Community & Economic Development Committee
February 27, 2024
AGENDA REPORT
TO: Jestin D. Johnson FROM: Emily Weinstein
City Administrator Housing and Community
Development Director
SUBJECT: Prohousing Incentive Pilot Program
Grant Application
DATE: February 12, 2024
City Administrator Approval Date:
RECOMMENDATION
Staff Recommends That City Council Adopt A Resolution Authorizing The City Administrator To Apply For, Accept, And Appropriate $1,390,000 In Funds From The State of California Department Of Housing And Community Development’s Prohousing Incentive Pilot Program For Capitalized Service Reserves for Affordable Housing.
EXECUTIVE SUMMARY
In December 2022, the City of Oakland (City) became the first community in the San Francisco Bay Area to receive the State of California’s (“State”) “Prohousing” designation. The Prohousing designation recognizes communities that have gone above and beyond the requirements of state law to produce more housing and especially more affordable housing. The State simultaneously launched a companion grant program available for communities that have received this Prohousing designation. After responding to the initial Notice of Funding Availability for this program, the City was awarded $2.39 million on May 9, 2023. With the launch of the second Notice of Funding Availability for the Prohousing Incentive Pilot Program on January 23, 2024, staff seeks authorization to apply for $1.39 million from this program. Staff propose the potential funding be dedicated to capitalized service reserves for permanent supportive housing units identified through the City’s Rapid Response Homeless Housing (R2H2) program and/or New Construction Notice of Funding Availability (NOFA). Service funding is an essential component of successful permanent supportive housing, and this grant represents a rare opportunity to seek State support for this need. This resolution would also authorize the City Administrator to distribute the funds for the intended purpose if the State issues the City an award.
BACKGROUND / LEGISLATIVE HISTORY
On May 17, 2022, the City Council approved 89197 C.M.S. to authorize an application to the State of California’s Prohousing designation program. On December 20, 2022, the State Department of Housing and Community Development (State HCD) announced that the City Jestin Johnson (Feb 14, 2024 12:21 PST)
Feb 14, 2024
Jestin D. Johnson, City Administrator
Subject: Prohousing Incentive Pilot Program Grant Application Date: February 12, 2024 Page 2
Community & Economic Development Committee
February 27, 2024
would receive its “Prohousing” designation in recognition of the City’s voluntary efforts to promote housing production and especially affordable housing production. The City’s Prohousing application cited a wide range of Oakland’s policies, practices, and programs, including the use of specific plans to streamline environmental reviews, several funding programs for affordable housing, and zoning changes. The City was the first jurisdiction in the San Francisco Bay Area to receive the Prohousing designation.
The Prohousing Incentive Pilot Program is a State HCD funding program that was created specifically for communities that received the Prohousing designation. The funding can be used for any housing and community development purpose allowed under State law and is therefore an unusually flexible funding source. During the first round of funding for this grant program in 2023, the City applied for and received $2.39 million. Due to adjustments in the State’s funding guidelines, the City is eligible to apply for $1.39 million in the 2024 Notice of Funding Availability. This number is based on a combination of the City’s population and the score of the original Prohousing designation application. The reduction from $2.39 million to $1.39 million of potential funding eligibility appears to be part of broader shift by the State to provide a larger number of communities with a smaller amount of funds via this grant program. This shift is unsurprising in light of the State’s constrained budget situation.
ANALYSIS AND POLICY ALTERNATIVES
The proposed resolution would authorize the City Administrator to apply to the Prohousing Incentive Pilot Program to advance the City’s objectives of housing, economic, and cultural security by supporting the construction of affordable housing. The funding in this grant could be applied towards a wide variety of housing and community development purposes, including but not limited to first-time homebuyer assistance, home rehabilitation, rental assistance, operating subsidy, or direct capital costs for interim or permanent affordable housing. However, staff recommends using this grant as capitalized service reserves for permanent supportive housing.
A capitalized service reserve is a lump sum awarded to a project that can be drawn on over an extended period of time to pay for service-related costs. A shortage of service and operating funding is one of the greatest barriers to the production of housing for unhoused Oaklanders, and the Prohousing Incentive Pilot Program is a rare opportunity to secure State funding for capitalized service reserves. Staff anticipate being able to put this additional service subsidy to immediate use in the City’s Rapid Response Homeless Housing (R2H2) program. If there is any service subsidy available after the R2H2 projects are funded, the capitalized service reserves could be used for homeless units under the City’s next New Construction Notice of Funding Availability.
In the Round 2 NOFA for the Prohousing Incentive Pilot Program, the State has announced their intention to prioritize funding for jurisdictions that have not yet received funds via this grant program. As of January 23, 2024, 36 jurisdictions had been awarded the Prohousing designation, of which 18 previously received funding via the Round 1 availability. With only $9.5 million available statewide for the Round 2 NOFA, it is quite likely funds in this NOFA will be exhausted before Oakland is able to receive any. However, State funding opportunities can be unpredictable at times, and staff recommend the City still seeks these funds.
Jestin D. Johnson, City Administrator
Subject: Prohousing Incentive Pilot Program Grant Application Date: February 12, 2024 Page 3
Community & Economic Development Committee
February 27, 2024
FISCAL IMPACT
If awarded, this grant would provide $1.39 million to the City for use as capitalized service reserves. The funding would be accepted and appropriated to the Oakland Department of Housing & Community Development Department, Grant Fund(s) to be determined and Project Code(s) to be determined.
PUBLIC OUTREACH / INTEREST
No outreach was conducted beyond normal Council noticing procedures as previous stakeholder engagement has identified service funding as a key bottleneck in producing Permanent Supportive Housing.
COORDINATION
This report was reviewed by the Budget Bureau and Office of the City Attorney.
SUSTAINABLE OPPORTUNITIES
Economic: If awarded, the grant would support the operation of permanent supportive housing units. These permanent supportive housing units would help Oakland residents exist homelessness and remain in the community.
Environmental: This item has no significant environmental impacts.
Race and Equity: According to the racial equity analysis of homelessness conducted by Oakland’s Department of Race and Equity1, African American Oaklanders experience disproportionate rates of homelessness compared to their percentage of the general population.
By providing more permanent supportive housing placements, this grant will help reduce the number of unhoused Oakland residents. This will consequentially reduce the impact of this racial disparity.
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Adopt A Resolution Authorizing The City Administrator To Apply For, Accept, And Appropriate $1,390,000 In Funds From The State of California Department Of Housing And Community Development’s Prohousing Incentive Pilot Program For Capitalized Service Reserves For Affordable Housing.
1 https://everyonehome.org/wp-content/uploads/2021/02/2021-Centering-Racial-Equity-in-Homeless- System-Design-Full-Report-FINAL.pdf
Jestin D. Johnson, City Administrator
Subject: Prohousing Incentive Pilot Program Grant Application Date: February 12, 2024 Page 4
Community & Economic Development Committee
February 27, 2024
For questions regarding this report, please contact Caleb Smith, Program Analyst III, at (510) 590-6275.
Respectfully submitted,
Emily Weinstein
Emily Weinstein (Feb 14, 2024 09:17 PST)
Emily Weinstein, Housing and Community
Development Director
Prepared by:
Caleb Smith, Program Analyst III, Housing and
Community Development