Title
a. Approve the Acquisition and Rehabilitation Loan Agreement, Acquisition and Rehabilitation Promissory Note and Deed of Trust for the County's Neighborhood Stabilization Program 3;
b. Authorize the Interim Director of Economic Development or the Director of Economic Development to make minor changes to the loan documents as necessary to implement the program; and
c. Authorize the Interim Director of Economic Development or the Director of Economic Development to execute the loan documents.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
a. Approve the Acquisition and Rehabilitation Loan Agreement, Acquisition and Rehabilitation Promissory Note and Deed of Trust for the County's Neighborhood Stabilization Program 3;
b. Authorize the Interim Director of Economic Development or the Director of Economic Development to make minor changes to the loan documents as necessary to implement the program; and
c. Authorize the Interim Director of Economic Development or the Director of Economic Development to execute the loan documents.
SUMMARY:
The County received a $1,284,194 grant from the U.S. Department of Housing and Urban Development (HUD) to increase the supply of affordable rental housing in the County through the federal Neighborhood Stabilization Program. Previously through the State, the County was the recipient of NSP1 funding as well as the beneficiary of NSP2 funding. The recommended action will allow the County to begin purchasing homes through the Neighborhood Stabilization Program 3 (NSP3).
DISCUSSION:
The NSP3 program was established to help stabilize neighborhoods whose vitality has been damaged by the economic effects of foreclosure and abandonment. In February 2012, the Board of Supervisors approved the County's NSP3 Action Plan, which provides for NSP3 funds to be used for a project and a program. The project will assist very-low income, psychiatrically disabled individuals secure affordable rental housing through an Interim, Inc. project in Marina. The program will assist very-low, low, and moderate income special needs households to secure affordable rental housing in Soledad. The program will involve the purchase, rehabilitation and resale of four to five foreclosed homes to local non-profit housing providers. These homes will provide affordable rental housing for farm workers, seniors, and/or the disabled which meet the Federal definition of special needs groups and are indentified as special needs households in the County's Annual Housing Report. Two homes will be restricted to very-low income households earning less than 50% of the Area Median Income (AMI) and the remaining homes will be restricted to low income or moderate households earning less than 80% or 120% of the AMI respectively.
The County is currently processing a contract with a Cottage and Castles Real Estate, Inc. (Master Consultant) to undertake the activities of the program. It is expected that the contract will be in place by September 30, 2012. The contract provides for all necessary protections for the County in regard to insurance and liability requirements and administration of the program. The Master Consultant will coordinate the pre-purchase inspections and appraisals and subsequent acquisition of homes from banks and owners through a short sale. The Master Consultant will then work with the non-profit housing provider to ensure that the home is rehabilitated to meet the needs of the anticipated residents prior to selling the home to a non-profit agency. In order to make the housing affordable, the County will sell each home to the non-profit housing provider for one dollar ($1.00) and record restrictive covenants that explicitly limit occupancy to income-qualified households for forty five (45) years. Resale will also be restricted with a right of first refusal held by the County if the property is sold prior to fifteen (15) years and a restriction upon resale to a non-profit if the property is sold within thirty (30) years.
The County will deposit funds to purchase and rehabilitate individual homes in an escrow account with a local title company. Prior to the close of each home, the Master Consultant will execute the attached Acquisition and Rehabilitation Loan Agreement, Acquisition and Rehabilitation Promissory Note, and Deed of Trust. The loan will be forgiven when the home is sold to the non-profit housing provider. The purpose of these documents is to secure the County's interest in the property, ensure that it is transferred to a qualified non-profit housing provider consistent with the requirements of NSP3, and establish the long-term affordability covenants on the property.
The County will enter into agreements with the non-profits to address NSP3 requirements related to the income restrictions, annual operations and maintenance of the properties, and monitoring.
OTHER AGENCY INVOLVEMENT:
County Counsel has reviewed the documents as to form.
FINANCING:
There is no impact on the General Fund. The County's NSP3 grant is budgeted in Fund 013/8200 (Community Development Grants) and can only be used to implement the NSP3 program.
Prepared by:
_____________________________
Jane Royer Barr, Ext. 5389
Housing Program Manager
Approved by:
_______________________________
Linda B. Guillis, Ext. 5383
Interim Director of Economic Development
Attachments: Acquisition and Rehabilitation Loan Agreement, Acquisition and Rehabilitation Promissory Note; and Deed of Trust.