DATE:
October 15, 2024
TO:
Adam Politzer, Interim City Manager
FROM:
Chadrick Smalley, Community Development Director
SUBJECT:
Resolution Of The City Council Of The City Of Emeryville Authorizing The City Manager To Execute The First Amendment To The Regulatory Agreement Between The City Of Emeryville And Avalon Senior Housing, L.P, For Avalon Senior Apartments At 3850 San Pablo Avenue To Increase The Average Income Limits From 37% Of Area Median Income To 40% Of Area Median Income
RECOMMENDATION
Staff recommends that the City Council adopt the attached resolution authorizing the City Manager to execute the First Amendment to Regulatory Agreement between the City and Avalon Senior Housing, LP, for the Avalon Senior Apartments, located at 3850 San Pablo Avenue, for the purposes of increasing the average income limits from 37% of the Area Median Income (“AMI”) to 40% AMI, to support the refinancing and rehabilitation of the development.
BACKGROUND
The Avalon Senior Apartments is a 67-unit affordable senior housing development owned by East Bay Asian Local Development Corporation (“EBALDC”) that received a $1,800,000 loan from the Emeryville Redevelopment Agency in 1998. As part of the loan agreement, EBALDC executed a Regulatory Agreement restricting the income and rents to eligible seniors at 30%, 35%, and 40% AMI, with an average of 35% AMI for a 55-year term. Subsequently, EBALDC received an award of Low-Income Housing Tax Credits from the California Tax Credit Allocation Committee (“CTCAC”) requiring the incomes and rents to be restricted to an average of 40% AMI. The Regulatory Agreement was subsequently amended in 2001 to address an error in rent calculations, which resulted in the income and rent limits to be increased to 32%, 37% and 42%, with an average of 37% AMI.
DISCUSSION
EBALDC has submitted an application to the CTCAC to refinance and rehabilitate Avalon Senior Housing and as part of that application is seeking approval from the City to amend the Regulatory Agreement to modify the average income and rent limits from 37% AMI to 40% AMI as follows:
Current Rent Restrictions: Average 37% AMI
Unit Type
32% AMI
37% AMI
42% AMI
Total
0 3
4 3
10 1
17 16
17 50
2 2
2 2
6 Total
22 22
22 66
Proposed Rent Restrictions: Average 40% AMI
Unit Type
30% AMI
40% AMI
50% AMI
Total
0 5
5 0
10 1
7 31
12 50
2 1
4 1
6 Total
13 40
13 66
EBALDC has indicated that the increase in average rent and income limits is necessary for the following reasons:
Avalon Senior Apartments has a 10% vacancy rate and has been unable to serve a significant number of potential residents with pensions or service-connected disability benefits due to seniors exceeding the current income limits; Avalon Senior Apartments will end the year in an operating deficit due to increased operating expenses caused by inflation, even after withdrawing all remaining operating and replacement reserves; Avalon Senior Apartments’ revenue has not increased at the same rate as operational costs, in part due to EBALDC’s internal policy to cap rent increases at 2.5% annually to ensure tenant stability for extremely low and very low-income seniors; EBALDC will be applying for California tax-exempt bonds to rehabilitate and preserve these homes, and needs to align the project with the state’s income limit standards to access the funding needed to rehabilitate the property and address deferred maintenance and capital improvements; and Avalon Senior Apartments could generate over $250,000 in additional revenue annually upon unit turnover if average rent limits are increased, which will help stabilize the project and assist with future capital improvements.
Staff supports EBALDC’s request to increase the average income and rent limit from 37% AMI to 40% AMI for all of the reasons EBALDC outlined above and because:
the increase in rent will only apply to vacant units at unit turnover and not to existing tenants, thereby ensuring tenant stabilization and protecting existing tenants from potential undue hardship; the ability to refinance the project and generate additional revenue to address future capital needs aligns with the City’s Housing Element Policy H-2-1, to facilitate the rehabilitation of the City’s existing housing stock to correct housing deficiencies, increase the useful life, and increase accessibility for all residents; and the potential increase in revenue to sustain the project’s viability aligns with the City’s Housing Element Policy H-2-3, to preserve “at-risk” affordable rental units through monitoring, working with nonprofits, and exploring available funding sources to preserve affordability.
FISCAL IMPACT
Implementing this change will not require any City funds. It will require a minimal amount of City staff time to revise, execute, and record the Regulatory Agreement amendment. Although the City is not liable for any operating budget shortfalls at Avalon Senior Apartments, supporting EBALDC to address capital needs and a structural operating deficit proactively with this amendment reduces the likelihood that the property would request urgent support from the City in the future.
CONCLUSION
Staff recommends that the City Council adopt the attached resolution authorizing the City Manager to execute the First Amendment to Regulatory Agreement to support the financial sustainability and rehabilitation of the Avalon Senior Apartments.
PREPARED BY: Valerie Bernardo, Community & Economic Development Coordinator II
Approved and Forwarded to the
City Council of the City of Emeryville:
Adam Politzer, Interim City Manager
ATTACHMENTS
Draft Resolution, including
Exhibit A: First Amendment to Regulatory Agreement
First Amendment Avalon Senior Apartments
City Council Meeting | October 15, 2024
City of Emeryville
CALIFORNIA
MEMORANDUM