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Home My WebLink About09/07/2004, C7 - AUTHORIZATION OF APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMEN council �°`D�47171 agcnaa Report It.N.A` c CITY O F SAN LUIS O B I S P O FROM: John Mandeville, Community Development Director Prepared By: Doug Davidson, Housing Programs Manager SUBJECT: AUTHORIZATION OF APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) FOR FUNDING UNDER THE CALHOME PROGRAM (PROPOSITION 46) CAO RECOMMENDATION Adopt.a resolution authorizing staff to complete and submit an application to HCD for CalHome Program funds in the amount of $500,000 to be used for first-time home buyers mortgage assistance. DISCUSSION On July 15, 2004, HCD issued a Notice of Funding Availability (NOFA) for approximately $30M of CalHome program funds. These funds are made available as a result of Proposition 46, the Housing and Emergency Shelter Act of 2002; a $2.1 billion bond measure approved by California voters in 2002. The maximum funding amount for any one jurisdiction is $500,000. This is the first of at least 3 grant authorizations staff will be seeking this year for Proposition 46 funds. The CalHome grant application deadline is September 15, 2004. The NOFA does not specify when the funds will be awarded. According to HCD staff, grants should be awarded in November, agreements signed in December, with funds available early in the year 2005. Housing Element certification is not a requirement or bonus factor for CalHome loans. CalHome funds would be used as low interest, deferred payment (or "silent") second trust deed loans to qualified low-income households for purchase of their first home. The funds can be used for "gap" financing, down payment assistance, and closing costs and are designed for first-time home buyers with incomes at 80% or less of the County median. It is anticipated that about five loans could be made with this grant. The large "gap" between what a low-income family can afford and the price of a home in San Luis Obispo limits the effectiveness of this type of program. Some might question if the program is worth the time and effort if only about five loans could be funded. Staff believes that it is worthwhile for several reasons: 1. For the five families receiving funds it would be a life-changing event not possible without assistance. 2. Five more families could become homeowners than if the State funds were not pursued at all. C7-1 CAR-Authorization to Apply for CalHome Grant Funds Page 2 3. It is a start for the City and Proposition 46 funds. 4. CalHome funds could establish the foundation for an ongoing City mortgage assistance program. 5. The Housing Element contains several policies and programs to provide assistance to first- time home buyers. Foremost among them: a. "Assist with the issuance of bonds, tax credit financing, loan underwriting, or other financial tools to help develop or preserve affordable units through various programs, including, but not limited to: (1) below-market financing and (2) subsidized mortgages for very-low, low, and moderate income persons and first- time home buyers, and (3) self-help or "sweat equity" homeowner housing" (Program 2.3.9) b. "Actively seek new revenue sources, including State, Federal, and private/nonprofit sources, and financing mechanisms to assist affordable housing development and first-time home buyer assistance programs." (Program 6.3.13) Proposition 46 funds are one piece of the affordable housing puzzle. In conjunction with Housing Element incentives, Federal CDBG/HOME funds, and the City's Affordable Housing Fund they can make a difference. Staff time will be spent primarily on putting together the application, and if successful, managing the program. The participating lenders will be setting up the qualified homebuyers with their conventional first mortgage. The Housing Authority has offered to process and service the. CalHome loans.. The City's grant application is enhanced by having the Housing Authority as our partner. FISCAL IMPACT Proposition 46 funds will have an overall beneficial fiscal impact. No impact on the General Fund will result, as CalHome funds are grants with no local matching requirements. Staff will be exploring the suitability of HOME funds as another funding source for the first-time home buyers assistance program. (Note: HOME funds are the federal HUD funds entitled to the "Urban County"in conjunction with the CDBG program.) ALTERNATIVE The Council could decide not to pursue this State loan program. This is not the recommended approach. One of the highest priorities of the new Housing Programs Manager position is to "aggressively pursue State housing grants and loans." The opportunity for this piece of the Proposition 46 funds would be lost entirely by not making the application. Attachment 1. Resolution dd/prop46/CCCaIHomeAuthor.Rpt ��Z Attachment 1 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO AUTHORIZING SUBMITTAL OF AN APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) FOR FUNDING UNDER THE CALHOME PROGRAM (PROPOSITION 46); THE EXECUTION OF A STANDARD AGREEMENT IF SELECTED FOR SUCH FUNDING AND ANY AMENDMENTS THERETO; AND ANY RELATED DOCUMENTS NECESSARY TO PARTICIPATE IN THE CALHOME PROGRAM WHEREAS, the City of San Luis Obispo, a political subdivision of the state of California, wishes to apply for and receive an allocation of funds through the CalHome Program; and WHEREAS, HCD has issued a Notice of Funding Availability (NOFA) for the CalHome program established by Chapter 84, Statutes of 2000 (SB 1656 Alarcon), and codified in Chapter 6 (commencing with Section 59650) of Part 2 of Division 31 of the Health and Safety Code (the "statute"); and WHEREAS, pursuant to the statute,HCD is authorized to approve funding allocation using monies made available by the State Legislature to the CalHome program, subject to the terms and conditions of the statute and the CalHome Program Regulations adopted by HCD on August 15, 2003; and WHEREAS, the City of San Luis Obispo wishes to submit an application to obtain from HCD an allocation of Cal Home funds in the amount of$500,000; and WHEREAS,the City's Housing Element contains policies and programs to actively pursue State grants available through Proposition 46. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Luis Obispo hereby: 1. Authorizes the filing of an application to HCD to participate in the CalHome Program in response to the NOFA issued on July 15, 2004; and 2. Directs that the application will request a funding allocation of Cal Home funds in the amount of $500,000 to provide mortgage assistance to low-income first-time home buyers in the City of San Luis Obispo. 3. Agrees that if the application is approved, use the CalHome funds for eligible activities in the manner presented in the application as approved by HCD and in accordance with program regulations cited above. The City may also execute any and all other instruments necessary or required by HCD for participation in the CalHome Program. Resolution No. Page 2 4. Authorizes the Chief Administrative Officer to execute in the name of the City of San Luis Obispo, the application, the Standard Agreement, and all other documents required by HCD for participation in the CalHome Program, and any amendments thereto. On motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was passed adopted this 7th day of September 2004. David F. Romero, Mayor ATTEST: Diane Reynolds, Acting City Clerk APPROVED AS TO FORM: Jona . Lowell, City Attorney dd/Prop46/CCCa1HomeAuthor.Reso C7-41