AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 19-000946
MEETING DATE:	09/24/19
legal entity taking action:	Board of Supervisors and Orange County Housing Authority
board of supervisors district(s):	1
SUBMITTING Agency/Department:	OC Community Resources (Approved)
Department contact person(s):	Dylan Wright (714) 480-2788
	Julia Bidwell (714) 480-2991

Subject: Selection of Westminster Crossing for Rental Assistance and Loan Subordination

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

No Legal Objection

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: N/A

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

Prior Board Action: 02/26/2019 #25, 12/18/2018 #35, 12/18/2018 #24, 10/30/2018 #S23E

RECOMMENDED ACTION(S):

Acting as the Board of Supervisors and as the Board of Commissioners to the Orange County Housing Authority, and as the Board of Commissioners to the Orange County Housing Authority, acting in its capacity as Housing Successor Agency:
1.	Approve the additional utilization of five Project-Based Housing Choice Vouchers for Westminster Crossing (in addition to the prior approval for 15 Project-Based Housing Choice Vouchers) for a total utilization of 20 Project-Based Housing Choice Vouchers for Westminster Crossing in accordance with the policies and procedures identified in the Orange County Housing Authority Administrative Plan and authorize the execution of related documents, instruments and agreements.
2.	Authorize the OC Community Resources Director or designee to subordinate previously approved $850,000 permanent loan to a future First Deed of Trust Tranche A conventional loan of $5,038,338 and Second Deed of Trust Tranche B permanent loan of $3,043,103 as set forth in this staff report and authorize OC Community Resources Director or designee to subordinate to additional senior debt(s), and other sources of affordable housing financing the project may leverage in the future, with the approval of County Counsel, up to 100 percent cumulative loan-to-value based on the as-built appraised market value, if necessary, based on any future changes in project financing.

3.	Authorize the OC Community Resources Director or designee to execute subordination agreements; standard set of loan documents and restrictive covenants; and such additional agreements, contracts, instructions and instruments necessary or appropriate for permanent loan financing and commitment of the U.S. Department of Housing and Urban Development Project-Based Housing Choice Vouchers, which incorporate the business and financial terms set forth in this Agenda Staff Report in a form as approved by County Counsel.

SUMMARY:

Approval of the County commitment of a total of 20 Project-Based Housing Choice Vouchers and loan subordination for Westminster Crossing will allow the County to continue to support the production of supportive housing in Orange County.

BACKGROUND INFORMATION:

On November 10, 2015, the Board of Supervisors (Board) approved issuance of the 2016 Permanent Supportive Housing Notice of Funding Availability (2016 PSH NOFA). The objective of the 2016 PSH NOFA was to provide up to $8 million in HOME Investment Partnership Act (HOME) funds and/or Orange County Housing Successor Agency (HSA) funds and up to 100 Project-Based Housing Choice Vouchers (PBV) for the acquisition, new construction and acquisition/rehabilitation of supportive housing for extremely low-income households who are experiencing homelessness in Orange County. The 2016 PSH NOFA is one of the strategies implemented by the County of Orange (County) to align resources to end homelessness through the development of supportive housing.

On April 24, 2018, the Board approved the issuance of Addendum 1 to this 2016 PSH NOFA, which increased the amount of funding by $4 million, to a total of $12 million, under this NOFA. The Addendum 1 also increased the number of Veterans Affairs Supportive Housing (VASH) and/or Housing Choice Vouchers by 100, to a total of 200 vouchers, and approved modifications including, but not limited to, increases to the per unit subsidy limits for projects located in Urban County participating cities. On December 18, 2018, the Board approved an additional increase in funding by another $2 million, to a new combined total of $14 million in HOME and/or HSA funds and the utilization of up to 50 additional VASH vouchers.

Meta Housing Corporation (Developer) responded to the 2016 PSH NOFA Addendum 1 with a funding application for a 65-unit affordable rental housing development, Westminster Crossing Apartments (Development). The Development will be located at 7122-7140 Westminster Boulevard in the City of Westminster.

The Development is new construction of 65 units (64 rental units) of affordable housing for low- to extremely-low income individuals and families. The site is currently comprised of an existing strip mall and consists of about two acres.

On October 30, 2018, the Board approved the Development for a Special Needs Housing Program (SNHP) funding allocation, funded by the California Housing Finance Agency, in the amount of $2,184,000, to support 15 units dedicated to tenants who meet Mental Health Services Act (MHSA) criteria. On December 18, 2018, the Board also adopted a resolution authorizing Health Care Agency to submit and execute application and related documents to the State Department of Housing and Community Development (HCD) for No Place Like Home (NPLH) competitive Notice of Funding Availability to fund the Development, in an amount of $1,933,845. On February 26, 2019, the Board approved the Development for permanent loan financing under the 2016 PSH NOFA Addendum 1 in the amount of $850,500 along with 15 PBVs. On May 7, 2019, the Board approved the Development for additional SNHP funding allocation, funded by the California Housing Finance Agency, in the amount of $728,000, to support an additional 5 units dedicated to tenants who meet MHSA criteria, for a total of 20 SNHP units.

The Development will consist of 31 one-bedroom units, 17 two-bedroom units (including a manager’s unit) and 17 three-bedroom units, of which 15 one-bedroom units would receive capital funding and 20 one-bedroom units would receive PBVs under the 2016 PSH NOFA and will house 20 individuals experiencing homelessness with household incomes at or below 30 percent of Area Median Income. These units will be supported by 20 PBV rental subsidies from the Orange County Housing Authority (OCHA). The two-bedroom manager’s unit will not be income restricted.

The Developer is requesting an additional 5 PBVs for Westminster Crossing (in addition to the prior approval for 15 PBVs) for a total utilization of 20 PBVs to be available to the Development after construction has been completed and a Certificate of Occupancy has been issued. These 20 PBVs will be guaranteed for 15 years, consistent with U.S. Department of Housing and Urban Development (HUD) regulations, and will provide rent subsidies to 20 of the apartments funded under the 2016 PSH NOFA. The value of the 20 PBVs for the 15-year period is estimated to be $5,616,000 based on the current Voucher Payment Standard and anticipated Utility Allowance.

In March 2019, the Developer received final threshold determination from HCD deeming their NPLH application non-compliant with the site control standards. As a result, the Developer revised the project financing plan and is requesting an additional 5 PBVs under the 2016 PSH NOFA Addendum 1.

The following updated financial summary highlights the Permanent Financing phase of the Development:

Sources of Funds	Total
Conventional Loan - Tranche A	$5,038,338
Perm Loan - Tranche B	$3,043,103
No Place Like Home (did not receive award)	$0
County Loan	$850,500
City of Westminster	$5,500,000
Special Needs Housing Program	$2,912,000
Tax Credit Equity	$24,174,000
Deferred Developer Fee	$235,786
Total Development Costs	$41,753,727

OCHA will provide PBVs to 20 units for this project. These 20 PBVs will be guaranteed for 15 years consistent with HUD regulations.

Funding of the PBVs is contingent upon evidence of commitment of all construction and permanent financing sources.

This Development is part of the concerted effort to develop the System of Care. Approval of this PBV award will contribute to the efforts on building a responsive System of Care in Orange County that provides solution that meets the needs of the homeless populations. The proposed Development has the opportunity to end homelessness by providing supportive housing to 20 households. Additionally, the creation of 65 affordable housing units provides housing stability and security for households with low-income and very-low income. The supportive housing units in this development are part of the 2,700 supportive housing units identified in the Housing Funding Strategy to address housing needs for homeless individuals and families. As such, these 20 units of new supportive housing units will contribute to the progress of this Countywide effort.

Compliance with CEQA: This action is not a project within the meaning of CEQA Guidelines Section 15378 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 approval of the County commitment of 20 Project-Based Housing Choice Vouchers and 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: Per 24 CFR Part 58, an Environmental Assessment of the project was completed and Authority to Use Grant Funds was issued by U.S. Department of Housing and Urban Development on March 20, 2019.

FINANCIAL IMPACT:

Existing appropriations can absorb encumbering the funds in the current fiscal year to be paid upon issuance of the Certificate of Occupancy. The 20 PBVs available to recipients is funded 100 percent by federal HUD funding and can be absorbed with existing appropriations within OCHA Fund 15F.

STAFFING IMPACT:

N/A