SR 07-25-2017 8A
Ci ty Council
Report
City Council Meeting : July 25, 2017
Agenda Item: 8.A
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To: Mayor and City Council
From: Andy Agle, Director , Housing and Economic Development, Housing Division
Subject: Proposed Revisions to Housing Trust Fund Guidelines
Recommended Action
Staff recommends that the City Council approve proposed revisions to the Housing
Trust Fund Guidelines, as recommended by the Housing Commission, which would
create a new h ousing t rust f und with associated guidelines for eligible uses and
affordability levels, as well as new procedures and measures applicable to all housin g
trust funds regarding public input, planning, reporting, and overall transparency, as
redlined in Attachment A.
Executive Summary
Of the City Council’s five Strategic Goals, maintaining an inclusive and diverse
community focuses directly on addressing the strains on individuals and families to
afford to live in Santa Monica. The City’s Housing Trust Funds Guidelines (Guidelines)
establish the requirements and procedures for the approval of funding for affordable
housing. During the past year, the Hous ing Commission undertook a comprehensive
review of the Guidelines, which culminated in a set of recommendations presented in
this report. The proposed revisions to the Guidelines include the creation of a new
h ousing t rust f und, expanded planning and repor ting procedures, protocols to refine
loan approval rationale , and enhanced transparency regarding the use of all h ousing
t rust f unds.
Background
Santa Monica has a long history of leadership in Southern California for championing
housing affordability. V oter -approved affordable housing goals are achieved through a
variety of City policies, including rent control, zoning regulations such as the Affordable
Housing Production Program, as well as investments in the production and preservation
of affordable ho using via the City’s housing trust funds. Prior to 1998, staff administered
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five different affordable housing trust funds, each with separate guidelines involving
eligibility requirements, loan terms, and other conditions, creating complexity and
inconsist ency amongst the funds. On November 24, 1998 (Attachment B), City Council
approved consolidation of the various trust fund guidelines into a single set covering all
of the housing trust funds.
Since 1998, City Council has revisited and amended the Guideli nes on five occasions to
reflect updated market conditions and best practices. The current Guidelines establish
uniform loan terms and conditions among the five trust funds, while recognizing unique
eligibility requirements, where applicable, based upon ea ch trust fund revenue source.
Prior to the State -mandated dissolution of redevelopment agencies in 2012, the City’s
redevelopment tax increment revenue was the primary local funding source for the
production and preservation of affordable housing in Santa Monica. Such funding
amounted to approximately $15 million annually and financed affordable housing
through loans to nonprofit housing organizations.
In November 2016, Santa Monica voters approved Measures GS and GSH, which
together create a new source o f locally controlled revenue and direct one -half of the
revenue toward affordable housing purposes. The new tax is expected to generate
approximately $8 million annually. In addition, Council dedicated proceeds from the
repayment of City loan s to the forme r Redevelopment Agency, toward affordable
housing . Proceeds are estimated to average approximately $8 million annually for the
next seven years.
The Housing Commission’s review of the Guidelines evaluated whether amendments
are warranted. Prior to forming recommendations, the Commission sought public
comment on the existing Guidelines by proactively contacting the City’s established
neighborhood groups, as well as other stakeholders. Additionally, notice seeking public
comment was published on the Housing Division’s website. Commissioners requested
comments on the following items: (1) s pecific guidelines for a “Redevelopment
Replacement Housing Trust Fund” (involving the new voter -approved funding and any
General Funds allocated by Council from RDA loan rep ayments); (2) g eneral guidelines
applicable to all h ousing t rust f unds; (3) p lanning and r eporting procedures; and (4) the
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d ecision -making process for approving affordable housing loans. Written responses
from 16 individuals and organizations were receive d and considered by the Housing
Commission (Attachment C).
Discussion
A three -member subcommittee of Housing Commissioners reviewed the Guidelines and
presented a draft report (Attachment D) with recommendations to the Housing
Commission on May 18, 2017. The subcommittee report recommended the following to
City Council:
(1) Creation of a new “Redevelopment Replacement Housing Trust Fund”;
(2) Public planning and reporting on all Housing Trust Funds;
(3) Increased transparency regarding approved loans, trust fund balances, and
uses of funds; and
(4) Limited changes to the loan -approval process.
The Commission discussed the draft report, approved minor revisions, and adopted the
final report (Attachment E).
Each section below includes the Housing Commi ssion’s recommendations to City
Council, followed by staff’s identification of any legal or administrative issues associated
with the proposed revisions to the Guidelines.
Creation of a New Housing Trust Fund
Currently, the scope of the Guidelines include s five existing h ousing t rust f unds , as
follows :
(1) Citywide Housing Trust Fund
(2) Redevelopment Housing Trust Fund
(3) HOME Housing Trust Fund
(4) CDBG Housing Trust Fund
(5) TORCA Housing Trust Fund
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The Housing Commission recommends the creation of a new, sixth h ousing t rust f und
called “Redevelopment Replacement Housing Trust Fund” (RRHTF) containing revenue
from 50% of the Measure GSH transaction and use tax and G eneral F unds allocated
annually by Council, initially derived from the former Redevelopment Agency (RDA)
loa n repayments . Establishing a new and separate housing trust fund is intended to
provide transparency regarding tracking, expenditure, and use of the funds delineated
through a reserve account in the Special Revenue Source Fund. General Funds include
dedica ted funds from the June 14, 2016 City Council meeting in which City Council
directed staff to set aside the RDA loan repayments for affordable housing (Attachment
F). The Housing Commission also recommends specific requirements and eligible uses
to ensure funds meet the City’s priority affordable housing needs.
The Housing Commission recommend s a three -prong ed approach for the RRHTF that
seeks to 1) increase affordable housing opportunities with new construction, 2) preserve
existing affordable housing wit h acquisition and rehabilitation, and 3) prevent
displacement of low -income households with rental -subsidy programs. One key
recommendation is targeting the funding to households with incomes at or below 80
percent of area median income. Another recommenda tion is that proposed eligible uses
include both new construction and acquisition and rehabilitation developments, noting
that new construction has historically achieved better leveraging of public and private
financing, thereby minimizing City subsidies a nd maximizing the reach of City housing
trust funds. Finally, the Housing Commission recommends that the eligible uses of the
RRHTF allow for rental -subsidy programs, subject to Council approval regarding
specific programs.
With respect to eligible borro wers, and consistent with current Housing Trust Fund
Guidelines policy, the Housing Commission also recommends that eligibility for the new
trust fund be limited to nonprofit affordable housing organizations and limited
partnerships with a nonprofit genera l partner.
In summary, the Housing Commission recommends:
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Creation of a new housing trust fund (“Redevelopment Replacement Housing Trust
Fund”) for revenue received from Measure GSH and any matching funds allocated
by Council; and
Guidelines for the new housing trust fund establishing:
o Eligible uses include affordable housing created through new construction
and acquisition/rehabilitation, as well as rental subsidies, if a specific program
is approved by Council
o Funds be targeted to households with inco mes at or below 80 percent of area
median income; and
o Eligible borrowers must be nonprofit housing organizations.
One area of clarification involves the requirement, pursuant to State law, that 20 percent
of any loan payments from the former RDA to the C ity be deposited into a ‘Low -
Moderate Income Housing Asset Fund’ (LMIHAF). The existing Redevelopment
Housing Trust Fund (RHTF) serves as the LMIHAF and is subject to specific regulatory
restrictions regarding eligible uses and affordability targeting. The refore, staff
recommends continuing to direct 80 percent of RDA loan repayments to the RRHTF ,
which is subject to local discretion only, and 20 percent to the existing RHTF, in order to
facilitate the appropriate use, tracking, reporting, and compliance as sociated with th e
affordable housing revenue. Additionally, to avoid confusion between the existing RHTF
and the proposed RRHTF , staff recommends renaming the existing RHTF to the “Low -
Moderate Income Housing Asset Trust Fund” (LMIHATF).
Public Planning and Reporting Procedures for All Housing Trust Funds
The Housing Commission recommends establishing housing trust fund priorities aligned
with the adopted Housing Element’s affordable housing production goals. Under
California law, the City is required to periodically prepare a Housing Element which
must be approved by the State. The City’s current Housing Element covers the period
from 2014 through 2021 and includes ‘Quantified Objectives’ for housing production
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based on the Regional Housing Needs Assessme nt (the RHNA is conducted by the
Southern California Association of Governments). Quantified Objectives established in
the Housing Element already provide a guide as to affordability level (extremely low -,
very low -, low -, and moderate -income) goals. To in form priorities for housing trust funds
allocations, the Housing Commission recommends aligning with the Housing Element
planning cycle and using that process to refine affordable housing production goals with
respect to housing type (family, senior, speci al needs, etc.) and size (bedroom mix).
In addition to achieving harmony among affordable housing production policy and
housing trust fund priorities, the Housing Commission aims to ensure transparency and
accountability regarding the use of all housing trust funds. Therefore, the Commission
recommends the following planning, public input, and reporting procedures be included
in the Housing Trust Fund Guidelines:
Staff shall prepare a proposed Initial Plan for affordable housing development for
the remai ning period covered by the current Housing Element (i.e., though
2021);
Staff shall make the proposed initial plan available online , for a 45 -day period for
written public comment, and hold a public hearing (which staff recommends be
hosted by the Housing Commission) between the 30 th and 45 th day of the
comment period (to receive additional/final public comment);
Proposed initial plan shall be submitted with public comment to the Housing
Commission for review and advisory recommendations, and then to the Council
for consideration and approval;
Annually thereafter, the Housing Division shall submit a report to the Housing
Commission, along with any proposed amendments to the Council -adopted
initial plan, detailing the following information:
(1) source and am ount of funds received into each housing trust fund during
the prior year;
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(2) amount and uses of funds expended from each housing trust fund during
the prior year;
(3) quantity and type of affordable housing made available for occupancy
during the prior year;
(4) quantity and type of affordable housing which exceeded or fell below the
annual production mandate of Proposition R during the prior year;
(5) cumulative figures of source/amount of housing trust funds, quantity/type
of affordable housing made available, and exceeded/missed Proposition
R requirement, covering the Housing Element period, as well as a
comparison with the Quantified Objectives set forth in the Housing
Element; and
(6) comparison of the actual cumulative affordable housing production
covering t he period of the adopted Initial Plan with the goals set forth in
that plan.
One clarification staff recommends is that the annual report information described in
Item 2 above also include the amount and source of funding commitments issued during
the pr ior year. Such information will make clear the resulting unencumbered trust fund
balances available at the end of each reporting period.
Increasing Transparency for All Housing Trust Funds
The Housing Commission recommends several measures to provide ea sy and prompt
access to housing trust fund information. These include online posting, automated email
notification to the public, and public meetings regarding loan commitments. For online
postings, the Commission recommends that information be available i n one online
location, clearly identified as “Housing Trust Funds” on the Housing Division website,
and include the following relevant information within one week of becoming public:
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(1) current Housing Trust Funds Guidelines;
(2) all documents generated and made public by the City Manager, the Housing
Division, the Housing Commission, and the City Council pursuant to the
affordable housing planning and reporting process;
(3) written explanation of the City’s decisions to approve or reject applications;
(4) all loan com mitment letters issued;
(5) all notices of the required public meeting following a loan commitment; and
(6) all annual reports provided by the Housing Trust Fund recipients (redacted for
privacy).
Another measure the Housing Commission recommends is the creati on of an
automated notification service whereby members of the public can register to receive
emails when new housing trust fund information (as described above) is posted on the
website. Furthermore, the Housing Commission recommends that loan commitment
recipients hold a public meeting about the associated affordable housing. The public
meeting must occur within 30 days of the loan commitment, and the recipient must
provide a document giving notice of the date, time and location of the public meeting to
the Housing Division at least 15 days prior to the public meeting date.
One clarification staff recommends is that the posting of information described in Items
1 -6 above be applied prospectively, given the 30 -year history of housing trust fund
loans.
Revisions to Loan Approval Process
Current Guidelines prescribe an administrative process for the review and approval of
loan applications involving both new construction and acquisition/rehabilitation
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affordable housing developments. The process has prove n effective in creating
affordable housing for families, individuals, seniors, persons living with disabilities, and
persons experiencing homelessness. Administrative loan approval allows applicants to
be competitive in the Santa Monica marketplace, where property acquisition
opportunities suitable for affordable housing are sporadic and highly competitive .
The loan application and approval process includes these components:
Loan application submitted (applicant)
Due diligence and underwriting (City and a pplicant and other public/private
lenders/investors)
Loan Committee Report issued w/recommendations (City)
Loan Committee meeting – approve/deny loan (City)
Loan Commitment letter issued with conditions for final loan approval (City)
Loan Documents prepara tion, review, negotiation, and execution (City and
applicant and other public/private lenders/investors)
Escrow closing/property acquisition (City and applicant and other public/private
lenders/investors)
Historically, only nonprofit affordable housing o rganizations and partnerships have
applied for housing trust fund loans, although two of the five existing housing trust funds
allow for -profit applicants. Long -standing protocol requires that staff prepare an internal
Loan Committee Report which provides an overview of the proposed affordable
housing, target population, affordability levels, sources and uses of funds including any
proposed vouchers from the Housing Authority, due diligence conclusions, and the
general basis for recommending approval (or de nial) of the proposed affordable housing
loan.
To increase transparency and document in detail the rationale regarding the decision -
making aspect of the loan approval process, the Housing Commission recommends that
staff prepare and make public a written statement explaining the reasons for approving
or denying a loan request. The written statement should address the merits of the loan
application evaluated under the criteria enumerated in the Guidelines:
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Significantly increase affordable housing opportun ities for households who
have difficulty finding housing including the homeless, large families, the
disabled, seniors, and persons traditionally served by Single -Room
Occupancy housing
Are cost -effective or achieve the lowest possible subsidy per unit for
City/Agency resources
Benefit a high percentage of very low - and low -income households by
ensuring deeper affordability
Are located in areas currently underserved by affordable housing
developments
Address an area of need identified in the Housing Element of the City of
Santa Monica
The Housing Commission further recommends that two additional criteria be included to
evaluate a loan application and addressed in the written statement:
Whether the proposed affordable housing addresses a particular need ident ified
in the Council -approved Initial Plan (described earlier in this report); and
Applicant’s past and projected effectiveness implementing the City -established
local preferences (i.e., households that live or work in Santa Monica).
The practical effect of evaluating an applicant’s effectiveness in achieving the City’s
local preference goals c ould favor housing providers who administer their wait ing lists in
a manner where only households who live or work in Santa Monica are beneficiaries of
City -funded a ffordable housing.
The Housing Commission also recommends the Guidelines be revised to clarify that a
commitment letter issued by the City shall be signed by the Housing Division Manager
and the Director of Housing and Economic Development (a protocol wh ich has been in
practice for years). Furthermore, at its May 18, 2017 meeting, the Housing Commission
appointed a two -member subcommittee to observe the loan approval decision -making
process to facilitate a future discussion regarding other possible recomm ended changes
to the Guidelines. Staff will coordinate with the subcommittee to assist them in achieving
familiarity with the details of the loan approval process.
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Of final note is the Housing Commission’s recommendation regarding the loan approval
process as it relates to the intersection of public input and compliance with fair housing
law s . The Commission report notes that a significant portion of public comment (about
possible revisions to the existing Guidelines) involves a recent housing trust fund lo an
for affordable housing targeted to persons living with disabilities. Concerned that the
City should tread cautiously to avoid creating impediments to fair housing (e.g., like
imposing a requirement on the developer to conduct a public meeting after a lo an
commitment has been issued) while simultaneously establishing policies for robust
public input regarding affordable housing spending priorities, the Commission
recommends, “that City Council direct the City Attorney to ‘review existing guidelines
and pr ocedures and provide legal advice regarding whether any changes are
appropriate .’” Accordingly, the City Attorney’s Office will review the Guidelines for fair
housing compliance and staff will return to Council with amendments , if warranted.
Maximum Loan and Developer Fee Limits
The maximum housing trust fund loan (and grant) limits pursuant to the current
Guidelines are established on a per -unit basis and adjusted annually based upon a
Council -approved methodology linked to changes in land and constructi on costs (see
Municipal Code Section 9.64.070{b}). The FY201 7 -1 8 limits are illustrated in the table
below:
Maximum Loan/Grant Amount
Fiscal Year 201 7 -1 8
New
Construction
Acquisition &
Rehabilitation
Zero and 1 -
Bedroom Units $492,848 $613,710
2 or mo re
Bedroom Units $518,363 $645,940
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Loans in excess of the maximum (per -unit) amounts must be approved by the City
Council, as well as loans involving more than 50 residences. The Housing Commission
noted that the combination of the two limits (a per -unit loan limit and a 50 -unit loan limit)
results in substantial administrative authority for loan approval. In that context, the
Commission recommends revising the Guidelines to include an aggregate loan/grant
limit of $15 million per affordable housing devel opment. Any loan/grant exceeding $15
million would require City Council approval.
The proposed $15 million aggregate loan limit raises a few issues. One issue involves
a potential disconnect between proprietary and regulatory policies intended to facili tate
affordable housing. Since 2005, the Guidelines have included the 50 -residence loan
limit for affordable housing funding. Similarly, the zoning code provides for
administrative approval of affordable housing developments containing 50 residences or
few er . (On Ju ly 11, 2017, City Council endorsed a final draft Downtown Community
Plan which would allow administrative approval for a ffordable housing developments.)
Revising the current Guidelines to add a $15 million loan limit could result in
misalignment of streamlining measures for affordable housing development. For
example, a proposed affordable housing development involving 45 residences with an
average loan subsidy of $350,000 per residence would require Council approval (45 x
$350,000 = $15,750,000), though the housing would not require discretionary
approvals. An additional challenge is that competing for other financing to leverage City
funds (such as Low Income Housing Tax Credits) cannot occur until all discretionary
approvals are obtained, which can create delays in proposed housing, given application
periods are limited to once or twice year. With respect to preservation of existing
housing through acquisition and rehabilitation, the proposed $15 million loan limit could
limit such opportunitie s to properties with less than 28 residences , given that recent City
loans have average d $550,000 per residence ($550,000 x 28 = $15,400,000), as sellers
may be reluctant to accept purchase offers subject to Council approval.
Finally, the Housing Commissio n’s report notes that public comment received involved
the issue of increasing the developer fee limit. The ‘base limit’ amount allowed for the
developer fee was last established for the fiscal 2007 -08 period, although the amount is
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adjusted annually per the Guidelines. The Commission did not have adequate
opportunity to study and evaluate the issue of developer fee limits, but intends to
consider the matter in the future and make a recommendation to Council.
Next Steps
An additional issue staff would lik e to address which was not part of the Housing
Commission report involves updating the sustainability goals in affordable housing
which would be eligible for financing by housing trust funds (see Exhibit D of the
Guidelines, “Green Affordable Housing Check list”). Staff will collaborate with the City’s
Office of Sustainability and the Environment to prepare recommended updates to
Exhibit D, seeking a balance between integrating effective (and required) sustainability
features, recognizing the cost -effectiven ess thresholds of other public funding
programs, and requiring leveraging from federal/state/local sustainability programs
where available. Staff would review with the Housing Commission any proposed
changes to Exhibit D, and then return t o Council with r ecommendations.
Summary
The following table summarizes the proposed revisions to the Housing Trust Fund
Guidelines:
Proposed Revisions to the Housing Trust Fund Guidelines
Creation of a New Housing
Trust Fund
Creation of new Housing Trust Fund for Measur e
GSH revenues and matching G eneral F unds allocated
by Council
Targeting households with incomes at or below 80
percent of Area Median Income.
Eligible Uses includes new construction, acquisition
and rehabilitation, and Council -approved rental
subsidy prog rams.
Eligible borrowers must be nonprofit housing
organizations and partnerships with a nonprofit
general partner.
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Proposed Revisions to the Housing Trust Fund Guidelines
Public Planning and Reporting
Procedures for all Housing
Trust Funds
Alignment of Housing Trust Fund priorities with the
adopted Housing El ement’s affordable housing
production goals.
Planning, public input, and reporting procedures tied
to the Housing Element cycle.
Housing Trust Funds annual report.
Increasing Transparency for all
Housing Trust Funds
One online location identified as “H ousing Trust
Funds”
All relevant information available online.
Automated notification service for members of the
public.
Loan Approval Process
Written statement explaining reasons for approving or
denying a loan request.
Two additional criteria be include d to evaluate a loan
application
Commitment letter be signed by the Housing Manager
and the Director of Housing and Economic
Development.
Maximum Loan and Developer
Fee Limits
City Council approval required for any loan and or
grant exceeding $15 million
Eligible Sustainability Features
Staff will collaborate with the City’s Office of
Sustainability and the Environment to update Exhibit
D of the Housing Trust Funds Guidelines.
Financial Impacts and Budget Actions
As this report addresses policies by whic h City funds are allocated to nonprofit
affordable housing developments, there is no immediate financial impact or budget
action necessary as a result of the recommended action.
Under the proposed Guidelines, rental subsidies would be an eligible use for
Redevelopment Replacement Housing Trust Funds, if a particular rental subsidy
program is proposed by staff and approved by City Council. The financial impact of
using Redevelopment Replacement Housing Trust Funds for rental subsidies would be
discussed at the time a particular program was proposed for City Council approval.
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Prepared By: Natalie Verlinich, Senior Development Analyst
Approved
Forwarded to Council
Attachments:
A. Redlined Housing Trust Fund Guidelines 2017
B. City Council Staff Report 11.24.1998 (Web link)
C. Housing Commission Public Comment to HTF Guidelines
D. Draft Housing Commission Subcommitee Report 05.18.2017
E. Final Housing Commission Rep ort 05.18.2017
F. City Council Staff Report 06.14.2016 (Web link)
Adopted 11-24-1998
Amended 5-2-2000
Amended 4-24-2001
Amended 1-11-2005
Amended 6-19-2007
Amended 2-25-2014
Amended 7-25-2017
(* Loan/Grant Limits and Developer Fee Lim its have been updated for the FY2017-2018 period)
Housing Trust Fund Guidelines
City of Santa Monica
Housing Division
SUMMARY OF HOUSING TR UST FUND GUIDELINES
Citywide Housing Trust
Fund
Low-Moderate Income Housing
Asset Trust Fund
Redevelopment Housing Trust
Fund
HOME
Housing Trust Fund
CDBG
Housing Trust Fund
TORCA
Housing Trust
Fund
Replacement
Redevelopment
Housing Trust
Fund Taxable
Proceeds
(Loans)
Tax Exempt
Proceeds
(Grants)
Primary
fF unding source
In-lieu fees, development
agreements, office
mitigationcommercial
linkage fees , proceeds from
sale of City-owned property
Proceeds from
the sale of
former RDA
housing assets
and 20% of the
loan
repayments
owed by the
former RDA to
the
CityRedevelop-
ment tax
increment funds
Redevelop-
ment tax
exempt bond
proceeds
Federally-funded HOME Program Federally-funded CDBG
Program
TORCA
conversion tax ,
proceeds from
repayment of
TORCA shared-
appreciation loans
Voter Approved
Measure GSH and
City Council
matching funds
including 80% of
the loan
repayments owed
by the former RDA
to the City
Residual receipts loan payments
Eligible
Borrowers
Nonprofits, limited partner-
ship w/nonprofit general
partner
Nonprofits, for profits, and
limited partnerships with
nonprofit general partner
Nonprofits, for profits & limited
partnerships ; Mm ay not be
provided to primarily religious
organizations
Nonprofits and limited partnerships with nonprofit general partner
Eligible Projects
Rental housing, 4 or more units, SRO housing, congregate housing. Acquisition and rehabilitation projects with at least 51% of the units occupied by tenants whose incomes do not exceed
80% of median income, except when waived by the City Manager unless otherwise prohibited by state or federal law . New construction with exceptions.
If in-lieu fees, only new
construction and average 2
bedrooms
Mixed use if residential area equals
51% or more of space
New Construction allowed
only if with CHDO.
Rental subsidy
programs with City
Council approval
Eligible Uses Rental housing development: land lease/purchase, acquisition re habilitation, new construction. Site acquisition & preparation, new construction & rehabilitation, carrying fees & charges,
architecture, legal, organizational; relocation. Predevelopment loans, bridge loans. Working Capital for Citywide, CDBG, TORC A, Low-Moderate Income Housing Asset and
Redevelopment Replacement . If using in-lieu fees, new construction only (average 2 bedrooms).
Ineligible Uses Preliminary feasibility studies, organizational operating expenses.
Housing acquisition and rehabilitation if using in-lieu fees.
Reserves, impact fees, operating
subsidies; land banking, tempor -ary
shelters, project-based rental assist-
ance, commercial properties
New construction unless by
CHDO; rental assistance
payments
Loan Term Development loans and grants: 55 years, with automatic 25-year extension upon determination by City of full compliance with lo an terms.
Interest Rate Freddie Mac Rate for 30-year loans; may be lower for tax credit projects, HUD 202/811, or when required to meet other lender/ s ubsidy layering guidelines
Payments Loans may be deferred for up to 2 yrs.; 3 yrs. with City Manager /Executive Director waiver. Thereafter, payments to be made from resi dual receipts. Grant balance reduced by 1/80th each
year.
Maximum
Loans
New construction*: 0 & 1 bedroom: $469,379; 2 or more bedroom: $493,679;
Acquisition and Rehabilitation*: 0 & 1 bedroom: $584,486; 2 or more bedroom: $615,181;
* figures updated for the FY2016-2017 period.
**HOME subsidy shall not exceed the maximum all owed by HUD under the HOME program (24 C FR 92.250), or that pr ovided for under S ection IV, Loan Terms, of these Guidelines,
whichever is less.
***Individual Loans which exceed $15 million shall be approved by City Council be fore issuance of a commitment letter.
Affordability
Requirements
All assisted units must be
affordable to households
whose incomes do not
exceed 60% of median
income.
All assisted units shall be
affordable to households whose
incomes do not exceed 80100 %
of median income. New
construction units shall be
affordable to households whose
incomes do not exceed 80% of
median income.
For 4 or fewer HOM E-assisted units,
household income cannot exceed
60% of median income (use High
HOME rents); for 5 or more HOME-
assisted units, 20% of the HOME
units, household must be at/below
50% of median income (use Low
HOME rents). (Refer to HOME
Final Rule, 24 CFR 92.252.)
For new construction, at least
20% of the units in the project
must be affordable to households
whose incomes do not exceed
80% of median income. Rents
for all assisted units should be
affordable to households whose
incomes do not exceed 80% of
median income.
All assisted units shall be affordable to
households whose incomes do not
exceed 80% of median income.
Rent restrictions Based on 30% of applicable income category, adjusted for unit size
(i.e., # of bedrooms)
Maximum rents are determined by
HUD
Based on 30% of applicable income category, adjusted for unit size (i.e., #
of bedrooms)
Prevailing wage
and Labor
requirements
City code provides that State prevailing wage requ irements are applicable to rehabilitation projects over $15,000 and new construction projects over $25,000. of either 20 units or more, or
$250,000 construction contract; as adjusted for inflation since 1987 . Applicable to new construction projects of either 20 uni ts or more or construction cost of $1,000,000, as adjusted for
inflation since 1987.
Davis-Bacon does not apply to these funds. Davis-Bacon is applicable for
projects where 12 units or more are
assisted with HOME funds.
Davis-Bacon is applicable
for projects of 8 units or
more.
Davis-Bacon does not apply to these funds.
Local Preference Yes Yes, with 1st preference to
persons displaced by
redevelopment projects
Only if permitted by HUD Only if permitted by HUD Yes Yes
Note: For complete details about the information c ontained on this summary sheet, please refer to the appropriate sect ion of these Guidelines.
TABLE OF CONTENTS
I. INTRODUCTION 1
II. TYPES OF LOANS AND GRANTS 2
III. LOAN TERMS 4
IV. APPLICATION SUBMITTAL AN D REVIEW PROCEDURES 7
Application Submittal 7
Application Review 8
Competitive Selection Criteria 15
V. LOAN COMMITMENT AND CLOSING PROCEDURES 15
Loan Commitment 15
Loan Closing 17
VI. PROJECT MONITORING AND REPORTING 17
VII. FUNDING SOURCES 20
HOME Trust Fund 20
CDBG Housing Trust Fund 24
Citywide Housing Trust Fund 27
Low-Moderate Income Housing Asset Trust Fund Redevelopment Housing Trust
Fund 29
TORCA Housing Trust Fund 33
Redevelopment Replacement Housing Trust Fund 35
VIII. EXHIBITS 37
Exhibit A Definitions
Exhibit B HOME Program Subsidy Limits
Exhibit C Rental Housing Loan Application (with checklist)
Exhibit D Green Affordable Housing Checklist
Housing Trust Fund Guidelines (July 2017) Page 1
I. INTRODUCTION
The City of Santa Monica and the Redevelopment Agency of the City of Santa Monica provide
financial assistance to support th e acquisition, rehabilitation, and new construction of properties
to preserve and increase affordable rental housing opportunities for lower income households
through the following Programs:
HOME Housing Trust Fund (HHTF)
CDBG Housing Trust Fund (CDBGHTF)
Citywide Housing Trust Fund (CHTF)
Low-Moderate Income Housi ng Asset Trust Fund (LMIHATF)
Redevelopment Housing Trust Fund (RHTF)
TORCA Housing Tr ust Fund (THTF)
Replacement Redevelopment Housing Trust Fund (RRHTF).
Under these Programs, the City provides deferred payment loans and/or grants to bridge the
financial gap between available re sources - including the borrower's/grantee’s equity and private
financing - and the costs of developing afford able multi-family housing. The purpose of the
Housing Trust Fund Guidelines (“Guidelines”) is to provide an overview of the types and terms of
loans which are available, application requirement s, review procedures, selection criteria, loan
commitment and closing procedures, and project monitoring and reporting requirements of these
varied Programs within one comprehensive source of reference. Throughout this document,
loans and grants may be referred to collectivel y as “loans” except when the terms are unique
to a loan or to a grant.
These requirements are minimum requirements fo r participation in City Programs and are
subject to change at any time. Meeting these requirements is not a guarantee of participation
in any Program. The City reserves the righ t to require additional qualifications for
individual projects. The City reserves the righ t to reject any and all applications and to
accept applications which in its judgment best s erve the interests of the City. On a case by
case basis, City Council may also modify or waive provisions of these Guidelines.
These Programs are administered by the Housing Di vision of the City of Santa Monica (under the
direct supervision of the Housi ng Manager, the direction of the Director of Housing and Economic
Development, and the general su pervision of the City Manager /Executive Director of the
Redevelopment Agency ) on behalf of the City of Santa Monica , and, when Redevelopment
Housing Trust Funds are used, the Redevelopm ent Agency of the City of Santa Monica .
These Guidelines should be interp reted in conjunction with Federal, State, and City statutes and
regulations governing use of these funds; in the event of a conflict between these Guidelines and
such statutes and regulations, the requirements of those statutes and regu lations shall prevail.
Leveraging of City dollars (to the extent possibl e) with outside funding sources will continue to
be a priority.
Housing Trust Fund Guidelines (July 2017) Page 2
II. TYPES OF LOANS AND GRANTS
Acquisition & Predevelopment Loans and Grants
Acquisition & Predevelopment loan s may be made to private, nonpr ofit corporations with a proven
capacity to develop, own, and operate housing, and that have a vali d 501(c)(3) or (4) designation
from the IRS , and in limited circumstances described in the foregoing individual trust fund
sections, to for-profit entities . Funds may be used for acquisition and pre-development expenses
for projects for which there is site control and which have received a preliminary funding
commitment from the City /Agency . Expenses shall be limited to se rvices that ca nnot be obtained
on a contingency basis and may include (but are not limited to) architectural and engineering fees,
title reports, legal and organizati onal fees, mortgage application f ees, environmental analysis, and
permits and fees for public agencies. Pre -development funds may also be used for purchase
options or deposits for the purchase of buildings or land to be rehabilitat ed or developed with
assistance from one or more of the Program s , or purchase options or deposits on properties that
will not receive further subsidies under the Pr ogram, but that will be used for housing projects
developments that meet the same requirements. Such funds may be provided as part of a
predevelopment loan or through a separate cont ract with a nonprofit cor poration as discussed
below. Predevelopment loans may also be made to a nonprofit corporat ion for the purpose of
acquiring real property for future affordable ho using development, including but not limited to
vacant property, and properties with existing residential or commercial improvements.
These predevelopment funds shall be disbursed to an eligible borrower at the time of the City's
preliminary approval of a specific project. The amount of predevel opment funds disbursed to each
project shall be included in the calculation of the maximum loan from a Program and shall be
considered as part of the principal.
Development Loans and Grants
Program funds may be used for development loans for the following eligible purposes:
(1) The purchase of existing multifamily or other buildings for rent to low - and moderate -
income households and for the developmen t of congregate housing for rent to low -
and moderate - income persons with special need s. Except for congregate housing,
existing buildings shall consist of f our or more units, unless the City
Manager /Executive Director finds that a substantial public benefit will be provided by
a project consisting of less than 4 units.
(2) The purchase or lease of land, buildings ; or air rights for new construction or
rehabilitation of housing that may util ize available State and Federal housing
assistance programs such as the Section 202 Supportive Housing for the Elderly
Program, tax-exempt bond financing, S ection 811 Supportive Housing Program, and
low-income housing tax credits.
Housing Trust Fund Guidelines (July 2017) Page 3
(3) The development of limited - equity housing cooperatives through either conversion
or new construction.
(4) The provision of interim loan funds for a ny of the above purposes prior to the funding
of a public or private loan. Eligible development costs fo r the above uses include but
are not necessarily limited to:
(A) site acquisition and preparation;
(B) rehabilitation of dwelling units, common areas and related structures;
(C) new construction;
(D) carrying charges and financing fees;
(E) architectural, legal, and organizational fees;
(F) temporary or permanent tenant relocation costs; and
(G) a developer fee consistent with gui delines described in Section IV below.
(5) Prepayment of certain financing fees, such as bond issuance fees as necessary to make
favorable financing available.
Working Capital Loans and Grants
Up to five percent (5%) of the total funds available to Housing Development Corporations (HDCs)
under the CDBG Housing Trust Fund, th e TORCA Housing Trust Fund and the Low-Moderate
Income Housing Asset Trust Fund Redevelopment Housing Trust Fund may be available for
Working Capital Loans. A Working Capital Loan may be made to an HDC under contract with
the City of Santa Monica for th e development and management of affordable housing. Loan funds
shall be held in a separate, interest-bearing a ccount by the HDC for use as “working capital” to
fund early costs for securing site c ontrol and expenses related to feas ibility studies pr ior to approval
of a site-specific predevelopment loan or other loan from the City /Agency .
Loan funds may be used for reimbursable developm ent expenses that have received prior written
approval from the Housing Manager in connectio n with the acquisition, rehabilitation or
construction of housing units that will meet the cr iteria of low - or moderate - income household
benefit as established by the Guidelines. Eligible uses include but are no t necessarily limited to:
(1) Site control costs through deposits to escrow for purchase of buildings or sites within
the City of Santa Monica, or options to purchase property;
(2) Non-refundable option payments, in order to assist the HDC to secure property in a
competitive real estate market.
(3) Development expenses that cannot be funded on a contingency basis, including
architectural and engineering fees, environmen tal studies, appraisals and inspection fees.
The total of such expenses shal l not exceed $25,000 per project.
Upon receipt of an acquisition & predevelopment lo an, or development loan for the project, the
HDC shall promptly reimburse the Working Cap ital account for the amount advanced from the
fund for such purpose. In the event that the HDC does not receive an acquisition &
predevelopment loan or development loan for the pr oject or is unable to complete the project, the
Housing Trust Fund Guidelines (July 2017) Page 4
City /Agency may forgive 90% of the total funds expended by the HDC upon repayment by the
HDC of 10% of the amount of the expenditure.
No later than thirty calendar days after the termination date of the Working Capital Loan
Agreement, the HDC shall provide a full accounti ng of the amount of funds available in the
account, including all accrued interest, and a list of projects, if any, for which funds have been
used and have not been repaid, along with a sche dule of projected repayment dates. In the event
the Working Capital Loan Agreement is not renewe d, these funds shall be returned to the City.
III. LOAN TERMS
Term
Permanent loans that are not grants shall be due and payable in fifty-five (55) years subject to the
terms of the applicable Regulatory Agreement or recorded Covenants. Such loans may be
extended for up to twenty-five (25) additional year s, provided that the Borrower is in compliance
with the loan documents. Where necessary in or der to meet the requirements for other project
funding or enhance project feasib ility, the Housing Manager may approve a shorter loan term.
However, in no case shall a Regulatory Agreement or recorded Covenant remain in effect for fewer
than 55 years.
Acquisition & Predevelopment Loans that are not grants shall be due and payable in twenty-four
(24) months subject to the terms of the appl icable Memorandum of Agreement or recorded
Covenants. Such loans may be extended for up to eighteen (18) months with an additional twelve
(12) month extension option. Where necessary in order to meet the requirements for other project
funding or enhance proj ect feasibility, the Director of Housing and Economic Development
Department may approve a shorter loan term.
Purchase Option
At the end of the permanent loan term, the City w ill have the option to take title to the property in
accordance with the terms of an option agreement.
Interest Rates for Loans
The interest rate shall be set at either:
(1) the rate established by the Federal Home Loan Mortgage Corporation for the average
conventional commitment of a fixed rate, thirty-year (30) mort gage, and shall be
compounded annually; or
Housing Trust Fund Guidelines (July 2017) Page 5
(2) when necessary to secure investor equity, in terest rates of affordab le housing projects that
include tax credits or conventional lende rs, at 3% simple interest; or
(3) when the City /Agency loan is in a second position to a fi rst trust deed capital advance/loan
made under the U.S. Department of Housi ng and Urban Development (HUD) Section 202
or Section 811 Programs, the inte rest rate shall not exceed th e highest permissible rate on
the applicable HUD Section 202 or Section 811 Program mortgages, under authority of
Chapter 24 of the Code of Federal Re gulations (CFR), Subpart 885.410(g); or
(4) when required in order to meet federal s ubsidy layering guidelines, at the Applicable
Federal Rate (that rate established by the Internal Revenue Service pursuant to Section
1274(d)(1) of the Internal Revenue Code).
The City Manager /Executive Director may waive or reduce the interest rate as needed to ensure
the feasibility of projects.
Loan Payments
Payments on permanent loans shall be made as follows:
(1) Payments of principal and interest may be de ferred for up to two (2) years from the date of
execution of the loan, and up to three (3) years from the date of execution of the loan with
approval of the City Manager /Executive Director of the Rede velopment Agency of the City
of Santa Monica . After the expiration of the deferra l period, payments of principal and
interest shall be made annually to the City /Agency in an amount equal to 50% of project
Residual Receipts, if any. However, this 50 % of Residual Receipts may be split among all
the public lenders (including the City /Agency ) on a pro rata (of funding) basis. Payments
shall be applied first to accrued interest, and then to principal.
(2) The Borrower may elect to prepay the loan prior to the end of the term. However, the
Regulatory Agreement or recorded Covenants sh all remain in full force and effect for its
term regardless of any prepayment.
(3) If the Borrower violates the terms of th e Regulatory Agreement or recorded Covenants
such that the City /Agency declares the loan in default, the entire amount of unpaid principal
plus accrued interest at the rate establis hed at the time of closing shall be due.
(4) Unless paid in full earlier, the remaining prin cipal balance of the loan and accrued interest
shall be due and payable at the end of the te rm of the Promissory Note. Where necessary
to meet requirements of third party inve stors and with approval of the City
Manager /Executive Director , the City may allow the remaining principal and accrued but
unpaid interest to be payable on ly to the extent that the fair market value of the Project
exceeds the principal balance of the exis ting indebtedness secured by the property.
(5) For loans for projects not financed by federal Low Income H ousing Tax Credits, upon
determination by the City /Agency that the borrower is in full compliance with the terms
and conditions of the Regulatory Agreement, D eed of Trust, and Program Loan Agreement
(collectively referred to as “Loan Documents”), the City /Agency shall extend the terms of
the existing Regulatory Agreement, Deed of Trust, and Program Loan Agreement for a
Housing Trust Fund Guidelines (July 2017) Page 6
minimum period of twenty-fiv e (25) years ("Extension Period"). If borrower fully
complies with all terms and conditions of the Loan Documents during the Extension
Period, then any remaining principal and accrued but unpaid interest shall be forgiven at
the end of the Extension Period.
Payments on acquisition & predevelopment loans shall be made as follows:
(1) Payments of principal and in terest are deferred until maturity. Upon maturity, the
City/Agency may extend the term for up to eight een (18) months with an additional twelve
(12) month extension option.
(2) The Borrower may elect to prepay the loan prior to the end of the term. However, the
Memorandum of Agreement or recorded Covena nts shall remain in full force and effect
for its term regardless of any prepayment.
(3) If the Borrower violates the terms of the Memorandum of Agreement or recorded
Covenants such that the City /Agency declares the loan in default, the entire amount of
unpaid principal plus accrued interest at the ra te established at the time of closing shall be
due.
Grant Balance Reduction
(1) For grants for projects not financed by Low Income Housing Tax Credits, as long as
Grantee is in full compliance with the Regul atory Agreement, the City shall reduce the
amount of the balance of the grant by 1/80 th of the total grant am ount each year. If the
Grantee is in full compliance with the Regul atory Agreement, the Conditional Grant Note,
or the Conditional Grant Deed of Trust, at the end of the in itial 55-year term, the Grantor
shall accept a twenty-five (25) year extension of the term of the Regulatory Agreement, the
Conditional Grant Note, and the Conditional Grant Deed of Trust. Thereafter, as long as
the Grantee is in full compliance with th e Regulatory Agreement, the Conditional Grant
Note, and the Conditional Grant Deed of Trust, Grantor shall continue to reduce the
remaining balance of the Gran t by 1/80th of the Grant amount each year for an additional
25 years or until the balance of the Grant reaches zero.
Security
The loan shall be secured as follows:
(1) The loan shall be secured by a Deed of Trust and Promissory Note which may be
subordinated to Deeds of Trust securing other Fe deral, State, City loans, or loans from
conventional financing institutions used in conjunction with the Trust Fund loan on the
same property. The City /Agency must approve all re quests for subordination.
(2) The loan shall be further secured by a Re gulatory Agreement, Memorandum of Agreement,
or recorded Covenants to assure that Pr ogram funds are used to provide long-term
affordable rental housing opportunities for low - and moderate -income households. The
Housing Trust Fund Guidelines (July 2017) Page 7
Borrower and the City /Agency shall execute the Regulator y Agreement, Memorandum of
Agreement, or recorded Covenants regulating project rents, tenant selection procedures,
use of project income, manage ment and maintenance, transfer of property, and permitted
forms of ownership and use. The Regulatory Agreement, Memorandum of Agreement, or
recorded Covenants shall be reco rded with the Deed of Trust.
Maximum loan and grant amounts
Except as restricted by State or Federal law, the maximum Trus t Fund Loan/Grant per-unit shall
not exceed the following:
Original Base Amount
Fiscal Year 2007-08*
Updated Amount
Fiscal Year 2017-18*
New
Construction
Acquisition &
Rehabilitation
New
Construction
Acquisition &
Rehabilitation
Zero and 1-Bedroom
Units
$367, 000
$457,000
$492,848
$613,710
2 or more Bedroom
Units
$386,000
$481,000
$518,363
$645,940
* Maximum loan/grant to be adjusted in July of each year utilizing the annual adjustment
methodology for the City’s Affordable Housing Fee pursuant to Santa Monica Municipal Code
Section 9.56.070(b)
Actual loan/grant amounts will be based on the project’s need and the level of affordability that is
provided. Program loan/grants in excess of ma ximum amounts above must be approved by the
City Council /Redevelopment Agency . Loans for Pp rojects in excess of fifty (50) units or
individual loans in excess of $15 million must be approved by the City Council /Redevelopment
Agency .
IV. APPLICATION SUBMITTAL AND REVIEW PROCEDURES
Application Submittal
All applications for Program funds shall be submitted to the Housing Division and shall be
reviewed and approved through an administrative review process as established in these
Guidelines.
Housing Trust Fund Guidelines (July 2017) Page 8
The Applicant shall complete and submit to th e Housing Division the Application for Program
Funds (see Exhibit C) and prepare all required attachments, includi ng the management plan, tenant
selection and marketing plan, relo cation plan if necessary, signed purchase agreement and escrow
instructions, preliminary title repor t, and limited partnership document s, if necessary, at least sixty
(60) days prior to the scheduled close of escrow . Applications may be submitted at any time during
the program year and will be considered in the order submitted to the Housing Division.
Application Review
The Housing Division staff sha ll review the application to:
(1) determine that the minimum Program requirements are met;
(2) ensure that the estimated development co sts are reasonable and in conformance with
the City’s underwri ting guidelines and
(3) review the estimated mortgage amount and Borrower equity contribution in
accordance with the City’s underwriting guidelines and the requirements of the
proposed source of City /Agency funding.
Within sixty seventy-five (6075 ) days of the submission of the application, the Housing Division
shall determine whether the proposal is approvabl e for commitment, with or without conditions.
If the City determines, in its discretion, that th e application is complete and meets all of the
Program criteria, the City may issue a commitment letter. If the applica tion has deficiencies, the
City /Agency staff will identify the problem areas and notify the Applicant.
Staff shall review the design of the proposed proj ect for appropriateness fo r the proposed target
group, compatibility with surrounding uses, cost effectiveness of construction, and appropriateness
of proposed materials for low main tenance and long term durability.
Design Review
Applicants proposing new construction or chan ge of use of projects, including the moving on of
buildings on to vacant sites, will be responsible for no tifying the neighbors of the proposed project
plans for the site at the time the project is submitted to the Architectural Review Board (ARB) for
approval. Applicants will invite neighbors to review the projec t design and comment on the plans
at the ARB meeting. The Applicant will notify the neighbors at least seven (7) days prior to the
ARB meeting at which the project is scheduled to be reviewed.
Determination of Reasonable Costs and Financial Feasibility
Housing Division staff shall review the Applicant's estimates and projections of rents, expenses,
reserves and development costs in accordance with the City’s underwriting guidelines. The
Applicant shall provide background documenta tion on all costs as requested by the City /Agency .
The City /Agency may adjust cost and expense amounts as appropriate to conform to current
Housing Trust Fund Guidelines (July 2017) Page 9
market and industry standards. The total amount of the Program loan and all private loans shall
not exceed the total developm ent costs approved by the City /Agency .
The maximum allowable purchase price shall not exceed the appraised value as evidenced by an
appraisal prepared by a California State Certifie d General Appraiser and approved by the Housing
Division, which is dated not more than six (6) m onths prior to the date of the application. The
appraisal may not determine property value based solely on sales of properties financed by public
agencies.
The maximum affordable mortgage amount shall be calculated using the rent schedule proposed
by the Applicant as approved by the City /Agency , the proposed interest rate and terms of the
primary loan(s), and reasonable operating allowances and reserves including a reserve to amortize
a mortgage as needed.
The requested City /Agency loan for a project shall not exceed the total amount of the gap between
the maximum affordable mortgage amount availabl e from non-City sources plus funds available
from other sources of public s ubsidy, and the total development costs plus any on-going annuity
necessary to maintain affordable rent levels as defined in the Program application. The maximum
City /Agency loan shall not exceed the maximum per - unit limits described in these Guidelines.
All assisted units must maintain rents that do not exceed the Maxi mum Affordable Rent, as defined
in these Guidelines, for the life of the loan in accordance with the term s of the loan or other
recorded Covenants. Syndicated projects must be structured such that ownership can feasibly be
acquired by the nonprofit General Pa rtner at the end of the term of the limited partnership
agreement, when appropriate. When determining the maximum City /Agency loan, Housing
Division staff will scrutinize the rent schedule and annual cash flows in order to determine whether
long-term affordability is mainta ined. In cases where a rent s ubsidy program is utilized and the
mortgage is calculated on the basi s of the subsidized rents, an "affordability reserve" may be
required, where the amount of the reserve shall be sufficient to cover the difference between
affordable rents and the subsidized rents.
Developer Fee
For new construction projects, the developer fee shall not exceed the fo llowing per unit amounts,
based on the size of the project:
Original Base Amount
Fiscal Year 2007-08*
Updated Amount
Fiscal Year 2017-18*
For 1 – 20 units $16,240 $21,809
For 21 – 30 units $15,080 $19,042
Housing Trust Fund Guidelines (July 2017) Page 10
For 31 – 50 units $13,920 $17,577
For 51 or more units Negotiated Negotiated
For acquisition and rehabilitation projects of 7 units or less, the developer fee shall not exceed
$12,868 (updated for FY 2017-2018; original base amount for FY2007-2008 was $10,900) per
unit. For acquisition and rehabili tation projects of 8 or more uni ts, the developer fee shall not
exceed the greater of $55,000 per project or the sum of 5% of the depreciable acquisition basis and
15% of the rehabilitation basis. With the excepti on of those fees for ac quisition and rehabilitation
projects of 8 or more units, developer fees will be adjusted in July of each year utilizing the annual
adjustment methodology for the City’s Affordab le Housing Fee pursuant to Santa Monica
Municipal Code Section 9.56.070(b). At the discretion of the City Manager /Executive Director a
higher fee may be allowed.
The development fee for new construction projects will be released in three stages: (1) one-third
upon receipt of the necessary building permits, (2) one-third upon issuance of the certificate of
occupancy, and (3) one-third upon th e later of permanent loan cl osing or full lease-up of the
project. For projects involving acquisition and rehabil itation, the development fee may be released
in two stages: (1) twenty-five percent at the tim e of issuance of the build ing permit, and (2) 75%
at the time of conversion of interim financing to permanent financing, or full lease-up of the
project, whichever is later. Where the project does not utilize inter im financing or involves
acquisition only, the schedule for release of the de veloper fee will be reviewed on a case by case
basis. Changes to the above sc hedules for the releas e of fees may be approved by the Housing
Manager.
Developer Capacity
Applicants must demonstrate the capacity to successfully develop the proposed project. The
City /Agency shall evaluate capacity on the basis of th e Applicant’s track record in developing and
managing affordable housing, or inclusion of devel opment team members with a successful record
in developing such housing. In addition, Appli cants must demonstrate the financial and legal
capacity to undertake the proposed project.
Clear Title
The Applicant shall have the respons ibility to obtain clear title to the property. As soon as feasible,
the Applicant will submit a preliminary title report for City /Agency review and written approval.
Staff shall review the state of title, including the c onditions, covenants, re strictions and legal
description of the property and the rent control registration and removal permit issues. The
Applicant shall correct the state of title and remove all exceptions to the title not consented to by
the City /Agency before the City /Agency closes the loan.
Housing Trust Fund Guidelines (July 2017) Page 11
Senior Financing
The Applicant shall secure other resources such as equity from syndication proceeds, tax exempt
financing, federal and state hous ing rental and development s ubsidies and available private
financing to minimize the amount of the City /Agency loan. The Applicant will submit to the
City /Agency for review the terms and conditions of all non-City financing as well as equity
contributions. The Applicant must submit projecte d cash flows for the term of the loan, showing
the maximum possible increases (i.e., worst case scen ario) in debt service per year, the projected
rent and expense increases, th e means of making up any deficits , and projected payments of
Residual Receipts. The City /Agency shall analyze the feasibility of the project to carry the loan,
and if feasible will approve th e terms of the non-City financing.
The City /Agency may, at its sole discretion, calculate th e mortgage amount at the terms and rates
of available financing programs ot her than that proposed by the Borrower, if alternative terms and
rates are available that w ould reduce the amount of City /Agency subsidy required, and would
otherwise conform to the City/Agency requirements.
Management and Affirmative Marketing Plan
Except in the case of projects funded under the federal Section 202 Supportive Housing Program
and Section 811 Supportive Housin g Program, the Applicant shall prepare a Project Management
Plan for the City /Agency's review and approval. The Plan sh all describe the Applicant's policies
and procedures concerning:
(1) Affirmative marketing and tenant sel ection procedures including application
procedures, prioritization of Santa Monica residents and workers (see Local
Preference section below) where possible; waiting lists, and lease agreements; and
marketing efforts and tenant selection procedur es that will be used to attract eligible
persons from all racial, ethnic and gender groups, as well as persons living with
disabilities, in the housing market area to the availabl e housing; the Plan should
describe the protocols for keeping records of affirmative marketing activities and for
keeping records of requests (from applicants and existing tenants) for accessible
units;
(2) Procedures for determining tenant eligib ility and certifying incomes; the Plan should
demonstrate sufficient outreach to disabil ity-related groups to ensure that accessible
units are occupied to the extent possi ble by those households who need the
accessibility features due to disability;
(3) Management/tenant relations and assist ance to tenant organi zations, including the
training and use of tenants to perform ma intenance and management functions as
appropriate;
(4) Maintenance and repair services;
(5) On-site management facilities;
Housing Trust Fund Guidelines (July 2017) Page 12
(6) Rent collection;
(7) Records and reporting requirements;
(8) Personnel and staffing;
(9) Compliance with all tenant protection la ws, including rent co ntrol law and Building
and Health and Safety Codes;
(10) Fee schedule.
No person shall on the grounds of race, marital st atus, sex, color, age, religion, national origin,
ancestry, physical disability, AIDS, or sexual orient ation be excluded from participating in, be
denied the benefits of, or be subjected to di scrimination under any progra m or activity funded in
whole or in part with these funds.
Local Preference
Local preference for Santa Monica residents and work ers in tenant selection has been established
by the City /Agency as policy. Local preference shall be a requirement of the Citywide Housing
Trust Fund, Low-Moderate Income Housing Asset Tr ust Fund Redevelopment Housing Trust
Fund, and the TORCA Trust Fund , and the Redevelopment Replacement Housing Trust Fund .
Local preference shall be a requirement of th e HOME and CDBG Trust Funds only if permitted
by the federal government.
In evaluating a loan request, staff shall evaluate a loan applicant’s effectiveness in achieving the
City’s loan preference goals and give priority to those loan applicants who administer their wait
lists using sorting protocols which result in outc omes where households who live or work in Santa
Monica are beneficiaries of C ity-funding affordable housing.
Subject to applicable tenant income limits and a ny preferences required by th e laws of the United
States or the State of Califor nia (including but not limited to laws and regulations governing
nondiscrimination and preferences in housing occupa ncy), the Borrower shall give preference in
leasing units in the following order of priority.
(1) First priority shall be given to persons who have been permanently displaced or face
permanent displacement from housing in Santa Monica as a result of any of the following:
(a) A redevelopment project undertake n pursuant to Calif ornia’s Community
Redevelopment Law (Health & Safety Code Sections 33000, et seq.) -- applicable
only to projects funded by the Low-Moderate Income Housing Asset Trust
FundRedevelopment Housing Trust Fund .
(b) Ellis Act, owner-occupancy, or removal permit eviction;
(c) Earthquake, fire, flood, or other natural disaster;
(d) Cancellation of Section 8 c ontract by property owner; or
Housing Trust Fund Guidelines (July 2017) Page 13
(e) Governmental Action, such as Code enforcement.
(2) Second priority shall be gi ven to persons who are either:
(a) Residents of Santa Monica and/or
(b) Working in Santa Monica at least 36 hours per week for at least 6 months.
Regarding any “accessible units” that are required as part of a multifamily development, such
accessible units should be first o ffered to existing occupants of the building (if applicable) who
are not occupying an accessible unit and who have i ndicated a need for the features of an accessible
unit. If no existing occupants of the building have indicated the need for the features of an
accessible unit, or if the building is being leased for the initial occupancy, then such accessible
units should first be offered to applicants who have indicated the need for the features of an
accessible unit, inclusive of the preferences above. The application of preferences may not conflict
with Section 504 of the Rehabilitation Act of 1973, 24 C.F.R. §100.202, and any other preemptive
laws that may be enacted regarding fair hous ing for persons living w ith disabilities.
“Accessible units” refers to those units which were originally approved by the City
specifically as accessible units and which provide specific feat ures to addre ss the needs of
persons living with mobility impairments or persons living with sensory impairments.
Environmental Review
Project sites must be free from adverse environmental impacts, e.g., noise, or the proposed project
must successfully mitigate these impacts. The City /Agency shall assess the environmental effects
of each activity proposed to be carried out with City /Agency funding in accordance with the
provisions of the National Environmental Po licy Act of 1969 (NEPA) and the California
Environmental Quality Act (CEQA), as applicable . The Housing Division staff will commence the
assessment as part of the initial review of the app lication. For projects subj ect to NEPA review, no
loan funds (except for activit ies normally exempted from the environmental clearance
requirements in 24 CFR Part 58.34) shall be releas ed until the environmental review is completed,
the notice of finding and environmental assessmen t results are published, and the 15 day public
comment period expires.
Prevailing Wages
Any contract for construction (rehabilitation or new construction) of affordable housing with 12
or more units assisted with HOME funds, or 8 or more units if the project is assisted with CDBG
funds, must contain a provision requ iring that not le ss than the prevailing wage s paid in the locality,
as determined by the Secretary of Labor pursuant to the Davis-Bacon Act, will be paid to all
Housing Trust Fund Guidelines (July 2017) Page 14
laborers and mechanics employed in the development of the project. Contractors and
subcontractors must comply with regulations issued under this Act and pertaining to labor
standards and HUD Handbook 1344.1.
For all funding programs, the following prevailing wa ge requirements apply. Pursuant to Chapter
7.28 of Article VII of the Santa Monica Municipa l Code, any rehabilitation or new construction
project receiving City /Agency financial assistance shall comply with State prevailing wage
requirements if the following mi nimum thresholds are met:
(1) For a rehabilitation project over $15,000., either a minimu m project size of 20 units,
or a minimum total construction contract of $250,000, as adjust ed by the CPI since
1987. [CPI adjustment for 2007 is $461,412].
(2) For a new construction project over $25,000, either a minimum project size of 20
units, or a minimum total construction c ontract of $1,000,000, as adjusted by the CPI
since 1987. [CPI adjustment for 2007 is $1,845,650].
"Minimum total construction contract" shall not in clude expenses associated with site acquisition,
architectural and other pre-c onstruction development costs, financing charges, bonding and
insurance requirements, and fees, permits or licen ses required in connection with the project. The
minimum thresholds stated above are adjusted each July 1st by the percentage change in the
Consumer Price Index for the previous calendar year. Current minimum thresholds and prevailing
wage levels can be obtained from the Office of the City Engineer.
Relocation
The Applicant shall develop a plan for temporar y relocation or permanen t voluntary relocation,
where necessary, for review by the City /Agency . The relocation plan shall be in accord with the
City's Relocation and Tenant Assistance Plan, and the requirements of the Uniform Relocation
Assistance and Real Property Acquisition Polici es Act of 1970, and the implementing regulations
at 24 CFR Part 42, and the California Relocation Assistance Law, where applicable, copies of
which may be obtained from the H ousing Division. There shall be no permanent involuntary tenant
displacement. In cases where tenants will be vo luntarily displaced, the Applicant must submit a
copy of a letter to each tenant which (1) details the tenant’s right s to relocation assistance, and (2)
has been signed by the tenant indicating the tenant ’s voluntary waiver of any relocation payments.
Contracting Requirements
All Applicants will be required to submit an affirmative action/equal employment opportunity plan
indicating the methods that they will use to encourage the part icipation of certified Minority
Business Enterprise/Women Owned Business Ente rprise (MBE/WBEs) in their development
project. City /Agency staff will review the plan and competitive bid and selection process to ensure
that required procedures have been followed. City /Agency staff will also monitor construction to
ensure that MBE/WBEs are participating in the pr oject as indicated in th e construction contract.
Housing Trust Fund Guidelines (July 2017) Page 15
In accordance with the City's Women and Minorit y Business Enterprise Program approved by City
Council on March 8, 1983, all Borrowers are required to consider the City 's Women and Minority
Business Enterprise Program Library of Direct ories and Minority and Wo men Vendors' listing the
procurement of equipment, material , supplies and professional services.
All work shall be completed by State-licensed contractors which shall have Santa Monica business
licenses. All contracts must comply with co mpetitive bidding require ments. Contracts over
$10,000 must be in accordance with City's Wome n and Minority Business Enterprise Program.
All efforts shall be made by the private owner or the Borrower to provide equal opportunity for
employment without discrimination as to race, marital status, sex, color, age, religion, national
origin, ancestry, physical disability, AIDS, or sexual orientation, in se eking contractors and
subcontractors.
Competitive Selection Criteria
In selecting among competing proj ect applications, unless otherwis e determined for a particular
project, priority shall be given to projects that:
(1) Significantly increase affordable hous ing opportunities for households who have
difficulty finding housing including the homeless, large families, the disabled,
seniors, and persons traditionally se rved by Single Room Occupancy housing.
(2) Are cost effective or achieve the lowest possible subsidy per unit for City /Agency
resources.
(3) Benefit a high percentage of very low - and low - income households by ensuring
deeper affordability.
(4) Are located in areas currently unders erved by affordable housing developments.
(5) Address an area of need identified in the Housing Element of the City of Santa
Monica ;
(6) Addresses a particular need identified in the Counci l-approved Housing Trust Funds
Plan;
(7) Applicant’s past and projected effectiv eness implementing the City-established local
preferences (i.e., households which li ve or work in Santa Monica).
.
V. LOAN COMMITMENT A ND CLOSING PROCEDURES
Loan Commitment
A commitment letter shall be prepar ed by the Housing Division, reviewed and approved by
signature by the Manager of the Division and the Dire ctor of Housing and Economic Development,
Housing Trust Fund Guidelines (July 2017) Page 16
and signed by the City Manager /Executive Director . The letter shall state the maximum amount
of Program funds reserved for the project and li st all of the additional conditions, documents and
steps that must be taken by the Borrower prior to loan closing. All loans which exceed the
maximum loan and grant amounts in Section III shall require City C ouncil approval. Notice of
the issuance of the commitment shall be poste d publicly, and a copy of such notice shall be
published in a newspaper of general circulation , no later than 21 days after the commitment is
issued .
Staff will prepare and make public a written stat ement explaining the reasons for approving or
denying a loan request. The written statement should address the merits of the loan application
evaluated under the criteria, including:
- Whether the loan request si gnificantly increases affordab le housing opportunities for
households who have difficulty finding housing in cluding the homeless, large families, the
disabled, seniors, and persons traditionall y served by Single-Room Occupancy housing;
- Cost-effective or achieve the lowest possi ble subsidy per unit for City resources;
- Benefit a high percentage of very low- and low-income hous eholds by ensuring deeper
affordability;
- Located in areas currently underserve d by affordable housing developments
- Addresses an area of need identified in the Housing Element of the City of Santa Monica;
- A ddresses a particular need id entified in the Council-approve d Housing Trust Funds Plan;
- Loan Applicant’s past and pr ojected effectiveness implementing the City-established local
preferences (i.e., households which live or work in Santa Monica).
The Borrower shall conduct a public meeting for the proposed project w ithin 30 days of the
delivery of the loan commitment letter. The Borrower must provide a written notice which
provides the date, time and location of the public meeting to the H ousing Division at least 15 days
prior the public meeting date. The written notice shall be made public on the Housing Division’s
website. In addition, staff will provide the writte n notice to the neighborhood association in which
the proposed project is located and the notice sh all be published in a newspaper of general
circulation. This publication may be combined with the notice of issuance of the commitment.
Upon issuance of a commitment lett er, the Housing Division shall prepare draft loan documents,
including a draft Loan Agreement, Promissory Note , Deed of Trust (or other appropriate security
as determined by the Housing Manager), and Regulatory Agreement or recorded Covenants, and
submit them to the City Attorney ’s office for review and approval as to form. The submission
shall include copies of the preliminary title report , instructions to escrow concerning the items that
may appear on the title upon closing, and may incl ude the purchase agreement, long term lease
agreement, or air-rights agreement, as applic able. Requirements for a Regulatory Agreement or
recorded Covenants may be waived in the case of a project which is funded under the HUD Section
202 or Section 811 Program.
Housing Trust Fund Guidelines (July 2017) Page 17
Loan Closing
Funds may be disbursed following execution of th e loan documents by the Borrower and the City
Manager /Executive Director , and compliance with all commitmen t conditions. Staff shall submit
a request for release of funds required for loan closing to the Finance Director. The Finance
Director may then authorize release of loan funds into an escrow account established for the loan
closing with instructions for disbursement. The City /Agency will wire funds to escrow twenty-
four hours prior to the sc heduled close of escrow.
VI. PROJECT MONITORI NG AND REPORTING
The Housing Division shall monitor the project duri ng rehabilitation or cons truction as needed for
compliance with any loan documents and applicable City, State and/or Federal regulations. The
Housing Division shall request no tification of the final inspecti on and final construction release
from the primary lender, and shall review mana gement practices and re porting procedures with
the Borrower and project management agent at that time for full compliance with Program
requirements. A copy of the Notice of Completion for the project shall be submitted to the Housing
Division at the time the Notice is recorded.
Borrowers shall be required to certify annually that they have complied with affirmative marketing
and tenant selection procedures, and shall submit an annual report to the Housing Division in the
form specified by the Division. The Housing Division shall monitor compliance with any
Regulatory Agreement or recorded Covenants, th e loan documents, and applicable City, State
and/or Federal regulation s on an annual basis.
For projects funded under the federal Secti on 202 Supportive Housing Program and Section 811
Supportive Housing Program, during the term of the HUD Capital Advance documents,
compliance with the HUD documents will constitute compliance with the provisions of these
Guidelines.
Fair Housing and Equal Opportunity
Borrower shall post notices stati ng that a housing projec t is subject to Fair Housing and Equal
Employment Opportunity requirements of 24 CF R 92.350 and 351 at each project site. The name
and telephone number of the Fair Housing Officer of the City of Santa Monica will be included on
the notices.
Fair Housing complaints are referred to the City Attorney's office for investigation. If, after
investigation, it is determined that discrimination in the rental or sale of housing has occurred, the
City Attorney may attempt to me diate a settlement between the owner/seller and the complaining
party. Mediation is usually successful. However, if it is not, the party with the complaint may
Housing Trust Fund Guidelines (July 2017) Page 18
proceed to file against the ow ner/seller. If a pattern of discrimination has occurred, the
City /Agency may file suit for unfair business prac tices or other appl icable violations.
Establishment and Use of Reserve Funds
Upon completion of project construction, the Bo rrower will be requir ed to capitalize a Reserve
Fund in an amount determined by the City /Agency and make annual contri butions to the Fund.
The Reserve Fund can be utilized for expenditures related to necessary structural and equipment
replacements and improvements of a capital nature , and is not intended to be used for ordinary
maintenance items. Any expenditure by the Borro wer from the Reserve Fund in excess of $5,000
must be approved in advance by the City /Agency in writing. Expend itures of $1,000 to $5,000
must be documented by paid invoices submitted to the City /Agency within 30 days of
disbursement from the Reserve Fund.
Annual Reporting by the Housing Division
The City Manager shall prepare an initial proposed plan, called Hous ing Trust Funds Plan (“Plan”),
for affordable housing development in the City for the remaining period covered by the current
Housing Element (i.e., through 2021). The Plan sha ll be made available online and the Housing
Division shall conduct a 45-day public comment period. A public meeting hosted by the Housing
Commission shall be held by the Housing Division between the 30 th and 45 th day of the public
comment period. Once the public comment peri od is completed, the Plan with any public
comments shall be submitted to the Housing Co mmission for review and recommendation to the
City Council for review and its approval. A H ousing Trust Funds Plan shall be prepared and
adopted for each Housing Element cycle.
Thereafter, on an annual basis, the Housing Division shall pr epare a report to the Housing
Commission for its review and recommendation for C ity Council approval. Th e annual report shall
include details on the following items:
(1) The source and amounts of funding for each Housing Trust Fund received during the
prior year;
(2) The amount and uses of funds, including th e amount and source of funding commitments
issued, from each Housing Trust Fund during the prior year;
(3) The quantity and type of affordable housi ng made available for occupancy during the
prior year;
(4) The quantity and type of housing which ex ceeded or fell below the annual production
mandate of Proposition R during the prior year;
(5) Cumulative figures of source/am ount of Housing Trust Funds, quantity/type of affordable
housing made available, and exceeded/misse d Proposition R require ment, covering the
Housing Element period, as well as comparison with the Quantified Obje ctives set forth in
the Housing Element; and
(6) A comparison of the actual cumulative a ffordable housing production covering the period
of the adopted Housing Trust Funds Plan with the goals set forth in that plan.
Housing Trust Fund Guidelines (July 2017) Page 19
Once approved by City Council, both reports sha ll be posted on the Housing Division’s website.
Public Information on the Housing Division’s Website
Within one week of becoming public, the followi ng items shall be posted to the “Housing Trust
Funds” location on the Housing Division’s website:
(1) the current Housing Trust Fund Guidelines;
(2) all documents generated and made public by th e City Manager, the Housing Division, the
Housing Commission, and the City Council pursu ant to the affordable housing planning
and reporting process;
(3) written explanation of the City ’s decisions to approve or deny loan applications;
(4) all loan commitment letters issued;
(5) all notices of the required public mee ting following a loan commitment; and
all annual reports provided by th e Housing Trust Fund recipients . Staff shall ensure that
the annual reports posted publica lly shall redact any confiden tial or personal information.
Housing Trust Fund Guidelines (July 2017) Page 20
VII. FUNDING SOURCES
HOME Trust Fund
Source of Funds
Funding for this Program is provided through th e U.S. Department of Housing and Urban
Development (HUD) HOME Program (including program income and residual receipts), and
therefore is subject to the federal rules and regu lations found in 24 CFR Pa rt 92, as amended from
time to time.
Eligible Borrowers/Grantees
Eligible borrowers are non-prof it Housing Development Corpor ations (HDCs) with proven
capacity to develop, own and operate affordable housing, and which have a valid 501(c)(3) or (4)
designation from the IRS, and private owners of multi-family and SRO rental buildings with
proven capacity to develop, own and operate affo rdable housing. Limited partnerships whose
general partner is otherwise eligible ar e also eligible to borrow Program funds.
Eligible Projects
Projects eligible for HOME funding shall:
(1) be rental projects located in the City of Santa Monica;
(2) contribute to the achievement of the City's fair housing goals;
(3) involve 4 or more apartments or Ss ingle-Rr oom-Oo ccupancy (SRO) units which will
be rented to eligible lower income house holds at rents that do not exceed rents as
defined by 24 CFR 92.252, dated September 16, 1996, as amended from time to time.
Projects serving persons with specia l needs, or where the City Manager /Executive
Director finds that the project will provide a s ubstantial public benefit, may have fewer
than four apartment or SRO units. Transi tional or permanent housing may be provided
(but not temporary shelters).
(4) have at least 20% of the HOME assisted uni ts rented to very low income families (50%
of median income) under the terms and condi tions set forth in 24 CFR 92.252 (2)(b);
(5) demonstrate financial feasibility -- incl uding the ability to maintain rents for the
subsidized units at affordable levels fo r the periods specified in 24 CFR 92.252;
(6) be free of significant adverse environmenta l impacts, except those that can be mitigated
through the project itself;
(7) minimize tenant displacement;
(8) comply with all local building and zoni ng codes and standards, including energy
efficiency and water conservation standards, meet housing quality standards in Section
882.109 of Title 24. Newly constructed housin g must meet the current edition Model
Energy Code of the Council of Am erican Building Officials;
(9) make efficient use of public funds and avoid "layering" of subsidies beyond those
necessary to achieve a fina ncially feasible project;
(10) have at leas te 51% of the project space be reside ntial, if in a mixed use project.
Housing Trust Fund Guidelines (July 2017) Page 21
(11) Acquisition or Acquisition a nd Rehabilitation projects shal l have at least 51% of the
units occupied by households with incomes th at do not exceed 80% of median income,
adjusted for household size, at the time of acquisition (ex cept as approved by the City
Manager /Executive Director ).
Eligible Uses and Activities
HOME funds may only be used to finance new cons truction or acquisition a nd/or rehabilitation of
rental housing which is affordable to very low and low-income households as defined by 24 CFR
92.2. Fifteen percent (15%) of the annual HOME fund allocation shall be set aside for certified
community housing developmen t organizations (CHDO’s).
New construction costs eligible for HOME fundi ng shall be as specified in 24 CFR Part 92,
including:
1. site acquisition;
2. cost of demolishing existing structures only if construction is commenced within 12
months of demolition;
3. site preparation costs (grading, filling, etc.);
4. financing costs as described in 24 CFR 92.206;
5. architectural, engineering, a nd other related soft costs;
6. the cost of extending or upgrading utilities to the site to support the proposed project;
7. construction costs;
8. relocation costs; and,
9. affirmative marketing and audit costs related to HOME program requirements.
10. predevelopment loans up to a period of 24 months for site acquisition, predevelopment
activities, including professional services which cannot be obtained on a contingency
basis, and construction. Such loans may be extended for up to 18 months with an
additional 12 month extension option at the discretion of the Housing Manager.
Rehabilitation costs eligib le for HOME funding include:
1. project acquisition with or without rehabilitation;
2. costs of temporary or permanen t relocation for existing tenants;
3. financing costs, as described in 24 CFR 92.206;
4. architectural, engineerin g, or other design costs;
5. utility upgrade or extension costs;
6. costs associated with demolition (where necessary) only if rehabilitation is commenced
within 12 months of demolition;
7. construction costs;
8. project audit costs; and,
9. affirmative marketing costs.
Ineligible Uses and Activities
The following costs are not el igible for HOME funding:
1. project reserve accounts for replacement or operating reserv es, and operating subsidies;
Housing Trust Fund Guidelines (July 2017) Page 22
2. payment of impact fees;
3. land banking;
4. emergency repair or weatherization programs;
5. commercial properties;
6. temporary shelters; or
7. project-based rental assistance.
Affordability Requirements
A housing project qualifies as a HOME assisted a ffordable housing project if rents are limited as
follows:
1. At least 20 % of the HOM E assisted units are:
a) Occupied by very low-income families w ho pay toward rent not more than 30% of
the family adjusted income, or
b) Occupied by very low-income families and bear rents not greater than 30% of the
gross income of a family whose income equals 50% of the median income, as
determined by HUD. In determining the maximum monthly rent, the landlord must
subtract a monthly allowance for any utiliti es and services (excluding telephone) to be
paid by the tenant.
2. All remaining HOME assisted units must bear rents not gr eater than the lesser of:
a) The fair market value for existing compar able units in the area as established by
HUD, less the monthly allowance for utilities a nd services to be paid by the tenant; or
b) A rent that does not exceed 30% of the ad justed income of a family whose income
equals 65% of the median income for the ar ea as determined by HUD. In determining
the maximum monthly rent, the owner must subtract a monthly allowance for utilities
and services to be paid by the tenant.
3. Is occupied only by households that qualify as lower income (80% of median income)
families;
4. Will remain affordable, pursuant to deed restriction, covenants running with the land,
or other mechanisms that ensure that the pr operty will remain affordable without regard
to the term of the mortgage or transfer of ownership for not less than 55 years.
Other Requirements
Minimum Loan: All HOME investments must total not less than $1,000 multiplied by the number
of HOME assisted units in the project.
Maximum Loan: The maximum amount of subsidy per unit shall not exceed the maximum
allowed by HUD under the HOME program (24 CFR 92.250), or that provided for under Section
IV, Loan Terms, of these Guidelines, whichever is less. The City will avoid unnecessary layering
of subsidies from different federal, state and lo cal programs and seek to maximize the benefit to
target households from the investment of HOME funds in a project. See E xhibits (in Section VIII
of this report) for Home Program Subsidy Limits.
Housing Trust Fund Guidelines (July 2017) Page 23
Property Standards: Housing that is assisted with HOM E funds must meet, at a minimum, the
housing quality standards of all local codes, rehabilitation standards and zoning codes. Newly
constructed housing must meet th e current edition of the Mode l Energy Code published by the
Council of American Building Officials. Substan tially rehabilitated housi ng must meet the cost-
effective energy conservation and eff ectiveness standards in 24 CFR 39.
Labor Standards/Construction Contracts: Any contract for constr uction (whether it is for
rehabilitation or for new construc tion) of affordable housing with 12 or more units assisted with
HOME funds must contain a provision requiring that not less th an the prevailing wages paid in the
locality, as determined by the Secretary of Labor pur suant to the Davis-Bacon Act, will be paid to
all laborers and mechanics employed in the de velopment of the project. Contractors and
subcontractors must comply with regulations issued under this Act and pertaining to labor
standards and HUD Handbook 1344.1. These provisions apply whether HOME funds are used for
construction or non-construction costs.
Lead-based Paint : Housing assisted with HOME funds constitutes HUD-associated housing for
the purpose of the Lead-Based Paint Poisoning Pr evention Act and is therefore subject to 24 CFR
Part 35. Unless otherwise provided, borrowers are responsible for testing and abatement.
Conflict of Interest: No person who is an employee, agent, consultant, officer, or elected official
or appointed official of the City who exercises or has exercised a ny function or responsibility with
respect to activities assisted w ith HOME funds or who is in a pos ition to participate in a decision
making process or gain inside information with re gard to these activities, may obtain a financial
interest or benefit from a HOME assisted activity, or have an interest in any contract, subcontract
or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with
whom they have family or business ties, dur ing their tenure or for one year thereafter.
Religious organizations : HOME funds may not be provided to primarily religious organizations,
such as churches, for any activity including secular activities. In addition, HOME funds may not
be used to rehabilitate or cons truct housing owned by primarily relig ious organizations or to assist
primarily religious organizations in acquiring housing. However, HOME funds may be used by a
secular entity to acquire housing from a primarily religious organization, a nd a primarily religious
organization may transfer title to property to a w holly secular entity and th e entity may participate
in the HOME program in accordance with the requi rements of this part. The entity may be an
existing or newly established entity (which may be an entity established, but not controlled, by the
religious organization). The co mpleted housing project must be used exclusively by the owner
entity for secular purposes, available to all persons regardless of religion. In particular, there must
be no religious or membership crit eria for tenants of the property.
Housing Trust Fund Guidelines (July 2017) Page 24
CDBG Housing Trust Fund
Source of Funds
Funding for this program is provided through th e U.S. Department of Housing and Urban
Development (HUD) Community Development Block Grant (CDBG) program (including
program income and residual receipts), and therefore is subject to the federal rules and regulation
found in 24 CFR Part 570, as amended from time to time.
Eligible Borrowers/Grantees
Eligible borrowers are community-based nonprof it housing development corporations (CBDO’s)
duly organized or with capacity to promote a nd undertake community deve lopment activities on a
not-for-profit basis, with proven capacity to de velop, own and operate affordable housing, within
a neighborhood identified in the Community Developm ent plan. Such organizations are defined in
CDBG regulations (24 CFR 570.204(a)(2)(c)(1)). Nonprofit Housing Development Corporations
(HDC’s) and social service ag encies with proven capacity to develop, own, and operate affordable
housing, and limited partnerships whose general part ner(s) is otherwise elig ible under the above
provisions are also eligible to borrow Program funds if the nonprofit partner is the managing
general partner throughout the term of the loan and will receive at least 51% of the developer fee.
Nonprofit corporations must have a valid 501(c)(3) or (4) designa tion from the Internal Revenue
Service.
Eligible Projects
Eligible projects will: (1) have four or more apartment units, sS ingle rR oom oO ccupancy (SRO)
units, or fewer than four units in the cas e of congregate housing, mobile home unit s or where the
City Manager /Executive Director finds that the project will provide a substantial public benefit;
(2) if acquisition or rehabilitati on, have at least 51% of the units occupied by low and moderate
income tenants at the time of acquisition (except as approved by the City Manager /Executive
Director ); (3) if new construction, have 20% of the un its occupied by low income tenants; (4) be
free from significant adverse environmental impact s except those that can be mitigated; and, (5)
avoid permanent involuntary tenant displacement to the greatest degree feasible in order to carry
out the program. Transitional or permanent housing may be provided. Rents of assisted units shall
be affordable to households whose incomes do not exceed 80% of the area median income.
Eligible Uses and Activities
Funds can be used to make loan s to eligible borrowers to provide affordab le housing, principally
for low and moderate income house holds, including but not limited to:
(1) acquisition and/or rehabilitation of eligible rental properties;
(2) new construction of rental or limited e quity cooperative housing by a CBDO is eligible,
provided the construction activ ity is carried out as part of a neighborhood revitalization,
community economic development or energy conservation project;
Housing Trust Fund Guidelines (July 2017) Page 25
(3) predevelopment loans up to a period of 24 months for site acquisi tion or construction.
Such loans may be extended for up to 18 mont hs with an additiona l 12 month extension
option at the discretion of the Housing Manager.
(4) acquisition of short-term occupancy rental housing.
Funds may also be used for related predevelop ment activities, includi ng professional services
which cannot be obtained on a contingency basis.
Ineligible Uses and Activities
Funds may not be used for the following activities:
(1) the construction of new rent al housing or for any program to subsidize or assist such
housing except when carried out by a CBDO.
(2) to provide income payments for rent or utilities, except in emer gency situations for a
period not longer than three months.
(3) to assist rental housing properties if less than 51% of the units w ill be occupied by low
and moderate income households. However, such housing may be assisted where
(a) The assistance is for the purpose of reducing the development cost of new
construction;
(b) The project is not designed for/occupied by elderly households;
(c) At least 20% of the units will be occupied by low- and moderate-income
households (households with incomes which do not exceed 80% of median income);
and
(d) The proportion of the total cost of de veloping the project (to be borne by the
CDBG funds) is less than or equal to the proportion of the units in the project which
will be occupied by low to moderate income households.
Compliance with Federa l and Local Regulations
All projects must comply with all applicable federal requirements contai ned in 24 CFR Part 570
Subpart K, including but not limited to standards of financial management, environmental review,
labor and wage requirements, de barred contractors, lead-based paint and equal opportunity.
Borrowers should note:
Contract Requirements: All work shall be completed by licensed contractors. All contracts must
comply with competitive bidding requirements.
Labor Standards: A property with eight or more residential units must comply with the Federal
Labor Standards, including the Davis-Bacon Act requirements, as promulgated by HUD, and set
forth in 24 CFR Part 570, Subpart K in the performa nce of the rehabilitation or construction work
financed by the loan. Contracts over $10,000 must comply with Equal Opportunity Affirmative
Action requirements of Section 3 of the Housing Urban Development Act of 1968 and be in accord
with the City's Women and Minority Business Enterprise Program. All efforts shall be made to
provide equal opportunity for employment without discrimination as to r ace, marital status, sex,
Housing Trust Fund Guidelines (July 2017) Page 26
color, age, religion, national orig in or ancestry, and to seek out qualified local tradespeople for
contracting and subcontracting bids.
Lead Based Paint: All projects must comply with the fede ral Lead-Based Paint Hazard Abatement
regulations contained in Subpart K, 24 CFR 570.
Accessibility: All projects must comply with the federa l Section 504 Disabled Accessibility
regulations contained in Sections 8.22 and 8.23 of Subpart C, 24 CFR Part 8.
Religious Organizations : All projects must be used exclusiv ely for secular purposes, and must be
available to all persons regardless of religion. The housing may not be used for worship or
religious instruction.
Housing Trust Fund Guidelines (July 2017) Page 27
Citywide Housing Trust Fund
Source of Funds
Funding for this program is provided using revenues generated through (i) Development
Agreements with for-profit development firms doi ng business in the City of Santa Monica, (ii) in-
lieu fees from the Affordable Housing Production Program established by Ordinance 1918, and
(iii) the Office MitigationAffordable Hous ing Commercial Linkage Fee Program , and (iv)
proceeds from the sale of City-owned property .
Eligible Borrowers/Grantees
Eligible borrowers are nonprofit Housing Deve lopment Corporations (HDCs) with proven
capacity to develop, own, and opera te affordable housing and whose Articles of Incorporation and
Bylaws irrevocably dedicate residential propert y owned by the corporation to the charitable
purpose of providing affordable housing to low and moderate income households. Limited
partnerships with such a nonprofit housing development corporation as the general partner are also
eligible borrowers if th e nonprofit partner is the managing gene ral partner througho ut the term of
the loan and will receive at leas t 51% of the developer fee. N onprofit corporations must have a
valid 501(c)(3) or (4) designation fr om the Internal Revenue Service.
Eligible Projects
Funds can be used to make deferred loans to elig ible borrowers to provide affordable housing, for
low - and very low - income households through acquisition and/or rehabilitation or new
construction.
Eligible rehabilitation projects will:
(1) be in need of rehabilitation as defined herein;
(2) be located in the City of Santa Monica;
(3) be free from significant adverse envir onmental impacts except those that can be
mitigated through rehabilitation; and
(4) avoid permanent involuntary tenant displa cement to the greatest degree feasible in
order to carry out the program.
Eligible projects which involve new construction or conversion of an existing non-residential use
will conform to items (2), (3), and (4) above.
Eligible acquisition and rehabilita tion projects shall have at leas t 51% of the units occupied by
households whose incomes do not ex ceed 80% of median income, ad justed for household size, at
the time of acquisition (except as approved by the City Manager /Executive Director ). Any units
vacated subsequent to the acquisi tion date All assisted units shall be affordable to households
whose incomes do not exceed 60% of median income , and (except for households in occupancy at
the time of acquisition) shall be occupied by households whose incomes do not exceed 60% of
median income.
Housing Trust Fund Guidelines (July 2017) Page 28
For new construction projects, any unit assisted under this program shall be affordable to and
occupied by households whose incomes do not ex ceed 60% of median income as adjusted for
household size.
Eligible Uses and Activities
Funds can be used to make loans to eligible borrowers to provide affordable housing, for low - and
very low - income households, including but not limited to the following:
(1) acquisition and reha bilitation of eligible rental properties;
(2) acquisition and conversion of non-resi dential property to multifamily or singleSingle -
room Room occupancy Occupancy rental housing units;
(3) new construction of rental housing units;
(4) acquisition and rehabilit ation or construction of singleSingle -room Room occupancy
Occupancy housing units; and
(5) predevelopment loans up to a period of 24 months for site acquisition, predevelopment
activities, includi ng professional services which ca nnot be obtained on a contingency
basis, and construction. Su ch loans may be extended fo r up to 18 months with an
additional 12 month extension option at th e discretion of the Housing Manager.
Other Requirements
Funds derived from the Affordable Housing Pr oduction Program may only be used for (i) new
construction expenses, or for (ii) acquisitio n expenses incurred in conjunction with new
construction of projects. Units assisted with Inclusionary Program or Affordable Housing
Production Program funds shall be primarily units for families with an average of two bedrooms.
Religious Organizations
All projects must be used exclusively for secula r purposes, and must be av ailable to all persons
regardless of religion. The housing may not be used for worship or religious instruction.
Housing Trust Fund Guidelines (July 2017) Page 29
Low-Moderate Income Housing Asset Trust Fund Redevelopment Housing Trust
Fund
Source of Funds
Funding sources for this program areis generated from the City’s redevelopment project areas
proceeds from the sale of former Redevelopment Agency housing assets, residual receipts from
former Redevelopment Agency assets (i.e., loans), as well as a portion of the loan repayments from
the former Redevelopment Agency to the City . Sources include tax-increment revenues which are
set aside for the purpose of increasing, improvi ng and preserving the comm unity’s supply of low
and moderate income housing as stipulated by California Redevelopment Law, Health and Safety
Code Section 33334.234176 . In the event the tax-in crement revenues are leveraged in the capital
markets using a tax exempt debt instrument, then these proceeds may only be used for grants.
(Further information on grant te rms provided in Section III).
Eligible Borrowers/Grantees
Eligible borrowers are nonprofit Housing Develo pment Corporations (HDC’s) duly organized to
promote and undertake community development activit ies on a not-for-profit basis, or for-profit
housing developers or development corporations , with proven capacities to develop, own, and
operate affordable housing. Limited partnerships whose general partners are otherwise eligible
under the above are also eligib le to borrow Program funds.
Eligible Projects
All acquisition and rehabilitation units shall be affordable to households whose incomes, as
adjusted for household size, do not exceed 100% of median income, and shall be occupied by
households whose incomes do not exceed 100% of median income. The City Manager/Executive
Director may allow these units to be occupied by households whose income does not exceed 120%
of median if required for project feasibility. Rents for such units may not exceed 30% of 110% of
median income. If existing tenants at the time of acquisition or funding of the project have incomes
above the required level, City st aff may defer these requirements as to those units housing such
tenants only where the intent to use the propert y for future affordable housing to persons and
families of low and moderate income has been adequately documented. City Council action on
this exemption will take place in the form of a blanket resolution. Such deferred units will be
required by appropriate covenants to be converted to affordable units when the existing tenants
vacate the units. Eligible acquisition or acquisiti on and rehabilitation project s shall have at least
51% of the units previously or currently occupied by tenants with incomes that do not exceed 80%
of median income, adjusted fo r household size (except as approved by the Executive DirectorCity
Manager).
All new construction projects shal l be affordable to households whose income, as adjusted for
household size, does not exceed 80% of median income.
Housing Trust Fund Guidelines (July 2017) Page 30
Eligible acquisition and/or rehabilitation projects will be in the defined rede velopment project area
unless the Redevelopment Agency makes a finding that use of redevelopment funds outside the
project area will be of benefit to the redevelopmen t project area. In addition, eligible projects will :
(1) have four or more apartment or SRO units or be congregate housing or mobile home
unit s , except where the Executive DirectorCity Manager finds that the project will
provide a substantia l public benefit;
(2) be in need of rehabi litation as defi ned herein;
(3) be located in the City of Santa Monica;
(4) be free from significant adverse envir onmental conditions except those that can be
mitigated at a reasonable cost through rehabilitation; and
(5) minimize tenant displacement.
Eligible Uses and Activities
Program funds can be used to make loans or grants to eligible borrowers who will provide
affordable housing, principally for low - and moderate - income households. Eligible uses of
deferred payment loan funds or grants incl ude, but are not lim ited to, the following:
(1) acquisition and/or rehabilitati on of eligible properties for re ntal or transitional housing;
(2) acquisition and conversion of non-resi dential property to multifamily or single Single-
room Room occupancy Occupancy rental housing units;
(3) new construction of housing units for rental or transitional housing;
(4) acquisition and rehabilitation of singleSingle -room Room occupancy Occupancy
housing units; and
(5) predevelopment loans or grants up to a period of 24 months for site acquisition,
predevelopment activities, including professi onal services which cannot be obtained on
a contingency basis, and construction. Such loans or grants may be extended for up to
18 months with an additional 12 month ex tension option at the discretion of the
Housing Manager.
Affordability Requirements
As required by State law, all proj ects shall be targeted to house holds earning 80% or less of the
area median income, based on the State of California Housing and Community Development
income and rent limits. State law also requires that at least thirty percent (30%) shall be expended
for rental housing affordable to and occupied by “low-income” households does not exceed thirty
percent (30%) of the area median income and no mo re than twenty percent (20%) affordable to
and occupied by households between 60% of the ar ea median income and 80% of the area median
income.
Units are considered affordable when the rent, less a deduction for a utility allowance, for a “very -
low - income” household does not exceed thirty percen t (30%) of 50% of the area median income;
for a “low - income” household does not exceed thirty per cent (30%) of 60% of the area median
Housing Trust Fund Guidelines (July 2017) Page 31
income ; and for “moderate- income” households does not exceed thirty perc ent (30%) of 110% of
median income .
Very - low - income households are households whose in comes do not exceed 50% of the area
median. Low - income households are households whose in come does not exceed 80% of the area
median. Moderate- income households are households whose income does not exceed 120% of
the median income. The median income as referenced a bove is the Los Angeles County median
income figure, adjusted for hous ehold size, as published by the U.S.California Department of
Housing and Urban Community Development (HUDHCD ) from time to time.
Project Monitoring
The Redevelopment AgencyCity shall monitor annually any housi ng affordable to households of
low - or moderate - income funded with redevelopment these trust funds. The Agency City will
require owners or managers of the housing developments to s ubmit an annual report to the
Redevelopment AgencyCity . The annual report will include information on rental rates, family
income, and family size of occupants.
Security
The loan or grant shall be secured by a Deed of Trust and Promissory Note which may be
subordinated to deeds of trust securing other Fede ral, State, or City loans, or loans from
conventional financing institutions used in conjunction with the Redevelopment Low-Moderate
Income Housing Asset Trust Fund Loan on the same property. The Redevelopment AgencyCity
must obtain written commitments to protect the Agency’s City’s investment in the event of a
default. The Redevelopment AgencyCity must approve all requests for subordination.
The loan or grant shall be further secured by r ecorded Covenants and Re strictions, running with
the land, to assure that Program funds are used to provide long-term affordable rental housing
opportunities for low and moderate inco me households. The Borrower and the Redevelopment
AgencyCity shall execute and record Covenants and Rest rictions regulating pr oject rents, tenant
selection procedures, use of proj ect income, management and main tenance, transfer of property,
and permitted forms of ownership and use, including a prohibition on conversion of the project to
condominium or stock cooperative ownership for the term of the recorded Covenants and
Restrictions. The recorded Covenants and Restric tions shall provide for the longest feasible time ,
but for a period not less than the effectiveness of the Redevelopment Plan for which the
redevelopment project area is generating redevelopment tax increment funds . Notwithstanding
the above, the Covenants and Restrictions would in no event, be shorter than any other term of a
Regulatory Agreement or Covenant recorded concurrently with the CityAgency ’s Covenants and
Restrictions. The Covenants and Restrictions sh all be recorded with the Deed of Trust.
In some circumstances, these Covenants a nd Restrictions may be subordinated by the CityAgency ,
pursuant to Section 33334.143 of California Health and Safety Code, to liens, encumbrances, or
regulatory agreements of other fe deral or state agencies or lende rs providing financing for the
project , subject to assurances by senior lenders th at the City’s lien rights will be protected .
Housing Trust Fund Guidelines (July 2017) Page 32
Religious Organizations
All projects must be used exclusively for secula r purposes, and must be av ailable to all persons
regardless of religion. The housing may not be used for worship or religious instruction.
Housing Trust Fund Guidelines (July 2017) Page 33
TORCA Housing Trust Fund
Source of Funds
Funding for this program Program is provided using revenues gene rated pursuant to the Tenant
Ownership Rights Charter Amendment, as amended by Proposition K (including the repayment of
shared-appreciation loans made pursuant to this Program .
Eligible Borrowers *
Eligible borrowers are nonprofit Housing Deve lopment Corporations (HDCs) with proven
capacity to develop, own, and opera te affordable housing, and whos e Articles of In corporation and
Bylaws irrevocably dedicate residential propert y owned by the corporation to the charitable
purpose of providing affordable housing to low - and moderate - income households. Limited
partnerships with such a nonprofit housing development corporation as the general partner are also
eligible borrowers if th e nonprofit partner is the managing gene ral partner througho ut the term of
the loan and will receive at leas t 51% of the developer fee. N onprofit corporations must have a
valid 501(c)(3) or (4) designation fr om the Internal Revenue Service.
Eligible Projects
Eligible projects include acquisiti on, rehabilitation, or new constr uction of rental or ownership
housing projects which:
(1) consist of mobile home unit(s), congregate housing, SRO Single-Room Occupancy
units, or have four or more apartments, except where the City Manager /Executive
Director finds that the project will pr ovide a substantial public benefit;
(2) are located in the City of Santa Monica;
(3) are free from significant adverse envir onmental impacts except those that can be
mitigated through rehabilitation ;
(4) avoid permanent involuntary tenant displa cement to the greatest degree feasible in
order to carry out the program and
(5) have at least 51% of the units occupi ed by households whose incomes do not exceed
80% of median income, adjusted for househol d size, at time of acquisition (except as
approved by the City Manager /Executive Director ).
Projects which involve conversion of an existing nonr esidential use to residential use are eligible.
Transitional or permanent housing may be provide d. Projects which involve the conversion of
mobile home units to limited equity housing cooperative ownership are also permitted.
Eligible Uses and Activities
Program funds can be used to make loans to eligible borrowers who will provide affordable
housing, principally for low and moderate income households. Eligible uses of TORCA funds
include, but are not limite d to, the following:
*While the City may not act as a borrower itself, the City Ch arter provides that the City may also utilize TORCA funds for
the development of housing proj ects which meet TORCA requirements.
Housing Trust Fund Guidelines (July 2017) Page 34
(1) acquisition and/or rehabilitati on of eligible rental properties;
(2) acquisition and conversion of nonresid ential property to multifamily or sS ingle Rr oom
oO ccupancy rental housing units;
(3) new construction of rental housing units;
(4) acquisition and rehabilitation of singleSingle -room Room occupancy Occupancy
housing units;
(5) predevelopment loans up to a period of 24 months for site acquisition, predevelopment
activities, includi ng professional services which ca nnot be obtained on a contingency
basis, and construction. Su ch loans may be extended fo r up to 18 months with an
additional 12 month extension option at the discretion of the Housing Manager; and
(7) provide rental subsidies for temporary or permanent housing for Lowlow -Income
income households.
Affordability Requirements
All units assisted under this program shall be affo rdable to households with incomes that do not
exceed 80% of median income, and (except for hous eholds in occupancy at time of acquisition)
shall be occupied by households with incomes that do not exceed 80% of median income.
Other Requirements
Labor Standards: State prevailing wa ge requirements apply to projects of 20 units or more, or in
the event that in which project costs exceed $25,0001,000,000 for new construction or $15250 ,000
for rehabilitation , as adjusted for inflation since 1987 .
Religious Organizations
All projects must be used exclusively for secula r purposes, and must be av ailable to all persons
regardless of religion. The housing may not be used for worship or religious instruction.
Housing Trust Fund Guidelines (July 2017) Page 35
Redevelopment Replacement Housing Trust Fund
Source of Funds
Funding for this program is provided using reve nues generated through (i) the voter-approved
Measure GSH tax revenues and (ii) any othe r funds dedicated by the City Council.
Eligible Borrowers/Grantees
Eligible borrowers are nonprofit Housing Deve lopment Corporations (HDCs) with proven
capacity to develop, own, and opera te affordable housing and whose Articles of Incorporation and
Bylaws irrevocably dedicate residential propert y owned by the corporation to the charitable
purpose of providing affo rdable housing to low - and moderate -income households. Limited
partnerships with such a nonprofit housing development corporation as the general partner are also
eligible borrowers if th e nonprofit partner is the managing gene ral partner througho ut the term of
the loan and will receive at leas t 51% of the developer fee. N onprofit corporations must have a
valid 501(c)(3) or (4) designation fr om the Internal Revenue Service.
Eligible Projects
Funds can be used to make deferred loans to elig ible borrowers to provide affordable housing, for
low - and very low -income households through acquisiti on and/or rehabilitation or new
construction.
Eligible rehabilitation projects will:
(1) be in need of rehabilitation as defined herein;
(2) be located in the City of Santa Monica;
(3) be free from significant adverse envir onmental impacts except those that can be
mitigated through rehabilitation; and
(4) avoid permanent involuntary tenant displa cement to the greatest degree feasible in
order to carry out the program.
Eligible projects which involve new construction or conversion of an existing non-residential use
will conform to items (2), (3), and (4) above.
Eligible acquisition and rehabilita tion projects shall have at leas t 51% of the units occupied by
households whose incomes do not ex ceed 80% of median income, ad justed for household size, at
the time of acquisition (except as approved by the City Manager). Any units vacated subsequent
to the acquisition date shall be affordable to households whose incomes do not exceed 80% of
median income, and (except for households in o ccupancy at the time of acquisition) shall be
occupied by households whose incomes do not exceed 80% of median income.
Affordability Requirements
All assisted units shall be affo rdable to households whose inco mes do not exceed 80% of median
income, and (except for households in occupancy at the time of acquisition) shall be occupied by
Housing Trust Fund Guidelines (July 2017) Page 36
households whose incomes do not exceed 80% of median income. The City may require the
Borrower to pay to the City residua l receipts resulting from rents a ssociated with tenant(s) existing
prior to the acquisition which ex ceed the rent limits pursuant to the Regulatory Agreement.
For new construction projects, any unit assisted under this program shall be affordable to and
occupied by households whose incomes do not ex ceed 80% of median income as adjusted for
household size.
All eligible projects assisted under this program will not be required to meet a minimum average
number of bedrooms per unit requirement.
Eligible Uses and Activities
Funds can be used to make loans to eligible borrowers to provide affordable housing, for low - and
very low - income households, including but not limited to the following:
(1) acquisition and reha bilitation of eligible rental properties;
(2) acquisition and conversion of non-residentia l property to multifamily or Single-Room
Occupancy rental housing units;
(3) new construction of rental housing units;
(4) acquisition and rehabilitation or cons truction of Single-Room Occupancy housing
units;
(5) predevelopment loans up to a period of 24 months for site acquisition, predevelopment
activities, includi ng professional services which ca nnot be obtained on a contingency
basis, and construction. Su ch loans may be extended fo r up to 18 months with an
additional 12 month extension option at th e discretion of the Housing Manager; and
(6) Rental subsidy or other affordable hous ing programs with City Council approval.
Religious Organizations
All projects must be used exclusively for secula r purposes, and must be av ailable to all persons
regardless of religion. The housing may not be used for worship or religious instruction.
Housing Trust Fund Guidelines (July 2017) Page 37
VIII. EXHIBITS
Exhibit A Definitions
Exhibit B HOME Program Subsidy Limits
Exhibit C Rental Housing Loan Applic ation (with check list and including Green
Affordable Housing Checklist)
Exhibit D Green Affordable Housing Checklist
Housing Trust Fund Guidelines
EXHIBIT A
Definitions
Acquisition Basis: Owner’s basis for acquisition of the pr operty as determined by Standard
Accounting Procedures.
Capitalized Reserve Account: An account established with funds from capital funding sources
available at the time of completion of developmen t for the purpose of funding future project costs.
Community Housing Development Corpora tion (CHDO): A private nonprofit housing
development corporation which meets a series of HUD qualifications prescribed in the HOME
Regulations, including the requirement that it is duly organized to provide decent housing that is
affordable to low- and moderate-income persons ; maintains at least on e-third of its governing
board’s membership for residents of low-income neighborhoods, other low-income residents, or
elected representatives of low-income neighborho od organizations; and, provides a formal process
for low-income program beneficiaries to advise the organization in its decisions regarding the
design, siting, development, and mana gement of affordable housing.
Community Based Development Organization (CBDO): A Housing Deve lopment Corporation
which meets the requirements of CDBG regulations as defined in 24 CFR 570.204(a)(2)(c)(1), as
amended from time to time.
Congregate Housing: A multi-family residential facility with shared kitchen facilities, deed-
restricted or restricted by an agreement approve d by the City for occupancy by low or moderate
income households, designed for occupancy for periods of six months or longe r, providing services
which may include meals, housekeeping and persona l care assistance as we ll as common areas for
residents of the facility.
Depreciable Basis: Owner’s basi s for depreciable costs of the pr oject as determined by Standard
Accounting Procedures, not including developer fees.
Fair Market Rents: Maximum rents as published by HUD for the Section 8 programs for the Los
Angeles Area, adjusted for unit size.
Grant: Transfer of trust funds for purposes of financing the development of affordable housing,
on the condition that grantee rema ins in full compliance with the Regulatory Agreement. Unlike
a loan, the grant only becomes due and payable in the event that grantee is in default of the
Regulatory Agreement.
HED: Housing and Economic Development De partment, City of Santa Monica. This
Department will administer the Program for the City under the direction of the City
Manager/Executive Director.
Housing Trust Fund Guidelines
Nonprofit Housing Development Corporation (HDC ): A private, nonprof it corporation with
proven capacity to develop, own and operate h ousing, and which has a valid 501(c)(3) or (4)
designation from the IRS.
Limited Equity Cooperative: A form of owne rship whereby the residents form a cooperative
corporation which owns and manages the property, and where the return on residents' original
equity is limited to no more than 10%, as define d in the California Health and Safety Code, Section
33007.5.
Loan: Advance of trust funds for purposes of developing affordable housing with promise to
repay.
Qualified Developer: A non-prof it corporation with proven capacity to develop, own and operate
housing which has a 501(C) (3) or (4) designation from the I.R.S.
Low and Moderate Income Households:
For Home Trust Fund, CDBG Housing Trust Fund and TORCA Housing Trust Fund: Households
with incomes that do not exceed 80% of Los Angeles County median income, adjusted for
household size, as published by the U.S. Departme nt of Housing and Urban Development (HUD)
from time to time.
For Citywide Housing Trust Fund: Households with incomes that do not exceed 60% of the Los
Angeles County median income, adjusted for hous ehold size, as published by the U.S. Department
of Housing and Urban Developmen t (HUD) from time to time are c onsidered low income. Within
this group of households, those with incomes that do not exceed 50% of the median are considered
very low income.
For Low-Moderate Income Housing Asset Trust FundRedevelopment Housing Trust Fund :
Households with incomes that do not exceed 120% of the Los Angeles County median income,
adjusted for household size, as published by the U.S. Department of Housing and Urban
Development (HUD) from time to time.
Maximum Affordable Rent: A rent which does not exceed thirty percent (30%) of the maximum
income level of the income group being served (see "Low and Moderate Income Households"),
adjusted for unit size and utility costs.
For Low-Moderate Income Housing Asset Tr ust FundRedevelopment Housing Trust Fund : the
Maximum Affordable Rent for households with incomes that do not ex ceed 120% of median
income for Los Angeles County shall be 30% of 110% of such median income.
Housing Trust Fund Guidelines
Maximum Allowable Rent: The legal rent for th e unit under Santa Monica Rent Control Charter
Amendment, with allowa ble adjustments by the Rent Contro l Board for annual expense increases
or for capital improvements.
New Construction: The construc tion of new housing including, but not limited to assembly of
factory-built modular ho using, or conventional on-site construction.
Operating Reserve Account: An account establishe d for the purpose of funding a deficit in the
project’s operation.
Rehabilitation: Correction of local code violati ons and removal of health and safety hazards;
upgrading of housing units to decent, safe and sa nitary conditions to comply with the Housing
Quality Standards promulgated by HUD and with local standards; repair or replacement of major
building systems or components in danger of fail ure; and alterations, ad ditions and improvements
to expand the number of affordable units, or n eeded to improve the basic livability, energy
efficiency, accessibility for the disabled, or secu rity of the property, a nd to reduce overcrowding.
Rehabilitation Basis: Owner’s basis for reha bilitation costs incurred for the property, as
determined by Standard Accounting Pro cedures, not including developer fees.
Replacement Reserve Account: An account established for the purpose of funding major
repairs or replacement of capital components of a building which re ach the end of their economic
life and require replacement.
Residual Receipts: The gross receipts from the property, less actual costs of operation,
administration, maintenance, taxes, insurance, utilities, management, approved replacement and
operating reserves, payments of prin cipal and interest on loans senior to the City loan, and required
debt service coverage. The amount of Residual R eceipts shall be calculated based on the actual
income and expenses set forth in the Annua l Operating Budget requi red under the Regulatory
Agreement or recorded Covena nts, as approved by the City.
Single Room Occupancy Housing: Multifamily resi dential buildings containing housing units with
a minimum floor area of one hundred fifty square feet and a maxi mum floor area of three hundred
seventy-five square feet which may have kitc hen and/or bathroom facilities, and where each
housing unit is restricted to occupancy by no more than two persons and is offered on a monthly
rental basis or longer.
Transitional Housing: A type of supportive housing used to facilitate the movement of homeless
individuals and families to permanent housing. T ypically, transitional housing is housing in which
homeless people live for up to 24 months and receiv e supportive servic es that enable them to live
more independently. The supportive services ma y be provided by the or ganization managing the
housing or coordinated by them and provided by ot her public or private so cial service agencies.
EXHIBIT B
HOME PROGRAM SUBSIDY LIMITS
UNIT SIZE SUBSIDY LIMIT
0 Bedroom $141,088
One Bedroom $161,738
Two Bedroom $196,672
Three Bedroom $254,431
Four Bedroom or larger $279,285
Limits are for 2017
EXHIBIT C
Housing Trust Fund Loan Application
(includes Checklist)
City of Santa Monica
Housing and Economic Development Department
Housing Division
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Rental Housing Loan Applic ation Page 1
Santa Monica Housing Division
Rental Housing Loan Application
Loan Request: $ _____________________ Term (in years): ___________
Purpose of Loan (Circle one):
Acquisition & Rehabilitation New Construction Rehabilitation
Proposed City Funding Source (Circle one):
Predevelopment Construction Permanent Interim/Bridge
Applicant
Name of Organization ________________________________________________________
Street Address ________________________________________________________________
City, State & Zip Code ________________________________________________________
Contact/Title _________________________________________________________________
Phone/Fax ___________________________________________________________________
Legal Status of Applicant (Circle one): nonprofit corporation for-profit corporation
general partnership limited partnership individual joint venture other
Names and Addresses of Principals (if firm, not individual)
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
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Rental Housing Loan Applic ation Page 2
Santa Monica Housing Division
Proposed Project
Name of Project ________________________________________________________________
Street Address __________________________________________________________________
City, State & Zip Code __________________________________________________________
Total Number of Units ___________________________________________________________
Description of Proposed Project
Please provide a brief description of the proposed physical project, including proposed (or current if an
existing property) resident income levels, number and si ze of units, special amenities, on-site services, etc.
Description should be at least several paragraphs in length.
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Rental Housing Loan Applic ation Page 3
Santa Monica Housing Division
(Please circle the appropriate categories)
Building Type
Row
Detached
Semi-Detached
Walk-up
Elevator
Mixed-Use
Foundation Type
Full Basement
Partial Basement
Crawl Space
Slab/Grade
Parking Type
Subterranean
Semi-Subterranean
Tuck-under
On-Grade
Existing
Proposed
Stories:
Units:
Buildings:
Parking Spaces:
Gross Building Sq/Footage
(excluding parking):
Parking Square Footage:
Residential Area:
Commercial Area:
Year Built: __________
Units Demolished: __________
Amenities
Pool Laundry Other: __________________________
Type of Social Services, if any __________________________________________________
Accessory Buildings(i.e. Rec Halls, Garage or Shed Structures, etc.):
No., type, size ________________________________________________________________
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Rental Housing Loan Applic ation Page 4
Santa Monica Housing Division
Unit Mix
Existing
Proposed
Sq/Ft
Rents
Existing
Proposed
studio
one bedroom
two bedrooms
three bedrooms
four bedrooms
Total
Site information
Lot Size: Sq. Ft.
Lot Dimensions: X Ft.
Zoning:
Variances/conditional use permits/
other planning approvals required?
Is the project located in the Coastal Zone?
Equipment and Services to be included in Rent
Ranges (gas/electric)
Refrigerator (gas/elec)
Air Conditioner
Kitchen Exhaust Fan
Dishwasher
Garbage Disposal
Laundry Facility
Drapes
Carpet
Gas
Heat
Hot Water
Water
Electricity
Other:
Do you have a Rent Control Removal Permit? Yes No
If yes, please provide the permit number and date of issue ___________________________
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Rental Housing Loan Applic ation Page 5
Santa Monica Housing Division
Financing
Will this project seek to utilize low income housing tax credits? Yes No
If yes, estimated federal credits ___________ 9% ____________ 4% ____________
estimated State credits ___________
Will the project seek to utilize tax exempt financing? Yes No
If yes, proposed issuer and form of credit enhancement ______________________________
____________________________________________________________________________________
Development Team
Name
Contact/Title
Phone/Facsimile
Address
Developer
Architect
Consultant
Attorney
General Contractor
Construction Manager
Relocation Consultant
Other
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Rental Housing Loan Applic ation Page 6
Santa Monica Housing Division
Certification Statement
Please provide the following information. Leav e no blanks. If not applicable, type N/A.
(Please attach additional sheets, if necessary).
1. Applicant's Name:
2. List any additional names or aliases, exercise of power of attorney and/or
fiduciary trust capacities that you are currently using or have used in the past. If any,
please explain.
3. List all partnerships, corporations, joint ventures, and/or limited partnership
entities, (including applicant, if applicab le), which you are currently or have been
associated with, and designate whether you are/were a principal and list your title
and responsibilities, the purpose of the organization and its current status.
3a. Have any of the entities listed above been either suspended, revoked, lapsed
and/or terminated for any reason? If so, please explain.
3b. Has the applicant or its partners or principals filed for bankruptcy? If so, please
state the case number and whether the case was dismissed, discharged or is current.
3c. Has the applicant or its partners or principals defaulted on a financial obligation?
If so, please explain.
3d. Is there, or has there ever been, a settlement and/or judgement filed or a case
pending against the applicant or its partners or principals? If so, please explain.
3e. Has a lien ever been filed against real property owned by the applicant or its
partners or principals listed above as a result of a judgment, etc.? If so, please explain.
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Applic ation Page 7
Santa Monica Housing Division
4. Has the applicant or its partners or principals ever been convicted of a felony or
misdemeanor other than minor traffic violations and/or placed on probation, fined or
given a suspended sentence in court? If so, please explain.
5. Has the applicant or its partners or prin cipals ever been cited and/or convicted
of a misdemeanor, including but not limited to a conviction under local health, fire,
environmental and/or building and safety laws, relating to the ownership and/or
management of real property? If so, please explain.
6. Does the applicant have any employees or relatives who have close
associations with current or former employees of the Santa Monica City Council, City
Manager’s Office, or the Housing and Econ omic Development Department? If so,
please explain.
7. Are any current or former employees of the Santa Monica Housing Division
currently employed by the applicant? Any relatives of any Housing Division
employees? If so, please state the individual =s name and dates of employment.
8. Are there any Housing Division current or former employees that have a financial
interest in this project? If so, state name, dates of employment and interest.
9. List all residential income properties which are owned by the applicant or its
partners or in which principals have a vested interest.
10. Does the applicant or its partners or principals have any income and/or real
property taxes or assessments that are past due? If so, please explain.
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Applic ation Page 8
Santa Monica Housing Division
PRIVACY NOTIFICATION. The information requested above is to be used by the Santa
Monica Housing Division to assess the applicants creditworthiness. Information provided
that is contained in public records cannot be withheld from disclosure under the
California Public Records Act, Government Code, Sections 6250 and 6254. All other
information may be required to be disclosed outside the agency by state and/or
federal law.
Furnishing all information requested on this form is mandatory. Failure to provide such
information may result in disqualification or a withdrawal of Housing Division’s
commitment.
CRIMINAL PENALTIES. Any person who shall knowingly make or cause to be made,
either directly or indirectly, an y false statement in writing, with the intent that it shall be
relied upon, for the purpose of procuring the loan secured by real property shall be
guilty of a criminal offense, punishable by a fine not exceeding ten thousand dollars
($10,000.00) or by imprisonment in a county jail not exceeding six months, or by both the
fine and imprisonment. (California Penal code sections 532(a) and 532)).
CONTINUING OBLIGATION . I understand that I have a continuing obligation to provide
the Housing Division with current and accurate information. Applicant must provide to
Housing Division all requested information with an Applicant’s Certification Statement
for any individual or entity that Housing Division in its sole discretion believes is necessary
to evaluate the application (reasonably related to the applicant).
I, the undersigned, certify that the information provided to the City of Santa Monica,
Housing Division, is true and correct as of the date set forth opposite my signature on
this application package and acknowledge that any false or misleading statements of
the information contained may result in civil liability and liability for monetary damages
to the lender, its agents, successors, and assigns, insurers and any other person who
may suffer any loss due to reliance upon any false or misleading statements which I
have made on this Certification Statement.
_____________________________ ____________________________________________
Date Applicant’s Name
____________________________________________
Certified By (Print Name)
____________________________________________
Signature
____________________________________________
Title
____________________________________________
Federal Tax ID#
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application - Special Supplement Page 1
Santa Monica Housing Division
Special Supplement for Environmental Review
In addition to the following information, please attach 1 copy each of application exhibits (1c)
Construction and Design Description and (1e) current photos of site, and Assessor Parcel Map(s) with
parcels indicated. These materials will be forwarded separately to the parties responsible for
environmental review.
Applicant: ____________________________________________________________________
Project Address: ______________________________________________________________
Site information
Assessor’s Parcel #(s):
Lot Size: Sq. Ft.
Lot Dimensions: X Ft.
Zoning:
Uses on adjacent sites:
Variances/conditional use permits/
other planning approvals required?
Is the project located in the Coastal Zone?
Present Property Use:
Prior Property Use:
Number of:
Existing
Proposed
Stories:
Units:
Buildings:
Parking Spaces:
Gross Building Square Footage
(excluding parking):
Parking Square Footage:
Year Built:
Units Demolished:
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application - Special Supplement Page 2
Santa Monica Housing Division
Special Supplement for Environmental Review
Part II. Questions
1. Please describe adjacent uses and neighborhood characteristics.
2. Is the property designated or determined eligible for historic register designation
at the local, state or national level? Has it been determined ineligible?
3. Please identify the source of information used to determine the exact or
approximate year of building construction.
4. Will financing for this project include the Historic Rehabilitation Tax Credit?
5. Provide the name and address of an y person who has commented or may wish
to comment on this project.
6. Provide the names and telephone numb ers of the project applicant, project
monitor, and project architect and/or contractor.
7. Please provide a copy of a building permit for each building, if applicable.
8. Are there any other environmental studies available for the site (i.e.
Archaeological, Hazardous Materials, Phase I or II)?
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Checklist
Rental Housing Loan Application
Santa Monica Housing Division
Page 1
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application Checklist
Santa Monica Housin g Division
_______ # Application
_______ # Attachment A - Tenant Profile
_______ # Special Supplement for Environmental Review
_______ # Site and Project Information
Survey of site, if available
Legal Description of the Property
Construction and Design Description
For Acquisition or Rehabilitation Project s - Property Inspection Report and/or
Detailed Work Write-Up on a unit by unit basis
Schematic designs, if available
Current Photos of Site
Evidence of Site Control
Preliminary Title Report
Appraisal, if available
Current Rent Roll for existing tenants of acquisition and rehabilitation projects,
and estoppel certific ates when available
Verification of Zoning, if available
Phase I Environmental Report and any ot her Environmental Reports (e.g. lead
and asbestos assessments)
Termite Report
Construction Cost Estimate
Proposed Project Timetable
Checklist
Rental Housing Loan Application
Santa Monica Housing Division
Page 2
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application Checklist
Santa Monica Housin g Division
Analysis of replacement reserve requir ements, showing remaining economic life
and projected replacement cost for building systems
Checklist, cont.
Page 3
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application Checklist
Santa Monica Housin g Division
# Financial Feasibility Project development and operating pro formas in format shown. A diskette with
these forms prepared using Excel software is available from the City for your use. Notes and assumptions
explaining the basis of all projected costs development and operating costs must be provided. Required
exhibits include:
_____ Project Summary
_____ Exhibit 1, Development Costs
_____ Exhibit 2, Rent Schedule
_____ Exhibit 3, Operating Expenses
_____ Exhibit 4, 30 Year Cash Flow Analysis
_____ Exhibit 5, Financing
_____ Exhibit 6, Tax Credit Analysis (where applicable)
_____ Exhibit 7, Bond Fees Worksheet (where applicable)
_____ Exhibit 8, Sources and Uses Through Construction (when available)
# Organizational Documents
Project Team Resumes
Resumes of Principals of sponsor
For nonprofit developers,
List of Board of Directors and Organizational Chart
501(c)(3) exemption determin ation letter from the IRS
By-Laws, Articles of Incorpora tion, Partnership Agreements
Current Financial Statements (Audited st atements should be no more than 1
year old. Unaudited statements shou ld be no more than 6 months old.)
Ownership Plan, if applic ant will not be owner.
Checklist, cont.
Page 4
F:\F:\Housing\Production\City Council\Staff Reports\HTF Guidelines\2017-07-25\Attachment A - Redlined Housing Trust Fund Guidel ines 2017 - 07.14.17.docx
Rental Housing Loan Application Checklist
Santa Monica Housin g Division
# Financing
Evidence of other Financing Approvals, Summary of Terms and Status, Contact
Persons and phone numbers.
Ground Lease, if applicable
Loan Documents for Existing or Proposed Subordinate Financing, if available
Tax credit reservation, if available
# Property Management
Resume of Firm
Management Plan, if available
# Tenant Information
Tenant Profile, existing if available and proposed, showing number of persons in
each household and income level.
Relocation Plan, if applicable
# Tax Credit Projects Only
Evidence of Tax Credit A llocation, if available
Commitment of Tax Credit Investor, if available
Partnership Agreement, if available
EXHIBIT D
Green Affordable Housing Checklist
6
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N/A
10
If
n
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t
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l
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.
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m
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d
W
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r
P
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u
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&
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-
M
A
3
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u
e
l
a
m
,
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a
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l
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m
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m
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c
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l
a
m
,
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.
a
r
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t
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m
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s
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be
a
m
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n
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a
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e
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s
.
La
m
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t
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t
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p
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m
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d
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m
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d
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s
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r
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s
.
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n
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p
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r
t
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f
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d
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d
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G
B
D
&
C
G
-
M
A
6
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r
t
i
f
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d
w
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d
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l
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k
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f
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a
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t
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2
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0
1
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b
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m
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n
d
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.
If
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t
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If
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n
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l
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d
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a
s
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d
e
s
c
r
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b
e
w
h
y
.
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t
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f
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M
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s
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f
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d
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l
d
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d
Co
n
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t
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c
t
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o
n
G
u
i
d
e
l
i
n
e
(S
M
G
B
D
&
C
G
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f
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s
c
r
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f
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t
In
c
l
u
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d
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n
P
r
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j
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c
t
Ye
s
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o
N
o
t
S
u
r
e
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-
W
i
l
l
In
c
l
u
d
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n
B
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d
Pa
c
k
a
g
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t
o
De
t
e
r
m
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e
C
o
s
t
N/A
11
Pl
a
s
t
i
c
L
u
m
b
e
r
SM
G
B
D
&
C
G
-
M
a
b
SM
G
B
D
&
C
G
-
L
A
7
Pl
a
s
t
i
c
l
u
m
b
e
r
i
s
m
a
d
e
f
r
o
m
re
c
y
c
l
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d
p
l
a
s
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c
p
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o
d
u
c
t
s
.
It
c
a
n
b
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e
d
a
s
a
n
a
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r
n
a
t
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to
w
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a
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.
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G
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C
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A
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b
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m
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f
i
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s
t
a
n
t
.
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l
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t
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n
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l
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d
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l
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d
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c
r
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t
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Bu
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Co
n
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G
u
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l
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(S
M
G
B
D
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C
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)
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B
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c
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12
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d
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r
A
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r
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a
l
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t
y
No
-
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C
(
v
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l
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m
p
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d
)
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t
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G
B
D
&
C
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-
M
A
7
No
-
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O
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p
a
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t
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x
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a
l
p
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t
.
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r
r
e
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t
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-
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C
p
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l
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b
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l
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-
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t
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e
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l
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t
.
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t
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n
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l
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d
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w
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.
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.
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m
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a
r
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f
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h
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m
a
n
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e
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l
t
h
.
If
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n
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l
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d
e
d
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l
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s
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d
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s
c
r
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b
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o
w
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w
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d
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p
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j
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c
t
.
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n
o
t
i
n
c
l
u
d
e
d
,
p
l
e
a
s
e
d
e
s
c
r
i
b
e
w
h
y
.
Ci
t
y
o
f
S
a
n
t
a
M
o
n
i
c
a
H
o
u
s
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g
D
i
v
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s
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o
n
-
G
r
e
e
n
A
f
f
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d
a
b
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e
H
o
u
s
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g
C
h
e
c
k
l
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t
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e
m
a
n
d
S
a
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t
a
M
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n
i
c
a
G
r
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e
n
Bu
i
l
d
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g
D
e
s
i
g
n
a
n
d
Co
n
s
t
r
u
c
t
i
o
n
G
u
i
d
e
l
i
n
e
(S
M
G
B
D
&
C
G
)
r
e
f
e
r
e
n
c
e
D
e
s
c
r
i
p
t
i
o
n
B
e
n
e
f
i
t
In
c
l
u
d
e
d
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n
P
r
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j
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c
t
Ye
s
N
o
N
o
t
S
u
r
e
-
-
W
i
l
l
In
c
l
u
d
e
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n
B
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d
Pa
c
k
a
g
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t
o
De
t
e
r
m
i
n
e
C
o
s
t
N/A
13
Se
a
l
E
x
p
o
s
e
d
P
a
r
t
i
c
l
e
B
o
a
r
d
SM
G
B
D
&
C
G
-
M
A
7
Pa
r
t
i
c
l
e
b
o
a
r
d
t
y
p
i
c
a
l
l
y
in
c
l
u
d
e
s
f
o
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m
a
l
d
e
h
y
d
e
.
Se
a
l
i
n
g
w
i
t
h
a
f
l
a
t
,
l
a
t
e
x
-
b
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d
pr
i
m
e
r
o
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s
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a
b
l
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ma
t
e
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a
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c
a
n
p
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n
t
t
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o
f
f
ga
s
s
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o
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m
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l
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e
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y
d
e
.
EP
A
r
a
n
k
s
f
o
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m
a
l
d
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h
y
d
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a
s
a
pr
o
b
a
b
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h
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m
a
n
c
a
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c
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n
o
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e
n
.
Ex
p
o
s
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r
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t
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f
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m
a
l
d
e
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y
d
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c
a
n
ca
u
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y
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n
o
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n
d
t
h
r
o
a
t
ir
r
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t
a
t
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o
n
,
s
k
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a
s
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e
s
,
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a
d
a
c
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s
,
no
s
e
b
l
e
e
d
s
,
a
n
d
n
a
u
s
e
a
.
If
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n
c
l
u
d
e
d
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l
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d
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w
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c
t
.
If
n
o
t
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n
c
l
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d
e
d
,
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l
e
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s
e
d
e
s
c
r
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b
e
w
h
y
.
Fo
r
m
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a
b
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s
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d
Co
u
n
t
e
r
s
SM
G
B
D
&
C
G
-
M
A
7
Pa
r
t
i
c
l
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d
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m
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d
i
u
m
de
n
s
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f
i
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b
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(
M
D
F
)
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n
ca
b
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M
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r
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.
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b
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.
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a
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.
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d
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c
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h
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N/A
16
Gr
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N/A
17
1
REQUEST FOR PUBLIC COMMENT
In light of the State’s dissolu tion of Redevelopment Agencies, th e p assage of local Measures GS
an d GSH, and the City Council’s decision to commit to afford able h ousing purp o ses the funds to
b e received from the State for certain RDA loan repayments, the Santa Monica Ho u sing
Commission is undertaking a review of the existi n g Housing Trust Fund Guidelines. In order to
facilitate the Housing Commission’s review, th e Housing Trust Fund Guid elines subcommittee
requests that interested member s of the public provide written commen ts o n any or all of the
issues set out below by Friday, March 10, 201 7 . Comments can be submitted to Michael
Soloff, Chair of the Housing Commission, via email at mich ael.soloff@smgov.net , or via U.S.
Mail or personal delivery to Mich ael Soloff, Chair, c/o Seiky Gil, Secretary, Santa Monica
Housing Commission, 1901 Main Street, Suite C, San ta Monica, CA 9 0 4 05.
I. SPECIFIC GUIDELINES FOR TH E PROPOSED “REDEVELOPMENT
REPLACEMENT HOUSING TRUST FUND”
Prior to 2012, Santa Monica spent approximately $15 million per year on affordable housing.
Most of that funding came from RDA funds dr awn from the City’s “Redevelopment Housing
Trust Fund.” The State then ended RDA funding in 2012.
In 2015, the Housing Commission recommended to th e City Council that it request that the
voters replace half of the lost RDA funds with new revenues fr om a ¼ cent sales tax increase,
and that the City replace the ot her half with funds from ex isting general fund revenues.
Now that the voters have a pproved Measures GS and GSH, the Housing Commission has
recommended that the City Council establis h a new “Redevelopment Replacement Housing
Trust Fund” to be funded by (1) the half of the GS sales tax revenues voters advised should go to
affordable housing, and (2) a matching amount (at le ast) of other City general fund revenues.
Creation of this fund will provide transparency on the amount and uses of the GS revenues, and
the City’s commitment to providing the matching f unding required to fully replace (at least) the
lost RDA funds previously used for affordable housing.
A. Acquisition and Rehabilita tion / New Construction
The existing Housing Trust Fund Guidelines ge nerally authorize lending for the acquisition and
rehabilitation of existing units as affordable housing, and for the construction of new affordable
housing. A review of the existing Housing Trust Fund Guidelines reveals that there are some
differences between the guidelines governing ex penditures from the existing “Citywide Housing
Trust Fund” (“CHTF”) and the guidelines governi ng the former “Redevelopment Housing Trust
Fund” (“RHTF”) as follows:
1.Affordable Housing Production Program (“AHPP”) in-lieu fees deposited into the CHTF
(as opposed to development agreement or office mitigation funds) can only be used for new
construction, and that new construction must have on average two bedrooms per unit. By
contrast, all of the RHTF funds could be used ei ther for acquisition and rehabilitation of existing
buildings, or for new construction, without any requirement regarding th e average number of
bedrooms per unit.
2
2. For the CHTF, all assisted units must be affordable to households whose incomes do not
exceed 60% of area median income. By contrast, for the RHTF new construction units had to be
affordable to households whose incomes do not ex ceed 80% of median income, while acquisition
and rehabilitation units had to be affordable to households whose incomes do not exceed 100%
of median income.
3. For the CHTF, loans can only be made to nonprofits, and to limited partnerships with a
nonprofit general partner. By contrast, the RHTF also could make loans to for-profit developers
of affordable housing.
The Housing Trust Fund Guidelines subcomm ittee therefore requests public comment on the
following aspects of the specific guidelines for new proposed “Redevelopment Replacement
Housing Trust Fund”:
1. Should the guidelines allow expenditures for both acquisition and rehabilitation of
existing units and the construction of new units, or only for the construction of new units (and
why or why not);
2. Should the guidelines require any minimum av erage number of bedrooms per unit (and if
so what minimum) in new construction projects a nd/or in acquisition and re habilitation projects
(and why or why not);
3. What affordability level(s) should be re quired in new construc tion projects and/or
acquisition and reha bilitation projects (and why); and
4. Should the guidelines permit loans to for-pro fit developers of affordable housing, as well
as to nonprofits and to limited partners hips with a nonprofit general partner.
B. Additional Uses
In 2015 the Housing Commission recommended that th e City create a pilot rent-subsidy program
for severely rent-burdened low-income residents in long-term rent cont rolled units and, if
successful, that the program should be brought to scale. The City is in the process of creating
such a pilot program, and will thereafter evalua te its results. The Housing Commission also
recommended that the City consider the possibi lity of issuing lease-re venue bonds to acquire
property for future development as affordab le housing. During 2016, the Housing Commission
heard public comment that certai n existing non-profit affordable housing projects created with
the support of City fund s face negative cash flows, and may need some additional City support.
Further study, and City Council approval, is re quired before any such additional uses of
affordable housing funds can or should occur.
The Housing Trust Fund Guidelines subcom mittee requests public comment on whether the
guidelines for new proposed “Redevelopment Re placement Housing Trust Fund” should at this
time include among th e eligible uses:
3
1. Rental subsidies with City C ouncil approval (and why or why not).
2. Property acquisition for future affordab le housing development through lease-revenue
bonds with City Council appr oval (and why or why not).
3. Cash flow support to existing non-profit affo rdable housing projects with City Council
approval (and why or why not).
II. GENERAL GUIDELINES APPLICABLE TO ALL HOUSING TRUST FUNDS
A. Maximum City Funding Without City Council Approval
The existing Housing Trust Fund Guidelines lim it the maximum size of the contribution the City
can make to an affordable housing project wit hout further City Council approval as follows:
“Except as restricted by State or Federal la w, the maximum Trust Fund Loan/Grant per-unit
shall not exceed the following:
Original Base Amount
Fiscal Year 2007-08*
Updated Amount
Fiscal Year 2016-17*
New
Construction
Acquisition &
Rehabilitation
New
Construction
Acquisition &
Rehabilitation
Zero and 1-Bedroom
Units
$367, 000
$457,000
$469,379
$584,486
2 or more Bedroom
Units
$386,000
$481,000
$493,679
$615,181
* Maximum loan/grant to be adjusted in July of each year utilizing the annual
adjustment methodology for the C ity’s Affordable Housing Fe e pursuant to Santa Monica
Municipal Code Section 9.56.070(b)
Actual loan/grant amounts will be based on the project’s need and the level of affordability
that is provided. Program loan/grants in excess of maximum amounts above must be
approved by the City Council/Redevelopment Agenc y. Projects in excess of fifty (50) units
must be approved by the City C ouncil/Redevelopment Agency.”
4
In 2015, Staff provided the attached PDF chart pr oviding financial information about all of the
affordable housing projects supported by the Housing Trust Funds from 2006 forward.
This chart shows that five new construction pr ojects were completed during the period from
2012-2014. As is typical in new construction, both City funding and tax credit financing were
used. In each case the projects averaged more than 2 units per bedroom. The cost of City
support per unit ranged from $236,111 to $307,896. The cost per bedroom ranged from $96,650
to $133,144.
This chart shows that two acquisition and rehabilitation projects were undertaken during the
period from 2012 to 2015. As is typical in ac quisition rehabilitation, only City funding was
used. One project averaged one bedroom per un it, the other averaged 1.8 bedrooms per unit.
The cost of City support per unit ranged from $302,296 to $550,000. The cost per bedroom
ranged from $302,096 to $305,556. One additional acquisition rehabili tation project was
undertaken in 2016, again using only City funds. This project involved one bedroom units. The
cost to the City per unit and per bedroom was $529,667.
All of the following fell within the Housing Trust Fund Guidelines maximums for administrative
approval of the City funding.
In light of the foregoing historical data on costs to the City, the Housing Trust Fund
subcommittee requests public comment on the following:
1.Should the Housing Trust Fund Guidelines continue to authorize the funding of
acquisition and rehabili tation projects without City Counc il approval (and why or why not)?
2.Should the Housing Trust Fund Guidelines c ontinue to set an administrative maximums
(i.e., a maximum loan / grant level that does not require City Council approval) for zero to one
bedroom units and for two or more bedroom units , or should the guidelines switch to some other
form of administrative maximum such as a per bedroom administrative maximum (and why or
why not)?
3.Should the Housing Trust Fund Guidelines lower any of the current administrative
maximums (and why or why not)?
B. Project Size
The current Housing Trust Fund Guidelines provid e that acquisition and re habilitation projects—
other than congregate housing—mus t be four or more units unless the City Manager finds a
substantial public benefit to a smaller project. They do not address the size of construction
projects. The three most recent acquisition and rehabilitation projects have consisted of 10-12
5
units (and 10-18 bedrooms). The five most r ecent new construction projects have consisted of
33-47 units (and 74-132 bedrooms).
The Housing Trust Fund Guidelines subcom mittee requests public comment on whether any
changes should be made regarding project size, such as increasing the minimum project size (and
why or why not).
C. Working Capital Agreements
The current Housing Trust Fund Guidelines perm it working capital loans in certain limited
amounts and for certain specified purposes pr ior to approval of an acquisition and pre-
development loan or a development loan. They fu rther provide that, in the event no such further
loan is approved for the project, or the devel oper cannot complete the project, the City may
forgive up to 90% of the working capital loan upon repayment of 10%. The Housing Trust Fund
Guidelines subcommittee requests public comment on whether to limit this working capital loan
forgiveness to 50% upon repayment of 50% (and why or why not)?
D. Developer Fees
The current Housing Trust Fund Guidelines provide:
“For new construction projects, the deve loper fee shall not exceed the following
per unit amounts, based on the size of the project:
Original Base Amount
Fiscal Year 2007-08*
Updated Amount
Fiscal Year 2016-17*
For 1 – 20 units $16,240 $20,770
For 21 – 30 units $15,080 $18,135
For 31 – 50 units $13,920 $16,740
For 51 or more units Negotiated Negotiated
For acquisition and rehabilita tion projects of 7 units or less, the developer fee
shall not exceed $12,256 (updated for FY 2016-2017; original base amount for
FY2007-2008 was $10,900) per unit. For acqui sition and rehabilitation projects
of 8 or more units, the developer fee shall not exceed the greater of $55,000 per
project or the sum of 5% of the depr eciable acquisition basis and 15% of the
rehabilitation basis. With the excepti on of those fees for acquisition and
rehabilitation projects of 8 or more units, de veloper fees will be ad justed in July of
each year utilizing the annual adjustment methodology for the C ity’s Affordable
Housing Fee pursuant to Santa Monica Municipal Code Section 9.56.070(b). At
the discretion of the City Manager/Executive Director a higher fee may be
allowed.”
6
The Housing Trust Fund Guidelines subcom mittee requests public comment on whether any
changes should be made regarding de veloper fees (and why or why not).
III. PLANNING AND REPORTING
The Housing Trust Fund Guidelines subcom mittee is contemplating making the following
adjustments to the existing guidelines:
1. Adding the following planning and reporting procedure:
“The Housing Trust Oversight Committee sh all prepare an initial proposed plan
for affordable housing development in th e City during the current RHNA cycle,
submit it to the Housing Commission for re view and advice to City Council, and
then submit it—together with the recommendations of the Housing
Commission—to the City Council for revi ew and approval. The Housing Trust
Fund Oversight Committee thereafter will pr epare an annual report detailing (1)
the source and amount of funds flowi ng into each housing trust fund during the
prior year, (2) the amount and uses of funds flowing out of each housing trust
fund during the prior year, (3) the number and type of affordable units made
available for occupancy during the prio r year, and whether generated from
housing trust fund expenditures or as incl usionary units, (4) the number and types
of units by which the annual requirement of Proposition R was either missed or
exceeded, and (5) a cumulative figure w ithin the RHNA cycl e of each of the
foregoing items and a comparison with th e RHNA cycle targets set forth in the
approved Housing Element. The Housi ng Trust Fund Oversight Committee shall
submit this report—together with any reco mmended changes to the approve initial
plan—to the Housing Commission for revi ew and advice to City Council, and
then submit the annual report and recommendations—together with the
recommendations of the Housing Commi ssion—to the City Council for review
and approval. The Housing Trust Fund Oversight Committee shall repeat this
process each RHNA cycle.”
The “Housing Trust Fund Oversight Committee” is a new term referring to those charged with
making funding decisions under the guidelines. The goal of this proposal is to help assure
compliance with Prop R, compliance with the a ffordable housing production goals set forth in
the approved Housing Element, maximization of the return on scarce Housing Trust Fund
monies, and robust opportunities for input on spen ding priorities by the City Council, Housing
Commission, and the public.
2. Providing that the “Housing Trust Fund Over sight Committee” will generate a written
statement of reasons for its decision to grant or deny each loan application that otherwise meets
the minimum eligibility requireme nts set forth in the guidelines.
3. Providing the opportunity for any interested pa rty to place a standi ng request to receive
by email (1) the written statements of reasons for granting or denying eac h loan application, and
(2) any commitment letters entered into by the City.
7
4. Providing that the City will maintain in one easily located place on its website (1) all
documents of the Housing Trust Fund Oversi ght Committee, the Hous ing Commission, and the
City Council generated by the RHNA cycle plan ning process described above, (2) the written
explanations of the Housing Trust Fund Over sight Committee decisions whether to approve
applications described above, (3) all commitme nt letters issued, and (4) all annual reports
provided by housing trus t fund recipients.
The Housing Trust Fund Guidelines subcommitt ee requests public comment on whether to make
any or all of these adjustments to the current guidelines (and why or why not).
IV. THE DECISIONMAKING PROCESS
A. The Decisionmakers
The current Housing Trust Fund Guidelines prov ide that “[a] commitment letter shall be
prepared by the Housing Division, reviewed by the Manager of the Division and the Director of
Housing and Economic Development, and signed by the City Manager/Executive Director. The
letter shall state the maximum am ount of Program funds reserved for the project and list all of
the additional conditions, documents and steps that must be taken by the Borrower prior to loan
closing.”
The Housing Trust Fund Guidelines subcom mittee requests public comment on whether to
maintain this current system, or whether to add anyone from outside Staff (for example, from the
Housing Commission) to the group making indivi dual funding decisions either (a) as voting
members or (b) as advisory members (and why or why not).
B. Approval Criteria
The current Housing Trust Fund Guidelines provide:
“These requirements are minimum requi rements for partic ipation in City
Programs and are subject to change at any time. Meeting these requirements
is not a guarantee of participation in any Program. The City reserves the
right to require additional qualificatio ns for individual projects. The City
reserves the right to reject any a nd all applications and to accept
applications which in its judgment best serve the interests of the City. On a
case by case basis, City Council may also modify or waive provisions of these
Guidelines.”
They further provide:
“In selecting among competing project a pplications, unless otherwise determined
for a particular project, priority shall be given to projects that:
(1) Significantly increase afford able housing opportunities for
households who have difficulty finding housing including the
homeless, large families, the disabled, seniors, and persons
8
traditionally served by Singl e Room Occupancy housing.
(2) Are cost effective or achieve th e lowest possible subsidy per unit
for City/Agency resources.
(3) Benefit a high percentage of very low and low income households by
ensuring deeper affordability.
(4) Are located in areas currently underserved by affordable housing
developments.
(5) Address an area of need identifie d in the Housing Element of the
City of Santa Monica.”
The Housing Trust Fund Guidelines subcom mittee requests public input on the following:
1. Should the Housing Trust Fund Guidelines clar ify that the selection criteria should be
applied to determine whether to approve or reject applications that meet the minimum
requirements, whether or not an additional applic ation is pending at the same time (and why or
why not);
2. Should effectiveness in meeting the applicable local preferences be added as a selection
criterion (and why or why not); and
3. Should addressing an area of need identifie d in the RHNA cycle plan (discussed above)
be added as a selection crit erion (and why or why not).
C. Notice of Application
The Housing Commission has received comments from a member of the public advocating that
public notice be provided of applications fo r Housing Trust Funds upon submission, with an
opportunity for public comment pr ior to individual funding deci sions. The Housing Commission
also has heard concerns raised that such a change could ne gatively impact the production of
affordable housing. The Housing Trust Fund Guidelines subcommittee requests further public
comment on this issue.
10 March 2017
Chair Soloff, Housing Commissioners:
Thank you for the opportunity to address the proposed Redevelopment Replacement Housing
Trust Guidelines. As you know, Santa Monicans for Renters’ Rights has been intimately
involved in the creation and maintenance of affordable housing for nearly forty years. We are
concerned about the creation of an adequate supply of affordable housing as it is a means by
which people can age in place and in peace. That need has become even more acute as the cost of
h ousing, both rental and ownership, has gone up dramatically over the years.
We will use your “Request for Public Comment” as a Guide.
Acquisition and Rehabilitation/New Construction
We think that Trust Fund funds should be used for both new construction as well as acquisition
and rehab of affordable housing. New construction creates more affordable housing and purchase
rehabilitation preserves existing housing stock. The existing program recognizes the need for
both and we see no reason to change a progra m that works.
We believe that for -profit developers should not be able to compete for the City funds. Besides
the fact that they have other opportunities to generate funding, they would ultimately decrease
the affordable housing stock by being able to sel l their project at the end of the deed -restricted
term and reap a windfall profit. Non -profits can’t and won’t do that.
We favor the 30 -60% AMI affordability range since that range covers so many low income
working people. We appreciate the work being don e by some non -profit agencies in the 0 -30%
AMI range and encourage that funding continue to be used for them and other special needs
populations.
Additional Uses
A limited program of rental subsidies makes sense. While it has no bearing on the rental hous ing
stock, it does speak to one of the values that our city holds dear: it allows us to help people who
have been in our community for a long time to stay in our community. Increasing rents have
placed many tenants into the category of being rent -burdened. Longtime tenants whose incomes
have not kept pace with the costs of living should not have to choose between food and housing,
nor should they be forced out of the community they love and helped build.
Project Size
Size matters in housing projects, not o nly because of the economy of scale, but also because
larger projects serve more people. We don’t suggest increasing the minimum project size
primarily because we are an infill city without large tracts of underutilized land. We should
remain compatible wi th the General Plan. However, there should be some exemptions for non -
profit, 100% affordable projects since they are a public benefit.
Working Capital Agreements
Loan forgiveness in the circumstances cited allows the City to forgive up to 90% of a loan, but it
does not mandate that level of loan forgiveness. That language works.
Developer Fees
We support raising the developer fees. Those fees are very important for non -profit developers.
Santa Monica’s currently are lower than those allowed by other aff ordable housing regulatory
agencies. The City has not been applying any cost of living increases in these fees for many
years. We would like to see them doubled from the levels listed in your request.
Planning and Reporting
We strongly support the added transparency recommended by the Housing Commission.
That said, we want to be mindful of the fact that, even for the City itself, real estate negotiations
must be done in closed session. The development review process should be clear and public.
Policy development should be clear and public. However, the negotiations on land purchase for
individual projects must be done quickly and privately. Any procedures that slow the
negotiations down, prevent competitiveness by the non -pro fit. This is so for both the acquisition
of the property and the ability to receive Tax Credit Allocations.
We hope that our comments are helpful to your work.
Thank you,
Patricia Hoffman Denny Zane
Co -Chair, Santa Monicans for Renters’ Rights Co -Chair, Santa Monicans for Renters’ Rights
1423 SECOND STREET, SUI TE B, SANTA MONICA, CA 90401 T 310. 394 .8487 F 310.395 .4336
Equal Housing Opportunity
March 8, 2017
Santa Monica Housing Commission
Attn: Michael Soloff, Chair
1901 Main Street, Suite C
Santa Monica, CA 90405
Dear Chair Soloff:
Thank you for soliciting stakeholder input into the Housing Trust Fund Guidelines review
process. The following are Community Corporation of Santa Monica’s comments and
recommendations for your consideration:
• In general, the Housing Trust Fund (HTF) guidelines have worked well for
Community Corporation of Santa Monica (Community Corp) over many years, as
a practitioner of affordable housing development and ownership with long -
standing service to the community . We encourage the guidelines to maintain
their current flexibility with regard to the process for approving loans on a rolling
and ongoing basis, with administrative approval based on certain threshold
criteria. This flexibility allows affordable housing developers to be competitive in
the open marketplace for potential development sites. In addition, the
administrative approval process affords non -profit developers a straightforward
and expedited process for affordable housing production.
• Community Corp s upports and encourages the City of Santa Monica leadership
to allocate financial resources from the City’s budget to match revenue generated
by Measure GS. Affordable housing development in this high -opportunity City is
expensive relative to other markets, and the more commitment of resources for
the Trust Fund, the more affordable housing that can be produced.
• With regard to the Redevelopment Housing Trust Fund (RRHTF ), guidelines
should support development of acquisition/rehabilitation projects as well as new
construction projects, as both types of projects are of value to the community and
have different benefits and goals that are met with these projects. This will also
allow for flexibility in selecting sites based on availability and opportunity.
Santa Monica Housing Commission
March 8, 2017
Page 2
1423 SECOND STREET, SUI TE B, SANTA MONICA, CA 90401 T 310. 394 .8487 F 310.395 .4336
Equal Housing Opportunity
• No minimum number of bedrooms per unit should be specified in
acquisition/rehabilitation projects to allow for maximum flexibility based on the
specifics of the potential project site, since the City i s constrained by geographic
footprint and availability of reasonably -priced development opportunities.
• There should be minimum affordability levels set for new construction project s
that are consistent with the City’s housing needs and goals. Exceeding th ese
minimums should be encouraged through incentives. Acquisition/rehabilitation
should be reviewed on an individual basis since there may be less flexibility on
affordability and financial feasibility for those projects (for example, an 8 -unit
acquisition /rehabilitation with all 1 -bedrooms may not pencil with a large
percentage of 30% AMI/rent units). The maximum AMI level served by the
RRHTF and CHTF should be 80% Area Median Income (AMI ).
• For -profit affordable housing developers c ould be allowed to apply for funds ,
along with nonprofits, so long as the City’s affordable housing objectives are met.
However, non -profits sh ould be awarded larger developer fees or other
incentives, as their missions lend themselves to longer term affordability or more
service s -enriched housing. N on -profit housing developers are mission -driven to
build and operate sites as affordable housing beyond the regulatory period , in
essence after the expiration of the original regulatory period -in perpetuity. To
ensure affordable housin g units are not sold or converted into market -rate
housing, for -profit developers sh ould be required to include a mission -driven non -
profit partner with at least 51 % ownership in the project to maintain the mission -
oriented nature of the project.
• Rental s ubsidies should not be allocated from the HTF due to the limited
availability for development capital, unless a limited amount and with a cap per
project . Rental subsidies tend to be capital -intense programs, and other
resources could be pursued for these subsidies, such as funding through the
Continuum of Care.
• Community Corp encourages the use of property acquisition for future affordable
housing development through bonds, as that would be another vehicle for
affordable housing p roduction. Alternatively, bonds could be sold and the
revenue lent to affordable housing developers for property acquisition if the City
does not wish to acquire property itself.
•
Santa Monica Housing Commission
March 8, 2017
Page 3
• Cash flow support could be offered to non -profit partners on a limited basis for
projects in jeopardy of financial feasibility due to extenuating circumstances, and
in addition, the HTF guidelines could allow for flexibility in such circumstances to
restru cture or forgive debt as a means to assist overburdened projects.
1423 SECOND STREET, SUI TE B, SANTA MONICA, CA 90401 T 310. 394 .8487 F 310.395 .4336
Equal Housing Opportunity
• Currently the City allows affordable housing projects up to fifty units to be
approved administratively, which significantly expedites the process of producing
affordable housing. Community Corp advocates to increase the fifty units further
to allow for greater expediting of affordable housing production, for example up to
75 units (this could be implemented specifically in high density neighborhoods).
• Acquisition/rehabilitation projects should continue to be approved
administratively, to be equitable with market -rate developers who may also
purchase and rehabilitate such buildings without City Council approval, and in
fact, with much less scrutiny. In a ddition, Community Corp suggests setting loan
limits per bedroom instead of per unit . In general, the loa n limits are reasonable
and consistent with the cost of producing affordable housing in this high -
opportunity environment.
• We strongly suggest the deve loper fee limits be increased for non -profits , to
encourage and reward development of affordable housing. Non -profits utilize
developer fee to support their overhead and administrative operations, so that
they can continue to provide the service of afforda ble housing production to the
City and community. Non -profits develop this housing with great risk to their
organizations, by making multi -million dollar construction loan guarantees and
long -term operating deficit guarantees. In addition, the developer fe es in these
HTF guidelines are substantially lower than those allowed by other affordable
housing regulatory agencies such as the California Tax Cr edit Allocation
Committee. The developer fee limits have not be en evaluated in over ten years,
but the cost o f developing housing and operating our business has increased
significantly. There might be consideration to incentivize non -profit developers by
allowing higher fees for their organizations (rather than for -profits), or
incentivizing specific City goals (such as special needs housing) with additional
developer fees. To give an example, our newest project at 1626 Lincoln, if
funded with City funds, would restrict Community Corp’s developer fee to
$860,000; but with other funding such as Low -Income Housing
Santa Monica Housing Commission
March 8, 2017
Page 4
Tax Credits, we are able to earn a fee of $2,000,000. Affordable Housing projects
take approximately 5 years of developer time to complete, and the fee is only
earned in portions during certain compl etion milestones.
• A minimum project size for new construction projects would be a prudent addition
to the guidelines, as larger projects enjoy better economies of scale and minimal
variance on the amount of work required for larger numbers of units. Community
Corp would recommend new construction project size minimums of 25 units.
• A minimum project size for new construction projects would be a prudent addition
to the guidelines, as larger projects enjoy better economies of scale and minimal
variance o n the amount of work required for larger numbers of units. Community
1423 SECOND STREET, SUI TE B, SANTA MONICA, CA 90401 T 310. 394 .8487 F 310.395 .4336
Equal Housing Opportunity
Corp would recommend new construction project size minimums of 25 units. For
acq uisition /rehab ilitation projects , a minimum of at least 1 0 units could be
considered as well, though this m ay eliminate smaller infill projects , and such
projects may be more expensive to develop . However, it would also be prudent
to consider all de velopment proposals even those under the above minimums on
a case -by -case scenario. This ensures smaller sites are considered for funding
that follow the intent of the HTF guidelines and are consistent with the City’s
housing needs and goals .
• Community Corp supports continuing the 90% forgivable working capital loan .
The more vehicles the City has to incentivize a ffordable housing development,
the more affordable housing that will get built. Lowering the forgivable amount
would be a disincentive to developers.
• Community Corp strongly recommends a more transparent and ongoing
reporting process to help organizations plan affordable housing production
pipeline. Reporting of HTF balances and potential projects would allow greater
confidence and stronger pipeline planning. This process has worked well in other
cities such as Los Angeles to sustain an ongoing production p ipeline and
manage affordable housing funding resources.
• Again, we recommend that the City keep the existing approval process for
affordable housing projects in place, to ensure that projects have an expedited
and straightforward process for getting completed. Community input or other
measures can be incorporate d without
Santa Monica Housing Commission
March 8, 2017
Page 5
disrupting the existing approval process. We strongly discourage the requirement
for projects to be open to public comment prior to loan commitments, as this
could put potential projects a t risk. However, as a community -based organization
we value community and stakeholder input and encourage this process begin
after loan commitment approval. Allowing privacy during sensitive property
negotiations ensures the success of acquisition transact ions for affordable
housing production. Requiring a public process prior to commitment would
seriously jeopardize the ability to consummate these transactions. Nonprofits
must compete on the direct and open marketplace with foreign investors and for -
profit real estate investment trusts and this privacy is critically important.
We sincerely appreciate your consideration of our recommendations and value our
partnership with the City of Santa Monica . Please contact me if you would like additional
information regarding these comments.
Sincerely,
1423 SECOND STREET, SUI TE B, SANTA MONICA, CA 90401 T 310. 394 .8487 F 310.395 .4336
Equal Housing Opportunity
Tara Barauskas
Executive Director
Dear Housing Chairman Mike,
As a participating member in the Neighborhood Council, I've been aware for some time of the concerns of
Zina Josephs, the FOSP, and that of other neighborhood groups re. Step Up On 25th St. and the process
by which the City has made its decisions providing support to the facility, and I hope the Commission will
take what seem their justifiable concerns seriously as you shape and recommend the Housing Trust
Guide lines
Best regards,
Danilo Bach
March 12, 2017
Dear Housing Commissioners:
To enhance transparency and protect residents’ safety, please make the following
changes to the Housing Trust Fund Guidelines:
1. Require public notification at the time any Housing Trust Fund loan
applications are submitted. No public dollars should be committed or spent on
“confidential” loans. A copy of all applications should be available to the public.
Applications should include the name of the seller, location of the p roperty, and
name of the “beneficial owner,” NOT just the name of the LLC.
** The current “over -the -counter” process for approving acquisition and rehab
projects is not transparent and does not protect the public.
2. Require that Housing staff do a site vi sit to each property . It is inappropriate to
house a group of people experiencing mental illness next to a family day care, as
the Step Up on 26th Street project was in Sunset Park.
3. Require a five -year Public Records Request with the Police Department
f or Calls for Service before loaning Housing Trust Funds to any organization. A
five -year Public Records Request for “Calls for Service” to the SMPD from the (5)
Step Up buildings in Santa Monica would show nearly 1,800 calls to the Police
Department. I nci dents included assault, narcotics, indecent exposure, lewd
activity, sexual assault, urinating/defecating in public …. yet staff located
a Step Up facility next door to a family day care center. (What happened to
common sense?)
4. Require an onsite security to support the health and safety of clients/tenants in
Step Up projects. A murder took place at Step Up on 5th in April 2016. No staff
members could be found.
5. Require two community meetings for Housing Trust Fund loans (both for
acquisition/rehab and f or new construction). Please follow the lead of Community
Corporation of Santa Monica construction projects.
6. Require a public hearing regarding the proposed loan.
7. Require that within 2 weeks of a Housing Trust Fund loan issuance , a notice be
publishe d in the Daily Press or the local newspaper of record is at the time. A
delay from March to August, as in the case of Step Up on 26th, is unacceptable.
8. Require that within 2 weeks of a Housing Trust Fund loan issuance , an
email and a post card be sent t o the city -recognized neighborhood organization for
the neighborhood in which the project is located. Contact information for these
organizations and a map with the neighborhood boundaries is posted on the city
website at http://www.smgov.net/content.aspx?id=
9. Require that approved Housing Trust Fund loans be posted online within 2
weeks of approval .
10. The City Council must also amend the zoning ordinance to end the exemption
from Development Review for 100% affordable housing projects of 50 units or
less. If staff is allowed to approve loan/grant amounts up to approximately
$500,000 per unit in projects up to 50 units in size, that could add up to $25 millio n
per project, with no City Council review to ensure the safety and security of
neighbors.
Thank you for your efforts on behalf of our community.
During my freshmen year in college, on a scholarship that did not cover all costs,
requiring a paying job to cover the difference, I heard that the state mental hospital
adjacent to the campus paid high wages. So I applied, passed the tests for
employment, but was told that in order for them to hire a student from the adjacent
college, I had to get the Dean’s per mission.
I requested Dean’s permission. The answer was NO. He said, “It’s our
responsibility to protect the welfare of our students,” recognizing that mentally ill
persons present a risk. And the Police Department in Santa Monica, as well as the
city’s “wellness” department, has the same responsibility. So please see that the
changes outlined in this email are implemented in order to safeguard the residents
in such cases.
You might want to go a step farther. When Ronald Reagan was elected President in
1980, he discarded a law proposed by his predecessor that would have continued
funding federal community mental health centers. This basically eliminated
services for people struggling with mental illness.
He made similar decisions while he was the governo r of California, releasing more
than half of the state’s mental hospital patients. And, following a court ruling, laws
were passed that abolished involuntary hospitalization of people struggling with
mental illness. This started a national trend of de -inst itutionalization. It was
assumed that community -based services would step in and provide the services that
the states had provided at mental hospitals, but that funding never materialized.
Until you devise some standard for treatment for the mental ill, please implement
the changes outlined above to protect residents from the risk inherent in placing
mentally ill persons in residential neighborhoods and, in so doing, mitigate the risk
to the city of potential lawsuits that could result from such action.
We clearly want these unfortunate folks to have housing. But, as the recent election
made clear, people need certain services to transition into housing, and the money
from Measure H is intended to provide not only housing, but also those needed
service s as well.
Cordially,
Ellen Brennan
26 -year resident of Santa Monica
South Beach neighborhood
P.S. In case you think it’s just the neighborhood organizations that complain about
Step Up on 2nd, let me describe my experience prior to 2012, while I was on the
Pier Restoration Corporation Board. At that time, city -appointed Boards and
Commissions provided food for Board members, to compensate for their giving up
their dinner hour, and the food was purchas ed out of our budget. We voted to
support Step Up on 2 nd by ordering our food from them. But after two meetings,
we changed that order because the food from Step Up on 2 nd was so tasteless that
everybody complained.
Around the same time, the City Coun cil began offering sandwiches for purchase at
the desk in the City Hall lobby during Council meetings, for the convenience of
residents coming to the meetings straight from work. City staff ordered from Step
Up on 2nd, but these sandwiches were also tastel ess, so this practice was stopped.
And at the same time, Kathleen Rawson, the CEO of the Bayside District (now
Santa Monica Inc.) was on a crusade to get the Police to remove all Step Up on
2nd clients from the 3rd Street Promenade, where they were appar ently offensive
to shoppers.
Dear Housing Commissioners,
This is an addition to suggestions for changes in the Housing Trust Fund
Guidelines that I detailed in a previous email.
I suggest that any Trust Fund loans to special needs providers who have
excessive Calls for Service to Fire and Police at previous sites
be made contingent on the recipient agreeing to maintain security staff
on site to protect the residents in the projects , to protect the neighborhood,
and to protect the city from su its that might result otherwise.
The loan will be contingent upon their agreement to always maintain security
staff on site.
Then, there has to be some way to enforce this. And if it is discovered that no
security staff is on site, then a fine would be paid into the Housing Trust
Fund, with a set numbers of days to correct without an additional fine.
These fines cannot be used to pay back the loan. They are to cover the risk
the provider has placed upon all concern, and will be set by the Housing
C ommission members.
Food for thought.
Cordially,
Ellen Brennan
26 -year resident of Santa Monica
Hi Michael,
I am a Sunset Park resident and former Santa Monica Social Services Commissioner. And though I
plead ignorance and not enough time to learn everything I’d need to learn on the more technical issues
given the March 10 deadline, I wanted to offer my two cents on some of the broader issues.
It seems to me the Step Up on 26th Street project has exposed many flaws in the process that nee d to be
addressed.
Santa Monica is a city that prides itself on inclusiveness and participation. Yet the City completely
excluded Sunset Park residents from any participation in the decision making process in considering Step
Up’s application, and has re jected holding any public meetings since it approved the loan.
The perception among Sunset Park residents is that this was deliberate, a response to the unsuccessful
attempt to launch another Step Up project near SMC, and that the City and Step Up follow ed an old
adage made famous in the music industry: sometimes it is better to ask for forgiveness than permission.
It is my understanding that the Step Up project was approved without anyone from the City examining the
property, the surrounding environs, or the police reports for other Step Up properties. 26th Street is home
to a daycare facility and a preschool (both in private homes), with the daycare right next door to the new
Step Up property. According to Police Service Reports, in 2015 - 2016 Step Up programs occasioned
917 police calls for service. That’s 1.25 police calls per day. In many instances, the calls were for serious
crimes and disturbances, including disturbances of the peace, threats, public urination or defecation,
public intoxicati on, health and safety code violations, 72 hour psychiatric holds, indecent exposure,
violation of a restraining order, malicious mischief, search warrants, fights, domestic violence, elder
abuse, battery, assault with a deadly weapon, persons with a gun, s exual assault, person down, suicide,
and a homicide.
There are a variety of people in dire need of affordable housing, none of whom pose any of the concerns
that Step Up residents do in a neighborhood teeming with children: low income families with no hi story of
psychiatric disorders, veterans, battered women, the elderly…
There is also the question of ensuring the City allocates public monies in the most effective, most efficient
way possible to help the most people possible. Nearly $6,500,000 is bei ng spent for a 12 unit building
where 7 units already are rented to existing Section 8 Voucher tenants who are under rent control, Of the
remaining 5 units, one will be used for the Step Up resident manager. Only 4 will be rented by Step Up
clients. I d on’t know how else to color it other than to say that spending $6.5 million dollars to house 4
low income residents is a remarkably ineffective, inefficient use of public funds. That amount of money
should have enabled the City to construct many more unit s to help a geometric multiple of the number of
people who will be moving in to Step Up on 26th.
So to me the key is making sure there is a completely revamped decision making process. I think
Council, or a subcommittee if they have (or can create) th e legal authority to appoint one, needs to
oversee and approve any decision, with public notice and input. Right now it seems as thought there’s a
sort of Brewster’s Millions approach, and the goal shouldn’t be simply to use the money, but to use the
money most effectively and to balance a host of community needs and interests. Council and community
input may then do away with the need for regulations about how much this or that costs, and instead look
at a given project, its cost, the number of people ser ved, the needs of those people, and the environment
and needs of the existing neighborhood in question.
I think City funds, or monies from its funding sources if that would not violate any regulations, should be
earmarked for project consultants with ex pertise in construction, etc. to vet any proposals. For the life of
me, I don’t understand how remodels cost more than new construction, or how the 26th project is costing
as much as it is. I would figure the right consultants would have greatly impacted both the decision, the
cost, and the terms of any agreement for the purchase, use, construction, and management of the 26th
Street property.
And I think in addition to someone from the Housing Commission, a person designated by the local
neighborhood organization for the neighborhood in question should have an advisory role. I think things
would have been very different on 26th Street if Zina Joseph or any number of Sunset Park residents had
been able to contribute to the pro cess from the outset.
In addition, there should always be site surveys, and the people equivalent of an environmental impact
report. Had anyone taken the time to look into 26th Street, they hopefully would have realized up front
that they could have ide ntified other organizations and people in need of housing that would have been a
better fit next door to a daycare facility.
I wish the city had the authority to purchase properties and lease them to the right organizations / people
in need, following Co uncil consideration and public input.
Thank you so much for your consideration, and for all you are doing.
All my best,
Jeff All my best,
Jeff
Jeff Silberman
King, Holmes, Paterno, & Soriano, LLP
1900 Avenue of the Stars
25th Floor
Los Angeles, C alifornia 90067
Telephone: 310 282 8961
Facsimile: 310 282 8903
Email: jsilberman@khpslaw.com
Good day,
More transparency on the Housing Trust Fund Guidelines.
Public monies should not be spent in secret.
Thank you,
Jodi Summers
Walk of Fame International
310.392.1211
walkoffameinternational@gmail.com
http://walkoffameinternational.com/
**
Never tell people how to do things. Tell them what to do and they will surprise you with
their ingenuity. --George S. Patton
p age 1 of 4
To: Housing Commission
Housing Trust Fund Guidelines Subcommittee
From: Leslie Lambert, Sunset Park resident
Shawn Landres, Sunset Park resident
Date: March 10, 2017
Re: Public Comment on Housing Trus t Fund Guidelines
Thank you for the opportunity to provide public comment. Below are general
comments that may be applicable to multiple questions, as well as specific
comme nts on three items (acquisition and rehabilitation / new construction,
rental subsidies, and approval criteria). Please do not hesitate to contact us
with any further questions.
General Comment: The current system for approving funding for housing
projects works well, as demons trated by the thousands of well -designed and
managed affordable housing units that have been produced over the past 20
years.
In general, the guidelines should encourage maximum participation in and
competition for housing trust fund s. With the uncertainties surrounding tax
reform at the federal level and its impact on the value of Low Income Housing
Tax Credits, it would be inadvisable to make any changes that could make low -
income housing development less attractive or more difficu lt than it is now.
Therefore, any changes to the guidelines should seek to avoid incurring new
delays by adding further review on a project -by -project basis, which may result
in the loss of acquisition opportunities, and/or missing important application
d eadlines for leveraging resources. That said, developers of new affordable
housing construction should be required to include community input from the
neighborhoods in which their projects are being proposed.
Programmatically, the guidelines for acquisit ion and rehabilitation should seek
to reduce housing insecurity for the maximum number of existing residents,
especially seniors and those with special needs. With respect to new
construction projects, the guidelines should seek to maximize low -income
hous ing that is inclusive of children and families.
Lambert and Landres, Public Comment to Housing Commission, March 10, 2017, page 2 of 4
A CQUISITION AND R EHABILITATION /N EW C ONSTRUCTION
1. S HOULD THE GUIDELINES ALLOW EXPENDITURES F OR BOTH ACQUISITION AND
REHABILITATION OF EX ISTING UNITS AND THE NEW CONSTRUCTION OF NEW UNITS
(AND WHY OR WHY N OT )?
Comment: The City has funded many successful acquisition and rehabilitation
projects as well as new construction projects and should continue to do so.
Existing tenants of acquisition/rehabilitation projects are protected in that they
can remain, and, when t heir unit turns over, the new tenant would be one whose
eligibility has been confirmed per the funding sources being used. Another
advantage of acquisition/rehab is its protection of existing neighborhoods from
the loss of rent -controlled units.
There ar e, however, downsides to the acquisition/rehab approach. Specifically:
• These projects are far costlier because of the absence of leveraging resources;
• Units tend to be smaller and therefore unsuitable for large families;
• The provision of open space is limited; and
• These units do not count toward meeting the City’s RHNA goals.
New construction has none of these problems and therefore is likely to be a
more cost -effective way to deliver affordable housing.
2. S HOULD THE G UIDELINES REQUIRE AN Y MINIMUM NUMBER OF BEDROOMS PER
UNIT (AND IF SO WHAT MINIM UM ) IN NEW CONSTRUCTION PROJECTS AND /OR
ACQUISITION AND REHA BILITATION PROJECTS (AND WHY )?
Comment: This depends on the population to be served. In the case of
permanent supportive hou sing, units will be smaller. For new construction
family projects, the average number of bedrooms should be 2, but 3 - and 4 -
bedroom units should be encouraged. Bedroom mix requirements in the
acquisition and rehabilitation program should also favor larg er units but may be
constrained by availability in the existing housing supply.
Lambert and Landres, Public Comment to Housing Commission, March 10, 2017, page 3 of 4
3. W HAT AFFORDABILITY LE VELS SHOULD BE REQUI RED IN NEW CONSTRUCT ION
PROJECTS AND /OR ACQUISITION AND R EHABILITATION PROJEC TS (AND WHY )?
Comment: Affordability levels in the City’s new construction projects are
dictated by the competitive criteria for the allocation of tax credits. The
maximum income allowed for projects using tax credits is 60% of area median
income (AMI). All Community Corporation of Santa Monica (CCSM) projects
have a range of incomes from 30% to 60% of AMI. If the City is considering
deeper income targeting or lowering the maximum allowable rents, the impacts
on the financial stability of the project must be evaluated such that project
operations, maintenance and r eplacement are covered by the rental income.
The affordability levels of units in acquisition and rehabilitation projects could
be higher unless otherwise required by another funding source. Meeting the
income targeting goals of the Housing Element shoul d be the basis for setting
affordability levels regardless of housing type.
4. S HOULD THE GUIDELINES PERMIT LOANS TO FOR -PROFIT DEVELOPERS OF
AFFORDABLE HOUSING , AS WELL AS TO NONPRO FITS AND LIMITED PAR TNERSHIPS
WITH A NONPROFIT GEN ERAL PARTNER ?
Comment: Most pub lic funding sources cap developer fees. So whether the
developer is nonprofit or for -profit is irrelevant, all other things being equal.
Some of the best affordable housing developers in the region are in fact for -
profit, providing well designed and manag ed projects with strong support
services for tenants.
However, since most affordable units produced in Santa Monica have been
developed by CCSM, the City has an investment in the long -term sustainability
of CCSM. Since developers sustain thems elves with developer fees, the City
should continue fun ding projects proposed by CCSM and other nonprofit
developers that have received City funding, provided they continue to meet
appropriate eligibility criteria and standards for fiscal integrity.
Lambert and Landres, Public Comment to Housing Commission, March 10, 2017, page 4 of 4
A DDI TIONAL U SES
• R ENTAL SUBSIDIES WITH C ITY C OUNCIL APPROVAL (AND WHY OR WHY
NOT ).
C omment: Rental subsidies (with City Council approval) would be an
appropriate eligible use primarily for Santa Monica’s most vulnerable residents,
including the extremely elderly and those with special needs, and only to the
extent that assistance in accessing all available city, county, state, and federal
benefits is provided to all households that apply for subsidies and meet the
eligibility criteria (irrespective of whether they otherwise will receive rental
subsidy benefits). Appropriate provisions should be ma de to protect prospective
beneficiaries who may have reasonable data protection concerns, especially with
respect to actual or perceived immigration status.
T HE D ECISIONMAKING P ROCESS - A PPROVAL C RITERIA
2. S HOULD EFFECTIVENESS IN MEETING THE APPLI CABLE LOCAL PREFEREN CES BE
ADDED AS A SELECTION CRITERION (AND WHY OR WHY NOT )?
Comment: The notion of priority is meaningless unless it is a weighted
selection criterion. We support this change.
3. S HOULD ADDRESSI NG AN AREA OF NEED I DENTIFIED IN THE RHNA CYCLE
PLAN (DISCUSSED ABOVE ) BE ADDED AS A SELECT ION CRITERION (AND WHY OR
WHY NOT )?
Comment: As noted above, meeting the income targeting goals of the Housing
Element should be the basis for setting affordability level s regardless of housing
type. While planning ought to be based on the needs identified in each multi -
year RHNA cycle, the unpredictability of the Santa Monica housing market
(particularly due to Ellis Act evictions) is such that housing trust funds ought t o
have the flexibility to respond to emergent needs and opportunities. RHNA -
derived needs could be a criterion but should not be a weighted priority.
Mike,
After reviewing the documents from you and other City records, I want to provide feedback on
the Housing Division Subcommittee’s policy and procedure questions. The policies may need
some adjustments; the procedures require major changes to the very opaqu e process.
Acquisition andò Rehabilitation/New Construction
1. Yes, the guidelines should allow expenditures for both acquisition and rehabilitation of units
because this option provides the most flexibility.
2. New construction should average a minim um of 2 units and rehabilitation the same number of
units as when the property acquired because it is cheaper to build multiple units than to
reconfigure an existing property.
3. The RHTF affordability levels should be used for CHTF because current RHTF l evels help the
broadest range of people.
4. Yes, loans should be permitted to for -profit developers subject to a credit check and
development history that includes residential construction.
Additional Uses
1. The pilot of rent subsidies for low income r esidents with Council approval, if successful,
should be continued because keeping current long term residents is a means of protecting our
most vulnerable residents.
2. Yes, lease -revenue bonds should be used for property acquisition for future housing a s this
financing mechanism is one of the most economical.
3. Yes, cash flow support should be extended to non -profit affordable housing projects,
otherwise some of the units may become market rate to maintain financial viability.
Maximum City Funding wit hout Council Approval
1. Continued funding without Council approval should be allowed with a change in opaque
procedures:
A. A requirement for two community meetings for Housing Trust Fund loans (both for
acquisition/rehab and for new const ruction), as has been the practice with Community
Corporation of Santa Monica construction projects.
B. A requirement for a public hearing regarding the proposed loan.
C. A requirement that within 2 weeks of a Housing Trust Fund loan being issued , a notice
be published in the Daily Press or whatever the local newspaper of record is at the time .
D. A requirement that approved Housing Trust Fund loans be posted online within 2
wee ks of approval .
2. With the suggested procedure changes suggested above, the Housing Trust Fund Guidelines
should continue to set administrative maximums.
3. The current administrative maximums need not be lowered, but the exemption from Planning
Commis sion review of projects of less than 50 units should be eliminated.
Project Size
Construction projects should be a minimum of 30 units while rehabilitation unit size remains 4 or
more units.
Working Capital Agreements
Repayment of 50% must be required to forgive the other 50% as a matter of good business
practice.
Developer Fees
Maximum Developer fees should remain unchanged except the negotiated amount for 5 units or
more must be less than the fee for 31 - 50 units.
Planning and Reporting
Yes, the suggested changes by the Housing Trust Fund Guidelines should be implemented
because the current process is opaque and no reporting is evident in a timely manner.
Decision Making Process
Yes, a member of the Housing Commission and a member from the Soci al Services Commission
should be added to the group making funding decisions because outside views are always
valuable when spending City money. Staff members should not outnumber outside members.
Approval Criteria
1. Yes, the Trust Fund Guidelines should be applied as selection criteria whether another
application is pending or not. That is the purpose of minimum criteria that projects must meet to
be eligible.
2. The selection criteria should definitely include l ocal preference because the money is local and
meant to be spent to help local residents.
3. Needs identified in the cycle plan may be added as selection criteria because needs of groups
change over time and flexibility is needed.
Notice of Application
Public notice should always be provided and public comment encouraged prior to making
decisions because spending taxpayer money requires public input.
Sincerely,
Mary Marlow
Dear Mr. Soloff; the following are my comments on the proposed amendments to the HOUSING
TRUST FUND GUIDELINES
1. TRANSPARENCY. We must return to the days when ALL city funded low income housing
projects were subject to a public hearing and a vote at City Council.
A. We need to end the policy of developers making back room deals with the Housing Manager
outside the purview of the public. It is absurd that a non resident bureaucrat, the Housing
Manager decides how to spend our tax payer money, where the projects are developed and for
what target tenant, i.e. the mentally ill, mult ifamily , county homeless shelter, senior citizen etc.
WITH NO PUBLIC HEARING AND NO VOTER INPUT. Spending $6,000,000 of taxpayer money
must 1st be subject to a public hearing at City Council.
2. ALL PROJECTS MUST BE MEASURED AGAINST PRESIDENT OBAMA'S AFFIRMATIVELY
FURTHERING FAIR HOUSING
H.U. D. Regulation. The days of the City restricting funding to the Pico Neighborhood to
further the City's segregationist housing patterns must end. This City policy has resulted in the
perpetuation of segregat ed schools. More than 60 years after Brown vs. The Board of
Education of Topeka Kansas the children of the Pico Neighborhood are still attending
segregated schools.. This is due to city site selection in developing low income housing
projects.
The Guide lines need to incorporate by reference the AFFH regs. and specifically provide
development will comply with these regulations.
a. There must be a moratorium on low income housing projects in the Pico Neighborhood (
between SM Blvd and Pico Blvd) until 50 0 units of MULTIFAMILY housing is developed between
Wilshire Blvd and San VIcente Blvd.
3. IMPLEMENT MEASURE G.S.H.
ALL THE Campaign literature was that G. S. H. meant Great Senior Housing. The voters were led
to believe IF THEY VOTED "yes" WE WOULD GET SENIOR CITIZEN HOUSING. So the first 500
units of housing built with sales tax proceeds must be restricted to develop GREAT SENIOR
DEED RESTRICTED SENIOR HOUSING...my suggestion is the income level should be 120 % of
county median income and below. After 500 units of senior housing has been developed with
the sales tax funds the City can ask the residents what housing they want.
4. The Homeless in Santa Monica are not homeless because they were evicted from a SM apt.
or lost their SM home to forec losure. They come here because " if you build it they will
come" With the passage of HHH the City of LA will be building hundreds of units for the
homeless and with the passage of Measure H the County will provide services in the under
served areas of th e County. So NO MORE HOMELESS SHELTERS IN SM .. Don't steal County
Measure H money from the cities East of down town Los Angeles, Palmdale and Lancaster that
need the money to provide services for their residents.
5.The Housing Trust Fund Oversight Committee is NOT transparent. Where is the explanation
of what this Committee is, who are the members, who appointed the members, what the
qualifications were to be appointed? We need City Council review and approval of low income
housing projects at a public hearing.
6. Housing Trust Fund Money should be used to assist rent burdened tenants. My
neighbors earn $25,000 A MONTH, and pay only $940.00 a month for their 2 bedroom
apt. The current rent control law forces rental housing providers to subs idize rich tenants. The
low income tenants should be subsidized by the City, not individual property owners.
7. Rent Subsidy for Accessory Dwelling Units. The City recently amended the zoning code to
facilitate the development of accessory units in the single family zone. The Trust Fund should
provide a rent subsidy to those homeowners who rent their accessory unit to a low income
person ($120% of county median income or any income below the 120% amount).
8. Loans for accessory dwellings. The Housin g Trust fund should loan money to homeowners
who want to build an accessory unit and agree to rent the unit to a low income person,
including a person or family with a Section 8 voucher.
Mathew Millen, Santa Monica, CA
March 10, 2017
Michael Soloff, Chair
Santa Monica Housing Commission
Attn: Michael Soloff, Chair
1901 Main Street, Suite C
Santa Monica, CA 90405
Dear Chair Soloff:
Thank you for the opportunity to provide input on the Housing Trust Fund guidelines. It is a privilege to
work and develop housing in the City of Santa Monica for those who are chronically homeless. Step Up
has worked in other major cities in the develop ment of housing for those who are disabled and chronically
homeless and from our perspective, Santa Monica is an enlightened city when it comes to special needs
housing. As you know, Step Up develops special needs housing for chronically homeless individu als with
mental illness, a special subset of the affordable housing.
We submit the following for your consideration as part of the Commission’s review of the guidelines.
Under A. Acquisition and Rehabilitation / New Construction:
1. Re: CHTF funds, we t hink they should be expanded to include acquisition and rehabilitation as
well as new construction. Securing sites in Santa Monica is certainly a challenge and if those sites
with CHTF funds are restricted to only new construction projects, it further red uces the number
of sites possible for consideration.
2. Also since our housing is virtually all single adults, the two bedroom average is very problematic
for us. Typically in our model, we construct studio apartments and this is for two reasons;
chronical ly homeless individuals often don’t want to need even one bedroom units (since it is a
big adjustment to housing after being on the street for years) and while we look for balance in
our unit size vs. number of units for the project, as the only developer dedicated to building
housing for homeless individuals, we always try to maximize the number of units for each
development. Therefore we recommend that no minimum bedroom size be called out in the
guidelines.
3. Step Up units typically target individuals at 30% or lower of AMI . There are no other developers
targeting this income group in the City. We also know that affordable developers don’t typically
serve these individuals in units that target a higher AMI. While we recognize the need for AMI
ceilings a t the higher level, it would be helpful for the 30% and below AMI population to be called
out for a set aside within either the CHTF or the RHTF.
4. We would support guidelines allowing applications from loans from for -profit developers of
affordable housing, but some method to prioritize, in a competitive process, applications for
loans from nonprofits and to limited partnerships with a nonprofit general partner. While the
field of developers that can help the City accomplish their housing goals should not b e hindered
by a limitation of prospective developers, we believe that non -profit developers, by virtue of
being mission -driven instead of profit -driven, provide greater long term affordable housing
stability and that should be incentivized in the applicati on process.
Under B. Additional Uses
1. RHTF should include rent subsidies. We know the answer to homelessness in the City is permanent
supportive housing but the housing finance system only funds the housing and not the support.
And it’s the services that a re essential to the success of tenants integrating and becoming part of
the Santa Monica community. Step Up has to secure this service funding almost always through
separate funding sources and this become very difficult to sustain over time. But we’ve b een very
successful; we have a 90 retention rate of tenants after they’ve been housing one year (even for
those who have lived on the streets for decades). We achieve this because we’ve been successful
at securing funding from foundations for the on -site services. We typically have one on site
services staff for each 25 units. Ideally the services component on site would allowed to be funded
through the operating budget of each project, rather than a separate fundraising effort.
2. We support property acqu isition for future affordable housing development through lease -
revenue bonds, with City Council approval, as this will help address one of the most challenging
issues in the City in developing housing; finding appropriate sites. This is not only an issue of
actual sites but the timing of available funds at the City along with available properties. It’s a
challenge to find a site that fits for affordable housing and align that with the availability of City
housing funds. This issue is further complicated by securing site control with a seller willing to tie
their property up for 120 days for the financing period we need to complete the City’s loan review
process. A property acquisition fund for future developments would help reduce these
challenges.
3. We also support cash flow support for existing non -profit developers. This is truly enlightened
and several philanthropic foundations are recognizing similar needs among nonprofits. Housing
development is only one of our functions and much of our organiz ation provides services to
homeless individuals. In our world, much of our service contract funding is through the
government and most government agencies require us to front the cash for 60 to 90 days before
we are reimbursed (although this is not true o f the City of Santa Monica who have mechanisms
for advancing payments) so this creates an ongoing cash flow burden that a cash flow support
would address.
A. Maximum City Funding Without City Council Approval
1. The Housing Trust Fund Guidelines should con tinue to authorize the funding of acquisition and
rehabilitation projects without City Council approval. As evidenced by our current project, Step
Up on 26 th , we know that neighborhoods and neighbors will always support our projects, just not
in their nei ghborhoods. Further even if a project is “by rights” neighbors will still oppose projects.
And the only way they have to oppose projects is to politicize the issue by bringing it to City
Council. This would create an awkward situation of creating a publ ic referendum on each and
every affordable housing project the City funds. This would demonstrably undermine our ability
to start, construct and open new projects. If City Council were required to approve our projects,
it would create a venomous negative environment in the City towards affordable housing and
severely hamper the City’s opportunity to create diversity.
2. The Housing Trust Fund Guidelines should continue to set administrative maximums that does
not require City Council approval for zero to one bedroom units and for two or more bedroom
units. The process has worked very well in the City.
3. The Housing Trust Fund Guidelines should not lower any of the current administrative maximums.
Housing is getting more expensive, not less.
The Housing Trus t Fund Guidelines should not make any changes regarding project size . There
are viable projects that are above four units that City staff can make informed decisions on.
D. Developer Fees
• The developer fees in the City are substantially lower than other jurisdictions and need to be
increased based on generic calculations. Further, I would recommend a fee increase for special
needs housing developers in the City. This housing is more challenging to develop than affordable
housing for several reasons; the re is likely more neighborhood and other opposition to this type
of housing, the tenants are far more challenging than those in affordable units, and the projects,
because they require the costs of additional and substantial services, also tends to be more
expensive to operate than regular affordable units.
III. PLANNING AND REPORTING
• Generally, documenting the funding process, both individually and broadly, is consistent with
maximizing limited resources to accomplish the City’s housing goals. Knowing how hard the City
housing staff work with limited resources, this may impose a significant administrative burden.
There is a concern that item #3, could unintentionally activate neighborhood opposition to a
project in its early stages since the “any inter ested party” would be notified prior to the
contractual close of a sale of the property to the developer, thereby given interested parties who
wish to undermine the project, a greater opportunity to succeed in killing the project. We
recognize the need, e specially in the City, to be transparent but this likely will reduce the chances
of a special needs project to succeed. In our experience, even when a project is completely by
right, existing residents will willingly trample the rights of others based on fear and discrimination.
The transparency issue needs to be weighed against the real need to create housing for those City
residents who have been living on the streets of Santa Monica for years.
C . Notice of Application
• Public notice of applications for Housing Trust Funds upon submission, with the opportunity for
public comment prior to individual funding decisions, would most certainly negatively impact
production of affordable housing and it would even more impact production of spec ial needs
housing. As noted above, if an interested party can be informed of the noticing of a loan
decision, it will provide an opportunity for that party to take steps to undermine the project
after the loan approval but prior to the close of sale. Whi le this may seem like a small window
of opportunity for those against a specific project, there are many actions, in our experience,
which people will resort to, will do anything to stop the project, including a lawsuit. Even when
a project is completely by right, existing residents will willingly trample the rights of others
based on fear and discrimination. If public notice is provided prior to a funding decision, it
would provide more time and opportunities for a project to be derailed.
As the develop er in a by rights project, Step Up has a process of informing neighbors of the
project, but this is done after the acquisition is complete. Indeed, this is no different than any
other private party purchasing property; an individual does not inform a neig hbor prior to the
purchase to ask their opinion of the purchase or even if the neighbor supports such a purchase.
This would be absurd. Certainly, the City has a different obligation to communicate decisions
than a private party. However if suggested th is layer of disclosure were applied to every City
action, I suspect City staff would be doing little work with all the disclosure requirements.
In conclusions, there are many many things right with how the City conducts funding of affordable housing
in the City. In my opinion, City staff have done an excellent job in a very challenging environment. Current
authorities bestowed on City staff are in large part to why the City does such an excellent job. If some of
these proposed steps were enacted, it wo uld enable the politicization of new affordable housing projects
in the City, thereby jeopardizing them and most likely killing new special needs projects.
March 10, 2017
RE: Housing Trust Fund Guidelines revisions
Dear Housing Commission:
To enhance transparency and protect residents’ safety, please make the following changes to the
Housing Trust Fund Guidelines:
1. Require public notification at the time any Housing Trust Fund loan applications are submitted.
No public dollars should be committed or spent on “confidential” loans. A copy of all applications
should be available to th e public. Applications should include with the name of the seller, location of
the property, and name of the “beneficial owner,” NOT just the name of the LLC.
** The current “over -the -counter” process for approving acquisition and rehab projects is not
tra nsparent and does not protect the public.
3. Require that Housing staff do a site visit to each property . It is inappropriate to house a group of
people experiencing mental illness next to a family day care, as the Step Up on 26th Street project
was in Sun set Park.
4. Require a five -year Public Records Request with the Police Department for Calls for Service
before loaning Housing Trust Funds to any organization. A five -year Public Records Request for
“Calls for Service” to the SMPD from the (5) Step Up bui ldings in Santa Monica would show nearly
1,800 calls to the Police Department. I ncidents included to assault, narcotics, indecent
exposure, lewd activity, sexual assault, urinating/defecating in public …. yet staff
located Step Up facility next door to a family day care center.
5. Require an onsite security to support the health and safety of clients/tenants in Step Up projects.
A murder took place at Step Up on 5th in April. No staff members could be found.
6.Require two community meetings for Housing Trust Fund loans (both for acquisition/rehab and for
new construction). Please follow the lead of Community Corporation of Santa Monica construction
projects.
7. Require a public hearing regarding the proposed loan.
8. Require that within 2 wee ks of a Housing Trust Fund loan issuance , a notice be published in the
Daily Press or the local newspaper of record is at the time. A delay from March to August, as in the
case of Step Up on 26th, is unacceptable.
9. Require that within 2 weeks of a Housing Trust Fund loan issuance , an email and a post card be
sent to the city -recognized neighborhood organization for the neighborhood in which the project is
located. Contact information for these organizations and a map with the nei ghborhood boundaries is
posted on the city website at http://www.smgov.net/content.aspx?id=
City of Santa Monica
www.smgov.net
The City of Santa Monica, California, USA
10. Require that approved Housing Trust Fund loans be posted online within 2 weeks of approval .
The City Council must also amend the zoning ordinance to end the exemption from Development
Review for 100% affordable housing projects of 50 units or less. If staff is allowed to approve
loan/grant amounts up to approximately $500,000 per unit in projects up to 50 units in size, that
could add up to $25 million per project, w ith no C ity Council review to ensure the safety and
security of neighbors.
Thank you for your efforts on behalf of our community.
Best,
Taffy
Taffy Patton
Chair Residents Coalition
March 10 , 2017
S anta Monica Housing Commission
Attn: Michael Soloff, Chair
1901 Main Street, Suite C
Santa Monica, CA 90405
Dear Chair Soloff:
Thank you for soliciting stakeholder input into the Housing Trust Fund Guidelines review
process. Venice Community Housing (VCH) has not utilized Santa Monica ’s H o using
Trust Fund (HTF) in the past, and therefore we offer our general support of the
comments sub mitted by our partners at C ommuni ty Corporation of Santa Mon ica based
on their high level of experience . However, based on interest in possibly accessing
funds in the future, we specifically h ighlight our support for the followin g comments and
recommendations :
V CH encourage s the guidelines to maintain their current flexibility with regard to the
process for approving loans on a rolling and ongoing basis, with administrative
approval based on certain threshold criteria. This flexibility allows affordable housing
developers to be competitive in the open marketplace for potential development sites.
In addition, the administrative approval process affords non -profit developers a
straightforward and expedited process for affordable housing production.
N o minimum number of bedrooms per unit should be specified in
acquisition/rehabilitation projects to allow for maximum flexibility based on the
specifics of the potential project site, since the City i s constrained by geographic
footprint and availability of reasonably -priced development opportunities.
R ental s ubsidies should not be allocated from the HTF due to the limited availability
for development capital, unless a limited amount and with a cap per project .
V CH encourages the use of property acquisition for future affordable housing
development through bonds, as that would be another vehicle for affordable housing
p roduction. Alternatively, bonds could be sold and the revenue lent to affordable
housing developers for property acquisition if the City does not wish to acquire
property itself.
Currently the City allows afforda ble housing projects up to 50 units to be approved
administratively, which significantly expedites the process of producing affordable
housing. V CH supports increasing the 50 units further to allow for greater expediting
of affordable housing production, for example up to 75 units (this could be
implemented specifically in high density neighborhoods).
Acquisition/rehabilitation projects should continue to be approved administratively, to
be equitable with market -rate developers who may also purchase and rehabilitate
such buildings without City Council approval, and in fact, with much less scrutiny.
Page 2 of 2
We strongly suggest the deve loper fee limits be increased for non -profits , to
encourage and reward development of affordable housing. Non -profits utilize
developer fee s to support their overhead and administrative operations, so that they
can continue to provide the service of afforda ble housing production . T he developer
fe es in these HTF guidelines are substantially lower than those allowed by other
affordable housing regulatory agencies such as the California Tax Cr edit Allocation
Committee. The developer fee limits have not be en evaluated in over ten years, but
the cost o f developing housing and operating our business has increased
significantly. There might be consideration to incentivize non -profit developers by
allowing higher fees for their organizations (rather than for -profits), or incentivizing
specific City goals (such as special needs housing) with additional developer fees.
A minimum project size for new construction projects would be a prudent addition to
the guidelines, as larger projects enjoy better economies of scale and minimal
variance on the amount of work required for larger numbers of units. V CH supports a
new co nstruction project size minimum of 25 units. For acq uisition /rehab ilitation
projects , a minimum of at least 1 0 units could be considered as well, though this m ay
eliminate smaller infill projects , and such projects may be more expensive to develop .
Even with minimums, i t would be i mportant to consider all de velopment proposals ,
including those under the above minimums, on a case -by -case scenario.
Again, we recommend that the City keep the existing approval process for affordable
housing projects in place, to ensure that projects have an expedited and
straightforward process for getting completed. Community input or other measures
can be incorporate d without disrupting the existing approval process. We strongly
discourage the requirement for projects to be open to public comment prior to loan
commitments, as this could put potential projects a t risk. However, as a community -
based organization we value community and stakeholder input and encourage this
process begin after loan commitment approval. Allowing privacy during sensitive
property negotiations ensures the success of acquisition transact ions for affordable
housing production. Nonprofits must compete on the direct and open marketplace
with foreign investors and for -profit real estate investment trusts and this privacy is
critically important.
We sincerely appreciate your consideration of our recommendations and value t he
affordable housing leadership and work of the City of Santa Monica . Please contact me
if you would like additional information regarding these comments.
Sincerely,
B ecky Dennison
Executive Director
March 9, 2017
To: Housing Commission
From: Board of Directors, Friends of Sunset Park
RE: Housing Trust Fund Guidelines revisions
A majority of the FOSP Board supports transparency and resident input on all land use
decisions . It seems outrageous that City staff is allowed to approve the ex penditure of millions of
dollars in public funds and make decisions in secret on land use matters that impact residents’
quality of life.
There needs to be public notification and public hearings before such large sums of money are
allocated.
And we be lieve that the zoning code provision that 100% affordable housing projects of 50 units
or less require no input from City Council should be removed.
Therefore the FOSP Board requests the following changes to the Housing Trust Fund
Guidelines:
1. A requirement for public notification at the time Housing Trust Fund loan applications are
submitted. If it’s “confidential,” no public dollars should be committed or spent. A copy of the
application should be available to the public, with the location of the property and the name of
the “beneficial owner” of both buyer and seller, not just the name of the LLC.
2. The current “over -the -counter” process for approving acquisition and rehab projects is not
sufficient.
3. A requirement that Housing sta ff do a site visit to the property . It makes little sense to house a
concentration of people experiencing mental illness next door to a family day care, as has
happened with the Step Up on 26 th Street project.
4. A requirement to do a Public Records Req uest with the Police Department for Calls for
Service for the previous five years before loaning Housing Trust Funds to any organization. A
Public Records Request for “Calls for Service” to the SMPD from the 5 Step Up buildings in
Santa Monica for the last five years shows nearly 1,800 calls to the Police Department. The
incidents range from 72 -hour psychiatric holds to assault w/ deadly weapon, death investigation,
homicide investigation, health & safety code violations (narcotics), public intoxication, in decent
exposure, lewd activity, sexual assault, urinating/defecating in public, search warrant, and
violation of restraining order.
Even if all of that is dismissed, as has been done by the City Manager in the case of Step Up on
26th, a history of SMPD “Community Meetings ” would indicate ongoing problems with
neighbors.
5. A requirement for onsite security to support the health and safety of clients/tenants in Step
Up projects. A “Murder at Step Up on 5 th ” in April 2016 was reported in the local p ress. A
homeless man was subsequently arrested for stabbing another homeless man to death in a Step
Up apartment. No explanation given as to why two homeless men, who were not Step Up
clients, were inside a Step Up apartment. When a reporter visited the fa cility, the office was
closed and no staff members could be found.
6. A requirement for two community meetings for Housing Trust Fund loans (both for
acquisition/rehab and for new construction), as has been the practice with Community
Corporation of San ta Monica construction projects.
7. A requirement for a public hearing regarding the proposed loan.
8. A requirement that within 2 weeks of a Housing Trust Fund loan being issued , a notice be
published in the Daily Press or whatever the local newspape r of record is at the time. A delay
from March to August, as in the case of Step Up on 26 th , is unacceptable.
9. A requirement that within 2 weeks of a Housing Trust Fund loan being issued , an email and a
post card be sent to the city -recognized neighbor hood organization for the neighborhood in
which the project is located. Contact information for these organizations and a map with the
neighborhood boundaries is posted on the city website at
http://www.smgov.net/content.aspx?id=
City of Santa Monica
www.smgov.net
The City of Santa Monica, California, USA
10. A requirement that approved Housing Trust Fund loans be posted online within 2 weeks of
approval .
11. We will also be requesting that the City Council amend the zoning ordinance to end the
exemption from Development Review for 100% affordable housi ng projects of 50 units or less.
If staff is allowed to approve loan/grant amounts up to approximately $500,000 per unit in
projects up to 50 units in size, that could potentially add up to $25 million per project, with no
City Council review. That is also unacceptable.
City of Santa Monica Municipal code:
http://www.qcode.us/codes/santamonica/view.php?version=beta&view=mobile&topic=9 -4 -
9_40 -9_40_020
9.40.020 – Applicability of Development Review Permits –
B. The following types of projects are exempt from Development Permit Review
requirements:
1. Single unit dwellings; and
2. 100% Affordable Housing Projects of 50 units or less . (Added by Ord. No.
2486CCS §§ 1, 2, adopted June 23, 2015)
We want the City Council to delete exemption #2 -- “100% Affordable Housing Projects of 50
units or less.”
Thank you for your consideration.
Zina Josephs, on behalf of the FOSP Board
1
5/18 /17 SUBCOMMITTEE DISCUSSION DRAFT ONLY
To: Santa Monica City Council
From: Santa Monica Housing Commission
Date: May 18 , 2017
RE PORT REGARDING HOUSING TRUST FUND GUIDELINES
The Santa Monica Housing Commission has reviewed the existing Housing Trus t Fund
Guidelines to determine whether any adjustments should be made in light of (1) the elimination
by the State of Redevelopment Agenc y funding (“RDA funding ”) in 2012, (2) the
recommendations contained in the Housing Commission ’s 2015 Affordable Housin g Strategies
Report (Attachment A hereto), (3) the passage of M easures GS and GSH in 2016 , (4)
accumulated experience, (5) public comment at Housing Commission meetings, and (6) written
public comment received in response to the Housing Commission’s specif ic requests for public
comment (Attachment B hereto). This Report sets forth the views of [INSERT PROPER
DESCRIPTION IN LIGHT OF COMMISSION VOTE ].
i
TABLE OF CONTENTS
Page
I. EXECUTIVE SUMMARY .................................................................................................1
II. THE HOUSING COMMISSI ON RECOMMENDS THAT T HE CITY
COUNCIL CREATE A “RE DEVELOPMENT REPLACEM ENT HOUSING
TRUST FUND” ...................................................................................................................1
A. The Rationale And Proposed Funding Sources For A New
“Redevelopment Replacement Housing Trust Fund” ..............................................1
B. Proposed Elgibility Guidelines For A New “Redevelopment Replacement
Housing Trust Fund”................................................................................................1
1. The Housing Commission Recommends That Both New
Construction And Acquisition and Rehabilitation Constitute
Eligible Uses, Without Any Minimum Average Number of
Bedrooms Per Unit Requirement .................................................................1
(a) Despite The Grea ter Cost To The City And Other
Limitations, The Housing Commission Recommends
Retention Of The Option To Fund Acquisition And
Rehabilitation Projects .....................................................................2
(b) The Housing Commission Does Not Favor A Minimum
Average Number Of Bedr ooms Per Unit Requirement For
Project Eligibility .............................................................................4
2. The Housing Commission Recommends A Requirement That All
Units In Eligible Projects Be Affordable To Households Making
__% Or Less Of The Los Angeles County Area Median In come ...............5
3. The Housing Commission Recommends That Eligible Borrowers
Be Restricted To Nonprofits ........................................................................7
C. Additional Uses ........................................................................................................7
III. THE HOUSING COMMISSI ON RECOMMENDS EXPAND ED PUBLIC
PLANNING AND REPORTI NG MEASURES REGARDIN G THE SOURCES
AND USES OF ALL HOUS ING TRUST FUND MONIE S ..............................................8
A. The Housing Commission Recommends The Creation Of An Affordable
Housing Planning And Reporting Procedure Tied To The Housing
Element ....................................................................................................................8
B. The Housing Commission Recommends Adopting Measures To Increase
Transparency Regarding The Expenditure Of Housing Trust Funds ...................10
IV. THE HOUSING COMMISSI ON RECOMMENDS THAT C E RTAIN LIMITED
CHANGES BE MADE TO T HE PROCESS OF MAKING INDIVIDUAL
LOANS ..............................................................................................................................11
ii
A. The Housing Commision Recommends No Change At This Time To The
Persons Authorized To Approve Individual Loans ...............................................11
B. Th e Housing Commission Recommends That Clearer Guidance Be
Provided To Staff Regarding The Policy Considerations That Properly
Inform The Exercise Of Its Discretion To Approve Or Reject Loan
Applications ...........................................................................................................12
C. The Housing Commis sion Recommends That Staff Generate A Written
Statement Of Reasons For Granting Or Denying Loan Applications ....................13
D. The Housing Commission Does Not Recommend That Public Notice And
Comment Be Added Prior To Loan Application Rev iew And Approval,
But It Does Recommend That City Council Direct The City Attorney To
Provide Legal Advice To It Regarding Certain Commenters’ Concerns ..............13
E. The Housing Commission Recommends Restoring A Maximum Loan
Limit For Administrative Approvals Independent Of The Per Unit Limits
In The Existing Guidelines ....................................................................................15
V. DEVELOPER FEES ..........................................................................................................17
1
I. EXECUTIVE SUMMARY
[INSERT AND ADJUST IF NECESSARY IN LIGHT OF COMMISION APPROVED
FINAL RECOMMENDATIONS AND REASONING]
II. THE HOUSING COMMISSI ON RECOMMENDS THAT T HE CITY COUNCIL
CREATE A “REDEVELOPMENT REPLA CEMENT HOUSING TRUST FUND”
A. The Rationale And Proposed Funding Sources For A New “Redevelopment
Replacement Housing Trust Fund”
Prior to 2012, Santa Monica spent approximately $15 million per year on affordable housing.
Most of that funding came from RDA funds drawn from the City’s “Redevelopment Housing
Trust Fund.” The State then ended RDA funding in 2012.
In 2015, the Housing Commi ssion recommended that the City Council request that the voters
replace half of the lost RDA funds with new revenues from a ¼ cent local sales tax increase, and
that the City Council replace the other half with funds from existing general fund revenue s. T he
City Council responded by (1) placing Measures GS and GSH on the November 2016 ballot, and
(2) accepting Staff’s recommendation that the City devote all RDA loan repayments received to
affordable housing.
Now that the voters have approved Measures GS an d GSH, t he Housing Commission
recommend s that the City Council establish a new “Redevelopment Replacement Housing Trust
Fund ” (“RRHTF”) to be funded by (1) the half of the GS sales tax revenues voters advised
should go to affordable housing, and (2) a matc hing amount (at least) of other City general fund
revenues (e.g., RDA loan repayments). Creation of this fund will provide transparency regarding
the amount and uses of the GS revenues . It also will affirm the City’s ongoing commitment to
providing the m atching fund s required to fully repla ce (at least) the lost RDA funding previou sly
used for affordable housing, and will provide transparency regarding fulfillment of that
commitment. This is particularly important because the principal matching funding c ommitted
by City Council to date (the RDA loan repayments) are one time funds, and long -range
budgetary planning is required now to assure that the matching funds will continue on an
ongoing basis.
B. Proposed Elgibility Guidelines For A New “Redevelopment Re placement
Housing Trust Fund”
1. The Housing Commission Recommends That Both New Construction
And Acquisition and Rehabilitation Constitute Eligible Uses , Without
Any Minimum Average Number of Bedroom s Per Unit Requirement
The existing Housing Trust Fund Guid elines generally authorize lending both for the
construction of new affordable housing, and for the acquisition and rehabilitation of existing
units as affordable housing. Under the existing “Citywide Housing Trust Fund” (“C itywide
HTF”) guidelines, howev er, any Affordable Housing Production Program (“AHPP”) in -lieu fees
2
deposited into the C itywide HTF (as opposed to development agreement or office mitigation
funds) c an only be used for new construction, and that new construction must have on average
two b edrooms per unit . Neither the 11/24/98 staff report supporting City Council adoption of the
original version of the current consolidated guidelines, nor the staff reports supporting
subsequent revision s , identify the reason(s) for these restrictions on th e use of AHPP in -lieu
fees.1
(a) Despite The Greater Cost To The City And Other Limitations ,
The Housing Commission Recommends Retention Of The
Option To Fund Acquisition And Rehabilitation Projects
In 2015, Staff provided financial information about all of th e affordable housing projects
supported by the various Housing Trust Funds from 2006 forward (Attachment C hereto). This
information confirms that acquisition and rehabilitation projects —while less expensive overall —
currently are considerably more expensi ve to the City than new construction projects that
leverage City dollars through the use of tax credit financing.
In particular, f ive new construction projects were completed during the period from 2012 -2014.
As is typical in new construction, both City f unding and tax credit financing were used. In each
case the projects averaged more than 2 units per bedroom. The cost of City support per unit
ranged from $236,111 to $307,896. The cost of City s upport per bedroom ranged from $96,650
to $133,144.
By con trast, two acquisition and rehabilitation projects were undertaken during the period from
2012 to 2015. As is typical in acquisition rehabilitation, only City funding was used. One
project averaged one bedroom per unit, the other averaged 1.8 bedrooms pe r unit. The cost of
City support per unit ranged from $302,296 to $550,000. The cost of City support per bedroom
ranged from $302,096 to $305,556. One additional acquisition and rehabilitation project was
undertaken in 2016, again using only City funds. This project involved one bedroom units. The
cost of City support per unit and per bedroom was $529,667.
Acquisition and rehabilitation projects have two additional limitations in comparison to new
construction projects. First, because up to half of th e existing residents of an eligible acquisition
and rehabilitation project may have incomes exceeding the affordability covenants to be imposed
1 One commenter recommended eliminating these restrictions on the use of AHPP in -lieu fees in
order to provide maximum flexibility. Given that the AHPP program is part of the City
Council’s implementation of voter -approved Prop R’s mandate that at least 30% of all new
housing constructed in the City meet certain affordability thresholds, the Housing Commission
believes it remains appropriate to limit the use of AHPP in -lieu fees to new construction.
Similarly, because the AHPP program generally requires that on -site inclusionary affordable
units contain at least two bedrooms (see S.M.M.C. § 9.64.050(C)), the Housing Commission
likewise believes it is appropriate to retain the requirement that AHPP in -lieu fees go to new
affordable housing construction projects with an average of at least two bedrooms per unit.
3
on the units, the full benefit of the project as affordable housing may not occur immediately.2
Second, acquisit ion and rehabilitation projects —at least of the type typically funded in Santa
Monica —do not count toward satisfying the housing production goals established through the
Regional Housing Needs Assessment (“RHNA”) process and adopted in the approved Housing
Element.3
Given these facts, the Housing Commission has a strong general preference for new affordable
housing construction projects using tax -credit funding , as opposed to affordable acquisition and
rehabilitation projects. As documented in our 2015 Aff ordable Housing Strategies Report
(Attachment A hereto), rising rents and the vacancy decontrol mandated by the Costa -Hawkins
Act mean that , in the not too distant future, the only opportunit ies for those in the bottom half of
the Los Angeles County income distribution to live in Santa Monica will be in whatever deed -
restricted affordable housing we as a community are prepared to create. It therefore is important
to maximize the return on any affordable housing funds expended on the creation of new deed -
re stricted units.
Nevertheless, the Housing Commission believes that it is not prudent to eliminate altogether the
option to fund affordable acquisition and rehabilitation projects. First, based on the comments
received from affordable housing developers, t he Housing Commission is uncertain as to
whether there presently are and/or will continue to be sufficient opportunities to fully utilize all
available funding on new construction projects utilizing tax -credit financing.4 Second, the
Housing Commission is uncertain that the current differential in City costs between new
construction and acquisition / rehabilitation projects will remain as large as it has been in the
past . The proposals by the Trump Administration and Congressional leadership to substantia lly
reduce federal corporate tax rates already have reduced the funds that can be raised through tax
credits, and would reduce those funds further if actually adopted.5 Third, there may be instances
in which other important City goals (for example, protec ting existing low income residents,
protecting existing neighborhoods, spreading affordable housing throughout the City, et cetera)
justify the additional cost to the City of an acquisition and rehabilitation project.6 Therefore, at
2 Current HTF Guidelines provide that acquisition and rehabilitation projects are eligible for
funding i f at least 51% of existing residents have incomes of 80% of AMI or less, and there is
assurance that the required affordability covenants will apply after those residents ultimately
depart from their units.
3 See City of Santa Monica 2013 -2021 Housing Elem ent Ch. 5.G.2.a, at pp. 137 -38.
4 The Housing Commission renews the recommendation in its 2015 Affordable Housing
Strategies Report (see Attachment A) that the City review its existing landholdings to identify
sites where new affordable housing projects ca n be constructed.
5 See “Developers of affordable housing in California are on pins and needles over Trump's tax
plan ,” Los Angeles Times (2/26/17), available at http://www.latimes.com/politics/la -pol -ca -
trump -tax -affordable -housing -20170226 -story.html .
6 The Housing Commission recognizes that some residents also prefer affordable acquisition and
rehabilitation projects because they will not generat e any additional traffic. But it is office and
commercial development that is the principal driver of increased traffic in Santa Monica.
(footnote continued)
4
present the Housing Co mmission prefers to rely on the increased planning and transparency
measures identified in Part III below —rather than a categorical ban on acquisition and
rehabilitation projects —to provide increased assurance that affordable housing funding decisions
give adequate weight to the differential in costs to the City between new construction projects
and acquisition and rehabilitation projects.
(b) The Housing Commission Does Not Favor A Minimum
Average Number Of Bedrooms Per Unit Requirement For
Project Eligibility
The appropriate size of a unit to construct depends up on the target population for that unit. For
example, Step -Up commented that studio units are the most appropriate initial housing to
construct for the chronically homeless population it seeks to serve . By contrast, CCSM new
construction projects have average more than two bedrooms per unit —even without such a
requirement in the former Redevelopment Housing Trust Fund —in accordance with its primary
mission to serve low -income working families. Therefo re, because a minimum average of two
bedrooms per unit likely is inappropriate for certain specialty housing projects (such as
supportive housing and senior housing), the Housing Commission does not favor a minimum
average number of bedrooms per unit requi rement for new construction projects. The Housing
Commission likewise does not favor such a requirement for acquisition and rehabilitation
projects because it likely would render much of the City’s existing housing stock ineligible.7
Rather, the Housing Commission favors developing an overall unit mix target for all units
funded by the RRHTF as part of the RHNA cycle planning process recommended in Part __
below.
Housing generates far fewer additional vehicle trips than commercial and office development.
See 6/15/09 “Trip -Gener ation Rates for Urban Infill Land Uses in California Phase 2: Data
Collection,” prepared for Caltrans, available at
http://www.dot.ca.gov/newtech/researchreports/reports/2009/final_summary_report -
calif._infill_trip -generation_rates_study_july_2009.pdf . And housing for low -income
households that often do not own cars generates even less vehicle traffic. Inde ed, because low -
income workers who currently commute to Santa Monica have a preference —together with
existing residents —when competing for affordable housing units, newly constructed affordable
housing projects might even effect a net reduction in traffic. In any event, given the importance
of maintaining the City’s economically diversity —a goal repeatedly affirmed both by the voters
and by the City Councilmembers they elect —the Housing Commission does not believe any
marginal traffic differential between new construction and acquisition / rehabilitation projects
should drive affordable housing funding decisions.
7 See Santa Monica Rent Control Board 2016 Consolidated Annual Report at 9 (58% of
controlled units are zero or one bedroom units, while just 7% are three or more bedroom units),
available at
https://www.smgov.net/uploadedFiles/Departments/Rent_Control/Repo rts/Annual_Reports/2016
%20RCB%20ANNUAL%20REPORT%20 -%20FINAL.pdf
5
2. The Housing Commission Recommends A Requirement That All
Units In Eligible Projects Be Affo rdable To Households Making __%
Or Less Of The Los Angeles County Area Median Income
Under the current guidelines for the C itywide HTF, a ll assisted units must be affordable to
households whose incomes do not exceed 60% of area median income. By contrast, for the
former R edevelopment Housing Trust Fund (“Redevelopment HTF ”) new construction units had
to be affordable to households whose incomes do not exceed 80% of area median income, while
acquisition and rehabilitation units had to be affordable to house holds whose incomes do not
exceed 100% of area median income.
T he Housing Commission understands from Staff that the City , when implementing these
restrictions, uses figures published by United States Department of Housing and Urban
Development (“HUD”) and /or the California Department of Housing and Community
Development (“HCD”) for the various income categories . However, t he 60% and 80 % figures
used d o not equal the result of multiplying the actual Los Angeles County area median income
by 0.6 and 0.8 , resp ectivel y . Rather, in each of those categories the qualifying incomes have
been adjusted upward by HUD due to the high cost of housing in Los Angeles County.8 For
example, the current “60 percent income l imit ” figure provided by HUD —which is the income
li mit for households to qualify for residence in units constructed with either federal or California
tax credits 9 —is $52,080 for a family of four,10 a figure which mathematically is just a shade
above 80% of the current Los Angeles County area median income f or a family of four of
8 See “4 -Person Very Low -Income Limit Calculation for Los Angeles -Long Beach -Glendale,
CA HUD Metro FMR Area ” in HUD’s FY 2016 Income Limits Documentation System
(applying “High Housing Co st Adjustment); “FY 2016 60% Income Limits Calculation” for Los
Angeles -Long Beach -Glendale, CA HUD Metro FMR Area in HUD’s FY 2016 MTSP Income
Limits Documentation System (60% figure is 1.2 times HUD’s 50% figure); “FY 2016 Low -
Income Income Limits Calcul ation ” for Los Angeles -Long Beach -Glendale, CA HUD Metro
FMR Area in HUD’s FY 2016 Income Limits Documentation System (applying “High Housing
Cost Adjustment); HCD’s 5/24/16 Memorandum “State Income Limits For 2016” (explaining
HUD methodology), available at http://www.hcd.ca.gov/grants -funding/income -limits/state -and -
federal -income -limits/docs/inc2k16.pdf .
9 See California Tax Credit Alloca tion Committee Online Compliance Manual at 19 -20 (stating
requirement under federal tax credit program), available at
http://www.treasurer.ca.gov/ctcac/compliance/manual/manual.p df ; California Revenue and
Taxation Code Section 23610.5 (b)(1)(A) (projects eligible for state tax credit must qualify for
federal tax credit).
10 See HUD’s “FY 2016 Multifamily Tax Subsidy Project Income Limits Summary , Los
Angeles -Long Beach -Glendale, C A HUD Metro FMR Area ”; California Tax Credit Allocation
Committee’s “Maximum Income Levels for Projects Placed in Service on or after 3/28/16” at p.
4, available at http ://www.treasurer.ca.gov/ctcac/rentincome/16/income/post20160328.pdf .
6
$64,800 (per HCD) / $64,400 (per HUD).11 And the “low income limit ” figure calculated by
HUD —which HCD notes “[i]n general . . . reflects 80 percent (80%) of the [HUD Median
Family Income] level”12 —is $69,450 13 , a figure that is slight ly highe r than the current Los
Angeles County area median income.
In our 2015 Affordable Housing Strategies Report, the Housing Commission recommended that
all of the funds raised through the proposed local sales tax increase and City general fund
matching funds be spent on households earning 80 % or less of Los Angeles County area median
income. [OPTION 1: The Housing Commission reaffirms this recommendation, despite the
fact that the “low income limit” figure published by HUD and HCD —and used by the City as the
80% figure —is slightly higher than the actual Los Angeles County area median income. The
Housing Commission notes that if two parents in a four person household work fulltime at our
new City minimum wage of $15 per hour, they would earn —without an y overtime —more than
the “60 percent income limit” (and more than 0.8 times the actual Los Angeles County area
median income), but less than the HUD/HCD “low income limit” figure. The Housing
Commission is not prepared to exclude the possibility of creati ng some units for such families
with RRHTF funds, which would be the case if the “60% income limit” figure were adopted as
an absolute cut off for RRHTF funding, just as it currently is for Citywide HTF funding under
existing guidelines.14 Rather, the Hous ing Commission believes that the RHNA cycle planning
process recommended in Part III.A below is the proper mechanism with which to assure that the
vast majority of the RRHTF funding targets the most disadvantaged groups.] [OPTION 2 :
Because the HUD adjust ment makes the “60 percent income limit” figure used by the City equal
to 80% of the actual Los Angeles County area median income, the Housing Commission
recommends that the guidelines for the RRHTF limit eligibility to projects serving households
11 The HUD figure is slightly lower than the HCD figure because HUD no longer follows a so -
called “hold harmless” policy of never reducing its figures, but HCD has retained that policy .
See HCD’s 5/24/16 Memorandum “State Income Limits For 2016” at p. 1, available at
http://www.hcd.ca.gov/grants -funding/income -limits/state -and -federal -income -
limits/docs/inc2k16.pdf .
12 This figure also may differ slightly from the HUD “low income” figure due to HCD’s
retention of the “hold harmless” policy.
13 See HCD’s 5/24/16 Memorandum “State Income Limits For 2016” at p. 1, available at
http://www.hcd.ca.gov/grants -funding/income -limits/state -and -federal -income -
limits/docs/inc2k16.pdf .
14 One commenter suggested adopting the same limit as the cut off for funding from the Citywide
HTF funding. [Option 1A: The Housing Commission is unaware of the reason the Citywide
Housing Trust Fund targeted 60% of area median income or below, and therefore is not in a
position to determine whether it should be changed.] [Option 1B: The Housing Commission is
unaware of any reason specific to the Citywide Housing Trust Fund that makes the current target
of 60% of area median income or below necessary or beneficial for that fund. Accordingly , the
Housing Commission recommends that City Council change the income target for the Citywide
Housing Trust Fund to 80% or below.]
7
earning no more than 60% of area median income, the same limit imposed by the existing
guidelines for the Citywide HTF.]
3. The Housing Commission Recommends That Eligible Borrowers Be
Restricted To Nonprofits
Under the guidelines for the C itywide HTF, loans can on ly be made to n onprofits, and to limited
partnership s with a nonprofit general partner . By contrast, the guidelines for the former
Redevelopment HTF also permitted loans to for -profit developers of affordable housing.
The Housing Commission recommends tha t the RRHTF be subject to the same non -profit
participation requirement as the Citywide HTF. To date, n o one has identified and substantiated
any benefit to the City of providing loans to for -profit developers of affordable housing (such as
an ability to leverage private investment funds, an ability to undertake desirable projects that
nonprofits are unable to deliver, et cetera). Unless and until such a benefit is identified and
vetted by t he Housing Commission and the City Council , the Housing Commissio n believe that
all loans of public funds from the RRHTF should go to nonprofit s and to limited partnerships
with a nonprofit general partner .
C. Additional Uses
In 2015 the Housing Commission recommended that the City create a pilot rent -subsidy program
for s everely rent -burdened low -income residents in long -term rent controlled units and, if
successful, that the program should be brought to scale . The City currently is in the process of
creating such a pilot program. The Housing Commission also recommended in 2015 that the
City consider the possibility of issuing lease -revenue bonds to acquire property for future
development as affordable housing. The Housing Commission understands that Housing Staff is
in the process of doing so. During 2016, the Housing Commission heard public comment that
certain existing non -profit affordable housing projects created with the support of City funds face
negative cash flows , and may need some additional City support. The Housing Commission is
concerned about this issue a nd is seeking additional information.
Further study, and City Council approval, is required before funds in the RRHTF can or should
be used for these additional purposes . The Housing Commission nevertheless recommends that
the RRHTF guidelines expressly st ate that rental subsidies —with City Council approval —are an
eligible use . The potential funding of a rental assistance program was a major element of the
campaign in favor of Measures GS and GSH,15 and including it as an eligible use —subject to
15 See , e.g., Ballot Argument in Favor of Measure GSH (“In addition, half of the funds from
Measure GSH will be used for . . . providing rental assistance and other affordable housing
opportunities to low -income families and seniors.”), available at
https://ballotpedia.org/Sa nta_Monica,_California,_Sales_Tax,_Measure_GSH_(November_2016
) ; Ballot Argument in Favor of Measure GS (“Measure GSH and Measure GS will provide
locally -controlled funds to help rent -burdened residents, often seniors, stay in their homes
through their go lden years ”), available at
(footnote continued)
8
City Counci l approval —will both affirm that intention to the voters and streamline the process of
bringing the contemplated pilot program to scale .
III. THE HOUSING COMMISSI ON RECOMMENDS EXPAND ED PUBLIC
PLANNING AND REPORTI NG MEASURES REGARDIN G THE SOURCES
AND USE S OF AL L HOUSING TRUST FUND MONIE S
A. The Housing Commission Recommends The Creation Of A n Affordable
Housing Planning And Reporting Procedure Tied To The Housing Element
Pursuant to California law, the City periodically prepare s a Housing Element that must be
app roved by the State. The current approved Housing Element covers the period from 201 4 -
2021. Included within the Housing Element is a quantified o bjective for housing production
which is based in part on the Regional Housing Needs Assessment (“RHNA”) perfo rmed by the
Southern California Association of Governments (“SCAG”). In particular, t he RHNA process
determined that the City’s share of the regional need for new housing production during the
period from 2014 -2021 is 1,674 units, of which 974 (58.2%) sho uld be below -market affordable
units. The City’s quantified objectives in the approved Housing Element reduced the number of
affordable units in light of certain conditions prevailing in December 2013 (the time when the
Housing Element was approved), incl uding the loss of Redevelopment funds. Nevertheless,
those quantified objectives still call for the production of 1,371 units, of which 671 (48.9%)
should be below -market affordable units. These figures, as well as the number of units in each
target inco me category already approved or in construction as of the commencement of the
Housing Element/RHNA cycle period, are set forth in the following chart from page 25 of the
Housing Element:
https://ballotpedia.org/Santa_Monica,_California,_Allocation_of_Sales_Ta x_Revenue_to_Public
_Schools_Advisory_Vote,_Measure_GS_(November_2016).
9
While the Housing Element establishes certain overall quantified ob jectives for affordable
housing production, it does not establish clear guidance as to proper uses of City affordable
housing funding resources. The Housing Element is at a very high level both as to the nature of
the units to be produced, and as to the m echanisms to assure their production. No objectives are
established as to the size of the units to be produced, the nature of the units (e.g., family,
supportive, senior), or their locations within the City. M oreover, no particular mechanism is
provided for tracking progress toward even these high -level goals , and for adjusting City policies
(both in terms of inclusionary units and expenditures of City resources) as necessary to achieve
these goals. Finally, there is no formal mechanism for the public an d the City Council to weigh
in on spending priorities on an ongoing basis .
Therefore, to help assure (1) compliance with the affordable housing production goals set forth
in the approved Housing Element, (2) compliance with Prop R’s requirement that 30% of annual
new housing production meet certain affordability targets, (3) maximization of the return on
scarce Housing Trust Fund monies, and (4) robust opportunities for input on spending priorities
by the City Council, Housing Commission, and the public, the Housing Commission
reco mmends the inclusion within the Housing Trust Fund Guidelines of the following planning
and reporting process:
The City Manager shall prepare an initial proposed plan for affordable housing
development in the City during the per iod covered by the current Housing
Element (“the proposed Initial Plan”). The Housing Division shall make the
proposed Initial Plan available online, and provide a 45 day period for written
public comment. The Housing Division also shall seek public comm ent at a
public meeting held between the 30 th and 45 th day of the comment period. T he
Housing Division thereafter shall submit the proposed Initial Plan —together with
any public comment received —t o the Housing Commission for its review and
advice . The Ho using Division then shall submit the proposed Initial Plan —
together with the public comment and the recommendations of the Housing
Commission —to the City Council for its review and its approval . The Housing
Division thereafter will prepare an annual report detailing (1) the source and
amount of funds flowing into each housing trust fund during the prior year, (2) the
amount and uses of funds flowing out of each housing trust fund during the prior
year, (3) the number and type of affordable units made availa ble for occupancy
during the prior year, and whether generated from housing trust fund expenditures
or as inclusionary units, (4) the number and types of units by which the annual
requirement of Proposition R was either missed or exceeded, (5) a cumulative
figure of each of the foregoing items within the period covered by the Housing
Element and a comparison with the ta rgets set forth in the Housing Element , and
(6) a comparison of the cumulative affordable housing production within the
period covered by th e adopted Initial Plan with the goals set forth in that plan .
The Housing Division shall submit this report —together with any recommended
changes to the approve d I nitial P lan —to the Housing Commission for its review
and advice, and then submit the annual report and recommendations —together
with the recommendations of the Housing Commission —to the City Council for
its review and approval.
10
The City Manager and the Housing Division shall repeat this process each time a
new Housing Element is approved .
B. The H ousing Commission Recommends Adopting Measures To Increase
Transparency Regarding The Expenditure Of Housing Trust Funds
Prior to the termination of RDA funding, the City spent approximately $16 million per year in
Housing Trust funds. Thanks to the vote rs’ approval of Measures GS and GSH —and with the
commitment of the City Council to match the funds raised through those measures —the City is
poised to resume spending at that same level.
T he existing Housing Trust Fund Guidelines provide for almost no re porting to the public
regarding these very substantial expenditures.16 Nor is such information readily accessible on
the City’s website.
The Housing Commission believes that increased transparency is critical regarding the
expenditure of such large sums of money on what has been identified as a top public policy
priority by both the City Council at its August 2015 Retreat , and by the voters with their
November 2016 approval of Measures GS and GSH . The Housing Commission therefore
recommends that the Hous ing Trust Fund Guidelines include the following measures to assure
that all relevant and public information is available in one easily accessible location on the City’s
website, to assure that interested organizations and members of the public can sign up to receive
an automatic email with a link to the document every time a new document is posted , and to
assure that interested members of the public have a prompt opportunity to inquire about
approved loans and the associated projects :
The City shall require any loan recipient to hold a public meeting about the
associated project within 30 days of delivery of the loan commitment. The
recipient must provide a document giving notice of the date, time and location of
public meeting to the Housing Division at le ast 15 days prior to the public
meeting date.
The City s hall place on its website, in one easily identifiable location labeled
“Housing Trust Funds”, all of the following materials within one week of each
such document becoming public : (1) the current Hous ing Trust Fund Guidelines;
(2) all documents generated and made public by the City Manager , the Housing
Division, the Housing Commission, and the City Council pursuant to the
affordable housing planning and reporting process described in Part __ of these
G uidelines , (3 ) the written explanations of the City’s decisions whether to
approve or reject applications described in Part ___ of these Guidelines (which
shall be deemed public upon either communication to the applicant that its
application was rejected, or delivery of the commitment letter to the applicant
16 The sole provision for public notice is the following requirement at page 15 of the existing
guidelines: “Notice of the issuance of the commitment shall be posted publicly, and a co py of
such notice shall be published in a newspaper of general circulation.”
11
when an application is accepted ), (4 ) all loan commitment letters issued (which
shall be deemed public when delivered to the applicant ), (5) all notices of the
required public meeting following a loan c ommitment, and (6 ) all annual reports
provided by Housing T rust F und recipients pursuant to these Guidelines (which
shall be deemed public upon receipt). The City also shall provide —at the same
location on its website —a mechanism whereby interested member s of the public
can sign up to receive an automatic email with a link to the document every time a
new document is posted to this section of the City’s website.
IV. THE HOUSING COMMISSION R ECOMMENDS THAT CERTAIN LIMITED
CHANGES BE MADE TO THE PROCESS OF MAKING INDIVIDUAL LOANS
The existing Housing Trust Fund Guidelines generally provide for an expedited and confidential
process of administrative review and approval of individual loan applications. Staff and various
non -profit affordable housing providers asser t that this process facilitate s the production in the
City of both new construction and acquisition / rehabilitation affordable housing projects .
According to staff and these providers, the existing loan approval process makes them more
competitive in the acquisition of suitable propert ies in the City (which are in short supply) by (1)
keeping potential competitors from learning of the non -profit’s acquisition plans before the non -
profit is in a position to make its offer for each property to the owner, an d (2) permits the non -
profit to timely demonstrate to the owner that the non -profit definitely has the financial resources
in hand to consummate a purchase transaction.
In 2016, a single loan was approved . That loan was in the amount of $6.356 million , an d was for
the purpose of acquiring and rehabilitating a property consisting of twelve single bedroom units.
As noted in Part II.B.1.a above, this loan represented an expenditure of $529,667 per bedroom,
which is far above (1) the expenditure of $302,096 t o $305,556 per bedroom for two other
acquisition / rehabilitation projects supported with City loans during the period from 2012 -2015,
and (2) the expenditure of $96,650 to $133,144 per bedroom for five new construction projects
completed du ring the period from 2012 -2014. In light of the very high cost -per bedroom
represented by this loan, the Housing Commission has considered potential changes to the loan
decision -making process —and recommends that some of these potential should be made —as
explained below .
In addition, the Housing Commission has appointed a subcommittee to observe the decision -
making process over the next year in order to facilitate its consideration of whether to
recommend additional changes.
A. The Housing Commision Recommends No Change A t This Time To The
Persons Authorized To Approve Individual Loans
The current Housing Trust Fund Guidelines provide that “[a] commitment letter shall be
prepared by the Housing Division, reviewed by the Manager of the Division and the Director of
Housing a nd Economic Development, and signed by the City Manager/Executive Director. The
letter shall state the maximum amount of Program funds reserved for the project and list all of
the additional conditions, documents and steps that must be taken by the Borrowe r prior to loan
closing.”
12
At least at this time, t he Housing Commission does not recommend making any substantive
changes to this portion of the guidelines. Adding decisionmakers risks impeding the production
of affordable housing by slowing down the appr oval process. And —particularly if a Brown
Act body is thereby created —adding decisionmakers (or even advisors ) risks impeding the
production of affordable housing by prematurely making the non -profits’ acquisition plans
known to the for -profit developers com peting for property acquisition.
Particularly given the affordable housing crisis documented in our December 2015 Affordable
Housing Strategies Report (Exhibit A hereto), the Housing Commission is not prepared to take
steps that risk impeding th e Cit y’s historical success as an affordable housing producer absent
very good reasons for doing so. Given the proposed enhanced planning and transparency
measures recommended in Part III above, as well as the proposed improvements to the loan
approval process recommended below, the Housing Commission does not see such very good
reasons at the present time.
The Housing Commission does recommend that the guidelines clarify that the Manager of the
Housing Division and the Director of Housing and Economic Develop ment not only must review
the proposed commitment letter, but also must approve it in writing.
B. The Housing Commission Recom m ends That Clearer Guidance Be Provided
To Staff Regarding The Policy Considerations That Properly Inform The
Exercise Of Its Discret ion To Approve Or Reject Loan Applications
The current Housing Trust Fund Guidelines provide (bolding and underlining in original):
“These requirements are minimum requirements for participation in City
Programs and are subject to change at any time. Meeti ng these requirements
is not a guarantee of participation in any Program. The City reserves the
right to require additional qualifications for individual projects. The City
reserves the right to reject any and all applications and to accept
applications wh ich in its judgment best serve the interests of the City. On a
case by case basis, City Council may also modify or waive provisions of
these Guidelines.”
They further provide:
“In selecting among competing project applications, unless otherwise
determined for a particular project, priority shall be given to projects that:
(1) Significantly increase affordable housing opportunities for
households who have difficulty finding housing including the
homeless, large families, the disabled, seniors, and persons
tradit ionally served by Single Room Occupancy housing.
(2) Are cost effective or achieve the lowest possible subsidy per unit
for City/Agency resources.
(3) Benefit a high percentage of very low and low income households by
ensuring deeper affordability.
(4) Are located in areas currently underserved by affordable housing
13
developments.
(5) Address an area of need identified in the Housing Element of the
City of Santa Monica.”
The Housing Commission first recommends that the Housing Trust Fund Guidelines clarify that
the enumerat ed selection criteria are to be applied by the decisionmakers to determine whether to
approve or reject applications that meet the minimum requirements, irrespective of whether or
not an additional application is pending at the same time seeking the same f unds . The mere fact
that a project meets the minimum guideline requirements, and the Housing Tru st Funds has
money available , is not an adequate basis for determining whether the wiser course is to expend
scarce and valuable affordable housing dollars on the current ly proposed project , or instead to
hold those dollars for a potential future project.
The Housing Commission also recommends th at two additional criteria be used to evaluat e
whether or not to approve applications that meet the minimum requireme nts. First, the
guidelines should add to the list of evaluation criteria the issue of whether the project addresses
an area of particular need identified in the City Council approved affordable housing plan (as
updated each year) described in Part III.A a bove. Adding this additional criterion will make
clear that the enhanced planning process recommended above is meant to facilitate increased
public and City Council involvement in setting affordable housing fund spending priorities
(without imposing the r isks attendant with such increased involvement on a loan application by
loan application basis).
Second, the guidelines should add to the list of evaluation criteria consideration of the
applicant ’s past and projected effectiveness in meeting the applica ble preferences established by
the City (including the preference for those who live or work fulltime in the City).
C. The Housing Commission Recommends That Staff Generate A Written
Statement Of Reasons For Granting Or Denying Loan Applications
The Housing C ommission recommends that the Housing Trust Fund Guidelines provide for the
City to prepare a written statement explaining its decision to approve or reject loans that meet the
minimum requirements in light of the enumerated evaluation cr i teria. Requiring a written
statement should help assure that the evaluation criteria are fully considered, and will enhance
the ability of the public and the City Council to evaluate the quality of each loan decision and the
overall effectiveness of the current structure for making loan decisions.
D. The Housing Commission Does Not Reco m mend That Public Notice And
Comment Be Added Prior To Loan Application Review And Approval, But
It Does Recommend That City Council Direct The City Attorney To Provide
Legal Advice To It Regar ding Certain Commenters’ Concerns
A number of commenters have advocat ed that public notice be provided upon the submission of
applications for Housing Trust Funds, with an opportunity for public comment prior to individual
funding decisions. The Housing Commission does not recommend making this change at this
time .
14
First, as discussed in Part IV.A above, the Housing Commission is not inclined to change the
current expedited and confidential loan review and approval process —which staff and non -profit
affor dable housing providers assert facilitates the production of affordable housing —absent very
good reasons to do so. Given the proposed enhanced planning and transparency measures
recommended in Part III above, as well as the proposed improvements to the lo an approval
process recommended in Parts IV.B -C above, the Housing Commission does not see such very
good reasons at the present time.
Second, staff advised the Housing Commission that it is current practice that —as part of the loan
conditions imposed by t he City on recipients of initial loans made to acquire properties for new
construction affordable housing projects —the non -profit developer is required to have two
public meetings to discuss the design of project . Hence, there is an opportunity for public
comment prior to approval of the construction loan itself. [CONFIRM TIMING ]
Third, a significant portion of the public comment associated with this proposed change has
focused on the loan made in 2016, which happened to be to a supportive housing provide r.
Indeed, no other specific loan or project was cited as illustrating the need for prior public notice
and comment on loan applications. This 2016 loan was reviewed and approved using the
existing confidential and expedited process, and the Housing Comm ission is not making any
comment about that loan or project. However, as pertinent to this report, t he Housing
Commission is concerned that if public comment was allowed prior to loan approval, and the
City were to refuse to make a future loan to a suppor tive housing provider after receiving public
comments like some of the comments the Housing Commission has received after -the -fact about
the 2016 loan , it could raise doubts about the City’s compliance with Fair Housing Law even if
the City had fully legit imate reasons for denying the future loan application (for example, on
grounds of cost -effectiveness).17 In such a circumstance, prior public notice and comment could
impede efforts to assure scarce and valuable affordable housing dollars are spent wisely.
17 See, e.g., United States v. Massachusetts Indus. Fin. Agency , 910 F. Supp. 21, 24, 2 9 -30 (D.
Mass. 1996) (bolding added):
NEARI is a non -profit educational corporation organized to diagnose, treat, and
educate emotionally disturbed adolescents. In early 1988, it began the process of
developing a residential school in Western Massachusetts . . . .
A more serious question is whether defendant [state governmental agency] has
pointed to fatal deficiencies in plaintiffs' case at this stage. Plaintiffs argue that
defendant's requirement that NEARI satisfy community concerns was impossible
and unwarranted —and a discriminatory act in itself under the FHAA. This
argument assumes, among oth er things, that discriminatory fears held by some
members of the community motivated defendant's actions, that defendant's
expressions of concern over NEARI's financial stability and the project's impact
on municipal services were pretextual, and that defe ndant's commitment to a fair
reevaluation of the project at a future date was not offered in good faith.
The plaintiffs' argument assumes a great deal, but not, at least at this stage, too
much. Taking the facts in the light most favorable to plaintiffs —th e apparent
(footnote continued)
15
Separately, t he Housing Commission note s that Fair Housing Law appears to permit some
consideration of whether a proposed project constitutes “a direct threat” to public safety.18 In
order to provide further assurance to the public that the City is fully c omplying with its Fair
Housing obligations, and its public safety obligations, the Housing Commission recommends
that City Council direct the City Attorney to review existing guidelines and procedures and
provide legal advice regarding whether any changes are appropriate.
E. The Housing Commission Recommends Re stor ing A Maximum Loan Limit
For Administrative Approvals Independent Of The Per Unit Limits In The
Existing Guidelines
The existing Housing Trust Fund Guidelines limit the maximum size of the contribu tion the City
can make to an affordable housing project without further City Council approval as follows:
“Except as restricted by State or Federal law, the maximum Trust Fund Loan/Grant per -unit
shall not exceed the following:
“smooth sailing” of the project before the April 26 hearing, the arguably
discriminatory nature of the local opposition to the project at that hearing,
and the defendant's request for additional information after April 26 —the
court must conclude that a reasonable factfinder could resolve factual
disputes in favor of plaintiffs and find in their favor. The case will come down
to questions of credibility and fair inference. Defendant's motion for summary
judgment will therefore be denied.
18 42 U.S.C. § 3604(f)(9); s ee, e.g., United States v. Massachusetts Indus. Fin. Agency , 910 F.
Supp. 21, 26 -27 (D. Mass. 1996). The United States Department of Justice website’s Questions
and Answers on the Fair Housing Act and Zoning (updated August 15, 2015), a v ailable at
https://www.justice.gov/crt/joint -statement -department -justice -and -department -housing -and -
urban -development -1 , states :
The Fair Housing Act affords no protections to individuals with or without
disabilities who present a direct threat to the persons or property of others.
Determining whether someone poses such a direct threat must be made on an
individualized basis, howeve r, and cannot be based on general assumptions or
speculation about the nature of a disability.
16
Original Base Amount
Fisca l Year 2007 -08*
Updated Amount
Fiscal Year 2016 -17*
New
Construction
Acquisition &
Rehabilitation
New
Construction
Acquisition &
Rehabilitation
Zero and 1 -Bedroom
Units
$367, 000
$457,000
$469,379
$584,486
2 or more Bedroom
Units
$386,000
$481,00 0
$493,679
$615,181
* Maximum loan/grant to be adjusted in July of each year utilizing the annual adjustment
methodology for the City’s Affordable Housing Fee pursuant to Santa Monica Municipal Code
Section 9.56.070(b)
Actual loan/grant amounts will be based on the project’s need and the level of affordability that is
provided. Program loan/grants in excess of maximum amounts above must be approved by the
City Council/Redevelopment Agency. Projects in excess of fifty (50) units must be approved by
the City Council/Redevelopment Agency.”
The effect of these existing guidelines is that staff, without any direction from City Council,
could approve a loan in excess of $30 million.
When the current Housing Trust Fund Guidelines were first adopted in 1998, t hey provided for
both a fixed dollar maximum loan amount per unit, and an overall maximum loan amount, in the
absence of City Council approval.19 These amounts were raised over the years, with the
maximum based on what is required to create affordable hous ing in the most expensive parts of
the City.20 In 2005, City Council adopted staff’s recommendation to dispense with the separate
overall loan dollar maximum without City Council approval, relying instead on the 50 unit
maximum —combined with the maximum pe r unit —to serve as the maximum loan amount.21
And in 200 7 the City Council adopted a formula for automatic cost escalation of the maximum
per unit amounts.22
19 See Staff Report for Item 6 -U, Santa Monica City Council Meeting 11 -24 -98, available at
https://www.smgov.net/departments/council/agendas/1998/19981124/s1998112406 -U.html .
20 See Staff Report for Item 9 -B , Santa Monica City Council Meeting 5 -2 -2000, available at
https://www.smgov.net/departments/council/agendas/2000/20000502/s2000050209 -B.html ; Staff
Report for Item 1 -F , Santa Monica City Council Meeting 4 -24 -2001, available at
https://www.smgov.net/departments/council/agendas/2001/20010424/s2001042401 -F.htm .
21 See Staff Report for Item 8 -D , Santa Monica City Council Meeting 1 -11 -200 5 , available at
https://www.smgov.net/departments/council/agendas/2005/20050111/s2005011108 -D.htm .
22 See Staff Report for Item 8 -C , Santa Monica City Council Meeting 6 -19 -200 7 , available at
https://www.smgov.net/departments/council/agendas/2007/20070619/s2007061908 -C.htm .
17
The Housing Commission is concerned that as costs keep escalating, the overall maximum loan
amount subject to purely administrative approval has grown too large . It is difficult to imagine
the circumstances where the City would lose out on a particularly valuable affordable housing
opportunity if it did not take the time for a special City Council meet ing to approve a loan of $30
million (which represents close to two full years’ worth of GS/GSH funds and matching funds
from the City’s general funds).23 Accordingly, the Housing Commission recommends that the
Housing Trust Fund Guidelines re -establish an overall maximum dollar loan amount subject to
administrative approval of $___.
V. DEVELOPER FEES
The current Housing Trust Fund Guidelines provide:
“For new construction projects, the developer fee shall not exceed the following
per unit amounts, based on th e size of the project:
Original Base Amount
Fiscal Year 2007 -08*
Updated Amount
Fiscal Year 2016 -17*
For 1 – 20 units $16,240 $20,770
For 21 – 30 units $15,080 $18,135
For 31 – 50 units $13,920 $16,740
For 51 or more units Negotiated Negotiated
For acquisition and rehabilitation projects of 7 units or less, the developer fee
shall not exceed $12,256 (updated for FY 2016 -2017; original base amount for
FY2007 -2008 was $10,900) per unit. For acquisition and rehabilitation projects
of 8 or more units , the developer fee shall not exceed the greater of $55,000 per
project or the sum of 5% of the depreciable acquisition basis and 15% of the
rehabilitation basis. With the exception of those fees for acquisition and
rehabilitation projects of 8 or more uni ts, developer fees will be adjusted in July of
each year utilizing the annual adjustment methodology for the City’s Affordable
Housing Fee pursuant to Santa Monica Municipal Code Section 9.56.070(b). At
the discretion of the City Manager/Executive Director a higher fee may be
allowed.”
Several commenters pointed out that these developer fees have not been increased in
approximately 10 years, and urged that they be raised. The Housing Commission has not had an
23 The City Attorney will have to advise whether such a meeting could occur in clo sed session
because of its relationship to the acquisition of a specific piece of property with City loaned
funds (or otherwise).
18
adequate opportunity to evaluate this comment, and will work with staff to do so and to make a
subsequent recommendation to the City Council.
34210521.6 1
To: Santa Monica City Council
From: Santa Monica Housing Commission
Date: May 18 , 2017
RE PORT REGARDING HOUSING TRUST FUND GUIDELINES
The Santa Monica Housing Commission has reviewed the existing Housing Trus t Fund
Guidelines to determine whether any adjustments should be made in light of (1) the elimination
by the State of Redevelopment Agenc y funding (“RDA funding ”) in 2012, (2) the
recommendations contained in the Housing Commission ’s 2015 Affordable Housin g Strategies
Report (Attachment A hereto), (3) the passage of M easures GS and GSH in 2016 , (4)
accumulated experience, (5) public comment at Housing Commission meetings, and (6) written
public comment received in response to the Housing Commission’s specif ic requests for public
comment (Attachment B hereto). This Report sets forth the views of the Housing Commission
as approved at its May 18, 2017 meeting .
34210521.6 i
TABLE OF CONTENTS
Page
I. EXECUTIVE SUMMARY .................................................................................................1
II. THE HOUSING COMMISSI ON RECOMMENDS THAT T HE CITY
COUNCIL CREATE A “RE DEVE LOPMENT REPLACEMENT HOUSING
TRUST FUND” ...................................................................................................................2
A. The Rationale And Proposed Funding Sources For A New
“Redevelopment Replacement Housing Trust Fund” ..............................................2
B. Proposed El i gibility Guidelines For A New “Red evelopment Replacement
Housing Trust Fund”................................................................................................3
1. The Housing Commission Recommends That Both New
Construction And Acquisition and Rehabilitation Constitute
Eligible Uses, Without Any Minimum Average Number of
Bedrooms Per Unit Requirement .................................................................3
(a) Despite The Greater Cost To The City And Other
Limitations, The Housing Commission Recommends
Retention Of The Option To Fund Acquisition And
Rehabilitation Projects .....................................................................3
(b) The Ho using Commission Does Not Favor A Minimum
Average Number Of Bedrooms Per Unit Requirement For
Project Eligibility .............................................................................5
2. The Housing Commission Recommends A Requirement That All
Units In Eligible Projects Be Affordable To Househ olds Making
80% Or Less Of The Los Angeles County Area Median Income ...............6
3. The Housing Commission Recommends That Eligible Borrowers
Be Restricted To Nonprofits ........................................................................8
C. Additional Uses ........................................................................................................8
III. THE HOUSING COMMISSI ON RECOMMENDS EXPAND ED PUBLIC
PLANNING AND REPORTI NG MEASURES REGARDIN G THE SOURCES
AND USES OF ALL HOUS ING TRUST FUND MONIE S ..............................................9
A. The Housing Commission Recommends The Creation Of An Affordable
Housing Planning And Reporting Procedure Tied To The Housing
Element ....................................................................................................................9
B. The Housing Commission Recommends Adopting Measures To Increase
Transparency Regarding The Expenditure Of Housing Trust Funds ...................11
IV. THE HOUSING COMMISSI ON RECOMMENDS THAT C ERTAIN LIMITED
CHANGES BE MADE TO T HE PROCESS OF MAKING INDIVIDUAL
LOANS ..............................................................................................................................12
34210521.6 ii
A. The Housing Commis s ion Recommends No Change At This Time To The
Persons Authoriz ed To Approve Individual Loans ...............................................13
B. The Housing Commission Recommends That Clearer Guidance Be
Provided To Staff Regarding The Policy Considerations That Properly
Inform The Exercise Of Its Discretion To Approve Or Reject Loa n
Applications ...........................................................................................................13
C. The Housing Commission Recommends That Staff Generate A Written
Statement Of Reasons For Granting Or Denying Loan Applications ....................15
D. The Housing Commission Does Not Recommend That Public Notice And
Comment Be Added Prior To Loan Application Review And Approval,
But It Does Recommend That City Council Direct The City Attorney To
Provide Legal Advice To It Regarding Certain Commenters’ Concerns ..............15
E. The Housing Commission Recommends Restoring A Maximum Loan
Limit For Administrative Approvals Independent Of The Per Unit Limits
In The Existing Guidelines ....................................................................................17
V. DEVELOPER FEES ..........................................................................................................18
1
I. EXECUTIVE SUM MARY
The Housing Commission recommends that the City Council ma ke the following changes to the
existing Housing Trust Fund G uidelines:
1. Create a “Redev elopment Replacement Housing Trust Fund” that will be funded with
one -half of the GS sales tax revenue s, and with a matching amount (at least) of other City
general fund revenues (e.g., the RDA loan repayments). Doing so will provide transparency
regarding the amount and uses of GS funds, will affirm the City’s ongoing commitment to
providing the matching funds required to fully replace (at least) the lost RDA funding previously
used for affordable housing, and will provide transparency regarding fulfillment of that
commitment.
2. Provide that this new fund may be used f or (1) loans to non -profits for new construction
projects, or for acquisition and rehabilitation projects, targeted to h ouseholds earning 80% or less
of the Los Angeles County Area Median Income , and (2) rental subsidies with City Council
approval . The potential funding of a rental assista nce program was a major element of the
campaign in favor of Measures GS and GSH, and including it as an eligible use —subject to City
Council approval —will both affirm that intention to the voters and streamline the process of
bringing the contemplated pilo t program to scale.
3. Require that Staff prepare, the public and Housing Commission review, and the City
Council approve a plan for affordable housing production coinciding with each successive
Housing Element cycle, followed by annual reporting by Staff on progress and annual
consideration by Staff, the public, the Housing Commission and the City Council of whether to
make changes to the plan . Implementing this planning and reporting process will help assure (1)
compliance with the affordable housing pr oduction goals set forth in the approved Housing
Element, (2) compliance with Prop R’s requirement that 30% of annual new housing production
meet certain affordability targets, (3) maximization of the return on scarce Housing Trust Fund
monies, and (4) rob ust opportunities for input on spending priorities by the City Council,
Housing Commission, and the public .
4. Clarify that the criteria enumerated in the current guidelines for selection among
competing projects that meet the minimum requirements are to be applied to determine whether
to approve or reject all applications that meet the minimum requirements , irrespective of whether
or not an additional application is pending at the same time seeking the same funds , and add to
those criteria (1) whether the proposed project meets an area of need identified in the City
Council approved affordable housing production plan for the Housing Element cycle, and (2)
consideration of the applicant’s past and projected future effectiveness in meeting the applicable
pre ferences established by the City (including the preference for those who live or work fulltime
in the City).
5. Require that Staff prepare a written statement explaining its decision to approve or reject
loans that meet the minimum requirements in light o f the enumerated evaluation criteria.
Requiring a written statement should help assure that the evaluation criteria are fully considered,
and will enhance the ability of the public and the City Council to evaluate the quality of each
loan decision and the overall effectiveness of the current structure for making loan decisions.
2
6. Require measures to increase transparency including (1) requiring successful applicants
to hold a public meeting within 30 days of a loan commitment , (2) requiring that all relevant and
public documents regarding the affordable housing production plan, the Housing Trust funds,
individual loan application decisions, and ongoing loans are available in one easily accessible
location on the City’s website, and (3) permitting inte rested organizations and members of the
public to sign up online to receive an automatic email with a link to the document every time a
new document is posted .
7. Limit loans subject to administrative approval to no more than $15 million.
The Housing C ommission does not recommend that the City Council make changes at this time
to the persons authorized to make loan decisions of $15 million or less, and does not recommend
that the public receive notice of individual loan applications and an opportunity t o comment prior
to loan commitment . The Housing Commission is not inclined to make any changes to the
current expedited and confidential loan rev iew and approval process —which S taff and non -profit
affordable housing providers assert facilitates the produc tion of affordable housing —absent very
good reasons to do so. Given the proposed enhanced planning , loan approval and transparency
measures recommended above, the Housing Commission does not see such very good reasons at
the present time.
Finally, in ord er to provide further assurance to the public that the City is fully complying with
b o t h its Fair Housing obligations, and its public safety obligations, the Housing Commission
recommends that City Council direct the City Attorney to review t h e existing guidelines and
procedures and provide legal advice regarding whether any changes are appropriate.
II. THE HOUSING COMMISSI ON RECOMMENDS THAT T HE CITY COUNCIL
CREATE A “R EDEVELOPMENT REPLACE MENT HOUSING TRUST F UND”
A. The Rationale And Proposed Funding Sources For A New “Redevelopment
Replacement Housing Trust Fund”
Prior to 2012, Santa Monica spent approximately $15 million per year on affordable housing.
Most of that fundi ng came from RDA funds drawn from the City’s “Redevelopment Housing
Trust Fund.” The State then ended RDA funding in 2012.
In 2015, the Housing Commission recommended that the City Council request that the voters
replace half of the lost RDA funds with ne w revenues from a ¼ cent local sales tax increase, and
that the City Council replace the other half with funds from existing general fund revenue s. The
City Council responded by (1) placing Measures GS and GSH on the November 2016 ballot, and
(2) acceptin g Staff’s recommendation that the City devote all RDA loan repayments received to
affordable housing.
Now that the voters have approved Measures GS and GSH, t he Housing Commission
recommend s that the City Council establish a new “Redevelopment Replacement Housing Trust
Fund ” (“RRHTF”) to be funded by (1) the half of the GS sales tax revenues voters advised
should go to affordable housing, and (2) a matching amount (at least) of other City general fund
3
revenues (e.g., RDA loan repayments). Creation of this fund will provide transparency regarding
the amount and uses of the GS revenues . It also will affirm the City’s ongoing commitment to
providing the matching fund s required to fully repla ce (at least) the lost RDA funding previou sly
used for affordable hou sing, and will provide transparency regarding fulfillment of that
commitment. This is particularly important because the principal matching funding committed
by City Council to date (the RDA loan repayments) are one time funds, and long -range
budgetary pl anning is required now to assure that the matching funds will continue on an
ongoing basis.
B. Proposed El i gibility Guidelines For A New “Redevelopment Replacement
Housing Trust Fund”
1. The Housing Commission Recommends That Both New Construction
And Acquisitio n and Rehabilitation Constitute Eligible Uses , Without
Any Minimum Average Number of Bedroom s Per Unit Requirement
The existing Housing Trust Fund Guidelines generally authorize lending both for the
construction of new affordable housing, and for the acqui sition and rehabilitation of existing
units as affordable housing. Under the existing “Citywide Housing Trust Fund” (“C itywide
HTF”) guidelines, however, any Affordable Housing Production Program (“AHPP”) in -lieu fees
deposited into the C itywide HTF (as o pposed to development agreement or office mitigation
funds) c an only be used for new construction, and that new construction must have on average
two bedrooms per unit . Neither the 11/24/98 S taff report supporting City Council adoption of
the original ve rsion of the current consolidated guidelines, nor the S taff reports supporting
subsequent revision s , identify the reason(s) for these restrictions on the use of AHPP in -lieu
fees.1
(a) Despite The Greater Cost To The City And Other Limitations ,
The Housing Co mmission Recommends Retention Of The
Option To Fund Acquisition And Rehabilitation Projects
In 2015, Staff provided financial information about all of the affordable housing projects
supported by the various Housing Trust Funds from 2006 forward (Attachmen t C hereto). This
information confirms that acquisition and rehabilitation projects —while less expensive overall —
currently are considerably more expensive to the City than new construction projects that
leverage City dollars through the use of tax credit financing.
1 One commenter recommended eliminating these restrictions on the use of AHPP in -lieu fees in
order to provi de maximum flexibility. Given that the AHPP program is part of the City
Council’s implementation of voter -approved Prop R’s mandate that at least 30% of all new
housing constructed in the City meet certain affordability thresholds, the Housing Commission
believes it remains appropriate to limit the use of AHPP in -lieu fees to new construction.
Similarly, because the AHPP program generally requires that on -site inclusionary affordable
units contain at least two bedrooms (see S.M.M.C. § 9.64.050(C)), the Ho using Commission
likewise believes it is appropriate to retain the requirement that AHPP in -lieu fees go to new
affordable housing construction projects with an average of at least two bedrooms per unit.
4
In particular, f ive new construction projects were completed during the period from 2012 -2014.
As is typical in new construction, both City funding and tax credit financing were used. In each
case the projects averaged more than 2 units per be droom. The cost of City support per unit
ranged from $236,111 to $307,896. The cost of City s upport per bedroom ranged from $96,650
to $133,144.
By contrast, two acquisition and rehabilitation projects were undertaken during the period from
2012 to 2015. As is typical in acquisition rehabilitation, only City funding was used. One
project averaged one bedroom per unit, the other averaged 1.8 bedrooms per unit. The cost of
City support per unit ranged from $302,296 to $550,000. The cost of City support per bedroom
ranged from $302,096 to $305,556. One additional acquisition and rehabilitation project was
undertaken in 2016, again using only City funds. This project involved one bedroom units. The
cost of City support per unit and per bedroom was $529,667.
Acquisition and rehabilitation projects have two additional limitations in comparison to new
construction projects. First, because up to half of the existing residents of an eligible acquisition
and rehabilitation project may have incomes exceeding t he affordability covenants to be imposed
on the units, the full benefit of the project as affordable housing may not occur immediately.2
Second, acquisition and rehabilitation projects —at least of the type typically funded in Santa
Monica —do not count towa rd satisfying the housing production goals established through the
Regional Housing Needs Assessment (“RHNA”) process and adopted in the approved Housing
Element.3
Given these facts, the Housing Commission has a strong general preference for new affordable
housing construction projects using tax -credit funding , as opposed to affordable acquisition and
rehabilitation projects. As documented in our 2015 Affordable Housing Strategies Report
(Attachment A hereto), rising rents and the vacancy decontrol mandate d by the Costa -Hawkins
Act mean that , in the not too distant future, the only opportunit ies for those in the bottom half of
the Los Angeles County income distribution to live in Santa Monica will be in whatever deed -
restricted affordable housing we as a co mmunity are prepared to create. It therefore is important
to maximize the return on any affordable housing funds expended on the creation of new deed -
restricted units.
Nevertheless, the Housing Commission believes that it is not prudent to eliminate altog ether the
option to fund affordable acquisition and rehabilitation projects. First, based on the comments
received from affordable housing developers, the Housing Commission is uncertain as to
whether there presently are and/or will continue to be suffici ent opportunities to fully utilize all
2 Current HTF Guidelines provide that acquisition an d rehabilitation projects are eligible for
funding if at least 51% of existing residents have incomes of 80% of AMI or less, and there is
assurance that the required affordability covenants will apply after those residents ultimately
depart from their unit s.
3 See City of Santa Monica 2013 -2021 Housing Element Ch. 5.G.2.a, at pp. 137 -38.
5
available funding on new construction projects utilizing tax -credit financing.4 Second, the
Housing Commission is uncertain that the current differential in City costs between new
construction and acquisition / rehab ilitation projects will remain as large as it has been in the
past . The proposals by the Trump Administration and Congressional leadership to substantially
reduce federal corporate tax rates already have reduced the funds that can be raised through tax
cr edits, and would reduce those funds further if actually adopted.5 Third, there may be instances
in which other important City goals (for example, protecting existing low income residents,
protecting existing neighborhoods, spreading affordable housing thr oughout the City, et cetera)
justify the additional cost to the City of an acquisition and rehabilitation project.6 Therefore, at
present the Housing Commission prefers to rely on the increased planning and transparency
measures identified in Part III bel ow —rather than a categorical ban on acquisition and
rehabilitation projects —to provide increased assurance that affordable housing funding decisions
give adequate weight to the differential in costs to the City between new construction projects
and acquisi tion and rehabilitation projects.
(b) The Housing Commission Does Not Favor A Minimum
Average Number Of Bedrooms Per Unit Requirement For
Project Eligibility
The appropriate size of a unit to construct depends up on the target population for that unit. For
exa mple, Step -Up commented that studio units are the most appropriate initial housing to
4 The Housing Commission renews the recommendation in its 2015 Affordable Housing
Strategies Report (see Attachment A) that the City review its existing landholdings to ide ntify
sites where new affordable housing projects can be constructed.
5 See “Developers of affordable housing in California are on pins and needles over Trump's tax
plan ,” Los Angeles Times (2/26/17), available at http://www.latimes.com/politics/la -pol -ca -
trump -tax -affordable -housing -20170226 -story.html .
6 The Housing Commission recognizes that some residents also prefer affordable acquisition and
r ehabilitation projects because they will not generate any additional traffic. But it is office and
commercial development that is the principal driver of increased traffic in Santa Monica.
Housing generates far fewer additional vehicle trips than commerc ial and office development.
See 6/15/09 “Trip -Generation Rates for Urban Infill Land Uses in California Phase 2: Data
Collection,” prepared for Caltrans, available at
http://www.dot.ca.gov/newtech/researchreports/reports/2009/final_summary_report -
calif._infill_trip -generation_rates_study_july_2009.pdf . And housing for low -income
households that often do no t own cars generates even less vehicle traffic. Indeed, because low -
income workers who currently commute to Santa Monica have a preference —together with
existing residents —when competing for affordable housing units, newly constructed affordable
housing pr ojects might even effect a net reduction in traffic. In any event, given the importance
of maintaining the City’s economically diversity —a goal repeatedly affirmed both by the voters
and by the City Councilmembers they elect —the Housing Commission does no t believe any
marginal traffic differential between new construction and acquisition / rehabilitation projects
should drive affordable housing funding decisions.
6
construct for the chronically homeless population it seeks to serve. By contrast, CCSM new
construction projects have average more than two bedrooms per unit —even withou t such a
requirement in the former Redevelopment Housing Trust Fund —in accordance with its primary
mission to serve low -income working families. Therefore, because a minimum average of two
bedrooms per unit likely is inappropriate for certain specialty ho using projects (such as
supportive housing and senior housing), the Housing Commission does not favor a minimum
average number of bedrooms per unit requirement for new construction projects. The Housing
Commission likewise does not favor such a requiremen t for acquisition and rehabilitation
projects because it likely would render much of the City’s existing housing stock ineligible.7
Rather, the Housing Commission favors developing an overall unit mix target for all units
funded by the RRHTF as part of th e Housing Element/RHNA cycle planning process
recommended in Part III.A below.
2. The Housing Commission Recommends A Requirement That All
Units In Eligible Projects Be Affordable To Households Making 80%
Or Less Of The Los Angeles County Area Median Income
Under the current guidelines for the C itywide HTF, a ll assisted units must be affordable to
households whose incomes do not exceed 60% of area median income. By contrast, for the
former R edevelopment Housing Trust Fund (“Redevelopment HTF ”) new co nstruction units had
to be affordable to households whose incomes do not exceed 80% of area median income, while
acquisition and rehabilitation units had to be affordable to households whose incomes do not
exceed 100% of area median income.
T he Housing Com mission understands from Staff that the City , when implementing these
restrictions, uses figures published by United States Department of Housing and Urban
Development (“HUD”) and/or the California Department of Housing and Community
Development (“HCD”) fo r the various income categories . However, t he 60% and 80 % figures
used d o not equal the result of multiplying the actual Los Angeles County area median income
by 0.6 and 0.8 , respectivel y . Rather, in each of those categories the qualifying incomes have
be en adjusted upward by HUD due to the high cost of housing in Los Angeles County.8 For
7 See Santa Monica Rent Control Board 2016 Consolidated Annual Report at 9 (58% of
controlled units are zero or one bedroom units, while just 7% are three or more bedroom units),
available at
https://www.s mgov.net/uploadedFiles/Departments/Rent_Control/Reports/Annual_Reports/2016
%20RCB%20ANNUAL%20REPORT%20 -%20FINAL.pdf
8 See “4 -Person Very Low -Income Limit Calculation for Los Angeles -Long Beach -Glendale,
CA HUD Metro FMR Area ” in HUD’s FY 2016 Income Lim its Documentation System
(applying “High Housing Cost Adjustment); “FY 2016 60% Income Limits Calculation” for Los
Angeles -Long Beach -Glendale, CA HUD Metro FMR Area in HUD’s FY 2016 MTSP Income
Limits Documentation System (60% figure is 1.2 times HUD’s 5 0% figure); “FY 2016 Low -
Income Income Limits Calculation ” for Los Angeles -Long Beach -Glendale, CA HUD Metro
FMR Area in HUD’s FY 2016 Income Limits Documentation System (applying “High Housing
Cost Adjustment); HCD’s 5/24/16 Memorandum “State Income Limi ts For 2016” (explaining
(footnote continued)
7
example, the current “60 percent income l imit ” figure provided by HUD —which is the income
limit for households to qualify for residence in units constructed with either federal or California
tax credits 9 —is $52,080 for a family of four,10 a figure which mathematically is just a shade
above 80% of the current Los Angeles County area median income for a family of four of
$64,800 (per HCD) / $64,400 (per HUD).11 And the “low income limit ” figure calculated by
HUD —which HCD notes “[i]n general . . . reflects 80 percent (80%) of the [HUD Median
Family Income] level”12 —is $69,450 13 , a figure that is slightly highe r than the current Los
Angeles County area median income.
In our 2015 Affordable Housing Strategies Report, the Housing Commission recommended that
all of the funds raised through the proposed local sales tax increase and City general fund
matching funds be spent on households earning 80 % or less of Los Angeles County area median
income. The Housing Commission reaffirms this recommendation, despite the fact that the “low
income limit” figure published by HUD and HCD —and used by the City as the 80% figure —is
slightly higher than the actual Los Angeles County area median income. The Housing
Commission notes that if two parents in a four person household work fulltime at our new City
minimum wage of $15 per hour, they would earn —without any overtime —more than the “60
percent income limit” (and more than 0.8 times t he actual Los Angeles County area median
income), but less than the HUD/HCD “low income limit” figure. The Housing Commission is
not prepared to exclude the possibility of creating some units for such families with RRHTF
funds, which would be the case if the “60% income limit” figure were adopted as an absolute cut
HUD methodology), available at http://www.hcd.ca.gov/grants -funding/income -limits/state -and -
federal -income -limits/do cs/inc2k16.pdf .
9 See California Tax Credit Allocation Committee Online Compliance Manual at 19 -20 (stating
requirement under federal tax credit program), available at
http://w ww.treasurer.ca.gov/ctcac/compliance/manual/manual.pdf ; California Revenue and
Taxation Code Section 23610.5 (b)(1)(A) (projects eligible for state tax credit must qualify for
federal tax credit).
10 See HUD’s “FY 2016 Multifamily Tax Subsidy Project Incom e Limits Summary , Los
Angeles -Long Beach -Glendale, CA HUD Metro FMR Area ”; California Tax Credit Allocation
Committee’s “Maximum Income Levels for Projects Placed in Service on or after 3/28/16” at p.
4, available at http://www.treasurer.ca.gov/ctcac/rentincome/16/income/post20160328.pdf .
11 The HUD figure is slightly lower than the HCD figure because HUD no longer follows a so -
called “hold harmless” policy of never re ducing its figures, but HCD has retained that policy.
See HCD’s 5/24/16 Memorandum “State Income Limits For 2016” at p. 1, available at
http ://www.hcd.ca.gov/grants -funding/income -limits/state -and -federal -income -
limits/docs/inc2k16.pdf .
12 This figure also may differ slightly from the HUD “low income” figure due to HCD’s
retention of the “hold harmless” policy.
13 See HCD’s 5/24/16 Memorandum “State Income Limits For 2016” at p. 1, available at
http://www.hcd.ca.gov/grants -funding/income -limits/state -and -federal -income -
limits/docs/i nc2k16.pdf .
8
off for RRHTF funding, just as it currently is for Citywide HTF funding under existing
guidelines.14 Rather, the Housing Commission believes that the Housing Element/RHNA cycle
planning process recommended in Part III.A below is the proper mechanism with which to
assure that the vast majority of the RRHTF funding targets the most disadvantaged groups.
3. The Housing Commission Recommends That Eligible Borrowers Be
Restricted To Nonprofits
Under the guidelines for the C itywide HTF, loans can only be made to n onprofits, and to limited
partnership s with a nonprofit general partner . By contrast, the guidelines for the former
Redevelopment HTF also permitted loans to for -profit developers of affordable housing.
The Housing Commission recommends that the RRHTF be subject to the same non -profit
participation r equirement as the Citywide HTF. To date, n o one has identified and substantiated
any benefit to the City of providing loans to for -profit developers of affordable housing (such as
an ability to leverage private investment funds, an ability to undertake de sirable projects that
nonprofits are unable to deliver, et cetera). Unless and until such a benefit is identified and
vetted by t he Housing Commission and the City Council , the Housing Commission believe that
all loans of public funds from the RRHTF shoul d go to nonprofit s and to limited partnerships
with a nonprofit general partner .
C. Additional Uses
In 2015 the Housing Commission recommended that the City create a pilot rent -subsidy program
for severely rent -burdened low -income residents in long -term rent controlled units and, if
successful, that the program should be brought to scale . The City currently is in the process of
creating such a pilot program. The Housing Commission also recommended in 2015 that the
City consider the possibility of issuing lea se -revenue bonds to acquire property for future
development as affordable housing. The Housing Commission understands that Housing Staff is
in the process of doing so. During 2016, the Housing Commission heard public comment that
certain existing non -pro fit affordable housing projects created with the support of City funds face
negative cash flows , and may need some additional City support. The Housing Commission is
concerned about this issue and is seeking additional information.
Further study, and City Council approval, is required before funds in the RRHTF can or should
be used for these additional purposes . The Housing Commission nevertheless recommends that
the RRHTF guidelines expressly state that rental subsidies —with City Council approval —are an
e ligible use . The potential funding of a rental assistance program was a major element of the
campaign in favor of Measures GS and GSH,15 and including it as an eligible use —subject to
14 One commenter suggested adopting the same limit as the cut off for funding from the Citywide
HTF funding. The Housing Commission is unaware of the reason the Citywide Housing Trust
Fund targeted 60% of area median income or bel ow, and therefore is not in a position to
determine whether it should be changed.
15 See , e.g., Ballot Argument in Favor of Measure GSH (“In addition, hal f of the funds from
Measure GSH will be used for . . . providing rental assistance and other affordable housing
(footnote continued)
9
City Council approval —will both affirm that intention to the voters and streamline the process of
bringing the contemplated pilot program to scale .
III. THE HOUSING COMMISSI ON RECOMMENDS EXPAND ED PUBLIC
PLANNING AND REPORTI NG MEASURES REGARDIN G THE SOURCES
AND USE S OF ALL HOUSING TRUST FUND MONIE S
A. The Housing Commission Recommend s The Creation Of A n Affordable
Housing Planning And Reporting Procedure Tied To The Housing Element
Pursuant to California law, the City periodically prepare s a Housing Element that must be
approved by the State. The current approved Housing Element cov ers the period from 201 4 -
2021. Included within the Housing Element is a quantified o bjective for housing production
which is based in part on the Regional Housing Needs Assessment (“RHNA”) performed by the
Southern California Association of Governments (“SCAG”). In particular, t he RHNA process
determined that the City’s share of the regional need for new housing production during the
period from 2014 -2021 is 1,674 units, of which 974 (58.2%) should be below -market affordable
units. The City’s quantified objectives in the approved Housing Element reduced the number of
affordable units in light of certain conditions prevailing in December 2013 (the time when the
Housing Element was approved), including the loss of Redevelopment funds. Nevertheless,
those q uantified objectives still call for the production of 1,371 units, of which 671 (48.9%)
should be below -market affordable units. These figures, as well as the number of units in each
target income category already approved or in construction as of the com mencement of the
Housing Element/RHNA cycle period, are set forth in the following chart from page 25 of the
Housing Element:
opportunities to low -income families and seniors.”), available at
https://ballotpedia.org/Santa_Monica,_California,_Sales_Tax,_Measure_GSH_(November_2016
); Ballot Argument in Favor of Measure GS (“Measure GSH and Measure GS will provide
locally -controlled funds to help rent -burdened residents, often seniors, stay in their homes
through their golden years ”), available at
https://ballotpedia.org/Santa_Monica,_California,_Allocation_of_Sales_Tax_Revenue_to_Public
_Schools_Advisory_Vote,_Measure_GS_(November_2016).
10
While the Housing Element establishes certain overall quantified objectives for affordable
housing production, it does not estab lish clear guidance as to proper uses of City affordable
housing funding resources. The Housing Element is at a very high level both as to the nature of
the units to be produced, and as to the mechanisms to assure their production. No objectives are
esta blished as to the size of the units to be produced, the nature of the units (e.g., family,
supportive, senior), or their locations within the City. M oreover, no particular mechanism is
provided for tracking progress toward even these high -level goals , and for adjusting City policies
(both in terms of inclusionary units and expenditures of City resources) as necessary to achieve
these goals. Finally, there is no formal mechanism for the public and the City Council to weigh
in on spending priorities on an o ngoing basis .
Therefore, to help assure (1) compliance with the affordable housing production goals set forth
in the approved Housing Element, (2) compliance with Prop R’s requirement that 30% of annual
new housing production meet certain affordability targets, (3) maximization of the return on
scarce Housing Trust Fund monies, and (4) robust opportunities for input on spending priorities
by the City Council, Housing Commission, and the public, the Housing Commission
reco mmends the inclusion within the H ousing Trust Fund Guidelines of the following planning
and reporting process:
The City Manager shall prepare an initial proposed plan for affordable housing
development in the City during the period covered by the current Housing
Element (“the proposed Ini tial Plan”). The Housing Division shall make the
proposed Initial Plan available online, and provide a 45 day period for written
public comment. The Housing Division also shall seek public comment at a
public meeting held between the 30 th and 45 th day of the comment period. T he
Housing Division thereafter shall submit the proposed Initial Plan —together with
any public comment received —t o the Housing Commission for its review and
advice . The Housing Division then shall submit the proposed Initial Plan —
to gether with the public comment and the recommendations of the Housing
Commission —to the City Council for its review and its approval . The Housing
11
Division thereafter will prepare an annual report detailing (1) the source and
amount of funds flowing into ea ch housing trust fund during the prior year, (2) the
amount and uses of funds flowing out of each housing trust fund during the prior
year, (3) the number and type of affordable units made available for occupancy
during the prior year, and whether generate d from housing trust fund expenditures
or as inclusionary units, (4) the number and types of units by which the annual
requirement of Proposition R was either missed or exceeded, (5) a cumulative
figure of each of the foregoing items within the period cove red by the Housing
Element and a comparison with the ta rgets set forth in the Housing Element , and
(6) a comparison of the cumulative affordable housing production within the
period covered by the adopted Initial Plan with the goals set forth in that plan .
The Housing Division shall submit this report —together with any recommended
changes to the approve d I nitial P lan —to the Housing Commission for its review
and advice, and then submit the annual report and recommendations —together
with the recommendations of the Housing Commission —to the City Council for
its review and approval.
The City Manager and the Housing Division shall repeat this process each time a
new Housing Element is approved .
B. The Housing Commission Recommends Adopting Measures To Increase
Tr ansparency Regarding The Expenditure Of Housing Trust Funds
Prior to the termination of RDA funding, the City spent approximately $16 million per year in
Housing Trust funds. Thanks to the voters’ approval of Measures GS and GSH —and with the
commitment o f the City Council to match the funds raised through those measures —the City is
poised to resume spending at that same level.
T he existing Housing Trust Fund Guidelines provide for almost no reporting to the public
regarding these very substantial expend itures.16 Nor is such information readily accessible on
the City’s website.
The Housing Commission believes that increased transparency is critical regarding the
expenditure of such large sums of money on what has been identified as a top public policy
p riority by both the City Council at its August 2015 Retreat , and by the voters with their
November 2016 approval of Measures GS and GSH . The Housing Commission therefore
recommends that the Housing Trust Fund Guidelines include the following measures to a ssure
that all relevant and public information is available in one easily accessible location on the City’s
website, to assure that interested organizations and members of the public can sign up to receive
an automatic email with a link to the document eve ry time a new document is posted , and to
assure that interested members of the public have a prompt opportunity to inquire about
approved loans and the associated projects :
16 The sole provision for public notice is the following requirement at page 15 of the existing
guidelines: “Notice of the issuance of the commitment shall be posted publicly, and a copy of
such notice shall be published in a newspaper of general circulation.”
12
The City shall require any loan recipient to hold a public meeting about the
associ ated project within 30 days of delivery of the loan commitment. The
recipient must provide a document giving notice of the date, time and location of
public meeting to the Housing Division at least 15 days prior to the public
meeting date.
The City s hall place on its website, in one easily identifiable location labeled
“Housing Trust Funds”, all of the following materials within one week of each
such document becoming public : (1) the current Housing Trust Fund Guidelines;
(2) all documents generated and ma de public by the City Manager , the Housing
Division, the Housing Commission, and the City Council pursuant to the
affordable housing planning and reporting process described in Part __ of these
Guidelines , (3 ) the written explanations of the City’s decisio ns whether to
approve or reject applications described in Part ___ of these Guidelines (which
shall be deemed public upon either communication to the applicant that its
application was rejected, or delivery of the commitment letter to the applicant
when an application is accepted ), (4 ) all loan commitment letters issued (which
shall be deemed public when delivered to the applicant ), (5) all notices of the
required public meeting following a loan commitment, and (6 ) all annual reports
provided by Housing T ru st F und recipients pursuant to these Guidelines (which
shall be deemed public upon receipt). The City also shall provide —at the same
location on its website —a mechanism whereby interested members of the public
can sign up to receive an automatic email wit h a link to the document every time a
new document is posted to this section of the City’s website.
IV. THE HOUSING COMMISSION R ECOMMENDS THAT CERTAIN LIMITED
CHANGES BE MADE TO THE PROCESS OF MAKING INDIVIDUAL LOANS
The existing Housing Trust Fund Guidelines generally provide for an expedited and confidential
process of administrative review and approval of individual loan applications. Staff and various
non -profit affordable housing providers assert that this process facilitate s the production in the
City of both new construction and acquisition / rehabilitation affordable housing projects .
According to S taff and these providers, the existing loan approval process makes them more
competitive in the acquisition of suitable propert ies in the City (which are i n short supply) by (1)
keeping potential competitors from learning of the non -profit’s acquisition plans before the non -
profit is in a position to make its offer for each property to the owner, and (2) permits the non -
profit to timely demonstrate to the ow ner that the non -profit definitely has the financial resources
in hand to consummate a purchase transaction.
In 2016, a single loan was approved . That loan was in the amount of $6.356 million , and was for
the purpose of acquiring and rehabilitating a prop erty consisting of twelve single bedroom units.
As noted in Part II.B.1.a above, this loan represented an expenditure of $529,667 per bedroom,
which is far above (1) the expenditure of $302,096 to $305,556 per bedroom for two other
acquisition / rehabilit ation projects supported with City loans during the period from 2012 -2015,
and (2) the expenditure of $96,650 to $133,144 per bedroom for five new construction projects
completed du ring the period from 2012 -2014. In light of the very high cost -per bedroom
represented by this loan, the Housing Commission has considered potential changes to the loan
13
decision -making process —and recommends that some of these potential should be made —as
explained below.
In addition, the Housing Commission has appointed a subc ommittee to observe the decision -
making process over the next year in order to facilitate its consideration of whether to
recommend additional changes.
A. The Housing Commi s sion Recommends No Change At This Time To The
Persons Authorized To Approve Individual Loans
The current Housing Trust Fund Guidelines provide that “[a] commitment letter shall be
prepared by the Housing Division, reviewed by the Manager of the Division and the Director of
Housing and Economic Development, and signed by the City Manager/Exe cutive Director. The
letter shall state the maximum amount of Program funds reserved for the project and list all of
the additional conditions, documents and steps that must be taken by the Borrower prior to loan
closing.”
At least at this time, t he Housin g Commission does not recommend making any substantive
changes to this portion of the guidelines. Adding decisionmakers risks impeding the production
of affordable housing by slowing down the approval process. And —particularly if a Brown
Act body is the reby created —adding decisionmakers (or even advisors ) risks impeding the
production of affordable housing by prematurely making the non -profits’ acquisition plans
known to the for -profit developers com peting for property acquisition.
Particularly given t he affordable housing crisis documented in our December 2015 Affordable
Housing Strategies Report (Exhibit A hereto), the Housing Commission is not prepared to take
steps that risk impeding th e City’s historical success as an affordable housing producer ab sent
very good reasons for doing so. Given the proposed enhanced planning and transparency
measures recommended in Part III above, as well as the proposed improvements to the loan
approval process recommended below, the Housing Commission does not see suc h very good
reasons at the present time.
The Housing Commission does recommend that the guidelines clarify that the Manager of the
Housing Division and the Director of Housing and Economic Development not only must review
the proposed commitment letter, b ut also must approve it in writing.
B. The Housing Commission Recom m ends That Clearer Guidance Be Provided
To Staff Regarding The Policy Considerations That Properly Inform The
Exercise Of Its Discretion To Approve Or Reject Loan Applications
The current Hous ing Trust Fund Guidelines provide (bolding and underlining in original):
“These requirements are minimum requirements for participation in City
Programs and are subject to change at any time. Meeting these requirements
is not a guarantee of participation i n any Program. The City reserves the
right to require additional qualifications for individual projects. The City
reserves the right to reject any and all applications and to accept
applications which in its judgment best serve the interests of the City. O n a
14
case by case basis, City Council may also modify or waive provisions of
these Guidelines.”
They further provide:
“In selecting among competing project applications, unless otherwise
determined for a particular project, priority shall be given to projec ts that:
(1) Significantly increase affordable housing opportunities for
households who have difficulty finding housing including the
homeless, large families, the disabled, seniors, and persons
traditionally served by Single Room Occupancy housing.
(2) Are cost e ffective or achieve the lowest possible subsidy per unit
for City/Agency resources.
(3) Benefit a high percentage of very low and low income households by
ensuring deeper affordability.
(4) Are located in areas currently underserved by affordable housing
developme nts.
(5) Address an area of need identified in the Housing Element of the
City of Santa Monica.”
The Housing Commission first recommends that the Housing Trust Fund Guidelines clarify that
the enumerated selection criteria are to be applied by the decisionmak ers to determine whether to
approve or reject applications that meet the minimum requirements, irrespective of whether or
not an additional application is pending at the same time seeking the same funds . The mere fact
that a project meets the minimum guid eline requirements, and the Housing Tru st Funds has
money available , is not an adequate basis for determining whether the wiser course is to expend
scarce and valuable affordable housing dollars on the current ly proposed project , or instead to
hold those dollars for a potential future project.
The Housing Commission also recommends th at two additional criteria be used to evaluat e
whether or not to approve applications that meet the minimum requirements. First, the
guidelines should add to the list of eval uation criteria the issue of whether the project addresses
an area of particular need identified in the City Council approved affordable housing plan (as
updated each year) described in Part III.A above. Adding this additional criterion will make
clear th at the enhanced planning process recommended above is meant to facilitate increased
public and City Council involvement in setting affordable housing fund spending priorities
(without imposing the risks attendant with such increased involvement on a loan a pplication by
loan application basis).
Second, the guidelines should add to the list of evaluation criteria consideration of the
applicant ’s past and projected effectiveness in meeting the applicable preferences established by
the City (including the pre ference for those who live or work fulltime in the City).
In addition, the Housing Commission is undertaking a review of the suggestion s by one of its
members that the guidelines should require (or add as evaluation criteria ) that applicants obtain
multipl e bids from potential general contractor s and /or subcontractor s, and that applicants
15
demonstrate good faith efforts to obtain all other available project subsidies. The Housing
Commission did not have adequate time to obtain public comment on these sugges tions, or to
evaluate them in detail, and will send a follow -on report to the City Council shortly with its
recommendations rega rd these suggestions.
C. The Housing Commission Recommends That Staff Generate A Written
Statement Of Reasons For Granting Or De nying Loan Applications
The Housing Commission recommends that the Housing Trust Fund Guidelines provide for the
City to prepare a written statement explaining its decision to approve or reject loans that meet the
minimum requirements in light of the enume rated evaluation cr i teria. Requiring a written
statement should help assure that the evaluation criteria are fully considered, and will enhance
the ability of the public and the City Council to evaluate the quality of each loan decision and the
overall ef fectiveness of the current structure for making loan decisions.
D. The Housing Commission Does Not Reco m mend That Public Notice And
Comment Be Added Prior To Loan Application Review And Approval, But
It Does Recommend That City Council Direct The City Attorne y To Provide
Legal Advice To It Regarding Certain Commenters’ Concerns
A number of commenters have advocat ed that public notice be provided upon the submission of
applications for Housing Trust Funds, with an opportunity for public comment prior to indivi dual
funding decisions. The Housing Commission does not recommend making this change at this
time .
First, as discussed in Part IV.A above, the Housing Commission is not inclined to change the
current expedited and confidential loan review and approval pro cess —which S taff and non -profit
affordable housing providers assert facilitates the production of affordable housing —absent very
good reasons to do so. Given the proposed enhanced planning and transparency measures
recommended in Part III above, as well as the proposed improvements to the loan approval
process recommended in Parts IV.B -C above, the Housing Commission does not see such very
good reasons at the present time.
Second, S taff advised the Housing Commission that it is current practice that —as p art of the loan
conditions imposed by the City on recipients of initial loans made to acquire properties for new
construction affordable housing projects —the non -profit developer is required to have two
public meetings to discuss the design of project . He nce, there is an opportunity for public
comment prior to approval of the construction loan itself.
Third, a significant portion of the public comment associated with this proposed change has
focused on the loan made in 2016, which happene d to be to a supportive housing provider.
Indeed, no other specific loan or project was cited as illustrating the need for prior public notice
and comment on loan applications. This 2016 loan was reviewed and approved using the
existing confidential and expedited process, and the Housing Commission is not making any
comment about that loan or project. However, as pertinent to this report, t he Housing
Commission is concerned that if public comment was allowed prior to loan approval, and the
City were to r efuse to make a future loan to a supportive housing provider after receiving public
16
comments like some of the comments the Housing Commission has received after -the -fact about
the 2016 loan , it could raise doubts about the City’s compliance with Fair Housi ng Law even if
the City had fully legitimate reasons for denying the future loan application (for example, on
grounds of cost -effectiveness).17 In such a circumstance, prior public notice and comment could
impede efforts to assure scarce and valuable affor dable housing dollars are spent wisely.
Separately, t he Housing Commission note s that Fair Housing Law appears to permit some
consideration of whether a proposed project constitutes “a direct threat” to public safety.18 In
order to provide further assurance to the public that the City is fully complying with its Fair
17 See, e.g., United States v. Massachusetts Indus. Fin. Agency , 910 F. Supp. 21, 24, 2 9 -30 (D.
Mass. 1996) (bolding added):
NEA RI is a non -profit educational corporation organized to diagnose, treat, and
educate emotionally disturbed adolescents. In early 1988, it began the process of
developing a residential school in Western Massachusetts . . . .
A more serious question is wheth er defendant [state governmental agency] has
pointed to fatal deficiencies in plaintiffs' case at this stage. Plaintiffs argue that
defendant's requirement that NEARI satisfy community concerns was impossible
and unwarranted —and a discriminatory act in its elf under the FHAA. This
argument assumes, among other things, that discriminatory fears held by some
members of the community motivated defendant's actions, that defendant's
expressions of concern over NEARI's financial stability and the project's impact
on municipal services were pretextual, and that defendant's commitment to a fair
reevaluation of the project at a future date was not offered in good faith.
The plaintiffs' argument assumes a great deal, but not, at least at this stage, too
much. Taking th e facts in the light most favorable to plaintiffs —the apparent
“smooth sailing” of the project before the April 26 hearing, the arguably
discriminatory nature of the local opposition to the project at that hearing,
and the defendant's request for additiona l information after April 26 —the
court must conclude that a reasonable factfinder could resolve factual
disputes in favor of plaintiffs and find in their favor. The case will come down
to questions of credibility and fair inference. Defendant's motion for summary
judgment will therefore be denied.
18 42 U.S.C. § 3604(f)(9); s ee, e.g., United States v. Massachusetts Indus. Fin. Agency , 910 F.
Supp. 21, 26 -27 (D. Mass. 1996). The United States Department of Justice website’s Questions
and Answers on the Fair Housing Act and Zoning (updated August 15, 2015), a vailable at
https://www.justice.gov/crt/joint -statement -department -justice -and -d epartment -housing -and -
urban -development -1 , states :
The Fair Housing Act affords no protections to individuals with or without
disabilities who present a direct threat to the persons or property of others.
Determining whether someone poses such a direct th reat must be made on an
individualized basis, however, and cannot be based on general assumptions or
speculation about the nature of a disability.
17
Housing obligations, and its public safety obligations, the Housing Commission recommends
that City Council direct the City Attorney to review existing guidelines and procedures and
provide lega l advice regarding whether any changes are appropriate.
E. The Housing Commission Recommends Re stor ing A Maximum Loan Limit
For Administrative Approvals Independent Of The Per Unit Limits In The
Existing Guidelines
The existing Housing Trust Fund Guidelines limit the maximum size of the contribution the City
can make to an affordable housing project without further City Council approval as follows:
“Except as restricted by State or Federal law, the maximum Trust Fund Loan/Grant per -unit
shall not exceed the following:
Original Base Amount
Fiscal Year 2007 -08*
Updated Amount
Fiscal Year 2016 -17*
New
Construction
Acquisition &
Rehabilitation
New
Construction
Acquisition &
Rehabilitation
Zero and 1 -Bedroom
Units
$367, 000
$457,000
$469,379
$584,486
2 o r more Bedroom
Units
$386,000
$481,000
$493,679
$615,181
* Maximum loan/grant to be adjusted in July of each year utilizing the annual adjustment
methodology for the City’s Affordable Housing Fee pursuant to Santa Monica Municipal Code
Section 9.56.070(b)
Actual loan/grant amounts will be based on the project’s need and the level of affordability that is
provided. Program loan/grants in excess of maximum amounts above must be approved by the
City Council/Redevelopment Agency. Projects in excess of f ifty (50) units must be approved by
the City Council/Redevelopment Agency.”
The effect of these existing guidelines is that S taff, without any direction from City Council,
could approve a loan in excess of $30 million.
When the current Housing Trust Fund Guidelines were first adopted in 1998, they provided for
both a fixed dollar maximum loan amount per unit, and an overall maximum loan amount, in the
absence of City Council approval.19 These amounts were raised over the years, with the
maximum based on wh at is required to create affordable housing in the most expensive parts of
19 See Staff Report for Item 6 -U, Santa Monica City Council Meeting 11 -24 -98, available at
https://www.smgov.net/departments/council/agendas/1998/19981124/s1998112406 -U.html .
18
the City.20 In 2005, City Council adopted S taff’s recommendation to dispense with the separate
overall loan dollar maximum without City Council approval, relying instead on the 50 unit
maximum —combined with the maximum per unit —to serve as the maximum loan amount.21
And in 200 7 the City Council adopted a formula for automatic cost escalation of the maximum
per unit amounts.22
The Housing Commission is concerned that as costs keep esc alating, the overall maximum loan
amount subject to purely administrative approval has grown too large . It is difficult to imagine
the circumstances where the City would lose out on a particularly valuable affordable housing
opportunity if it did not take the time for a special City Council meeting to approve a loan of $30
million (which represents close to two full years’ worth of GS/GSH funds and matching funds
from the City’s general funds).23 Accordingly, the Housing Commission recommends that the
Hous ing Trust Fund Guidelines re -establish an overall maximum dollar loan amount subject to
administrative approval of $15 million .
V. DEVELOPER FEES
The current Housing Trust Fund Guidelines provide:
“For new construction projects, the developer fee shall not exceed the following
per unit amounts, based on the size of the project:
Original Base Amount
Fiscal Year 2007 -08*
Updated Amount
Fiscal Year 2016 -17*
For 1 – 20 units $16,240 $20,770
For 21 – 30 units $15,080 $18,135
For 31 – 50 units $13,920 $16 ,740
For 51 or more units Negotiated Negotiated
20 See Staff Report for Item 9 -B , Santa Monica City Council Meeting 5 -2 -2000, available at
https://www.smgov.net/departments/council/agendas/2000/20000502/s2000050209 -B.html ; Staff
Report for Item 1 -F , Santa Monica City Council Meeting 4 -24 -2001, av ailable at
https://www.smgov.net/departments/council/agendas/2001/20010424/s2001042401 -F.htm .
21 See Staff Report for Item 8 -D , Santa Monica City Council Meet ing 1 -11 -200 5 , available at
https://www.smgov.net/departments/council/agendas/2005/20050111/s2005011108 -D.htm .
22 See Staff Report for Item 8 -C , Santa Monica City Council Meeting 6 -19 -200 7 , available at
https://www.smgov.net/departments/council/agendas/2007/20070619/s2007061908 -C.htm .
23 The City Attorney will have to advise whether such a meeting could occur in closed session
because of its relationship to the acquisition of a specific piece of property with City loaned
funds (or otherwise).
19
For acquisition and rehabilitation projects of 7 units or less, the developer fee
shall not exceed $12,256 (updated for FY 2016 -2017; original base amount for
FY2007 -2008 was $10,900) per unit. For acquisi tion and rehabilitation projects
of 8 or more units, the developer fee shall not exceed the greater of $55,000 per
project or the sum of 5% of the depreciable acquisition basis and 15% of the
rehabilitation basis. With the exception of those fees for acqui sition and
rehabilitation projects of 8 or more units, developer fees will be adjusted in July of
each year utilizing the annual adjustment methodology for the City’s Affordable
Housing Fee pursuant to Santa Monica Municipal Code Section 9.56.070(b). At
th e discretion of the City Manager/Executive Director a higher fee may be
allowed.”
Several commenters pointed out that these developer fees have not been increased in
approximately 10 years, and urged that they be raised. The Housing Commission has not had an
adequate opportunity to evaluate this comment, and will work with S taff to do so and to make a
subsequent recommendation to the City Council.