Item 18 - Approve a Pre-Commitment for HOME Program Funds

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Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity March 4, 2025 Page 5 4 8 5 0 The pre-commitment letter shall not obligate the City or any department thereof to approve any application or request for, or take any other action in connection with, any planning approval, permit, or other action necessary for the construction, rehabilitation, installation, or operation of the project. The pre-commitment letter will be conditional on Habitat for Humanity obtaining approval of all required entitlements and discretionary actions to allow the construction of 40 affordable ownership units to be located at 621 W. Alton Avenue. In compliance with the City’s Affordable Housing Funds Policies and Procedures, KMA completed a preliminary financial gap analysis by reviewing the developer’s estimates and projections of sales prices, expenses, reserves, and development costs; and confirming the project’s underwriting and other requirements pertinent to the funding sources (Exhibit 3). Following this analysis and completion of the procurement process, KMA confirmed the preliminary financial gap and the Review Panel’s recommendation to award $9,807,571 in HOME Program funds. The project’s economics are described in detail in KMA’s analysis attached as Exhibit 3 to this report. Project Description - 425 E. Wellington Avenue The second pre-commitment letter for 425 E. Wellington Avenue, Santa Ana, CA (APN 398-028-12) between the City and Habitat for Humanity provides an enforceable funding commitment of up to $920,000 in Inclusionary Housing Funds for eligible homebuyers to purchase nine (9) existing rental units that will be converted into affordable ownership condominium units including: (1) an allocation of $720,000 to the City's Down Payment Assistance Program, and (2) a conditional award up to $200,000 for eligible relocation costs (Exhibit 4). The letter is referred to as a pre-commitment because, similar to the HOME Program, the City has requirements that must be met before a full commitment can be issued in the form of a Memorandum of Understanding. Specifically, this project involves the conversion of an existing nine-unit apartment building into condominiums, which will be made available for homeownership to Low and Moderate-Income households earning less than 120% of the AMI. The existing building on the property was rehabilitated in May 2024 and includes one two-bedroom unit and eight one-bedroom units, each with a single bathroom. Unit sizes range from 420 to 846 square feet and are move-in ready. The building recently underwent over $1 million in renovations, which included new flooring, electrical upgrades (new outlets and fixtures), updated kitchen cabinets, and complete bathroom remodels. Doors, windows, shutters, garage doors, stairways, and railings were restored or replaced as needed to meet code compliance. Current residents of the property with household incomes of less than 120% AMI and that qualify to purchase a unit within the Property will be given the right of first refusal to purchase a unit at an affordable purchase price (eight of the nine units are currently occupied). KMA estimates the moderate income affordable sales prices at $310,400 for the eight (8) one-bedroom units and $350,500 for the one (1) two-bedroom unit. The allocation of $720,000 to the City’s Down Payment Assistance Program will be available for down payment assistance to individual households to purchase a unit, structured as