City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-00225 May 31, 2022
Title: Step Up in Sacramento-Veev/Lennar Donation Project- Land and Predevelopment Loan – Approval to Allocate Funds and Approval to Enter into a Funding Agreement (Two-Thirds Vote Required)
Location: District 5
Recommendation: 1) Pass a Motion by two-thirds vote waiving the 10-day posting requirement for contracts over $1 million under City Code section 4.04.020 (C) and Council Rules of Procedure Chapter 7, Section E.2.d.; and 2) adopt a resolution authorizing: a) the City Manager, or the City Manager’s designee, to establish the Step Up in Sacramento Affordable Housing Development Project (I02189040) (the “Project”); b) the City Manager, or the City Manager’s designee to appropriate $2,925,000 to I02189040 from the City Housing Trust Fund Commitment of Measure U Fund balance to the Revolving Loan Fund (Fund 2029); c) the City Manager, or the City Manager’s designee to negotiate, enter into, execute, and amend from time to time a $2,925,000 funding agreement comprised of City Housing Trust funds to Step Up on Second for the purpose of providing Step Up on Second a land and predevelopment loan for the Project; and d) the City Manager, or the City Manager’s designee, to perform all other actions related to the Project including executing related affordability agreement and other documents with Step Up.
Contact: Danielle Foster, Housing Policy Manager, (916) 808-1869, [email protected], Office of Innovation & Economic Development; Michael Jasso, Assistant City Manager, (916) 808-1380, [email protected], Office of Innovation & Economic Development
Presenter: Not applicable.
Attachments:
1-Description/Analysis
2-Residential Project Preliminary Summary
3-Resolution
Description/Analysis
Issue Detail: The City was approached by the Lennar Homes Foundation in Fall/Winter 2020 with a proposal from Lennar Homes Foundation to provide a modular homes demonstration project within the City of Sacramento utilizing the Veev Homes panelized home technology to showcase this option for affordable housing development. Over the course of time, sites were explored and the options and type of housing further refined through community conversations and partnership meetings including Step Up on Second, nonprofit housing organization, (as the long-term owner), Veev Homes (as the contractor), Lennar Homes Foundation (as the primary funder), and the City. Through these refinement meetings, there was consensus built around a 125-unit development focused on studios, one-bedroom, and some two-bedroom units to assist individuals, couples, and small families exiting homelessness or at-risk of homelessness with permanent affordable housing.
Lennar Homes has nearly 70 years of experience in housing development nationally and since 2001 has been bettering communities through its Lennar Charitable Housing Foundation by providing development and ongoing support to charities that serve individuals who are homeless or in transitional housing. Step Up on Second has nearly 40 years of experience in providing social services and housing to homeless individuals and families, with a focus on housing retention supports. Data across Step Up housing and services shows that 97% of residents housed and supported by Step Up are able to successfully maintain their housing after the first year of occupancy. Veev Homes is a vertically integrated real estate developer that provides a full array of development services on staff, including architectural & structural design, permitting, full modular build, installation and development. With their proprietary construction for modular development and second units, Veev is able to bring designs directly to the product line and does not face the same supply chain surprises or costs. Veev is able to automate and scale its construction paneling without relying on external sources and meets a nearly zero waste fabricated environment.
While design of the 125-unit modular home permanent supportive housing development is still preliminary and being modified to fit the site being negotiated, it is projected to include a mix of studios, and one and two bedroom units as detailed in Attachment 2. With the generous donation from Lennar Housing Foundation in the project development, the City has solely been requested to provide this $2,925,000 loan for the initial land purchase and predevelopment costs by Step Up. This is projected to result in a $25,000 to $30,000 per unit subsidy. The actions within this report will ensure the timely predevelopment and construction of this project, within Lennar timelines, so that this project is not relocated to another community.
Project Description
This project is proposed to be a modular housing development of 125 studio, one bedroom, and two bedroom permanent housing units with kitchens and bathrooms. Final design and layout will be subject to planning and environmental review, community integration, and architectural design as the project proceeds in predevelopment. These housing units on a 1.5- acre parcel, near light-rail, will offer affordable, transit-oriented permanent housing for individuals and families who are homeless or at-risk of homelessness, working to reduce the local homeless crisis. All homes developed in this community will be energy-saving, all electric, utilizing solar, resulting in lower operating costs and utility costs for residents. Final finishes printed on the homes and opportunity for mural art in the project will also be further considered during predevelopment and community conversations, as the modular housing is able to accommodate both options. Resident selection will incorporate the local Coordinated Access System (CAS) in partnership with Sacramento Steps Forward, the local Continuum of Care. An estimate of unit breakdown and affordability is included as Attachment 2 of this report.
Lennar Homes and Veev will provide all site development and construction of the homes, including community space, property manager and services space, and outdoor space for the residents. Step Up will provide a full package of social services to the community, as well as typical property and asset management. The City will have a 55-year affordability regulatory agreement in place with Step Up to ensure the ongoing maintenance of the property and its affordability.
Step Up will provide on-site supportive services within the permanent supportive housing community with a high commitment to the Housing First, evidence-based service model. This model focuses on meeting clients where they are at and working with them by providing the supportive services necessary to be successful in maintaining housing. All tenants in the community will be offered supportive services at no cost. Supportive services will include specific services and referrals regarding: engagement and assessment, benefits and income, community integration/participation, case management and program linkage (referrals), housing retention, life skills (housing keeping, budgeting, etc.), substance use counseling, recreational and social activities, and transportation. The Step Up Model of permanent supportive housing approach can be summed up in three words: “whatever it takes” for client success. The Step Up model has proven successfully nationally, with the organization engaged on permanent supportive housing developments throughout California, including a number of Homekey sites, as well as Georgia, Florida, and pending projects in other states.
Step Up has been working to finalize the Purchase and Sale Agreement (PSA) with the site owner in correlation with the City’s commitment to the project. The PSA includes the necessary due diligence period for Step Up to complete final assessment of the site. Once city action has occurred, Veev will work further on site design and Step Up will commence in community conversations on the project. Depending upon the timeframe of design, community outreach, entitlement, environmental review, building permit process, and other predevelopment steps, site work is projected to commence in early 2023 with a completion date in mid 2024 and full occupancy soon thereafter.
Policy Considerations: This is an exciting opportunity to receive a donation project from Lennar Charitable Housing Foundation that furthers city goals of showcasing new greener housing technologies, expanding affordable permanent supportive housing stock, furthering investments in transit-oriented residential development on historically commercial corridors, and achieving a lower subsidy cost per unit. The below market rate loan being requested by Step Up for the site and predevelopment work necessary for this development equates to less than $25,000 per unit in City and total public assistance. This will also allow the city to partner on a project that will likely be a focal point for legislature conversation and visits.
Economic Impacts: Actual economic impact is difficult to project given that development will include off-site factory work of the modular paneling and most of the project costs are bourn by Lennar Homes. The City investment in this project, is estimated to infuse the economy with a minimum of 35 jobs, 20 direct and 15 indirect. The greater economic impact will be stabilizing the housing for 125 households, reducing other community costs and providing a platform for additional income and spending capacity amongst these community residents.
Environmental Considerations:
California Environmental Quality Act (CEQA): The current action is the establishment of a funding mechanism to finance various activities, including the environmental review necessary for the development of the ultimate housing project.
The establishment of a funding mechanism is not a project pursuant to CEQA Guidelines section 15378(b)(4). The establishment of this funding mechanism does not constitute an approval of any particular project and does not foreclose the adoption of alternatives or mitigation measures because environmental review, as necessary, will be conducted in association with the development of the ultimate project. (CEQA
Guidelines, § 15004(b).)
Sustainability: The housing technology envisioned for this project utilizes a factory development technology that is nearly net zero waste. Housing developed will be all- electric and utilizing solar technology, contributing towards city policy goals and requirements.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The actions recommended in this report enable the City to further its goals to develop affordable housing, reduce homelessness, support sustainable housing development technologies, and seek lower construction cost opportunities. Actions in this report will allow the City to support the placement of this charitable development by Lennar Housing Foundation while also investing in city neighborhoods and needs and increasing the number of affordable housing units and corresponding beds to further respond to our local emergency shelter crisis.
Financial Considerations: On February 2, 2021, the City Council set aside a commitment of $31.5 million in the City’s General/Measure U (GF/MU) fund balances for the City Housing Trust Fund. This report recommends establishing the Step Up in Sacramento Affordable Housing Development Multi-Year Operating Project (I02189040) and appropriating $2,925,000 to the project from the City Housing Trust Fund commitment in the Measure U Fund, bringing the City Housing Trust Fund available balance to $2,005,000, provided Council approves the recommendation.
The $2,925,000 loan being provided to the project from the City Housing Trust Fund (Measure U Funds) will have a 55-year term at 3% interest, residual receipts payments to facilitate development and operations of this permanent supportive housing project.
Local Business Enterprise (LBE): Not applicable.
Attachment 2‐ Residential Project Preliminary Summary
Step Up in Sacramento ‐ Step Up, Veev Homes, Lennar Housing Foundation Partnership Type Amount Affordability Anticipated Resident
Studio 75 30% AMI Homeless/Special Needs
1 bedroom 30 30% AMI Low Income Individuals
2 bedroom 18 50% AMI Low Income Families
2 bedroom 1 N/A Resident Manager Unit
1 bedroom 1 N/A Assistant Resident Manager Unit
TOTAL 125
Other Spaces and Features
Minimum of 1,250 square feet of meeting space and office space Community room and outdoor open space/recreation
Connectivity to nearby transit
All‐electric green development, with solar connectivity Supportive services and property management
Potential community art components
Preliminary Summary of Units
RESOLUTION NO. 2022 -
Adopted by the Sacramento City Council
on date of May 31, 2022
STEP UP IN SACRAMENTO PROJECT (PROJECT): AUTHORIZATION TO ALLOCATE $2,925,000 FROM THE CITY HOUSING TRUST FUND MEASURE U
BALANCE TO THE STEP UP IN SACRAMENTO PROJECT AND EXECUTE THE
NECESSARY FUNDING AGREEMENT, AFFORDABILITY AGREEMENT, AND
RELATED DOCUMENTS FOR THE COMPLETION OF THIS AFFORDABLE
HOUSING PROJECT
BACKGROUND
A. In Fall/Winter 2020, Lennar Housing Foundation approached the City wi th an opportunity t o partner on a project by which Lennar would develop tiny homes within the city utilizing Veev Homes technology , if the City could assist with identifying a site.
B. Over time and after several sites, the Step Up, Lennar, and Veev partnership, in coordination with the City, have identified a transit-oriented location, the transfer of which is in the process of being negotiated . Step Up requiring $2,9 25,000 as a below market loan for the necessary site and predevelopment costs to bring this project to fruition. Predevelopment activities include environmental review as necessary.
C. On February 2, 2021, the City Council set -aside a commitment of $31.5 million in the City’s General/Measure U fund balances for the City Housing Trust Fund. This Fund currently has $4,930,000 of available funding for the purpose of furthering affordable housing.
D. In exchange for an ongoing affordability agreement on the housing units restricted to very low and extremely low income households , staff is recommending a loan of $2,925,000 be made from the Housing Trust Fund to the Step Up in Sacramento Project (I0218904 0) with repayments going back to the Revol ving Loan Fund (Fund 2029).
E. The recommended actions are consistent with the 2021 -2029 Housing Element, which encourages the provision of a variety of quality housing types to encourage neighborhood stability, including options f or extremely low -income households (Resolution No. 2021 -0259), the City Council’s adopted Housing Trust Fund Framework from January 28, 2020, and Council’s efforts under the Comprehensive Siting Plan to further affordable housing to reduce local instances of homelessness.
F. The City’s commitment of these funds does not constitute the City’s commitment to or approval of any particular project, nor does it foreclose alternative solutions or mitigation measures that would otherwise be required in connection with the eventual project. City retains the sole and independent discretion as the lead agency to decide whether to approve a project and, among other things, balance the benefits of the project against any significant environmental impacts prior to taking final action if such significant impacts cannot otherwise be avoided, and determine not to proceed with approval of the project.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. All evidence presented having been duly considered, the findings, including environmental findings regarding this action, as stated above, are found to be true and accurate and are hereby approved adopted.
Section 2. The City Manager, or the City Manager’s designee, is authorized to establish the Step Up in Sacramento Affordable Housing Development Project (I02189040) and appropriate $2,925,000 from the City Housing Trust Fund commitment of Measure U Fund balance (City Funds) to I02189040 for the purpose of providing a construction loan to the Developer for the land acquisition and predevelopment costs of the Project.
Section 3. The City Manager, or the City Manager’s designee, is authorized to transfer $2,925,000 to the Revolving Loan Fund (Fund 2029) from the Measure U Fund for this purpose.
Section 4. The City Manager, or the City Manager’s designee, is authorized to negotiate, enter into, execute, and amend from time to time, a $2,925,000 funding agreement comprised of City Funds for the Project, and to execute other documents, including the necessary 55-year Affordability Agreement, as approved to form by the Office of the City Attorney, and perform other actions required for the City Housing Trust Fund (City Funds), including without limitation, negotiation, subordination, financial restructuring, and extensions, consistent with this resolution.
Section 5. The City Manager, or the City Manager’s designee, through the funding agreement and related documents is authorized to provide this predevelopment loan at three percent interest with a 55-year term to Step Up on Second for the Project.
Section 6. The City is directed to return future loan repayments to the source of the originating funds, with repayments going back to the Revolving Loan Fund (Fund 2029) to be reused within the City’s Housing Trust Fund.