HomeMy WebLinkAboutItem 28 - Fiscal Year 2023-24 Request for Proposals for Affordable Homeownership OpportunitiesCommunity Development Agency
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Item # 28
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
February 20, 2024
TOPIC: Addendum to the Fiscal Year 2023-24 Request for Proposals for Affordable
Homeownership Opportunities
AGENDA TITLE
Approve an Addendum to the Fiscal Year 2023-24 Request for Proposals for Affordable
Homeownership Opportunities
RECOMMENDED ACTION
Authorize the City Manager to issue an Addendum to the Fiscal Year 2023-24 Request
for Proposals for Affordable Homeownership Opportunities to expand the types of
eligible proposals for affordable rental projects with a development site preference for
specific areas in the City and revise the name to Request for Proposals for Affordable
Housing Development.
GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
On October 17, 2023, the City Council authorized the City Manager to issue a Fiscal
Year 2023-24 Request for Proposals (RFP) for Affordable Homeownership
Opportunities to solicit proposals for affordable ownership projects in the City of Santa
Ana with funding from the HOME Investment Partnerships (HOME) Program (Exhibit
1). Following this approval, RFP # 23-156 was issued on October 19, 2023. The first
deadline for the RFP was on December 15, 2023, and the City received one proposal
before the deadline requesting a total of $2.4 million out of the $7.8 million made
available. Staff is still reviewing the proposal.
In general, there was a low response to the RFP. Multiple developers worked to create
a proposal to develop new affordable homeownership opportunities. However, the
feedback that staff received was that developers were unable to formulate a feasible
proposal due to various complexities with financing affordable homeownership
opportunities using the City's HOME Program funds. Developers had the following
issues:
Maximum per -unit subsidy limit: The HOME Program establishes maximum per -
unit subsidy limits for the use of HOME funds. The 2023 maximum per -unit
subsidy limits published by the Department of Housing and Urban Development
(HUD) and applicable to Santa Ana are as follows:
Addendum to the FY 2023-24 RFP for Affordable Homeownership Opportunities
February 20, 2024
Page 2
Bedrooms
HOME Maximum Subsidy
0 Bedrooms
$173,011
1 Bedroom
$198,331
2 Bedrooms
$241,176
3 Bedrooms
$312,005
4+ Bedrooms
$342,482
The difference between the total development cost of a home and the maximum
purchase price affordable to households earning 80% Area Median Income (AMI)
exceeds at least $500,000 per unit for a newly constructed home in Santa Ana.
However, the funds provided through the RFP have maximum per -unit subsidy
limits as shown above, which leaves a financial gap of more than $200,000 to
$300,000 per home. No other identifiable public or private funds are available to
fill this gap.
• Buyer qualification/equity considerations/etc.: There are numerous challenges
related to selecting and qualifying buyers for affordable homeownership
opportunities. Buyers need to be able to qualify to purchase the home based on
AMI, and at the same time, they need to qualify for a first mortgage necessary to
close escrow.
• Interest rate environment: The current high interest rate environment creates a
situation in which the maximum affordable sales prices are very low, since a
large portion of the maximum payment goes toward interest. It is likely that this
situation will continue for the foreseeable future.
Developers worked diligently to formulate proposals to respond to the RFP, but the
complexities of affordable homeownership finance were too difficult to overcome.
Meanwhile, staff assisted potential respondents and answered all questions in a
complete and timely manner. In addition, a comprehensive marketing strategy ensured
widespread awareness of the RFP. This included publication on the City's official
website, a public notice in the OC Register, and targeted emails to affordable housing
membership associations such as the Kennedy Commission, 2-1-1 Orange County, and
the Southern California Association of Nonprofit Housing. Additionally, a letter was
emailed to developers and nonprofit organizations who had previously expressed
interest and were part of the Community Development Agency's RFP Database.
Addendum to the RFP
Pursuant to Section III of the City's Affordable Housing Funds Policies and Procedures,
the Community Development Agency, upon City Council approval, may issue a Request
for Proposals (RFP) from available funds. The RFP must be open and provide sufficient
time for applicants to identify an eligible site and complete and submit a proposal. This
Addendum follows this prescribed process and although the initial response to the RFP
fell below expectations, staff remains committed to the objective of providing affordable
Addendum to the FY 2023-24 RFP for Affordable Homeownership Opportunities
February 20, 2024
Page 3
homeownership opportunities through this RFP. Specifically, four (4) separate City -
owned sites (see Attachments 1 through 3 of Exhibit 2) are being included in the
Addendum. These four (4) sites would be solely for the development of affordable
home ownership.
This Addendum not only provides development opportunities for affordable
homeownership, but recognizes the need for flexibility and adaptability to address Santa
Ana's diverse housing needs. Staff recommends issuing the attached addendum to
RFP # 23-156 (Exhibit 2). The proposed addendum includes the following major
changes:
• Expands the eligibility criteria to allow rental affordable housing opportunities
while maintaining the City's interest in affordable homeownership opportunities
(Attachments 1 through 3 of Exhibit 2).
• Adds five (5) target areas for potential developers to focus their efforts where the
City has invested significant public resources in the past, and where the City
would like to see additional resources targeted in the future. The five (5) areas
are as follows: 1st Street Hotel Conversion (Attachment 4 of Exhibit 2),
Cornerstone Village (Attachment 5 of Exhibit 2), Townsend-Raitt (Attachment 6
of Exhibit 2), Cedar -Evergreen (Attachment 7 of Exhibit 2), and 1900-2000 West
Myrtle Street (Attachment 8 of Exhibit 2).
Revises the text throughout the RFP to allow for rental affordable housing
opportunities.
Increases the amount of funding available from $7.8 million to $8.35 million.
This Addendum aims to encourage a broader range of proposals to address the diverse
housing requirements within the City of Santa Ana. If approved by City Council, the
addendum will enhance the RFP's effectiveness in soliciting proposals that align with
the City's overarching goal of providing affordable and diverse housing options.
FISCAL IMPACT
There is no fiscal impact associated with this action.
EXHIBIT(S)
1. Staff Report from October 17, 2023
2. Addendum to RFP # 23-156
Submitted By: Michael L. Garcia, Executive Director of Community Development
Approved By: Tom Hatch, Interim City Manager
EXHIBIT 2
REQUEST FOR PROPOSAL (RFP) No. 23-156 ADDENDUM
Addendum No.: 1
Date of Addendum: February 20. 2024
RFP Number: 23-156
Agency: Community Development Agency
Due Date, Time: April 1, 2024 - 4:00 PM PST
Revised Due Date: May 31, 2024 - 4:00 PM PST
Revised Title: Affordable Homeownership Opportunities Housing Development
The purpose of this addendum is to expand the types of eligible proposals for affordable rental projects with a
development site preference for specific areas of the City. This addendum details deletions and additions to the RFP.
Revisions to pre-existing language in RFP No. 23-156, are indicated either by strike throu"" for deletions and
underlining for insertions.
Revision 1 -ADD
Page 1, Cover Page
REQUEST FOR PROPOSALS NO. 23-156
FOR
AFFORDABLE HOMEOWNERSHIP/RENTAL_OPPORTUNITIES HOUSING DEVELOPMENT
Revision 2 -ADD
Page 3, (II) Overview of Project
The City of Santa Ana (City) is seeking proposals from qualified firms and organizations (Proposers) to provide the
development of affordable hemGGWRGrS" ^ housing opportunities in the City of Santa Ana. Proposed developments
GWRership "0616;Rg Proposed developments may be for acquisition and rehabilitation of eligible properties for
rental and/or ownership housing; acquisition and conversion of non-residential property to multifamily housing units;
and/or new construction of housing units for rental and/or ownership housing. In particular, the City is interested in
projects that will provide affordable homeownership opportunities..-; however, rental projects are eligible.
In order to meet the City's goals, the City is soliciting proposals for the development of affordable homonwnerch'.,
housing projects from developers who are experienced, very knowledgeable of affordable housing programs and its
requirements, financially creative and capable of developing, managing and maintaining high quality housing.
The term "Vendor", "Proposer", and "Contractor" shall refer to any legal entity or entities submitting a proposal in
response to this Request for Proposals (RFP).
Development Site Preferences
The Citv wants to maximize the positive impact of its limited affordable housina development funds by concentrati
EXHIBIT 2
their expenditure in targeted areas of the City. The City has identified eight (8) geographical areas where it has
targeted significant public resources in the past, and where it would like to see additional resources targeted in the
future. These geographical areas include City -owned sites and areas as follows: 1st Street Hotel Conversion,
Cornerstone Village, Townsend-Raitt, Cedar -Evergreen, and 1900-2000 Myrtle Street (see Attachments 1 through 8
in this Exhibit). The proposed disposition and development of the City -owned sites would be solely for the
development of affordable housing in accordance with requirements for an exemption from the California Surplus
Land Act (Gov. Cody section 54220 et seg.).
Revision 3-ADD
Page 4, (VI) Minimum Qualifications
In order to meet the City's goals, the City is soliciting proposals for the development of affordable h.,.r,or,wnersh )
housing projects from developers who are experienced, very knowledgeable of affordable housing programs and its
requirements, financially creative and capable of developing, managing and maintaining high quality housing.
Revision 4-ADD
Page 7, (ii) Developer Experience
A narrative describing recent affordable h^mQ^i°f^Q.,h ig residential development experience, with an emphasis on
experience gained in the last five years on projects similar to the one being proposed.
Revision 5-ADD
Page 9, (VI)(G)(1)(d)(ii) Proposal Content - Financial Parameters
Low income housina tax credits (if applicable):
■ Provide eligible basis, gross and net tax credit proceeds calculations.
■ Provide the self -scoring sheet for the 9% TCAC or CDLAC applications. Explain why the protect
does not receive the maximum points, if applicable.
■ Provide the tiebreaker calculation for 9% TCAC projects.
■ Provide a description of the various sources of financing that will be needed to complete the project
as either a 4% Low -Income Housing Tax Credit deal and as a 9% Low -Income Housing Tax Credit
deal. The narrative should provide a projected tie breaker score for 9% Low -Income Housing Tax
Credits with a best case and worst -case scenario based on the capital stack being pursued, with a
relative comparison to the most recent tie breaker scores for the type of project being proposed in
the last three 9% tax credit rounds. Clearly state if the project will be ready to apply for 9% Low -
Income Housing Tax Credits during FY 2024 — 2025. This should include evidence of progression
towards planning entitlements and other requirements necessary for the tax credit application.
Clearly state if the project will be competing with another project owned by the developer in Orange
County for an upcoming 9% Low -Income Housing Tax Credit round, including a comparison of the
projected tie breaker scores for both projects.
Project Cash Flow
■ Provide a cash flow analysis that shows the order of repayment priorities. Be explicit about the
cash flow assumptions.
Revision 6-ADD
Page 10, (VI)(G)(6) Project Rental Income / Sales Prices
Include evidence that the rental income / sales prices shown in the pro forma are reasonable and achievable. Please
include a preliminary market study analysis that supports that this is achievable.
Revision 7-ADD
Page 11, 5. Number of proposed copies
RFP 23-156 FOR AFFORDABLE HOMEOWNERSHIP HOUSING OPPORTUNITIES
Revision 8 -ADD
Page 16, (XI)(D)(1) Ranking Criteria
Each member of the Review Panel will evaluate and rank each affordable rental housing proposal using the evaluation
criteria listed below:
COMPETITIVE SELECTION CRITERIA
1. LEVEL OF AFFORDABILITY AND TARGET POPULATION
ELIGIBLE
(Max. 25 Points)
POINTS
Project significantly increases affordable housing opportunities for large families
(three- and four -bedroom units)
10
EXHIBIT 2
Project provides at least 50% or more of the units for extremely low-income families
at 30% Area Median Income (possible points based on a tiered scoring — 10 pts. for
50%, 8 pts. For 40%, 6 pts. for 30%, 4 pts. for 20%, etc.
10
Project increases affordable housing opportunities for special needs populations
including, but not limited to, homeless individuals and families, and persons with a
disability
5
Sub -total
25
2. TIMELINESS TO BUILD NEW HOUSING (Max. 20 Points)
Project has demonstrated site control
7
Project is zoned appropriately
5
Project does not have any other site -related issues
5
Project aligns with the City's Housing Element, Strategic Plan, and/or 5-Year
Consolidated Plan
3
Sub -total
20
3. PROPERTY MANAGEMENT/SALES EXPERIENCE AND SHILLS
(Max. 15 Points)
Project is energy efficient and incorporates green -building techniques
6
Applicant's ability to manage affordable rental units to ensure ongoing compliance
with affordability requirements and long term financial solvency
3
Applicant's past experience in property management or sale of affordable units
3
Applicant's capacity and ability to quickly lease/sell completed units
3
Sub -total
15
4. DEVELOPER EXPERIENCE AND SHILLS (Max. 15 Points)
Applicant's experience in obtaining additional financing
4
Applicant's capacity and ability to obtain entitlements
4
Applicant's overall past and projected effectiveness to provide affordable housing
4
Applicant's past and projected effectiveness to manage the construction process and
stay on schedule
3
Sub -total
15
5. LEVERAGING OF CITY FUNDS
Max. 5 Points
Applicant's potential or capacity to obtain additional financing for this project
5
Sub -total
5
6. ANTICIPATED FINANCIAL PARAMETERS (Max. 15 Points)
Project's proposed development costs are reasonable and comparable
3
Project's proposed rents/sales prices are realistic
3
Project's operating costs are realistic and reasonable (rental only)
3
Project has sufficient operating and replacement reserves (rental only)
3
Project is projecting a positive cash flow through affordability period (rental only)
3
Sub -total
15
7. RFP PRIORITIES (Max. 5 Points)
Project is an acquisition/rehabilitation project with substantial rehabilitation located in
one of the four target geographical areas.
5
Sub -total
5
8. COMMUNITY INCLUSION (Max. 5 Points)
Project demonstrates how neighborhood input was solicited and utilized in the
development of the proposal including any community outreach efforts; or project
provides details on the development team's community outreach strategy for the
project.
5
EXHIBIT 2
Sub -total
BONUS POINTS: Project provides at least 75% or more of the units for extremely 5
low-income families at 30% Area Median Income
BONUS POINTS: Developer commits to donate a portion of their developer fee to a 5
nroiect or initiative in the surrounding neighborhood
I TOTAL ELIGIBLE POINTS 1 115 1
Each member of the Review Panel will evaluate and rank each affordable homeownership proposal using the
evaluation criteria listed below:
Revision 9 -ADD
Page 28, Available Funds for this RFP
Available program funds may be used for development loans for the following eligible purposes:
(1) The purchase or lease of land and buildings for new construction or rehabilitation of housing that may utilize
available State and Federal housing assistance programs for homeownership or rental projects.
(2) The purchase of existing multi -family or other buildings that result in the sale or rental of units to low- and
moderate -income households.
(3) The provision of interim loan funds for any of the above purposes prior to the funding of a public or private loan.
Eligible development costs for the above uses include, but are not necessarily limited to:
a. Site acquisition and preparation;
b. Rehabilitation of dwelling units, common areas and related structures;
c. New construction;
d. Carrying charges and financing fees;
e. Architectural, legal, and organizational fees;
f. Temporary or permanent tenant relocation costs.
Please refer to the Affordable Housing Funds Policies and Procedures amended by City Council on August 18, 2020 for
more information.
As of the date of issuance, the Available Funds for this RFP will be as follows, subject to change:
HOME Investment Partnerships Program (HOME) $7,796,256
$8,360,632
Available funds can be used for a variety of housing types and preferences. Please see the table below for the general
allowable uses of funds for each source. Please see Exhibit A for a more detailed description of the eligible uses for
each source.
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The HOME Program establishes maximum per -unit subsidy limits for the use of HOME funds. The 2023 maximum
Per -unit subsidy limits published by HUD and applicable to Santa Ana are as follows:
Bedrooms
HOME Maximum Subsidy
0 Bedrooms
$173,011
1 Bedroom
$198,331
2 Bedrooms
$241,176
3 Bedrooms
$312,005
4+ Bedrooms
$342,482
EXHIBIT 2
Revision 10 -ADD
Page 28, Eligible Projects
Projects eligible for HOME funding shall:
1) be an affordable homeownership or rental project located in the City of Santa Ana;
Revision 11 -ADD
Page 28, Eligible Uses and Activities
HOME funds may en4�-be used to finance new construction or acquisition and/or rehabilitation of single family
ownership housing which is affordable to low-income households as defined by 24 CFR 92.2. HUD defines "Single
Family Housing" as a one -to -four family residence, condominium unit, cooperative unit, combination of
manufactured housing and lot, or manufactured housing lot. HOME funds may also be used to finance new
construction or acquisition and/or rehabilitation of rental housing which is affordable to very low and low-income
households as defined by 24 CFR 92.2. Fifteen percent (15%) of the annual HOME fund allocation shall be set
aside for certified Community Housing Development Organizations (CHDO's). New construction costs eligible for
HOME funding shall be as specified in 24 CFR Part 92, including:
1) site acquisition;
2) site preparation costs (grading, filling, etc.);
3) financing costs as described in 24 CFR 92.206;
4) architectural, engineering, and other related soft costs;
5) the cost of extending or upgrading utilities to the site to support the proposed project;
6) construction costs;
7) relocation costs; and,
8) affirmative marketing and audit costs related to HOME program requirements.
Rehabilitation costs eligible for HOME funding include:
1) project acquisition with or without rehabilitation;
2) financing costs, as described in 24 CFR 92.206;
3) architectural, engineering, or other design costs;
4) utility upgrade or extension costs;
5) costs associated with demolition (where necessary) only if rehabilitation is commenced within 12 months of
demolition;
6) construction costs;
7) project audit costs; and,
8) affirmative marketing costs.
Revision 12 - ADD
Page 29, Rental Affordability Requirements
HUD provides the following maximum HOME rent limits. The maximum HOME rents are the lesser of:
1) The fair market rent for existing housing for comparable units in the area as established by HUD; or
2) A rent that does not exceed 30 percent of the adjusted income of a family whose annual income equals 65
percent of the median income for the area, as determined bV HUD, with adjustments for number of bedrooms in
the unit. The HOME rent limits provided bV HUD will include average occupancy per unit and adjusted income
assumptions.
In rental Droiects with five or more HOME -assisted rental units. twentv (20) percent of the HOME -assisted units
must be occupied by very low-income families and meet one of following rent requirements:
1) The rent does not exceed 30 percent of the annual income of a family whose income equals 50 percent of
the median income for the area, as determined by HUD, with adjustments for smaller and larger families. HUD
provides the HOME rent limits, which include average occupancy per unit and adjusted income assumptions.
However, if the rent determined under this paragraph is higher than the applicable rent under 24 CFR
92.252(a), then the maximum rent for units under this paragraph is that calculated under 24 CFR 92.252(a).
2) The rent does not exceed 30 percent of the family's adjusted income. If the unit receives Federal or State
project -based rental subsidy and the very low-income family pays as a contribution toward rent not more than
30 percent of the familV's adjusted income, then the maximum rent (i.e., tenant contribution plus project -based
rental subsidy) is the rent allowable under the Federal or State project -based rental subsidV program.
EXHIBIT 2
This addendum shall become part of the RFP and MAY be returned with the RFP.
RESPONDER:
NAME:
SIGNATURE:
TITLE:
DATE:
EXHIBIT 2
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EXHIBIT 2
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ATTACHMENT 3
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ATTACHMENT 4
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ATTACHMENT 6
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EXHIBIT 2
ATTACHMENT 7
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Flores, Dora
From: Nathaniel Greensides
Sent: Wednesday, February 14, 2024 12:42 PM
To: eComment
Cc: Hernandez, Johnathan; Brown, Judson
Subject: Feb 20th City Council Meeting Agenda Item 28
Dear City Council,
I applaud the efforts to increase homeownership via the development of residential real estate to be sold at
affordable rates. I was aware of the RFP regarding the approximately $7.8m funds to be put toward home
ownership opportunities and even spread the word to some organizations who I believe would make a good fit
for the RFP. However, as noted in the staff report, it is not a surprise to me that the requirements of the RFP in
addition to the current state of economic affairs resulting in lower than expected submissions. In addition to the
proposed amendments from city staff, I also urge city staff and the Council to consider manners of making
funds available for conversions of rental units to non -rental housing units, especially where tenants have resided
in the same unit for a minimum period of time such as 15 years. There are a few organizations in California and
even two specifically in Santa Ana I can think of that are already uniquely poised to assist long-term tenants in
the process of buying the apartment where they have lived for decades.
Thank you for your consideration.
Sincerely,
Nate Greensides
Resident of Ward 5
Flores, Dora
From: Brian Hendricks <
Sent: Tuesday, February 20, 2024 11:10 AM
To: eComment
Subject: Item 28 - For your consideration
Hello Mayor Amezcua and members of City Council:
As it relates to Item 28, 1 would like to request that council consider giving priority to any project that involves
acquisition/rehabilitation over new construction - if this aligns and is consistent with City of Santa Ana goals related to
affordable housing. Preservation of affordable housing in the city can be just as important as developing new units. I
have been fortunate to be involved in a number of new construction affordable housing developments, so of course I
am overall very much in favor of them. However, perhaps City of Santa Ana leadership would like to prioritize rehab and
preservation of existing housing units rather than adding more new development of affordable housing projects.
I thank you for your consideration.
Best regards,
Brian Hendricks
Magis Realty, LLC