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DISCUSSION.
City of San Bernardino
Request for Council Action
Date: November 05, 2025
To: Honorable Mayor and City Council Members
From: Gabriel Elliott, Director of Community Development and Housing Department: Community Development & Housing
Subject: Approval of the Loan and Regulatory Agreements between the City of San Bernardino and E. Street Veterans Apartments, LP, A California Limited Partnership (Ward 2)
Recommendation
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Authorize the execution of the Loan and Regulatory Agreements between the City of San Bernardino and E. Street Veterans Apartments, LP, a California Limited Partnership, for the allocation of $1,985,401 in Permanent Local Housing Allocation funds and $2,014,599 in Low and Moderate Income Housing Asset Funds, totaling $4 million, to support the development of the E.
Street Veterans Apartments located at 1351 N. E Street, San Bernardino, California; and
2. Adopt Resolution No. 2025-389, authorizing the Director of Finance and Management Services to amend the Fiscal Year 2025/2026 operating and capital budget by $4 million, allocating $1,985,401 in Permanent Local Housing Allocation funds and $2,014,599 in Low and Moderate Income Housing Asset Funds; and
3. Authorize the City Manager, or designee, to take any further actions and execute any and all documents or instruments, including but not limited to subordination agreements for senior lenders, subject to review and approval by the City Attorney to facilitate execution of the agreements and release of funds.
City Manager's Comments
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Executive Summary
The City of San Bernardino proposes to enter into Loan and Regulatory Agreements with E. Street Veterans Apartments, LP to provide $4,000,000 comprised of $1,985,401 in Permanent Local Housing Allocation (“PLHA”) funds and $2,014,599 in Low and Moderate Income Housing Asset Funds (“LMIHAF”) to support the development of the E. Street Veterans Apartments (“Project”), a 30-unit affordable housing community for homeless and at-risk veterans at 1351 N. E Street. The $27.47 million project, led by U.S. VETS Housing Corporation and Kingdom Development, will include one manager’s unit, on-site supportive services, and a community center.
Financing sources include tax credit equity, state and county loans, and land contribution, with costs determined to be reasonable given prevailing wage requirements and inclusion of a $4.5 million Capitalized Operating Subsidy Reserve.
The Project will provide 29 affordable units restricted between 30% and 50% of Area Median Income and contribute toward the City’s Regional Housing Needs Assessment goals.
Background
On April 11, 2025, the City of San Bernardino conditionally approved to provide E Street Veterans Apartments, LP with $4,000,000 to support the development of the 30-unit E Street Veterans Apartments project (“Project”) located at 1351 North E Street (the “Site”) in the City of San Bernardino, California (the “City”). The City’s approval of two loans from PLHA and LMIHAF will facilitate the development of a 30-unit affordable rental housing community targeting special needs homeless veterans earning between 30% and 50% of the Area Median Income (AMI).
While the existing zoning for the Site does not allow for residential development, the Project has previously had a Conditional Use Permit (“CUP”) approved by the City’s Planning Commission. However, the CUP has since expired, and the new CUP was approved by the Planning Commission on October 13, 2025.
Discussion
The Project represents a critical investment in supportive housing for veterans experiencing or at risk of homelessness within the City. The site, a 0.79-acre vacant parcel, will be developed into a high-quality, service-enriched residential community providing 30 affordable one- and two-bedroom rental units, including one two-bedroom manager’s unit. The residential units will be in a three-story building, and the management office and community center will be located in an adjacent one-story building. The Project will also include 30 surface parking spaces. The Project will be built at a density of 37.75 units per acre.
Centrally located community spaces will house the resident manager’s office and accommodate social and supportive service programs coordinated by United States Veteran’s Initiative, the lead service provider. Upon lease-up, the provider will engage tenants to determine appropriate supportive services tailored to resident needs, fostering long-term housing stability.
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The Project will be constructed in one phase and is estimated to be completed and stabilized within 24 months or by the end of 2027. The Site is not anticipated to require site remediation or significant structural or topographical modifications. The minimal off-site improvements, including curb, gutter, sidewalk, and electrical connections, will be limited in scope and cost.
U.S. VETS Housing Corporation will be the developer and the Administrative General Partner of E Street Veterans’ Apartments, LP (Borrower/Owner), with Kingdom Development, Inc., as the Managing General Partner and R4 as the Limited Partner providing the Tax Credit Equity contribution. A Holocaust survivor has contributed the site to U.S. VETS Housing Corporation with the intention for the land to be used for the Project as a thank you to U.S. World War II soldiers for his rescue.
The $27,473,000 Project will be financed with the following secured non-City funds:
9% Tax Credit Equity $12,463,000
HCD – VHHP Loan $4,426,000
County Forgivable Loan $5,000,000
Land Contribution $860,000
Home Depot Forgivable Loan $500,000
Contributed Developer Fee $224,000
Non-City Funding Sources $23,473,000
The City’s financial consultant, Keyser Marston Associates, Inc. (KMA) reviewed the proposal and determined that while the $915,800 per unit total development cost is higher than typical, it is reasonable given the inefficiencies of a small project, the imposition of prevailing wages, and the inclusion of the $4,500,000 Capitalized Operating Subsidy Reserve (COSR) in the budget are the cause for the higher than typical development costs. Without land costs and the COSR, the costs equate to $737,100 per unit.
When the estimated total development costs are compared with the secured non-City funding sources, the Project has a $4,000,000 funding gap. The Borrower requests that the City fill the gap with two loans, as follows:
1. LMIHAF Loan:
a. A $2,014,599 loan amount that will be drawn down at the end of construction;
b. A 3.0% simple interest rate;
c. A 55-year loan term;
d. Payments will be made with annual residual receipts; and e. The loan will be secured with a Deed of Trust (DOT) and, subordinated to the HCD and County loans, as well as construction and permanent financing, subject to City Manager approval.
2. PLHA Loan:
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a. $1,985,401 loan amount that will be drawn down during construction; b. A 3.0% simple interest rate;
c. A 57-year loan term with no payments due during construction; d. Payments will be with annual residual receipts after COO; and e. The loan will be secured with a DOT subordinated to the HCD, and County Loans, as well as construction and permanent financing, subject to City Manager approval.
The Veterans Housing and Homeless Prevention (VHHP) Regulatory Agreement will target the population of special needs homeless veterans earning between 30% and 50% of AMI. The Project's affordability levels will also be restricted by the California Tax Credit Allocation Committee (“TCAC”), the California Department of Housing and Community Development (“HCD”), the County of San Bernardino, and the City. The City’s two recorded regulatory agreements, which will be subordinated to the HCD and County regulatory agreements, will include the following restrictions:
1. LMIHAF Regulatory Agreement (55 Years from Certificate of Occupancy):
30% AMI Households and Rents
1-Bedroom Units 12
2-Bedroom Units 3
Total LMIHAF Restricted Units 15
2. PLHA Regulatory Agreement (55 Years from Certificate of Occupancy):
50% AMI Households and Rents
1-Bedroom Units 9
2-Bedroom Units 5
Total PLHA Restricted Units 14
While the project's average affordability is 40% AMI, it does not have access to Project-Based Vouchers. Therefore, a $4,500,000 COSR has been funded and will be used to meet operating losses for at least 20 years per the Developer’s pro forma.
The City will be able to count 15 units as Extremely-Low Income units, 14 units as Very-Low Income units, and one (1) unit as Above-Moderate unit for Regional Housing Needs Assessment (RHNA) purposes. By allocating the $2,104,599 of the Low Mod funds towards Extremely-Low Income units, the Project will help the City meet the Low Mod Income Targeting requirements.
The development advances the City’s goal of providing permanent supportive housing for veterans and contributes to regional efforts to combat homelessness through high- quality, service-oriented affordable housing. With financing secured from multiple public sources including the City’s PLHA and Low/Moderate Income Housing funds, the project is ready to proceed to closing and construction following City Council’s approval of the Loan and Regulatory Agreements.
2021-2025 Strategic Targets and Goals
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Approving the Loan and Regulatory Agreements aligns with Key Strategic Target and No. 3: Improved Quality of Life.
Fiscal Impact
There’s no impact on the City’s General Fund. Approval of this item authorizes the use of $4,000,000 from the City’s PLHA and Low/Moderate Income Housing funds.
The loan will be secured by a Deed of Trust and Regulatory Agreement recorded against the property. Repayment will be made on a residual receipts basis over the term of the loan.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Authorize the execution of the Loan and Regulatory Agreements between the City of San Bernardino and E. Street Veterans Apartments, LP, a California Limited Partnership, for the allocation of $1,985,401 in Permanent Local Housing Allocation funds and $2,014,599 in Low and Moderate Income Housing Asset Funds, totaling $4 million, to support the development of the E.
Street Veterans Apartments located at 1351 N. E Street, San Bernardino, California; and
2. Adopt Resolution No. 2025-XXX, authorizing the Director of Finance and Management Services to amend the Fiscal Year 2025/2026 operating and capital budget by $4 million allocation of $1,985,401 in Permanent Local Housing Allocation funds and $2,014,599 in Low and Moderate Income Housing Asset Funds; and
3. Authorize the City Manager, or designee, to take any further actions and
FINANCIAL
DATA
Current Fiscal Year: Next Fiscal Year: Total Cost: Ongoing Cost:
COST $ 4,000,000 $ 0 $ 4,000,000 $ 0
GENERAL
FUND
SHARE
$ 0 $ 0 $ 0 $ 0
SOURCE OF FUNDS:
PLHA - $1,985,400.60
LMIHAF: $2,014,599
Budget Adjustment:
Yes
For Fiscal Year: 25/26Click or
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execute any and all documents or instruments, including subordination agreements for senior lenders, subject to review and approval by the City Attorney to facilitate execution of the agreements and release of funds.
Attachments
Attachment 1 Resolution No. 2025-XXX
Attachment 2 PLHA Loan & Regulatory Agreement
Attachment 3 LMHIAF Loan & Regulatory Agreement
Attachment 4 Planning Commission Resolution No 2025-048 Attachment 5 Subordination Agreement
Ward:
Second Ward
Synopsis of Previous Council Actions:
On April 11, 2025, the City of San Bernardino conditionally approved to provide E Street Veterans Apartments, LP with $4,000,000 to support the development of the 30- unit E Street Veterans Apartments project located at located at 1351 North E Street in the City of San Bernardino, California. The City’s approval of two loans from PLHA and LMIHAF will facilitate the development of a 30-unit affordable rental housing community targeting special needs homeless veterans earning between 30% and 50% of the Area Median Income (AMI).
On October 13, 2025, the Planning Commission approved the Conditional Use Permit for the project.
CC: Eric Levitt, City Manager