Community Development Agency
www.santa-ana.org/community-development
Item # 18
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
March 4, 2025
TOPIC: Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity of Orange County
AGENDA TITLE
Approve a Pre-Commitment of $9,807,571 in HOME Program Funds for the Development of 40 New Affordable Ownership Units Located at 621 W. Alton Avenue, and Approve a Pre-Commitment of up to $920,000 in Inclusionary Housing Funds for Eligible Homebuyers to Purchase Nine (9) Existing Rental Units that will be Converted into Affordable Ownership Condominium Units Located at 425 E. Wellington Avenue for a total of $10,727,571
RECOMMENDED ACTION
1. Authorize the City Manager to execute a pre-commitment letter with Habitat for Humanity of Orange County for $9,807,571 in HOME Investment Partnerships Program funds for the development of 40 new affordable ownership units located at 621 W. Alton Avenue, Santa Ana, CA (APN 410-351-02) (Agreement No. A-2025- XXX).
2. Authorize the City Manager to execute a pre-commitment letter with Habitat for Humanity of Orange County for up to $920,000 in Inclusionary Housing Funds for eligible homebuyers to purchase nine (9) existing rental units that will be converted into affordable ownership condominium units located at 425 E. Wellington Avenue, Santa Ana, CA (APN 398-028-12) (Agreement No. A-2025-XXX).
GOVERNMENT CODE §84308 APPLIES: Yes
COMMUNITY DEVELOPMENT COMMISSION RECOMMENDATION
At a special meeting on December 13, 2024, the Community Development Commission recommended the City Council to approve recommended action No. 1 and No. 2 above by a vote of 5:0. However, recommended action No. 2 was amended by staff following the Commission meeting to add $20,000 and adjust the language of the award to comply with California Government Code §§ 7260 or 66300.6 relocation assistance obligations regarding the conversion of market rate rental units.
EXECUTIVE SUMMARY
In October 2023, City Council directed staff to invest affordable housing funds exclusively for the development of affordable ownership opportunities. Following the
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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issuance of a Request for Proposals approved by City Council, staff is now recommending an award of over $10.7 million to produce 49 new affordable ownership opportunities for low- and moderate-income families. The homes would be developed and purchased by Habitat for Humanity of Orange County at two sites. If approved by City Council, this will be the single largest investment in affordable ownership opportunities in the history of the City of Santa Ana. This will also double the number of affordable homes that Habitat for Humanity of Orange County has created in the City and will be the highest number of affordable homes they have created in any city in Orange County. If this award is approved, the City of Santa Ana will have invested over $15.8 million in new funding for affordable homeownership opportunities over the last three years.
DISCUSSION
On October 17, 2023, the City Council authorized the Community Development Agency (“CDA”) to release a Fiscal Year 2023-24 Request for Proposals (“RFP # 23-156”) to develop affordable ownership projects in the City of Santa Ana (“City”) with funding from the HOME Investment Partnerships (“HOME”) Program (Exhibit 1). The RFP was prepared in compliance with the City’s Affordable Housing Funds Policies and Procedures. The RFP was published on the City’s website and Planet Bids; a public notice was published in the OC Register on October 25, 2023; and an e-mail was sent out to Orange County’s largest affordable housing membership associations, interested developers, and nonprofit organizations from CDA’s RFP Process Database.
A Review Panel, composed of City staff from the Community Development Agency and Planning and Building Agency together with an affordable housing consultant, used the Scoring and Selection Criteria from the RFP to review all of the proposals. Habitat for Humanity of Orange County, Jamboree Housing, THRIVE Santa Ana, Mary Erikson, and Orange County Community Housing Corporation (“OCCHC”) each submitted a proposal during the period that the RFP was open. Jamboree Housing and THRIVE Santa Ana ended up withdrawing their proposals. The proposal from OCCHC that was scored and reviewed did not meet the minimum threshold requirements and the proposal from Mary Erikson was determined to be infeasible because it was cost prohibitive. Following this review and scoring process, and substantial due diligence, the Review Panel is recommending the following awards for two projects for Habitat for Humanity to create 49 new affordable ownership opportunities:
Developer: Habitat for Humanity of Orange County
•621 W. Alton Avenue: $9,807,571 in HOME Program funds for the development of 40 new affordable ownership units including 30 homes for low-income families at 80% Area Median Income (“AMI”) and 10 homes for moderate-income families at 120% AMI.
•425 E. Wellington Avenue: Up to $920,000 in Inclusionary Housing Funds for eligible homebuyers to purchase nine (9) existing rental units that will be converted into affordable ownership condominium units Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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including: (1) an allocation of $720,000 to the City's Down Payment Assistance Program, and (2) a conditional award up to $200,000 for eligible relocation costs.
Background on Habitat for Humanity of Orange County
Habitat for Humanity of Orange County (“Habitat for Humanity”) is a nonprofit organization dedicated to providing affordable housing for qualifying families. Since 1988, the organization has completed and sold 239 homes in Orange County, including 32 affordable homes in the City of Santa Ana. Habitat for Humanity is currently building an additional six (6) new homes in the City at 1921 W. Washington Ave for low-income families at 80% of the AMI that was made possible with $2.2 million from the City’s Inclusionary Housing Fund. Habitat for Humanity also currently administers the City’s Residential Rehabilitation Grant Program with $500,000 per year in Community Development Block Grant funds. The organization is the largest provider of affordable ownership opportunities in Orange County and also advocates for fair housing policies, addresses substandard housing conditions, and offers families training and resources to achieve homeownership.
Project Description - 621 W. Alton Avenue
The first pre-commitment letter for 621 W. Alton Avenue, Santa Ana, CA (APN 410-351- 02) between the City and Habitat for Humanity provides an enforceable funding commitment of $9,807,571 in HOME Program funds for the development of 40 new affordable ownership units (Exhibit 2). The letter is referred to as a pre-commitment because the HOME Program has strict commitment requirements under 24 CFR Part 92 that must be met before a full commitment can be issued in the form of a Conditional Grant Agreement. Specifically, Habitat for Humanity proposes to demolish the existing structures on the property to build 40 new homes for affordable ownership. The project will include 30 three-bedroom, one and a half-bath homes for low-income households earning up to 80% of the AMI ("Low-Income Households") and 10 three-bedroom, one and a half-bath homes for moderate-income households earning up to 120% AMI ("Moderate-Income Households"). The AMI is currently $129,000 for a four-person household, as published by the California Department of Housing and Community Development. Households must also meet the eligibility requirements for Habitat for Humanity’s Affordable Homeownership Program with a residency preference for local residents and workers in Santa Ana in accordance with Santa Ana Municipal Code Section 8-3500.
In a preliminary design drafted by Habitat for Humanity, each unit will have a two-story in a duplex configuration and will be approximately 1,070 square feet in size. At least two (2) of the homes will be Americans with Disabilities Act (ADA) compliant. The site bridges the larger scale of existing multi-family properties to the north and east of the project site with the existing single-family homes to the west. The proposed units are arranged along paseos with a modest central courtyard located at the paseo intersection, complementing the large park (Lillie King Park) across the street. Each unit features a front porch and private patio. Garages and guest parking are accessed via a looping alley, allowing efficient movement for trash collection and emergency vehicles.
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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There will be two parking spaces adjacent and dedicated to each home (one enclosed and one surface). There will also be 16 additional surface parking stalls for guests, including two ADA-accessible stalls.
The overall design and materials of the new construction will be compatible with and complement the variation of styles within the neighborhood. Overall, the project will include a design and quality construction materials that will ensure that the project ages well for the duration of the building’s lifetime. Keyser Marston Associates, Inc. (“KMA”) estimates the low income affordable sales prices at $300,200 and Habitat for Humanity is currently estimating the moderate income affordable sales prices at $389,500.
This project is being developed in partnership with Bill Taormina who is the current owner of the land. Mr. Taormina will be holding title of the land through the entitlement and building process. As such, he will continue to be responsible for holding costs and pay for the property taxes and required insurance for the duration of the project and up until the new homes are sold. Habitat for Humanity and Mr. Taormina have entered into a Memorandum of Understanding with the agreed upon terms and details of the partnership and land purchase.
The project will require relocation of the existing religious organizations currently occupying and renting the existing structures on the property in compliance with the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act (“Uniform Relocation Act”), and all state and local relocation requirements. Currently, three religious organizations rent the existing structures including Faith Community Church of Santa Ana, Fundamentalist Baptist Church, and Turning Point Fellowship.
These tenants will be provided relocation assistance that complies with the federal Uniform Relocation Act as required by the HOME Program federal funds. Per Habitat for Humanity, Federal relocation requirements stipulate that the maximum relocation assistance for businesses is $53,200 plus three months of rent payments, if required.
As such, Habitat for Humanity estimates the total relocation assistance at $213,000.
Once the three religious organizations vacate the existing structures, Habitat for Humanity will pay Mr. Taormina the rent paid by the vacating occupants and begin the process to demolish the buildings.
From an initial review of the project by the City’s Planning and Building Agency, the timeline for processing the application and obtaining necessary approvals is expected to take approximately seven (7) to 12 months. The property is currently zoned as LR-7 (Low Density Residential, seven (7) units per acre). To the extent required under state housing laws, Habitat for Humanity may need to request a General Plan Amendment and zone change. Habitat for Humanity may also be required to comply with the City’s Sunshine Ordinance, which includes holding two community meetings. A California Environmental Quality Act review may be required and a Density Bonus Agreement may also be necessary, depending on the concessions and waivers needed for the development of the project.
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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The pre-commitment letter shall not obligate the City or any department thereof to approve any application or request for, or take any other action in connection with, any planning approval, permit, or other action necessary for the construction, rehabilitation, installation, or operation of the project. The pre-commitment letter will be conditional on Habitat for Humanity obtaining approval of all required entitlements and discretionary actions to allow the construction of 40 affordable ownership units to be located at 621 W. Alton Avenue.
In compliance with the City’s Affordable Housing Funds Policies and Procedures, KMA completed a preliminary financial gap analysis by reviewing the developer’s estimates and projections of sales prices, expenses, reserves, and development costs; and confirming the project’s underwriting and other requirements pertinent to the funding sources (Exhibit 3). Following this analysis and completion of the procurement process, KMA confirmed the preliminary financial gap and the Review Panel’s recommendation to award $9,807,571 in HOME Program funds. The project’s economics are described in detail in KMA’s analysis attached as Exhibit 3 to this report.
Project Description - 425 E. Wellington Avenue
The second pre-commitment letter for 425 E. Wellington Avenue, Santa Ana, CA (APN 398-028-12) between the City and Habitat for Humanity provides an enforceable funding commitment of up to $920,000 in Inclusionary Housing Funds for eligible homebuyers to purchase nine (9) existing rental units that will be converted into affordable ownership condominium units including: (1) an allocation of $720,000 to the City's Down Payment Assistance Program, and (2) a conditional award up to $200,000 for eligible relocation costs (Exhibit 4). The letter is referred to as a pre-commitment because, similar to the HOME Program, the City has requirements that must be met before a full commitment can be issued in the form of a Memorandum of Understanding.
Specifically, this project involves the conversion of an existing nine-unit apartment building into condominiums, which will be made available for homeownership to Low and Moderate-Income households earning less than 120% of the AMI. The existing building on the property was rehabilitated in May 2024 and includes one two-bedroom unit and eight one-bedroom units, each with a single bathroom. Unit sizes range from 420 to 846 square feet and are move-in ready. The building recently underwent over $1 million in renovations, which included new flooring, electrical upgrades (new outlets and fixtures), updated kitchen cabinets, and complete bathroom remodels. Doors, windows, shutters, garage doors, stairways, and railings were restored or replaced as needed to meet code compliance.
Current residents of the property with household incomes of less than 120% AMI and that qualify to purchase a unit within the Property will be given the right of first refusal to purchase a unit at an affordable purchase price (eight of the nine units are currently occupied). KMA estimates the moderate income affordable sales prices at $310,400 for the eight (8) one-bedroom units and $350,500 for the one (1) two-bedroom unit. The allocation of $720,000 to the City’s Down Payment Assistance Program will be available for down payment assistance to individual households to purchase a unit, structured as Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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a silent mortgage based on homebuyer eligibility. Homebuyers must meet the eligibility requirements for Habitat for Humanity’s Affordable Homeownership Program with a residency preference for local workers and residents of Santa Ana in accordance with Santa Ana Municipal Code Section 8-3500. The conditional award of up to $200,000 for eligible relocation costs will be available upon a determination by the City that the Project is subject to relocation benefits under California Government Code §§7260 or 66300.6. The specific amounts utilized for relocation benefits will be based on actual amounts determined immediately prior to the relocation of existing tenants.
The City and Habitat for Humanity will enter into a Memorandum of Understanding ("MOU") that sets forth the terms under which the City will provide the homebuyer Down Payment Assistance and conditional relocation award. The MOU will specify that the project is not undertaken by the City and is not in furtherance of a City program. Rather, the MOU is a response to Habitat for Humanity’s request for financial assistance to enhance affordability for qualified homebuyers by providing homebuyer Down Payment Assistance through an existing City program. The MOU will require that Habitat for Humanity execute an affordable housing covenant to offer the nine (9) affordable units to households with income that does not exceed the limits for Low and Moderate- Income Households for an affordable sales price that complies with the limits for an "affordable housing cost," as defined in California Health and Safety Code §50052.5.
The affordable housing covenant will run with the land for a period of forty-five (45) years.
This second pre-commitment letter shall not obligate the City or any department thereof to approve any application or request for, or take any other action in connection with, any planning approval, permit, or other action necessary for the construction, rehabilitation, installation, or operation of the project. The pre-commitment letter will also be conditional on Habitat for Humanity obtaining approval of all required entitlements and discretionary actions to allow the construction, improvement, conversion, and/or development of nine (9) affordable ownership units at 425 E. Wellington Avenue.
In compliance with the City’s Affordable Housing Funds Policies and Procedures, KMA completed a second preliminary financial gap analysis for this project (Exhibit 5).
Following this analysis and completion of the procurement process, KMA confirmed the preliminary financial gap and need for the Review Panel’s recommendation to award up to $920,000 in Inclusionary Housing Funds. This second project’s economics are described in detail in KMA’s analysis attached as Exhibit 5 to this report.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action because the recommended actions consist of a pre-commitment of funds that is conditional upon compliance with the California Environmental Quality Act and the National Environmental Policy Act.
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025
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FISCAL IMPACT
For 621 W. Alton Avenue, the Grant Agreement is estimated to be finalized for City Council approval in FY 26-27. Upon future approval of the Grant Agreement, funds will be budgeted and available as shown below:
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY 26-27 13018780- 69152 HOME Program Loans and Grants $9,807,571 Total $9,807,571
The HOME Program currently requires a matching cash contribution from the City for $348,717.76 for FY 23 and FY 24. The City has over $26.4 million in carry over cash contributions eligible to meet this match requirement.
For 425 E. Wellington Avenue, the MOU is estimated to be finalized for City Council approval in FY 25-26. Upon future approval of the MOU, funds will be budgeted and available as shown below:
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY 25-26 41718820-69152 Inclusionary
Housing Fund Loans and Grants $920,000
Total $920,000
EXHIBIT(S)
1. Staff Report from October 17, 2023
2. Pre-Commitment Letter for 621 W. Alton Avenue
3. Preliminary Financial Gap Analysis for 621 W. Alton Avenue
4. Pre-Commitment Letter for 425 E. Wellington Avenue
5. Preliminary Financial Gap Analysis for 425 E. Wellington Avenue Submitted By: Michael L. Garcia, Executive Director of Community Development Approved By: Alvaro Nuñez, City Manager