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CITY COUNCIL AGENDA REPORT
City of Anaheim
HOUSING AND COMMUNITY DEVELOPMENT
DEPARTMENT
DATE: JULY 15, 2025
FROM: HOUSING AND COMMUNITY DEVELOPMENT DEPARTMENT
SUBJECT: APPROVAL OF AN AMENDMENT TO THE CITY
AFFORDABLE HOUSING RESTRICTIONS AGREEMENT
FOR THE ELM STREET COMMONS AFFORDABLE
RENTAL HOUSING DEVELOPMENT LOCATED AT 111 –
125 WEST ELM STREET
ATTACHMENT (Y/N): YES ITEM # 11
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council, by Motion, approve the First Amendment to City Affordable Housing Restrictions [Non-Subordinate] with the Anaheim Housing Authority to authorize the Executive Director of the Anaheim Housing Authority to implement a rent limit structure associated with the Low-Income Housing Tax Credit (LIHTC) program which is primarily based on a percentage of the Area Median Income (AMI) for the Elm Street Commons Affordable Rental Housing Development located at 111 – 125 West Elm Street; authorize the Director of Housing and Community Development, or her designee, to execute and administer the First Amendment; find and determine the amendment is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2), 15060(c)(3), 15378, and 15061(b)(3) of Title 14 of the California Code of Regulations; and, making certain other findings in connection therewith.
BACKGROUND:
Elm Street Commons Apartments (Project) is a 52-unit, 100% affordable multi-family affordable rental project located at 111 – 125 W. Elm Street. The units are rented to families earning between 30% to 60% of the Area Median Income.
In December 2006, the Anaheim Housing Authority (Authority) entered into an Affordable Housing Agreement with Advanced Development & Investment, Inc (ADI), acting as the original developer, and approved a $3,750,000 loan (Authority Loan) to help with the development of the Project. The Authority loan amount was subsequently reduced to $3,515,257 as the developer did not expend the full amount of the original loan. In 2010, ownership of Elm Street Commons LP was transferred to Wentwood, a Texas-based company, which assumed the role of developer and took over control of the Project.
Amendment to City Affordable Housing Restrictions – Elm Street Commons July 15, 2025
The Authority loan carries a 58-year repayment term and bears 3% simple interest. As of July 15th, the outstanding Authority loan balance, including accrued interest, totals approximately $10,485,913. This loan will remain in place and is expected to be paid over time from any available residual receipts once the property is stabilized. The Authority Loan is subordinate to the first mortgage lender, California Community Reinvestment Corporation (CCRC). The current outstanding balance of the CCRC loan, which includes accrued interest, is approximately $2,881,430.20.
DISCUSSION:
On December 11, 2024, CCRC informed staff and interested parties that the Borrower and Property Owner, Elm Street Commons LP, had initiated a strategic default and ceased making payments on the first mortgage effective November 2024. Wentwood, the owner of the site, expressed its intention to sell its California property holdings and, where feasible, exit the state. Additionally, staff was notified that Westlake Housing, L.P., the property manager, would resign and cease property operations.
CCRC further indicated its intent to initiate non-judicial foreclosure proceedings. On February 25, 2025, CCRC recorded a Notice of Default against the property’s title.
Subsequently, on June 10, 2025, CCRC recorded the Notice of Trustee’s Sale, setting a public auction date for July 17th, 2025. CCRC is moving forward with the foreclosure and plans to sell the property unless the outstanding loan of $2,881,430.20 is paid or a resolution is reached before the sale date.
To prevent foreclosure and protect the long-term affordability of the Elm Street Commons property, the Authority is taking proactive steps to assume temporary control of the project and stabilize its operations. The Authority has negotiated an Option to Purchase Agreement with Elm Street Commons LP to acquire their interest in the Elm Street Commons property for $100. The Authority will temporarily assume the role of borrower and property owner until the selection and approval of a new owner is finalized.
In addition, the Authority will purchase the existing first deed of trust loan held by CCRC utilizing Low Moderate Income Housing Asset funds (LMIHAF) in the amount of $2,881,430.20. By purchasing the loan, the Authority preserves the below-market interest rate and favorable repayment terms of the original loan. This structure allows the Authority to take control of the property without triggering a foreclosure. The mortgage loan purchase enables the Authority to step in and immediately address any deferred maintenance and facilitate the transition to a qualified new borrower and property owner under the City’s oversight, while protecting the affordability covenants for low-income residents.
As part of the evaluation of this transaction, staff has reviewed both the physical and financial condition of the property. Based on recent financial statements, the property has struggled to maintain financial stability, with recurring shortfalls in net cash flow and an ongoing inability to cover its debt payments. In 2022, the property experienced a negative cash flow and was unable to make its debt obligations. While 2023 showed some improvement, the property fell short of lender requirements and continues to operate with little to no cushion for rising costs or unforeseen expenses. This shortfall is partly attributed to the owner’s decision not to increase rents, the property’s obligation to Amendment to City Affordable Housing Restrictions – Elm Street Commons July 15, 2025
use the California Department of Housing and Community Development (HCD) rent limits, and rising operational costs.
The current rent limits, which require HCD rents, are tied to a structure commonly utilized by properties receiving assistance under the former Redevelopment Agency.
Rent structures for affordable housing developments have since been modernized and now align with the rent limits in place for the Low-Income Housing Tax Credit (LIHTC) program. The difference between the former Redevelopment rent structure and LIHTC rents is quite technical in nature. Both rent frameworks are based on area median incomes published by the U.S. Department of Housing and Urban Development (HUD) to ensure affordability, but they apply different methodologies to calculate rent limits.
LIHTC (Tax Credit Allocation Committee (TCAC)) rents typically allow slightly higher limits that reflect current financing realities. Since the elimination of Redevelopment, the associated housing set-aside rent structure applies only to legacy projects and is now largely defunct. Since the Elm Street Affordable Housing Restrictions Agreement does not contemplate a shift away from Redevelopment-era rent limits, staff requests authority to amend the agreement to allow the use of TCAC rents, aligning the project with current industry standards, and improving long-term financial viability.
It is anticipated that the modernized rent structure will result in rent increases. To minimize impacts on existing households, staff will evaluate each tenancy and use a phased approach to rent increases, providing residents with ample notice and support if an increase is applied. In all cases, rents will remain at affordable levels based on State standards, ensuring that no tenant is paying more than 30% of their income on housing costs.
Affordable housing preservation is a priority to staff and aligns with the City’s Strategic Plan Goal B Enhance Livability, Strategy 2 - Develop strategies to stabilize and expand affordable, workforce, and home ownership housing options for low-income residents.
Acquiring the property will preserve long-term affordability for existing and future low- income households. Without this intervention, the property is at risk of foreclosure and resale at market rates, potentially eliminating affordability restrictions and displacing extremely low- and very low-income families the Project currently serves.
This request is in connection with an item agendized separately under the Housing Authority agenda for consideration this evening.
IMPACT ON BUDGET
There is no impact to the budget. The item requests a policy change only.
Respectfully submitted,
Grace Ruiz-Stepter
Director of Housing and Community Development
Attachments:
1. First Amendment of City Affordable Housing Restrictions
2. Original City Affordable Housing Restrictions