteria were used
select more specific target areas for the first phase of the
cntv's rehabilitation program. These criteria included: proximity
-&n areas, availability of public services and facilities, age
neighborhood, clarity of neighborhood boundaries, present land use,
-:Dosed land use (zoning and general plan designations), percent
..ner occupied, sense of community identity, and need for public
1 provements.
Zn addition to these selection criteria, two other factors influenced
the final recommendations. The first was the match between anticipated
4emand for rehabilitation assistance and the size of the loan fund.
e second factor in recommending Pilot study areas was contrast among
dial). type of rehabilitation needed (preventative or
.:.sed upon all the above factors, levels of priority have been assigned
=he unincorporated area's census tracts. It is recommended that the
---ra;n begin in the high priority areas. In subsequent action, the
=gym can be transferred to areas with medium and lower priorities.
Priority
'-.00dlawn Park (portion of C.T. 133.04)- A 1910 residential subdivision
the South Bay area. This well defined community is surrounded or.
:.ree sides by the City of Chula Vista, and contains about 200 single
homes, many in need of substantial rehabilitation. Need for
:::=?c improvements is evidenced throughout this community, and the
.^:al civic association has evidenced a willingness to work toward
cr'_ding local facilities.
Santee (Fanita area in C.T. 166.02) - A residential area located
... =::;West of Gillespie Field which contains about 650 single family
r^es, which require moderate repair and maintenance. Rehabilitation
its area is considered preventative so that further deterioration
._ _::versed and the houses remain in the stock of habitable units.
• Attachment III (Contd)
%.s noted above, the number, condition and type of structures
.Dries considerably from area to area. The two contrasting
areas of Woodlawn Park, and Santee are recommended so that the
cffect of these characteristics can be compared. The amount of
`_,e loan fund allocated to each area is anticipated as approximately
--u-:1l. Woodlawn Park has a small number of structures with a high
7-crcentage in need of major repairs. Santee, on the other hand, has
large number of structures, most needing only minor repairs. When
ether target areas are selected, these factors must be taken into
account.
:;ium Priority
^sllbrook (Townsite area of C.T. 189.01 and 189.02) - Small
concentrations of older residential units surrounding the commercial
a ea.
Lincoln Acres (Unincorporated portion of C.T. 122.00) - An older
:siaential and commercial community surrounded on all four sides by
...tional City. It is similar in character to Woodlawn Park, although
is much larger (500 homes). Many homes are in need of substantial
_-::abilitation.
::: Lakeside (Portions of C.T.s 168.03, 168.04, and 168.05) - Homes in
=:e Lakeside area needing rehabilitation are not in concentrated areas
and therefore no particular subareas have been delineated.
:'ower Priority
== San Dieguito (Portions of C.T.S 173.01, 174.01, 175.00, and 177.001
z_t.^.ough there are many homes in this coastal area in need of rehabili-
-ation, there does not appear to be a need for public money to accomplish
-::is. Staff will continue to observe the rising costs and changing land
.:es to guide future consideration of this area.
:arbison-Crest (Portion of C.T. 155.00) - Many homes in this East
" =y area are old and in need of rehabilitation. The homes are not
'-Cated in concentrated areas, but are scattered over a large area.
..__rent growth management trends would seem to discourage investment
public money in an isolated area such as this although the condi-
=_on of the units themselves demonstrates a need.
incorporated Areas
7:ur nonentitlement cities (Carlsbad, Del Mar, Escondido and La Mesa)
:.u�•e expressed interest in rehabilitation loan Programs. County
_a-f is working with each city to determine the most appropriate
_- cet area boundaries. Of the twelve municipal census tracts listed
_n the Community Development Block Grant application, the following
_re being proposed as rehabilitation target areas for the Urban County
! ' • ^yam.
Attachment III (Contd)
Carlsbad - 179.00 '
Escondido - 205.00 - high priority
201.01 - medium priority
206.02 - lower priority
Del Mar - 172.00 Pending further analysis or the economic
feasibility and constraints of conducting
publicly assisted rehabilitation that is
in this area. staff will make a further
} reconanendation to your Board after completion
of this analysis.
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Attachment IV
PROGRAM OPERATION
The following is an overview of the essential steps in disbursing
Rehabilitation Loan funds:
1- Applicant Contacts County: Potential applicants
an interview and property inspection from the County. request
2. County Interviews Ap Iic
ant
iapplicants will be intervieweddandsancts on-olteeznspection of
s property will be made to determine eligibility and
viability of proposed improvements.
3. 'th I 'ants Applies to Coun`
a formal application will be submitted: After htoltherCountanfornspection
ing.
Y process-
;.
r -- r+cNaLe a aescription of the work to
performed under the rehabilitation program including an
expected cost estimate.
�• Applicant Applies for Loan
specifications and cost estimatesBased
relimithe applicantnapy work
the bank for a loan. Staff will assist the applies to
applicant
needed. pplicant if
Bank Reviews Loan Application: Loan review will be performed
by a loan officer of the participating bank
staff may provide input into the review procedure.
although County
ASplicant Obtains Bids From Contractors:
chooses to have the work as described b If the applicant
bids are solicited from at least three ycqua,,COu7ty performed,
County Reviews Bids: tars.
submitted forconformanceutoytheaworklspecificationsll review all band costs
within the limits of the program.
a_.p�licant Select c Contractor
bids not qualifying under the After the County has eliminated
the -contractor. Program the applicant selects
Bank Approves Loan: Loan approval will be based on
mined program criteria and final bid Thamount. Predeter-
County
ComrnuniDy Development fundsBtokt}1e bank e County will transfer
or an interest subsidy under certain as
a loan guarantee
Programs.
Sank Makes Loan: Tile bank will arrange with the contractor
z incremental disbursement phased with construction.
Attachment Iv (contd)
13. Contractor Obtains Permits and Begins Construction:
The contractor will si
be responble for obtaining all neces-
sary permits.
14. County Inspects Construction: During construction the
County building department will provide standard code
inspection by personnel trained for rehabilitation work
and a housing specialist will inspect for conformance to the
agreed upon work specifications.
15. Contractor Completes Construction:
16. Cot Approves Construction: The housing specialist and
the nuilding department inspector will jointly sign -off
for the final inspection.
In contracting with the County housing Authority, each function
indicated as a County function will be performed by the County
Housing Authority.
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