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9 DATE:August 19, 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:HOUSING ELEMENT 2023-31 IMPLEMENTATION ROADMAP
RECOMMENDATION
It is recommended that the City Council by Minute Order, provide direction on the on the Housing Element 2023-31 Implementation Roadmap regarding the following:
1. Does the City Council agree with the Guiding Principles presented in the Roadmap?
2. Does the City Council agree with the key strategies identified?
3. Should programs be added or subtracted from the Table 2, "Proposed Funding Summary by Program" as proposed for funding at this time?
4. Are the funding amounts in Table 2, "Proposed Funding Summary by Program" generally acceptable?
EXECUTIVE SUMMARY
The Housing Element is an integral part of the Foster City General Plan that serves to identify the community’s housing needs; state the community’s goals and objectives for housing production, rehabilitation, and preservation, and conservation to meet those needs; and define the policies and programs that the community will implement to achieve the stated goals and objectives.
On March 20, 2024, the City Council adopted a General Plan Amendment consisting of revisions to the 2023-31 Housing Element and on April 18, 2024, the city received a letter from the California Department of Housing and Community Development (HCD) that the
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9 adopted housing element is in substantial compliance with State Housing Element Law.
Chapter 8, Housing Goals, Polices, and Programs provides the housing goals and policies for the city and describes the implementation programs that the city needs to undertake in the 2023-2031 planning period. These goals, policies, and programs aim to provide additional housing in a way that is balanced with the community’s desires to retain the aspects of Foster City that make it a great place to live, work, and play. It includes seven (7) goals, 37 policies and 106 programs to be implemented over an 8-year period.
We are in the second year of implementation.
Government Code Section 65400 requires each jurisdiction to prepare an annual progress report (APR) on the jurisdiction’s status and progress in implementing its housing element. Each jurisdiction’s APR must be submitted to HCD and the Governor’s Office of Planning and Research (OPR) and HCD by April 1 of each year (covering the previous calendar year. HCD has created the Housing Accountability Unit to ensure that jurisdictions follow through with their Housing Element commitments by implementing its goals, policies and programs.
In order to stay on track for a timely implementation of the goals, policies and programs outlined in the Housing Element, it is critical to analyze priorities, resources, funding opportunities, and budget requirements. There are challenges to implementation, including limited resources (staffing and financial), time constraints, etc.
Staff has prepared a Housing Element 2023-2031 Implementation Roadmap (Roadmap) to include prioritization of programs, financial analysis, and recommendations for the use of the city’s limited available housing funds. The Roadmap includes recommendations for leveraging the city’s available housing funds by using them as matching funds for county and state housing funding opportunities advertised through Notices of Funding Availability (NOFAs). Staff sees this as a working document that will be modified and adjusted as conditions change, such as when new funding opportunities become available, funding applications are not successful, or opportunities for collaboration with other jurisdictions or organizations become available. The Roadmap identifies potential sources of funding and could also provide the staff with the flexibility to apply for future funding opportunities up to a certain amount that are consistent with the Housing Element goals and policies in order to provide staff with the ability to respond to short-turnaround applications.
Staff has prepared a draft Roadmap for Council’s review and direction. Staff will return to the City Council at a future date for: 1) acceptance of the Roadmap and direction to pursue NOFA opportunities, 2) approval of the application for the HCD issued 2024 Local Housing Trust Fund Program Notice of Funding Availability in the amount of up to $5M, and 3) associated budget amendments/appropriations.
BACKGROUND/ANALYSIS
The Roadmap is a strategy to guide planning and manage priorities for implementation of the Housing Element policies and programs, with special focus on the near-term 7 2
9 priorities to facilitate meeting the seven (7) goals and 37 policies of the Housing Element, and the issued Regional Housing Need Allocation (RHNA) targets for the eight-year planning cycle.
Implementation of the Housing Element includes the unit production goal of 1,896 units (777 market rate and 1,119 below market rate), the City of Foster City’s assessed RHNA target. To reach the assessed target for below market rate (BMR) units, the City of Foster City must either facilitate development of a substantially greater number of market rate units than the target (if it relies solely on the 20% inclusionary housing requirements) and/or the city must facilitate development of 100% affordable projects. In addition to new production, implementation includes preservation of existing affordable units and providing fair housing and other program information and services.
The Roadmap includes prioritization of programs, financial analysis, and recommendations for the use of the city’s limited available housing funds.
The implementation of the Housing Element, requires:
•Staffing resources
•Financial Resources
Staffing Resources
The implementation of the Housing Element is primarily the responsibility of the Community Development Department (CDD). However, other departments have a role to play as well.
Staffing within CDD is limited, with four (4) planners, including the Planning Manager, one (1) Housing Coordinator and the Community Development Director. The city often has to rely on the use of consultants for their expertise and to meet time constraints. The city also relies on the county and other partnerships, including 21 Elements, HIP Housing, MidPen Housing, LifeMoves, Rebuilding Together Peninsula and others.
Financial Resources
The city maintains several funds related to affordable housing. Some of these funds are available for implementation of Housing Element programs and some are dedicated for specific purposes. The various funds and their sources are described in detail in the Roadmap. At the present time, the amount of housing funds available for implementation of Housing Element program adds up to approximately $8 million as shown in Table 1.
The amounts available in each fund may change slightly when the FY 2023-24 closing balances are finalized. Because the main source of funds, the Commercial Linkage Fee (Fund 137), is dependent on the timing, amount, and type of future development, the projection for additional funds is uncertain. In addition, approximately $1.4 million in shared equity for the seven Emerald Bay ownership units would be added to Fund 122 if those units are sold or refinanced after the deed restrictions expire in 2026, but the timing for those sales is uncertain. Staff’s recommendations assume no significant additional 7 2
9 housing revenues within the 2023-2031 Planning Period. If significant revenues are received, the spending plan in the Roadmap can be adjusted.
In addition to the funds shown in Table 1, funds in Fund 128 General Plan – Building and Construction Ordinance – Zoning Code Maintenance Fund can be used to implement programs that require amendment of the general plan or building or zoning regulations.
Table 1: Existing Housing Funding Resources
Fund
Successor
Agency
Affordable
Housing Fund
122
City
Affordable
Housing
Fund
124
Commercial
Linkage Fee
137
Local Housing
Trust Fund
145
Total
Beginning balance
6/30/24
$2,475,623 $708,648 $5,405,386 0 $8,589,657
Reserve $300,000
for EUPP Property
Reserve
$-300,000 -$300,000
Transfer
Commitment for
EUPP County
Match
-$50,000 $50,000 0
Reserve for FY
2024/25 Budget
-$156,384 -$110,000 -$266,384
Transfer per FY
2024/25 Budget
-$500,000 $500,000 0
Total Available $1,969,239 $708,648 $4,795,386 $550,000 $8,023,273 From time to time, staff applies for grants and funds at County, Regional, State and Federal agencies to add to the City’s financial resources or use the services provided by these agencies. The potential sources most relevant to Foster City are summarized below with more detail and information on other potential sources provided in the Roadmap. •County Financial Resources
oNotices of Funding Availability (NOFAs). The County of San Mateo offers two Notices of Funding Availability (NOFAs) per year – one in January and one in April. The County-administered funds come from county, state, and federal sources with corresponding restrictions on eligible uses. These funds are typically provided in the form of low-interest loans. The City of Foster City has been awarded nearly $200,000 in loaned funds for rehabilitation of two of the Existing Unit Purchase Program Homes to transition them to future supportive housing. The City has two (2) years to spend the funds.
oMeasure K provides discretionary funding from a half-cent countywide sales tax with the goal of providing local funds for local needs. The city submitted an application for $35,000 on August 2, 2024 for Measure K funds to 7 2
9 support a pilot Emergency Rental Assistance Program (ERAP). The goal of the ERAP is to provide one-time emergency rent relief of one (1) month of rent up to a maximum of $3,000 for Foster City renters who are at risk of displacement within the next three (3) months. Staff will draft the details of the pilot program and present it to the City Council at a future meeting. While the amount of funding requested is relatively small, the fund has the potential to help a minimum of 10 tenants with one-time grants up to $3,000 each. The total amount being requested is $35,000 including $5,000 for administration of the program.
•Regional Financial Resources
oHousing Endowment and Regional Trust (HEART) provides programs, including First-Time Homebuyer down payment assistance loans, loans to nonprofit developers to build or renovate affordable apartments near transit, and accessory dwelling unit (ADU) plans and handbook.
oHIP Housing, under agreement with the City, provides a Home Sharing program that matches people who have space in their home to share, with people who are searching for an affordable place to live. HIP also provides a Self Sufficiency Program that provides housing scholarships and intensive trauma-informed case management to low-income parents.
oThe Bay Area Housing Finance Authority (BAHFA) was established by Assembly Bill 1487 in 2019. Several pilot programs have been initiated, including a pipeline pilot to provide an inventory of affordable housing projects in the pipeline but for which not all funding is secured, preservation programs, and anti-displacement pilot programs. The primary focus is on the 2024 Bay Area Affordable Housing Bond, a potential regional bond measure for the November 2024 ballot to generate $20 billion to build more affordable homes and keep existing homes affordable. Of the proceeds, $2.1 billion is expected to be allocated to San Mateo County. Each county receiving direct funds from the Bond must adopt expenditure plans describing how they will use their funds and the outcomes they hope to achieve. The county plan would be approved by the Board of Supervisors and must demonstrate that the county has consulted with all cities in their county that are not receiving a direct allocation of funds. The county plan would then be required to be approved by BAHFA.
•State and Federal Financial Resources
oLocal Housing Trust Fund (LHTF) Program, administered by HCD, will provide $53 million in their 2024 NOFA in matching grants to established Local Housing Trust Funds. HCD issued the 2024 NOFA in July with applications due in September. 15% of the funds are reserved for new LHTFs. Program funds may be used for construction loans and/or permanent financing loans for affordable rental housing, emergency shelters, permanent supportive housing, transitional housing, and 7 2
9 affordable homebuyer/homeowner projects, including ADUs/JADUs. The minimum request from a new LHTF is $500,000; maximum request is $5 million.
oProhousing Incentive Program (PIP), administered by HCD, creates incentives for jurisdictions that are compliant with State Housing Element Law and that have enacted specific prohousing policies. These incentives take the form of additional points or other preferences in the scoring of applications for competitive housing and infrastructure programs. In August 2024, 19 jurisdictions received more than $15 million. The next round of applications will be due in December 2024.
oThe California Tax Credit Allocation Committee (CTCAC) allocates federal and state Low-Income Housing Tax Credits (LIHTC) to the developers of affordable housing for households at 30% to 80% of median income. This is a competitive process. Metro Senior Apartments, Miramar Apartments, and Alma Point Senior Apartments utilized tax credits.
oCommunity Development Block Grant (CDBG) is a federal program providing funds to jurisdictions that meet certain population thresholds. The jurisdiction can use the funds for a wide variety of purposes such as social services, capital projects, and affordable housing developments. Foster City does not meet the 50,000-population requirement to be an “entitlement city” and is eligible to apply to receive funds through the County. oPermanent Local Housing Allocation (PLHA) funds, similar to CDBG, are available for a variety of projects and programs that assist in addressing housing needs. The city is able to participate through the County. oSection 8Housing Choice Voucher program is a federal program of the Department of Housing and Urban Development (HUD) administered by the San Mateo County Housing Authority. The voucher provides rental subsidies to low-income households to pay the difference between 30% of their income and the federally approved payment standard. The program allows households to find their own housing. Foster City adopted Chapter
5.72 in 2013 requiring landlords of a structure with more than ten units to accept Section 8 and other types of rental vouchers.
oVeterans Affairs Supportive Housing Voucher (VASH) program combines HUD’s Housing Choice Voucher rental assistance for homeless veterans with case management and clinical services provided by the Department of Veterans Affairs.
Based on the needs identified in the Housing Element, the Roadmap utilizes the following guiding principles:
1.Leverage Funding: actively explore new funding sources and leverage existing 7 2
9 funding by pursuing matching funds to maximize the City’s ability to provide funding for programs.
2.Encourage Production: create financial and expedited application incentives for developers and homeowners to facilitate production of units; engage in strategic partnerships with nonprofit agencies and developers.
3.Facilitate Special Needs: develop incentives and reduce barriers to access for seniors and those with special needs or disabilities. Engage in strategic partnerships with nonprofit agencies and developers.
4.Support Preservation: create incentive programs and improvements in communication of services available to assist owners in preserving and maintaining their housing units.
5.Protect Tenants: ensure that planned and existing market rate and below market rate rental units are well managed and in compliance with laws, including fair housing and anti-discrimination laws, regulatory agreements, policies, and BMR (below market rate) Guidelines.
6.Promote Sustainability: focus on sustainability, including energy efficiency and conversation, water conservation, walkability, access to public transit, lowering greenhouse gas emissions, and supporting climate change initiatives.
Strategies and Actions
Based on the required Housing Element implementation programs, analysis of financial and staffing resources, the Housing Element Implementation Roadmap includes the following recommended strategies and actions for inclusion in the Housing Element Implementation Roadmap:
A. Obtain and Leverage Funding
1. Leverage available City funding by using it as a match to obtain grants and loans for housing unit production and other programs.
The City’s recent creation of the LHTF, facilitates the ability to leverage existing commercial linkage fee funds to apply for the State’s LHTF NOFA. Programs utilizing the State LHTF must comply with State LHTF program requirements, including income targeting and prevailing wage requirements.
Staff is preparing an application for HCD’s 2024 LHTF NOFA, due in September 2024. If awarded to the city, funds must be distributed by the City in the form of loans. Proposed uses of the funds include (see Table 2 below for draft funding amounts proposed; also reference Table 8 in the Roadmap):
•Assistance to housing developers of very low- and low-income units (H-A-5-e) 7 2
9 •Low-income homeowner rehabilitation loan program (H-B-2-a) •ADU financial incentive program (H-D-4-b)
If the application for the LHTF NOFA is not successful, staff will prepare a revision of the Roadmap and return to the City Council for direction.
2. Prioritize at least some funds to provide incentives for low income ADUs as the option most likely to result in new units with limited City funds.
This is part of the proposal for HCD’s 2024 LHTF NOFA. Funds would be used for low interest loans in exchange for a 10-year commitment that the ADU would be rented at affordable rates.
3. Prioritize some funds to offer financial subsidies for partnerships with housing developers.
This is part of the proposal for HCD’s 2024 LHTF NOFA. Funds would be used for low interest loans to the housing developers for the creation of affordable housing units.
4. Create and implement a plan for rehabilitation of EUPP homes for supportive housing.
The County has awarded Foster City nearly $200,000 as a loan from the County of San Mateo from their 2024 NOFA. These funds would be used to rehabilitate two of the City’s EUPP homes to prepare them for future use for supportive housing. However, staff recently learned from the County that there will be an additional requirement for an expanded environmental review for the project at an additional cost of 20% or more of the project cost. Therefore, staff recommends delaying use of the funds, which will likely require a future application, to give staff time to explore the potential for future County NOFAs to fund rehabilitation of the additional four EUPP units to consolidate the environmental review to one project, and to prepare a long-term strategy for the EUPP units for City Council guidance and review.
5. Obtain funding for preservation of units for low-income households and those with special needs.
This is part of the proposal for HCD’s 2024 LHTF NOFA. Some of the funds would be used for low interest loans to lower-income owners to improve their homes.
Look for additional funding in the form of loans or matching grants to assist low- income households or partnerships with nonprofits that can assist low income and special needs households.
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9 6.Obtain funding for Housing Element programs such as programs requiring workshops, significant outreach, acquisition of software, and financial incentives (e.g. energy efficiency).
A tenant-landlord education workshop is scheduled for August 28, 2024 in partnership with Project Sentinel.
7.Monitor funding sources at the local, state, and federal level for potential sources of funding.
Staff are continually monitoring funding sources at the local, state, and federal level for potential opportunities.
Staff recommends exploring the ProHousing Incentive Program (PIP) for the next round of funding.
Specific funding opportunities include the proposed Bay Area Affordable Housing Bond Ballot Initiative for affordable housing, which would provide $2.1 B to the County of San Mateo. The initiative is on the November 2024 ballot.
B. Provide Incentives
1.Provide administrative incentives to developers and property owners, consisting of streamlined protocols and requirements and reduced fees for and permitting.
Staff has implemented a number of administrative streamlining efforts and continues to make improvements to forms, protocols, and the City’s website and to create expedited processing opportunities for specific programs.
2.Provide financial incentives to facilitate and encourage production of units such as subsidies for below market rate unit production, especially for extremely low and very low income units (including ADUs/JADUs), subsidies for 100% affordable projects, and incentives to reduce the cost of compliance such as waiver of rental registry fees for projects that meet certain conditions. Staff held a roundtable with nonprofit and for-profit housing developers in June 2024 to learn more about constraints and to explore ways the City can provide incentives to facilitate housing production.
For funding incentives, staff will research grants and NOFAs and conduct an analysis on potential opportunities for subsidies or fee waivers based on existing fund balances and potential NOFA funding opportunities. Subsidies or low-interest loans for ADUs/JADUs are likely to be the most cost effective subsidies to produce new units if owners will accept the deed restriction requirement that is a term of HCD’s LHTF program.
For the September 2024 application to HCD for LHTF matching funds, draft 7 2
9 proposed uses of the LHTF funds include:
a. Assistance to housing developers of very low- and low-income units b. Low-income homeowner rehabilitation loan program (preliminary proposal is up to $100,000 loan at 3% interest, deferred)
c. ADU financial incentive program (preliminary proposal is up to $100,000 loan at 3% interest, deferred)
C. Form Partnerships
1.Conduct extensive outreach to both for-profit and non-profit developers and owners to form partnerships and promote development of opportunity sites.
The City will need to be creative in partnering with developers to ensure that it meets both the above-moderate target of 777 units and the below market rate target of 1,119 units. Incentives to help improve the financial feasibility of projects, such as long-term subsidies, or the acquisition of land need to be considered.
2.Explore flexibility in implementation of the City requirements, such as assistance with impact fee payments or other requirements, that may assist in financing of housing development.
3.Look for opportunities to partner with affordable housing providers on 100% affordable housing developments. These types of developments are more likely to obtain competitive funding from county, state, and federal sources. Such developments bring the City closer to meeting its RHNA targets for affordable units.
D. Monitor Constraints to Implementation
1. Continue roundtable discussions with housing developers to understand potential ways that the City can lessen constraints to housing development.
Examples of key constraints include land costs, construction costs, prevailing wage requirements, and financing limitations. Staff held the first in a series of roundtable discussions with nonprofit and for-profit housing developers in June 2024 to learn more about constraints and to explore ways the City can facilitate housing production.
Funding Summary
Based on the analysis of funds available and the outlined strategy above, the Roadmap includes a funding strategy to utilize existing affordable housing funds together with matching funds to the extent feasible as shown in Table 2. This proposal includes using
5.49 million in City funds of the available $8.0 million, including $4,675,000 of the $5,405,386 in Fund 137 Commercial Linkage Fee, which has a five-year time limit from the date of each receipt. The funding and implementation of associated programs would 7 2
9 be spread out over the six years remaining in the 2023-2031 Planning Period.
The funding strategy outlined in Table 2 may change as additional financial resources are secured or other conditions change, including not being successful in obtaining an award of HCD LHTF monies. Staff will also collaborate with the City Attorney’s office on a more detailed review to ensure that the proposed uses of the funds are consistent with any restrictions for the specific funding sources. Staff is not proposing any spending from Fund 124 at this time in order to maximize the funds spent from Fund 137 Commercial Linkage Fee that have a time limit. The use of Fund 124 may be revisited for future programs.
Table 2: Proposed Funding Summary by Program
Conclusion
Staff is seeking direction from the City Council on the draft Housing Element Implementation Roadmap, including:
1. Does the City Council agree with the Guiding Principles presented in the Roadmap?
2. Does the City Council agree with the key strategies identified?
3. Should programs be added or subtracted from the Table 2, "Proposed Funding Summary by Program" as proposed for funding at this time?
4. Are the funding amounts in Table 2, "Proposed Funding Summary by Program" generally acceptable?
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9 CEQA
The consideration of the Housing Element Implementation Roadmap is exempt from CEQA under Section 15262 Feasibility and Planning Studies. The actions to implement the Housing Element are within the scope of the Housing and Safety Element Updates Environmental Impact Report (EIR) certified by the City Council on May 22, 2023 by Resolution No. 2023-48.
FISCAL IMPACT
The Housing Element Implementation Roadmap includes recommendations for spending from several of the city’s affordable housing funds. This is consistent with the purposes of these funds, including the requirement to spend Commercial Linkage Fee revenues within a specified timeframe.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 – Draft Housing Element 2023-2031 Implementation Roadmap