92-146 RESOLUTION NO. 92R-146
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF ANAHEIM APPROVING AN
AMENDMENT TO THE HOUSING ELEMENT OF
THE AHAHEIM GENERAL PLAN DESIGNATED
AS AMENDMENT NO. 328, ADDING APPENDIX
D THERETO.
WHEREAS, the City of Anaheim, pursuant to the
recommendations of the Planning Commission of the City of Anaheim,
adopted a General Plan for the City of Anaheim; and
WHEREAS, on the 15th day of June, 1992, the city Planning
Commission of the City of Anaheim did hold a public hearing to
consider a General Plan Amendment. The General Plan Amendment does
consider amending the Housing Element of the City of Anaheim by
adding Appendix D thereto (relating to housing projects at risk of
losing affordability controls); and
WHEREAS, at said public hearing, the City Planning
Commission did duly adopt its Resolution No. PC92-70 containing a
report of its findings, a summary of the evidence presented at said
hearing, and recommending that said Amendment to the General Plan
designated as Amendment No. 328 be adopted by the City Council
adding Appendix D to The Housing Element of the General Plan of the
City of Anaheim; and
WHEREAS, upon receipt of said Resolution, summary of
evidence, report of findings and recommendations of the City
Planning Commission, the City Council did fix the 23rd day of June,
1992, as the time, and the City Council Chamber in the Civic Center
as the place for a public hearing on said proposed Amendment No.
328 and did give notice thereof in the manner and as provided by
law; and
WHEREAS, the City Council did duly hold and conduct such
public hearing and did give all persons interested therein an
opportunity to be heard, and did receive evidence and reports and
did consider the recommendations of the City Planning Commission;
and
WHEREAS, the City Council does find and determine that
Amendment No. 328 adding Appendix D to the Housing Element of the
General Plan of the City of Anaheim should be approved.
NOW, THEREFORE, BE IT RESOLVED by the city Council of the
City of Anaheim that Amendment No. 328 adding Appendix D to the
Housing Element of the General Plan of the City of Anaheim in the
form attached hereto be, and the same is hereby, approved.
Amend #328
BE IT FURTHER RESOLVED that the Planning Department be,
and it is hereby, instructed to amend the General Plan to conform
to General Plan Amendment No. 328 as herein adopted and approved.
THE FOREGOING RESOLUTION is approved and adopted by the
City Council of the City of Anaheim this 23rd day of June, 1992.
ATTEST:
CITY CLERK OF T 2ITY OF ANAHEIM
JLW:dnl
R34A328.12
062492
- 2 -
Amend #328
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.
CITY OF ANAHEIM )
I, LEONORA N. SOHL, City Clerk of the City of Anaheim, do hereby certify that the foregoing Resolution No. 92R-146
was Introduced and adopted at a regular meeting provided by law, of the Anaheim City Council held on the 23rd
day of June, 1992, by the following vote of the members thereof:
AYES: COUNCIL MEMBERS: Simpson, Ehrle, Pickler, Daly and Hunter
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
AND I FURTHER CERTIFY that the Mayor of the City of Anaheim signed said Resolution No. 92R-146 on the 24th
day of June, 1992. ,~
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Anaheim this 24th
day of June, 1992.
CITY CLERK OF THE CITY OF ANAHEIM
(SEAL)
I, LEONORA N. SOHL, City Clerk of the City of Anaheim, do hereby certify that the foregoing is the original of
Resolution No. 92R-146 duly passed and adopted by the City Council of the City of Anaheim on June 23, 1992.
CITY CLERK OF THE CITY OF ANAHEIM
APPENDIX D
CITY OF ANAHEIM
HOUSING ELEMENT AMENDMENT
Assessment of the Preservation of
Assisted Housing Developments
in the City of Anaheim
June 1992
TABLE OF CONTENTS
I. INTRODUCTION ...................................... 2
II. IDENTIFICATION/INVENTORY OF AT RISK
PROJECTS, DISCUSSION AND COST ANALYSIS ............... 2
III. ANALYSIS OF RESOURCES FOR PRESERVATION ............... 13
IV. QUANTIFIED OBJECTIVES ............................... 18
~ V. DEVELOPMENT OF PROGRAMS ........................... 20
VI. SUMMARY .......................................... 2.3
I. INTRODUCTION
Appendix D of the City of Anaheim 1989 Housing Element has been prepared to address
housing projects at risk of losing affordability controls during a ten year planning period. The
planning period corresponds with the 5 year planning period of the 1989 Housing Element; July
1, 1989 through June 30, 1994; and an additional 5 year period from July 1, 1994 through
June 30, 1999.
As a result of recent state legislation (SB1019), Government Code Section 65302(c) requires
the preparation of a Housing Element as part of a jurisdiction's General PJan. The City of
Anaheim adopted their Housing Element in 1989 and amended the element in 1990, pursuant
to Section 65302(c). The Element was reviewed by the Planning Commission, adopted by the
City Council and subsequently reviewed by the State of California Department of Housing and
Community Development. The Housing Element was found to be in compliance with Housing
Element Law (Article 10.6 of the Government Code).
In 1989 an amendment to State Planning Law (Chapter 145, Statutes of 1989, Amended
Section 65583 of the Government Code) was passed which mandated that an analysis and
program for preserving low income housing be completed by cities and counties. The purpose
of the Housing Element General Plan Amendment No. 328 is to complete an assessment of the
preservation of assisted housing developments in the City of Anaheim. State law requires that
this mandatory inventory and analysis be adopted as an amendment to the City Housing
Element before July 1, 1992. The Housing Element Amendment is drafted to be inserted in
the existing Housing Element as Appendix D.
II. iNVENTORY DISCUSSION
According the Section 65583(a)(8) the inventory shall include all multi-family rental units which
are assisted under any number of Federal Department of Housing and Urban Development
(HUD), state, local and/or other programs, and which are:
· Eligible to change to non-low income housi'ng uses due to termination of
subsidy contract, mortgage prepayment, or expiring use restrictions; and
· Eligible within the ten year period following the statutory adoption of the
Housing Element Amendment,
The inventory of these affected units is shown in Table 1,
2
Sources: In order to assess the projects which could potentially convert to non-low income
housing by loss of subsidies, use restrictions, Federal contracts, etc., several sources were
used. For Federally Subsidized or Assisted projects the 1990 updated inventory of Federally
Subsidized Rental Units at Risk of Conversion prepared by the California Housing Partnership
Corporation, the California Coalition of Rural Housing and tl~e California Department of Housing
and Community Development was utilized. The Village Center Apartments Project is the only
project at risk of conversion during the ten year planning period which received Federal
Assistance. The project utilized a FHA Section 221 (D)(4) loan {New Construction) and has a
Section 8 Contract renewable at five year intervals with the next optional extension due
August 24, 1994.
Other sources reviewed to compile the inventory included primarily Anaheim Community
Development staff involved in the on-going monitoring of affordable housing units within the
City. The Community Development Department employs one full-time staff position
responsible for tax-exempt bond administration of regulatory agreements (mutti-;amily revenue
bonds), as well as all other Affordable Housing agreements. The bond administration fees are
sufficient to allow program monitoring of other affordable units developed under the Density
Bonus Program and Senior Housing Ordinance. Therefore, an "up-to-date" inventory of all units
with potential expiration of affordability terms was easily accessed through the current city
data base.
PROJECTS:
· ~, Project 1: Village Center Apartments
200 E. Chartres Street
Anaheim, Ca 92805
Name/Address of Property Owner: Village Center Apartments
8383 Wilshire Blvd
Beverly Hills, Ca 90211
Type of Governmental Section 221(D)(4) WAH market rate mortgage
Assistance Received: and Section 8 New Construction Opt-Out Contract.
3
TABLE I
C~TY OF ANAHEIM
ASSISTED HOUSING INVENTORY-ANAHEIM
UNZTS AT RISK OR CONVERSION FROM JULY 1, 19B4 THROUGH JULY 1, 1999
roj. ProJa~ Name Owner Type(a} # of Type/1.ength Earliest # of # of Tenant Type Bedroom Date Condition
o. Address NamelAddreae of Gov't Sect. 8 of Afford. Potential Units AFFD {Eld, Faro.) Mix Built
(Incl. 23p) Tel. # Assist. Contracts Controls Conversion Total Units
Long Beach CA 90503
Anaheim. 92801 1779 Colonial Ave Financing
714-637-2377
Irvine CA 92720
714-720-0330
Earliest Possible Change The Section 8 New Construction Opt-Out
from Low-Income Use: Contract is up for renewal on August 24, 1994.
Total Number of Low-Income
Units that could be lost: 100
Village Center was constructed in 1979 under a 221 (D)(4) market rate mortgage provided by
the Federal Government. The loan was for $2,289,600 to be paid over a 40 year period at an
8% interest rate. This ~oan was issued to a for-profit organization for the construction of
elderly housing (WAH). WAH projects require at least one of the tenants of the unit to be 62
years of age or older. There are no prepayment penalties connected to the loan. Prepayment
of the loan does not affect the use restrictions that are attached to the property.
The use restrictions for Village Center are a result of the Section 8 New Construction Opt-Out
Contract (Section 8 Contract) which was attached to the property when the market rate
mortgage was issued on August 15, 1979. The purpose of the Section 8 Contract is to ensure
affordability of the 100 one-bedroom units as elderly housing,
The Section 8 Contract for Village Center is a typical Section 8 rent subsidy arrangement. The
senior citizens pay their portion of the rent, which is 30% of their adjusted gross monthly
income, to the owner or manager of the development and the Federal Government, through the
Department of Housing and Urban Development (HUD) (processed by the Anaheim Housing
Authority), pays the remaining 70% of the fair market rent. The Section 8 Contract is due to
expire August 24, 1994. The property owner will have the option to renew the Section 8
Contract with HUD at this date for an additional 5 year term. -:
If the property owner determines that it is no longer in their best interest economically to
continue the Section 8 Contract, then one year prior to the expiration of the Contract they are
required to ~ile a Notice of Intent {NOI) with HUD to indicate their intention of converting the
units from a low-income use,
Once a NOI has been filed with HUD, there are a number of steps the property owner must go
through to successfully opt-out of the Section 8 Contract. During this process HUD will offer
the property owner incentives to maintain the Section 8 Contract, The incentives could
potentially include refinancing their mortgage at a lower interest rate, or renegotiating the rents
4
charged for the units. If at any point during the process, the property owner fails to complete
a step HUD has outlined as necessary for the opt-out to occur, the Section 8 Contract rolls over
automatically for the additional 5 year period, If the property owner chooses to opt-out of the
Section 8 Contract, this will represent a decrease of 13% of the rent restricted affordable
senior housing stock in the City of Anaheim (100 of 748 affordable units).
Risk of Conversion
According to analysis and survey information obtained by the Anaheim Community
Development Department, it is unlikely that in the next two years (when NOI must be filed) that
the property owner will decide to opt-out of the Section 8 Contract. The current real estate
market in Orange County and Southern California is not expected to substantially increase in
value or market rents in the next two years. Further, a significant amount of senior housing
has been constructed in Anaheim since the adoption of a senior housing ordinance in 1985
(1,842 units). Therefore, this represents a very competitive market segment. Because of other
use restrictions requiring this housing project to remain available for seniors, it is clearly in the
owners best economic interest to continue to participate in the Section 8 Program and receive
fair market rent and a strong occupancy rate.
Cost Analysis
According to Section 65583(a)(8)(B) the cost of producing new rental housing comparable in
size and rent levels to replace the units which could convert and the cost of preserving all of
the developments at risk of converting must be included in the Housing Element Amendment.
If these costs cannot be estimated directly it is permissible to describe whether such costs are
anticipated to be higher or lower than the replacement estimates, and for what reason, as well
as the magnitude of the differences in the estimates
Replacement
In order to construct a new seniors housing project, a cost of $64,00 per square foot of
building area is estimated using Craftsman Building Cost estimator (using locatiohal index). The
project consist of approximately:
600 sq. ft. units x 100 units -- 60,000 sq. ft.
20% additional floor area (i.e., corridors) = 12,000 sq. ft.
Total building area ---- 72,000 sq. ft.
1) Construction Cost: 72,000 sq. ft. x $64,00 = $4,608,000
2) So. ft Costs (financing costs, architectural, engineering) = $859,950 ,
3) Land Cost, site area: 1.,5 acres x $750,000 = $1,125,000
$6,592,950
Contingency 20% = $1,:318,590
Total Replacement Cost = $7,911,540
Preservation
In order to preserve the units at the rent levels currently charged to the elderly tenants, a direct
replacement subsidy would be necessary. This could be accomplished in one of the following
manners:
1) Continue to pay the rent differential from a funding source other than the Section 8
Program, i.e., Redevelopment Housing Set-Aside funds:
A) 100 units x 8400 (ave. HUD HAP payment for project) Housing Assistance
Payment: 840,000 per month x 12 = $480,000 per year.
B) From 1994 through 1999 total subsidy required 5 years x 480,000
$2,400,O00.
2) Assist a non-profit housing corporation to purchase the project with an estimated value
assuming market rate rents:
Assumptions: 8% interest rate
8750 per month rent
20% management reserves, etc.
30 year loan
$8,177,009 value
Given the option discussed above, it would be very difficult to either construct a new senior
project of 100 units or assist a non-profit corporation to acquire the existing project because
both of these options are based on the abiliw to receive market rate rents. The goal of
continuing the affordable rents would take a much greater capital investment beyond the costs
associated directly with developing the units to meet the rent levels currently in place.
6
Therefore, the goal of maintaining affordable rents could only be economically achieved throuqh_
preservation of the units by a replacement subsidy pro,ram; by the reduction of the principle
amount of the mortgage; or by lowering the interest rate on the present loan. If these options
are not feasible, a rent subsidy could be paid monthly, annually or less frequently to adjust
rents to an affordable level. These options would appear to be acceptable to the property
owner due to the competitive nature of senior housing in Anaheim. Since the entitlements for
this project were issued as a variance (No. 2835), the use is restricted to the elderly for the life
of the project and therefore the fair market rent received by the owner is an incentive to
continue the project with affordable rents,
PROJECTS 2, 3, 4, 5 6, 7
Projects 2 through 7 all received assistance through multi-family tax exempt bond financing
with regulatory agreements expiring during the ten-year planning period. Project Number 2
(Harborcliffe) and Project Number 7 {West Anaheim Royale) received bond financing through
the Anaheim Housing Authority while projects 3, 4, 5 and 6 received bond allocations via the
Anaheim Housing Authority's participation in a County of Orange Pooled Bond Issue as
indicated below:
Project No. 2 Harborcliffe Anaheim Housing Authority
21'70 S, Harbor Blvd Bond Issue
Anaheim, Ca 92801
Project No. 3 South Ohio Street Apts County Pooled Bond Issue
205 S. Ohio St
Anaheim, Ca 92805
Project No. 4 Lincoln Court Apts County Pooled Issue
2570 W. Lincoln Ave
Anaheim, Ca 92801
Project No. 5 Westport Villas County Pooled Issue
2300 Westport Dr,
Anaheim, Ca 92806
7
Project No. 6 127 W. Cypress St. County Pooled Issue (Elderly)
Anaheim, Ca 92805
Project No. 7 West Anaheim Royale Anaheim Housing Authority
641 S. Beach Blvd. Bond Issue
Anaheim, Ca 92804
All of the above bond issues with the exception of West Anaheim Royale were constructed in
1985 and 1986, and utilized pre-tax reform affordability requirements. This results in shorter
term of affordability, ten years, and less restrictive affordable requirements; households earning
80% or less of the median income with rents not to exceed 30% of 65% of the median income
adjusted for household size. Because project numbers 2 through 6 were constructed at
relatively the same time and have identical terms and conditions of affordability, they will
receive one analysis. West Anaheim Royal~ was constructed more recently (1988) and is a
congregate care facility for the elderly with different terms and conditions of affordability from
the other bond issue projects and will therefore be analyzed separately.
PROJECTS 2, 3, 4, 5, 6
Name and Address of Property Owner: See Table 1
Type of Governmental Assistance: Multi-Family Tax Exempt Bond Issue
~ Earliest Possible Change from Low-Income Use: Project 2 7/96
Project 3 "- 7/96
Project 4 5/96
Project 5 2/96
Project 6 3/95
Total Number of Low-income Units that could be Lost: 48
The five bond issue projects result in the potential loss of 48 lower income units. This loss of
affordable units is not as significant as Project Number 1 because the affordable rent paid by
the tenant is only marginally less than the market rate rent within the same project. This
margin between affordable rent and market rent has been steadily reduced during the past three
8
years due to the surplus of avai(able (market rate) apartment units in the area. Market rate
rents have essentially leveled off since 1987 while the affordable units under the tax exempt
program have been allowed annual adjustments upward. The result is a comparative rent
structure between market rate and affordable rents with the affordable rents either equal to the
market rents or only slightly below, say $50.00 ~ $75.00 per month less for a comparable unit.
This inequity has been addressed on newer projects in two areas: new bond issue projects
have 30 year affordability, rents are established at 30 of ,50% median income; occupancy
limited to households not earning mere than 50% of the median income; rent adjustments to
be the lesser of the Section 8 annual adjustment factor or the average increase in market rate
rents of similar units within the project during the preceding 12 months.
The bond units listed above may again become a valued affordable housing product if market
rents escalate at more than. 10% per year through the expiration of the regulatory agreements.
If this were to occur, then the rent restrictions would maintain the cap on the affordable rents
resulting in a truly below market rate affordable unit.
Risk of Conversion
When these regulatory agreements expire the owners will have the opportunity to convert the
units to market rate units. This will likely occur and will neither have a positive nor negative
economic impact on the property owner since the rental income will most likely remain
constant. However, an increase in the owner's property Value for the project will surely occur
with the expiration of restrictions and covenants pertaining to the maximum rent charged and
occupancy. It is doubtful that a public agency will be interested in maintaining the current
affordability controls due to the evidenced lack of results caused by certain market conditions.
However, it is possible that new affordability r~strictions could be negotiated in return for a
refunding of the bond issue for each project. Interest rates have decreased since the original
bond issue and therefore a refunding at a lower interest rate may be an incentive to increase
the terms and conditions' of affordability utilizing the Housing Authority's current program.
Cost Analvsis:
Replacement
A total of 48 units could be lost to conversion during the ten-year planning period which
received multi-family tax exempt bond financing. The direct replacement through new
9
construction could be accomplished as part of one project comprised of 250 units (20 of units
affordable under a new tax exempt bond issue). The 48 units would be for very low income
tenants and be part of a mixed income project.
Cost of Development:
Ave. 750 sq. ft. units x 250 units = 187,500 sq. ft.
20% additional floor area (i.e., corridors) = 37,500 sq. ft.
Total building area: = 225,000 sq. ft.
1) Construction cost: 225,000 sq. ft. x $64.00 = $14,400,000
2) Soft Costs (financing costs, archit., eng.) = 2,835,000
3) Land cost, site area: 6 acres x 750,000 -- 4,500,000
Total replacement cost = $21,735,000
The new construction replacement cost is $21,735,000. Assuming land availability, medium
density zoning, a developer capable of achieving a letter of credit from an "A" rated lender and
sufficient equity, this project could be achieved. If bond financing is obtained the project
should be self-sustaining with little or no additional subsidy by a public agency. This is a
feasible alternative, however, more costly and time consuming in bringing the units to
completion than the preservation alternative as discussed below.
Preservation,
To preserve the 48 units in place, and to reduce the rent and occupancy income to correspond
to the Housing Autbority's current policy, a bond refunding could be used. The Housing
Authority could reissue the full bond amount at a lower interest rate with the cost savings used
to reduce rents and continue affordability for an additional 30 years. The Housing AuthoriW
has conducted one bond refunding to date for a 117 unit senior housing project which lowered
the interest rate from 7.5% fixed rate to 4.5% variable rate. The cost to the Housing Authority
is minimized with the owner paying all issuance fees (up to 2% of the bond amount) from the
refunding amount. This appears to be the most cost effective means to continue the
affordability for these 48 units while revising the terms and conditions to achieve deeper
affordability. This alternative would be based on the legal authority to provide for a bond
refunding. If prohibited within the bond documents, this option may be reviewed and a direct
subsidy approach used as discussed in project 1.
10
Project 7: West Anaheim Royale
G41 S. Beach Blvd
Anaheim, Ca 92804
Name/Address of Property Owner: Goldrich and Kest
5150 Overland Ave
Culver City, Ca 90231
Assistance Received: Multi-Family Tax Exempt . Revenue Bond
Financing
Earliest Possible Change
from Low Income Use: March, 1999 ~
Total Number of Low Income
Units that Could be Lost: 20
The West Anaheim Royale Project differs from the other tax-exempt bond projects as the
housing qualifies as a congregate care facility for the elderly. The project was constructed in
1988 and consists of 100 units of which 20 are affordable under the State Board and Care
rate. The affordable rents are the lesser of the Social Security Index (SSI) Board and Care rate,
or 90% of SSI rate. Current affordable rents within the project are $660,00 per room with two
occupants per room ($330 per occupant). If this project were to convert in March of 1999,
the loss of these units, which include certain board ;and care services, would be difficult to
replace elsewhere in the City. Therefore, along with the Village Center project, this congregate
care facility should be a priority for preservation activity.
Risk of Conversion
Tl~e potential conversion of these restricted units is likely to occur due to the market demand
for care services. It is possible to achieve double the rent received on the restricted units if
they were to convert to market rate rents, i.e., $1,300 per room, $650 per occupant monthly.
By doubling the rent to 81,300 per unit for 20 units the gross operating income is increased
by 812,800 per month. This creates a strong incentive 1o the owner to allow the expiration
of the affordability terms and conditions under the regulatory agreement tO occur.
11
Cost AnaIvsis
Replacement
In order to replace 20 units of congregate care within the City, a land area of approximately
one acre would be needed. Assuming neighborhood support, the project could be 100%
affordable. The cost to construct such project would be approximately as follows:
Ave. 600 sq. ft. units x 20 units = 12,000 sq, ft.
20% additional floor area (i.e., corridors) = 2,400 sq. ft.
Total building area = 14,400 sq. ft.
1) Construction cost: 14,400 sq. ft. x 964.00 = 9921,600
2) Soft costs (financing costs, arch., eng.) = 9250,000
3) Land cost, site area: 1 acre x 9750,000 = 9750,000
Total replacement cost = 91,921,600
The new construction replacement cost is 91,921,600 or 996,080 per unit. Again, this
assumes land availability, developer interest and community acceptance. Considering these
variables and the high cost of new construction, a deep subsidy by a public agency would be
required to reduce the rents to the 9650 per month affordable rent level now in place in the
project. For example, with tile "cost to build" at 996,080 per unit the rent level Zo support this
debt, assuming a debt service average of 115%, is 9810 per month. If a 50% care, property
management and reserve fee is added to the minimum debt service amount the rent increases
to 91,215. This is prior to rsceiving any developer profit which at 12% would again increase
the unit rent resulting in a rent of 91,360.
The rent needed for the new project as seen above replicates the market rents for the existing
project. Therefore, it would be more efficient to work with the existing project to preserve the
20 units rather than construct 20 new units resulting in the same or additional subsidy
requirement.
Preservation
Preservation is the preferred alternative for this project as discussed above. The most likely
alternative for preservation would be a bond refunding as discussed for Projects 2 through 6
if legally feasible. Other alternatives may include a monthly subsidy or an up-front subsidy for
a specified period of time as discussed for Project 1. Sale of the project to a non-profit is also
12.
an alternative, however, a subsidy may still be necessary due to the costs associated with a
well run and managed congregate care facility.
III. ANALYSIS OF RESOURCES FOR PRESERVATION
According to Section 65583(a)(8)(c), the Housing Element Amendment sbould identify public
and private nonprofit corporations which have legal and managerial capacity to acquire and
manage assisted housing developments, Inclusion on 'this list should be based on a
corporation's expression of interest in acquiring and managing such projects.
Public A~enc¥ and Non Profit Corporations
The City of Anaheim operates an extensive variety of housing programs through the Housing
Authority and Affordable! Housing Development program. In addition to existing programs, as
a resource for preservation, the Community Development Department will include the following
activities:
Evaluation of legal and procedural framework for preservation of at risk units within the
City.
Identification and monitoring of threatened projects.
3} Analysis of factors that influence an owner's decision to terminate the operation of the
units at rise of converting.
4} Determination of the feasibility of an entity acquiring and preserving the units at rise of
conversion.
5) Analysis of Federal, State and local financial incentives available to deter the conversion
and assist with the acquisition and preservation of units at risk of conversion.
6) Provision of technical assistance to developers, nonprofit corporations and residetit councils
interested in negotiating the acquisition of units at rise of conversion.
In order to ensure the effectiveness of this resource, it is the intent of the City to identify all
interested public agencies and nonprofit housing corporations that have legal and managerial
capacity to acquire and manage assisted housing developments. The following groups have
been included on the State Department of'HCD's list of entities interested in Right of First
Refusal program for Orange County:
1) H.O.M.E.S. Inc 1905 E. 17th St,, #217
Santa Ana, Ca 92701
(714)836-6543
13
2) Twelve Pak Enterprises P.O. Box 544
Pasadena, Ca 91102
(818)440-0969
3) Homeaid 1330 S. Valley Vista Dr.
Diamond Bar, Ca 91765
(714)396-9993
4) Southern Presbyterian Homes 1111 N. Brand Blvd., Ste 300
G~endale, Ca 91202
(818)247-0426
5) Golden State Mobilehome 1479 Moreno Blvd., #B19
Owners League, Inc. San Diego, Ca 92110
(619)276-1621
6) Ralph F. Currico 18107 Hwy 173
Hesperia, Ca 92345
(619)389-2413
7) Flory, Olson & Van Osdel 11711 Sterling Ave., Ste 13
Riverside, Ca 92503
(714) 687-5484
8) County of Orange/St. Vincent De Paul 180 Cypress ~"
Orange, Ca 92666
(714)547-5566
9) Zucker Systems 3911 California St.
San Diego, Ca 92110
(619)497-2297
10) Jamboree Housing Corp. 17200 Jamboree Road, Ste O
irvine, Ca 92714
(714)263-8676
14
In addition to these groups, there are presently two community based nonprofit housing
development corporations operating in Anaheim which may have a strong interest and capacity
to acquire and manage subsidized housing and other housing at risk of conversion. These
groups include:
1) Orange County Community 1833 E. 17th St., Ste 207
Housing Corporation Santa Aria, Ca 92701
(714)558-8161
2} Shelter for the Homeless 8291 Westminster Blvd. Ste. 170
Westminster, Ca 92683
(714)897-3221
While the City of Anaheim operates its own Housing Authority and implements housing
programs financed through the Anaheim Redevelopment Agency, these governmental agencies
(as well as the City of Anaheim) do not currently own or operate any housing development.
However, contacts with other public agencies that have an interest in acquiring and managing
subsidized housing and other housing at risk of conversion will be conducted by the City.
Public Financing and Subsidy Prosrams
Under 'the provisions of the Low-Income Housing Preservation and Resident Homeownership
Act of 1990 {the Act), the owners of federal mortgage subsidized affordable housing interested
in continuing to operate the housing are entitled to incentives sufficient to yield eight percent
of the preservation equity of the project, limited by the federal cost limits and subject to
appropriations. Incentives available include rent increases, increases in Section '8 contract
rents, additional Section 8 certificates, access to excess reserves, or residual receipts, flexible
subsidies, or Section 241(d) insurance for capital improvements, equity take-out loans under
Section 241 (f), and possible redirection of Section 236 interest reduction payment to a second
mortgage. These incentives are neg9tiated by the owner and the U.S. Department of Housing
and Urban Development end must be sufficient to cover the annual authorized return, debt
service on any rehabilitation loan, debt service on the HUD mortgage, operating expenses and
adequate reserves.
Owners of federal mortgage subsidized affordable housing interested in a voluntary sale to a
priority purchaser, i,e., tenant council, nonprofit corporation or state/local agency, can trigger
15
the availability of HUD financial assistance subject to appropriations. Through this apprpach
HUD must provide assistance sufficient to enable acquisition at a purchase price not greater
than the project's preservation value, to pay the debt service on the mortgage, and debt service
on any rehab loan, to meet project operating expenses and adequate reserves and to receive
an adequate return on any cash investment made to acquire tim project. Priority purchasers
have access to the following assistance, some of which is unavailable to other qualified
purchasers: 1) Insurance for financing up to 95 percent of the preservation equity under the
Section 241 (f) program; 2) Grants up to the present value of the total of projected published
fair market rents for Section 8 existing housing for the next ten years; and 3) Reimbursement
for certain transaction expenses.
The Low-Income Housing Preservation and Resident Homeownership Act of' 1990 does not
cover Section 8 opt-outs and expirations, and owners retain the decision whether or not to
remain in the program after receiving an offer from HUD to increase the contract rents up to
the Section 8 existing fair market rent,
Additional resources available to assist in preserving units at risk of conversion include the
following:
Home Investment Partnership Act (HOME)
The City of Anaheim expects to receive $1,437,000 for fiscal year 1992-93. To the
extent permissible under federal regulations, the City is prepared to allocate a portion of
this funding toward preservation of affordable units. The use of this resource would
require inclusion of a program description for preservation during the fiscal year in which
assistance is anticipated. This funding level is expected to continue for the fiv~ and ten-
year planning period but is based on congressional and executive action and is therefore
not guaranteed.
Community Development Block Grant (CDBG)
The Ciw of Anaheim is an entitlement City and for fiscal year 1992-93 will receive
$2,629,000 from the federal government to implement this program. Typically, areas
receiving financial assistance include housing rehabilitation; public service; neighborhood
public facilities improvements; citizen participation; and administration. Given the pdority
established in recent legislation for the preservation of aftordure housing losing subsidies
and restrictions, it is fair to assume that the CDBG program will allow financing to be used
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to preserve units at risk of conversion. Therefore, this funding source could be accessed
to preserve units at risk. This funding source is similar to Number 1 and is an entitlement
which is essentially a year-to-year allocation.
3) Rental Section 8 Certificates and Rental Vouchers
Through the City's Housing Authority with funding provided by the federal government,
certificates and vouchers are provided for low income famiJies and individuals. The
Housing Authority may direct rental certificates ;and vouchers towards preserving units at
risk of conversion.
4) Housing1 Set-Aside Funds
The Anaheim Redevelopment Agency operates an active Housing Set-Aside program. The
annual budget is approximately $4 million and the agency has expended its annual budget ~1~
each year since the program's inception in 1989.. This housing fund is an appropriate and
allowable source of funds to preserve units at risk of conversion. One of the six programs
established is entitled "Affordable Housing Incentives". This program, which receives
approximately $700,000 annually, could be utilized to address expiring affordable housing
units.
5) Low-Income Housin~ Tax Credit (LIHTC)
The availability of federal and state tax credits may assist replacement housing
affordability or preservation of existing housing if substantial rehabilitation takes place.
The availability of this resource is dependent upon continuing legislative extensions.
6) Tax ExemrJt Bond Financino --
The Anaheim Housing Authority as well as the County of Orange has the capacity to issue
multi-family ["evehue bonds. The Anaheim Housing Authority has recently completed its
first refunding bond issue which substantially reduced the debt service requirements for
a t 1 7 unit affordable senior citizens' apartment project.
It is anticipated that the Housing Authority and ,County of Orange (through pooled bond
issues) will be active in utilizing this resource to offer incentives for preservation of
expiring bond issue units (refunding) and as an economic incentive to replace conventional
financing for other units at risk of conversion.
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7) Bond Fee.s
The Anaheim Housing Authority provides bond administration service (monitoring of
regulatory agreements) for a fee of 1/8 of 1% of the bond amount, This fee is used for
staff and administrative costs as well as for affordable housing development. The current
reserve is estimated at $300,000 during FY 1992-93.
8) Section 80peratinq Reserve
The Housing Authority receives administrative funds to implement the Section 8 program.
When a housing authority is well managed at an administrative cost less than the amount
received from HUD, the housing authority may retain the excess amount in an operating
reserve account. A minimum balance is required, but at certain times the housing
authority utilizes the excess reserve for affordable housing development.
The amoqnt available is difficult to establish given recent administrative costs incurred by
the Housing Authority in moving to s new building location. As funds are available, this
resource may be made available to preserve units at risk of' conversion.
IV. QUANTIFIED OBJECTIVES
According to Section 65583(B), localities are required to establish in their housing elements
quantified objectives for the maximum number of housing units that can be constructed,
rehabilitated and conserved over a five-year time frame. Tile objective for units to be
conserved should include a subtotal for the number of at risk units developed pursuant to
Section 65583(a)(8)(A).
During the current five-year planning period, July 1989 to July 1994, no housing projects are
at risk of conversion and, therefore, the number of conservation units is limited to other
activities. However, during the second five-year planning period, seven projects, as listed in
table 1, are at risk of converting to non-affordable housing. If all seven projects converted, 168
affordable units would be lost. It is the City's objective to retain all 168 units as affordable
housing through resources and activities previously discussed. Where preservation is found to
be feasible, the City will actively pursue and technically assist in retaining these affordable
units.
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Q_~g~ntified Obiectives 1989-1994
Income Group Construct Rehab~ Conserve2
Very Low (up to 50% median income) 1,489 690 7
Low (50% - 80%) 2,044 510 16
Moderate (80% - 120%) 1,834 3,500 35
Above Moderate (over 120%) 2,865 3,500 20
1) The 1989 Housing Element states that 14,300 housing units in the City are in need of
rehabilitation, of which 7,000 are occupied by lower income households. The City's objectives
are less than the projected "need" based on availability of financial resources necessary to
accommodate the rehabilitation of 14,300 housing units. Using CDBG and Redevelopment
Housing Set-Aside funding it is anticipated that $1.5 million could be expended annually for
rehabilitation of very low, low arid moderate income occupied units. This results in $7,500,000
for five years. Assuming an average rehabilitation loan of $25,000, 300 units could be
rehabilitated using public resources for low and very low income occupied units. The private
market may provide financing for the moderate income units in need of rehabilitation. This
assistance would be provided in the form of home equi{y loans. This number is difficult to
quantify since the City does not typically monitor this activity. The 7,000 units represents all
non-low income units presented in the 1989 Housing Element with 50% allocated toward
moderate and 50% toward above moderate.
In addition to CDBG and Housing Set-Aside programs, the Community Development Department
will use Rental Rehabilitation funding or HOME funds from the federal government ~ available
to accomplish substantial Rehabilitation of large apartment projects. Combined with other
available resources, the rehabilitation of three major projects which include Westchester Square,
Jeffrey-Lynne and South of Romneya, may result in approximately 900 units rehabilitated
during the planning period and occupied by very low and low income households. Of the 900
units, 60% are allocated toward very low and 40% toward lower income households.
The units represented under the conservation column are anticipated to be conserved through
the City's neighborhood preservatiol~ activities, house "move-ohs" and relocations, and
negotiations and agreements pertaining to condominium conversions,
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V__~, DEVELOPMENT OF PROGRAMS FOR PRESERVATION
According to Section 65583(c)(6), the Housing Element Amendment should include or reference
programs to preserve the low income use of at risk projects listed in the ten-year inventory, with
specific focus on units at risk during the five-year planning period.
The 1989 Housing Element, page 48, lists housing programs by policy area 1989 - 1994. The
programs currently listed which apply to preservation of assisted units include Policy Areas II and III
with a new Policy Area IV added to specifically address preservation. Preservation programs under
Policy Areas II and III are reprinted in the following table for ease of reference.
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PROGRAMS FOR PRESERVING UNITS AT RISK OF CONVERSION
RESPONSIBLE PROGRAM STATUS IMPLEMENTATION
POLICY AREA PROGRAMS ENTITY EXISTING NEW TIME FRAME
Housing 2.11 Continue to op;rate and seek Community Development/ X Ongoing
Affordability increases in the Section 8 or Ilks rental Housing Authority
subsidy program to support ve~ low
income households.
2.16 Continue to pursue public and quasi- Community Development/
publi~ resources such a~ State bond Housing Authority X Ongoing
funds, tax-exempt mortgage revenue
bonds and other relevant financing for
the development of new mixed rental
development including the use of tax
increment set aside where appropriate.
2.17 Review affordable housing unite at risk Community Development/
of converting to mel'~et rate over the Housing Authority
next S years. Identify funding sources X Initiate study 1991-92.
to assist in the retention of these units
as affordable hopsing.
Housing 3.01 Over the course of five years Community Development with X
Availability implement the construction of 100 support from Housing
very low income affordable units in a Authority, Redevelopment and
mixed income setting, with specific non-profithcusingcorporations.
emphasis on family unit development. Ongoing
3.08 Continue to pro,de tenant nounscling, Community Development X
shared housing and related support
services whioh enable tenants to
effectively ~.eek and/or retain
affordable housing.
3.12 The City maintains e current llst of all Community Development X Ongoing
affordable rental and ownership units Department
within the City end monitors these
units for compliance. The City will
continue to pursue various resources
both financial and, regulatory to
maintain the affordab~ty of these units
for the longest feasible time.
Although the above listed programs provide a ,~ework for addressing expiration of a ,able housing units, the following programs are
added to ensure proper attention to the units at risk of conversion:
RESPONSIBLE PROGRAM STATUS IMPLEMENTATION
POLICY AREA PROGRAMS ENTITY .EXISTING NEV~.. TIME FRAME
IV. Preservation of 4.01 P~ovide the following teohnicaf Community Development X Ongoing
Assisted Units assistance for units at risk of
conversion to norHow income use for
a ternyear planning period: evaluate
legal and procedural framework for
preservation: identification and
monitoring of projects et risk: analysis
of factors that influence an owners
decision to terminate affordebllity
controls; determination of the
feasibilit~ of an entity acquiring and
presen/~ng at risk housing; analyale of
federal, state and local financial
incentives to deter conversions and
assist with acquisition and
p~aservadon of u~ts at risk of
conversion; work' with developers,
nonprofit corporations, and
councils interested in negotiation for
eoc!uisition of units at rise of
4.02 Provide mu{tl-family tax-exempt bond Community Development X Ongoing
financing refunding to continue
affordability of bond issue units at Hsk
of expiring regulatory agreements
when legally feasible. X Ongoing
4.03 Make financial resources through Community Development
housing set-aside, CDBG, federal,
state ar~J local sources to preserve
units at risk of conversion to non-low
X X Ongoing
4.04 When feasible, provide for long term Community Development
affordability for all new projects and
renegofiated projects. Add anti-
displacement provisions that allow that
residents in the units at the end of the
term of affordabd~ty ~nay remain and
continue under the affordable program
until no longer income eligible or
choose to move. This will allow for
attrition of affordable units and avoid
an economic hatriehJp at the
termination of affordable controls.
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Vl. SUMMARY
The two five-year periods of analysis for the City of Anaheim's Housing Element Amendment are July
1989 - June 1994 and July 1994 - June 1999. During this time period there are no units at risk of
converting to non-low income use during the first five-year period and seven (7) projects at risk during
the second five-year period. Only one of the seven projects has deep affordability through the
provision of 100 Section 8 certificates in connection with a 100 unit senior housing project - Village
Center. The Section 8 contract renewal is due in August of 1994. It appears that there is sufficient
economic incentive for the property owner to renew the contract for another five-year period given the
competitiveness of market rate senior housing in Anaheim.
The other six projects consist of multi-family bond issues with expiring regulatory agreements. '[he
current affordable rents, with the exception of West Anaheim Royale (a congregate care facility), are
very close to the market rate rents due to previous tax law affordability requirements (less restrictive
than current law). These units may be preserved through a bond refunding or other incentive program.
Since many of these units were constructed under a county pooled bond issue, it is feasible that
another pooled issue could be accomplished to refinance these projects while requiring deeper and
longer ~erm affordability.
The West Anaheim Royale project which provides congregate care to the elderly could be a significant
loss to Anaheim's elderly housing stock. There appears to be a financial incentive to convert to r~arket
rate units in March of 1999. This project should be closely monitored for possible conversion, and
appropriate actions taken by the City to deter conversion through the programs listed in this
amendment to the Housing Element.
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