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HomeMy WebLinkAbout2020-12-08; Council Policy No. 90 - Administration of the Housing Trust FundCity 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 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 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 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 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