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Council Provided Information - 2/13/2024CITY 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:February 13, 2024 RE: RESOLUTION: FUNDING ALLOCATION FOR GAP FINANCING FOR HIGH OPPORTUNITY AREAS ISSUE-AT-A-GLANCE The Board will consider funding allocations and preliminary terms for two affordable housing projects located in “high opportunity areas” through the RDA’s Housing Development Loan Program (HDLP). Together, the two projects requested $5.35 million in low interest loans, which exceeds the current allocation of $2.7 million for this type of project. The allocation of funds for “high opportunity areas” dates from 2017, when the Board authorized $4.5 million for projects located in neighborhoods that provide residents with improved chances at upward economic mobility, like good schools, public transit access, and health care facilities. RDA staff plans to transmit the remaining HDLP Notice of Funding Availability (NOFA) applications for discussion in the March meeting. The Board could decide on the high opportunity applications at the February or March RDA meetings. In summary, the two requests in high opportunity areas this year are: -515 Tower - Conversion Phase I at 515 East 100 South. The request is for $2,650,000 for 96 units of “shared-equity” affordable housing to be developed by the Perpetual Housing Fund of Utah. This developer also applied for competitive HDLP funding and would use any funds granted from either source for this project. -Fairmont Heights II at 2257 South 1100 East. The request is for $2,700,000 for affordable housing to be developed by Lincoln Avenue Capital. This developer also applied for $3.2 million from the general competitive HDLP funding for their Fairmont Heights 1 project, for a total of $5,900,000. On February 1, the RDA Finance Committee recommended fully funding the 515 Tower - Conversion Phase I. Item Schedule: Briefing: February 13, 2024 Set Date: N/A Public Hearing: N/A Potential Action: TBD Page | 2 Goal of the briefing: Discuss the two applications for HDLP funding in high opportunity areas and consider approving funds for one or both of the projects. BACKGROUND AND ADDITIONAL INFORMATION A. Project Descriptions. 1.515 Tower - Conversion Phase I. This phase of this project would involve the adaptive re-use of a former office building at 515 East 100 South. The RDA loan of $2,650,000 would help fund 96 units of affordable and deeply affordable units. One half of the total units (48) would have three or four bedrooms, with the remaining units mostly studios. The project received 9% Federal LIHTC housing credits. The interest rate would be 2% for this 15-year cash-flow loan. The Board priorities met with this project would be Family Housing, Target Populations (Deeply Affordable Units), Expand Opportunity, Adaptive Re-use, Transportation Opportunities, Commercial Vitality. See additional information on Sources and Uses of funding for this project below. This project would be the first to be developed through the recently created Perpetual Housing Fund of Utah, which purchased this property with funded with a $10 million allocation from the City’s American Rescue Act Plan (ARPA) funds. Under a “shared-equity” model, 75% of any profits or appreciation for this phase of the development would be shared among the residents through a tenant wealth-building program. This developer also applied for competitive HDLP funding and stated that it would use any funds granted from either source for this project. 2.Fairmont Heights II. This project would use $2,700,000 of HDLP funds for affordable senior housing at 2257 South 1100 East. Fifty-five one- and two-bedroom units would be constructed, including five units reserved for people who have experienced chronic homelessness, five units for mobility impaired individuals, and nine units for people with disabilities. The interest rate would be 1% for this two-year acquisition loan with a balloon payment or conversion at the end of that period. The Board priorities met with this project would be Target Populations (Deeply Affordable Units), Expand Opportunity, Transportation Opportunities, Architecture and Urban Design. See additional information on Sources and Uses of funding for this project below. The developer, Lincoln Avenue Capital seeks an acquisition-to-permanent financing loan, which means initial funds would be used to buy the property. The developer would need to obtain tax credits, financing, and building approvals within two years, or would be required to repay that loan. If the developer succeeds, the acquisition loan could be converted to a long-term (permanent) loan The developer also applied for $3.2 million from competitive HDLP funding for their Fairmont Heights 1 project, which is on the same property, for a total of $5.9 million. Page | 3 B. Background. 1.Housing Development Loan Program (HDLP) Policy. The HDLP provides low-interest loans to incentivize the development and preservation of affordable housing in Salt Lake City. Each year, RDA staff presents a Housing Development Funding Strategy that proposes funding priorities and allocations, as well as projecting revenues for the upcoming fiscal year. The process is designed to provide flexibility for meeting current needs, leverage current opportunities, coordinate with other City resources, and shift funding priorities to reflect evolving plans and policies. 2.Housing Priorities for Fiscal Year 2024. Applicants are required to meet the requirements laid out in the RDA’s HDLP Guidelines and Application Handbook, as well as the annual housing priorities set by the Board. For FY24, at least one of the following had to be met to qualify for consideration for funding: •Deeply Affordable Housing Threshold Requirement: at least 10% of the total residential units shall be income and rent restricted to households earning 40% of the area median income AND deed restricted for both rent and income •Family Housing Threshold Requirement: a minimum of 10% of the total residential units shall have three or more bedrooms and shall be income and rent restricted to those earning 60% AMI and below, with AMI limits as established by HUD. 3.High Opportunity Areas. In 2017, the RDA Board allocated $4.5 million to incentivize the development and preservation of affordable housing located within High Opportunity Areas. The High Opportunity Area map was updated in 2023, to reflect newer data and metrics, which resulted in an expanded area that qualifies for these funds. POLICY QUESTIONS 1. Does the Board wish to be informed of the RDA staff recommendations for other HDLP loans before making decisions on these two high-opportunity area projects? Page | 4 2. If the Board chooses to fully fund the 515 Tower - Conversion Phase I at the requested amount of $2,650,000, would it like to consider moving the $50,000 to the regular HDLP funding balance to help fund other affordable housing projects?