HomeMy WebLinkAbout1977-11-15; City Council; 5149-1; Residential Rehabilitation Loan Programno
CITY OF CARLSBAD
Initial:
AGENDA BILL NO. 5149 Supplement No. 1 Dept. Hd.
DATE: November 15, 1977 City Atty
DEPARTMENT: Planning (Redevelopment) _ City Mgr.
SUBJECT:
RESIDENTIAL REHABILITATION LOAN PROGRAM
STATEMENT OF THE MATTER:
REQUEST:
At it's meeting of April 19, 1977, Council directed staff to work with
County staff to prepare a residential rehabilitation program to be
implemented as a part of the City's Housing and Community Development
Block Grant Program.
A report outlining the proposed program was presented to Council at it's
meeting of August 2, 1977, (Exhibit 2). At that time Council directed
staff to request through the Board of Supervisor's, a re-evaluation of
the proposed income limits.
The Board's response to the Council's concern is contained in Exhibit
3. As you will note, the income figures have been adjusted to reflect
gross income (before taxes), rather than net, after tax, income as
originally proposed.
With the above noted exception, the program as originally proposed,
remains unchanged.
EXHIBITS:
1. Agenda Bill 5149
2. County Rehabilitation Loan Program
3. Letter from Chairman of Board of Supervisors, Dated 11/l/77.
RECOMMENDATION:
If Council concurs with the proposed program, containing the amended
income limitations, a minute motion approving the program, subject to
the execution of an appropriate implementation contract, would be in
order.
Council Action:
11-15-77 Council approved the r,.ogram, subject to the execution of an
appropriate implementation contract.
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.� CITY OF -'RLSBAD'
AGENDA BILL NO.,�/��� —,-
DATE• August 2, 1977
DEPARTMENT: PLANNING
SUBJECT:
Residential Rehabilitati-en Loan Program
Initial• n
Dept. Nd.�____
City Atty '/ I
City Mgr.
STATEMENT OF THE RATTER
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 prevision
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.
Exhibits
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.
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FORM PLANNING 73
JUL 1.1 1977
CITY Or
�'r''•r' INTER -DEPARTMENTAL CORRESPONDEN EE
�crc' ffanning Dep,,nr..;.,„
o, tE June 29 , 1977 _
To: Board of Supervisors (A45)
FROM: CLIFFORD 11. GRAVES
Assistant CAO-OMB (A214)
s
SUBJECT: Residential Rehabilitation Loan Program
On April 26, 1977 (#26) 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.
z
It is my
RBCOMENDATION: that your Board •
s
1. Approve the Residential Rehabilitation Loan Program described
herein (page 2);
2. Designate the areas defined in this report as residential
rehabilitation target areas for purposes of this program
(page 6);
3. Approve in principle the delegation of responsibility for
implementation of the Residential Rehabilitation Loan Pro- t
gram in the Urban County to the County's Housing Authority
(CHA), and direct CHA staff to proceed with program imple-
mentation (page 8); i
DISCUSSION: `
According 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 1
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s
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Board of Supervisors - 2 _ June 29, 1977
deteriorating housing units in the Urban County in need of reha-
bilitation. The Residential Rehabilitation Loan Program is
designed to arrest the deterioration by:
I. 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 stock.
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 subsidies for home improvement loans
.:jade by private lenders to lower income home owners in speci-
fied areas of the urban county.
=HABILITATION PROGRAM:
The program proposed is a two year pilot program. Within the
first 18 months of operation, this program will be evaluated and
adjusted to best meet the County's needs, and, if deemed appro-
priate by your Board, expanded in fu*"src CDBG applications to
address a greater number of the County's deteriorating residen-
tial units.
Operating Agency
3t is proposed that the County Housing Authority operate the
Rehabilitation program under the powers provided in the Health
and Safety Code. An explanation of these powers and a discus-
3ion 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
-a-mount, the City of La Mesa has indicated its intention to
request your Board's approval of $170,000 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 l;esa's program must be subtracted from the overall rehabilita-
Lion loan fund.
III
Board of supervisors _ 3
As a result, a balance of $771,000
able, plus $80,000 from Second Year
Escondido. The total available for
County is therefore $851,000.
Julie 29, 1977
in Third Year funds are avail -
funds within 'the City of
the Loan fund in the Urban
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
:titer 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-
ment loan program.
Title I loans currently have an interest rate of 11 percent per
nnnum. is proposed that this interest rate be subsidized
down t�percent with the use'of CDBG funds. The County will
?:repay portion of the interest on t})e loans which will sub-
stantially reduce the monthly payments to be paid by the homy
owners. The full loan amount will be supplied by the•lending
_nstitution and the County must only use the CDBG funds for the
_nterest write down.* This method "leverages" the CDBG funds
to almost four times ($2,000,000) the amount possible under a
::_rect loan program.
:.ssuming an average loan of $5,000, .this will provide approxi-
nately 400 home owners with a home improvement loan at substan-
tially below conventional market rates.
e maximum loan amount proposed for this program is $10,000 with
:.aaximum term of 15 years.
2. 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 "non -bankable" for part: or
:11'of`,1 needed rehabilitation loan, they will be permitted to
_.;t-aiji a deferred loan. Deferred loans are to be repaid at no
_:'-serest. However, when the property changes title the loan
rincipal :s due in full. A maximum loan amount of $5,000 is
_ecommended for deferred loans.
The County Housing Authority will contract with (a) Commercial
e,snk(s) for this arrangement.
ELM
• Board of Supervisors -'4 - June 29, 1977
If the average deferred loan amount is $3,000, 100 households
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would receive assistance.
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If either loan fund is not being used as anticipated, funds '
should be reproaramed to the other fund.
ELIGIBILITY: 1
.Eligible Participants
A11 property to be assisted under any aspect of the program i
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 corunonly
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-
qual-fication as well.
•` �F
For this reason it is recommended that the income limits utilized
by HUD in the Section 235 program be utilized in the County's ;t
rehabilitation loan program. AG suc;, the income limits rec-m-
mended for this program reflect net incomes (after taxes and
unusual expenses such as large medical bills) are as follows:
;1 INCOME LIMITS
0 `t.
Family Size Maximum Net Income
1 person $ 9,500 V
�x
2 pe::sons 10,925 •t
Y
3 persons 12,250
4 persons 13,650
' 5 persons 14,500 j!
�/10� �) 6 persons 15,326
7 parsons 16,150
8 or more 17,100
i
In addition to the above eligibility criteria, participants
.rust have had title to the property on which the rehabilitation
'oan is taken for a minimum of one year prior to application.
L•oard of Supervisors - 5 - June 2°, 3^77
Slicible 7nprover::ents
It is proposed that any improvement which is allo.:abl.e under:
the rmm Title 7 loan be eligible under the County's program.
.;xa::,ples of eligible repairs include:
1. Additions and alterations to increase the livability or use-
fulness of existing rooms, porches, stairways, closets,
bathrooms, and entrances.
2. 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.
j'he following improvements are not eligible:
Barbeque Pits
Bathhouses
Burglar .41 prms
Burglar Protection Bars
Durrbwaiters
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 resiaa:
tial structure
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
Recommended Target Areas
The following neighborhoods are recommended as priority areas
:or initiation of the rehabilitation program. A detailed
!E
Board of Supervisors - 6 - dune 29, 1977
,
description of
p`these area., and the selection process used 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 mark (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 conlitions in these areas on a house -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
In 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. Lakeside 4portions of Census Tracts 168.03, 168.04,
and 1^t .DV)
d. San Dieguito (portions of Census Tracts 173.01, 174.C:,
and 175. 00) 1I,?.
e. Harbison -Crest (portion of Census Tract 155.00)
Board of Supervisors - 7 - June 29, 1977
2) Carlsbad (Census Tract 179.00 - northernportion) ,
3) Escondido (Census Tract 201.01 and 206.02) '
PROGRAM OPERATION:
Process
i
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 ' Nome site and will determine the extent of needed improvements.
A discussion of the economic feasibility of making these needed i
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. t;
The Rehabilitation Specialist and the home owner must both
approve the completed rehabilitation work before paymant is
released to the contractor. It is anticipated t}4at contractors 1 will be paid in installments as predetermined milestones are
Completed. (A complete explanation of this process is contained '
i n Attachment IV.)
Staffing Requirements s
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 �
work outlined in the previous section, the recommended staff is:
rive housing Specialists: Specialists will work directly with i
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 rehabilitati of the structure. Specialists will on
also help prepare work estimates, , loan -applications and other documents, and act as a liaison, where
ecessary, between the horny owner and contractors.
One Senior Housing Specialist: The Senior Specialist will I
directly supervise the Housing Specialists, scheduling assign -
.meats and reviewing the accuracy of work performed. Ii addition, -the Senior Specialist will assist housing Specialists in finalizing
Construction work specifications and cost estimates, and in t
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 stuff will be assisted by three clerical
worker::, 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 Countv of San Diego and
the San Diego County Housinq Authority which Me -
gates responsibility for implementation of the
Residential Rehabilitation Loan Program.
2) Official bc•-idaries of the target areas selected and ,
refined after thorough citizen input and analysis.
3) Environmental Impact Report submitted for both State
and federal reviews.
9) Agreement negotiated with'the Cities that wish to have
the County aamdnisLer their rehabilitation programs.
5) Contract negotiated with the Commercial Banks) 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,
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0"CLI'rFORD W. GRAVES
Assistant CAO - 01•IB
Fiscal Impact Statement:
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Program: Community Development
0
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Board of Supervisors -'10 -
June 29, 1977
Recommended Proposal: 1977-78 1978-79 Inc/Dec, Percent
Direct Cost $493,000 $675,600 $182.600 37
Indirect Cost 12,000 13,000 1 000
0.08
Total Cosh 505 000
. � 688,600 183,600 36
Earned Revenue 502,000 685,350 183,350 37
Staff Years 9.5 10.0
0.05
r�„ount Budgeted
for this Proposal 505,000
!remarks: Estimated implementation time for. this program is 1.75-
years, covering Fiscal Year's 1977-78 and 78-79. Total program
cost during this tWO year fiscal period is estimated at $1.2 million.
Of this approximately 28 percent ($119,000) is allocated to
administrative and indirect costs. The proportion of administra-
::ive costs to total costs is expected to go down from 32 percent in the
from =irst fiscal year to 25 percent in the second reflecting the shift
percunte($3Q0,000)phase" to an drawdown is planx4edginilthe11first yearrlforol40
oans
.
"et County cost of $3,000 is estimated for the first fiscal year
and $3,250 in the second year. These amounts represent non-reim-
aursable indirect costs. The remaining total of 7,350 (99
percent) for the two fiscal years is the estimated amount to be'
fully reimbursable by HUD.
- G:KC:im
.. James S. Wilson, Jr.
Karla Cohn
hments
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ATTACHMENT I
AUTi1ORITY To CONDUCT RMIABILITATION
Authority to expend public funds to stimulate resi6er.tial rehabilita-
tion of privately owned dwelling units rests in two sections of the
Health and Safety Code. Tahel I following this attachment summarizes
these provisions.
Marks-Foran Act
Zither. the County or the Housing Authority can undertake rehabilitation
under provisions of the ,larks-Foran Act (Health and Safety Code Section
37910 anu 37964). The. major emphasis of the Act is neighborhood upgra-:-
ing. Procedures are specified for preparation of a Rehabilitation Fi-
nancing Plaa which includes designation of specific target areas. t•iithin
:.he target area, any property owner is eligible for a low interest home
i~provement loan. Local agencies may choose to finance these loans
t'irough bond proceeds or state and federal grants such as the Co-murity
Development Block Grant. Also included in the financing plan is a
Public Improvements Plan detailing services and facilities which the
County must promise to provide in the target area. In addition. to finan-
cing guidelines such as maximum loan amounts and periods of repayment,
the Act also requires that rehabilitation standards be enforced in 95
percent of all residences in each rehabilitation target area. This
:.i;:ans that mandatory, door-to-door code enforcement is required.
:sousing Authori.'.ies Law
:he powers to rehabilitate residential units is granted to the County
rousing Authority -in the Health and Safety Code Section 34312. Because
•zhe emphasis in this portion of the Code is on individual dwelling, :nits,
_ZI.rcet areas are not required, nor are requirements on the provision of
::::biic improvements or mandatory housing or rehabilitation code enforce-
-ent.
:,wever, the Housing Authority is empowered to provide assistance only
-vr lower income households. This requires imposition of income liA;.i;s
certify that households are eligible to receive assistance through
Authority's residential rehabilitation program.
?though the Housing Authorities I,aw does not include financing guide-
?'.ines for low interest loans, it does require that the County Authority
nbtain a trust; deed as collateral for the ;rehabilitation loan.
-tiff Analysis and Recommendation
i:search indicates that mandatory enforcement of rehabilitaticn stan-
irds or codes throughout a target area, as required by the Marks-Foran
Act, would be detrimental to the success of residential rehabilitation
:.:a San Diego County. Due to the nature of residential deterioration
in most parts of the County, units requiring rehabilitation are scattered
.4:.ong standard, well maintained units. Door-to-door inspections appear
be an unnecessary and costly use of staff and would be un;rolccno
%,,*)r..g property owners. The primary disadvantage of mandatory code
.�i �:sC33:•IE:�T I �
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c-nforcement, however, is the potential for displacement of home oo:ners
cannot afford a loan, or cannot make aneeded repairs with the ,
Program Is loan maximum.ll
through the Housing Authorit--SUlt, a voluntary rehabilitation enforcement program such as
^: fitted y Law is recommended. How-
.� it is recor,�mended that target area boundaries be adopted in order
"cus investment of the Community Development Block Grant fund in a
and effective manner. In this approach, the rehabilitation of
^ntial structures in a confined area
= an;I of the neighborhood as aawholemulate pr_vate invest -
upgrading it is recommended that the County implement its Community
:•::ant Block Grant rehabilitation program through the County
Authority utilizing the Housing Authorities La
::••ent this reco„Liendation, . w. In order to
it inecessary to enter into a contract
="e County Housing Authority to this effect.
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TABLI, I
Comparison of Rehabilitation Powers
Housing Authority
County or Housing Authority Recommended Program:
Authority; Housing Authorities Law
Housing Authority
Improvement
Program Emphasis:Marks Foran Act •
Of individual. Housing Authorities'Lay dwelling unit Improvement of neighborhoods p
Im rovement of dwelli�
Required Components: units within specific
Income limits areas
Second Trust Deed as loan Approved rehabilitation
collateral Financing plan. public
Hearing on Plan.
Specified boundaries
Guaranteed provision of pub-
lic improvements
House -by -house ment code enforce -
Requirements by Law: Liriit on extent of repairs
Income Limits
Requirements by Second Trust Deed as
HUD Regulation: Loan collateral
Specified Area boundari
hTTACID;LUT II
REIIA}3ILITATION FINANCING FROGRA;IS
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 monL_hly 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 zevie. This attach,rent
c7s the techniques which are currently available to meetthese 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,
required, if $5,000 worth of repairs is
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
conventional home improvement loans require repayment between
5 and 7 years. FIiA Title I home improvement loans have a 12
to 15 year maximum term. If $5,000 is borrowed at 11 percent,
monthly payments over 5 years ($109) is significantly greater
than the same loan repayed over 12 years (nifi most real
rehabilitation loan programs utilize CDBG
a 12 year term, modeled
after the FIiA loan. In some instances, however, .Loans up to
30 year's are allowed, depending on the economic life of the
property.
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.
Attachment II (Contd)
a) Loan Guarantee
When a government agency insures a loan, lenders are assureA
Of some decree of repayment and can charge borro mrs less
interest, PifA Title I home improvement loans, whic- are
available through most institutions, exemplify this principle.
While the interest rate for conventional bank home improve-
ment loans currently averages about 15 percent, FHA insures
20 percent of the principal 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. In this instance, the ban:
can reduce interest to 3 3/4 percent. The difference be-
tween repaying, an PHA loan at 11 percent and a 3 3/4 per-
cent CDBG guaranteed loan is almost $20 per month on a
twelve year, $5,000 loan.
A program of this type was developed by the Bank of .America.
Essentially, the bank agrees to perform all processing and
credit checking on 3 3/4 percent rehabilitation loans, us:,na
the CDBG fund as loan collateral. The County refers eligible
borrowers to the bank. If a loan is to be made, the County
deposits an amount equal to the principal in a non -interest
bearing account, and, as the borrower repays the bank,
the bank repays the County from this account. Because tha
County insures the loan 100 percent, it car. also direct
the Bank of America to issue loans to specific borrowers
who are non -bankable for conventional loans - people whose income or credit ratings would normally disqualify them
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 to make more loans over time, but long term staffing 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•possib ility
of -default. The Bank of America has essentially "loaned"
the County's money. If a borrower defaults on the loan,
the bang; 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 public relations
problems, but to sit on. the loan ties up the rehabilitation
loan fund.
V*�
Attachment ii (Contd)
This loan guarantee program offers one component which
is of significant value in a publicly endorsed rehabili-
tation program.. This component is the deferred loan. Of
value in areas of very low-income and/or elderly hone
owners, a deferred loan is made at no interest and becomes
due upon transfer of title to the property. Households
on low or fixed incomes often cannot afford loan repay-
ment, 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 anr_' expect repayment at some future
date when the property changes ownership.
Experience of other publicly assisted rehabilitation pro-
grams has shown that the average loan amount is generally
$5000 to $8000.
b) Interest Subsidy
Rather than guaranteeing the loan
pend
thereby reducing the interest rate tontheaborrrower,ltheer'
County can directly reduce the borrower's interest payment.
Security Pacific National Bank modeled an interest subsidy
Program on federal and state rehabilitation ;
ms
Again, eligible borrowers are referred by the county.
` bank representatives. If bankable, the bank makes an
11 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, thereby lower-
ing the borrower's monthly payment. The County•sets
critexia for subsidizing the loan and chooses how far to
write down the interest.
if, for example, the County chooses to subsidize the bor-
rower's interest on a $5,000 t%r lve year loan to 3 3 4
interest (effecting the same montnly payment as the loan
guarantee program), the County would pay Security Pacific
Bank a lump sum of approximately $1550 (an amount equal
to 7< percent interest) .
The County may choose not to subsidize the interest so
deieply. I:aving the borrower repay the loan at 5 percent
•z•ather than 3 3/4 percent interest increases his or her
monthly payment by about $3, but reduces the cost to the
County oy $250. This allows the County to assist more
households and increases the leverage factor to almost
4 to 1.
nL+_achment• II (Contd),
The advantage of an interest subsidy program is the greater lever -
ace of the CDBG fund. This is "one-time only" leverage since the
fund does not revolve for re -use. Another advantage is that this
is: the bank's loan. Security Pacific maintains all follow-up and
is responsible in case ofdefault. The primary disadvantage to
M s interest subsidy program is that it does not provide deferred
_pans to assist the very low income home owners. The borrower must
Lu bankable (be able to repay the loan at the reduced interest rate),
as determined by the bank, to receive any assistance.
Fi
PROGP.A.1,2
:co -;ended financing program is a combination of the loan guarantee
'--erest subsidy programs. It is suggested that a moderate interest
percent interest to the borrower for a 15 year term) be made
to bankable applicants. Responsible individuals who are deter-
-__:: •:o be non -bankable should be considered for deferred loans. Com- �
loans may be made as well. Borrowers will repay as much of the
5 percent as the bank determines they can afford, and the balance
.:::d5required to make needed repairs can be loaned on a deferred basis.
ATTACK IENT I T T
TARGET AREAS
criteria were used in initial selection of census tract areas
•••` tip a potential need for rehabilitation. The two factors were
40 percent or more low income households and 20 or more deterio-
re-ling dwelling units. A total of 37 census tracts were identified
::sing these criteria and these were included in the third year CD3G
�-�?ication. Since submission of the application, staff has further
refined and ranked the rehabilitation areas as follows:
corporated Area
'•-- enteen census tracts in the unincorporated area were identified '
_s potential areas for rehabilitation in the Community Development
--lock Grant application. A variety of additional criteria were used ;
:o select more specific target areas for the first phase of the
7::nty's rehabilitation program. These criteria included: eroximity
urban areas, availability of public services and facilities, age {
neighborhood, clarity of neighborhood boundaries, present land use,
.:posed land use (zoning and general plan designations), percent
•1-ner occupied, sense of community identity, and need for public }
iprovements.
a
addi,.ion to these selection criteria, two other factors influenced
t o final recommendations. Tho first was the match between anticipated
we:mand for rehabilitation assistance and the size of the loan fund. i
:e second factor in recommending pilot study areas was contrast among j
a_eas in terms of the type of rehabilitation needed (preventative or j
•n-ndlal).
::.sew upon all the above factors, levels of priority have been assigned
she unincorporated area's census tracts. It is recommended that the
gram begin in the high priority areas. In subsequent action, the
.ram can be transferred to areas with medium and lower priorities.
Priority .
•1 :-.00dlawn Park (portion of C.T. 133.09)- A 1910 residential subdivision
tie South Bay area. This well defined community is surrounded on
three sides by the City of Chula Vista, and contains about 200 single
f:-nil1•iiomes, many in need of substantial rehabilitation. Need for
•:-__c improvements is evidenced throughout this community, and the
.-cal civic association has evidenced a willingness to work toward
,--voiding local facilities.
r` Santee Wanita area in C.T. 166.02) - A residential area located
ost of Gillespie Field which contains about 650 single family
.::^es, which require moderate repair and maintenance. Rehabilitation
:his area is considered preventative so that further -deterioration
::versed and the houses remain in the stock of habitable units.
Attachment III (Coned)
;.., 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
cf.ect of these characteristics can be compared. The amount of
thle loan fund allocated to each area is anticipated as approximately
, =ual. Woodlawn Park has a small number of structures with a high
;:crcentage in need of major repairs. Santee, on the other hand, has
:. large number of structures, most needing only minor repairs. When '
.ther target areas are selected, these factors must be taken into j
account.
yiu a Priority
.:) rallbrook (Townsite area of C.T. 189.01 and 189.02) - Small
concentrations of older residential units surroL..ding the commercial
a_ ea.
.) Lincoln Acres (Unincorporated portion of C.T. 122.00) - An older
:sidential 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
b.c Lakeside area needing rehabilitation are not in concentrated areas
and therefore no particular subareas have been delineated.
Lower Priority
a= San Dieguito (Portions of C.T.S 173.01, 174.01, i75.00, and 177.00)
:.:though there are many homes in this coastal area in need of rahabili -
-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.
%'-rbison-Crest (Portion of C.T. 155..00) - Many homes in this East
.-:i:y area are old and in need of rehabilitation. The homes are not
^cited 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-
tion of •;,tie units themselves demonstrates a need.
incorporAted Areas
::.Wr nonentitlement cities (Carlsbad, Del Mar, Escondido and La Mesa)
..v.ve expressed interest in rehabilitation loan programs. County
_=aff is working with each city to determine the most appropriate
-;get area boundaries. Of the twelve muaicipal census tracts listed `
.:. the Community Development Block Grant application, the following
"re being proposed as rehabilitation target areas for the Urban County
. ^^ram.
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
recommendation to your Board after completion
of this analysis.
Jtittachment Iy
PROGRAIM OPERATION
o--A
The following is an overview of the essential steps in disbursing
,Rehabilitation Loan funds:
1. Applicant Contacts County: Potential applicants will request
an interview and property inspection from the County.
2. County Interviews Aelicant and Inspects Property: All applicants will be interviewees ai on -site inspection of
the property will be made to uetermine eligibility and
viability of proposed improvements.
3. AmIkants Applies to Count7: ?after the interview and inspection
a formal application will be submitted to the County for process-
ing.
County Prepares work Specifications and a Cost Estimate:
County staff will prepare a description of the work to be
performed under the rehabilitation program including an
expected cost estimate.
D. Applicant Appl;eG i'o- Loan: Based upon preliminary work
specifications and cost estimates the applicant applies to
the bank for a loan. Staff will assist the applicant if
needed.
6. Bank Review:; Loan Application: Loan review will be performed
ny a loan ofr cer oz the participating bank, although County
staff may provide input into the review procedure.
7. Applicant Obtains Bids From Contractors: If the applicant
chooses to have the work as described by the County performed,
bias are solicited from at least three qualified contractors.
County Reviews Bids: County staff will review all bids
submitted for conformance to the wort: specifications and costs
Within the limits of the program.
�1. Applicant Selects Contractor: After the County has eliminated
b:.dS not qualifying under the program the applicant selects
the contractor.
^• Bank ADDX-OvesLoan: Loan approval will be based on predeter-
mincd program criteria and final bid amount,
County Deposits Money faith Bank: The County will transfer
Community Development funds to the bank as a loan guarantee
or an interest subsidy under certain programs.
Bank Makes Loan: The bank will arrange with the contractor
iniincremental disbursement phased with construction.
Q
Attachment iv (contd) ,
.13. Contractor obtains Permits and Beoins Construction:
The contractor will be responsible for obtaining a11 neces-
sary permits.
14. Countv 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. CountV Approves Construction: The Lousing specialist and
the ing 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.
i
• r
�`'•: :✓ BOARD OF SUPERVISORS 1600 PACIFIC HIGHWAY
SAN DIEGO, CALIFORNIA 92101 (714) 236.2282
JIM BATES
SUPERVISOR November 1, 1977
FOURTH DISTRICT
Mr. Paul D. Bussey
City Ma..ager
;ity of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Dear Mr. Bussey:
In response to concerns expressed by the Carlsbad City Council,
staff has reviewed the income lia,tits proposed for the Residential
Rehabilitation Loan Program. With one significan!: exception,,
staff still believes that these income limits are appropriate.
One change is to tie the income limits to gross family income
before taxes, rather than net income as originally proposed.
The rationale for adopting this set of income limits is twofold.
These are the upper 'income limits defined by HUD for this region
for the Section 235 homeownership program. HUD feels that house-
holds earning 95 percent of the area's median income qualify as
"low and moderate" income households, yet earn enough to afford
homeownership. These figures are based on repayment of mortgages
of $33,000 maximum -- a modest amount in this housing market.
Secondly,.10 percent of liquid assets will be added to the base
income boosting the gross income figure.
Income limits for the Section 8 (Existing) rent supplement program
are $11,500 for a family of four. Staff feels that $13,650 for a
homeowning family of four ($2,150 greater than the rent subsidy
program) is a reasonable income ceiling because under this rehab-
ilitation loan program borrowers will have to repay loans of
several thousand dollars at five percent interest, in addition to
their mortgage payments which are generally larger than rent
payments.
I:, after reviewing this response, your Council still feels that
the income ceilings are too high, it may request that lower
income limits be established by the Board of Supervisors for that
portion of this program to be conducted in Carlsbad.
Paul D. Bussey -2- November 1, 1977
rfr. .
Staff is prepared to absorb any inconvenience caused by dual in-
come scales, but will have to reflectthe
all
publications, rather than preparing Sep
arator
press releases.
Please advise me as soon as possible of the Council's decision.
Si•cerely
IhIM BATES, Chairman
VBdard of Supervisors
JB:JSW:ee
3