HomeMy WebLinkAbout01/21/2003, C8 - AMENDMENT TO THE URBAN COUNTY'S AFFORDABLE HOUSING STRATEGY 1
council I m DS
j acEnba Repout
CITY OF SAN LUIS OBISPO
FROM: John Mandeville, Community Development Direct��
Prepared By: Jeff Hook, Associate Planne �- ' -
SUBJECT: AMENDMENT TO THE URBAN COUNTY'S AFFORDABLE HOUSING
STRATEGY
CAO RECOMMENDATION
As recommended by the Human Relations Commission, endorse the proposed amendment with
the recommendation that Funding Priority #1, to increase affordable rental housing for very-low
and low-income households, also include moderate-income households.
DISCUSSION
Situation. Federal rules require urban counties to publish a Consolidated Plan, describing the
jurisdictions' housing and community development needs and proposing short- and long-term
strategies for meeting those needs. This plan applies to San Luis Obispo County and all of the
cities participating in the Urban County. The Consolidated Plan is a five-year document, with
short-range "Action Plans" updated yearly. A key part of the plan is setting priorities. High
priority needs and activities have the best chance of receiving limited Community Development
Block Grant (CDBG), HOME, or Emergency Shelter Grant (ESG) funds.
San Luis Obispo Urban County's current Consolidated Plan was adopted in 2000, with updated
action plans approved in 2001 and 2002. The Plan includes an Affordable Housing Strategy that
prioritizes affordable housing needs, as follows:
Priority #1: Increase first-time home ownership opportunities for low- and moderate-
income households.
Priority #2: Increase availability of affordable and decent rental housing for low- and
very-low income persons and families.
Priority #3: Maintain and upgrade existing neighborhoods and housing units occupied by
low-and moderate-income households.
The County proposes to reverse priorities I and 2, so that increasing affordable and decent rental
housing becomes the new top priority for federal housing funds. The County has requested
comments on the proposed change.
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1 r.
Council Agenda Report — Amendment to the Affordable Housing Strategy of the 2000
Consolidated Plan
Page 2
Human Relations Commission Review. On December 18, 2002, the Human Relations
Commission held a public hearing to consider the 2003 CDBG Grant Applications. At the
hearing, the Commission also considered the proposed Affordable Housing Strategy
Amendment. The Commission endorsed the proposed amendment, but with the recommendation
that Priority #1 also address the housing needs of moderate-income households. The HRC
recommended the amended priorities read as follows:
Priority#1: Increase availability of affordable and decent rental housing for very-low, low- and
moderate-income persons and families.
Priority #2: Increase first-time home ownership opportunities for low- and moderate-income
households.
Priority #3: Maintain and upgrade existing neighborhoods and housing units occupied by low-
and moderate-income households.
Background Under the City's Affordable Housing Standards, "Moderate Income" refers to
households with annual incomes from 80 to 120 percent of County Median Income, or$40,250 -
$60,350 (for a household of four persons); and between $28,150 - $42,250 for single persons.
Renters in San Luis Obispo commonly spend more than 35 percent of their income on housing.
According to the 2000 Census, 58 percent of San Luis Obispo City residents are renters and of
these, over one-half (54%) pay 35 percent or more of their gross annual income on rent
payments. By contrast, only 40 percent of county renters pay more than 35 percent of their
income for housing, and statewide, 34 percent of renters pay over 35 percent. Due to the high
cost of housing in the City and County, there is a need for rental housing affordable to moderate
income households as well as to very-low and low-income households. The rate of rental
housing development locally and statewide dropped dramatically in the, 1990s from previous
levels.
During the past five years, the Urban County funded the "First Time Homebuyers Program" to
help achieve Policy #1 goals. The program was administered by the Housing Authority of the
City of San Luis Obispo with participation by the cities and unincorporated County. In the last
two years, this program has become ineffective because single-family housing costs have
increased rapidly countywide, and few first-time buyers can now qualify for a home loan without
increasingly larger subsidies from the program. Therefore the program has been able to help only
a few persons with large amounts of CDBG funding. The large, unmet need for safe, decent and
affordable housing for very-low, low and moderate income persons is not being effectively
addressed through this program. And while significant CDBG and HOME funds have been
committed to housing developments for very-low and low income persons, housing for moderate
income has been financially difficult to address.
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Council Agenda Report — Amendment to the Affordable Housing Strategy of the 2000
Consolidated Plan
Page 3
The proposed re-prioritization would not eliminate funding for ownership housing development.
It would, however, give preference for limited funding to rental housing developments. All
housing projects would continue to be rated based on a range of evaluation criteria in the
Consolidated Plan, and would vie for funding on a competitive basis. If and when the housing
market changes to favor the development of ownership housing, the Urban County would have
the option of setting different funding priorities.
FISCAL IMPACT
This proposal would not have a fiscal impact. Council would continue to evaluate CDBG
applications and make funding decisions based on the merits of individual projects. The Urban
County Affordable Housing Strategy funding priorities apply to the Urban County as a whole,
and while they provide an overall objective, do not preclude the Council from exercising
independent judgment. The proposed change recognizes fiscal realities of housing development
costs in SLO County, and gives additional emphasis to rental housing development.
ALTERNATIVE
1. Do not support the proposed amendment. Council may recommend the priorities remain
unchanged, or recommend different priorities than those suggested by County staff. The
Board of Supervisors will consider the Council's recommendation along with those of the
other participating jurisdictions in the Urban County.
Attachments:
1. Letter From County Staff
2. Excerpt from 2000 Urban County Consolidated Plan
Jh/CDBG/Affordablehousingstrategyamendment.ccrpt
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u SAN LUIS OBISPO COUNTY
DEPARTMENT OF PLANNING AND BUILDING
It VICTOR HOLANDA, AICP
DIRECTOR
Attachment 1
DATE: November 21, 2002
TO: City Council of the City of San Luis Obispo
FROM: Tony Navarro, Planner III
SUBJECT: Amendment to the Affordable Housing Strategy of the Urban County of
San Luis Obispo 2000 Consolidated Plan
Dear City Council Members,
The County of San Luis Obispo asks for your comments regarding the proposed
amendment of priorities in the Housing and Community Development Objectives and
Programs section of the Five-Year Strategic Plan as identified in the Urban County of San
Luis Obispo 2000 Consolidated Plan. Priority #2, Increase availability of affordable and
decent rental housing for low and very low-income persons and families, is proposed as
the new Priority #1. Existing Priority #1, Increase first-time home ownership
opportunities for low- and moderate income households, would be re-prioritized as #2
under the Affordable Housing Strategy..
During the past five years, the County funded the First Time Homebuyer program as an
eligible program under the current Priority #1, Increase first-time home ownership
opportunities for low- and moderateincome households. The program was
administered by the Housing Authority of the City of San Luis Obispo and benefitted
households countywide. In the past two years, this program has become difficult to
market because single family housing in the county is not affordable to people who are
80% of media_n income without some form of substantial financial assistance. A
household of four persons who earn less than $50,300 per year is an example of a
median income household. Also, few median income households can qualify for a
market rate loan to purchase a home in the county. Therefore, the program has
assisted fewer households with larger amounts of assistance. This reduces the number
of eligible persons who benefit from the federal funding programs while not addressing
the large unmet need to provide more safe, decent and affordable housing.
The Strategic Plan is not required to be revised each year but the County may assess
each year whether the strategies need any improvements or changes in emphasis.
With the re-prioritization of strategies, more rental housing projects could become
available. This will assist communities provide safe, decent and affordable housing to
COUNTY GOVERNMENT CENTER SAN LUIS OBISPO CALIFORNIA 93408 (805) 781-5600
EMAIL: planning@CO.SIO.Ca.us 0 FAX: (805) 781-1242 WEBSITE: http://WWW.slocoplanbidg.com Cg��'
Attachment 1
more households and help ease a high demand need. This action would also assist the
Urban County with its annual funding recommendations to reflect the changing real
estate market and meet the goals established in the Strategic Plan as approved by the
federal Department of Housing and Urban Development. Furthermore, the re-
prioritization will assist the Urban County meet the timeliness expenditure of both
Community Development Block Grant and HOME Investment Partnerships Act funds as
required by federal regulations.
The re-prioritization would not eliminate the funding opportunities for proposed
affordable single family housing developments. All housing projects would be rated
according to the established evaluation criteria identified in the Consolidated Plan and
must contend on a competitive basis. In the event that the housing market changes in
favor of moderate income people to afford home ownership, the County would consider
the option of setting new priorities.
Should you have any questions, please feel free to call me at 781-5787.
Sincerely,
Tony Navarro
Planner III
Department of Planning and Building
County of San Luis Obispo
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Attachment 2
1850
COUNTY OF SAN LUIS OBISPO
2000 CONSOLIDATED PLAN
Prepared by
Planning and Building Department, County of San Luis Obispo,
with assistance from the cities of
Arroyo Grande
Atascadero
Grover Beach
Paso Robles
San Luis Obispo
Approved by the San Luis Obispo County Board of Supervisors
March 21 , 2000
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Attachment 2
consultation with private and public groups having special knowledge about the
needs. The needs of underprivileged and under-represented residents of the
county must not be overlooked.
Affordable Housing Strategy
Priority#1: Increase first-time home ownership opportunities for low- and moderate-
income households.
As established in the.Housing and Homeless Needs section of this plan, extremely low-,
low-and moderate-income households have higher levels of overpayment for housing than
other income groups.
The highest priority under this plan is first-time homeownership assistance to other
moderate-income (51-80% MR) persons and families. This is because these families
cannot afford to purchase a home in the county without some form of assistance. This
type of assistance for very low-income (31-50% MFI or 0-30% MR) is rated slightly less
high in priority, due to inability of such families to afford monthly payments on home loans
without very large amounts of subsidy. Another category of projects that qualify for this
highest priority is where a project includes a mixture of ownership units for low-income
households, moderate-income households and/or middle-income households. Mixed-
income neighborhoods are considered better than having separate areas for each income
group.
The principal type of activity to accomplish first-time home ownership is home buyer
assistance, but site acquisition and new construction are considered to be almost as
important. Under this priority category, rehabilitation would be appropriate only in
conjunction with acquisition of existing housing for low- and moderate-income persons or
families.
Ownership Housing Development Program: This program encourages development of
affordable ownership housing for very low-income, low-income, and moderate-income
households by offering a variety of incentives to reduce development costs. The program
is flexible, applicable to new or redeveloped sites, and project sponsors who are public,
non-profit or for-profit. The most important types of incentives are expected to be financial
assistance for the costs of site acquisition, public improvements or actual construction of
homes. The primary funding source will probably be the HOME Program, while CDBG
funds are also appropriate for this program. Partnerships with local non-profit
organizations with the expertise to obtain funds through a variety of federal, state and
private funds are expected to prove most successful in producing affordable housing.
Density Bonus Programs: California jurisdictions are required to provide increases in
allowable density for projects which include specified amounts of affordable housing for
2000 Consolidated Plan(03/21/00) Page 37
San Luis Obispo County
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Attachment 2
low- or moderate-income households. The County and all of the cities in the county meet
or exceed the requirements of state density bonus law,which requires at least a 25 percent.
increase in allowable density (or incentives of equivalent financial value) plus additional
incentives for projects meeting one of the following minimum thresholds: 10 percent of the
housing is for low-income households (0-50% MFI), 20 percent of the housing is for
moderate-income households (51-80% MFI) or 50 percent of the housing is for senior
citizens,
First-time Home Buyer Programs: Many low-and moderate-income families could afford
to purchase their first home if the amount of the purchase price financed through an
amortized loan with monthly payments could.be brought down enough to make the monthly
payments affordable. The County will use HOME funds to provide low interest down
payment loans, or "gap" loans. In this manner, loans of about $10,000 to $25,000 each
will enable many families to obtain the major portion of the needed purchase money by
qualifying for conventional home loans through banks, savings and loans, or other private
lenders.
Quantified objectives: The County intends to allocate about $2.5 million total of a
combination of HOME and CDBG funds during the next five years to assist with the
development of new ownership housing and the acquisition of existing ownership housing.
Qualified organizations will be invited to submit proposals for the use of those HOME and
CDBG funds. Approximately 100 low-and moderate-income(0-80% MFI) households are
projected to achieve homeownership as a result of funding this program during the next
five years. Of these 100 households, the County projects about 30 to be low-income (0-
50% MFI), and fewer than 10 to be extremely low-income (0-30%). Some of the resulting
units of homeownership will occur after this five-year period, since new housing
construction normally involves lengthy periods of time for planning, site acquisition, design
and construction.
Geographic distribution: Activities increasing homeownership opportunities for low- and
moderate-income persons and families are needed in all communities, and therefore the
assistance will be made available county-wide. Communities with relatively low vacancy
rates, high housing costs or high concentrations of low-and moderate-income families will
be emphasized.
Priority#2: Increase availability of affordable and decent rental housing for low and very
low-income persons and families.
As noted in the needs assessment section of this plan, extremely low- and low-income
renter households have higher incidence of paying more than they can afford than renters
in any other income group or for homeowners in any income group. Low-income renters
are in need of assistance, but not nearly to the degree of extremely low-income renters.
This is supported by the long waiting lists at both housing authorities for public housing or
Section 8 rental assistance.
Page 38 2000 Consolidated Plan (03/21/00)
San Luis Obispo County
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Attachment 2
Section 8 Rental Assistance Program: The Housing Authority of the City of San Luis
Obispo administers this HUD program county-wide. Assistance includes Section 8 rental
assistance certificates and vouchers. There is a long waiting list for this very popular and
needed program. The County estimates that the current level of 1,450 Section 8 assisted
households can at least be maintained, if not increased, during the five-year period
covered by this plan.
Tenant-Based Rental Assistance for Special Needs Households: The Supportive Housing
Consortium initiated this HOME-funded program to enable its member agencies to move
their clients from homelessness or from a residential-based program into independent
rental housing by paying a portion of their rent for a limited time. The County has also
provided other funds to supplement the HOME funds. The program has been successful
in placing people into permanent housing,freeing up places in shelters and other program
for new clients.
Affordable Rental Housing Development Programs: The housing authorities of the cities
of San Luis Obispo and Paso Robles both own and operate public housing units with
subsidized rents for low-income tenants. Also, other non-profit organizations have
acquired existing rental housing, or developed new rental housing, to be operated as
affordable rental housing for low and very low-income households for many years. Support
services such as child care, health care screening and education should be linked to rental
housing built for extremely low-and low-income households. Where feasible, projects of
rental housing that can be made to remain affordable for many years without additional
(Section 8)assistance will be supported. Making this possible will require initial assistance
to acquire or develop the housing through the Low Income Housing Tax Credit Program,
the HUD Section 202(Elderly Housing) Program, the FmHA 514/515 (Rental/Farmworker
Housing) Programs, the HOME and CDBG programs.
Density Bonus Programs: As mentioned previously, California jurisdictions are required
to provide increases in allowable density for projects which include specked amounts of
affordable housing for low- or moderate-income households. The County and all of the
cities in the county meet or exceed the requirements of state density bonus law.
Quantified objectives: The County intends to allocate about$3.5 million in a combination
of HOME and CDBG funds during the next five years to assist with site acquisition and/or
development costs for the provision of long-term affordable rental housing, including
conversion of existing motels or commercial/industrial buildings, and for tenant-based
rental assistance for special needs households. Proposals to use other funding sources
not under direct control by the County will be considered favorably for consistency with this
plan by the County. Approximately 150 low- and moderate-income (0-80% MFI)
households are projected to benefit as a result of funding this program during the next five
years. Of these 150 households, the county projects about 120 to be low-income (0-50%
MFI), and 100 to be extremely low-income(0-30%). Some of the resulting rental units will
occur after this five-year period, since new housing construction normally involves lengthy
periods of time for planning, site acquisition, design and construction.
2000 Consolidated Plan (03121100) Page 39
San Luis Obispo County 4 Q
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Geographic distribution: Activities increasing affordable rental housing opportunities will
be focused in any urban areas close to shopping, schools, public transportation, medical
facilities and other services. Special emphasis will be placed on new affordable rental
housing for extremely low-income families in communities with large numbers of
agricultural, service sector or manufacturing employees, combined with relatively low
availability of affordable rental housing.
Priority#3: Maintain and upgrade existing neighborhoods and housing units occupied
by low-income households.
Maintenance and improvement of existing residential neighborhoods aids in the elimination
of blight and preserves the existing stock of affordable and decent housing units.
Rehabilitation of existing housing is often more cost-effective than building new housing,
and rehabilitation can be used to enlarge housing units to alleviate overcrowding.
Rehabilitation may also be appropriate to correct seismic deficiencies in some older
buildings. Also, when homes owned or occupied by low-income households are
rehabilitated, their neighbors (who are not low-income) may invest in the maintenance or
improvement of their properties because they now have an improved confidence that home
values in that neighborhood justify the investment. The Priority Needs Table (in the
appendix) shows housing rehabilitation as a high activity for assisting only existing
homeowners, since low-income and very low-income homeowners have difficulty in
maintaining their homes. Rental rehabilitation is of secondary priority because the County
has found that rental owners rarely want or need public assistance to finance rehabilitation
work, partly because of the affordability restrictions that accompany public assistance.
Residential Rehabilitation Program: The program can provides low interest loans orgrants
to homeowners of housing occupied by low-income households. It can apply both to
ownership and rental housing, although few rental housing owners are expected to
participate. Grants may be appropriate where small programs would make processing of
loans too costly. The primary source of funding is the CDBG program, but other potential
sources include the California Housing Rehabilitation Program and the HOME Program.
The County does not intend to fund a program of major housing until a large enough
program can be designed to make it cost effective. Small programs of housing
rehabilitation have proven in the past to have a high unit cost, but large programs (at least
30 units averaging about $15,000 each) can be deigned to be implemented in a cost
effective manner. Also, this program has been implemented in the 1980's in the
communities of San Miguel, Paso Robles,Templeton, Santa Margarita, Morro Bay, Grover
Beach, Oceano, Nipomo and a numberof smallercommunities in the unincorporated areas
of the county.
However, the County plans on continuing to support the minor home repair program that
has been implemented for the past several years by the Economic Opportunity
Commission (EOC). EOC has extended the impact of the program by combining County
Page 40 2000 Consolidated Plan (03/21/00)
San Luis Obispo County
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CDBG funds with weatherization funds from other sources.
Quantified objectives: .The County may allocate as much as $500,000 in CDBG funds to
the minor home repair program over the next five years. The number of low and moderate
income households that would be benefit is estimated at about 150.
Geographic distribution: County-wide.
Addressing Homelessness (Continuum of Care)
Priority#1: Prevent homelessness by enabling people to obtain or retain decent
affordable housing and supportive services.
As stated in the needs assessment section of this plan, homeless persons need permanent
affordable housing. Thus, one necessary part of the "continuum of care" strategy for
addressing homelessness consists of the affordable housing programs described above.
In addition, it is crucial to include measures to help people who are now in housing from
losing it to become homeless, or the numbers of homeless persons could grow rapidly.
This section addresses both the homeless and non-homeless who have special needs.
The City of San Luis Obispo Housing Authority's affiliate Non-Profit Housing Corporation
has opened four new apartment complexes, rehabilitated two properties, and acquired
another, with a total of 130 units. This agency has also acquired three homes for
transitional housing since 1992. The current transitional housing program has 12 beds for
homeless disabled adults housed in three single family homes, and another 16 beds in
housing it leases. In the first 20 months, 31 people have been housed and 12 have
graduated into permanent housing utilizing a Section 8 subsidy. It is anticipated that
another 60 residents will move into permanent housing during the five years covered by
this plan. The program combines case management and intensive living skills training with
socialization and individual self-determination,which are needed by this severely disabled
population. Case management continues beyond transitional housing and into permanent
housing.
However, in addition to funding for acquisition of housing for this program,ongoing funding
for staffing and operating costs is necessary. The County will support applications to the
HUD Supportive Housing Program for this purpose, since most public service CDBG funds
are used for other homeless programs.
The Economic Opportunity Commission (the local community action agency) and the
Salvation Army operate formal rental assistance programs. Most food distribution
programs and Churches have small eviction prevention funds. The HIV Consortium and
the AIDs Support Network provide rental assistance and transitional housing to persons
with AIDs and their families.
2000 Consolidated Plan (03/21/00) Page 41
San Luis Obispo County