There are no fiscal implications associated with this report. However, as part of its agenda on October 8, 2019, the Board will consider financial support for three affordable housing developments that include housing for extremely low-income and very-low income persons with intellectual and/or developmental disabilities. If approved, the County’s capital investment of $10,000,000 for the three affordable housing developments would be drawn from funding previously approved by the Board on March 12, 2019 (Item No. 24).
REASONS FOR RECOMMENDATION
The County’s loans would support three new housing developments and a total of 214 new apartments. The County’s investment of $10,000,000 would contribute to the construction of: a) 60 apartments for individuals with intellectual and/or developmental disabilities and their families (“I/DD units”); b) 54 apartments for very-low income (VLI) households; c) 88 apartments for households earning up to 80% of Area Median Income (AMI); d) 9 apartments for households earning up to 100% of AMI; and, e) three units for resident managers. The County’s contribution towards the 60 I/DD units would be approximately $166,667 per unit.
Table 1 summarizes the three developments that are recommended for funding. Attachment A provides more information for each specific project including funding sources, other leveraged sources, unit mix and affordability levels.
Table 1: Recommended Developments
Moderate Income Units
Proposed County Funds
2330 Monroe – Santa Clara
Wilton Court – Palo Alto
Block 15 – Sunnyvale
Description of New Construction Developments
Below is a brief description of the three proposed developments. Attachment B includes a two-page summary for each of the three proposed developments.
2330 Monroe Street, Santa Clara: 2330 Monroe Street is a new 65-unit (including one manager’s unit) affordable housing development in the City of Santa Clara. If approved, the County’s investment of up to $3,200,000 would contribute to the construction of 16 units for adults with intellectual and/or developmental disabilities and their families, 10 units for households earning up to 50% AMI, 29 units for households earning up to 80% of AMI and 9 units for households earning up to 100% AMI. Freebird Development Company, the developer, has also secured a commitment of $5,000,000 from the City of Santa Clara.
Wilton Court Apartments, Palo Alto: Wilton Court Apartments is a new 59-unit (including one manager’s unit) affordable housing development in the City of Palo Alto. If approved, the County’s investment of up to $2,800,000 would contribute to the construction of 21 units for adults with intellectual and/or developmental disabilities and their families and 37 units for households earning up to 60% AMI. Palo Alto Housing Corporation, the developer, has also secured a commitment of $12,350,000 from the City of Palo Alto.
Block 15, Sunnyvale: Block 15 Apartments is a new 90-unit (including one manager’s unit) affordable housing development in the City of Sunnyvale. If approved, the County’s investment of up to $4,000,000 would contribute to the construction of 23 units for adults with intellectual and/or developmental disabilities and their families, 44 units for households earning up to 50% of AMI, 13 units for households earning up to 60% of AMI, 9 units for households earning up to 80% of AMI. Related Companies of California, the developer, has also secured a commitment of $12,500,000 from the City of Sunnyvale and has applied for a $1,000,000 grant through the San Andreas Regional Center (SARC).
Underwriting & Financial Feasibility
The County’s underwriting and financial feasibility analysis is completed at three stages during each project’s development phase: 1) at the time an application is submitted to the County for funding; 2) at construction finance closing; and 3) after the construction is complete and the project converts to permanent financing. Each developer is required to provide a pro forma and financial plan when they apply for housing development funds from the County. The financing plan explains the pro forma and assumptions that the developer is using to develop their financial projections.
During the initial review, Office of Supportive Housing (OSH) would prepare a preliminary analysis to: 1) confirm the funding gap; 2) determine the maximum subsidy for the project; and 3) analyze the developer’s financial projections and funding sources. Each project is underwritten to the Board-approved underwriting standards, which includes but is not limited to loan terms, developer fee caps, payment of prevailing wages, replacement and operating reserve amounts, operating budget minimums, and cash flow distributions. A consultant would be used to peer review OSH’s analysis. OSH staff would also consult with staff from cities that have also received a funding request from the developer.
The second review is completed once the developer has secured all financing for the project. At this stage, the construction lender, senior lender, and other soft lenders would underwrite the development based on the collective requirements of each funding source. If there are inconsistent policies or assumptions have changed, OSH would negotiate the County’s position to ensure the number of supportive housing units does not change, that costs remain reasonable, that the development remains affordable for at least 55 years, and, to the extent possible, that the County’s investment is repaid.
The final and third review would be completed post construction to certify that all costs were appropriate, and a final cost certificate is prepared by the developer. OSH would review the final cost certificate and any cost savings are used to pay back a portion of the County’s loan.
The final loan amount for each development will be contingent upon the final tax credit award and the developer’s ability to secure other local, state, and federal funding. In general, loans issued for new construction would be structured as 3% simple interest residual receipt loans, subject to final underwriting, and would be consistent with the updated Supportive Housing Development Program Guidelines approved by the Board on August 13, 2019 (Item No. 92).
For each I/DD unit, the San Andreas Regional Center (SARC) would be responsible for making referrals, coordinating, and providing or funding ongoing onsite supportive services. SARC’s responsibilities would be delineated through the following:
1. A No-Cost Memorandum of Understanding (MOU) between SARC and the County describing SARC’s responsibilities related to the I/DD units and the organization’s partnership to assist homeless persons who have or may have an intellectual and/or developmental disability. The MOU between SARC and the County is currently being executed under authority delegated to the County Executive or designee (March 12, 2019 Board Meeting, Item No. 24).
2. Each developer has submitted a commitment letter from SARC describing the services that would be offered or funded by SARC to help each future tenant live as independently as possible.
3. Prior to the County funding each loan, SARC and each developer would enter into an MOU describing the responsibilities of SARC, the developer, the developer’s property management agent, and the developer’s resident services provider. These project-specific MOUs would be similar to MOUs between the County and the developer when a development includes supportive housing units for homeless and chronically homeless persons.
The recommended action would create 211 new affordable apartments. The 60 I/DD units would be for I/DD adults and their families, which could include children. The remaining 151 apartments would be affordable and available to lower-income households, including those with children.
The recommended action would create 211 new affordable apartments. While the units would not be age restricted for seniors, the apartments would be affordable and available to lower-income households, which could include seniors.
The three proposed multifamily rental developments would increase housing opportunities for households in Santa Clara County with a range of affordability levels.
On August 13, 2019 (Item No. 92), the Board approved amended guidelines for the County’s Supportive Housing Development Program. The new guidelines incorporated specific requirements related to financing the development of affordable housing for ELI and VLI persons with I/DD. On August 15, 2019, the Office of Supportive Housing (OSH) issued a draft updated Notice of Funding Availability (NOFA) to assist developers with their formal submittal. On September 9, 2019, the OSH issued the formal NOFA.
CONSEQUENCES OF NEGATIVE ACTION
The Board would not receive the report.
STEPS FOLLOWING APPROVAL
Upon approval, the Clerk of the Board is requested to notify Ky Le, Consuelo Hernandez, Eloiza Murillo-Garcia, and Marie Walters in the Office of Supportive Housing.