5 3
4 DATE: February 20, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Sofia Mangalam, Community Development Director
Leslie Carmichael, Consultant Planner
DEPARTMENT: Community Development
SUBJECT: LOCAL HOUSING TRUST FUND
RECOMMENDATION
It is recommended that the City Council adopt the attached resolution to establish a Local Housing Trust Fund (LHTF), a special revenue by type, and designate Commercial Linkage Fees and Below Market Rate Housing In-Lieu Fees as dedicated sources of funding for the LHTF.
EXECUTIVE SUMMARY
Establishment of a Local Housing Trust Fund will enable the City to apply for matching funds from the California Department of Housing and Community Development (HCD) LHTF Program. A key qualification is that the LHTF receives ongoing revenues from dedicated sources of funding. Staff recommends establishment of a LHTF with dedicated sources of funding to include Commercial Linkage Fees collected pursuant to Foster City Municipal Code (FCMC) Chapter 17.88 and Below Market Rate Housing In-Lieu Fees collected pursuant to FCMC Chapter 17.90.
BACKGROUND
The 2023-2031 Housing Element includes program H-A-5-c to expand sources of funds for affordable housing programs as follows:
5 3
4 H-A-5-c Expand Sources of Funds for the City Affordable Housing Fund. Provide the necessary legal framework to be able to accept grants and donations to the City Affordable Housing Fund as a qualified trust fund from County, State, or Federal programs; employers; organizations; and individual donors. Evaluate potential sources of reliable funding for affordable housing programs.
The California Department of Housing and Community Development (HCD) has established a LHTF Program. The LHTF Program Guidelines contain requirements for a LHTF to be eligible to receive matching grants from the state program, including, “The key characteristic of a Local Housing Trust Fund is that it receives Ongoing Revenues from Dedicated Sources of funding sufficient to permit the Local Housing Trust Fund to comply with the requirements of the Program.” The HCD LHTF Program awards LHTF funds to eligible applicants to enhance local housing trust funds by providing a dollar-for- dollar match. The minimum application request by an applicant that is a new LHTF but not a Regional Housing Trust Fund is $500,000. The maximum application request is $5 million. A Notice of Funding Availability (NOFA) for the next round of applications for the LHTF funds is scheduled for March 2024 with applications due in May 2024.
The City has several existing funds related to housing, including:
Fund Title Revenue Sources Restricted Purposes
122 Low- and Moderate-
Income Housing
Fund (LMIHF)
Revenue from assets
of the former
Community
Development Agency,
including loan
repayments and rental
income.
Low- to moderate-income
housing pursuant to
California Health & Safety
Code Section 34176 et.
seq.
124 City Affordable
Housing Fund
Community
Development Agency
“boomerang” funds;
payments related to
Foster Square
Affordable housing
137 Commercial Linkage
Fee Fund
Fees assessed on
new commercial
development per
Chapter 17.88
Provide housing affordable
to very low income, lower
income, and moderate
income households in the
city, consistent with the
goals and policies
contained in the city’s
housing element and the
purposes for which the fees
were collected, and for
administration and
compliance monitoring of
the affordable housing
5 3
4 program. (FCMC Section
17.88.060)
Not yet
created
Below market rate
housing in-lieu fee
In-lieu fees assessed
on new residential
development per
Chapter 17.90;
allowed for fractional
unit requirements or
as option for
development of five
(5) to nine (9) units
Provide, or assure the
continued provision of,
below market rate dwelling
units to extremely low
income, very low income,
lower income, and
moderate income
households in the city,
through property
acquisition, construction,
development assistance,
rehabilitation, conversion,
financing, rental assistance
or other subsidies or
methods, consistent with
the goals and policies
contained in the city’s
housing element and the
purposes for which the fees
were collected, and for
administration and
compliance monitoring of
the below market rate
dwelling units established
pursuant to this chapter.
(FCMC Section
17.90.100.C)
138 Tenant Relocation
Assistance Fund
City housing funds,
contributions from
Essex Property Trust,
and Permanent Local
Housing Allocation
Program (PLHA) funds
Foster’s Landing tenant
relocation assistance
139 Workforce Housing Initial appropriation
from Capital Asset
Acquisition and
Replacement Fund;
Rental income from
22-unit Workforce
Housing
22-unit Workforce Housing
140 Equipment
Replacement Fund -
Workforce Housing
Rental income from
22-unit Workforce
Housing
Equipment replacement at
22-unit Workforce Housing
5 3
4 604 Successor Agency of
Community
Development
Agency
County reallocation of
tax increment from
redevelopment project
areas
Obligations of the former
Community Development
Agency
Both the Commercial Linkage Fee and the Below Market Rate Housing In-Lieu Fee are designated to be deposited in the City’s affordable housing fund by the ordinances creating the related chapters in the FCMC:
•Commercial Linkage Fee - Section 17.88.060.A: All affordable housing commercial linkage fees or other funds collected under this chapter shall be deposited into the city’s affordable housing fund.
•Below Market Rate Housing In-Lieu Fee - Section 17.90.100.B: Deposits. All below market rate housing in-lieu fees or other funds collected under this chapter shall be deposited into the affordable housing fund.
Fund 137 Commercial Linkage Fee was created to be able to track these revenues and expenditures separately for reporting purposes. A separate fund for Below Market Rate Housing In-Lieu Fee revenue has not yet been created because no revenue from this fee has been received.
The potential uses of these fees are restricted as follows:
•Commercial Linkage Fee - Section 17.88.060.B: The monies in the affordable housing fund and all earnings from investment of the monies in the fund shall be expended exclusively to provide housing affordable to very low income, lower income, and moderate income households in the city, consistent with the goals and policies contained in the city’s housing element and the purposes for which the fees were collected, and for administration and compliance monitoring of the affordable housing program.
•Below Market Rate Housing In-Lieu Fee - Section 17.90.100.C: Use of Funds. In addition to the purposes set forth in Section 17.88.060, the monies in the affordable housing fund, including all interest and earnings from investment of the monies therein, shall be expended exclusively to provide, or assure the continued provision of, below market rate dwelling units to extremely low income, very low income, lower income, and moderate income households in the city, through property acquisition, construction, development assistance, rehabilitation, conversion, financing, rental assistance or other subsidies or methods, consistent with the goals and policies contained in the city’s housing element and the purposes for which the fees were collected, and for administration and compliance monitoring of the below market rate dwelling units established pursuant to this chapter.
5 3
4 ANALYSIS
Establishment of a LHTF will enable the City to apply for matching funds from HCD LHTF Program. A key qualification is that the LHTF receives ongoing revenues from dedicated sources of funding. Two existing sources of revenues that are restricted to affordable housing purposes include Commercial Linkage Fees collected pursuant to Foster City Municipal Code (FCMC) Chapter 17.88 and Below Market Rate Housing In- Lieu Fees collected pursuant to FCMC Chapter 17.90. Designating these revenues to the LHTF would satisfy the requirement for “ongoing revenues from dedicated sources of funding.” The existing Fund 137 Commercial Linkage Fee and yet to be established fund to receive Below Market Rate In-Lieu Fees would be considered components (i.e., sub-accounts) of a LHTF. This will allow these revenues to be tracked for required reporting purposes. This is consistent with the language in FCMC Section 17.90.100:
17.90.100 Affordable housing fund.
A. Establishment of the Affordable Housing Fund. The city of Foster City has established an affordable housing fund as set forth in Section 17.88.060. The city reaffirms that the affordable housing fund is created for the purpose of receiving and dispersing certain monies to address the housing needs of extremely low, very low, low and moderate income households. Separate accounts within the affordable housing fund may be created from time to time to avoid commingling of monies, if required by law or as deemed appropriate for the administration of the affordable housing fund. (emphasis added)
The available fund balance in Fund 137 is approximately $602,087.92 (as of 12/31/2023). On January 16, 2024, the City Council authorized an application to the County of San Mateo Housing Funds that requires a City match of $76,800 in City staff expense and $135,000 in matching funds. If the City match is allocated from Fund 137, this would leave a balance of approximately $390,287.92.
Potential uses of the LHTF (See Section 100 of LHTF Guidelines) include construction loans or permanent financing for the following:
•development or rehabilitation of affordable rental housing projects •emergency shelters
•permanent supportive housing
•transitional housing
•affordable homebuyer/homeowner projects, including assistance to income- eligible households to purchase for-sale units
•construction, conversion, repair, reconstruction, or rehabilitation of accessory dwelling units (ADUs) or Junior Accessory Dwelling Units (JADUs) The attached draft resolution designates Commercial Linkage Fees and Below Market Rate Housing In-Lieu Fees as dedicated sources of revenue for the City’s LHTF. The 5 3
4 LHTF would also be eligible to receive contributions/allocations from other sources. The resolution also includes adoption of the State’s LHTF Guidelines as the City’s Program Guidelines for the LHTF. This includes requirements for percentages that can be spent on administrative costs and for certain income levels, requirements for protection of program funds, reporting and other requirements.
City staff will return to the City Council for authorization to submit any application(s) for additional funds, such as for the HCD LHTF program.
CEQA
The proposed action is exempt from the requirements of the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Section 15378 because establishing a LHTF does not meet CEQA’s definition of a “project” because the action does not have the potential for resulting in either or a direct physical change in the environment or a reasonably foreseeable indirect change in the environment.
FISCAL IMPACT
There is no fiscal impact.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 – Resolution
Attachment 1a – Exhibit A to Resolution – 2020 Final Housing Trust Fund Guidelines