City Council
Report
City Council Meeting: September 13, 2022
Agenda Item: 5.E
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To: Mayor and City Council
From: Andy Agle, Director, Community Services Department, Housing and Human Services
Subject: Approval of Amended 2021-22 Annual CDBG and HOME Action Plan Incorporating Proposed HOME Investment Partnerships – American Rescue Plan (HOME-ARP) Allocation Plan
Recommended Action
Staff recommends that the City Council:
1. Approve amendment of the 2021-22 Annual CDBG and HOME Action Plan to incorporate the proposed HOME Investment Partnerships – American Rescue Plan (HOME-ARP) Allocation Plan (Attachment A).
2. Authorize the City Manager to submit all documents required to receive the City’s HOME-ARP funds to the U.S. Department of Housing and Urban Development (HUD).
Summary
Santa Monica is a longtime recipient of HOME Investment Partnerships Program (HOME) entitlement funds provided through the United States Department of Housing and Urban Development (HUD). In 2021, HUD awarded $2,220,124 in onetime funding to the City of Santa Monica under the HOME Investment Partnerships – American Rescue Plan (HOME-ARP). To access HOME-ARP funding, the City has developed a HOME-ARP Allocation Plan (Attachment A) proposing use of HOME-ARP funds for eligible activities benefiting qualifying populations, as defined in HUD’s September 2021 notice: Requirements for the Use of Funds in the HOME-ARP Program.
Staff recommends that HOME-ARP funds be used to address the escalating need for homeless prevention services exacerbated by rising rents, inflation, and the sunsetting 2 of 11
of COVID protections. Specifically, staff proposes to use HOME-ARP funds to implement broader eviction prevention services, including legal services, case management, and behavioral health care, and to provide financial assistance payments for housing deposits, utilities, back rent, short-term rent relief, and moving costs needed to prevent vulnerable Santa Monica renters from becoming homeless. The proposed strategy would shore up local homeless services and homeless prevention work in anticipation of a potential eviction wave when COVID relief and protections end for renters and may include additional funding for the City’s current Rent Control Adjustment Relief program (RCAR) if demand for assistance from HOME-ARP-eligible households exceeds available resources. The recommendations align with feedback resulting from consultation and public participation processes conducted in accordance with HOME-ARP regulations and include input from the Los Angeles Homeless Services Authority (LAHSA), the Los Angeles Continuum of Care (LA CoC), local service providers, rent-controlled Santa-Monica households, and members of the public.
The proposed HOME-ARP Allocation Plan must be submitted for HUD’s review and consideration as a Council-approved substantial amendment to the City’s 2021-22 Annual CDBG/HOME Action Plan (Attachment B).
Discussion
Current Homeless Prevention Efforts
Even before the City adopted Preventing Homelessness as one of the Four Pillars in addressing homelessness, Santa Monica has had a history of investing in services to prevent eviction and keep vulnerable Santa Monica renters housed. Programs originally designed to support people leaving homelessness to stay housed have expanded to include an array of social services, legal services, and flexible City funding to address tenant harassment, unlawful evictions, rent arrears, underemployment, hoarding, and behavioral issues that put any low-income renter at risk of becoming homeless. COVID put these services front and center and made eviction prevention a key priority across the country. While state, regional, and local rental assistance programs combined with myriad eviction moratoriums to help hundreds of Santa Monica renters stay housed over the past three years, those assistance programs and moratoriums are rapidly 3 of 11
sunsetting at a time when low-income households are now facing the impacts of inflation and rising rents.
The City has taken several steps to address increased needs, including expansion of eviction prevention services through both the Right to Counsel program that guarantees legal representation to any low-income Santa Monica renter who has an active eviction case as well as enhanced administrative and case management support for these households to help them address longer-term needs such as assistance completing housing and benefits applications. HOME-ARP funding would be used to provide supplemental financial assistance to pay back rents to resolve eviction cases, as well as shallow, short-term assistance with forward-rent to help at-risk renters stabilize. In addition, HOME-ARP funds would be used to keep these legal and support services going beyond the current commitment funding, which expires in 2023.
The City is also working to address the impacts of the Rent Control General Adjustment scheduled for September 1 that will place an additional rent burden on already struggling households, The Rent Control Adjustment Relief program (RCAR) makes available $750,000 in City funds to provide short-term assistance to cover the amount of rent increases for approximately 1,100 Extremely Low-Income (less than or equal to 30% of area median income) and Very Low-Income (between 30% and 50% of area median income) rent-controlled residents who are Severely Cost Burdened (paying more than 50% of monthly income towards rent). The City-administered program will provide assistance in the form of one-time payments directly to property owners/managers on behalf of eligible program applicants. Further, the City has also enacted an eviction moratorium that will protect qualifying tenants who need more time to pay increased rent, applicable only to rent due between September 1, 2022 and January 31, 2023. If voters approve the proposed ballot measure in November, the maximum allowable rent increase, currently at 6%, would revert to less than 1% in February and cap future rent increases at 3%. Should the measure fail to pass, the City will need to consider additional measures in order to provide longer-term assistance to impacted renters using resources beyond what is currently available. 4 of 11
While RCAR will provide temporary and much-needed relief for a portion of vulnerable households in rent-controlled apartments, there are already signs of a growing need for much deeper rental assistance beyond the impact of the increase. HUD’s most recent Comprehensive Housing Affordability Strategy (CHAS) data from 2018 estimates that there are 5,535 very low- and extremely low-income renters in Santa Monica who are severely rent-burdened (paying 50 percent or more of their income on rent). These households are susceptible to even small increases in rent as well as the cost of basic living essentials such as food and utilities that put them at greater risk of falling behind on rent. These vulnerabilities put such households at increased risk of eviction once the Los Angeles County eviction moratorium expires December 31, 2022, shortly followed by expiration of the City’s moratorium on January 31, 2023.
It is in this environment that staff recommends the use of one-time HOME-ARP funds to sustain and expand homeless prevention efforts.
Summary of HOME-ARP
The American Rescue Plan Act of 2021 appropriated $5 billion to provide housing, services, and shelter to eligible vulnerable populations, to be allocated by formula to jurisdictions that qualified for HOME allocations in Fiscal Year 2021. HUD published formula allocations of HOME-ARP funding on April 8, 2021, which included onetime funding of $2,220,124 to the City of Santa Monica. Though allocated to participating HOME jurisdictions, HOME-ARP itself is a unique funding source with a dedicated set of regulatory requirements. On September 13, 2021, HUD published a notice titled:
Requirements for the Use of Funds in the HOME-ARP Program, which articulated the process by which HOME-ARP recipients must develop and submit a HOME-ARP Allocation Plan. The HOME-ARP Notice detailed the program-specific regulatory requirements for preparation of the allocation plan, including requirements for consultation and public participation, and definitions of eligible activities and qualifying populations for which use of HOME-ARP funds may be proposed. The notice also specified that proposed HOME-ARP Allocation Plans must be submitted to HUD as a substantial amendment to its 2021-22 CDBG/HOME Annual Action Plan, a document originally approved by Council on April 27, 2021.
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Consultation and Public Participation
The Proposed HOME-ARP Allocation plan was developed though a consultation and public participation process conducted in alignment with the requirements outlined in the HOME-ARP Notice. Per the notice, HOME-ARP participating jurisdictions (PJs) must demonstrate consultation with the Continuum of Care serving the jurisdiction’s geographic area, homeless service providers, domestic violence service providers, veterans’ groups, public housing agencies (PHAs), public agencies that address the needs of the qualifying populations, and public or private organizations that address fair housing, civil rights, and the needs of persons with disabilities. In addition, PJs must provide for and encourage public participation in the development of the HOME-ARP Allocation Plan by holding a well-advertised public hearing to discuss development of the plan and by making the complete proposed plan available for a 15-day public review and comment prior to submission.
The HOME-ARP consultation requirements outlined above includes unique features that differ from what is normally required for the City’s Consolidated Plan. Specifically, HOME-ARP requirements lean heavily on consultation with the HUD-designated Continuum of Care Lead Agency to ensure that HOME-ARP funds are used by PJs in ways that align with and support the regional goals of the Continuum of Care in addressing homelessness. In compliance with this requirement, the City consulted extensively with the Los Angeles Homeless Services Authority (LAHSA), lead agency for the Los Angeles Continuum of Care (LA CoC), following release of their December 21, 2021 memorandum entitled “2021 HOME-ARP Funding Recommendations from the LA CoC”. Additional consultation efforts undertaken by City staff included participating in a LAHSA-hosted webinar with members of the LA CoC to discuss HOME-ARP recommendations, attending individual office hours with LAHSA staff to engage in an indepth discussion about uses of the City’s HOME-ARP allocation, and a City-convened Homeless Resource Coordination meeting bringing together local service providers, policymakers, healthcare organizations, and staff from a host of City and County departments for a robust discussion about LAHSA’s recommendations for HOME-ARP. 6 of 11
The City’s efforts to encourage public participation included an advertised public hearing at the May 23, 2022 meeting of the Social Services Commission and the release of a Housing Needs Survey to assess the needs of Santa Monica renters. The survey was open from June 24 to July 11, 2022, and made available in English and Spanish, both online and on-paper at a variety of City facilities and local service providers. Rent Control included a link to the survey in a mailer to over 27,500 residents in rentcontrolled apartments, and the survey was also publicized via City social media channels with a distribution list of over 47,000. The complete Proposed HOME-ARP Allocation Plan was made available for a 15-day public review period beginning on August 27, 2022. All public comments received to-date are included in the proposed plan. Any input received through the public review process or in response to this Council agenda will be incorporated into the final plan prior to HUD submittal.
Proposed Activities
HUD’s HOME-ARP notice specifies the activities that are eligible for HOME-ARP funding, including acquisition and development of non-congregate shelter, tenant-based rental assistance, supportive services, administration and planning, and nonprofit operating and capacity building assistance. The notice further defines the qualifying populations for whom HOME-ARP activities must be designed to assist, including sheltered and unsheltered homeless populations, those currently housed populations at extreme risk of homelessness, those fleeing or attempting to flee domestic violence or human trafficking, households at greatest risk of housing instability, and other families requiring services or housing assistance or to prevent homelessness.
Based on HUD’s eligibly criteria and taking into account the onetime nature of HOMEARP funds, LAHSA recommended that LA CoC participants use HOME-ARP for activities including acquisition of permanent housing resources, master leasing of multiunit housing, and provision of supportive services such as diversion, homelessness prevention, and short-term financial assistance. Notably, LAHSA recommended against use of HOME-ARP funding for non-congregate shelter due to the lack of permanent housing exits in the current system and the lack of operating dollars available to sustain new programs.
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Attendees at both the Homeless Resources Coordination meeting and the Social Services Commission meeting expressed support for using HOME-ARP funds for homeless prevention and supportive services to keep vulnerable households from becoming homeless or returning to homelessness. Participants cited the on-going economic impacts on vulnerable households facing barriers to maintaining or returning to work, such as lack of childcare, need to quarantine due to illness or close contact with infected persons, and impacts of inflation as exacerbating factors likely to increase housing instability. LAHSA agreed that homeless prevention efforts would be consistent with LAHSA recommendations and would support efforts to reduce the inflow of households into homelessness, which has been contributing to the increase in homelessness in the LA CoC despite increased rates of housing placements. Other LAHSA recommendations are largely duplicative of existing Santa Monica resources.
For example, the City supports affordable housing development through a local housing trust fund and has identified other sources of funding for Emergency Housing Voucher (EHV) navigation services and move-in costs.
Responses to the Housing Needs Survey also highlighted the need for additional supportive services, with respondents identifying difficulties in affording rent, utilities, and other basic needs along with an inability to find safe and decent housing at affordable costs among the top housing issues they experienced in the last six months.
Among the approximately 25 percent of respondents who stated that they currently need assistance with rent, the average amount of rental assistance needed is $971 per month, showing a need for deep rental subsidies. Regarding the upcoming Rent Control General Adjustment in September 2022, 62 percent of respondents in rent-controlled units stated that they will not be able to afford the 6 percent rent increase ($140 max).
In alignment with input received throughout the consultation and public participation processes, and consistent with HOME-ARP requirements for eligible activities and qualifying populations, staff recommends use of HOME-ARP funds for time-limited activities that address the emergent needs of Santa Monica’s most vulnerable households, as detailed in the table below. In preparing the HOME-ARP Allocation Plan, 8 of 11
staff assessed the possibility of allocating a full $2 million in HOME-ARP funds to rental assistance for eligible households. For example, exclusive use of HOME-ARP funds for rent assistance could provide 1,000 eligible households with a onetime payment of $2,000, after which all resources would be expended. However, after further discussion, staff ultimately identified a primary concern that maximizing the ability of HOME-ARP to provide short-term assistance would leave the City without adequate resources to support the wave of vulnerable Santa Monicans likely to be impacted by the sunset of eviction protections.
The resulting proposed HOME-ARP funding allocations are balanced to meet both the near-term needs of vulnerable households struggling to pay rent as well as the anticipated needs of the many households who may be at imminent risk of homelessness following the expiration of current eviction protections in late 2022 and early 2023. HOME-ARP funding would be used to support services for the next two to three years to coincide with the expected peak of housing instability in 2023-2025.
Using the funding in such a manner would also advance the City’s goal of cultivating an equitable and inclusive economic recovery and would support the homelessness prevention pillar of the four-pillar strategy to address homelessness.
In the event that demand for Administration and Planning resources falls short of proposed amounts, funds would be reallocated to Supportive Services and Homeless Prevention Services.
Supportive Services and Homeless Prevention Services - $2,000,000 Homeless Prevention Services
The upcoming expiration of current eviction protections marks the arrival of the longlooming eviction cliff, an event widely anticipated to result in issuance of a wave of unlawful detainers. For perspective, the Legal Aid Foundation of Los Angeles (LAFLA) took on 28 unlawful detainer (UD) eviction cases in the first quarter of 2022 alone, a trend that projects to an estimated 110 annually at a time when eviction protections still remain in place. UD cases are widely projected to rise following the sunset of 9 of 11
eviction protections, placing many vulnerable households at imminent risk of homelessness, with economic impacts from COVID continuing through 2025. Current funding for enhanced homeless prevention services expires in FY2023-24. Use of HOME-ARP funds to continue to provide supportive and preventative services will ensure that the City has a range of resources available to assist qualifying households in accessing and maintaining housing. Resources may include legal services, case management, behavioral health care, housing search and counseling services, and property manager/tenant mediation. Onetime HOME-ARP funds for supportive services will be made available to local service providers and awarded via a competitive process to agencies proposing eligible activities most responsive to anticipated needs.
Financial Assistance Funds
The City proposes to retain a portion of HOME-ARP funding to provide flexible financial assistance to eligible households at great risk of homelessness or housing instability that would be available to eligible households upon HUD’s approval of the allocation plan. These may be households that have been issued unlawful detainers or otherwise identified by service providers as requiring financial resources in order to avoid becoming homeless. Funds would be used by the City to issue payments on behalf of eligible households to property owners, utility companies, and other third parties for costs such as back-rent/rent arrears (up to the allowable six months), short-term rental assistance, utility and housing deposits, and moving costs needed to successfully close UD cases and prevent Santa Monica renters from becoming homeless. While HOME-ARP funds will not be available for use until HUD approves the allocation plan, if there are extremely low-income, severely rent-burdened households in Rent Controlled apartments not served by RCAR, HOME-ARP Financial Assistance Funds could also be available to assist more of those households.
Administration and Planning (A&P) - $220,124
10% of HOME-ARP funding is allocated to staff-time and resources required to administer the program in compliance with federal regulations.
TOTAL HOME-ARP FUNDED ACTIVITES - $2,220,124
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Next Steps
Once Council approves the HOME-ARP Allocation Plan, the City will prepare a final submission to HUD within 10 business days. HUD will then have 45 days to review the plan, provide feedback and/or request changes. Following HUD’s acceptance of a final Plan, the City must complete a procurement process to identify service providers for newly approved activities. That process will include a 30-day Request for Proposals (RFP) followed by 30 days for proposal review, 45 days to prepare a staff report requesting contractual authority from Council, and 10 days for contract execution. If all goes to plan, new services would start no earlier than March 1, 2023. To the extent possible, staff will make every effort to identify efficiencies that may shorten this timeline.
Note that any HOME-ARP funds set aside to provide financial assistance would be immediately available following HUD’s approval of the allocation plan, projected for November 2022, as payments would be administered directly by the City. Assistance would be available to participants engaged by current homeless prevention efforts such as LAFLA’s Right to Counsel and eviction prevention programs, as well as to extremely low-income, severely rent-burdened households that are unable to be served with current RCAR funding.
Past Council Actions
Meeting Date Description
April 27, 2021 (Attachment C) Approval of FY 2021-22 Annual Action Plan Financial Impacts and Budget Actions
Staff seeks authority to accept HOME Investment Partnerships – American Rescue Plan (HOME-ARP) funding from the United States Department of Housing and Urban Development (HUD). In order to accept funding, staff recommends the following budget changes. If renewals are awarded, budget changes will be included in subsequent year budgets, contingent on Council budget approval.
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FY 2022-23 Grant Budget Changes
Establish Revenue Budget Appropriate Funds
Account Number(s) Amount Account Number(s) Amount
20400001.405890 $2,220,124 20400021.556050 $220,124
20400021.556040 $2,000,000
Total $2,220,124 Total $2,220,124
Prepared By: Marc Amaral, Administrator
Approved Forwarded to Council
Attachments:
A. Attachment A: Proposed Santa Monica HOME-ARP Allocation Plan (Public Review)
B. Attachment B: 2021-22 CDBG/HOME Annual Action Plan
C. Attachment C: April 27, 2021 Staff Report