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HomeMy WebLinkAboutReso 1994-17648RESOLUTION NO. 17648 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ADOPTING AMENDMENTS TO THE GENERAL PLAN HOUSING ELEMENT OF 1991 REGARDING THE PRESERVATION OF AT- RISK HOUSING AS REQUIRED BY STATE HOUSING ELEMENT LAW WHEREAS, on May 15, 1992, the State Department of Housing and Community Development ("HCD") issued a letter notifying the City that the Housing Element of 1991 was found in compliance with State law, excepting those provisions for the preservation of at-risk housing brought about by Chapter 1451, Statutes of 1989, and to affect compliance after July 1, 1992; and, WHEREAS, in response, the City, in cooperation with HCD, prepared necessary amendments to the Housing Element of 1991 regarding the preservation of at-risk housing units; and, WHEREAS, in accordance with Government Code Section 65585(b), the City submitted for review, and received approval of the proposed amendments from HCD by their letter dated September 25, 1992; and, WHEREAS, pursuant to Government Code Section 65585(c) the City is now required to formally adopt those amendments as part of the Housing Element of 1991, and to provide a copy of the amended Housing Element to HCD to obtain full legal compliance; and, WHEREAS, an Initial Study and Negative Declaration thereon (IS-92-08), of possible significant environmental impacts of the 1991 Housing Element was previously issued by the Environmental Review Coordinator; and, WHEREAS, the Environmental Review Coordinator has reviewed the proposed amendments and determined that no new environmental issues not previously analyzed by that Initial Study and Negative Declaration (IS-92-08) are raised, and has thereby issued an Addendure to the Negative Declaration (IS-92-08A) for the proposed amendments; and, WHEREAS, the City Planning Commission considered said amendments at a duly noticed public hearing held August 24, 1994, at which they considered the Negative Declaration and Addendure thereto (IS-92-08A), and voted unanimously (4°0 with 3 members absent) to approve said amendments and recommend their adoption by the City Council; and, WHEREAS, the City Council conducted a duly noticed public hearing on September 6, 1994, to consider the Negative Declaration and Addendure thereto (IS-92-08A), and the proposed amendments to the Housing Element of 1991 and recommendations thereon. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CHULA VISTA does hereby find, order, determine, and resolve as follows: ' II ] Resolution No. 17648 Page 2 That the proposed amendments to the City's Housing Element of 1991 will have no significant environmental impacts, and adepts the Addendure to the Negative Declaration issued under IS-92-08A. That the proposed amendments are consistent with the goals and objectives of the General Plan Housing Element of 1991 regarding the preservation and enhancement of available low-income housing stock within the City. BE IT FURTHER RESOLVED that the City Council of the City of Chula Vista does adopt the proposed amendments to the Housing Element of 1991 regarding the preservation of at- risk housing units, a copy of which amendments are hereto as Exhibit A, and authorizes the filing of said adopted amendments with the State Department of Housing and Community Development as necessary to bring the City's Housing Element into full compliance with State law. Presented by Robert A. Leiter Director of Planning Approved as to form by ~rd~//~ ~ City Attorney Resolution No. 17648 Page 3 EXHIBIT A B.7 Student Pooulation Chula Vista is the location of one community college named Southwestern College with an enrollment of approximately 9,602. The college director indicated that in times of recession, full and part-time enrollment is expected to increase as adults re-enter school to enhance employment skills needed in the work force. While most of these conwnunity college students commute from outside the area, some do compete for local housing along with other low-income groups. C. AT-RISK HOUSING There ere three types of housing potentially et risk of converting to market type rentals between 1991 and 2001 as ahown in the following table: Potential At-Risk Housinq 572 total units Family Units - HUD 236 386 units Family Non-236 Units lI~ 154 units Elderly Non-236 Units 32 units C.1 Family Units - HUD 236 Contracts The following table illustrates the required information for the City's HUD Section 236 units: Castle Park Garden Apartments 272 Kennedy Street Chula Vista, CA 91911 6Z non-elderly, low income units Earliest Date of Conversion: December 1991 Age: 21 years Rehabilitation Needs: Minor b $ Oxford Terrace Apartments 555 Oxford Street Chula Vista,' CA 93911 132 non-elderly, low-income units Earliest Date of Conversion: March 1993 (Owner may begin LIHPRHA process 18 months project's 20th birthday) Aoe: 19 years Rehabilitation Needs: Minor before the Palomar Apartments 171Palomar Chula Vista, CA 91911 168 non-elderly, low-income units Earliest Date of Conversion: March 1993 (Owner may begin LXHPRHA process 18 months project's 20th birthday) Rehabilitation Needs: Minor before the II-lB ? I! I Resolution No. 17648 Page 4 Rancho Vista Apartments 1419 lobSos Drive Chula Vista, CA 91910 24 non-elderly, low-income units Earliest Date of Conversion: November 1991 Aoe: 21 years Behabilitation Needs: Hoderate In 1968, HUD developed the 236 program that provided both mortgage insurance and mortgage interest reduction to Iny for-profit or non-profit developer who egreed to build affordable housing units for families. Typically, the contracts for these projects included a 40 year mortgage which could be prepaid after 20 years, and if propayment occurs, then the project no longer has an affordability requirement. This propayment op.tion only applied to for-profit developers. Unfortunately, HUD did not consider the consequences of this propayment option, and as a result, the nation now faces a serious threat to its available stock of affordable housing. In )987, this threat was brought to the attention of the federal government, and Congress passed the Emergency Low-Income Housing Preservation Act (ELIHPA). This Act precluded any propayment until February of )ggO, and in February, the Act was extended until new permanent legislation could be adopted. In 1990, the National Affordable Housing Act wet passed, and this Act included the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA). LIHPRHA will provide a permanent solution to the preservation problem if it is adequately funded. Chula Vista has four projects which were HUD financed using the 236 program. Currently, two of these projects have filed a Notice of Intent which states that they intend to propay their mortgages. In reality, these projects probably will not be able to propay since both ELIHPA and LIHPRHA have strict requirements for prepayment. Under LIHPRHA, these property owners can elect to proceed under ELIHPA or LIHPRHA. Nonetheless, both 'acts require an owner to prove that termination of the affordable units will not materially increase economic hardship for current tenants (which generally means annual rent increases of less than 10%); will not involuntarily displace current tenants; or will not adversely affect affordable housing opportunities for low-income end very low-income families, including those families seeking employment in the area, and minorities. Both ELIHPA end LIHPRHA state that these units should be acquired by either a non-profit or e public agency whenever possible. Undoubtedly, the acquisition costs of these units will be high. Nonetheless, both lows provide acquisition incentives to non-profits and public agencies, but LIHPP, HA mandates that the following incentives be given: (11 insurance for financing up to g5 percent of the preservation equity (equity as determined by HUD) under the HUD Section 241(f) 11-19 Resolution No. 17648 Page 5 program; (2) grants up to the present value of the total of the projected published Fair Market Rents for Section 8 Existing Housing for the next 10 years (or longer, if necessary); reimbursement for transaction expenses relating to acquisition, such as ordinary transaction costs, financing fees and operating deficit coverage. Subject to appropriations, LIHPRHA also states that HUD must provide assistance sufficient to enable acquisition at a purchase price not greater than the HUD defined preservation value, to pay the debt aervtce of the mortgage and debt service on any rehabilitation loan, to meet project operating expenses and adequate reserves, and to receive an adequate return on any cash investment made to mcquire the project. The approximate cost of acquisition for all four complexes is S26 million. This figure was determined by using the Section 8 Fair Harket Rents end a gross rent multiplier of 8. These "at-risk" projects should be preserved, whenever possible, since it would be impossible for the City to replace these lost units. lhe City has already received the notice to prepay from two owners, and the other two projects can file their notices in March of 1991. The owners of these builders are receiving very small rents since the average rent for a two bedroom apartment is $292, and for the most part, they have burned their tax depreciation benefits. Therefore, it is very likely that they may attempt to sell or prepay. To date, the City has identified the following resources which could be utilized for the preservation of these MUD Section 236 units: a. Redevelopment Agency Housing Set-Aside Funds: end, b. Community Development Block Grant Funds/i Approximately $500,000 is available, but the City traditionally uses CDBG funds for public improvements in low and moderate income neiqhborhoods. lherefore. it is unlikely CDBG funds could be made available. The Agency's H~ $200,000 ~I~H could be leveraged in m bond issue to produce $2,000,000. If a bond issue is accomplished, the Agency would have sufficient funds to provide e loan to m non-profit for predevelopment mnd equity since the estimated cost, to the Agency, of preservation is $1,300,000. The cost of preservation is significantly less than the cost of replacement since this cost is estimated to be $40,530,000. In the past 12 months, City staff has identified the following non-profits which could assist with the preservation of the City's HUD Section 236 projects: a. Chtcano Federation; b. Civic Center Barrio; c. |nterfaith Housing; d. NAAC Project; and, e. South Bay Community Services. 11-20 II1 I; Resolution No. 17648 Page 6 C.2 Non-236 Houserio Units At-Risk In addition to the HUD Section 236 Projects, the Ctty has three apartment projects which are at-risk because of expiring use restrictions. These projects ere as follows: as Beacon Cove Apartments 536 East H Street Chula Vista, CA 91910 33 non-elderly, low-income untie Earltest Date of Conversion: 1996 Aoe: C veers Type of Government Assistance Received: the Ctty's Affordable Housing Obligation Nova Subdivision Fulfillment of for the Terra b. Eucalyptus Grove Apartments 67 East Flower Street Chula Vista, CA 91910 75 non-elderly, low-income units Earliest Date of Conversion: 1995 Aqe: 7 years Type of Government Assistance Received: Hultifamily Housing Revenue Bonds c. The HeadOwe of Chula Vista 1055 GranJas Road Chula Vista, CA 91911 3Z elderly, low-income units Eerltest Date of Conversion: 2000 Aqe: 7 years Type of Government Assistance Received: Density Bonus Density Bonus Terra Nova Villas 440 East H Street Chula Vista. CA 91910 46 non-elderly. low-income units Aoe: 7 veers Earliest Date of Conversion: 1995 TvDe of Government Assistance Housina Revenue Bonds Received: Multi-family The estimated cost of replacing these units $19,809,000. To date, the City has identified the following resources which could be utilized for the preservation of these units: a. Redevelopment Agency Housing Set Aside Funds: $200.000; and, b. Conrnuntty Development Block Grant Funds. Approximately $SOO,OOO is available, but the City traditionally uses CDBG funds for public improvements in low end moderate income neiuhborhoods. Therefore. it is unlikely CDBG could be made available. 11'21 I! 1 Resolution No. 17648 Page 7 In order to preserve the family units in Beacon Cove, the only viable alternative is rent subsidies since the existing contract specifically states that restrictions will terminate ten years after the contract was executed. lhe rent subsidies would provide, for the number of units currently restricted, the difference between what the owners are allowed to charge which is currently market rate and what market rate may eventually be. Estimating the cost of rental subsidies ts extremely difficult since the City has no way of determining how much end when rents will increase. lherefore, estimating the cost of preserving these units is nearly impossible. However. if an assumption is made that market rate rents increase bv 4% each Year for thirty years and the county median income does not }.Dcrease. the Aoencv would need approximately $315.000 to provide rental subsidies. Accordinq to the cooperation aqreement between the City and the owner, the owner is allowed to charqe a rental rate no oreater than )/12th of 30% of BO% of County median income. lherefore. if the median income increased at the same rate as the increase for market rents. the restricted rents would continue to mirror market rents and no subsidies would be needed. Since the Agency has limited funds and this funding has been committed to preserving the City's HUD Section 236 units and the Agency's very viable rehabilitation program, the Agency would only have approximately ))~Z~ $25.000 to f~f~//A~ allocate for rent subsidies. lhe City will continue to monitor compliance With the Citv's Cooperation Aqreement which reouires the owner to provide units to low income households. As the Year of Conversion approaches. the Aqencv will discuss the Doseability of Drovidinq rental subsidies or other incentives which could oreserve the units. lhe Agency is currently investigating the possibility of refinancing the bonds for Eucalyptus Grove, and if this occurs, the Agency will require extended rental restrictions. With this alternative, the Agency will incur no costs. Durino the refundinq of the bond issue for lerra Nova Villas. an extension of the orioinal requlatorv aoreement was attempted. However. due to the current lendino environment. the extension was not Dossable. CurrentlY. a non-~rofit corporation is attempting to acouire these units. If this transaction occurs. these units may continue to be affordable. If the non-profit does not acouire these family units. the City will attempt to work with the owner to extend the affordabilitY restrictions by determinino an alternative form of credit enhancement. lhe Letter of Credit for the bonds will expire on Harch 1. 1995. With this alternative. the Aqencv will incur some staff costs. but the costs will be minimal. Senior projects built were typically built under the density bonus program, mnd they are less likely to convert to market rents due to the Conditional Use Permits under which they II-22 Resolution No. 17648 Page 8 operate. In order to convert, the owner would have to underwrite a considerable expense to bring the senior projects into code compliance mainly for parking requirements. For these reasons, it is unlikely that The Headows will convert. The following non-profit corporations could assist with the preservation of the above listed units; e. Chtcano Federation; b. 'Civic Center Barrio; c. Interfaith Housing; d. MAAC Project; and, e. South Bay Community Services. Since the cooperation agreements ~IXH for Eucalyptus Grove and Beacon Cove allow rents which are currently prevailing market rates, the real impact of losing these units is minimal. When the cooperation agreements were written, the median income for the San Diego Standard Metropolitan Statistical Area was much less, and the rent restrictions were considerable. D. PROjECTED NEEDS D.I Introduction/Current Estimates Since the beginning of the last Element's planning period in 1985, the San Diego Region has experienced fairly rapid and consistent population growth at an average of 3.6% per year, coupled with an average growth in the number of housing units of 3.7% as illustrated in lable 11. By comparison, Chula Vista has generally paralleled the region with average growth rates for population and housing over the 5 year period being 0.1% higher than regional rates. Tables g and 10 provide the actual numerical growth in establishing the current population and housing totals for 1990. The figures in parenthesis under "% increase" represent the 1 actua growth percentage without influence from the Montgomery Annexation in late 1985. (continuation of existina Element text) II-23 ' l] 't Resolution No. 17648 Page 9 QUANTIFI[D ASSISTANCE OBJECTIVES 1991-96 COMPREHENSIVE HOUSING PLAN ObJectives I. 2. and 3 - New Construction Total Units: 1339 Very Low - 245 units 80 Public Housing Units (County Housing Authority) 75 Senior Housing Units (Section 202) 40 Non-Profit Family Housing Units SO Family Relocation Housing Units Low - 628 63 50 29 358 79 50 units Family Density Bonus Senior Density Bonus Family Non-Profit Affordable Housing Program (Mandatory) Affordable Housing Program (Incentives) Family Relocation Housing Moderate - 131 units 131 Market Rate for Sale and Rental Units Other - 335 units 335 Harket Rate for Sale and Rental Units Oblecttve 3 - ODoortunities for Very Low-Income Renters Total Units: 500 200 New Section 8 (Certificates end Vouchers) 300 Shared Housing Program (Seniors) Objective 5 - Rehabilitation and Conservation Total Units: 7)) 683 386 At Risk Low-Income Units (Section 236 Fmmily) 32 Non-236 Senior Housinq Units 200 Single Fmmily and Mobilehome Rehab (CHIP) (180 very low income, 20 low income) 65 Rental Rehabilitation Oblective 6 - Transitional Housinq Total Units: 20 Very Low-Income (New construction or rehab) llI-Z I! I IF Resolution No. 17648 Page 10 OBJECTIVE 5 The systematic renewal, rehabilitation, conservation, and improvement of the residential neighborhoods of the Chula Vista Planning Area. Poltcv The City shall address the development of mechanisms designed to prevent at-risk affordable units from conversion to market rate rents. The City will continue to initiate pro-active proermms for neighborhood revttalization and improvement, and te supply support funding for these efforts, especially in neighborhoods with higher concentrations of lower-income households. 3. The City shall continue to advocate conservation measures to preserve existing housing stock, variety, and affordability. ]molementinq Actions A. pf~J~fy~ Preservation of At-Risk Affordable Housing Units A.1 HUD Section 236 Units ~XYJ~Xi////Jl~//g~f~XX//~XX~d//X~//~/~f~Y//X~/2~ H~X$~/~/~X/A4Y/2)~2/)/~//W~/~/Z~ M~fl/:Y~Ylf~f~I~/IX~I~I~I~II~X~f~XX~I~/X~ ~f~Y~fX//Vtf(/~/A4A//X~K~/~/~I//Vr/~/~~//X~X The City has received Notice of Intent to Prepmy from two projects, with a possible loss of )86 affordable units. The City shall tnvolve itself in the negotiation process that is mandated under ELIPHA end LIHPRHA to ensure that every opportunity to retain affordability is pursued. III-21 III Resolution No. 17648 Page 11 The following actions are proposed to respond to the HUD Section 236 "at-risk" conditions in Chula Vista: During the current planninq oeriod. the City will concentrate its oreservation efforts toward the 386 HUD Section 236 units which have exDirinq use contracts. Our obiective is oreserve all 386 low income units. 7 As illustrated on oaoe II-18, the City ~lXX has reviewed its inventory of rental housing and determined which units have prepayment options and at what date. Since the City is aware that owners are allowed to file a Notice of Intent )B months before the 20th anniversary of their endorsement date and has determined these dates, City staff will monitor for these Notices of Intent, 7 When notices are filed, the City will monitor the process of negotiations, i.e.. olans of action and participate as necessary. lhe City will work to prevent prepayment based on a unsuccessful escrow or a finding of 'not needed in the community". 7 As listed on oaqe II-20, the City ~17~ has tdentifyit~ potential buyers for "at risk' HUD Section 236 projects and ~ill assist j~f~j bv determininq resources for acouisitton. In fact. Aqencv staff is currently workSrio with one of the orqanizations listed on II-20 to olan for the oosstbilttv of conversion. If this non-orofit is unable to work with the Aoencv. the Aqencv ~J//~iXJ will give assistance priority to i non-profit community development corporationi who can demonstrate caoacitv. ~II~II~II~M~X~II~/X~II~H~f~X~M~IXY/III~I~X ~/~/~/~//~//~/~//~~ Aqencv will consider utilizinq the $200,000 identified on oaqe ]]-20 to provide fundinq for oredeveloPment costs and acouisition tn order to enable non-profits to oreserve the Citv's HUD Section 236 Units, The City ~y Plans to form en ad-hoc committee comprised of non-profit end for-profit developers, City staff, other local government officials, and tenants of 'at-risk" units to develop a formal strategy for preservation. A.2 Non-Z36 Units As identified in Section l], the City has XMX 186 non-HUD Section 236 units which are at-risk of converting to market rate rentals. The following actions are proposed to respond to these units: 7~ City staff will continue, in the next several months. to pursue the possibility of refinancing the bonds for Eucalyptus Grove Apartments so that rental restrictions will continue. III-22 T Resolution No. 17648 Page 12 f~ Since the current restricted rents at Beacon Cove Apartments are close to market rate, preserving these units does not seem to be the best use of funds, Rent subsidies may be considered by City staff when the use restrictions for these projects exoire. X//llr~ However. the City has other urgent needs such as preserving the HUD Section 236 units, continuing the Agency's rehabilitation program, and funding non-profits who will provide units for very low-income househulds, As mentioned on oaoe 11-22. the City will attemot to work with the owner of Tetra Nova Villas to extend the affordability restrictions by determinino an alternative form of credit enhancement, Since The Meadows was built with e senior density bonus, conversion ~f~y will likely not occur· 7~ City staff will X~/vt~AX~//Y~f monitor the project in the veer 2000 and after, If conversion is requested. the City ~XX~X will work to negotiate continued rent restrictions. B. Community Appearance/Neighborhood Improvement Program The Building and Housing Department will continue to oversee and implement this pro-active program of neighborhood preservation and improvement. Initiated in March 1989, this program targets specific neighborhoods exhibiting high volumes of citizen complaints in which Code Enforcement Officers, teaming with residents and designated 'Block Captains', III-22a Resolution No. 17648 Page 13 PASSED, APPROVED and ADOPTED by the City Council of the City of Chula Vista, California, this 6th day of September, 1994, by the following vote: YES: Councilmembers: Fox, Horton, Moore, Rindone, Nader NOES: Councilmembers: None ABSENT: Councilmembers: None ABSTAIN: Councilmembers: None 'z":im Nader, ATTEST: Beverly/A. Authelet, City Clerk STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) CITY OF CHULA VISTA ) SS. I, Beverly A. Authelet, City Clerk of the City of Chula Vista, California, do hereby certify that the foregoing Resolution No. 17648 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 6th day of September 1994. Executed this 6th day of September, 1994. '11 1 I["