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CITY of BRISBANE
Wednesday, August 2nd, 2023 at 2:00PM ● Hybrid Meeting
Brisbane City Hall, Large Conference Room, 50 Park Place, Brisbane, CA The public may observe/participate in the Subcommittee meetings by using remote public comment options or attending in person. Subcommittee members shall attend in person unless remote participation is permitted by law. The Subcommittee may take action on any item listed in the agenda.
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Affordable Housing Subcommittee Agenda
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SUBCOMMITTEE MEMBERS:
Mayor Davis, Councilmember Lentz
ROLL CALL
A. Consider any request of a City Councilmember to attend the meeting remotely under the “Emergency Circumstances” of AB 2449
PRESENTATIONS AND DISCUSSION ITEMS
B. Review Visitacion Garden Senior Housing: Bridge Ground Release Expiration/Renewal
PUBLIC COMMENT
ADJOURNMENT
2 File Attachments for Item:
A. Review Visitacion Garden Senior Housing: Bridge Ground Release Expiration/Renewal 3 A.
BRIDGE Groundlease Page 1 of 4
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow
CITY COUNCIL SUBCOMMITTEE AGENDA REPORT
Meeting Date: 8/2/2023
From: John Swiecki, Community Development Director
Subject: Visitacion Garden Senior Housing; Bridge Ground Lease Expiration/Renewal
Background
For the past several months, staff has engaged in discussions with BRIDGE Housing staff regarding extension of the groundlease governing BRIDGE’s operation of Visitacion Garden senior apartments. Staff has also collected information on BRIDGE’s operational procedures, particularly regarding waitlist management and tenant preferences, at the request of this subcommittee. The April 10 subcommittee report provides detailed information on the groundlease and operational procedures and is attached to this report for reference.
Discussion
Current Groundlease- BRIDGE Financial Requests
As noted in the April 10 report, the property’s operating expenses are on track to eclipse rental revenue within the current lease term. BRIDGE has requested that the City/Housing Authority subsidize the property’s operations to neutralize the impact and avoid untenable rent increases. The requested amount is approximately $945,000 over the next five years. BRIDGE will provide a detailed formal request outlining the exact subsidy request and supporting revenue and operational expenses through 2028.
Two City/Housing Authority loans totaling approximately $2.34 million plus an additional $1.5 million in accrued interest are required to be repaid in 2028. BRIDGE has asked that these loans be forgiven.
The City’s 2023-2031 Housing Element commits to preserving deed-restricted affordable housing units and assisting tenants of those units in a variety of ways.
Specifically, program 3.A.1 commits to adopting the forthcoming Affordable Housing Strategic Plan (AHSP) and anti-displacement policies contained therein. Programming low/moderate income housing fund revenues to subsidize BRIDGE’s operational costs would be consistent with the City’s anti-displacement goals. Waiving repayment of the loans would similarly be consistent with the City’s policies to assist financially in the development of affordable housing. The current fund balance of the low/moderate income housing fund is approximately $3 million, with additional revenues anticipated with future adoption of a commercial nexus fee.
Groundlease Renewal: Preliminary City and BRIDGE Priorities City and BRIDGE staff have identified the following topics in upcoming groundlease renewal negotiations:
4 A.
BRIDGE Groundlease Page 2 of 4
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow - Evaluate household income levels served: Presently, the groundlease establishes the following household income limits:
o Max. 30% area median income (AMI): Two units
o Max. 40% AMI: Two units
o Max. 80% AMI: Two units
o Max. 120% AMI: Eight units
Adjusting the targeted income levels to very-low income households (earning max. 50% AMI) would more accurately reflect the actual incomes of both current tenants and the waitlist population, according to BRIDGE. - Ongoing City/Housing Authority financial support: BRIDGE projects the current delta between rental revenue and operating expenses to continue beyond the 2028 lease term. Should the groundlease extension include deeper affordability as highlighted above, this gap may widen. An ongoing subsidy from the City/Housing Authority is a high priority for BRIDGE to ensure the property remains solvent and rents are stabilized.
Additional priorities will be highlighted as conversations continue.
Additional Operational Information
BRIDGE provided the following responses to several questions by subcommittee members at the April 10 subcommittee meeting. (Note: responses to previous information requests are found in the April 10 subcommittee report, attached.) • What is the current age range of residents?
o Average is 78; youngest is 69, oldest is 90
• How long did each current resident wait on the waitlist before getting a unit? o One resident moved in 20 years ago; no records as to wait time o The other current 12 resident wait times were:
▪ 4 waited up to 1 year;
▪ 1 waited up to 2 years;
▪ 2 waited up to 3 years;
▪ 4 waited up to 4 years
▪ 1 person waited 6 years
• What were the annual rent increases for each tenant/unit in real dollars for the past 5 years?
Unit 2023 2022 2021 2020 2019
V1 54 31 0 35 20
V10 24 14 0 16 9
V2 46 27 0 30 moved in
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BRIDGE Groundlease Page 3 of 4
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow Unit 2023 2022 2021 2020 2019
V4 46 27 0 moved in
V5 54 31 0 moved in
V6 24 14 0 16 9
V8 35 20 0 23 13
V9 50 29 moved in
I1 0 0 0 0 0
I2 moved in
I3 35 20 0 moved in
I4 46 27 0 30 moved in
I5 VACANT
I6 46 27 0 30 17
o NOTE: unit 11 has a housing choice voucher and tenant rent is determined by the housing authority based on their income; tenant rent has remained flat all five years
• What are current vacancies and the income level of those vacancies? o As of May 11, 2023: Unit I5, 1 BR 60% AMI unit (Note: Since this was reported by BRIDGE, this unit has been filled.)
• What preference criteria do current residents meet, out of the preference listed in the ground lease?
o 11 residents meet Preference level 1; 2 residents have no preference • How does BRIDGE audit preference applicability and income of waitlist people (e.g., changing circumstances- waitlisted households who move out of Brisbane, stop working in Brisbane, or their family member in Brisbane dies, etc.) over time? Is there annual verification or does it occur when the waitlister is next on the list? o Preference levels are verified at the time of pre-application submittal to the waiting list, and categorized on the waiting list accordingly. Preferences are not re-verified when a unit becomes available.
• How does BRIDGE calculate income? What counts as income? Is this governed by State or other law or does BRIDGE/the City have discretion? o BRIDGE follows HUD methodology and include all current gross income, projected over the next 12 months, as well as asset income. BRIDGE verifies income and assets and collects second party documents (pay stubs, bank 6 A.
BRIDGE Groundlease Page 4 of 4
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow statements). The Ground Lease does not call out a methodology by definition.
This was also in compliance with the federal Department of Housing and Urban Development’s former HOME program regulations.
• What happens to a caregiver residing in a unit at the complex if the primary householder, who they were assisting, dies and the caregiver doesn’t meet age or income requirements to stay in the unit?
o In accordance with the Ground Lease, if a household does not meet the “eligible senior household” definition at recertification, they must vacate the unit. “Eligible Senior Household” must contain at least one member 62 and over, with all other members 45 or older, or spouse of any age.
Next Steps
Staff will continue conversations with BRIDGE regarding the mutual interest in renewing the ground lease this month.
Attachments
1. 4/10/2023 subcommittee report and attachments
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John Swiecki, Community Development Director
7 A.
BRIDGE Lease Renewal Page 1 of 3
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow
CITY COUNCIL SUBCOMMITTEE AGENDA REPORT
Meeting Date: 4/10/2023
From: John Swiecki, Community Development Director
Subject: Visitacion Garden Senior Housing; Bridge Ground Lease Expiration/Renewal
Background
The Visitacion Garden Senior Housing development at 8 Visitacion Avenue contains 14 apartment units for low- and moderate-income seniors (age 62+) and includes a senior recreation center (“Sunrise Room”). The former Brisbane Redevelopment Agency (RDA) purchased the site in 1995 for $440,000. The RDA then partnered with BRIDGE Housing, a non-profit affordable housing developer, to design, construct, and manage the affordable senior housing development. The RDA made two construction loans to BRIDGE in the amount of $900,000 from the low- and moderate-income housing fund and $1.4 million from bond proceeds. San Mateo County also contributed a $175,000 loan from affordable housing funds. Construction was completed in November 1999.
The RDA agency loan has a 30-year term, coterminous with the ground lease. The bond proceeds loan has a 40-year term, beyond the term of the ground lease.
Repayment of both loans are due at the respective expiration dates with interest (3% simple).
BRIDGE currently owns the building and improvements and manages the facility under a 30-year ground lease (“lease”) that expires in 2028, aligned with the term of the agency and bond proceeds loan repayment. The lease (attached) establishes the tenant household income levels (section 5.2), maximum rent calculations (section 5.3), and local preferences to determine tenant selection (section 5.5). These elements of the lease are discussed in more detail in the Discussion section below.
If the lease is not extended, ownership of the building and improvements on the site revert to the Housing Authority in 2028. The lease requires BRIDGE to make annual rent payments out of "Surplus Cash," which is defined in the lease generally as operating income from the development minus reasonable operating expenses. The City anticipated that surplus cash would gradually decline over time and projected $0 rent payments in years 26-30 of the lease.
BRIDGE Background: According to their website, BRIDGE was formed in 1983 to “spearhead new solutions to the worsening shortage of affordable housing” in the Bay Area. Since its inception, BRIDGE has grown to own or manage 126 affordable housing developments throughout the Bay Area, California, Oregon and Washington. In San Mateo County, BRIDGE’s portfolio includes ten properties (including Visitacion Garden).
BRIDGE’s role in affordable housing projects includes site acquisition, project design, construction, initial lease-up, and ongoing management. 8 A.
BRIDGE Lease Renewal Page 2 of 3
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow Household Income Levels Served: As described in Section 5.2 of the lease, the household income levels served by the development include:
• 30% area median income (AMI) or less: Two units
• 40% AMI or less: Two units
• 80% AMI or less: Two units
• 120% AMI or less: Eight units
Discussion
BRIDGE staff have proactively initiated preliminary conversations with City staff regarding the possible renewal of the lease. Staff will be meeting with BRIDGE staff in the near future to identify discussion points for potential lease renewal. Staff has also requested information from BRIDGE to address questions from City Council members regarding waitlist management and rent increase procedures. These items are addressed below and staff anticipates receiving additional information from BRIDGE in the coming weeks.
Waitlist Management: BRIDGE has an in-house waitlist team, based in their San Francisco offices, that manages the waitlist for Visitacion Garden. According to BRIDGE staff, there are currently 174 households on the waitlist. Given the size of this waitlist and the small size of the development, the typical wait times are considerable and vary based on preferences and the unit type available. Applicants with preference that qualify for a maximum 80% AMI unit will likely get contacted within a year for an available unit.
Households with preference that qualify for the four units restricted to 30% and 40% AMI will likely wait several years before contact regarding an available unit.
Applicants are chosen from the waitlist according to which preferences (see discussion below) they qualify for when completing their application. Applicants are required to provide proof that they meet any preference selected. When and if the active waitlist runs low, BRIDGE markets the property as outlined in section 5.5 of the lease. All marketing is conducted in a manner that follows Fair Housing Laws.
Preferences: Related to waitlist management, section 5.5 of the lease outlines the local “preferences” BRIDGE uses to determine which households on the waitlist are eligible when a unit becomes available, as follows:
• First preference: Current Brisbane resident
• Second preference: Immediate family members of Brisbane residents • Third preference: Current or most recently employed in Brisbane • Fourth preference: Households who were past residents of Brisbane (min. 6 months)
• Fifth preference: Households who were employed in Brisbane in the past (min. 6 months)
9 A.
BRIDGE Lease Renewal Page 3 of 3
Printed on 50% recycled paper Providing for Today, Preparing for Tomorrow Note that within the preference categories priority is based on the application date. Any modifications to these preferences would need to be negotiated through the lease renewal and would be subject to the legal restrictions of current Fair Housing laws.
Rent Increase Procedures: The calculations for maximum monthly rental charges are found in Section 5.3 of the lease, and summarized below:
• Max. 40% AMI (four units): 30% of 50% AMI (adjusted for household size) divided by 12
• Max. 120% AMI (eight units): 30% of 110% AMI (adjusted for household size) divided by 12
• Max. 80% AMI (2 units): Not specified in lease
The lease specifies that the household size shall be the number of bedrooms plus one (e.g., for a one-bedroom unit, the household size assumption would be two persons).
This formula allows rents to be increased annually to reflect changes in AMI. This could lead to significant challenges for households on fixed incomes. BRIDGE staff advises that annual increases are typically limited to 3%, significantly less than recent increases in AMI (e.g., the AMI increased by about 11% between 2021 and 2022). BRIDGE staff have stated that current rents are about 48% of the maximum they could charge under the terms of the lease. Rent increases of 5% were imposed on January 1, 2023, or about $24-$67 per month across the units. Any modifications to the maximum rent calculation would need to be negotiated through the lease renewal.
Fiscal Strength of Visitacion Garden: BRIDGE staff has preliminarily advised staff that the property is currently not profitable and projections indicate this will likely continue over the remaining term of the lease. While the City and BRIDGE anticipated surplus cash would decline in the final years of the lease, eliminating annual rent payments to the City, it was not anticipated that the property expenses would eclipse revenues to this degree. The long-term fiscal health of the property will likely be a significant factor in the City’s upcoming lease renewal discussions with BRIDGE.
Next Steps
Staff will begin conversations with BRIDGE regarding the mutual interest in renewing the ground lease this month. Staff will update this subcommittee and the full Council as those talks evolve and key discussion points are identified.
Attachments
1. 1998 BRIDGE Ground Lease
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John Swiecki, Community Development Director
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