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DISCUSSION
City of San Bernardino
Request for Council Action
Date: January 17, 2024
To: Honorable Mayor and City Council Members
From: Charles A. Montoya, City Manager;
Mary Lanier, Interim Agency Director of Community, Housing, and Economic Development
Department: Community, Housing, & Economic Development (CED) Subject: San Bernardino Regional Housing Trust Letter of Intent (All Wards)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino, California, authorize the City to join the San Bernardino Regional Housing Trust by submitting a Letter of Intent to the San Bernardino Council of Government.
Executive Summary
Submitting a letter of intent to join the San Bernardino Regional Housing Trust (SBRHT) serves as the initial step in becoming a member and does not financially obligate or commit the City to remain in the SBRHT. This would allow the City to avoid incurring additional fees that would be applied for joining after the initial opt-in period.
The City currently lacks the staffing capacity and operational readiness to implement its own housing trust, and even with the assistance of a consultant, it is unlikely that this could be established in time to be competitive for calendar year 2024 grant funding.
If the City were to establish its own housing trust at some point in the future, it can then opt out of the SBRHT, even after formally joining, by providing a written notice of exit six months prior to the start of a new fiscal year.
Background
Cities across the State are grappling with an affordable housing shortage that has been exacerbated over the past decade due to the dismantling of the State’s Redevelopment Agencies (RDA), which had been the largest funder for affordable housing bringing in roughly $1 billion annually across the State for affordable housing. RDA’s supported community facilities, combated urban blight, and encouraged sustainable communities. With spiraling housing costs, and the lack of a significant and consistent funding source, cities and counties must find alternative options to help boost the affordable housing stock.
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To help offset costs associated with affordable housing development, cities and counties utilize Housing Trusts, which play an important role in comprehensive equitable housing solutions that support long-term affordability and serve low-income households, people of color and other historically disadvantaged communities.
Housing trusts receive financial support from a variety of sources. Some of the most common categories of funding include dedicated funding from local jurisdictions, State and federal grants, bonds, and private donations and funds only accessible to housing trusts.
In 2017, the California Legislature approved Senate Bill 3 (SB 3), which authorized the issuance of $4 billion in bonds to fund a variety of housing programs, including the Local Housing Trust Fund (LHTF) Program. These funds are currently used to expand funding sources for housing, increase the supply of affordable housing through the creation of new local housing trust funds, and support ongoing operations of existing local housing trust funds.
On October 18, 2023, a presentation was received and filed by the Mayor and City Council concerning the San Bernardino Council of Governments’ (SBCOG’s) plan to form a separate Joint Powers Authority (JPA) for the establishment of a regional housing trust. SBCOG intends to utilize Southern California Association of Governments (SCAG) REAP 2.0 funds once awarded to initiate and implement the new JPA. This includes all studies, research, analysis, legal action/fees, etc. to be funded by REAP 2.0. Qualified staffing will be selected through a procurement process that will likely include member agency staff.
It was recommended that the JPA be its own separate legal entity known as the San Bernardino Regional Housing Trust (SBRHT) and be made up of member agencies with a non-profit component that would enable the SBRHT to solicit and accept private donations. The purpose of SBRHT is to attract significant funding and affordable housing interest into the San Bernardino Region.
Joining the SBRHT would allow the City the opportunity to work with eleven (11) other jurisdictions and policy makers who have submitted a Letter of Intent to the San Bernardino Council of Governments (SBCOG’s) Board to participate in SBHRT.
Jurisdictions that Have Joined the SBRHT
City of Colton City of Redlands
City of Fontana City of Rialto
City of Needles City of Twentynine Palms
City of Ontario City of Yucaipa
City of Rancho Cucamonga City of Yucca Valley
County of San Bernardino
In November 2023, SBRHT Ad Hoc committee met to provide guidance to staff regarding the implementation of the trust. There is currently one (1) vacancy on the Ad 1 7
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Hoc. The Board President will make an appointment to fill the vacancy in January.
Once a JPA is formed, the new JPA Board will make all governing decisions.
During the October 18 , 2023, Mayor and City Council meeting, staff was directed to evaluate a comparison between establishing a local housing trust or joining a regional housing trust so that the City Council can make an informed determination on the next steps.
Discussion
Developing a local housing strategy and housing trust fund (HTF) is both a time and resource-intensive process that requires a strategic plan, community engagement, engagement of leadership across multiple departments, and active participation from internal and external stakeholders (i.e., the Housing Authority, non-profits, State government, neighborhood groups, developers, lenders, Housing Division, Planning Division, etc.).
When a city, county, or regional entity establishes an HTF, there are multiple required and recommended steps to make it official, functional, and effective. Foundational steps include:
•Establishing the Board of Trustees.
•Identifying funding priorities.
•Developing a framework to operate effectively.
•Submitting a housing trust bylaw to the Attorney General. •Recording a Declaration of Trust.
•Setting up a trust fund account.
•Ensuring transparency.
•Setting up a budget.
•Determining an operating approach.
The purpose of establishing an HTF is to assist in the creation and preservation of mixed-income and affordable housing initiatives for the benefit of extremely low- through moderate-income households using the Local Housing Trust Fund (LHTF) Program. This program was established by the California Department of Housing and Community Development (HCD) and provides matching funds to local and regional housing trust funds.
Local Housing Trust Fund Program
HCD’s LHTF Program is an important and highly competitive source of funding for local and regional housing trusts. In March of 2023, HCD released a Notice of Funding Availability (NOFA) of $53 million, and it is expected to release a similar NOFA in March of 2024. It is important to note, however, that the maximum annual award per applicant is $5 million, and applicants must have already deposited a dollar-for-dollar match in their housing trust at time of application. This means that in order to be eligible to receive a $5 million award, applicants must also commit/deposit $5 million of their own 1 7
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funds into the trust. Additionally, applicants must also fund their HTFs from ongoing revenues sufficient to remain in operation for at least 5 years after being awarded, totaling at least an average of $100,000 per year. This is in addition to the initial deposit.
When HCD releases the NOFA for the LHTF Program, it outlines all application, program, and reporting requirements, as well as a scoring criterion under which all applications will be evaluated. Applications are typically due in May of each year, giving applicants approximately one month to submit a competitive application. If an applicant is awarded funding through the LHTF Program but fails to expend those funds towards the activities that they committed to in their application, HCD may assess negative points when scoring future applications from the same applicant. Additionally, previously awarded applicants must have committed at least 40 percent of the previous award(s) in order to be eligible to submit an application for the current year’s NOFA.
Finally, city and county applicants must have a housing element that was adopted by their governing body and subsequently determined by HCD to be in compliance with state Housing Element Law by the time awards are announced. If an applicant is determined to be out of compliance at the time awards are announced, it will be ineligible to receive funding and the next highest scoring eligible application may be funded in its place.
If an applicant is awarded funding, they must provide HCD with an annual report every July 31. This annual report requires awardees to track all projects that are being assisted by the LHTF Program funds, including the project name, type of housing, number of units, income level restricted in each unit, bedroom count of each unit, and amount of program funds expended per unit. Additionally, the annual report requires awardees to document the expenditure of all matching funds, including the amount by source. Funding is required to be used to provide construction loans and/or permanent financing loans to pay for the construction or rehabilitation of affordable rental housing projects, emergency shelters, permanent supportive housing, transitional housing, and affordable homebuyer/homeowner projects. Funding may also be used to assist income-eligible first-time homebuyers to purchase homes and to rehabilitate houses owned by income-eligible occupants, as well as to construct, convert, reconstruct, rehabilitate and/or repair Accessory Dwelling Units (ADUs) or Junior Accessory Dwelling Units (JADUs).
Essentially, to be eligible for the maximum funding award through HCD’s LHTF Program, cities and counties must:
•Have a finalized Housing Element that is compliant with state law. •Deposit $5 million into their HTF each year that they apply for funding. •Commit at least an additional $100,000 per year to their HTF for five years. •Have committed at least 40 percent of any previous award(s) towards projects. 1 7
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To be competitive and eligible for future years of funding, an applicant needs to have a functional and effective affordable housing strategy with a robust project pipeline.
The program requires a significant financial commitment in order to be eligible for the maximum funding award of $5 million, and the applicant must have the capacity to spend down awarded funds timely and effectively.
Establishing a City of San Bernardino Local Housing Trust If the City were to implement its own housing trust, it would be able to apply to the LHTF Program directly; however, the City currently lacks the staffing capacity and level of expertise needed to develop and implement its own HTF. As a result, the City would need to hire a consultant for assistance with an estimated cost of $75,000-$100,000.
Based on a survey of other cities that followed a similar path, the average timeframe between releasing an initial RFP for a consultant and establishing an HTF is 8 months.
Additionally, once established, the City would then need to finalize the legal and financial structures necessary for operating its HTF, as well as make appointments to its board of trustees. For the other cities that were surveyed, this can take an additional 6 months, if not longer. It is also important to note that other cities continue to retain a consultant after establishing an HTF, which is done in addition to hiring an in-house project manager for the program. This is needed to ensure proper management of the HTF, where awarded funds are spent appropriately and all reporting obligations to HCD are met. Additionally, due to the narrow application window for HCD’s LHTF Program, consultants are often relied on to assist with drafting competitive applications to secure future funding.
It will likely take the City longer to accomplish the above mentioned steps due to current challenges with vacancy and turnover rates. Additionally, the City’s Housing Element has not yet been finalized, which is a requirement in order to receive funds. If the City were to establish its own HTF, it would not be ready to apply for 2024 funding and is unlikely to be ready to submit a competitive application for 2025 funding; the City needs additional staffing capacity and expertise, and it also needs to conduct additional strategic planning for an affordable housing strategy.
Joining a regional housing trust alleviates many of these challenges and would allow the City to receive funding for its current projects earlier than it would if it declined to join. It is also important to note that joining a regional housing trust does not prevent the City from developing its own in the future, and it would afford the City time to rebuild its staffing capacity and expertise so that it could properly establish its own HTF, if desired.
Benefits of Joining a Regional Housing Trust
A Regional Housing Trust provides a mechanism to raise and leverage existing funds to support the creation of a housing trust, with a focus on affordable housing. Given the limited capacity of local jurisdictions to devote resources to trust administration, and San Bernardino Council of Governments’ (SBCOG) well-established role in the region, SBCOG is both qualified to and capable of administering a regional housing trust that would address regional housing needs while minimizing duplication of 1 7
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resources across San Bernardino County. SBCOG worked with the City/County Managers Technical Advisory Committee in 2022 to conduct research, analysis, and outreach in an effort to create a structure for how a regional housing trust would work in San Bernardino, including a strategic plan and white paper.
On April 5, 2023, the SBCOG Board of Directors authorized staff to begin the process of establishing the San Bernardino Regional Housing Trust (SBRHT), including the establishment of a new Joint Powers Authority. Staff will begin working with a Housing Trust Ad Hoc Committee to develop recommendations regarding policy decisions for the SBRHT.
Steps Needed to Join the San Bernardino Regional Housing Trust Fund (SBRHT) The first step in becoming a member of the SBRHT is to submit a Letter of Intent (LOI), signed by the City Manager to the San Bernardino Council of Governments (SBCOG).
The LOI does not financially obligate the City or commit the City to remaining in the SBRHT; it only serves to communicate the City’s interest in becoming a member.
At some point in the future, the City would need to take formal action to join the SBRHT JPA by adopting a Resolution. Should the City later decide to opt out of the SBRHT a new Resolution rescinding its membership at the local level will need to be adopted.
The City would be required to provide written notice of exit six months prior to the start of a new fiscal year.
Pros and Cons of Joining a Regional Housing Trust
Because most jurisdictions have limited staffing, time, funding, and/or expertise to administer a housing trust fund it can be a prudent decision to join a regional housing trust to avoid the unnecessary strain of limited resources. A regional housing trust can help leverage the region’s collaborative strengths, relieving the pressure of local housing needs through a regional approach and in theory secure more funding to invest in the region than the aggregate of any individually managed local programs. Although Housing Trusts can offer many benefits by consolidating resources and expertise to address broader housing challenges, they also face challenges related to coordination, governance, and decision-making due to the involvement of multiple stakeholders and jurisdictions. Below is a list of pros and cons associated with joining a regional housing trust.
Pros:
1.Pooling Resources: Allows local governments to pool their resources, which can amplify funding and support for housing initiatives that benefit a larger area.
2.Leveraging Expertise: Provides a wide range of expertise and perspectives, enabling more comprehensive planning and implementation of housing strategies.
3.Addressing Regional Needs: They're effective in addressing housing issues that transcend city or county boundaries. By working regionally, they can tackle problems that affect a larger population and require a more extensive approach. 1 7
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4.Economies of Scale: By operating at a larger scale, regional housing trusts may achieve economies of scale in terms of purchasing power, construction, or administrative costs, potentially stretching resources further.
5.Flexible Source Gap Financing: helps bridge the financial shortfall between available funds and the total project cost. This is particularly beneficial for projects that might not secure full funding from conventional sources.
Cons:
1.Complexity and Coordination: Coordinating efforts across multiple local governments can be challenging. Differences in regulations, priorities, and administrative processes among participating entities might slow down decision- making or create complications.
2.Competing Interests: Balancing the needs and priorities of various regions or stakeholders involved can be difficult. Conflicting interests might arise, leading to challenges in reaching consensus or implementing initiatives effectively.
3.Accountability and Governance: With multiple stakeholders involved, determining clear lines of accountability and governance can be complex. Ensuring transparency and equitable distribution of resources becomes more challenging.
4.Slow Decision-making: Inherent bureaucracy and the need for consensus among multiple entities may slow down the decision-making process, potentially delaying the implementation of housing projects or policies.
It is critical that SBRHT demonstrates an equitable fund distribution to address housing needs across all connected cities. SBRHT intends to establish an Administrative Plan and Bylaws to identify how to best allocate and reinvest funds for maximum output. The City will only be able to participate in discussions if it has a seat at the table. Below are some equity distribution strategies that SBRHT could undertake to address concerns:
1.Needs Assessment: Conduct a comprehensive analysis to understand the diverse housing needs across different communities within the region. This assessment should consider demographics, income levels, housing affordability, and existing gaps.
2.Transparent Allocation Criteria: Establish clear and transparent criteria for allocating funds. These criteria should consider factors such as community need, population density, income levels, existing housing conditions, and specific project impact on different areas.
3.Community Engagement: Involve community representatives, stakeholders, and housing advocates from various areas within the region in the decision-making process. Gather input on where the funds are most needed and ensure that different voices are heard.
4.Equity-Centered Policies: Develop policies that explicitly prioritize equity in fund distribution. This might involve setting aside a certain percentage of funds for underserved communities, prioritizing projects in areas with the greatest need, or using a weighted scoring system that accounts for equity factors. 1 7
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5.Regular Evaluation and Monitoring: Continuously evaluate the impact of fund allocation. Monitor the distribution of funds and their outcomes to ensure that they align with the intended goals of equitable housing development.
6.Flexibility and Adaptability: Remain flexible to adapt fund distribution strategies based on changing needs or unforeseen circumstances within different communities. This might involve reallocating funds or adjusting priorities based on updated assessments.
7.Partnerships and Collaboration: Collaborate with local governments, nonprofits, community organizations, and housing experts to leverage their knowledge and resources. Partnering with these entities can help identify areas of greatest need and ensure effective fund distribution.
8.Data-Driven Approach: Use data and metrics to guide decision-making. Collect and analyze data related to housing affordability, demographics, economic indicators, and other relevant factors to inform equitable fund distribution strategies.
Related Costs for Participating in a Regional Housing Trust SBCOG estimates that an affordable housing trust fund will require approximately $230,000 in annual contributions from participating jurisdictions for the first five to ten years of operation until the fund achieves financial independence. The City’s initial annual membership fee is expected to be $26,000.
2021-2025 Strategic Targets and Goals
Forming a Local Housing Trust or joining a Regional Housing Trust aligns with Strategic Target No. 2: Focused, Aligned Leadership and Unified Community as a Regional Housing Trust would allow the City to expand its funding pool and the resources necessary to increase affordable housing. Both also align with Strategic Target No. 3: Improved Quality of Life.
Fiscal Impact
There is no fiscal impact to the General Fund with this action.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California, authorize the City to join the San Bernardino Regional Housing Trust by submitting a Letter of Intent to the San Bernardino Council of Government.
Attachments
Attachment 1 Regional Housing Trust Fund Slide Deck
Attachment 2 Regional Housing Trust Letter of Intent
Ward:
All Wards
Synopsis of Previous Council Actions:
February 1, 2023 The City declared a Homelessness State of Emergency, 1 7
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which is exacerbated by the lack of affordable housing.
October 18, 2023 The Mayor and City Council received and filed a presentation from the San Bernardino Council of Governments concerning a regional housing trust.