Committee reviews draft proposal for local housing trust fund

By SARA HALL

The Housing and Human Services Committee (HHSC) last week heard a presentation on the city’s proposed local housing trust fund and provided feedback for staff to bring the draft documents to City Council.

HHSC members discussed the effort on Wednesday (March 27) and agreed and added input on the recommendations in the draft resolution, LHTF program application, administrative guidelines and other related documents.

Included is a statement of purpose, which identifies that the LBLHTF aims to assist in the creation and preservation of affordable housing in the City of Laguna Beach for the benefit of lower income households (extremely low, very and low).

Committee members unanimously recommended that City Council establish a Laguna Beach Local Housing Trust Fund by adopting a resolution committing housing in-lieu fee and housing funds to the LBLHTF and incorporating administrative guidelines and uniform multifamily regulations (UMRs) as loan and underwriting guidelines.

They also suggested that the council authorize the city manager to: Apply for and execute agreements related to the LBLHTF and issue a notice of funding availability (NOFA) with city-owned land.

Other recommendations included: Establish the specified priority populations and programs; direct staff to return to council during the budget process with changes aimed directing monies toward at the housing fund and direct staff to review NOFA responses with the HHSC affordable housing subcommittee, if they are available in a timely manner, for input prior to publication of the Future Council agenda packet.

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Photo by Scott Brashier

The city is working on a local housing trust fund

On Dec. 12, 2023, the City Council directed staff to conduct additional analysis with representatives from the Housing and Human Services Committee and, if feasible, return with the appropriate document(s) to establish a local housing trust fund.

HHSC completed extensive research and concluded that a LHTF would provide valuable funding to facilitate the development of affordable housing in Laguna Beach. The matter is tentatively scheduled for council consideration on April 9.

A housing trust fund acts as a critical financial resource to tackle housing challenges within a community. More specifically, a housing trust fund is a pool of money set aside by the city to support various initiatives aimed at making housing more affordable, accessible and sustainable. This funding can be used for a variety of purposes, including loans or programs.

According to staff, in the context of the state’s LHTF grant program, a housing trust is: “a public, joint public and private, or charitable nonprofit organization,” which was established by “legislation, ordinance, resolution (including nonprofit articles of incorporation), or a public-private partnership organized to receive specific public, or public and private revenue to address local housing needs.”

Housing Program Coordinator Jennifer Savage explained at last week’s HHSC meeting that the first step to establishing a LHTF is adoption of a resolution by the City Council. Using work prepared by the committee as a starting point, staff drafted a resolution, which will declare the establishment of the LHTF; adopt UMRs; authorize the city manager to apply for and execute agreements for grants; and authorize the city manager to issue a NOFA.

Alternatively, the city could adopt a resolution based on the state’s LHTF resolution template to authorize the CM to apply for and execute agreements, and a separate resolution establishing the LHTF and authorizing the issuance of a NOFA.

A NOFA advertises to developers and other interested parties that the city has funding to award to affordable housing projects. HHSC recommends including city-owned land with available funding, which will encourage/entice developers to respond to the NOFA, Savage pointed out. In addition, including land will increase the amount of grant funding the city can request from the LHTF grant program. If awarded LHTF based on city-owned properties, the city must make those sites available for affordable housing or lose the matching grant dollars.

Staff would recommend presenting two options to council of the NOFA, one with city land and one without, so they can take action that night and still approve it and move it forward, Savage explained.

The draft resolution also adopts the uniform multifamily regulations, the loan and underwriting guidelines that the city would follow. They do have the opportunity to adopt different standards, but using the already-established guidelines from the state would be easier, Savage explained.

“It’s a lot more simple if we’re applying for the grant program to use the state’s (standards),” she said.

HHSC also recommended that council identify administrative guidelines, including tasks related to solicitations, awards, reporting and oversight.

The draft guidelines touch on a number of topics and uses a template that the committee drew up. They also clarify a few things, Savage said.

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HHSC recommends that council authorize a specific employee position to administer funds. The draft resolution identifies the administrator as the community development director, lists the specific services provided by the finance division, and names the community development department to be responsible for the awards and reporting. It also speaks to oversight from HHSC and City Council through an annual report.

A section discusses target populations, programs and activities for LHTF funding.

Based on council priorities, recommendations from HHSC, Housing Element Actions, and the 2019 Arts Market Study, artists, seniors and the local workforce are the target populations.

In the draft LHTF administrative guidelines, priority in all disbursements shall be given to housing projects that, listed in order of priority:

Provide rent subsidies to extremely low-, very low-, or low-income households for qualifying artists, qualifying seniors and/or qualifying local workforce.

–Provide forgivable loans to facilitate the construction of accessory dwelling units or junior accessory dwelling units to extremely low, very low-, or low-income households for qualifying artists, qualifying seniors and/or qualifying local workforce.

–Provide perpetual affordability of housing to extremely low, very low-, or low-income households for qualifying artists, qualifying seniors and/or qualifying local workforce.

–New construction on land owned by the City of Laguna Beach and that provide a right of first refusal (ROFR) after the initial tax credit compliance has been met.

–Housing projects that guarantee a term of affordability of at least 55 years together with full repayment of the LBLHTF investment.

–New construction or rehabilitation projects that provide a majority of units that are permanent supportive housing units.

Frequently mentioned programs by the Housing and Human Services Committee include ADU development and housing subsidies for seniors, Savage noted. HHSC recommended rent subsidies for qualifying low-income artists, workforce members, or seniors. HHSC also recommended a pilot ADU grant program which would provide loans up to $50,000 forgivable over 20 years. For every year an ADU is maintained as a low-income housing unit, 5% of the loan would be forgiven.

“These capture some of what we’ve heard,” Savage said.

Other suggested programs include new multifamily development, rehabilitation of affordable rental units and senior aging in place.

For potential sources of ongoing revenue, the recommendations are based on committee suggestions and what staff found in looking at current balances. The key characteristic of a LHTF is that it receives ongoing revenues from dedicated sources of funding sufficient to permit the LHTF to comply with the requirements of the state’s grant program, Savage explained. HHSC recommended several funding sources: Inclusionary housing in-lieu fees; the city’s housing fund; short-term rental fees; housing impact fees/commercial linkage fees; hotel bed taxes; Laguna Beach Tourism Marketing District; parking fees and second home linkage fees.

At the meeting last week, a few of these funding sources were discussed more in depth.

Following council action in June 2022, short-term rental fees collected from units after the 127th (there are 145 short-term lodging units in Laguna Beach as of November 2023) are directed into the housing fund. Since that time, short-term lodging units 128-145 have generated $75,000 in revenue to be deposited into the fund.

“That will continue to grow,” Savage said.

The committee recommends that the City Council dedicate a percent of all annual short-term transient occupancy taxes or a specific dollar amount, instead of tracking short-term TOT contributions by unit.

Outside of the short-term lodging TOT, hotel bed taxes could also be a source of funds for housing. Currently, of the city’s TOT, 10% goes to the general fund and 2% goes to the measure LL fund, Savage explained. The TOT provides an increase in service by the police, fire and marine safety departments, and is used to provide services related to impacts from visitors such as cleaning Downtown sidewalks, undergrounding utilities and beach maintenance.

The city does not currently have housing impact fees or commercial linkage fees, Savage explained. Both would place a fee on any type of development, which would then be collected specifically for the purpose of developing affordable housing. HHSC has previously discussed the possibility of creating the fees. Although the benefit may not be significant due to the type of projects that typically are in Laguna Beach, Savage explained, however, they can’t predict possible future development in the city.

“We don’t have a lot of large development happening so I’m not sure how much value there will be,” she noted, “but maybe with the modification to the Downtown Specific Plan and the development standards that we have throughout town, maybe there will be more development in general and that might bring in some funding for the housing fund.”

There may be value to conducting a nexus study and implementing these fees so that the city is prepared to capture funds for affordable housing when development opportunities arise, she added.

The city also doesn’t currently have a second home linkage fee, Savage noted. They’ve found that there are approximately 2,431 housing units that may be second homes. A second home linkage fee of 1% of property tax on these properties could generate approximately $250,000 for affordable housing.

Parking funds are generally earmarked for transit services, parking enforcement, parking operations, maintenance, Neighborhood & Environmental Protection Plan, replacement of transit vehicles, capital improvement projects, parking facilities and mobility improvements, parking pay stations and parking structure rehabilitation.

Noting that the Alice Court project used some parking funds, Savage noted that the committee’s recommendation to the council could identify that there is that connection between parking and housing construction.

Savage also noted the comparison of the city’s own local housing trust fund to what the Orange County Housing Finance Trust offers.

“One of the things that we were trying to figure out is the cost benefit between applying for our own local housing trust fund grants and relying on the Orange County Housing Finance Trust,” Savage said.

The city is a member of the OCHFT, which recently published their 2024 notice of funding availability. The NOFA notes that the county trust fund anticipates receiving approximately $4.75 million from their local housing trust fund grant application. If Laguna Beach applies for and is awarded its own LHTF funding, projects in the city will not be eligible for funding from OCHFT.

Staff considered OCHFT’s funding limits and, based on the maximum funding per unit, compared what similar hypothetical 30-unit projects would get from the OC Housing Finance Trust and what it would get from a city local housing trust fund, and they also compared whether the supposed project was on city land or not.

“The conclusions are mixed,” Savage concluded. “It really depends on what project comes out to the city.”

There’s still value to applying for the trust fund grant application, she added.

“On top of that the committee and the council may find that their priorities with the funds aren’t even development. Your priorities may be ADU development, your priorities may be rent subsidies,” she said. “There’s still value in applying, we just have to figure out what our priorities are and where we want to target the funding.”

Committee members also discussed the LHTF application process, eligibility and application scoring for grant funding.

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Sara Hall covers City Hall and is a regular contributor to Stu News Laguna.


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