Cotati City Council
Agenda Staff Report
Item type: CONSENT CALENDAR (ACTION)
To: City Council
Subject: CONSIDERATION OF A RESOLUTION AUTHORIZING
APPLICATION FOR, AND RECEIPT OF, PROHOUSING
INCENTIVE PROGRAM FUNDS
Date: March 10, 2026
Written by: JP Harries, Senior Planner
Recommendation
It is recommended that the City Council adopt the accompanying Resolution authorizing the City Manager to apply for and accept funds from the State of California’s Prohousing Incentive Program, in an amount not to exceed $650,000.
Background
On September 30, 2025, the California Department of Housing and Community Development (HCD) released the Notice of Funding Availability (NOFA) for Round 4 of the Prohousing Incentive Program (PIP), making approximately $8 million available. The PIP complements the Prohousing Designation Program. It is designed to encourage jurisdictions to obtain a Prohousing Designation and to reward those that adopt additional Prohousing policies to achieve a higher Designation score. By pairing the Designation with a substantial grant award, the PIP aims to boost participation in HCD’s Prohousing Designation Program and support the creation and preservation of affordable housing. Applications are due to HCD by March 31, 2026. The PIP grant request must include the attached application form and the accompanying Resolution for this Council item, using the template form provided by the state.
On February 24, 2026, the City Council authorized the City Manager to apply for and participate in HCD’s Prohousing Designation Program. That same day, staff initiated a 30-day public review period for the draft application. Following the 30-day review period, the City will submit its application for the Prohousing Designation to HCD. Applications for the Prohousing Designation Program and the PIP funds may be submitted concurrently. Staff will submit both the Prohousing Designation application and the PIP grant application before the March 31, 2026, deadline.
Analysis/Discussion
The PIP is funded through Chapter 364, Statutes of 2017 (SB 2, Atkins), which established the Building Homes and Jobs Trust Fund (Fund). The Fund utilizes real estate transaction fees collected at the county level to establish a permanent source of funding. Five percent of annual collections are deposited in a fund to be used for an incentive program. PIP awards funds based on an Applicant’s Prohousing Designation Score and according to geographic area. Based on the funding formula, the City is eligible to apply for up to $650,000.
The PIP allows funds to be used to support a variety of planning or implementation activities related to housing and community development carried out by the City. Of the ten eligible uses of funds listed in the PIP application, staff anticipate using the funds for one or all of the following eligible activities:
1) The predevelopment, development, acquisition, rehabilitation, and preservation of multifamily, residential live/work, or rental housing that is affordable to extremely low-, very low-, low-, and moderate-income households, including necessary operating subsidies;
2) Affordable rental and ownership housing that meets the needs of a growing workforce earning up to 120 percent of area median income, or 150 percent of area median income in high-cost areas;
3) Matching portions of funds placed into local or regional housing trust funds; 4) Homeownership opportunities, including, but not limited to, down payment assistance; and
5) Grant administration activities (within the established limit of funds).
Given the eligible uses, PIP funds could be used to financially support or subsidize affordable housing projects such as the 120 East Cotati Avenue project. Additionally, PIP funds are ideally suited to support several of the City’s Housing Element Programs:
Program 1-1 Housing Rehabilitation
Improve neighborhoods and housing by providing opportunities for home ownership and housing rehabilitation through the following activities:
• As funds become available, implement a Housing Rehabilitation Program which provides low interest loans for the rehabilitation of homes owned or occupied by extremely low-, very low-, low-, and moderate-income households with an emphasis on assisting extremely low- and very low-income households. Ensure that the housing rehabilitation program includes provisions for mobile homes and renovations to provide accessibility for disabled persons, to the extent that the funding source allows these types of improvements.
• As funds become available, promote awareness of the housing rehabilitation program through contacting neighborhood groups in residential areas with aging housing stock. Outreach shall include program information as part of code enforcement efforts in cooperation with the Building Department.
• Provide annual funding for a regional or subregional shared planner or grant writer position to prepare funding applications for housing rehabilitation, as budget allows.
Program 1-2: Home Ownership
Improve neighborhoods and housing by providing opportunities for home ownership by implementing a Home Ownership Assistance Program which provides low interest loans to assist first-time low- and moderate-income homebuyers in purchasing a home.
Program 1-7: Essential Housing Bond Financing Program
In partnership with a Joint Powers Authority (JPA) and non-profit asset manager, seek to utilize tax exempt bonds to fund: (1) the acquisition of existing market-rate multi-family buildings and restrict future rents to be affordable to households that earn extremely low to moderate incomes, and/or (2) the construction of new deed-restricted affordable housing. In order for asset managers to access these types of bonds, Cities must join a Joint Powers Authority (JPA) and authorize the JPA to issue these bonds on behalf of the City. The asset manager then purchases the multi-family buildings or initiates new development, using only money from the bond financing, and sets the rents to be affordable to low- to moderateincome households. Municipal ownership reduces or eliminates the property tax burden and reduces the financing interest costs due to the tax-exempt bond, reducing the carrying cost of the property and allowing the reduced rents to be realized.
Program 3-2: Funding for Affordable and Special Needs Housing Continue to seek available funding for lower income and special needs housing to provide affordable housing and special needs housing that addresses the City’s priorities and the Quantified Objectives for 58 new affordable units. Funding for housing shall include the following actions:
• Support applicants of discretionary projects for County, State, Federal, or other funding applications for affordable (extremely low, very low, and low income) and special needs (seniors, homeless, at-risk of homelessness, large households, disabled persons, developmentally disabled persons, female-headed households, agricultural workers etc.) housing programs, including the Affordable Housing Innovation Program funds, BEGIN, CalHome, Emergency Housing and Assistance Program Capital Development, Housing Related Parks Program, Low Income Housing Tax Credits Multifamily Housing Program – General and Supportive Housing Components, Predevelopment Loan Program, and Transit-Oriented Development Housing Program. Continue to prioritize support of applications for discretionary projects that provide a significant percentage of units to serve the City’s extremely low-income, very low-income, transitional/supportive, senior, or large family housing needs.
• Continue the Housing Fund, with contributions collected from private and public sources to implement and/or supplement the City's housing programs. Use the Housing Fund to make housing available to very low- to moderate-income Cotati residents, with an emphasis on very low- and low-income units for individuals and large families, affordable senior housing, and transitional/supportive housing.
Program 3-5: Review Processing Fees
Pursue use of Housing Fund dollars to subsidize the development impact fees of extremely low, very low, and low-income units, where the City fell short of 5th Cycle RHNA targets.
Ensure compliance with SB 330 (Housing Accountability Act), and adherence to streamlining deadlines, thereby reducing the overall cost of housing developments by mitigating unnecessary delays. Ensure compliance with AB 602, as detailed in Program 5-4.
Conduct comprehensive review of processing fees and procedures to identify potential constraints to housing development
Program 4-1: Anti-Displacement Actions (portion)
Lower and moderate-income renters are at increased risk of displacement. The City shall take measures to reduce the risk of displacement through the City, especially in areas of increased investment and development, through the following actions:
• Pursue grant opportunities to create a residential rehabilitation program for lower income residents. Work with the Community Development Commission to apply for HOME, CalHome, and CDBG funds, as well as promote Section 504 Home Repair Program loans and grants to provide housing rehabilitation loans and weatherization services for income-eligible households to improve living conditions. Strive to expand application rates by 10% annually throughout the planning period.
Financial Considerations
There is no adverse impact on the City’s General Fund. The PIP grant request of up to $650,000 carries no matching fund requirement. Applying for these funds will increase the City’s available resources to support affordable housing projects and help fulfill the programs outlined in the City’s Housing Element. These funds, if awarded, will go directly into the City’s Affordable Housing Fund.
Environmental Issues
Applying for grant funding is not considered a project under the California Environmental Quality Act (CEQA) and is therefore exempt from CEQA review pursuant to CEQA Guidelines Section 15378(b)(4). Any project that may be developed with grant funds will be reviewed for CEQA compliance once the project details are known.