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HomeMy WebLinkAboutAttachment No. 1 Staff Report Back-Up ReportATTACHMENT TO STAFF REPORT FOR THE HOUSING REHABILITATION PROGRAM DETAILING PROPOSED PROGRAM PARAMETER REVISION (NOTE: revisions to prior Council approved Program Parameters are highlighted in bold italics with a corresponding note at end of document) SOURCE DOCUMENTATION IN SUPPORT OF THE ACTIVITY The source documents in support of establishing a Housing Rehabilitation Program benefiting owner occupants in the City of National City are the 2005- 2010 National City Housing Element and the Consolidated Plan 2010-2015 (which details strategies to address identified housing and community development needs using Home Investment Partnership and Community Development Block Grant funds.) The Housing Priorities and Specific Objectives section of the Consolidated Plan 2010-2015 contains the reference to an Ownership Housing Rehabilitation Program with a five year objective to rehabilitate/repair 15 homes. APPROVED FUNDING SOURCES IN SUPPORT OF ONGOING PROGRAM ACTIVITY HOME Investment Partnership Council Approval FY10-11 (balance) $112,465 Council Approval FY 12-13 $290,049 Total Available Funds $402,514 PROGRAM PARAMETERS The primary purpose of the City's Housing Rehabilitation Program (HRP) is to provide decent, safe, and sanitary housing throughout the City of National City. The objectives of the HRP are: 1. Revitalize aging single family properties in the City of National City. 2. Assist low income homeowners with financing to rehabilitate their property. 3, Target specific deteriorated neighborhoods as identified by staff. The Division of Housing and Grants has primary responsibility for the processing of applications considered for funding under the National City's Housing Rehabilitation Program (HRP). Following is a basic description of the program: 1. Eligible Property Type A property must be occupied by an income -eligible homeowner and be the owner's principal residence. The property must be a traditional single-family house or a condominium unit and is owned fee simple or other ownership form acceptable in the HOME Program regulations. Mobile homes and properties exceeding one dwelling unit do not qualify. 2. Eligible Costs Borrower must use loan proceeds only for costs of services, materials, if applicable, necessary to complete the rehabilitation of Borrower's property pursuant to the City approved specifications, plans and work write-up specifications. 3. Interest Intake Form Applicants will be considered on a first -come first -served basis subject to funding availability. Whether the applicant calls or comes to the office in person, Program Staff will fill out and time stamp the Interest Form and file it in chronological order for future contact. 4. Income Determination The HRP will utilize the Part 5 {HUD Section 8} definition for determining annual income. The applicant's gross monthly income shall include: • The applicant's gross wage earnings, which include, salary, overtime pay, commissions, fees, tips, and bonuses. • Interest and/or dividends. • Passbook value of equity in the subject property owned by the applicant. • Net income from business or net rental income. • Social security, annuities, pensions, retirement funds, etc. • Unemployment benefits • Alimony, child support, welfare payments. 5. Income Eligibility Qualified Borrower's must be low income, defined as having an income that does not exceed 80% of the San DiegolCarlsbad Metropolitan Area, adjusted for family size. The income figure is established by the Department of Housing and Urban Development (HUD) and periodically adjusted. A "household" means all persons occupying the housing unit as a place of residence. Currently the limits for FY 2012 are: Number of persons in household Maximum income limit for household One person $45,000 Two persons $51,400 Three persons $57,850 Four persons $64,250 Five persons $69,400 Six persons $74,550 Seven persons $79,700 Eight persons $84,850 6. Housing Inspection and Property Assessment Staff shall visit the applicant's home and identify priority code violations, incipient code violations, and desired property improvements. As part of this inspection, staff shall conduct a Lead Based Paint Inspection if the property was built prior to 1978. Staff will complete a set of repair specifications detailing which items need to be repaired and secure homeowner approval. The City may also help, if requested, with the process of getting contractors to bid on the work. The bids will be based on the repair specifications so that only the work specified will be bid on. Health and safety hazards receive the highest priority. All health and safety hazards must be eliminated. The priority of items listed above will be determined, on a case -by -case basis. Consideration the following items will be given when determining the priority of items for inclusion in the work write-up: • The age and physical condition of the building occupants • Funds available for rehabilitation of each unit • Value of the unit after rehabilitation 7. Cost Evaluation and Rehabilitation Value All projects must be evaluated and certified for cost reasonableness before proceeding. A contingency cost factor of 10 percent will be used to help insure against cost overruns and enable completing a project successfully — within available funding, subsidy limits, and time allotments. Staff shall review the cost estimate and work write-up with the borrower. Borrower shall approve the cost estimate and work write-up in writing. Appraisals will be required on all properties. The ratio of total property debt to property value shall not exceed 110% (see Note #1) of the after rehabilitation value. The value will be determined by an appraisal acceptable to the City. If the source of funds is the HOME Program, the after rehabilitation value of the property must not exceed 95% of the median purchase price for the San Diego/Carlsbad Metropolitan Statistical Area as published by HUD in accordance with the HUD Final Rule. O. Contractor Selection The borrower does not need to choose the lowest bidder but any bidder chosen must be within the 15% (see Note #2) margin from the City estimate. Selection of Contractor by borrower must be in writing. Staff shall insure that all the bids from contractors include the same work (i.e. apples for apples). 9. Loan terms: o The loan shall be due and payable upon sale, transfer, failure to occupy or additional encumbrance of the property whichever occurs first. o The interest rate will be 1 % simple interest. o The base maximum loan amount is $40,000 with a possible corresponding grant of up to an additional $10,000 for Lead Hazard Remediation based on actual cost of lead hazard remediation and the actual cost of temporary relocation if necessary. The $40,000 base maximum loan amount may be raised to up to $60,000 if any of the following occur: 1. The base maximum loan amount of $40,000 for qualified rehabilitation plus the Lead Grant amount of $10,000 is insufficient to address the cumulative total cost of lead remediation. 2. The base maximum loan amount of $40,000 for qualified rehabilitation is insufficient to address all Health & Safety Code violations, local Building Code violations, local Planning Code violations and various incipient rehabilitation requirements of the program as detailed elsewhere in the program Policies and Procedures. (see Note #3) o A minimum of $1,000 must be invested in each assisted unit. o A contingency of up to 10% of the construction estimate will be held in reserve. The total base maximum loan amount remains $40,000 inclusive of any contingency amounts that may be used. ►f the qualifying loan amount of up to $60,000, based on the above criteria, is used then the 10% contingency will be reflective of the construction estimate and the revised maximum loan amount will be $60,000 Including the contingency. (see Note #4) o Loan applicant(s) must be the legal owner(s) of the property. o All loan payments will be deferred for the life of the loan. o All loans must be approved by the City Manager (see Note #5) of the City of National City. PROGRAM REQUIREMENTS OF SPECIFIC FUNDING SOURCES (see Note #6) The above program particulars define the basic requirements of the Housing Rehabilitation Program funded by the HOME Investment Partnership. The guidelines meet the HOME Investment Partnership requirements to insure compliance with all federal statutes. Adherences to the HOME Investment Partnership rules for owner -occupied housing rehabilitation help create a detailed set of policies and procedures that protect the interests of the homeowner and the City by using a comprehensive set of checks and balances. They provide an excellent blueprint for any funding source. However there are a few specific differences for each funding source that are highlighted below: Term of Affordability Requirements • HOME Investment Partnership: Owner -occupied housing rehabilitation has no term affordability requirements. Default of Superior Loan Cures • HOME Investment Partnership: The right to cure a default on an existing loan is not a requirement of the HOME Investment Partnership by statute or by practicality (because HOME funds are more limited in availability than Low/Mod Set -Aside funds.) A foreclosure can cause, when values have dropped, the loss of HOME Funds and the Toss of owner -occupancy. Historic Preservation • HOME Investment Partnership: HUD has a requirement for all HUD programs that an historic review process (Section 106) must take place on any property over 50 years old. This means that any property built before 1960 is affected. • Impact: The minimum time it takes to achieve historic property clearance is 30 days. Home Investment Partnership funds cannot be allocated to or spent on a project prior to that time. Notes to document changes: I. The original total debt to property value was 100% and the revision raises it to 110% total debt to property value. This change was done to assist homeowners who purchased their homes at the height of the last real estate cycle and have seen values go down or stagnate during the recession who still wish to invest in their properties. This change gives staff some flexibility in assisting otherwise qualified home owners. 2. The original spread between Staff estimates and the selected contractor bid was 10% and the revision raises it to 15%. After reviewing the bids from the first four projects It became obvious that the housing rehabilitation construction market is currently quite volatile in large part due to material costs which fluctuate consistently because manufacturers and suppliers are not stockpiling as much product as they would in a more stable marketplace thus driving up prices and the lead-time to get products. There has also been wide fluctuations in bids In part because the recession removed a lot of small contractors from the bidding pool that normally would be bidding on these types of projects. 3. The original maximum loan amount was $40,000 with a possible lead paint abatement grant of $10,000. The problem that this change addresses is one where the cost of lead abatement exceeds the $10,000 grant amount and those excess costs are rolled over to the loan side which also carries the burden of the costs related to health & safety repair items Including planning and building code violations. In many instances where the owners would like to fix all their housing concerns there are limited funds currently available to do a complete Job. There are currently three (3) families in this current situation who need this flexibility so their loans can be finalized with others in potentially the same situation being processed now. 4. This language clarifies that the functionality of the ten percent (10%) loan contingency requirement from the original loan maximum of $40,000 will remain the same with the increased loan amount 5. When the original document was approved the loan approval authority was with the Executive Director of the Community Development Commission but with the demise of the functions of the Commission the signing authority becomes the responsibility of the City Manager. 6. The original document contained information pertinent to activities performed under Tax increment Low/Mod Set Aside funding which are no longer relevant and have been removed from the document.