DATE: December 6, 2022
TO: Mayor and City Council
FROM: Assistant City Manager
SUBJECT: Adopt Resolutions Authorizing the City Manager to: (1) Accept and Appropriate Funds Awarded by the California State Legislature under Assembly Bill 179 in an Amount up to $5.4 Million for the City’s Scattered Site Housing Program, and Negotiate and Execute Documents and Any Subsequent Amendments, Modifications, or Documents Thereto with the California State Department of Housing and Community Development; and (2) Negotiate and Execute Loan Documents between the City of Hayward and Bay Area Community Services in an Amount Not-to-Exceed $5.4 Million to Acquire and Rehabilitate a Minimum of Three Single-Family Homes for the City’s Scattered Site Housing Program, for which the California Environmental Quality Act Does Not Apply
RECOMMENDATION
That the Council adopts two resolutions authorizing the City Manager to:
Accept and appropriate funds awarded by the California State Legislature under Assembly Bill (AB) 179 in an amount up to $5.4 million for the City’s Scattered Site Housing program, and negotiate and execute documents and any subsequent amendments, modifications, or other documents thereto with the California State Department of Housing and Community Development (HCD) regarding acceptance of the funds (Attachment II); and Negotiate and execute loan documents between the City of Hayward and Bay Area Community Services (BACS) in an amount not-to-exceed $5.4 million for the City’s Scattered Site Housing program (Attachment III).
SUMMARY
On January 25, 2022, Council adopted Resolution 22-030 authorizing a joint application with BACS for the State Homekey Program to fund the City’s Scattered Site Housing program. The program converts single family homes to supportive shared housing, bringing housing for those experiencing chronic homelessness into existing residential communities with proximity to services, transport, and social connections. Acquisition of at least three homes will provide long term, affordable housing with access to supportive services for approximately 20 adults experiencing chronic homelessness. The City’s Homekey Round 2 application was denied for not meeting the threshold requirement of having site control and property appraisals at the time of application and staff have since worked with HCD to identify ways to make future applications more competitive.
On June 30, 2022, the Governor approved AB 179, the Budget Act of 2022, which included an award to the City of Hayward in the amount of $5.4 million for the City’s new Scattered Site Housing program, despite the Homekey denial. Since the award was made to the City to fund the Scattered Site Housing program, the Council must authorize acceptance of the funds and allocation of the funds to the project. The California Environmental Quality Act (CEQA) does not apply to the Scattered Site Housing Program, as the program is a ministerial project.
Additionally, staff recommends that Council authorize the City Manager to negotiate a loan agreement with BACS to use the recently awarded State funds for the City’s Scattered Site program to make down payments on a minimum of three single-family properties. Staff proposes making a loan to BACS for the program, instead of a grant, to allow for the possibility that the City may be successful at obtaining future Homekey funds for the program and therefore, be able to establish a revolving loan fund to acquire additional homes for the program.
In sum, staff recommends that Council adopt resolutions authorizing the City Manager to: (1) accept and appropriate the funds, and negotiate and execute any executing documents with HCD for up to $5.4 million in funds awarded through AB 179 for the City’s Scattered Site program; and (2) execute a loan agreement of up to $5.4 million to BACS to acquire and rehabilitate a minimum of three single-family homes for the program consistent with AB 179.
BACKGROUND
On January 25, 2022, Council adopted Resolution 22-030 authorizing a joint application with BACS for the State Homekey Program to fund the City’s Scattered Site Housing program. The Scattered Site Program is a shared housing model that creates deeply affordable housing by preserving single family homes in Hayward neighborhoods. Residents get their own locking bedroom door and share co-living spaces like the kitchen, living room, and yard. Homes are purchased in proximity to essential services like grocery stores and pharmacies and residents have access to a full suite of supportive services from BACS and other non-profit partner agencies. The model is cost-effective, as the homes are owned and maintained by BACS and do not require extensive construction or long-term operating costs. Each home provides permanent affordable housing to four to six individuals. Acquisition of at least three homes will provide long term, affordable housing with access to supportive services for approximately 20 adults experiencing chronic homelessness.
The City’s Homekey Round 2 application was denied for not meeting the threshold requirement of having site control and property appraisals at the time of application. Since then, staff have been working with HCD to make recommendations for revising guidelines for Homekey Round 3 that reduce the risk applicants must take for scattered site applications by making substantial capital commitments without guarantee of reimbursement. HCD will not release the Round 3 Notice of Funding Availability (NOFA) until Spring 2023, so it is currently unclear if the requirements that currently limit scattered site applications will still be in effect for Round 3. Presuming the requirements will still apply, staff has been working with HCD and BACS to identify ways to make the application more competitive, which includes acquiring properties in advance of applying to Homekey.
On June 30, 2022, the Governor approved AB 179, the Budget Act of 2022, which included an award to the City of Hayward in the amount of $5.4 million for the Scattered Site Housing program, despite the Homekey denial. The City will work with HCD to execute any executing documents to receive the funds and allocate them to the program.
DISCUSSION
Staff recommends utilizing the $5.4 million approved under AB 179 to fund the acquisition of the City’s first three homes under the proposed Scattered Site program, in partnership with BACS, and consistent with the previous Homekey application. The funds awarded to the City under AB 179 will be used as down payment or acquisition loans to BACS to help them acquire a minimum of three single family homes. The AB 179 funds will be loaned to BACS (as opposed to granted) because there is the potential for the City to receive funds for this program from future Homekey rounds that could be used to repay the loan to BACS. By acquiring the homes in advance of Homekey Round 3, the City will also be able to demonstrate site control on the application to ensure compliance with threshold requirements and increase the strength of a future Homekey application.
Should the City receive a future Homekey Round 3 award, the funds could be used to create a revolving loan fund and repay the City for the AB 179 down payment/acquisition funds, which then could be used to fund additional Scattered Site program home acquisitions. Should the City not receive a Homekey Round 3 award for the program, the loan could be converted to a long-term deferred loan payable when the property is sold or no longer used for the intended purposes. Additionally, any remaining funds could be provided as a grant to be used as an operating reserve to support the long-term viability of the project by covering the difference between the operating costs and tenant paid affordable rent.
Staff recommends that Council adopt the attached resolutions authorizing the City Manager to:
Accept and appropriate $5.4 million awarded through AB 179, and execute any executing documents with HCD for up to $5.4 million awarded through AB 179 for the City’s Scattered Site Housing Program; and Negotiate and execute loan documents between the City and BACS in an amount not-to-exceed $5.4 million to acquire a minimum of three single family homes.
ECONOMIC IMPACT
The City and local community experienced adverse economic impacts related to the COVID-19 crisis, particularly relating to housing costs, homelessness, and housing instability. National data indicate increases in risk factors that lead to homelessness, including increased food insecurity and the inability to pay rent or mortgage. There is a positive economic impact from reducing homelessness and severe housing cost burden, which would be achieved through leveraging the $5.4 million in AB 179 funds for the Scattered Site program.
FISCAL IMPACT
This item has no General Fund impact. The anticipated $5.4 million in AB 179 funds do not require a matching contribution. Additionally, staff anticipates that the Homekey Round 3 award could cover the full cost of acquisition and rehabilitation for the homes purchased with AB 179 funds and create the opportunity to establish a revolving loan fund. Should the City not receive a Homekey Round 3 award, AB 179 funds will be available to cover the full cost of acquisition and rehabilitation.
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):
2b.
Implement the Homelessness Reduction Strategic Plan
8b.
Apply for state housing funding to support strategic partnerships and Council Priorities.
PUBLIC CONTACT
Pursuing Homekey funding to support innovative, dedicated homeless housing projects was identified as a priority project in the Let’s House Hayward (LHH) plan. The LHH plan was developed through best-practices research and community engagement with a lens for racial equity and empowering individuals and families experiencing homelessness. It creates a strategic framework that better positions the City to address homelessness and seek funding for projects identified and prioritized through this process. The LHH plan was intentionally created to identify a pipeline of community-informed policies and programs for the City to embark upon, particularly those with expedited timelines.
Staff presented on the Scattered Site program in two public meetings as part of the Homekey application process., Additionally, the Homekey application requires detailed community outreach narrative. Staff will work closely with BACS to conduct targeted community outreach once properties are identified for the scattered site program.
NEXT STEPS
If authorized, the City will execute any documents with HCD to receive then accept and appropriate the AB 179 award. Following receipt of funds, the City Manager will negotiate and execute a loan agreement for down payment/acquisition with BACS. BACS will then enter into purchase agreements for a minimum of three properties and the City will fund the loans. Concurrently, the City and BACS will prepare an application for Homekey Round 3, which is anticipated to be due in Spring 2023. Staff will return to Council to provide a status update and request authorization to submit the Homekey Round 3 application in Spring 2023.
Prepared by: Amy Cole-Bloom, Management Analyst
Recommended by: Jennifer Ott, Assistant City Manager
Approved by:
_____________________________________
Kelly McAdoo, City Manager
December 16, 2021, Homelessness-Housing Task Force Staff Report and Materials: https://hayward.legistar.com/LegislationDetail.aspx?ID=5360310&GUID=71CA4C4F-CC27-410E-AEDE-27F03B400C19&Options=&Search= January 25, 2022, City Council Staff Report and Materials: https://hayward.legistar.com/LegislationDetail.aspx?ID=5390892&GUID=B276DA40-2A6A-46C1-A313-28235E575135&Options=&Search=