80A - AGMT WITH HABITAT FOR HUMANITY

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Conditional Grant Agreement, Affordability Restrictions, and Ground Leases November 17, 2020 Page 2 Following the City's RFP process, on March 5, 2019, the City Council authorized the City Manager and the Executive Director of the Housing Authority to execute a pre -loan commitment letter with Habitat for Humanity of Orange County ("Habitat for Humanity") for $231,494 in Inclusionary Housing Funds and a 99-year ground lease for the development of the Lacy Street affordable housing project located at 416 Vance Street and 826 N Lacy Street (Exhibit 1). Two of the conditions in the pre -loan commitment letter are review and approval of the documents evidencing the City loan by the City Council and review and approval of the document evidencing the Ground Lease by the Housing Authority. Therefore, staff are now seeking approval of the final documents with one modification. When staff originally recommended the pre -loan commitment for this project, it was drafted for an affordable rental project instead of an affordable ownership project. Since this project is not a rental project that would generate rental payments, Habitat for Humanity needs a grant to develop this ownership project for homeowners instead of a loan that would be repaid through residual receipts from rental payments. Therefore, staff is seeking approval to change the funding commitment from a loan to a grant. For the Conditional Grant Agreement, Habitat for Humanity proposes to utilize the $231,494 grant for the development of the Lacy Street affordable housing project ("Project"). The City's Conditional Grant Agreement for $231,494 in Inclusionary Housing Funds is conditional upon the successful development and construction of the Project (Exhibit 2). 90 percent of the funds will be disbursed upfront for the construction, with a 10 percent contingency. The grant is not subject to repayment if the Project is completed successfully. The Affordability and Maintenance Restrictions agreements for both homes in the Project will remain in effect for ninety-nine (99) years to align with the 99-year Ground Leases. There is one Affordability and Maintenance Restrictions agreement for the 416 Vance Street parcel and a second agreement for the 826 N Lacy Street parcel (Exhibit 3 and 4). Among the main components of these agreements, Habitat for Humanity will act as an agent for the Housing Authority and agrees that the properties shall be used only for decent, safe, sanitary and affordable housing. Habitat for Humanity will only enter into affordable mortgages for resale to moderate income households at an affordable purchase price. The agreements provide Habitat for Humanity the exclusive right to approve any assignment and re -sale of the affordable homes and Habitat for Humanity shall take all necessary steps to review the income of all homeowners prior to selling to them. Additionally, a local preference for Santa Ana residents and workers in homebuyer selection shall be a requirement of the project. Habitat for Humanity will also maintain a monthly maintenance reserve to pay for any required roof repairs, re -painting, landscaping, and pest control/remediation with the Housing Authority having the right to conduct periodic inspections of the roof, exterior paint, or landscaping. Ninety -Nine (99) Year Ground Leases The ninety-nine (99) year Ground Lease is between the Housing Authority (Agency) as the "Lessor" and Habitat for Humanity as the "Tenant", "Developer" of the improvements, and "Agent". Habitat for Humanity is referred to as the "Tenant" when referring to their tenancy obligations and their assigns, "Developer" when referring to their obligations during their tenancy while they develop the improvements on our properties, or "Agent" when referring to Habitat for Humanity's 80A-2