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HomeMy WebLinkAbout2020-12-08; City Council; ; Approval of City Council Policy No. 90 – Administration of the Carlsbad Housing Trust Fund (All Districts)Meeting Date: Dec. 8, 2020 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Jeff Murphy, Community Development Director jeff.murphy@carlsbadca.gov, 760-602-2783 Subject: Approval of City Council Policy No. 90 – Administration of the Carlsbad Housing Trust Fund (All Districts) Recommended Action Adopt a resolution approving City Council Policy No. 90 – Administration of the Carlsbad Housing Trust Fund (Exhibit 1). Executive Summary The Carlsbad City Council received an informational report on the Carlsbad Housing Trust Fund at its April 14, 2020, meeting. Following the report, the council approved a minute motion directing staff to bring back an agenda item for a policy discussion about the uses of the fund, with a focus on the best practices for using the money for administrative costs and for rental assistance. In response to City Council direction, staff is providing the requested information, as well as a proposed new City Council policy statement that sets forth administrative and implementation policies for the trust fund. The new policy has been reviewed by the Housing Commission and the Municipal Code Update Subcommittee, with both groups recommending approval of the draft policy with minor modifications as described in this staff report. City Council Policy No. 1 requires this new policy to receive four affirmative votes to be approved. Discussion Background The Carlsbad Housing Trust Fund is an integral part of the city’s inclusionary housing program and an important affordable housing financing tool, responsible for producing many of the approximately 2,300 affordable units in Carlsbad. The General Plan Housing Element and Inclusionary Housing Ordinance (Carlsbad Municipal Code Chapter 21.85) outline the appropriate uses of the trust fund. However, there is no formal City Council policy to further guide or prioritize its use. The report staff made to the City Council on April 14, 2020, described sources of its funding and uses in delivering affordable housing projects and services (Exhibit 2). As noted above, the council Dec. 8, 2020 Item #11 Page 1 of 83 then directed staff to return for a policy discussion about the uses of the fund, with a focus on the best practices for using the funds to cover administrative costs and for short-term rental assistance. Proposed City Council Policy statement While the Housing Trust Fund has been successfully implemented for many years, the program lacks some needed policy direction on how funds should be administered. To help in this effort, the proposed City Council policy addresses several aspects of effective fund administration, including the following: • Uses of the fund and relative priorities (policy section 1) • Housing Trust Fund annual report (policy section 2) • Criteria for evaluating affordable housing financial assistance requests (policy section 3) • Requirements for ensuring long-term affordability of housing (policy section 4) • Guidelines for use of the trust fund for reasonable administrative costs (policy section 5) Administrative costs and short-term rental assistance As noted above, the City Council expressed interest in learning more about best practices for using funds to cover city administrative costs and for short-term rental assistance. Additional information on these topics is provided below. Administrative costs The City Council requested information about best practices regarding the use of Housing Trust Fund monies for administrative costs. City staff sampled other California jurisdictions about their policies for covering administrative costs with their respective housing trust funds. None of the responding agencies reported having a formal cap on administration charges, either as a percentage of their housing trust fund budget or as an annual fixed-dollar amount. As reflected in the chart below, all but one agency reported that they budget administrative expenditures from their housing trust funds, ranging from approximately 4.3% to 11% of the total housing trust fund balance. Several agencies stated they attempt to keep administrative costs to a minimum. San Diego County staff stated that costs of administering the County Housing Trust Fund is borne entirely by the General Fund. AGENCY ADMINISTRATIVE COSTS COMPARISON Agency Fund balance Administrative costs as % of Housing Trust Fund Carlsbad $17.8M No cap San Diego Housing Comm. $54.0M 11%, no formal cap Sacramento $11.0M 7%, no formal cap Coronado Unknown 4.3%, no formal cap San Diego County $9.0M 0%, funded through General Fund Berkeley $71.0M No cap, target is less than 10% Santa Monica $58.0M No cap, keep at a minimum Dec. 8, 2020 Item #11 Page 2 of 83 Carlsbad’s practice has been to set administrative spending from the Housing Trust Fund through the annual budget process, rather than according to a fixed formula. The proposed policy would continue that practice, but it identifies the appropriate administrative expense categories and provides a general guideline that no more than 5% of the available fund balance be spent on annual administration costs. In keeping with the city’s adopted FY 2021 operations budget, a total of $398,6981 in administrative costs are funded from the trust fund. This amount covers 30% of the salary and benefits for both the housing services division program manager and administrative secretary, with the remaining 70% funded from the city’s General Fund. The position of a part-time office assistant for the Housing Services Division is 100% funded from the trust fund. It also covers miscellaneous office and administrative expenses, including training, office supplies, computers and utilities. At the beginning of the FY 2020-21 budget year (July 1, 2020), the trust fund had a total available cash balance of $18,156,501. As a result, the administrative costs for this fiscal year’s budget is 2.2% of the fund balance, which is at the lower end of the range when compared to other jurisdictions and within the targeted cap of less than 5% proposed under the new policy. Short-term rental assistance Based on available information, Housing Trust Fund monies have not been applied towards short-term rental assistance programs, but rather focused on the production and/or preservation of affordable housing units. That is not to say that the city has not used alternative funding sources to help support short-term rental needs. Specifically, the city has provided rental assistance relief using other funds provided by the federal Community Development Block Grant program and grant funds from the California Housing and Community Development, which are described below. • Community Development Block Grant Program Between 2016 and 2020, the city has allocated a total of $158,966 to the Community Resource Center and a total of $233,795 to Interfaith Community Services using Community Development Block Grant funds. The allotted funds were used to provide emergency rental assistance for low-income individuals and families who were at risk of losing their housing or individuals facing an emergency housing crisis. The amount of rental assistance varied on a case-by-case basis. On average, the assistance was around $500. Funds may also be used to assist individuals and families who are experiencing homelessness with new move-in costs, such as deposit and first month’s rent. Additional services are also provided as part of the rental-assistance program, which includes case management, social services, hygiene items and emergency food. Housing assistance is provided for a duration not to exceed three months. Last year (2019-2020), Interfaith served 581 Carlsbad households while the Community Resource 1 In keeping with the adopted 2020-21 operating budget, the Housing Trust Fund budgeted expenditures is $880,698 (Exhibit 3). The figure in the memo excludes the following administrative costs: $40,000 to Interfaith Community Services; $30,000 to Alliance for Regional Solutions; $400,000 to Regional Task Force on the Homeless; and $12,000 to Legal Aid Society (background checks). Dec. 8, 2020 Item #11 Page 3 of 83 Center served 133 respectively. These numbers reflect the rental assistance that was provided as well as any services, such as deposit payments, utility payments, etc. Earlier last month, the U.S. Department of Housing and Urban Development announced that the city was awarded an additional $909,924 of Coronavirus Aid, Relief, and Economic Security Act funding to help struggling families during these unprecedented times. In accordance with the Federal Register (Vol. 85, No. 162, 8/20/20), these CARES Act funds may be used to provide emergency payments for individuals or families impacted by the coronavirus for items such as food, clothing, housing (emergency rental assistance or mortgage assistance) or utilities for up to six consecutive months. Similar to other Community Development Block Grant funds, staff has released a notice of funding availability inviting organizations – including the city’s current service providers – to apply for these funds. Proposals were received on Nov. 9, 2020. City staff is currently reviewing each application for eligibility and completeness. To assist in the allocation process, the Community Development Block Grant Advisory Committee will be tasked with reviewing the proposals and making funding recommendations to the City Council. Final funding recommendations will be presented to the City Council at a public hearing, anticipated for mid-January 2021. • Housing and Community Development Grant funds In 2020, the city allocated $237,500 in state grant funds from the Department of Housing and Community Development to the Community Resource Center. The funds are intended, in part, to assist individuals, households or families who are at risk of losing their home and becoming homeless. The amount of rental assistance varies on a case-by-case basis. On average, assistance has been around $1,500 - $1,900 per month. Housing assistance is also provided for a duration not to exceed nine months. Also, while it is not considered a rental assistance program, the Housing Trust Fund has been used to support various homeless aid programs. For example, the 2020-21 fund budget allocated $400,000 to contract with the Regional Task Force on the Homeless to administer a flexible housing pool, which is intended to help homeless enter into stable, permanent housing. Additionally, the fund has provided $30,000 annually to the Alliance for Regional Solutions to help fund their Bridge-to-Housing Network that provides beds for those experiencing homelessness in North County. While staff recognizes the need to provide short-term rental assistance for struggling families, especially now during the COVID pandemic, diverting Housing Trust Fund money to address short-term needs may result in long-term implications that could adversely impact the future success of the program. For example, to date, roughly 2,300 long-term affordable housing units have been provided through implementation of the inclusionary housing ordinance, and, in many instances, financial assistance from the trust fund. Diverting funding from the fund to address rental assistance will help address a short-term demand, but will ultimately take away funding that could generate long-term, permanent affordable housing for the city. The financial assistance from the fund to help cover development costs is also a powerful tool to attract other funding sources, such as county and state grant programs, that, when combined, help cover construction costs to ensure that housing units can be affordable to lower-income families on a permanent basis. Also, as Dec. 8, 2020 Item #11 Page 4 of 83 previously mentioned, there are other funding sources, the Community Development Block Grants and HUD, the city effectively uses to provide rental assistance and that are not directly available to assist construction of new affordable housing. Housing Commission On August 13, 2020, staff presented the draft policy to the Housing Commission. After discussion and deliberation, the commission recommended that the City Council approve the proposed policy with one addition. Under Section 2 (Housing Trust Fund Annual Report), the Commission recommended that as part of the annual report, a discussion be included describing the projects not funded that year and reasons why. The recommended changes have been added to the proposed policy, which are highlighted in blue in Exhibit 4. The motion carried 4-0-1, with Commissioner John Nguyen-Cleary absent (Exhibit 5). During deliberation, it was pointed out by a couple of commissioners that program emphasis should be placed on building and/or preserving permanent affordable units and less on providing rental assistance. Municipal Code Update Subcommittee On Sep. 30, 2020, and Oct. 28, 2020, staff presented the draft policy to the Municipal Code Update Subcommittee. After discussion and deliberation, the subcommittee unanimously recommended that the City Council approve the proposed policy with various modifications, which are highlighted in red in Exhibit 3. The subcommittee also requested that as part of the budget summary sheets that are included in the annual operating budget, staff include the percent of Housing Trust Fund dollars that are proposed for administrative costs. Staff concurs with the subcommittee’s recommendations. Next Steps Staff will post the new City Council policy on the City of Carlsbad website and train staff about the new policy. A copy of the policy will also be provided to the city’s vendors and contractors who receive funding from the Housing Trust Fund to make them aware of the new policy requirements. Lastly, staff will ensure that the annual operating budget for the trust fund will include the percent of funds that will be used for administrative costs. Environmental Evaluation (CEQA) This action does not constitute a “project” within the meaning of the California Environmental Quality Act under Public Resources Code section 21065 in that it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment and therefore does not require environmental review. Public Notification This item was noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to the scheduled meeting date. Exhibits 1. City Council resolution (City Council Policy No. 90 as an attachment) 2. April 22, 2020, Staff Report to City Council on Housing Trust Fund 3. FY 2020-21 Housing Trust fund budget 4. Draft council policy with revisions highlighted 5. Housing Commission resolution Dec. 8, 2020 Item #11 Page 5 of 83 RESOLUTION NO. 2020-233 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING CITY COUNCIL POLICY NO. 90 - ADMINISTRATION OF THE CARLSBAD HOUSING TRUST FUND WHEREAS, the City Council finds that the Carlsbad Housing Trust Fund is an integral part of the city's inclusionary housing program and important affordable housing financing tool, responsible for producing many of the approximately 2,300 affordable units in Carlsbad; and, WHEREAS, The General Plan Housing Element and Inclusionary Housing Ordinance (Carlsbad Municipal Code Chapter 21.85) outline the appropriate uses of the Housing Trust Fund; and WHEREAS, the City Council desires to approve a new policy to ensure that consistent procedures are followed for the administration, tracking and distribution of Housing Trust Fund monies. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council hereby approves a new City Council Policy No. 90, entitled Administration of the Carlsbad Housing Trust Fund, attached hereto as Attachment A. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 8th day of December, 2020, by the following vote, to wit: AYES: Hall, Blackburn, Acosta, Bhat-Patel, Schumacher. NAYS: None. ABSENT: None. MATT HALL, Mayor \AA,1911(IDUVLA, BARBARA ENGLESON, City (SEAL) Dec. 8, 2020 Item #11 Page 6 of 83 City of Carlsbad Attachment A Policy No. 90 Date Issued: 12-08-2020 Effective Date: 12-08-2020 Resolution No. 2020-233 Cancellation Date: Supersedes No. N/A Council Policy Statement Category: AFFORDABLE HOUSING Specific Subject: Administration of the Housing Trust Fund PURPOSE: Pursuant to Carlsbad Municipal Code (CMC) Sections 21.85.110(D) and 21.85.120, all fees collected under the Inclusionary 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 Inclusionary 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 Inclusionary 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 Dec. 8, 2020 Item #11 Page 7 of 83 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 Inclusionary 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 costs' 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. 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. Page 2 of 5 Dec. 8, 2020 Item #11 Page 8 of 83 Policy No. 90 The annual budget process for the housing trust fund shall be guided by General Plan Housing Element policies and programs, the Inclusionary 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 programs' 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 Inclusionary 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. Page 3 of 5 Dec. 8, 2020 Item #11 Page 9 of 83 Policy No. 90 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. 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. Page 4 of 5 Dec. 8, 2020 Item #11 Page 10 of 83 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 Inclusionary Housing Projects b. City Council Policy No. 73 —City Option to Purchase Resale Affordable Housing Page 5 of 5 Dec. 8, 2020 Item #11 Page 11 of 83 EXHIBIT 2 Dec. 8, 2020 Item #11 Page 12 of 83 Dec. 8, 2020 Item #11 Page 13 of 83 Dec. 8, 2020 Item #11 Page 14 of 83 Dec. 8, 2020 Item #11 Page 15 of 83 Dec. 8, 2020 Item #11 Page 16 of 83 Dec. 8, 2020 Item #11 Page 17 of 83 Dec. 8, 2020 Item #11 Page 18 of 83 Dec. 8, 2020 Item #11 Page 19 of 83 Dec. 8, 2020 Item #11 Page 20 of 83 Dec. 8, 2020 Item #11 Page 21 of 83 Dec. 8, 2020 Item #11 Page 22 of 83 Dec. 8, 2020 Item #11 Page 23 of 83 Dec. 8, 2020 Item #11 Page 24 of 83 Dec. 8, 2020 Item #11 Page 25 of 83 Dec. 8, 2020 Item #11 Page 26 of 83 Dec. 8, 2020 Item #11 Page 27 of 83 Dec. 8, 2020 Item #11 Page 28 of 83 Dec. 8, 2020 Item #11 Page 29 of 83 Dec. 8, 2020 Item #11 Page 30 of 83 Dec. 8, 2020 Item #11 Page 31 of 83 Dec. 8, 2020 Item #11 Page 32 of 83 Dec. 8, 2020 Item #11 Page 33 of 83 Dec. 8, 2020 Item #11 Page 34 of 83 Dec. 8, 2020 Item #11 Page 35 of 83 Dec. 8, 2020 Item #11 Page 36 of 83 Dec. 8, 2020 Item #11 Page 37 of 83 Dec. 8, 2020 Item #11 Page 38 of 83 Dec. 8, 2020 Item #11 Page 39 of 83 Dec. 8, 2020 Item #11 Page 40 of 83 Dec. 8, 2020 Item #11 Page 41 of 83 Dec. 8, 2020 Item #11 Page 42 of 83 Dec. 8, 2020 Item #11 Page 43 of 83 Dec. 8, 2020 Item #11 Page 44 of 83 Dec. 8, 2020 Item #11 Page 45 of 83 Dec. 8, 2020 Item #11 Page 46 of 83 Dec. 8, 2020 Item #11 Page 47 of 83 Dec. 8, 2020 Item #11 Page 48 of 83 Dec. 8, 2020 Item #11 Page 49 of 83 Dec. 8, 2020 Item #11 Page 50 of 83 Dec. 8, 2020 Item #11 Page 51 of 83 Dec. 8, 2020 Item #11 Page 52 of 83 Dec. 8, 2020 Item #11 Page 53 of 83 Dec. 8, 2020 Item #11 Page 54 of 83 Dec. 8, 2020 Item #11 Page 55 of 83 Dec. 8, 2020 Item #11 Page 56 of 83 Dec. 8, 2020 Item #11 Page 57 of 83 Dec. 8, 2020 Item #11 Page 58 of 83 Dec. 8, 2020 Item #11 Page 59 of 83 Dec. 8, 2020 Item #11 Page 60 of 83 Dec. 8, 2020Item #11 Page 61 of 83 Dec. 8, 2020 Item #11 Page 62 of 83 Dec. 8, 2020 Item #11 Page 63 of 83 Dec. 8, 2020 Item #11 Page 64 of 83 Dec. 8, 2020 Item #11 Page 65 of 83 Dec. 8, 2020 Item #11 Page 66 of 83 Dec. 8, 2020 Item #11 Page 67 of 83 Dec. 8, 2020 Item #11 Page 68 of 83 Dec. 8, 2020 Item #11 Page 69 of 83 Dec. 8, 2020 Item #11 Page 70 of 83 EXHIBIT 3 Dec. 8, 2020 Item #11 Page 71 of 83 Dec. 8, 2020 Item #11 Page 72 of 83 Council Policy Statement Category: AFFORDABLE HOUSING Specific Subject: Administration of the Housing Trust Fund PURPOSE: Pursuant to Carlsbad Municipal Code (CMC) Sections 21.85.110(D) and 21.85.120, all fees collected under the Inclusionary 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 Inclusionary 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 Inclusionary 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. Policy No. 90 Date Issued: Effective Date: Resolution No. Cancellation Date: Supersedes No. N/A Dec. 8, 2020 Item #11 Page 73 of 83 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 Inclusionary 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. Such allowable administrative costs include personnel expenses and maintenance and operations (M&O) costs, such as office equipment and supplies, utilities, noticing, dues and subscriptions, travel and training, miscellaneous studies, audit, legal support, information technology support, interdepartmental charges, and 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. Dec. 8, 2020 Item #11 Page 74 of 83 supplemental administrative support to the Section 8 rental assistance program. Contributions to service providers who provide direct assistance to low-income and homeless persons, while budgeted as M&O expenses, are not considered administrative costs for purposes of this policy. The level of administrative expenses will be determined by the City Council as part of the annual budget. As a general guide however, administrative expenses should not exceed 3% to 5% of the available housing trust fund balance as of the end of the prior fiscal year. i. The annual budget process for the housing trust fund shall be guided by General Plan Housing Element policies and programs, the Inclusionary 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 3. Conversion of market rate units to affordable housing. 4. Acquisition/rehabilitation of distressed/at-risk affordable housing. 5. Land acquisition for future affordable units. 6. Short-term rental assistance programs to prevent and reduce homelessness. 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 Inclusionary Housing Projects, projects that provide the following will be given additional consideration when ranked against other projects. 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. Dec. 8, 2020 Item #11 Page 75 of 83 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. 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. 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. Dec. 8, 2020 Item #11 Page 76 of 83 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. 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 Inclusionary Housing Projects b. City Council Policy No. 73 – City Option to Purchase Resale Affordable Housing Dec. 8, 2020 Item #11 Page 77 of 83 EXHIBIT 5 Dec. 8, 2020 Item #11 Page 78 of 83 Dec. 8, 2020 Item #11 Page 79 of 83 Dec. 8, 2020 Item #11 Page 80 of 83 Dec. 8, 2020 Item #11 Page 81 of 83 Dec. 8, 2020 Item #11 Page 82 of 83 Dec. 8, 2020 Item #11 Page 83 of 83 Jeff Murphy Community Development Director December 8, 2020 Administration of Housing Trust FundNew City Council Policy Background •April 14, staff presented a report on the HTF •Requested future discussion on fund administration •Specifically, City Council looking to discuss… Best practices for using funds to cover admin costs Use of funds for rental assistance 2 Background •No established policy on HTF administration •Historically relied on ordinance •Staff prepared a new policy for City Council consideration 3 Policy Overview 4 •Use of funds and their prioritization •Annual report •Evaluation criteria used for housing assistance •Requirements for ensuring long-term affordability •Reasonable administrative costs Policy Overview 5 AGENCY FUND BALANCE ADMIN COST AS A % OF HTF Carlsbad $18.2M No formal cap SD Housing Commission $54.0M 11%; no formal cap Sacramento $11.0M 7%; no formal cap Coronado Unk.4.3%; no formal cap San Diego County $9.0M 0%; general fund Berkeley $71.0M <10% target; no formal cap Santa Monica $58.0M Keep at a minimum; no formal cap Policy Overview 6 •Proposed policy Admin costs determined at budget Cost not to exceed 5% of fund balance Policy Overview 7 •$880,698 total expenditures in FY20-21 budget Less: $40,000 Interfaith Less: $30,000 Alliance for Regional Solutions Less: $400,000 Regional Homeless Task Force Less: $12,000 Legal Aide Society •$398,698 actual administrative expenses Policy Overview 8 •Under the proposed policy… Admin costs equates to 2.2% of balance Falls below the limit in the proposed policy Falls at lower end of range (other jurisdictions) Policy Overview 9 •Not traditionally used for short-term rental assistance •City has used other sources of funding CDBG -$234,000 $500/family (average) Interfaith served 581 Carlsbad households CRC served 133 Carlsbad households Policy Overview 9 •COVID CDBG Cares Act Funding -$248,000 City contracted with Interfaith Community Services Community Resource Center (CRC) Up to $4,500 in rental assistance per family Policy Overview 10 •City has used other sources of funding (continued) CDBG –An additional $910,000 Short-term shelter, rental assistance and food delivery priority Organizations submitted proposals City Council in January to award Recommendations 13 •Housing Commission Recommendations Policy as proposed by staff Annual report to include projects not funded, if any •Emphasis should be on housing construction (less on rental assistance) Recommendations 13 •Subcommittee Recommendations Policy as proposed by staff and Housing Commission with certain changes reflected in the staff report Jeff Murphy Community Development Director December 8, 2020 Administration of Housing Trust FundNew City Council Policy Recommendations 13 •Section 1.j: City HTF dollars that have been awarded to a project must be expended within 24-months following fund commitment, unless a time extension is approved by City Manager, or designee.