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HomeMy WebLinkAbout2023-02-07; City Council; Resolution 2023-040RESOLUTION NO. 2023-040 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE FISCAL YEAR 2021-22 HOUSING TRUST FUND ANNUAL REPORT WHEREAS, Chapter 21.85 of the Carlsbad Municipal Code (CMC) 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 2021-22 Housing Trust Fund Annual Report on January 4, 2023; and WHEREAS, the Housing Commission recommended approval of the FY 2021-22 Housing Trust Fund Annual Report at their January 12, 2023, 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 2021-22 Housing Trust Fund Annual Report, attached hereto as Attachment A. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 7th day of February, 2023, by the following vote, to wit: AYES: NAYS: ABSTAIN: ABSENT: Blackburn, Bhat-Patel, Acosta, Burkholder. None. None. None. � SHERRY FREISINGER, City Clerk {SEAL) KEIT~yor Housing Trust Fund Annual Report Fiscal Year 2021-22 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 inclusionary housing in-lieu fees or affordable housing credit purchases. For the city to receive and use these fee payments, the Housing Trust Fund (HTF) 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 in-lieu 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 to utilize Housing Trust Fund dollars. 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 requires that staff shall provide a Housing Trust Fund Annual Report to the City Council and that the Report shall be reviewed by the city’s Housing Policy Team and Housing Commission, with the Housing Commission making a recommendation to the City Council. Attachment A {'city of Carlsbad 2 | Page City of Carlsbad Housing Trust Fund FY 2021-22 Annual Report 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 homeless services. During FY 2021-22 the following project or program expenditures and commitments occurred: Category Expenditures Encumbrances (Prior Year Commitments) New Loan Commitments Construction of new affordable housing $200,000 $1,317,664 $5,250,000 Preservation of affordable housing $5,749 Homeless Services $65,000 Administration $116,763 Other Housing Administrative support $50,000 TOTAL $437,512 $1,317,664 $5,250,000 Below are the descriptions of HTF uses by category for FY 2021-22. Construction of new affordable housing-$200,000 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 with other local and non-local sources of funding: Community Development Block Grant, the HOME federal funding program, 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 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. In 2017 and 2020 the City Council approved financing for the Windsor Pointe affordable housing project. The project, developed by Affirmed Housing, offers permanent supportive housing project for homeless household with serve 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. Construction began in late 2020 and was completed in 2022. HTF expenditures spanned three fiscal years. For the 2021-22 fiscal year, there were $200,000 expended from the HTF toward project construction. Final project contributions were expended in FY 2022-23. 3 | Page City of Carlsbad Housing Trust Fund FY 2021-22 Annual Report Preservation of affordable housing-$5,749 As part of the city’s affordable housing efforts, the city has purchased affordable housing units at risk of converting to market-rate 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 in the amount of $5,749) were incurred in FY 2021-22. Upon resale, some revenue will be returned to the HTF. Homeless Services-$65,000 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 each year for the Carlsbad Service Center ($40,000), 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 the year-round Bridge-to-Housing network coordinated by the Alliance for Regional Solutions ($25,000). Administration-$116,763 Housing Trust Fund dollars are used to cover administrative costs that are necessary to administer the fund. These include personnel expenses and maintenance and operations (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 FY 2021-22 administrative costs of $116,763 are less than 1% of the prior year fund balance. The combined administrative costs of $166,760, which include other Housing Administrative support described below, are 1.16% of the approximate $14 million FY 2020-21 Ending Fund Balance. Other Housing Administrative support- $50,000 Funds may also be used to supplement administrative and operational support for other housing programs such as rental assistance and CDBG. There is a dollar amount set aside annually to ensure administration of the Housing Choice Voucher Program (rental assistance) is fully covered ($50,000 in FY 2021-22). Funds for administration of that program come from the U.S. Department of Housing & Urban Development (HUD). 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. 4 | Page City of Carlsbad Housing Trust Fund FY 2021-22 Annual Report Summary of new projects In addition to the expenditures outlined in the section above, the City Council also approved loan commitments from the HTF in the amount of $5.25 million during FY 2021-22. The projects receiving these loan commitments are described below. 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 329-unit 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 on Aug. 31, 2021, to deepen the affordability of seven units to serve very low-income households. Marja Acres Senior Apartments The Marja Acres Apartments project is a 47-unit senior affordable housing project located on the west side of El Camino Real, just south of Kelly Drive. As an approved density bonus project, Marja Acres is required to provide 46 senior apartments affordable to lower-income seniors. 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 $650,000 loan from the city’s Housing Trust Fund on Oct. 12, 2021, to deepen the affordability of five units to extremely low-income levels. West Oaks Apartments West Oaks Apartments is a 42-unit affordable housing project located south of Palomar Airport Road and west of Palomar Oaks Way. As an approved density bonus project, Integral Communities is required to provide 38 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 $1,500,000 loan from the city’s Housing Trust Fund on Dec. 7, 2021, to increase the number of affordable units and to deepen the affordability on 10 units to serve extremely low and very low-income households. 5 | Page City of Carlsbad Housing Trust Fund FY 2021-22 Annual Report Financial Status of the HTF Revenue sources Fund revenue varies from year to year, but generally averages 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. FY 2021-22 Summary Beginning Available Fund Balance $14,379,262 Fee Revenue 1,254,167 Interest Revenue 420,403 Loan Payments 18,850 Repayment from Section 8 Admin 94,116 Tyler Ct. Transfer 200,912 Total Increase in Fund Balance $1,988,448 Loans Issued (200,000) Expenditures (187,512) Transfer to Section 8 Admin (50,000) Total Decrease in Fund Balance ($437,512) New Loan Commitments ($5,250,000) Ending Available Fund Balance $10,680,198 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 (FY 2022-23) administrative support budget allocated from the Housing Trust Fund to demonstrate the historically low use of HTF funds for administration. The FY 2021-22 actual administrative costs of $166,760 are 1.16% of the approximate $14 million FY 2020-21 Ending 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. Housing Trust Fund Administration 2020-21 (Actual) 2021-22 (Actual) 2022-23 (Budget) Personnel 149,413 41,585 83,419 Maintenance & Operations 165,015 75,175 147,326 Transfer to Section 8 Admin 50,000 50,000 100,000 Total administration $364,428 $166,760 $330,745 Review of prior year funding priorities The City Council approved the HTF priorities via City Council Policy No. 90 in December 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 6 | Page City of Carlsbad Housing Trust Fund FY 2021-22 Annual Report 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 At the close of FY 2021-22, there was one request for HTF assistance, from the Marja Acres Senior Apartments project, that was in the process of being evaluated. Since the original financing package on the affordable project was proposed in 2021, economic conditions had changed dramatically, which have impacted project financing. USA Properties requested additional support from the city. The request went to the Housing Policy Team, Housing Commission and City Council for approval after July 1, 2022. The City Council approved an additional $65,000 of assistance in the new fiscal year, bringing the total HTF contribution to $715,000. This will be reported in the FY 2022-23 Annual report. Summary of denied assistance requests There were no requests denied in FY 2021-22. YTD Summary As of the beginning of FY 2021-22, the Housing Trust Fund has an available cash balance of $14.38 million. The HTF made new loan commitments in the amount of $5.25 million during the fiscal year, but also received almost $2 million in revenue. As of June 30, 2022, the ending Available Fund Balance of the HTF was $10,680,198. In summary, the HTF continues to be a valuable source of funding to help create a diverse affordable housing stock.