ARLINGTON COUNTY, VIRGINIA County Board Agenda Item Meeting of January 21, 2006 DATE: December 19, 2005 SUBJECTS: A. Allocation of Fiscal Year (FY) 2006 Affordable Housing Investment Fund (AHIF)/HOME Investment Partnership Program (HOME) funds to Robert Pierre Johnson Housing Development Corporation (RPJ) as a loan to assist with the rehabilitation of two 11-unit buildings located at 123 S. Courthouse Road and 2011 S. 4 th Street. B. Allocation of Local Public Assistance Cost Allocation Plan (LPACAP) Supportive Housing Funds to RPJ as a grant to assist with the rehabilitation of two 11-unit buildings located at 123 S. Courthouse and 2011 S. 4 th Street. C. M. RECOMMENDATIONS: 1. Allocate up to $1,642,100 of AHIF/HOME (001.713) to RPJ to assist with the cost of the rehabilitation of two 11-unit apartment buildings, located in the Penrose neighborhood. The financing assistance is in the form of a subordinated loan to RPJ, subject to the terms and conditions outlined in this report. Allocate $40,000 in LPACAP Supportive Housing Funds as a grant to assist with the rehabilitation of two 11-unit buildings located at 123 S. Courthouse and 2011 S. 4 th Street. 2. Authorize the County Manager to execute the required documents for a loan of up to $1,642,100 to RPJ, subject to approval by the County Attorney. Authorize the County Manager or his designees to negotiate and sign a grant agreement to provide RPJ with $40,000, with the approval of the County Attorney. 3. Authorize the County Manager, with the concurrence of the County Attorney, to act as the County Board s representative in approving financing or program revisions that are necessary to remove any ambiguity or inconsistency or which improve the County s financial security or financial position, and which changes do not adversely affect the County financially, prior to or after execution of the County s financing documents. ISSUE: Should the County provide a loan and a grant to RPJ for the rehabilitation of two 11- unit (totaling 22 units) apartment buildings? County Manager: County Attorney: Staff: Betts Abel, Winsome Craig, David Cristeal, CPHD, Housing Division Cynthia Stevens, DHS, Supportive Housing
SUMMARY: RPJ, an Arlington based non-profit, has requested up to $1,642,100 from the AHIF/HOME funds to be combined with other resources for the rehabilitation of two properties located in the Penrose neighborhood. The Department of Human Services (DHS) is recommending a grant contribution of $10,000 per unit in LPACAP funds for the four units that RPJ has agreed to set aside as supportive housing. RPJ acquired the properties in August 2005 and plans to rehabilitate the apartment interiors and convert a total of five 1-bedroom-with-den units into 2-bedroom units. RPJ will make two units at 123 S. Courthouse Road fully accessible. BACKGROUND: The property on S. 4 th Street is a small three-story garden apartment building with a basement built in 1955 and is located in the Penrose neighborhood. It consists of eight one bedroom units and three one bedroom with den units (11 total units). The property on South Courthouse Road, built in 1952, is similar in size and configuration. RPJ recently purchased the properties and has discussed several redevelopment options with staff. (See map attached.) Redevelopment Plan: RPJ proposes to update the electrical systems, bathrooms and kitchens and to resurface the parking lots. Three one bedroom and den units in the 4 th St. building and two in the Courthouse Road building will be converted to two bedroom units. Two units at Courthouse Road will become fully handicapped accessible. Proposed Affordable Housing Plan: Sixteen of the 22 units in the project will be affordable to households at up to 60% of Area Median Income (AMI). Of these affordable units nine will be designated as HOME units, of which two in the Courthouse Road building will be affordable to households at up to 50% of the AMI. Rents of the four supportive housing units will be subsidized with Housing Choice Project Based Vouchers (HCPBV), local project based rental assistance, and/or LPACAP supportive housing funds. Of the total 22 units, the remaining six units, three in each building, will be affordable to households earning between 60% and 80% AMI. Proposed Rents Number of Affordable Units Monthly Rent Unit Size 80% AMI 60% AMI 50% AMI w/o utilities 1-Bedroom 4 units $980 1-Bedroom 11 units $877 1-Bedroom 2 units $745 2-Bedroom 3 units $1,020 2-Bedroom 2 units $1,100 Total 6 units 14 units 2 units Handicapped Accessibility: Two units in the Courthouse Road building will be fully accessible. - 2 -
County Funds Requested: RPJ is requesting an AHIF/HOME loan of $1,642,100 and a LPACAP grant of $40,000. Rents of the four supportive housing units will be subsidized with HCPBV, local project based rental assistance, and/or LPACAP supportive housing funds. Proposed Financing Plan: SOURCES OF FUNDS: USE OF FUNDS: VHDA Housing Fund $ 615,500 Acquisition $ 2,860,000 VHDA Bond $ 618,000 Const./Hard Costs $ 959,950 Va DHCD AHPP. $ 500,000 Soft Costs $ 268,650 VHDA HIP $ 643,000 Deferred Developer $ 30,000 Fee LPACAP $ 40,000 AHIF/HOME $1,642,100 Total Sources $ 4,088,600 Total Uses $4,088,600 DISCUSSION: Although the redevelopment of these properties has a higher than usual cost per AHIF/HOME unit, the project is justifiable in the current Arlington housing market for the following reasons: This project would continue to serve existing low and moderate income tenants. According to a tenant survey, the majority of the tenants are below 60% AMI. Five 1-bedroom-and-den units will be converted into 2-bedroom units for families. Two supportive housing units, made available to DHS clients, will be provided in each building, for a total of four supportive units. Rents for these households will be subsidized with HCPBV, local project based rental assistance, and/or LPACAP supportive housing funds RPJ is filling a niche of acquiring and rehabilitating small rental properties as other nonprofits such as AHC and APAH concentrate on large properties and no longer seem to be interested in smaller projects like this one. RPJ is a Community Housing Development Organization (CHDO) and will be only the second active CHDO in Arlington that will be eligible to receive federal funds designated specifically for CHDOs. AHC is the other non-profit CHDO. RPJ s request equates to an AHIF/HOME amount of $102,631/affordable unit which is high for an acquisition/rehab project. This is a result of the high acquisition cost of $130,000 per unit. Other small projects (11 units or less) in the County have recently been listed at $160,000 per unit. The highest per affordable unit costs to date are the new construction projects of Brunner Place (four affordable units), which was a mix of new construction and rehab ($135,000) and the six-unit Cameron Commons II ($101,500). RPJ has looked into all other sources of funding in response to staff s desire to lower the amount of AHIF/HOME funds/unit request and has received a commitment from the Virginia Housing and Development Authority (VHDA) for the primary financing for the project (a total of $1,867,500) as well as receiving $500,000 from the Virginia Department of Housing and Community Development (DHCD). - 3 -
Affordable Housing Policy: This proposal meets several of the County Board adopted Housing Goals and Targets, as follows: Goal 1. Support for persons with disabilities through two accessible units and four supportive housing units; Goal 2. Safe and decent housing (all of the units will be renovated, improving their livability and increasing their lifespan); Goal 3. Maintain the supply of affordable market rate units (the AHIF/HOME loan agreement will ensure affordability for 30 years); and Goal 5. Increase the number of units with two or more bedrooms (5 one-bedroom units will be converted into 5 two-bedroom units). Supportive Housing Plan: This project fulfills the Supportive Housing Plan strategy # 2 that calls for a portion of committed affordable rental units supported by County funds to be designated as supportive housing and linked to rental subsidy programs. Relocation: During the rehabilitation tenants will be temporarily relocated and will not be displaced. The relocation plan will be reviewed on January 18, 2006, by the Tenant Landlord Commission, which will send a letter to the County Board. Schools Impact: Arlington Public Schools (APS) reports that four students currently live at 2011 S. 4 th Street. The proposed redevelopment should have little impact on school population. Civic Association/Community Process: RPJ met with representatives of the Penrose Neighborhood Association in July 2005 and received an e-mail message from the Co-presidents supporting the two projects in their neighborhood. Housing Commission: RPJ met with the Citizens Advisory Commission on Housing (HC) in December and will return to the HC on January 12, 2006. The HC will send a separate letter to the County Board with its recommendation for this project. Loan Terms and Conditions: Allocate up to $1,642,100 in FY 2006 AHIF/HOME funds to RPJ as a loan to assist with the rehabilitation of two 11-unit buildings located at 123 S. Courthouse Road and 2011 S. 4 th St. and allocate $40,000 of LPACAP Supportive Housing Funds to RPJ as a grant to assist with the rehabilitation of the two buildings, subject to the following terms and conditions: - 4 -
1. The County Board s commitment of the AHIF/HOME loan to RPJ is a Conditional Commitment contingent on the completion of the Environmental Review Process and receipt by the County of a release of funds from HUD under 24CFR Part 58. 2. The applicant shall execute a generally standard AHIF/HOME Program Agreement and loan instruments for the County loan in a form acceptable to the County Manager and the County Attorney. 3. The $1,642,100 AHIF/HOME loan shall be in the form of a subordinated residual receipts loan, secured by a deed of trust, and repayable from the cash flow of the property. This loan will be made at an interest rate of two percent (2%), compounded annually over a term of 30 years 4. The applicant must secure all commitments of remaining funds to complete the development budget prior to disbursement of any funds from the County. 5. The affordable housing set-aside for the rental units will be as follows: two of the rental units will be affordable to households earning up to 50% of the AMI and fourteen of them will be affordable to households earning up to 60% of the AMI, all for 60 years, as set forth in the chart on page three of this report. Six of the units will be affordable to households earning up to 80% of the AMI. The developer agrees that the affordable rents shall be established in accordance with HUD rent limits set for Arlington County. Rents shall not exceed the established affordability level for the unit size, minus a utility allowance (if applicable) as per schedule annually approved by HUD for Arlington s Section 8 Housing Choice Voucher Program. 6. For the full term of the AHIF/HOME loan, RPJ or its designee agrees to designate four units (three with one-bedroom and one with two-bedrooms) for DHS clients who need supportive housing. RPJ or its designee shall provide a minimum of four units affordable to DHS clients through one of two financing mechanisms: 1) if Housing Choice (HC) project based vouchers (PBV) are available, the non-profit affiliate developer or its designee shall utilize the HCPBV to subsidize rents of four DHS clients, or 2) if HCPBV are not available, the affiliate developer or its designee shall utilize DHS local project based rental assistance and/or DHS LPACAP funds to subsidize rents of DHS clients. 7. The AHIF Agreement between the County and RPJ or its designated ownership affiliate shall include an Affirmative Marketing Plan in substantially that form as required by HUD for the federal HOME program and including, at a minimum, the elements specified in the Developer s final Affordable Housing Plan and Affirmative Marketing Plan. 8. The developer agrees to provide two affordable two-bedroom units as Type A dwelling units in compliance with the International Construction Code (ICC) 1107.5.4 and American National Standards - ANSI A117.1 for persons with physical disabilities and to fully cooperate with an affirmative marketing plan to market these units to households in need of such accommodation. - 5 -
9. The applicant, heirs or assigns shall provide a purchase option including a right of first refusal to the County or its designee, if RPJ decides to sell the property any time prior to the repayment of the approved County loan, wherein the County or its designee shall have the right, but not the obligation, for a period of up to 180 days, to purchase the property at 90 percent of its then-appraised fair market value, less outstanding principal on County loan. FISCAL IMPACT: The current AHIF/HOME balance for the FY 2006 is $10,734,049. If $1,642,100 in AHIF/HOME is allocated, the balance will decrease to $9,091,949. Another board report on this agenda is requesting a reservation of $3,297,031 in AHIF/HOME funding which will further reduce the AHIF/HOME funds to $5,794,918. If approved, the $40,000 grant would be funded from already appropriated LPACAP supportive housing funds and requires no local funding or increase in net tax support. This allocation, less expended, obligated, and projected costs, would leave a balance of approximately $1.59 million in the LPACAP supportive housing fund. - 6 -
- 7 -