Loading...
HomeMy WebLinkAbout2024-02-06; City Council; ; Fiscal Year 2022-23 Housing Trust Fund Annual ReportCA Review __AF__ Meeting Date: Feb. 6, 2024 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Mandy Mills, Director of Housing & Homeless Services mandy.mills@carlsbadca.gov, 442-339-2907 Subject: Fiscal Year 2022-23 Housing Trust Fund Annual Report Districts: All Recommended Action Adopt a resolution approving the Fiscal Year 2022-23 Housing Trust Fund Annual Report Executive Summary The Carlsbad Housing Trust Fund has provided assistance to projects and programs that support lower-income and homeless individuals and families for more than 20 years. The fund has provided financial support to an array of new affordable housing construction and supportive housing-related services. The City Council is being asked to approve the fiscal 2022-23 report on the fund, which is provided as Attachment A to the proposed resolution (Exhibit 1). This annual report must be submitted to the City Council for approval in keeping with City Council Policy No. 90, which outlines the policies for administering the Housing Trust Fund. Explanation & Analysis The city has an Inclusionary Housing Ordinance, Carlsbad Municipal Code Chapter 21.85, that requires at least 15% of new residential development to be reserved as affordable to lower- income households, among other measures intended to increase the number of affordable homes in Carlsbad. Developers of projects with no more than six units have the option to pay a fee in lieu of providing on-site affordable units. This fee is the largest contributor to the Housing Trust Fund. Other sources include interest from loans, housing credit purchases, housing impact fees, and interest earned on the fund balance. No General Fund money is deposited to the Housing Trust Fund. The fund is used to support a variety of affordable housing development and services for lower-income and homeless individuals and families. The fund had an available balance of just over $10,140,000 at the end of the last fiscal year, as detailed in Attachment A. Because it is a local fund, there is more flexibility in how the money is spent than there is for state or federal funds, provided expenditures are consistent with the purposes of the city’s Inclusionary Housing Ordinance and the housing policies and programs in the city’s General Plan. Feb. 6, 2024 Item #5 Page 1 of 10 City Council Policy No. 90 outlines the priorities, expectations and policies for Housing Trust Fund administration. The policy requires staff to provide a report on the Housing Trust Fund to the City Council each year. It also requires that the report be reviewed by the city’s Housing Policy Team and Housing Commission. After a review by both groups, the Housing Commission voted Jan. 11, 2024 to recommend the City Council accept the 2022-23 annual report. Fiscal Analysis There is no direct fiscal impact associated with accepting the annual report. Environmental Evaluation This action does not require environmental review because it does not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065. It has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Exhibits 1. City Council resolution Feb. 6, 2024 Item #5 Page 2 of 10 RESOLUTION NO. 2024-021 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE FISCAL YEAR 2022-23 HOUSING TRUST FUND ANNUAL REPORT WHEREAS, Chapter 21.85 of the Carlsbad Municipal Code requires that fees collected under the lnclusionary Housing Ordinance be deposited in a Housing Trust Fund; and WHEREAS, CMC 21.85 requires the Housing Trust Fund 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; and WHEREAS, on Dec. 12, 2020, the City Council adopted City Council Policy No. 90, which outlines the priorities, expectations and policies for Housing Trust Fund administration; and WHEREAS, City Council Policy No. 90 requires an Annual Report of the Housing Trust Fund be reviewed by the Housing Policy Team and the Housing Commission, with the Housing Commission making a recommendation to the City Council; and WHEREAS, the Housing Policy Team reviewed the FY 2022-23 Housing Trust Fund Annual Report on November 20, 2023; and WHEREAS, the Housing Commission recommended approval of the FY 2022-23 Housing Trust Fund Annual Report at their January 11, 2024, regular meeting. 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 approves the FY 2022-23 Housing Trust Fund Annual Report, attached hereto as Attachment A. Exhibit 1 Feb. 6, 2024 Item #5 Page 3 of 10 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 6th day of February, 2024, by the following vote, to wit: AYES: NAYS: ABSTAIN: ABSENT: Blackburn, Bhat-Patel, Acosta, Burkholder. None. None. Luna. KEITH BLACKBURN, Mayor SHERRY FREISINGER, City Clerk (SEAL) Feb. 6, 2024 Item #5 Page 4 of 10 Attachment A Housing Trust Fund FY 2022-23 Annual Report 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 low-income households. Some developments have the option to satisfy a portion of or all of their affordable housing obligation through payment of a housing impact fee, inclusionary housing in-lieu fees or affordable housing credit purchases. For the city to receive and use these fee payments, the Housing Trust Fund was established to confirm that fees collected were applied only towards the affordable housing needs of lower- income households. The Housing Trust Fund receives revenue from a variety of sources, including interest from loans, housing credit purchases, housing impact fees, and interest earned on the fund balance. The Fund 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. Reasonable costs of administration of the fund, programs and projects are allowed. The Housing Trust Fund significantly contributes to the success of the city’s inclusionary housing program. The Housing Trust Fund has been an indispensable tool to attract other funding sources to affordable housing projects, leveraging the city’s investment up to five times with outside funding sources. With its diversity of revenue sources, the Housing Trust Fund has provided sustained support for the inclusionary housing program, resulting in approximately 2,300 affordable homes in Carlsbad. On Dec. 12, 2020, the City Council adopted City Council Policy No. 90 which outlines the priorities, expectations and policies for HTF administration. The Policy calls for an Annual Report that shall be reviewed by the city’s Housing Policy Team, composed of representatives from Finance, Community Development, Housing Services and the City Attorney’s office, and the Housing Commission. Summary of use of funds The Housing Trust Fund has been used successfully to assist an array of new housing construction, land acquisition, first-time homebuyer loans and low income and homeless services. During FY 2022-23 there were the following project or program expenditures and commitments: Feb. 6, 2024 Item #5 Page 5 of 10 {'city of Carlsbad 2 | Page City of Carlsbad Housing Trust Fund FY 22-23 Annual Report Category Expenditures Encumbrances (Prior Year Commitments already removed from Fund Balance) New Loan Commitments Construction of new affordable housing $4,087,226 $2,480,438 $1,535,621 Tyler Court $84,002 Preservation of affordable housing $20,647 Homeless Services $55,990 Administration $155,723 Other Housing Administrative support $100,000 TOTAL $4,503,588 $2,480,438 $1,535,621 Below are the descriptions of HTF uses by category for FY 22-23. Construction of new affordable housing-$4,087,226 Historically, the Housing Trust Fund is predominantly used to subsidize the construction of new affordable housing in Carlsbad. Money from the Housing Trust Fund is often leveraged by other local and non-local sources of subsidy: Community Development Block Grants, the HOME federal funding program, the city Low and Moderate Income Housing Fund; federal and state low income housing tax credits and others. Financial assistance from the Housing Trust Fund is typically made in the form of long-term loans of 30 to 55 years at an interest rate of generally not more than three percent. Loan repayment requirements will vary by type of assistance. For example, repayment of principal and interest of first-time homebuyer loans are usually deferred for 15 or even 30 years, unless the home is sold. Repayments on loans to multi-family rental projects are amortized over the loan term, and payments are usually made on a surplus cash basis, that is, annual gross revenue minus annual operating expenses. At the end of the loan term or upon sale or transfer of the property, any remaining principal and accrued interest becomes due and payable at that time. Windsor Pointe In 2017 and 2020 the City Council approved financing for the Windsor Pointe affordable housing project. Project completion occurred during the 2022-23 fiscal year with city expenditures of $1,317,664. The project, developed by Affirmed Housing, offers permanent supportive housing project for homeless households with severe mental illness and affordable housing for other low-income households with a veteran preference. The project is 48 units located on two non-contiguous sites in the Barrio neighborhood, at 965 Oak Ave. and 3606 Harding St. Feb. 6, 2024 Item #5 Page 6 of 10 ' ~ ~ ~ 3 | Page City of Carlsbad Housing Trust Fund FY 22-23 Annual Report Aviara Apartments Aviara East Apartments is a 70-unit affordable housing project located on the east side of Aviara Parkway south of Palomar Airport Road and north of Laurel Tree Lane. The overall Aviara Apartment project is required to provide 70 units affordable to lower-income households. According to City Council Policy Statement No. 90, money from Housing Trust Fund is not to be used to satisfy a development's requirement to provide affordable housing in accordance with the city’s Inclusionary Housing Ordinance but may be used to assist in exceeding the requirement. The City Council approved a $3,100,000 loan from the city’s Housing Trust Fund in 2021, to deepen the affordability of 7 units to serve very low- income households. Construction commenced during fiscal year 2022-23 with city expenditures of $2,769,562. The remaining $330,438 will be expended during final phases of construction. Tyler Court-$84,002 In 1999, the Redevelopment Agency of the City of Carlsbad purchased the 75-unit Tyler Court Senior Apartment complex for the purpose of providing permanent affordable housing for very low-income senior residents. The day-to-day management is provided by a contract with a private property management company that oversees ongoing maintenance, repairs and capital improvements using reserve funds out of the Tyler Court Apartment Fund held by the City of Carlsbad. Based on the limited rental revenue, not all repair and maintenance projects can be done when identified. Each year city staff works with property management staff to estimate a dollar amount for repair and capital needs and then funds are appropriated in the budget for the following fiscal year. During FY23, the city transferred $60,000 from the Housing Trust Fund toward the Tyler Court Apartment Fund to cover net operating costs. There were also costs of $24,002 awaiting reimbursement from additional federal grant revenue. Preservation of affordable housing-$20,647 As part of the city’s affordable housing efforts, the city has purchased affordable housing units with the intent to resell them to eligible lower-income buyers, thereby preserving, extending and enhancing the existing affordable housing stock in Carlsbad. Most of the unit purchases utilized Community Development Block Grant (CDBG) funding, but one unit was purchased and rehabilitated with HTF. Some of the costs (improvements and homeowner association fees) were incurred in FY 2022-23. When it was resold, proceeds were returned to the HTF. Homeless Services-$55,990 The Housing Trust Fund has also been used to support a variety of services for low income and homeless individuals and families. For example, the Housing Trust Fund has provided funding Feb. 6, 2024 Item #5 Page 7 of 10 4 | Page City of Carlsbad Housing Trust Fund FY 22-23 Annual Report each year for the Carlsbad Service Center, which provides temporary day labor employment services, employment training and readiness, access to benefits, basic needs, rental assistance and case management. The Housing Trust Fund also supports a Housing Navigation program and the year-round Bridge-to-Housing network coordinated by the Alliance for Regional Solutions. Administration-$155,723 Housing Trust Fund dollars are used to cover administrative costs that are necessary to administer the fund. These include personnel expenses and maintenance and operational (not used for travel and training) expenses that are specifically related to the administration of the HTF. Total administrative expenses may not exceed 5% of the available housing trust fund balance as of the end of the prior fiscal year. The following administrative category would be added toward total administrative expenses against the cap. Other Housing Administrative support- $100,000 Funds may also be used to supplement administrative and operational support for other housing programs. There is a dollar amount set aside annually to ensure administration of the Housing Choice Voucher Program (rental assistance) is fully covered. Funds for administration of that program come from the U.S. Department of Housing & Urban Development. It is expected that funds will cover the administrative costs, but there have been instances when the timing of funds from HUD are received after the costs are incurred. It is essential to keep this program operational, so this budget allocation allows the city to maintain program administration without falling into a funding deficit. If the funds are not needed to balance at fiscal year end, they can be returned to the HTF. Summary of new projects In addition to the expenditures outlined in the section above, the City Council also approved new loan commitments from the HTF in the amount of $1.5 million during FY 22-23. The projects for these loan commitments are described below. La Posada Shelter La Posada is the city’s only homeless shelter and is operated by Catholic Charities. It currently provides 100 beds, of which 50 are reserved for farmworkers. The City Council expressed support for Catholic Charities to expand the capacity of the La Posada shelter to serve more individuals experiencing homelessness, including space for women and families. The total project cost is currently estimated at $10 to $12 million, depending on the inclusion of a third story to include more bed space to serve more individuals. The project is anticipated to start construction in 2024 if enough capital for construction can be raised by Catholic Charities. City staff have been actively seeking outside funding alternatives to reduce the amount of capital needed to be raised so that project construction can start. The City Council approved documents at the Feb. 7, 2023, City Council meeting to accept $2 million in funds from the Feb. 6, 2024 Item #5 Page 8 of 10 5 | Page City of Carlsbad Housing Trust Fund FY 22-23 Annual Report County of San Diego and, in turn, grant the funds to Catholic Charities towards the expansion. On May 16, 2023, the City Council approved $729,379 in Permanent Local Housing Allocation funds and $1,470,621 from the HTF towards the project. Marja Acres Senior Apartments The Marja Acres Apartments project is a 47-unit, 100% affordable senior housing project located on the west side of El Camino Real, just south of Kelly Drive being developed by USA Properties. As an approved density bonus project, Marja Acres is required to provide 46 senior apartments affordable to lower-income seniors. The City Council approved a $650,000 loan from the city’s Housing Trust Fund on Oct. 12, 2021, to deepen the affordability of five of the units to extremely low-income levels. On Oct. 11, 2022, the City Council approved an additional $65,000 to the loan amount for a total of $715,000, due to a funding gap that had increased since the time the original city HTF loan was awarded due to rising construction costs, utility operating costs and interest rates. The project site is currently being graded, and construction is anticipated to begin by 2024. Financial Status of the HTF Revenue sources Fund receipts vary from year to year, but generally average between $1-2 million annually. Revenues come primarily from residential development activity, loan repayments and interest income. No General Fund money is deposited to the Housing Trust Fund. Beginning Available Fund Balance $10,680,198 New Loan Receivable 4,087,226 Fee Revenue 297,855 Interest Revenue 274,019 (int + prin) Loan Payments 670,420 Resale of Aff. Units. 174,356 Total Increase in Fund Balance $5,503,876 Reduction in Fund Balance (Loans Issued) (4,087,226) Affordable Housing Expenditures/Contributions (76,637) Transfer to Section 8 Admin (100,000) Tyler Ct. Transfer (84,002) Administrative Expenses (155,723) Total Decrease in Fund Balance ($4,503,588) New Loan Commitments ($1,535,621) Ending Available Fund Balance1 $10,144,865 1. Total fund balance is presented net of previously committed but not yet funded developer loans of $4,016,059. Summary of administrative and non-project expenses The funding activities of the Housing Trust Fund require administrative support. The table below shows actual administrative support expenditures for the last two fiscal years and the current fiscal year administrative support budget paid by the Housing Trust Fund. The FY 2022- Feb. 6, 2024 Item #5 Page 9 of 10 6 | Page City of Carlsbad Housing Trust Fund FY 22-23 Annual Report 23 administrative costs of $255,723 were 2.4% of the approximately $10.7 million FYE 22 Fund Balance. Total administrative expenses may not exceed 5% of the available housing trust fund balance as of the end of the prior fiscal year. The maximum administrative cap for FY 2022-23 was $534,010. Housing Trust Fund Administration 2021-22 (Actual) 2022-23 (Actual) 2023-24 (Budget) Personnel[1] 41,585 43,438 143,140 Maintenance & Operations 75,175 112,285 115,390 Transfer to Section 8 Admin 50,000 100,000 300,000 Total administration $166,760 $255,723 $558,530 [1]Excludes personnel expense for the Housing Navigation program in Homeless Services. Review of prior year funding priorities The City Council approved the HTF priorities via City Council Policy No. 90 in Dec. 2020. Priorities are in the following 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 Upcoming funding priorities There has been no change to the funding priorities. Summary of pending assistance requests There are no pending requests. Summary of denied assistance requests There were no requests denied in FY 22-23. YTD Summary As of the beginning of FY 2022-23, the Housing Trust Fund had an available cash balance of $10.68 million. The HTF made new loan commitments in the amount of $1.5 million during the fiscal year, but also received almost $1.5 million in revenue. In summary, the HTF continues to be a valuable source of funding to help create a diverse affordable housing stock. Feb. 6, 2024 Item #5 Page 10 of 10