CITY OF OAKLAND
TO: Jestin D. Johnson
City Administrator
SUBJECT: Housing Accelerator Fund
City Administrator Approval
RECOMMENDATION
AGENDA REPORT
FROM: Emily Weinstein
Director, Housing &
Community Development
DATE: May 29, 2024
Date:
Staff Recommends That The City Council Adopt a Resolution Authorizing the City Administrator To:
(1) AUTHORIZING A $10 MILLION UNSECURED RECOURSE LOAN TO THE HOUSING
ACCELERATOR FUND TO ESTABLISH A FUND TO FINANCE AFFORDABLE HOUSING
ACQUISITION AND REHABILITATION, AND APPROPRIATING MEASURE U BOND FUNDS FOR THIS PURPOSE;
(2) AUTHORIZING AND APPROPRIATING $30 MILLION IN MEASURE U BOND FUNDS FOR
PERMANENT FINANCING TO TAKE-OUT THESE ACQUISITION AND REHABILITATION LOANS;AND
(3) MAKING RELATED CALIFORNIA ENVIRONMENTAL QUALITY ACT FINDINGS
EXECUTIVE SUMMARY
The proposed Resolution would authorize the City Administrator to request $10 million of Measure U funds and the authority to enter an unsecured loan with the Housing Accelerator Fund (HAF), a non-profit Community Development Financial Institution, to leverage private dollars from banks and philanthropists, and administer and fund acquisition and rehabilitation loans as part of the City's Acquisition and Conversion to Affordable Housing (ACAH) Program.
This loan would be an unsecured, recourse obligation of the HAF with "first-loss" features for Oakland projects. Staff is also requesting $30 million of Measure U funds for take-out permanent financing of the acquisition and rehabilitation loans. These actions will build upon and improve the City's established ACAH program and accelerate City anti-displacement efforts in low-income neighborhoods experiencing gentrification.
CED Committee
June 11, 2024
Jestin Johnson (May 30, 2024 23:23 PDT)
May 30, 2024
Jestin D. Johnson, City Administrator
Subject: Housing Accelerator Fund
Date: May 29, 2024
Attachments (2):
A. Housing Acceler ator Fund Background
B. ACAH Projects from 2017 - Present
Prepared by:
Meghan Hori, Housing Preservation Services
Manager
Candace Latigue, ELDE/Housing Development
Coordinator IV
CED Committee
June 11, 2024
Jestin D. Johnson, City Administrator
Subject: Housing Accelerator Fund
Date: May 29, 2024
Attachment A
Housing Accelerator Fund Background
CED Committee
June 11, 2024
Attachment A: Background Information on the Housing Accelerator Fund
The Housing Accelerator Fund (HAF) is a qualified existing non-profit CDFI that raises capital, leverages funds, reduces capital costs, provides loan underwriting, accelerates and improves the availability of financing for public and private-party affordable housing acquisitions and rehabs. HAF was the solution in addressing San Francisco’s affordable housing shortage, specifically providing anti-displacement bridge loans for the SF Small Sites Preservation Program. Outside of San Francisco, HAF also closed Bay Area regional loans in Marin and Santa Clara counties supporting nearly 200 units of affordable housing.
Mission
The San Francisco Housing Accelerator Fund’s (HAF) mission is to invest in the preservation and expansion of quality affordable housing and community facilities. The HAF accelerates the production and preservation of affordable housing for California's economically disadvantaged households, individuals, and communities by lending to, investing in, and directly acquiring real estate assets.
Regional Expansion
The HAF successfully achieved its launch goals within the City of San Francisco, reaching and exceeding the original target of $100 million invested and 1,500 permanent affordable homes in San Francisco in its first five years. In response to demand from other communities, and after extensive stakeholder conversations, HAF’s Board voted in 2022 to greenlight expansion to regional lending, serving the greater SF Bay Area.
Expanding regionally will allow the HAF to scale its lending and catalyze impact more broadly. After careful research of the markets and opportunities, the Fund piloted multiple regional loans this past year, focusing on projects and communities where the HAF’s capital will create the greatest difference in the lives of those who need it the most. A $17 milli on dollar loan – with the HAF as lead lender ($10 million) and Housing Trust Silicon Valley contributing the remaining $7 million – to Mid-Peninsula Housing marked the HAF’s first regional project, supporting the acquisition of the 80 -unit affordable housing property, Sherwood Oaks, in Fairfax (Marin County). The acquisition of this former market rate property prevents the potential displacement of current residents and ensur es permanent affordability for low -to-middle income residents in Marin County. Since then, HAF has closed a second regional loan to Mercy Housing California and Abode Communities for the development of a 110 -unit educator housing community in Palo Alto (Santa Clara County). HAF is excited to continue expanding our reach to support our partners and neighbors across the region.
Financial Strength
Since 2017, the HAF has invested $450 million to create 2500+ affordable housing units. The HAF’s outstanding loan portfolio grew ~5 times from $30 million in FY18 to $143 million in FY23 and loan commitments increased from $34 million in FY18 to $199 million in FY23. $70 million in loan commitments and outstanding portfolio as of FY23 is associated with two large loans to create PSH as part of the CA Homekey Program.
The efficacy of the HAF’s financing and technical assistance is reflected in a strongly performing portfolio even as the HAF assumes higher risks than other lenders. Since inception HAF has experienced no loan losses.
Attachment A: Background on the Housing Accelerator Fund To date, the HAF has secured $365 million in capital for lending: $278 million of debt capital from private sources; an equity-like investment from the City of SF of $20 million at 0% for 20 years; and $88 million in grants for lending capital, including a $50 million grant in 2018 that resulted in the establishment of a wholly owned subsidiary, "HHF.” $161 million of the HAF’s debt capital came from secured, revolving credit facilities: a $100 million facility with JPMorgan (formerly First Republic Bank) and a $61 million facility with Citibank. $117 million of capital raised to date comes from balance sheet debt, from banks, foundations, and other private institutions.
These capital raises and resulting lending have produced significant year-over-year increases in total assets and net assets. Since FY21, the HAF's total assets increased from $150 million to $244 million in FY23 (total assets are net of intercompany transfers). In this period, net assets increased from $68 million to $99 million to produce a net asset ratio of 41%, improving the HAF's equity cushion even as debt capital increased from $83 million to $144.8 million.
There have been no material changes to HAF’s financial health that are not reflected in the most recent audited financial statements for FY23. Further, there have been no material weaknesses, deficiencies, findings or questioned costs identified.
Lending Procedures
To guide all phases of loan underwriting and processing, the HAF staff created detailed Underwriting Guidelines and a Loan Manual, both of which reference industry best practices and HAF staff’s extensive lending experience.
The HAF Board of Directors and Credit Committee (a subset of the Board), as well as the HAF’s multiple investors, retain approval rights for amendments to the documents. Key underwriting considerations include overall feasibility, specific project risks and proposed mitigants, the loan repayment source, and, as previously described, the strength and capacity of the developer. Following loan underwriting, HAF staff submit a full credit memorandum (as approved by the Chief Investment Officer and Chief Executive Officer) to the HAF’s Credit Committee for approval. Loans over $10 million require full Board approval.
Financial Planning and Operations
The HAF places high priority on internal controls as part of day-to-day fiscal activities. The HAF’s organizational structure, methods of assigning authority and responsibility, approach to management, personnel policies and practices, and external relations have been developed so as to provide strong operational and fiscal controls. The HAF’s procedures incorporate the necessary internal controls to safeguard the Company's assets. Other policies and procedures that guide the HAF and ensure responsible & transparent operations include the Fund’s Conflict of Interest Policy & Procedures & its annual independent audit.
The HAF prepares an annual budget that is reviewed and approved by the Board of Directors with Budget vs. Actual updates provided at each Board meeting. The HAF also provides quarterly lending and financial statement reports to investors. Impact reporting is completed and disseminated on an annual basis. The HAF engages an independent auditor to conduct an annual financial statement audit. Since inception HAF has received unqualified audit opinions. HAF engages Arther J. Gallagher & Co. to provide a full suite of insurance brokerage services. The HAF selected Gallagher based on their deep expertise and experience in providing risk management services in the affordable housing industry.
Jestin D. Johnson, City Administrator
Subject: Housing Accelerator Fund
Date: May 29, 2024
Attachment B
ACAH Projects from 2017 - Present
CED Committee
June 11, 2024
Attachment B
Acquisition and Conversion to Affordable Housing (ACAH) Project Awards, 2017-Present CLT/COOP?
Year of
NOFA Project Name Project Sponsor Address # of Units
# of
Affordable
Units City Funds
City Funds Per
Unit
Council
District
2017 Highland Palms EBALDC 1810 E. 25th Street 23 22 $3,000,000 $130,435 2 2017 10th Avenue Eastlake EBALDC 2515 10th Avenue 35 34 $5,000,000 $142,857 2 CLT/COOP 2017 812 East 24th Street OakCLT 812 East 24th Street 7 7 $974,150 $139,164 2 CLT/COOP 2019 OakCLT Scattered Site (107th/Wentworth/87th) Oakland
Community Land
Trust (OakCLT)
2242 107th Ave, 5330
Wentworth Ave, 1709 87th Ave 3 3 $849,616 $283,205 5
2019 10320 MacArthur Blvd Project
Richmond
Neighborhood
Housing Services 10320 MacArthur Blvd 17 17 $2,500,000 $147,059 7 CLT/COOP 2019 Harvest House OakCLT 5940 Hayes Street 1 1 $150,000 $150,000 6 CLT/COOP 2019 6470 MacArthur Blvd OakCLT 6470 MacArthur 2 2 $390,606 $195,303 6 CLT/COOP 2019 Newton House BACLT 285 Newton Street 2 2 $300,000 $150,000 2 CLT/COOP 2020 1534 29th Avenue OakCLT 1534 29th Avenue 14 14 $2,100,000 $150,000 5 CLT/COOP 2020 789 61st Street Coop NCLT 789 61st Street Coop 4 4 $1,200,000 $300,000 1 CLT/COOP 2020 1658 34th Avenue OakCLT 1658 34th Ave 4 4 $1,200,000 $300,000 5 2020 East Bay Capital Portfolio II Fund IV, LP EBALDC 430 Vernon St, 3465 Richmond Bl 40 39 $1,700,000 $43,590 1 CLT/COOP 2019 & 2020 Scattered Site (Hillside/Ritchie/76th) OakCLT 8020 Hillside Street; 2684 Ritchie
Street, 2735 76th Avenue 3 3 $900,000 $300,000 6
CLT/COOP 2019 & 2022 12th Avenue Cooperative
Bay Area CLT
(BACLT) 1432 12th Ave 7 7 $2,609,831 $372,833 2
CLT/COOP 2019 & 2022 6106-6108 Hilton St CLY Anti-Displacement Project Northern California
Land Trust (NCLT) 6106-6108 Hilton Street 16 16 $4,800,000 $300,000 6 CLT/COOP 2019 & 2022 Shadetree BACLT/SHADE 48 5th Ave 25 20 $4,700,000 $235,000 2 2019 & 2022 2000 36th Avenue The Unity Council 2000 36th Ave 55 54 $7,500,000 $136,364 5 2019 & 2022 524-530 8th Street
Housing
Consortium of East
Bay 524-530 8th Street 39 39 $7,500,000 $192,308 3
2019 & 2022 36th Ave Apartments The Unity Council 1921 and 2022 36th Ave 25 24 $7,500,000 $300,000 5 322 312 $54,874,203