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Entity Staff Report - 7/4/2021CITY COUNCIL OF SALT LAKE CITY 451 SOUTH STATE STREET, ROOM 304 P.O. BOX 145476, SALT LAKE CITY, UTAH 84114-5476 SLCCOUNCIL.COM TEL 801-535-7600 FAX 801-535-7651 BOARD STAFF REPORT THE REDEVELOPMENT AGENCY of SALT LAKE CITY TO:RDA Board Members FROM:Allison Rowland Budget & Policy Analyst DATE:May 4, 2021 RE: RESOLUTION: FISCAL YEAR 2021-22 AFFORDABLE HOUSING DEVELOPMENT FUNDING PRIORITIES ISSUE-AT-A-GLANCE In accordance with the Housing Funds Allocation Policy and Housing Development Loan Program (HDLP) Policy adopted by the Board in recent months, RDA staff prepared a draft Fiscal Year 2022 Affordable Housing Priorities and Strategies document, which includes a proposed resolution and additional budget ideas. On May 4, the Board will discuss the funding Priorities in this transmittal. These are listed on page 5/12, and are intended as policy direction for RDA staff as they consider applications for affordable housing projects. In future years the annual Priorities will be transmitted around March for consideration well before budget discussions begin. Both the proposed total funding dedicated to affordable housing projects, and the allocation of this amount among different program categories are subject to Board approval as part of the RDA’s annual budget process. The Board will have an opportunity to discuss these in more detail on May 18. Staff note: In the RDA document, these program categories are referred to as Expenses in the Funding Overview (page 4/12), and Tactics elsewhere (pages 6/12 and 7/12). Goal of the briefing: Discuss and consider adopting the Resolution entitled Fiscal Year 2022 Affordable Housing Priorities. Item Schedule: Briefing: May 4, 2021 Set Date: N/A Public Hearing: N/A Potential Action: May 18, 2021 Page | 2 ADDITIONAL INFORMATION A. Proposed FY22 Priorities The transmittal lists thirteen proposed FY22 Priorities based on RDA staff’s assessment of current needs and Board objectives. According to the Housing Development Loan Program Policy adopted in March 2021, these Priorities should align with adopted Board and City Council policies, including the Housing Plan, Project Area Plans, RDA Guiding Framework, and RDA Housing Allocation Funds Policy. The short titles for the Priorities on page 5/12 are: 1. Family Housing 2. Target Populations 3. Neighborhood Safety 4. Missing Middle and Unique Housing Types 5. Homeownership 6. Sustainability 7. Expand Opportunity 8. Neighborhood Impact 9. Transportation Opportunities 10. Historic Preservation /Adaptive Re-use 11. Commercial Vitality 12. Public Art 13. Fund Leveraging Funding Priority Incentives: Projects would be eligible to reduce their base interest rate if they meet the adopted funding priorities as established annually, according to the RDA Housing Allocation Funds Policy. For each funding priority met, the project would be eligible to receive a 0.5% reduction to the Base Interest Rate, down to a minimum of 1%. The Board may wish to consider the advantages and disadvantages of naming 13 Priorities in the FY22 Strategy which all would carry equal weight for incentives: o Would the Board be interested in differentiating among these Priorities, for example, defining some as Required and others as Optional? o Since the Priorities are tied to potential interest rate reductions, would the Board like to consider some option for weighting their relative importance, for example, assigning 0.50% reductions to some, and 0.25% to others deemed less important? B. Proposed FY22 Tactics The proposed funding amounts listed for each Tactic are subject to change by the Board during the May 18 RDA budget discussion, depending in part on whether it chooses to dedicate more or less of the total budget to housing. For the purposes of this Priorities discussion, Board members may wish to indicate whether they agree with the share of the nearly $10.8 million total that is proposed for each Tactic. As presented in the RDA document, staff estimates that leveraging these funds with private investment would result in $150 million in total project costs, providing 348 new affordable units, including 116 at under 50% AMI. Proposed Amounts and Shares for FY22 RDA Housing Tactics Amount Share Housing Development Loan Program - Citywide NOFA $5,406,400 52% - Emergency Gap $1,000,000 10% - High Opportunity $2,700,000 26% Strategic Acquisition $1,000,000 10% ADU Pilot Program $280,455 3% TOTAL $10,386,855 100% Page | 3 The $10.4 million represents estimated FY22 revenue combined with housing funds remaining from FY21. As adopted in the Housing Development Loan Program Policy, the funding sources for each of the Tactics discussed below are described here: 1. Tactic 1: Housing Development Loan Program $9,106,400 from Primary, Secondary and HDLP Funds from FY22 and FY21 For HDLP funds, RDA staff proposes to release three notices of funding availability (NOFAs) in FY22: - A competitive $5.4 million Citywide NOFA for projects located within Salt Lake City, with a minimum of at least $394,000 (4%) reserved for projects located in RDA project areas. The target would be 135 new affordable units at about $40,000 each. RDA staff would issue the NOFA in July with a fixed submission date. If funds were left over after that competition, due to a lack of demand or viable projects, the RDA would issue a second competitive, time-limited NOFA in early 2022. - A $1 million Emergency Gap Financing NOFA available an open-ended basis for projects with a majority of units at or below 60% AMI which encounter an unexpected financial gap due to unforeseen circumstances. This would support 25 units at $40,000 each. - A High Opportunity NOFA would be released on an open-ended basis for new projects in designated “high opportunity” census tracts. This would be funded with the remaining $2.7 million reserved for this purpose in 2018, and support 45 units at $60,000 each. The Board may wish to request additional information on this proposed use of HDLP, including: o Would these amounts be fungible among the three categories if unexpected opportunities arise? What would be the process for making any changes? o How would the City’s equity goals be furthered through these proposed programs? 2. Tactic 2: Strategic Acquisition $1,000,000 from Primary Housing Fund These funds are proposed to be used for buying strategic properties in existing RDA project areas, including distressed motels or other properties, consistent with RDA and City goals. The Board may wish to request additional information on this proposed Tactic, including: o Is this amount sufficient for the proposed purpose? (This question also could be considered during the RDA budget discussion on May 18.) o How would the City’s equity goals be furthered through this proposal? Page | 4 3. Tactic 3: ADU Program $280,455 ($250,000 from NWQ funds and $30,455 from remaining FY21 Secondary Funds) These funds would be used to start a pilot accessory dwelling unit (ADU) program west of I-15 and targeted to the 9Line Community Reinvestment Area (CRA). The program would aim to foster new ADUs in the area as an affordable housing option by providing financial support for the construction of two new units, at a price of approximately $95,000 each. The program would require homeowners to rent their ADUs at a rate that is affordable to low and moderate income households. The Board may wish to request additional information on this proposed pilot program such as: o Would constructing just two ADUs be enough to help inform judgments about whether to continue this program in the future? o How would the program be structured, for example, is this envisioned as a revolving loan fund? How would the RDA monitor and impose the affordability requirement? o How would the application process work? Would only single-family homeowners be eligible, or could owner-occupied multifamily units also qualify? Would applicants be expected to provide some cash for construction ($95,000 seems too low to complete an ADU)? o How would the City’s equity goals be furthered through this proposed program? If both ADUs are built for $95,000 each, how would the remaining $90,455 allocated to this Tactic be used? (This question also could be considered during the RDA budget discussion on May 18.) The Board may wish to consider whether the pilot program would be more feasible if all of the Secondary funds for FY22, which are to be used in existing CRAs, were dedicated to the ADU program instead. This would result in $674,455. (This question also could be better considered during the RDA budget discussion on May 18.) POLICY QUESTIONS 1. The Board may wish to ask about the plan for dealing with any surpluses or shortfalls in actual revenue compared to the revenue estimates. Will the RDA staff return to the Board for authorization to make changes to the amounts allocated to each Tactic, for example, through budget amendments? 2. The transmittal states that the FY22 Strategy addresses all three Goals and the majority of the Objectives in the Growing SLC Housing Plan (Appendix A, page 7). The Board may wish to ask for additional information on how the RDA staff assesses this alignment. Specifically, how would the RDA: o Prioritize the development of new affordable housing with an emphasis on households earning 40% AMI and below. (Note: In the Target Population Priority, the threshold listed is 50% and below.) o Work with landlords to both improve their housing stock and rent to very low-income households. o Implement Lifecycle Housing principles in neighborhoods throughout the city. 3. The Board may wish to ask for an update from RDA staff as it relates to guiding policies specifically for the Northwest Quadrant affordable housing increment, including how it may address ideas raised by Board members in the discussion late in 2020.