DATE: December 6, 2022
TO: Mayor and City Council
FROM: Assistant City Manager
SUBJECT: Adopt a Resolution Amending Resolution 22-087 to Apply as Joint Applicant with EAH, Inc for the California State Department of Housing and Community Development California Housing Accelerator Limited Accelerator Project Gap Funding Program
RECOMMENDATION
That the Council adopts a resolution (Attachment II) amending Resolution 22-087 (Attachment III) and restating the City Manager’s authorization to apply as a joint applicant with EAH, Inc. for the State of California Housing and Community Development Department (HCD) California Housing Accelerator Limited Accelerator Project Gap Funding Program (LAPG Program) and increasing the amount of funding not-to-exceed $51 million to support the Pimentel Place development of 57 affordable housing units.
SUMMARY
In October 2022, HCD announced the availability of approximately $45 million under the LAPG Program for the purpose of supporting previously awarded Tier 1 and Tier 2 California Housing Accelerator projects that have not yet closed on their construction loan, and which cannot proceed due to funding gaps resulting from increased costs post Accelerator award. City staff and EAH, Inc. have determined that Pimentel Place meets the eligibility requirements for the LAPG Program and could receive up to $4.5 million in grant money to cover eligible project costs. A successful application to HCD’s LAPG Program would close the funding gap for Pimentel Place and would allow the project to begin construction by spring 2023. Staff recommends that the City, as a joint applicant with EAH, Inc., apply for the LAPG Program to support the development for 57 units of affordable housing at Pimentel Place.
BACKGROUND
On April 30, 2018, the City issued a Notice of Funding Availability (NOFA) for affordable housing development projects. EAH, Inc. submitted a proposal for Pimentel Place, formerly known as Matsya Villas, and was awarded funding from the City’s NOFA. The project has since then advanced by securing funding from other available sources. On August 20, 2021, Pimentel Place received approval of planning entitlements through the streamlining provisions of SB 35.
Project Funding to Date
On October 2, 2018, the Council approved a $2 million loan to EAH, Inc. for the development of Pimentel Place, which will provide 57 units of affordable housing to very low- and low- income households. Since the City funding approval, EAH has been proactively pursuing applicable funding, and the project has been awarded:
Over $5.3 million under the Measure A1 Rental Housing Development Regional Pool $400,000 in HOME funds from Alameda County
Over $8 million from the HCD Multifamily Housing Program Over $4 million from the HCD Infill Infrastructure Grant Program Approximately $7 million from the HCD Housing for Healthy California Program Over $46 million from the California Housing Accelerator Program – Tier 2 The project was thought to have complete funding and the ability to start construction once awarded the California Housing Accelerator funds; however, because of increased construction costs and interest rates post the Accelerator award, the project has subsequently identified a funding gap of approximately $4.5 million, and, as a result, is unable to proceed with their construction loan closing and start construction. The funding available under the LAPG Program would close the project’s financial gap and construction would start no later than 180 days from the supplemental award letter date with an anticipated completion of construction date for Fall 2024.
Limited Accelerator Project Gap Funding
There is a backlog of affordable housing developments with HCD awards that are shovel- ready and that are unable to move forward due to funding gaps resulting from the current shortfall of available bond allocations and low-income housing tax credits, especially 4% tax credits. In response to the current backlog of shovel-ready affordable housing projects and to help address the State’s long-term affordable housing crisis, on September 16, 2021, the State announced availability of approximately $1.6 billion in California Housing Accelerator Program (CHA Program) funding for eligible projects. Funding available under the CHA Program is from the Coronavirus State Fiscal Recovery Fund (CSFRF), established by the federal American Rescue Plan Act of 2021. The CHA Program’s purpose is to enable eligible projects to quickly begin construction and reduce the amount of time and money spent on producing affordable housing with the overarching goal to accelerate development of new affordable housing for those most in need.
After closing the CHA Program, in October 2022, HCD announced, as a limited supplemental solicitation to the Tier 1 and Tier 2 solicitations, the availability of approximately $45 million in supplemental funding for the purposes of supporting previously awarded Tier 1 and Tier 2 California Housing Accelerator projects which have not yet closed on their construction loan and cannot proceed due to funding gaps resulting from unprecedented increased costs accrued post Accelerator awards. Funding available under the LAPG Program is derived from a combination of the CSFRF, established by the federal ARPA and the state General Fund.
The LAPG Program is scheduled to announce awards at the end of November 2022 which would require awarded projects to construction to no later than 180 days from the supplemental award letter date. The projects would also be required to complete permanent loan conversions no later than November 2026.
Housing Element and Regional Housing Needs Allocation Compliance Local jurisdictions report progress annually on meeting their Regional Housing Needs Allocation (RHNA) goals which are included in the City’s Housing Element. Table 1 demonstrates progress made toward meeting Hayward’s RHNA goals for the period between 2015-2023 as of the last report year (2021), which is shown in the column titled “Reported 2020.” The State allows local jurisdictions to “report” the units when building permits are issued to construct the units. The “Approved” and “Pending Approval” columns provide an estimate of potential compliance by counting both entitled projects and projects going through the entitlement process.
Pimentel Place will add 57 affordable housing units to the City’s housing stock, which would help the City to meet its RHNA goals for low- and very low-income households. The income targeting is expected to change based on the requirements of all the funding sources utilized to fully fund the project. The most restrictive income targeting will apply. Generally, projects with low average affordability levels are more competitive for state funding sources, which means the project may serve a lower-income population than initially proposed. Pimentel Place will help the City meet the following goals established in the City’s Housing Element:
Assist in the development of housing affordable to low- and moderate-income households; Promote equal housing opportunities for all persons; and Provide for the special housing needs of seniors, persons with disabilities, large families with children, single female-headed households, and persons who are homeless.
Table 1 - 2023 RHNA Goal Progress in the City of Hayward As of 2020, the City already exceeded its goal for above moderate income units. If permits are issued for all projects currently in the development pipeline, the City is on track to nearly comply with the low-income category and make progress towards very low and moderate categories.
DISCUSSION
In response to the LAPG Program, EAH Inc. and staff have determined that Pimentel Place meets the eligibility requirements for the LAPG Program and could receive up to $4.5 million in grant money to cover eligible project costs. A successful application to the LAPG Program would provide additional needed project funding to close the funding gap and quickly begin construction. A description of the LAPG Program and the assistance it will provide to the project is further described in the following sections.
Description of the Program Eligibility Criteria
The LAPG Program incorporates by reference the requirements, standards, and rules as set forth in the prior Tier 1 and Tier 2 CHA Program. Under the CHA Program, grant funds are available to eligible multifamily housing projects that have already an existing HD loan commitment from one or more sources of HCD loan programs. Pimental Place meets these requirements as the Project has received a Tier 2 CHA Program award and received funding under three other HCD loan programs. HCD requires an authorizing resolution from the City within 30 days of the application deadline (November 14, 2022).
Funding is exclusively for eligible costs categorized under the federal low-income housing tax credit program.
Project Description
Pimentel Place is located at 2nd and C Streets. The site is currently a vacant lot following the demolition of a vacant commercial building in 2019. The project will consist of 57 units of residential apartments with two non-residential spaces, 800 sf and 1600 sq. ft. in size. The project amenities include on-site laundry facilities, community room, computer learning center, indoor kids’ play area, an outdoor roof deck, and an on-site resource coordinator to provide coordination of services related to health, nutrition, education, employment, transit, and other services for residents.
The project will provide approximately 56 units of affordable housing for a term of 55 years. Additionally, the project will provide at least 6% of the units affordable to low- and very low- income households in perpetuity in compliance with the City’s Affordable Housing Ordinance. All units, excluding the manager’s unit, will serve income eligible households earning a range from $20,000 to $114,240 (20% to 80% AMI levels). Attachment III provides the income limits associated with each income category for Alameda County. The project’s unit mix includes: 11 one-bedroom apartments; 27 two-bedroom apartments; and 18 three-bedroom apartments; and one on-site manager’s unit.
If this resolution is approved tonight and the project is awarded funds, staff will transmit the authorizing resolution to HCD, enter into a standard agreement with HCD, close loans with the developer for previously committed City funding in order to start construction t in spring 2023 and have full occupancy by winter 2024.
ECONOMIC IMPACT
The proposed affordable units support housing stability and will reduce the cost burden for very low- and low-income Hayward residents for a minimum of 55 years.
FISCAL IMPACT
The $51 million LAPG funds do not require a matching contribution. Acceptance and appropriation of the LAPG Program will completely fund Pimentel Place. There is no fiscal impact to the General Fund.
If awarded, the grant funds will reimburse costs directly to the EAH, Inc. While the City will be party to the standard agreement with HCD, EAH, Inc. will cover the costs associated with the development of Pimentel Place. Staff has requested authority to receive the grant award consistent with the template resolution provided by the State but does not anticipate the need to receive the grant funds since the City will not be paying for the project costs.
STRATEGIC ROADMAP
This agenda item supports the Strategic Priority of Preserve, Protect & Produce Housing. Specifically, this item supports the implementation of the following project(s):
Project 8, Part 8b: Apply for state housing funding to support strategic partnerships and Council Priorities.
PUBLIC CONTACT
In accordance with entitlement requirements, notices for this project were sent out to all property owners within a 300-foot radius of the project site. Additionally, as a requirement of the 2018 NOFA, EAH, Inc. held public outreach meetings to introduce the organization and the proposed project to the community, and to solicit input from the community.
NEXT STEPS
If authorized, staff will transmit the authorizing resolution to HCD. If awarded grants, staff will coordinate with EAH, Inc. to draft and enter into a standard agreement and all other necessary documents for the disbursement of funds.
Prepared by: Jane Kim, Housing Development Specialist
Recommended by: Christina Morales, Housing Division Manager Jennifer Ott, Assistant City Manager
Approved by:
Kelly McAdoo, City Manager