Agenda Item AGENDA STAFF REPORT ASR Control 24-001040
MEETING DATE:	02/25/25
legal entity taking action:	Board of Supervisors and Orange County Housing Authority
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	OC Community Resources (Approved)
Department contact person(s):	Dylan Wright (714) 480-2788
	Julia Bidwell (714) 480-2991

Subject: 2025 Supportive Housing Notice of Funding Availability & Recapitalization Policy

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

No Legal Objection

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: See Financial Impact Section

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: See Financial Impact Section	County Audit in last 3 years: No
Levine Act Review Completed: N/A

Prior Board Action: 2/27/2024 #35, 2/28/2023 #32

RECOMMENDED ACTION(S):

Acting as the Board of Supervisors and the Board of Commissioners to the Orange County Housing Authority:

Approve the recommended changes in policy and process for the 2025 Supportive Housing Notice of Funding Availability.

Approve and authorize the OC Community Resources Director, or designee, to implement the proposed Recapitalization Policy.

Authorize the OC Community Resources Director or designee to issue the 2025 Supportive Housing Notice of Funding Availability with an emphasis on developing extremely low-income housing with up to $12,050,000 in available funding as outlined in the Financial Impact Section and utilize up to 150 Housing Choice, Mainstream and/or Veterans Affairs Supportive Housing Project-Based Vouchers and return to the Board of Supervisors for funding commitments to individual projects.

SUMMARY:

Approval of the proposed Recapitalization Policy and recommended policy and process changes for the 2025 Supportive Housing Notice of Funding Availability and its issuance with up to $12.05 million in available funding and up to 150 Housing Choice, Mainstream and/or Veterans Affairs Supportive Housing Project-Based Vouchers for continued investment will support the production and preservation of affordable and supportive housing in Orange County.

BACKGROUND INFORMATION:

On February 28, 2023, the Board of Supervisors (Board) authorized the OC Community Resources (OCCR) Director or designee to issue a 2023 Supportive Housing Notice of Funding Availability (2023 NOFA) with up to $67.1 million in Federal HOME Investment Partnerships Program (HOME), HOME American Rescue Plan (HOME-ARP), Mental Health Services Act (MHSA) and American Rescue Plan Act Coronavirus State and Local Recovery Funds (ARPA-SLFRF) and utilize up to 210 Housing Choice, Mainstream and/or Veterans Affairs Supportive Housing (VASH) Project-Based Vouchers (PBVs) and return to the Board for funding commitments to individual projects. The Board also approved the changes in policy and process for the 2023 NOFA. The 2023 NOFA was released on March 20, 2023.

On February 27, 2024, the Board authorized the OCCR Director or designee to issue a 2023 NOFA First Amendment with up to $32.7 million in HOME, HOME-ARP, MHSA and 15G Reserves Funds and utilize up to 218 Housing Choice, Mainstream and/or VASH PBVs and return to the Board for funding commitments to individual projects. The Board also approved the changes in policy and process for the 2023 NOFA First Amendment. The 2023 NOFA First Amendment was released on March 15, 2024.

Since issuance of the 2023 NOFA and First Amendment, OCCR has received 18 applications. Out of the 18 applications submitted, seven applications have been processed and approved by the Board, six applications are currently in the review process and five applications were withdrawn. The 13 active applications requested 302 Housing Choice PBVs, 10 VASH PBVs, approximately $6.4 million in MHSA Capitalized Operating Subsidy Reserves and approximately $35.7 million in capital funding to fund and/or subsidize the development of 379 units of supportive housing for extremely low-income households experiencing homelessness.

OCCR staff worked with other County Departments and agencies to gather feedback on the 2025 Supportive Housing Notice of Funding Availability. OCCR staff also held a developer input session on November 14, 2024 to discuss the current NOFA and the proposed recommended changes in policy and process stemming from internal County of Orange (County) review. Developers noted that they are continuing to face high development cost due to shortage of material, high interest rates and rising insurance costs. Feedback provided by developers on the current NOFA was also taken into consideration in developing the changes.

The recommended changes in policy and process for the 2025 NOFA are included in Attachment A. The recommended changes are updates to clarify County policy or process, reflect industry standards and address new federal regulations.

The recommendations for issuance of the 2025 NOFA will make available up to $12.05 million HOME, HOME-ARP, MHSA, 15G Reserves and/or Housing Successor Agency (HSA) Funds. If approved, the 2025 NOFA will also authorize the use of up to 150 Housing Choice, Mainstream and/or VASH PBVs.

The 2025 NOFA will continue to place an emphasis on developing extremely low-income supportive housing as part of a comprehensive approach to support both the County’s Housing Funding Strategy (HFS) and the 2022 HFS Update to develop 2,396 permanent supporting housing units by 2029 to address housing needs for individuals and households experiencing homelessness. Additionally, these supportive housing units will follow the best practices, guiding principles and commitments of the Homeless Service System Pillars Report that was created by the Commission to End Homelessness and accepted by the Board on October 18, 2022.

Under the direction of the Board, OCCR staff drafted a Recapitalization Policy (Attachment B) for consideration. The Recapitalization Policy establishes clear guidelines and procedures for evaluating and processing recapitalization requests for affordable housing projects, including refinancing, debt restructuring, resyndication and other related activities. These processes are integral to preserving and/or extending housing affordability while maintaining the physical condition of existing properties.

The proposed Recapitalization Policy ensures that the needs of low-income households are met while making efficient use of public funding and resources by:

1.	Permitting various recapitalization methods to extend the lifespan and affordability of projects;
2.	Outlining a detailed submission process, beginning with an initial request at least 180 days before the anticipated approval date which consists of a threshold review, followed by a financial and underwriting analysis to ensure compliance and feasibility; and
3.	Outlining an extensive review process for resyndication requests which also requires an extended affordability period of at least 15 years.

Furthermore, the Recapitalization Policy outlines two paths of approval for such requests.

Path One: Recapitalization requests that meet all established conditions, with the exception of resyndication requests, may be approved by the Director of OC Housing and Community Development (OCHCD). These conditions include full compliance with existing loan terms, verified financial stability of both the project and ownership, and no changes to project ownership or County imposed covenants. The proposed recapitalization must ensure long-term affordability, project sustainability, and alignment with County housing goals. Staff may request additional documentation as needed.

Path Two: Any request not fully meeting the conditions for Director level approval under the Recapitalization Policy or involving resyndication will be brought to the Board for consideration.

The recommended changes in policy and process and proposed Recapitalization Policy were presented to the Project Review Advisory Panel at their December 12, 2024 meeting.

Compliance with CEQA: This action is not a project within the meaning of California Environmental Quality Act (CEQA) Guidelines Section 15378 (Attachment C) and is therefore not subject to CEQA, since it does not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. The approval of this agenda item does not commit the County to a definite course of action in regard to a project since it is for an approval of funding and vouchers to allow the continued support of the production of supportive housing in Orange County. This proposed activity is therefore not subject to CEQA. Any future action connected to this approval that constitutes a project will be reviewed for compliance with CEQA.

Compliance with NEPA: The proposed activity is Exempt under Section 24 CFR 58.34(a)(3) (Attachment D).

FINANCIAL IMPACT:

Up to $12.05 million may be funded as loans from a combination of funding sources, including HOME, HOME-ARP, MHSA, 15G Reserves and HSA. The loans will impact OC Housing Fund 15G, MHSA Fund 12A and Housing Asset Fund 170. These loans only affect the notes receivable balance sheet accounts of the funds. Per budgeting practice, the loans are not built into fiscal year appropriations. The 150 Housing Choice, Mainstream and/or VASH PBVs were received and are included in the OC Housing Authority Fund 15F FY 2024-25 budget.

STAFFING IMPACT:

N/A

REVIEWING AGENCIES:

OC Health Care Agency
Office of Care Coordination

ATTACHMENT(S):

Attachment A – Recommended Changes in Policy and Process for the 2025 Supportive Housing Notice of Funding Availability
Attachment B – Recapitalization Policy
Attachment C – California Code of Regulations Title 14 Section 15378
Attachment D – Code of Federal Regulations Title 24 Subtitle A Part 58