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HomeMy WebLinkAbout19D - RENTAL REHAB LOAN PROGRAM ,,,,,,,,u'",.,,,,,,-- ~ ~. REQUEST FOR COUNCIL ACTION !!!! / CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY: JULY 6, 2004 TITLE: APPROVED 0 As Recommended 0 As Amended 0 Ordinance on 1st Reading 0 Ordinance on 2nd Reading 0 Implementing Resolution 0 Set Public Hearing For RENTAL REHABILITATION LOAN PROGRAM AND RENTAL REHABILITATION REBATE PROGRAM {2¡¡~ CONTINUED TO FILE NUMBER RECOMMENDED ACTION 1. Approve the Rental Rehabilitation Loan program, Executive Director of the Community Development Agency necessary documentation to implement the program $150,000 for program funding. authorize the to execute all and allocate tr. Approve the Rental Rehabilitation Rebate Program, Executive Director of the Community Development Agency necessary documentation to implement the program $100,000 for program funding. authorize the to execute all and allocate DISCUSSION The City of Santa Ana strives to ensure that the City's neighborhoods are attractive and well maintained. To achieve that goal, the City has designed the Rental Rehabilitation Loan Program (Exhibit 1) and Rental Rehabilitation Rebate Program (Exhibit 2) to assist owners of multi-family rental properties, occupied by low income households, to bring their properties into conformance with the City's municipal code. Properties cited by Code Enforcement receive priority for funding under these programs. The loan program offers loans in an amount not to exceed $75,000. Borrowers must have acceptable credit history to qualify. The total debt on the property, including the rehabilitation loan, must not exceed ninety percent of the appraised, after rehabilitation value of the property. Borrowers would be required to restrict occupancy of at least fifty-one percent of the uni ts to households whose income does not exceed eighty ~ercent of the area median for a period of ten years. Of those restricted ~nits, fifty percent must be rented at or below fifty percent of the area 19D-1 Rental Rehabilitation Rental Rehabilitation July 6, 2004 Page 2 Loan Program and Rebate Program median and the remaining restricted units must be rented at or below sixty percent of the area median. Loans will be at zero percent interest amortized over ten years. At the City's discretion, loan payments may be deferred until such time as the cashflow from the property is sufficient to begin making payments. If the rehabilitation work includes remediation of hazardous substances, all costs attributable to lead-based paint, asbestos, and mold in excess of $2,500 will be forgiven at the time all rehabilitation is complete and the property is in compliance with all applicable building codes. Failure to complete the work and bring the property into compliance with all applicable codes may result in an amortized loan that exceeds $75,000 due to the addition of the costs associated with the remediation of hazardous substances. The rebate program offers owners of rental units a reimbursement of up to $2,500 on two items necessary to bring the property into code compliance for a maximum rebate of $5,000. Total annual income of all households occupying the rental units cannot exceed eighty percent of area median income as determined by U. S. Department of Housing and Urban Development (HUD) . Properties cited by Code Enforcement will receive priority for funding. Funds are to be reimbursed directly to property owners for the cost of labor and materials incurred for eligible repairs. Examples of items eligible for reimbursement include but are not limited to repair or replacement of fences that are visible from the street, repair or replacement of garage doors, replacement of deteriorated driveways with concrete, roof repair or replacement, exterior painting or stucco repair and installation of the front landscaping and irrigation system. Work requiring a permit will not be eligible for reimbursement if a permit is not obtained and the work is not completed and/or approved in accordance with permit requirements. Work not requiring a permit must be completed in accordance with general industry standards. ENVIRONMENTAL IMPACT In accordance with the California Environmental Quality Act, the proposed programs are not considered projects. No further action is required. 19D-2 Rental Rehabilitation ~ental Rehabilitation ~u1Y 6, 2004 Page 3 Loan Program and Rebate Program FISCAL IMPACT Funds for the Rental Rehabilitation Loan Program in the amount of $150,000 will be available in the CDBG account (135-148-6951/80299). Funds for the Rental Rehabilitation Rebate Program in the amount of $100,000 will be available in the CDBG account (135-148-6951/80298). APPROVED AS TO FUNDS AND ACCOUNTS: ¡)~ß J~ P. Reekstin Executive Director Community Development Agency oma Director Management Services Agency JPR/RL/mlr 8. Act~on5\2004CC\RentalRehabLoan-RentalRebate Prog 7-6-04 8 19D-3 RENTAL REHABILITATION LOAN PROGRAM The Rental Rehabilitation Loan Program (Program) seeks to benefit low-income households in the City of Santa Ana by facilitating the rehabilitation of multi-family residential buildings, and by the elimination of slum and blight. This Program is designed and implemented in accordance with the Federal laws that govern its funding sources. Should those laws change, the Program may be modified so as to insure continued compliance. Continued operation of the Program is dependent upon availability of funds. The maximum loan amount, excluding loan amounts that may be subject to forgiveness, is $75,000. General Eligibility Requirements Borrowers must be the owners of multi-family residential rental property located in the City of Santa Ana. Priority will be given to properties that have been cited by the City of Santa Ana for failure to comply with the City's municipal code as it relates to the public health and safety in the operation and maintenance of such buildings. Borrowers must complete an application, and must enter into a loan agreement with the City setting forth the terms and conditions of their loans. Borrowers must maintain hazard insurance and, if within a Federally designated Flood Plain, flood insurance for the life of the loan with the City named as an additional insured. Borrowers must agree to accept Section 8 Vouchers for any and all eligible tenants throughout the life of the loan. All owners of record must have a current credit history that demonstrates prudent use of debt and a commitment to meeting financial obligations, and must execute all loan documents. The total debt on the property, including the rehabilitation loan, must not exceed 90 percent of the appraised, after rehabilitation value of the property. All real estate taxes and mortgage payments must be current. In addition, the City reserves the right to reject loan applications for other reasons that may, in its sole opinion, put the security of its loan at an unacceptable level of risk. These include, but are not limited to the condition of title, the manner in which ownership is vested, and the general condition of the property. In the event that the City's estimate of the cost to make all EXHIBIT 1 Page 1 19D-4 8 8 8 necessary repairs, including a 10 percent contingency, exceeds allowable loan limits, borrowers will be required to deposit the necessary additional funds into a construction escrow account with an escrow company of the City's choosing. These funds will be drawn down as necessary and at the discretion of the City to pay for construction costs. All work must be performed by licensed general contractors who are in compliance with City license and insurance requirements, and who are not included on the debarment list maintained by the u.s. Department of Housing and Urban Development (HUD). All work must be performed in accordance with applicable Federal, State and Local regulations, including abatement or control of lead-based paint and asbestos. Affordability and Monitoring Requirements Borrowers must agree to collect and provide the City with information on tenant incomes, and must agree to execute loan agreements incorporating appropriate affordability requirements. Borrowers are required to restrict occupancy of at least 51 percent of the units to households whose income does not exceed 80 percent of the area median for a period of 10 years. The following table is effective as of March 15, 2004: Household Maximum Household Maximum Size Income Size Income 1 $40,250 5 $62,100 2 $46,000 6 $66,700 3 $51,750 7 $71,300 4 $57,500 8 $75,900 Rents for half or 50 percent of the restricted units must not exceed 50 percent of the area median. The following rents would apply as of March 15, 2004: Bedrooms Allowable Rent Studio $661 One Bedroom $756 Two Bedrooms $850 Three Bedrooms $945 EXHIBIT 1 Page 2 19D-5 The remaining restricted units must have rents that exceed 60 percent of the area median. The following would apply as of March 15, 2004: do not rents Bedrooms Allowable Rent Studio $793 One Bedroom $907 Two Bedrooms $1,020 Three Bedrooms $1,134 These rents must be reduced in accordance allowance based upon tables maintained by Authority of the City of Santa Ana. with a utility the Housing The presumed household sizes are as follows: Bedrooms Household Size Studio One Person One Bedroom Two Persons Two Bedrooms Three Persons Three Bedrooms Four Persons Use of Loan Proceeds Loan proceeds may only be used to fund work that is necessary to bring the property into compliance with the City's municipal ordinance and other applicable Federal or State building codes. Properties with eight or more units will be subject to Federal Davis-Bacon requirements. Properties built before 1978 are subject to Federal regulations governing lead-based paint. Any relocation costs necessitated by the contracted work will be the responsibility of the borrower. These costs may be included in the loan. Loan proceeds may also be used to pay for certain costs normally associated with the loan process. These include but are not necessarily limited to the cost of appraisals, title reports, credit checks, flood certifications, underwriting fees, document preparation, and warehousing. Loan Terms Loans will be zero percent interest and be amortized over a period of 10 years beginning after the work is completed. At the City's discretion, loan payments may be deferred if EXHIBIT 1 Page 3 19D-6 8 8 e the borrower can demonstrate that the project's cash flow is inadequate to support both existing debt on the property, reasonable property maintenance and management costs, and the additional monthly payments attributable to the City loan. In these instances, payments may be deferred until such time as the borrower is able to begin making payments. Forgivable Loan for Hazardous Substances Costs Through the forgivable loan for remediation of hazardous substances costs, all costs attributable to lead-based paint, asbestos, mold and other hazardous substances in excess of $2,500 are converted to a grant and forgiven at the time all required rehabilitation is completed and the City has determined that the property is in compliance with all applicable City building codes. In order for the borrower to be eligible for the forgivable loan, the property must be professionally tested for the presence of hazardous materials, and only work items identified by testing to be in a deteriorated condition will be eligible for forgiveness. Should the borrower fail to complete the project and bring the property into compliance with all applicable City building codes, the costs associated with removal of hazardous substances will be subject to the same interest rate and amortization period as the amortized loan until such time as the property is in compliance. Failure to complete the work and bring the property into compliance with all applicable codes may result in an amortized loan that exceeds $75,000. For example, if a property requires $40,000 in conventional repairs and $50,000 to abate hazardous substances, failure to complete all the necessary work could result in an amortized loan of $90,000 or actual amount expended. EXHIBIT 1 Page 4 19D-7 MULTI-FAMILY RENTAL REBATE PROGRAM The City of Santa Ana seeks to ensure that City neighborhoods are attractive and well maintained. To achieve that goal, the City has designed its Multi-Family Rental Rebate Program to assist owners of residential rental properties to maintain those properties in good condition. The Program offers rebates of up to $5,000 to owners to assist them with the cost of necessary repairs. Funds are disbursed directly to property owners for the cost of labor and materials incurred for eligible repairs. The Program is dependent upon availability of funds. General Eligibility Requirements Borrowers must be the owners of multi-family residential rental property located in the City of Santa Ana. Priority will be given to properties that have been cited by the City of Santa Ana for failure to comply with the City's municipal code as it relates to the public health and safety in the operation and maintenance of such buildings. All owners of record must complete an application. Owners whose front yard fences do not conform to the City's municipal code must agree to use the Program to bring them into conformance. Total annual income of all resident households, meaning all persons using the property as their primary residence, cannot exceed 80 percent of the area median income as determined by the U.S. Department of Housing and Urban Development. The following table is effective as of March 15, 2004: Household Maximum Household Maximum Size Income Size Income 1 Person $41,600 5 Persons $64,100 2 Persons $47,500 6 Persons $68,900 3 Persons $53,400 7 Persons $73,600 4 Persons $59,400 8 Persons $78,400 Allowable Work Owners may receive a maximum reimbursement of $2,500 on each of two work items necessary to bring the property into compliance with the City's building codes. The following are examples of some of the physical improvement items that are eligible for the rebate: EXHIBIT 2 Page 1 19D-8 8 8 e . Repair or replacement of fences that are the street. Work must be carried out in with the City's ordinance. visible from accordance . Repair or replacement of garage doors. . Replacement of deteriorated driveways with concrete. . Complete re-roof using composition materials carrying a 20-year warrantee, 15 years if built up. . Exterior painting or stucco repair. . Front landscaping and irrigation system. For properties containing eight or more residential units, Davis Bacon regulations apply. For properties built before 1978, Federal lead-based paint regulations apply. Work requiring that permits be obtained from the City of Santa Ana will not be eligible for assistance if a permit is not obtained, and the work is not completed and approved in accordance with its requirements. Work not subject to permitting must be completed in accordance with general industry standards. Application and Disbursement Procedures Owners must first complete an application for the program, and be approved for participation. City staff will then inspect the property to determine the eligibility of the work items for which the owner wishes to receive a rebate. The owner and the City will then enter into an Agreement specifying those items and outlining the Program's procedures and requirements. Only the work items included in the Agreement will be eligible for a rebate. Once the work is finished, the owner will complete a payment request form, and submit the form and receipts to the City. Following inspection and approval of the work, the City will process the payment request form, and prepare a check to be mailed to the owner. EXHIBIT 2 Page 2 19D-9 19D-10