HomeMy WebLinkAboutR-1994-050 Rental Rehabilitation Program•
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RESOLUTION NO. 94- 52
A RESOLUTION authorizing and directing the City Manager of the City of
Yakima to file an Application with the Washington State
Department of Community Development for funding for a
rental rehabilitation program.
WHEREAS,the City of Yakima contemplates a rental rehabilitation
program for which federal funding is available from the United States
Department of Housing and Urban Development, through the Washington
State Department of Community Development. and
WHEREAS,the City Council of the City of Yakima deems it to be in
the best interests of the City that an application be filed for funding for
the purpose mentioned above, now therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
YAKIMA:
RA Zais, Jr , City Manager of the City of Yakima, is hereby
authorized and directed to execute and file the attached application
documents, including all understandings and assurances contained therein,
with the Washington State Department of Community Development for
funding for the purpose mentioned above; and he further is hereby
designated as the official representative of the City to act in connection
with that grant request and to provide such additional information as may
be required
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ADOPTED BY THE CITY COUNCIL this qday ofil
1994.
ATTEST:
City Clerk
ct 4;4
Mayor
City of Yakima
1994 Rental Rehabilitation Program
Yakima City Council
Patricia A. Berndt, Mayor
Clarence C. Barnett, Assistant Mayor
Lynn K. Buchanan
Bill Brado
Henry C. Beauchamp, Jr.
Ernie Berger
Bernard J. Sims
City Manager
Richard A. Zais, Jr.
Director of Department of Community and Economic Development
Glenn J. Valenzuela
Office of Housing and Neighborhood Conservation
Dixie L. Kracht, Block Grant Manager
April, 1994
Draft
Equal Housing Opportunity
April 21, 1994
Mr. Jeff Robinson
HAP/AHP/HOME Program, Housing Division
Washington State Department of Community Development
906 Columbia Street, SW, P.O. Box 48300
Olympia, Washington 98504-8300
Dear Mr. Robinson:
The enclosed City of Yakima Office of Housing and Neighborhood
Conservation's Rental Rehabilitation Program application has been written in
compliance with both the HOME regulations and State of Washington's
Department of Community Development's HOME Program :Design submitted to
the U.S. Department of Housing and Urban Development, Region X, Seattle,
Washington.
Funding of this application would assist our community in addressing Yakima's
depressed housing market which is causing displacement and substandard housing
conditions to be imposed on our very low income resident families. The City of
Yakima recognizes the need for joint partnership between public and private
markets to assist in the development of strategies to address a common problem
which affects the overall community. Your assistance in the approval of this
application would provide our community with one of the tools needed to help us
help ourselves. One (1) original and five (5) copies have been forwarded to you
for your review and consideration. Funding of this application will allow a
minimum of 16 loans representing 50 units of rental properties being reserved
for very low income families.
Sincerely,
Dixie Kracht
Block Grant Manager
enclosure:
City of Yakima Rental Rehabilitation
Check here if McKinney:
Project Summary
City of Yakima Office of Housing
Applicant: & Neighborhood Conservation
Address: 112 South 8th Street
Yakima. WA 98901
Phone: (509) 575-6101
Tax LD.: 91-6001293
Check here if LIHTC:
Contact:
Address:
Dixie Kracht. Block Grant Manager
112 South 8th Street
Yakima. WA 98901
Phone: (509) 575-6101
Project Name: Rental Rehabilitation Program
TypeofApM
Local Government:
Housing Authority:
Nonprofit Organization:
Tribal Housing Org:
ProPe
Privately Owned:
Publicly Owned:
Vacant Structure:
Vacant Property
X
X
Cate
Rental:
Owner -Occupied
Homeless Shelter
Other
Acquisition:
Rehabilitation:
New Construction:
X
X
Ttg�t
At or below 80%
At of below 50%
At or below 30%
No Income
Other (describe)
Total Units
Number of Units Household Income
50
50
Peg
Very low income
sulatiom:
vogoo*.tatr:
Length of Commitment to Serve Target Population:
(Minimum of 25 year length of commitment required)
30 Years
1
Describe the local need, or opportunity, the proposal is
intended to address.
The Rental Rehabilitation Program will offer affordable monies to
investors for the rehabilitation of rental units so they can afford to
rent decent, safe, sanitary dwelling units to very low income families
at a cost that does not exceed 30% of the families' income.
The City of Yakima has a very depressed housing market and can
utilize an additional 1,000 units. The vacancy rate is at 2.31% overall,
with a less than 1% vacancy for single family homes, and 5%
quarterly rent increases. (Please Refer to Attachment A - U.S.
Department of Housing and Urban Development, Region X Quarterly
Economic Report) This indicates the market can only offer
substandard, unaffordable housing units to our very low income
families. It is not uncommon to see doubling up of families, chemical
toilets in backyards, campers and trailers being used inconjunction
with abandoned, dangerous buildings and sheds for housing and
housing accommodations. The average rental for a 1 or 2 bedroom
unit is $350 - $600 a month. Incomes locally fall within 30% of the
federal median income guidelines which indicate rents should be at
$200 - $369 a month. (Please refer to Attachment B)
If affordable monies were made available to investors for the
rehabilitation of substandard units, these could be set aside for this
population group at a cost that is affordable to both the owner and the
tenant. Owners cannot afford to borrow funds at current market rates
of 8 to 9% to reinstate substandard units without changing rents that
are unaffordable. An average rehabilitation loan of $25,000 at 9%
would cost $200 a month without considering existing debts and
management overhead. The target area, "East of 16th Avenue within
the City Limits" has approximately eleven thousand units of which
60% are rentals and 40% of those are in substandard condition. In
1991 and 1992 the City's Rebound Plus Program boarded up 160
buildings identified as being abandoned, dangerous units„ unfit for
habitation. The Housing Division has a waiting list of 14 interested
investors who have substandard buildings which need funding for
rehabilitation. The City's Rebound Office has a waiting list of 100
investors, and the Yakima Housing Authority tenant waiting list for
Section 8 Rent Subsidies is over 1,000. Three to five families a day
call the Yakima County Coalition requesting assistance due to local
unaffordable rent levels and lack of available housing.
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2. Describe your proposed project.
The Rental Rehabilitation Program would provide affordable, decent
rentals for very, low income families by joining in partnership with
local lenders to combine funding resources to make monies available
and affordable to owners for use in the rehabilitation of their rental
units. The Office of Housing and Neighborhood Conservation
(OHNC) will take applications from investors, verify income (IRS),
credit history, property ownership and unit operating statement.
OHNC will then inspect the building and determine what work is
necessary in order to bring the property up to Section 8 Housing
Quality Standards and within the City's code requirements. A subsidy
analysis will be prepared determining the affordability of the loan.
This will indicate the proposed rent structure (Please Refer to Attachment
"B") and the operating costs to determine the available cash flow. This
cash flow will determine the repayment of the loan to the local lending
institution who have agreed to lend monies to project investors at 1.5
over prime on 5 year loans and 2.0 on 10 year loans. (Please Refer to
Attachment "C"). The difference between the affordable lender loan, and
the amount required for rehabilitation will be the determined subsidy
lien which will be repaid to the program in monthly installments at no
interest after the lender loan has been repaid. Repayments will be used
to fund other investor loans in the future. The investor will
acknowledge and consent to rent controls. Title of property will be
written and conveyed stating that the building is mandated by rent
controls based on local federal median income limits determined at the
origin of the loan. Each year the investor will submit an annual report
stating his rent structure and unit occupancy. Raising of rents will
only be allowed in accordance with increases indicated by the federal
median income guidelines released annually from the U.S. Department
of Housing and Urban Development. Transfer of ownership will
carry this stipulation for a period of 30 years. Defaults will activate a
due on demand clause requiring full payment of the subsidy amount.
These funds will be used to provide funds for other rental units located
in the target area. It is proposed to view these projects as kng berm investment
loans. If these units are resold and there has been a repaymer t of the subsidies, the
building would not be rented to high income families because of the
area in which it is located. This target area has the highest number of
minorities, lowest family income levels and the largest number of
older, dilapidated buildings. A profile of this area over the past fifty
years appears to be the indicator of the future due to City expansion,
annexation and development of the urban area for higher income
facilities and new developments with higher unit costs.
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3. Explain why HAP/AHP/HOME Program dollars are needed
for the implementation of this proposal. Describe financial
impacts on rent levels, long term affordability, and
leverage.
The Rental Rehabilitation Program will provide willing and
cooperative investors the opportunity to borrow funds to rehabilitate
and increase the value of their building in a manner that is affordable
enabling them to offer lower rents to resident families.
The history of the Rental Rehabilitation Program over the past nine
years has been very successful. It has rehabilitated 294 units with an
investment of $1,340,017 from local lenders, $193,760 from investors
and $2,229,855 in federal subsidies for a total of $3,763,632. This
program was eliminated in the federal budget, replacing it with HOME
state and local funding. Although the program has been elimiinated, the
Housing Division still has fourteen investors waiting for funds to
rehabilitate their rental units and no program funding available.
The Rental :Rehabilitation Program's average unit cost for rehabilitation
has been $15 to $25,000. If the investor were able to borrow this
amount at current rates, with no subsidy, payments would be $152 to
$253 per month in addition to existing indebtedness payments and
operating costs. This computes to a required rental unit cost of $350 to
$500 a month which is unaffordable to very low income resident
families. If a subsidy can be offered that directly relates to fixed rental
costs, the loan becomes affordable and attractive 1:o private investors.
A needed rehabilitation loan of $20,000 to an investor based on their
existing cash flow equates to a private loan of approximately $5 to
$10,000 which is insufficient to improve the property. With a subsidy
of $10 to $15,000, the loan becomes affordable and can be
underwritten by a local lending institution and most importantly
provides affordable rents.
Without this subsidy, investors will continue to rent substandard units
to recover existing debt service and maintain a rent structure that will
relate to market demand which is unaffordable to our very low income
community families.
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Describe any associated services that will be provided.
The Rental Rehabilitation Program not only offers affordable monies
to investors to provide decent, safe, affordable housing units for low
income families, but also offers technical assistance to investors and
tenants.
One of the positive results of working with program investors is the
educational process of owners becoming knowledgeable small business
proprietors. Not all rental units are owned by large investors or
management companies. Small investors have either purchased their
rental units for investment purposes or acquired them through
inheritance. Many owners are not sophisticated developers and do not
fully understand the rental business.
A goal of this program is to assist investors in understanding financial
statements, underwriting loan guidelines and managment skills. It is
important for them to know the Washington State Landlord/Tenant
Laws, fair housing compliance, criteria for selection of tenants and
proper procedure for maintaining the property. These skills are
incorporated into the program. The Housing Division works with
each investor personally so they can realize that the rental business is
considered a "small business" venture and should be treated as such.
Most small businesses fail because of lack of management skills.
This educational process results in long-term investments and financial
stability for the owners. In addition to the long-term commitment, the
owner is made aware that state tenancy laws prevail to all parties.
When landlords and tenants receive proper information regarding
their respective responsibilities under these laws, there is a better
relationship between these two groups.
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5. Describe the marketing and tenant selection process you will
use.
The Rental Rehabilitation Program will use private rental units owned
and operated by private investors.
The responsibility of tenant selection and marketing will be activated
by the investor under guidance and education provided by the housing
program.
In working with investors, the Housing staff will provide guidance,
information and examples of marketing and tenant selection activities
that can be used as a guide in determining the occupants for their units.
The investor will be issued a rent structure of the maximum rents and
income guidelines of families qualified for these rentals. It will be the
responsibility of the owner to use these requirements in the selection
of tenants.
If there are existing tenants, the investor will need to verify that they
meet program guidelines, and if they do not meet program criteria,
the investor will present a resolution for the solution of the problem
which could involve relocation benefits.
Additional information made available to investors will be the fair
housing and Washington State Landlord/Tenant Laws so they can make
knowledgeable decisions in their selection of tenants.
11.
Describe your plans for affirmative marketing to minority
and women -owned businesses in the implementation of
project activities.
The Rental Rehabilitation Program is designed so the investor is the
responsible party for soliciting bids and hiring of general and sub
contractors.
The Housing Division will encourage the use of recognized minority
and women owned businesses within the area. A prequalified
contractor's list will be issued to the investor of which 22% are
recognized as being minority. Because there is a limited number of
minority and women owned construction firms, investors will be
encouraged to use vendors and firms known for hiring minorities.
One of the elements of the Rental Rehabilitation Program is that
owning and managing rental units is considered a business. This
definition will carry forward by encouraging minority owners of
rentals to apply for the program. This will be accomplished by
working with established nonprofit agencies and by promoting the
program through minority news media and identified rental property
owners owner organizations.
12
Describe how the proposed project relates to local, regional,
and state housing, community development, land use, and
zoning plans and policies.
The Rental Rehabilitation Program has been identified as an action
needed to further the goals and missions of numerous policies.
One of the most outstanding is the City of Yakima's Vision 2010 which
was adopted by members of City Council on March 17, 1992 and
received state recognization. This document which is used as a
community and policy guide and basically states that the City needs " a
diverse choice of housing" affordable to all income ranges from very
low to the upper income.
The City of Yakima's Comprehensive Plan outlines the housing
element adopted by members of City Council on December 22, :1981;
amended March 4, 1986.
The Office of Housing and Neighborhood Conservation's Community
Development Plan's mission has been "Affordable where is this
located, I can not find the rest", adopted by members of City Council
in November of 1991.
The Comprehensive Housing Affordable Strategy (CHAS) adopted by
members of City Council in September of 1991 outlines the need for
adequate, affordable housing to all segments of our population.
These all relate back to the goal of the Rental Rehabilitation Program
providing affordable, adequate housing for our community.
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Describe the immediate and long term results you expect to
achieve.
The Rental Rehabilitation Program has been designed to join in
partnership, public and private markets to provide decent, safe,
affordable housing for approximately fifty families for a minimum of
30 years.
The target area, as designated for this project, (East of 16th Avenue
within City Limits) has the largest number of older structures in a
deteriorating condition. This project will assist neighborhood
conservation efforts already working in the area under Community
Development Block Grant and the City's Rebound Plus Program.
The end results of implementing the Rental Rehabilitation Program
will be long-term affordable rentals to very low income families,
improving existing declining neighborhoods, stabilizing the tax base
and rehabilitate abandoned properties thus increasing the number of
units available in our community.
The existing tax base for the proposed properties, in their current
condition, have a minimum value and tax assessment average of $150
to $200 per unit. Upon completion of the project with the
improvements in place, the tax base should reflect $300 to $450 per
unit. This will not impact low-income families because of the
established rent structure, but will improve neighborhoods and assist
the City's cost of services to the area, i.e., fire, police, etc.
Since the City is in need of an additional 1,000 units, this project
would assist in reaching that goal. Although fifty units seem small in
comparison to our City's overall need, this projects equates to
affordable, decent housing for approximately 150 persons.
The effects of living in substandard housing spreads itself through
many other social community concerns. Detrimental housing
conditions breed poor health, lack of interest in education, increased
domestic violence, and increase in crime and drug activity throughout
the whole community. Although this is a recognized problem, there is
no real measurable results that can be substantiated in numbers,
attitudes or self esteem of the affected families if decent affordable
housing was available.
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9. Describe how the housing units generated through the
proposal will remain affordable over the length of
commitment to serve the target population.
The Rental Rehabilitation Program will ensure units remain affordable
to the proposed very low income families by annually monitoring the
project.
The loan issued to the investor will carry program requirements that
establish maximum rents are based on the affordability of 50% of local
established federal median income levels in accordance with bedroom
size. This initial action will ensure rents being charged start at a level
that does not exceed 30% of the gross income from families with very
low earnings. Upon rehabilitation, the owner will submit occupancy
information stating each tenancy and their income levels. :Maximum
income guidelines will be provided to the investor and the fixed rental
amounts available.
In June of each year, the Housing Division will send each investor
newly established local federal median income guidelines, and indicate
the maximum allowable amount for rent increase. In return, the
investor will compile the current occupancy in the units and their
gross income, upon date of occupancy and the rents being changed.
This verification will ensure eligible tenants were prescreened for low
income status, but will not displace tenants that have established higher
income levels after initial occupancy.
The Housing Division will review this informatiion on an annual basis
to ensure compliance with program requirements. The Rental
Rehabilitation Program requirements will be outlined in a document
attached to the deedof trust and promissory note which will be
recorded with the title.
If the investor is not in compliance, the legal documents will be in
default and the loan will become due and payable in full at such time.
These requirements will ensure the initial and new occupancy will be
offered to only very low income families and rents will be monitored
annually for a minimum of thirty years to ensure compliance by the
Office of Housing and Neighborhood Conservation a Division of the
City of Yakima Department of Community and ]Economic
Development.
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10. Describe your organization's management ability.
It is the goal and mission of the Office of Housing and Neighborhood
Conservation "to encourage a variety of decent, safe and sanitary
housing in a good environment to all segments of the community at a
price people can afford". This statement reflects the commitment of
the City of Yakima's Housing Division.
The Office of Housing and Neighborhood Conservation has 16 years
of experience in the administration of grants and loans from both the
public and private sectors. These programs enlist extensive
rehabilitation and mortgage banking criteria. Each year a staff of
eight administers $2 to $3 million in rehabilitation loans and housing
counseling. The Housing Division has on staff a housing loan
specialist, certified inspectors, accounting technician and housing
counselors. Any aspect of housing can be handled by this Division
from mortgage loans in the private market to special needs housing in
the public sector. This has been documented by the Housing Division
being the recipients of local, state and federal program awards for
outstanding projects and programs.
The innovative and outstanding program criteria of the Office of
Housing and Neighborhood Conservation has been used as a model
throughout the nation as an illustration of examplary actions to use in
program design.
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11. Describe your organization's capacity to implement the
project within the proposed time frame.
The Rental Rehabilitation Program is similar to a program operated
by the Housing Divisions over the past eight years. The only
difference between the old program and the proposed program is the
fixed rents and tenant monitoring.
The program documents, lender match and trained staff are all in
place and would not need new development and only slight
modification of existing documents.
Since the federally funded Rental Rehabiliitation Program was
eliminated, the Housing Division has been establishing a waiting list of
potential interested investors. There are sixteen potential applicants
representing approximately fifty-two units, and calls are received on a
daily basis from interested applicants.
Local lenders have committed to matching program funding for loans
to the qualified applicant to make rehabilitation monies available.
(Please refer to Attachment D)
Since all program elements are in place and the applicants are waiting
verification, it would appear that the program could start upon
notification of funding availability and be implemented within the
proposed time frame indicated.
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12. Describe any relocation or displacement that will occur as a
result of this project.
The Rental Rehabilitation Program does not anticipate displacement of
any tenants in this program.
The anticipated rehabilitated units that are occupied will receive
temporary relocation consideration. It is the program's design to
offer other units for temporary relocation, or replacement housing to
families that could under unusual conditions be displaced. These costs
will be under the guidance of the recently adopted Federal Acquisition
and Relocation Regulations.
This will be accomplished by reviewing the anticipated rehabilitation
work, its time lines and the disruption of living conditions of the
occupied families. In multiple unit buildings, there could be the
relocation of families into a unit not immediately scheduled for rehab
before starting work on their unit. If it is a single unit building, the
family might be relocated temporarily to a different location during
the disruption of their utilities or facilities replacement. Permanent
displacement individuals will receive a lump sum payment for housing
calculated on like kind housing.
Based on the history of past rental rehabilitation programs, it has been
the Housing Division's experience that most applications for the
program are for buildings that are unoccupied.
The responsibility of relocation and displacement will be a part of the
investor application with financial responsibility of the investor and
the regulation guidance of the Office of Housing and Neighborhood
Conservation.
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13. Provide a detailed work plan and schedule for your project.
The work plan and proposed schedule is anticipated to be as follows:
Date
Activity Name/Position Competed
State Contract Sped
Program Doormats Modified
and Reviewed by Attorney
Four Applions Verified
Four Applications Verified
Four Bank Packages for Approval
Four Applications Verified
Four Bank Packages for Approval
Four Construction Starts
Four Applications Verified
Four Bank Packages for Approval
Four Construction Starts
Four Conon Starts
Four Bank Packages for Approval
Four Construction Starts
Four Construoicn Finals
Four Construction Finals
Four Placed in Ocavancy
Four Con Finals
Four Placed in Occupancy
Four Crap F'mals
Four Places in Occupancy
Four Placed in Occupancy
February/1994
February 1994
February 1994
March 1994
April 1994
May 1994
June 1994
July 1994
August 1994
September 1994
October 1994
November 1994
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14. List and describe the resources that will be leveraged by the
requested HTF Program dollars.
The Rental Rehabilitation Program will use State HOME Program
dollars in conjunction with monies contributed by local lenders to
provide a combined rehabilitation loan to investors.
The program has a minimum commitment of $ 500,000 to match the
proposed $500,000 being requested from the Rental Rehabilitation
Program.
Loans will be packaged so the repayment schedule assures affordability
to the project and thereby allows the investor to maintain the scheduled
affordable rents.
Packaged loans will be calculated on the available cash flow of each
project. This cash flow will be considered in determining the loan.
Payments will be made on a monthly basis to the lender, and after full
repayment of the lender loan, program subsidy will then be paid at the
same monthly amount with no interest until it has been paid in full to
the Office of Housing and Neighborhood Conservation.
All lender loans will be placed in either a first or second position on
the property, with the subsidy loan taking the next available position.
Lender terms of the loans will be 1.5 over prime for 5 years, and 2.0
over prime for 10 or 15 years.
Other resources combined into the program will be activity costs
attributed to investor's verifications, inspections and loan packaging.
Costs attributed to the origin of the loan such as initial inspections, and
project monitoring will be contributed by the Housing Division at an
operating and staff cost of $50,000.
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15. Please describe any opportunities or plans for innovative
uses of recycled or reprocessed building or construction
materials in your project. (Examples of such materials may
be furnishings, concrete, insulation, etc.).
New Questions
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