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HomeMy WebLinkAboutItem D - Approval of Home Improvement Program GuidelinesAGENDA REPORT DATE: May 28, 2002 TO: Chairperson and Members of the Redevelopment Agency THRU: John B. Bahorski, Executive Director FROM: Lee Whittenberg, Director of Development Services SUBJECT: APPROVAL OF HOME IMPROVEMENT PROGRAM GUIDELINES SUMMARY OF REOUEST: Staff recommends that the Redevelopment Agency approve the proposed "Home Improvement Program Guidelines for the City of Seal Beach ", establishing program guidelines and funding for four different housing programs structured to assist the low -to- moderate income residents of the City of Seal Beach. BACKGROUND: Approval of the recommended "Home Improvement Program Guidelines" will implement the provisions of the 2000 -2005 AB 1290 Implementation Plan approved by the Agency on April 22, 2002. It is necessary to approve the Home Improvement Program to establish program guidelines, funding levels, and implementation mechanisms. Overview of Previously Adopted Home Improvement Program: In 1998, the City of Seal Beach wanted to improve the aging homes existing within the community, using the "housing set -aside funds" of the Redevelopment Agency. A plan was developed and in July 1998 the Redevelopment Agency Board approved the Seal Beach "Home Improvement Program" (the "HIP"). The HIP was designed to: • Stabilize and improve the existing housing stock of the City • Utilize the State mandated low to moderate income Housing Set -Aside Funds for those purposes. The Housing Set -Aside Funds must be used only for the creation and/or preservation of affordable housing in accordance with the provisions and requirements of the California Health and Safety Code. The City's HIP utilized these set -aside funds to buy -down the conventional interest rate on the home improvement loan to a more affordable level for the homeowner. While the HIP bought the interest rate down, the U.S. Department of RrA Agenda Item C.W, Documeub AV 2Housing A,sks.e Pmgmm.RDA Sffr Report.TWb5 -01 -02 Approval of Home Improvement Program Guidelines Redevelopment Agency StgffReport May 28, 2002 Housing and Urban Development (HUD) Title One Loans provided the owner with a loan for the full amount of the improvements. This allowed the City to leverage the set - aside funds for greater benefit to the community. After the HIP was approved, it was launched and aggressively promoted through a variety of advertising avenues: cable TV, newspapers, community newsletter, mailed flyers as well as storefront flyers. Initially there was a lot of interest and phone inquiries about the program. However, there were some inherent obstacles in transferring this interest into actual home renovation. From the volume of calls, only 30 property owners initially qualified for City assistance and completed a HIP application. Of those 30, only 5 (or 16 %) actually completed improvements to their home. Furthermore, in November of 2000, HUD suspended the Title One Loan Program; consequently eliminating the major source of funding for the HIP. Staff has analyzed the obstacles to HIP's success and restructured the program to increase homeowner participation and expand the types of homeowner assistance programs, thereby improving the quality of housing in the City of Seal Beach. Outlined below are HIP's previous obstacles and their successful resolution for your review. Previous Proeram Obstacles: Housing Set -Aside Funds require the County income figures to dictate the income limits on this program. As a result, Orange County's income limits must be used to determine eligibility for Seal Beach residents. The problem is the median income for most residents of Seal Beach is substantially higher than the median income for Orange County. As a result, many interested Seal Beach residents could not qualify for assistance because their incomes were higher than the dictated limits. 2. The program was initially designed to offer a 3% loan to the lowest income households (80% or below median income homeowner) but an 8% loan to the higher income households (120% or below median income homeowner). Staff discovered the lowest income households could not afford any monthly loan repayment amount, so they were unable to utilize the program. On the other hand, the higher income households felt an 8% loan was not very competitive (conventional interest rates: 11 -13 %) and decided against utilizing the program. There was a cash rebate of $2,500 for exterior improvements offered, but it was contingent upon the rehab loan and consequently undemtilized. 3. In order to move forward with the lengthy application process, the resident was required to coordinate the bidding process, and take a very active role in the implementation of the needed home repairs. For a variety of reasons, this was an intimidating and difficult request for many of the residents. As a result, the application process became time consuming and discouraging for the homeowner. 2002 Housing Assistime RioMm.RDA amn Report Approval of Home Improvement Program Guidelines Redevelopment Agency SOffReport May 28, 2002 Overview of Proposed Home Improvement Programs: The Agency has an existing fund balance of $711,339 in the Housing Set -Aside Fund including the 2000/2001 set -aside funds referenced above, which will increase to $1,711,339 in the event the MPROP Loan is funded and the Agency is reimbursed for the "bridge loan" approved as part of the Seal Beach Trailer Park acquisition. The $1,711339 and the projected set -aside fund amounts for Fiscal Years 2001/2002 through 2004/2005 total approximately $2,800,000. That amount is shown to be expended in Table 1, Five -Year Housing Assistance Goals - 2000 -2005, of the "Home Improvement Program ", provided as Attachment 1. A. Proposed Owner- Occupied Home Improvement Loan Program: The income limit restriction of the Housing Set -Aside Funds continues to challenge many owner - occupant residents. However, the loan repayment schedule has been restructured to make it more affordable to the lowest income households and more attractive to the higher income homeowners (see Attachment 1, Table 2, Five -Year Home Improvement Program Goals, 2000- 2005): ❑ The new program structure has eliminated the monthly loan payment, which will help the lowest income residents. The new loan is deferred until the homeowner sells or refinances the property or a change in title occurs. After 10 years, 1 /10th of the principal and interest is forgiven each year until it is entirely forgiven. ❑ The Owner - Occupied Home Improvement Loan Program is funded entirely by Housing Set -Aside Funds and offers a very low interest rate of 2% to all income- qualified program participants, which will be more attractive to the higher income households. ❑ The maximum available loan amount has increased from $25,000 to $50,000, which will allow for more substantial home improvements. ❑ Owner occupied single - family residences, mobile homes, and condominiums will qualify for this program. ❑ This program is only available for non - substantial levels of rehabilitation (less than 25% of the after -rehab value). Substantial rehabilitation requires a different set of loan terms and criteria. B. Proposed Home Improvement Grant Program: The previous $2,500 Exterior Beautification Grant been replaced with an Owner- Occupied Home Improvement Grant Program which offers up to $10,000 in exterior improvements and health and safety /energy improvements. Any income- qualified, owner - occupied, resident wishing to undertake exterior beautification and/or health or safety improvements can qualify for this grant. It is anticipated that if Code Compliance discovers health and/or safety violations in a particular residence, they will refer income- qualified owners to this program. 2002 Housing Assis we Nv,un.RDA Staff Report Approval of Home Improvement Program Guidelines RedevelopmentAgency StafjReport May 28, 2002 The Home Improvement Loan Program and the Home Improvement Grant Program are not contingent upon each other and can be funded separately. C. Proposed Substantial Rehabilitation/Replacement Loan Program (Seal Beach Trailer Park): The Substantial Rehabilitation/Replacement Loan Program, will assist income- qualified owners of Mobile Homes within the Seal Beach Trailer Park. This program is designed to provide substantial rehabilitation to dilapidated mobile homes and improve health and safety living conditions for those Seal Beach residents within the Trailer Park. Severely distressed mobile homes may be eligible for replacement funding based upon the recommendation of Code Enforcement and/or the Building Department. Staff recommends that income - qualified applicants could obtain a loan of up to $50,000. Recent State regulations regarding the use of Housing Set -Aside fiords dictate that "substantial rehabilitation loans" be deferred and also require an affordable covenant be recorded on the property for at least 45 years. The regulations further state that the Agency must receive equity share repayment instead of an interest rate on these loans. This means that if the property sells to a non - qualified buyer within the 45 -year covenant, the Agency will receive a percentage of the property equity as loan repayment. Several of the mobile homes in the City are in need of repair and are believed to have a variety of exterior and/or interior code violations. Utilizing the Housing Set -Aside Funds, these homes will be brought up toto current Code requirements. D. Mortgage Assistance Loan Program: This program is designed to assist new buyers with up to 20% down payment assistance in purchasing condominiums or mobile homes in the City of Seal Beach. The loan is funded through Set -Aside Funds with a maximum loan amount of $35,000. State regulations also require this type of funding to have a 45 -year affordable covenant placed on the property as well as an equity share repayment plan. Staff recommends that the principal loan amount on both the Substantial Rehabilitation/Replacement Loan and the Mortgage Assistance Loan Program be entirely forgiven at year 10, while the equity share repayment will remain in effect the entire 45 years. F. Administration 2002 Housing Asaaance Pmgmm.RDA Sblr Report Approval of Home /mprovemem Program Guidelines Redevelopment Agency Staff Report May 18, 2002 CivicStone, the City's housing program consultant, will develop a set of procedures and application forms for these revised guidelines. CivicStone will also take a more active role in helping the homeowner through the HIP process; making the application process more manageable and attractive to the Seal Beach homeowner. CivicStone will also track, monitor, administer and report to the City on the intricacies and details of the revised HIP. This will accelerate the application, bidding, loan and construction processes as well as eliminate lender, construction and homeowner delays. CivicStone will: ❑ Qualify the property owners' applications for eligibility, based upon program guidelines. ❑ Interview contractors, check references, verify city and state requirements and develop a contractor's list. ❑ Work with homeowners to develop a Scope of Work for contractors to submit competitive bids. ❑ When required by the Planning Department, CivicStone will refer homeowners to qualified architecture companies for preparing construction plans. ❑ Conduct the competitive bid process and review the bids with the homeowners. ❑ Assist the properly owners with the loan process. ❑ Regularly inspect the properties and when appropriate approve the contractor progress payments. ❑ Ensure proper grant/loan documentation is provided to the Agency for each project funded through the HIP. Upon Agency approval of the Home Improvement Program, staff and CivicStone will develop the necessary procedures and application forms for these revised guidelines. Initiation of program activities will begin as soon as possible. FISCAL IMPACT: No impact to City General Fund. All program activities are funded through the Redevelopment Agency Housing Seat -Aside Fund, Account Number 061 -081- 45050. RECOMMENDATION: Staff recommends that the Redevelopment Agency approve the proposed "Home Improvement Program Guidelines for the City of Seal Beach ", establishing program guidelines and funding for four different housing programs structured to assist the low -to- moderate income residents of the City of Seal Beach. 2002 Housing Assi,tm Pmgmm.RDA Stiff Report Approval of Home Improvement Program Guidelines Redevelopment Agency Staff Report May 28, 2001 NOTED AND uttenberg 4%2 John B. rski, E xect hector of Development Services / Redevelo ent Agency Attachment: "Home Improvement Program Guidelines ", gelievelopment Agency of the City of Seal Beach, May 28, 2002 ((// 2002 Hoy mg Assismnce Pmg ,RDA Smn Report Approval of Home Improvement Program Guidelines Redevelopment Agency SmjfReport May 28, 2002 HOME IMPROVEMENT PROGRAM GUIDELINES REDEVELOPMENT AGENCY OF THE CITY OF SEAL BEACH MAY 28, 2002 2002 Housing Assistance PmMm.R A Staff Report Approval of Home Improvement Program Guidelines Redevelopment Agency Staff Repon May 18, 2002 CITY OF SEAL BEACH HOME IMPROVEMENT PROGRAM GUIDELINES Program Authorization and Intent: This Home Improvement Program was approved by the Redevelopment Agency of the City of Seal Beach on April 22, 2002. These programs are proposed to comply with the provisions of the State of California regarding the use of Redevelopment Agency "Housing Set - Aside" funds. The programs have been designed to assist identified groups of low- and moderate - income persons and families that reside or are anticipated to reside within the City of Seal Beach over the time period of 2000 -2005. These programs do not propose the use of funds for new construction of living units within the City, with the exception of the replacement program for living units within the Seal Beach Trailer Park. All of the other programs are proposed to assist current residents, both owners and renters, to the greatest extent possible, who would qualify under the various program guidelines established within the Seal Beach Home Improvement Program Guidelines. The Redevelopment Agency of the City of Seal Beach has approved the following programs for implementation by the Redevelopment Agency staff and appropriate consultants (Program Guidelines are summarized on Table 2): A. Home Improvement Programs: 1. Owner- Occupied Home Improvement Programs: (a) Home Improvement Loan Program: Eligible Properties: This program is available to owner - occupants of single family homes, condominiums and mobile homes (trailers). Loan Amount and Terms: Maximum deferred loan amount of $50,000.00. If property is sold to qualified buyer, that buyer will assume repayment terms. If property is sold to a non - qualified buyer within first 10 years, full principal amount plus 2% interest due upon sale. If property is sold to a non - qualified buyer in years 10 -20, 1 /10th of principal and interest forgiven for each year after 10th yea. Upon sale of property the pro-rated amount of principal and interest is due. Principal and interest completely forgiven on 20 -year loan anniversary. 2002 noosing A.intcxe P.g ..RDA Staff Report Approval of Home Improvement Program Guidelines Redevelopment Agency StafjReport May 28, 2002 Eligible Improvements: Any improvements to the home. This program is only available for non - substantial levels of rehabilitation (less than 25% of the after -rehab value). Substantial rehabilitation requires a different set of loan terns and criteria. Available Funding: $ 900,000.00 Note: $ 500,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge -loan is reimbursed. (b) Home Improvement Grant Program: Eligible Properties: This program is available to owner - occupants of single family homes, condominiums and mobile homes (trailers). Loan Amount and Terms: Maximum grant amount of $10,000.00. Grant forgiven after 3 years. Resale restriction during first three years: if property is sold to a non - qualified purchaser, the grant amount is paid to the Agency out of the sale proceeds. Eligible Improvements: Any improvements to the home. This program is only available for non - substantial levels of rehabilitation (less than 25% of the after -rehab value). Substantial rehabilitation requires a different set of loan terms and criteria. Available Funding: $ 100,000.00 2. Tenant Ownership of Seal Beach Trailer Park/Rehabilitation- Replacement of Existing Units Eligible Properties: This program is available to owner - occupants of mobile homes (trailers) within the Seal Beach Trailer Park. Loan Amount and Terms: Maximum deferred loan amount not to exceed $50,000.00. Each property has 45 -year affordable covenant. Full principal is forgiven on 10 -year loan anniversary. If property is sold to qualified buyer, that buyer will assume repayment. If property is sold to non - qualified buyer within first 10 years, the full principal plus equity share is due upon sale. Agency to receive equity share if home is sold to non - qualified buyer before 45 -year covenant expires. Eligible Improvements: Any improvements to mobile home are eligible. Replacement of entire housing unit must be approved by City Building and Code Enforcement Departments. 2002 Housing Assistance Prog a,RDA Stan Report Approval of Home Improvement Program Guidelines Redevelopment Agency Staff Repon May 28, 2002 Available Funding: $ 500,000.00 Note: $ 100,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge -loan is reimbursed. Tenant Ownership/Rental Assistance: To ensure the long -term preservation of Seal Beach Trailer Park as an important affordable housing resource, the City worked with LINC Housing, a nonprofit housing organization, to pursue tenant ownership of the park. The City was awarded by the State Department of Housing and Community Development (HCD) a $20,000 Technical Assistance grant to facilitate conversion of the park to tenant ownership. Through the issuance of a revenue bond by the Agency, approval of a MPROP Loan by the State of California and subsequent loan to LINC housing, conversion of the park to tenant ownership was completed in December 2000. Among the 125 units, 25 units have been deed - restricted as housing affordable to very low income households and 75 units have been deed - restricted as housing affordable to low /moderate income households. In addition, the City provides ongoing rental assistance to offset the monthly rent increase necessary to repay the bond. The rental assistance is for a period of 12 years with a maximum funding commitment of $ 965,000.00, and a maximum yearly commitment of $ 120,000.00. 3. Mortgage Assistance Loans Eligible Properties: This program is available to qualified purchasers of owner - occupied single family homes, condominiums and mobile homes (trailers). Loan Amount and Terms: Deferred Loan. Buyer pays all closing costs. 45 -year affordable covenant on property. Full principal amount forgiven on 10 -year loan anniversary. If property is later sold to qualified buyer, that buyer will assume repayment terms. Agency to receive equity share whenever home is sold to non - qualified buyer before 45 -year covenant expires Eligible Improvements: None, program is designed to provide up to 20% of purchase price for down payment. Maximum $35,000 deferred loan amount. Available Funding: $ 700,000.00 Note: $ 405,000 of fording for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge -loan is reimbursed. 2002 tbusing MSivanee P,og.m.RDA Staff Report 10 Approval of Home Improvement Program Guidelines Redevelopment Agency Smf(Report May 28, 2002 B. Housing Production and Assistance Goals Table 1 provides estimates in terms of number of households to be assisted and amount of housing set -aside fund to be expended over the five -year period (2000- 2005) of this Home Improvement Program. Table 1 Five -Year Housing Assistance Goals - 2000 -2005 Notes: 1. The $1,000,000 loan to LINC for acquisition of the park will be repaid back to the Agency within the time frame of this Home Improvement Program. These funds are proposed to be expended upon receipt and within the time frame of this Home Improvement Program. 2. Total Rental Subsidy is for 12 Years and will be allocated in future plans as appropriate. Total subsidy is not to exceed $965,000.00 3. $ 500,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. 4. $ 100,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. 5. $ 400,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. The Agency has discretion to re- allocate funding levels among the various programs identified above, with the understanding that the allocated funds must total the $ 2,800,000 indicated. In addition, the Agency needs to allocate funds to the proposed programs in such a manner as will allow the Agency to comply with the following requirements: ❑ 70.2 percent of the housing set -aside funds would need to be expended to assist housing for persons with very low and low income during the duration of this Home Improvement Program. ❑ 62.5 percent of the housing set -aside funds must be expended on housing that is available to families with children. 2002 Housing Assistvoce Pmgrun.RDA Stog Report II Households Set -Aside Funds Program Assisted to be Expended 1. Home Improvement Program 20 $ 1,000,000' 2. Tenant Ownership of Seal Beach Trailer Park Acquisition of Park (Loan)! 120 ($1,000,000) Rental Subsidy for 5 Yearn 25 $ 600,000 Replacement/Rehabilitation 10 $ 500,0004 3. Mortgage Assistance Loans 20 $ 700,000' Total 65 $ 2,800,000 Notes: 1. The $1,000,000 loan to LINC for acquisition of the park will be repaid back to the Agency within the time frame of this Home Improvement Program. These funds are proposed to be expended upon receipt and within the time frame of this Home Improvement Program. 2. Total Rental Subsidy is for 12 Years and will be allocated in future plans as appropriate. Total subsidy is not to exceed $965,000.00 3. $ 500,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. 4. $ 100,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. 5. $ 400,000 of funding for this program will not be available until the MPROP Loan is funded by the State of California and the Agency bridge loan is reimbursed. The Agency has discretion to re- allocate funding levels among the various programs identified above, with the understanding that the allocated funds must total the $ 2,800,000 indicated. In addition, the Agency needs to allocate funds to the proposed programs in such a manner as will allow the Agency to comply with the following requirements: ❑ 70.2 percent of the housing set -aside funds would need to be expended to assist housing for persons with very low and low income during the duration of this Home Improvement Program. ❑ 62.5 percent of the housing set -aside funds must be expended on housing that is available to families with children. 2002 Housing Assistvoce Pmgrun.RDA Stog Report II Approval ofHome Improvement program Guidelines RedevelopmentAgency Staff Report May 28, 2002 C. Program Implementation: CivicStone, the City's housing program consultant, will develop a set of procedures and application forms for implementation of the above - described programs. All procedures and application fomts shall be reviewed and approved by the Executive Director of the Redevelopment Agency of his/her designee. CivicStone will also take a more active role in helping the homeowner through the HIP process; making the application process more manageable and attractive to the Seal Beach homeowner. CivicStone will also track, monitor, administer and report to the City on the intricacies and details of the revised HIP. This will accelerate the application, bidding, loan and construction processes as well as eliminate lender, construction and homeowner delays. CivicStone will: ❑ Qualify the property owners' applications for eligibility, based upon program guidelines. ❑ Interview contractors, check references, verify city and state requirements and develop a contractor's list. • Work with homeowners to develop a Scope of Work for contractors to submit competitive bids. • When required by the Planning Department, CivicStone will refer homeowners to qualified architecture companies for preparing construction plans. ❑ Conduct the competitive bid process and review the bids with the homeowners. ❑ Assist the property owners with the loan process. ❑ Regularly inspect the properties and when appropriate approve the contractor progress payments. ❑ Ensure proper grant/loan documentation is provided to the Agency for each project funded through the HIP. • s rt a 2002 Housing Assistance RO ..RDA Sfna Report 12 \(i � ( ƒ r � E / N/) g am }& \a. 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