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First Amendment to Regina House Loan Agreement and Affordable Housing Covenants July 2, 2019 Page 2 DISCUSSION On April 11, 2006, the City of Santa Ana and the former Community Redevelopment Agency of the City of Santa Ana (RDA) entered into a Housing Development Loan Agreement and Affordable Housing Covenants with Mercy House Transitional Living Centers (Mercy House) for the rehabilitation of the Regina House Project located at 1505, 1507 and 1509 N. Bush Street, Santa Ana, CA. Mercy House has operated Regina House exclusively as a transitional housing program for homeless single women and their children within the community since 1994. At the time of the Loan Agreement in 2006, the City provided HOME Investment Partnerships Program (HOME) funds and RDA tax increment funds for the rehabilitation of the property. At the time of committing the HOME funds, the HOME Program allowed funds to be used for transitional housing. In accordance with the loan agreement and funding regulations, the City has continued to monitor Regina House to ensure compliance with the loan documents, regulations, and affordable housing covenants. In July 2017, Mercy House began operation of the Family Care Center, a 56-bed year round emergency shelter located in the City of Orange that serves homeless families with children. The shelter is within a network of three other family shelters that have been created in Orange County over the past four years known as the Family Shelter Network. Additionally, in November of 2018, Mercy House was named as the operator of The Link, a 200-bed interim emergency shelter in the City of Santa Ana that provides beds for both homeless individuals and families. The advent of these larger year-round shelters for families, has replaced the need for Mercy House to continue to operate Regina House as a transitional shelter. Furthermore, as demonstrated in the Business Plan and analysis of Orange County's housing market (Exhibit 1), there is a strong need in the community for the development of affordable housing for low-income families, including those who were formerly homeless and have a number of barriers to secure housing. In order to address this need, "Regina House" will be modified to "Regina Residence" exclusively providing permanent housing with supportive services for low-income families. The Regina House Permanent Housing Program will be designed to provide low-income permanent housing with supportive services to two (2) large sized, low-income families. Mercy House staff will provide supportive services including case management, resource referrals, and life skills. Supportive services for residents will be provided on a voluntary basis; however residents will be assertively and respectfully encouraged to participate in the supports and services available to them. Mercy House now seeks to amend the Housing Development Loan Agreement and Affordable Housing Covenants to allow for the project to become permanent affordable housing with supportive services, instead of a transitional shelter (Exhibit 2). Although this amendment will reduce the number of transitional shelter beds in the City of Santa Ana, the key difference is that these beds are being converted into permanent supportive housing units for large families. There are less permanent supportive housing units in Santa Ana, relative to emergency shelter beds, and this amendment will create more opportunities to secure permanent supportive housing for those individuals and families who no longer need transitional housing. 80Ci-2