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Recommendation to authorize City Manager to: 1) adjust Housing Trust Fund to include all existing City affordable housing funding sources except Housing Authority Funding; and 2) request The Long Beach Housing Development Company to annually review the need for potential Housing Trust Fund sources and report out to the City Council as necessary. (Citywide)
DISCUSSION
Background
On September 19, 2006, the City Council considered the adoption of a condominium conversion fee to provide funding for the Housing Trust Fund (HTF). After public testimony and Council discussion, Council requested staff to return to Council with a summary ofthe options available to fund the HTF.
This report presents a summary of the HTF funding options and an outline of the proposal and funding currently available to support the efforts to increase the availability of affordable housing within Long Beach.
Funding Options
On June 11, 2002, the City Council requested the City Manager to prepare a report regarding the feasibility of establishing a Housing Trust Fund (HTF) and to identify potential revenue sources. The City contracted with David Paul Rosen and Associates (ORA) to prepare the report, which was completed in July 2003.
In conducting the study, staff instructed ORA to investigate only new revenue sources that did not take away funds from the General Fund, inasmuch as that was the time when the City's General Fund account was in dire need of revenue. The report concluded that a commercial linkage fee ($10-15 per square foot) for new non-residential development, and inclusionary housing requirements for new residential development of 10% for rental housing and 15% for ownership housing was feasible. In lieu fees, for projects that did not provide the on-site housing, $14,000 per rental unit and $12,000 per ownership unit were suggested in the study.
On October 11, 2005, the City Council approved the creation of a HTF and requested the City Attorney to prepare an ordinance to establish, fund, and administer the HTF. The initial funding for the HTF included $3 million from the Douglas Park project mitigation fund (to be transferred over time), and annual transfers of $500,000 of transient occupancy taxes (TOT), if funds are available. In addition, the City Council also requested the City Attorney to prepare an ordinance to establish an on-going funding source through a new condominium conversion fee to be reviewed by the Planning Commission and return with a recommendation to City Council.
On June 15 and July 20, 2006, the Planning Commission discussed the creation of the new condominium conversion fee as a component of on-going funding for the HTF. Fees of approximately $4,000 per unit in either a flat fee or as a percentage of sales prices were considered. The Planning Commission recommended that a fee of 1.5% of the sales price of converted condominiums be set as a fee.
On September 19, 2006, the City Council considered a series of zoning code and related amendments, including the condominium conversion fee funding for a portion of the HTF. At that time, the funding anticipated from the condominium conversion fee was estimated to total approximately $1 million per year. The City Council deferred action on the ordinance and requested staff to reexamine the breadth of possible funding sources available for the HTF, and come back with an evaluation of the relative feasibility of these revenue sources.
Potential Funding Sources for the Housing Trust Fund
A number of funding options exist to support the HTF. These include both new revenue sources and earmarking of existing funds available for affordable housing programs or other purposes.
These sources include:
§ Redevelopment Housing Set-Aside - State law requires the Redevelopment Agency (RDA) to set-aside 20 percent of the tax increment revenues it receives to use for affordable housing purposes. The RDA currently transfers this money to the City's Housing Development Fund. Over the last several years this source of funding has been as follows:
o FY 2002: $ 4,550,774
o FY 2003: $ 6,457,675
o FY 2004: $10,429,604
o FY 2005: $12,744,239
o FY 2006: $15,851,560
o FY 2007: $16,879,000 (estimate)
This represents a substantial source of funding for affordable housing and is approximately one-third of the total funding for the Housing Services Bureau (HSB).
§ Douglas Park - As part of the November 2004 development agreement between the City of Long Beach and the McDonnell Douglas Corporation (AKA Boeing) (General Provision 8.30), Boeing Realty is required to contribute $3 million to the Housing Development Fund (HDF). The initial funding was $250,000 at the execution of the agreement. The remainder of the funding is required when milestones of residential and infrastructure improvements are undertaken. At the initial inception of the HTF last year, $250,000 of HDF revenue from the Boeing Mitigation fee was identified and a source for the HTF and was transferred into the HTF. As development progresses at Douglas Park, funds collected from future phases are scheduled to be transferred to the HTF.
§ Real Property Transfer Tax (RPTT) - The RPTT is a tax of $0.275 per $500 on the selling price of any real property assessed over $100 under provisions of the California Revenue and Taxation Code (Section 11901). Revenue generated and deposited into the General Fund by the RPTT has been as follows:
o FY 2002: $1,463,541
o FY 2003: $1,686,109
o FY 2004: $2,288,974
o FY 2005: $2,898,321
o FY 2006: $2,330,140
o FY 2007: $1,180,000 (estimate)
Options for the RPTT include establishing a baseline funding level, and transfer all or a portion of the revenues over that baseline amount into the HTF. However, this would negatively impact the General Fund. An increase in the RPTT taxation rate would require a 2/3 vote of the electorate.
§ Transient Occupancy Tax (TOT) - The TOT is a tax of 12 percent charged on occupancy of hotel guest rooms.
o FY 2002: $12,446,746
o FY 2003: $13,133,441
o FY2004: $14,088,242
o FY 2005: $15,527,753
o FY 2006: $16,547,963
o FY 2007: $17,289,661 (estimate)
One-half of the tax is deposited into the General Fund, and the other half is split between the Redevelopment Agency (RDA) and the Special Advertising and Promotions (SAP) Fund. The non-General Fund portion is restricted as to use, with the RDA portion committed to the Aquarium bonds and the SAP portion only available for promoting and marketing the City.
The General Fund contributed $500,000 in FY05 and again in FY06, because it was determined at the end of each fiscal year that funds were available. The FY07 General Fund budget does not include a transfer; determination of available funds cannot be made until the end of the fiscal year.
Some low-cost motels serve as transitional or long-term housing at affordable rates for lower income residents. TOT is not allowed to be collected for extended stays of over 30 days.
§ Condominium Conversion Fee - The Planning Commission discussed a condominium conversion fee in June and July 2006. Discussion focused on the level and mechanism (percentage versus fixed amount) for the fee. Upon deliberation, the Planning Commission recommended a 1.5% fee on the sales price of individual converted condominiums.
§ Commercial Linkage Fee - A commercial linkage fee has not been established by the City Council. The DRA Study (July 2003) concluded that a fee in the range of $10-15 per square foot of new non-residential development to fund affordable housing projects and programs could be supported. However, since that time development costs and other fees applied to new development have increased. Therefore, if this approach is considered, new analysis to establish the appropriate fee is required.
§ Inclusionary Housing Requirement - A requirement for affordable housing to be included in residential development of a certain size is an effective way to ensure that affordable rental and ownership units are being produced within a community. The DRA Study (July 2003) concluded an inclusionary housing requirement for residential development of 10% for new rental housing and 15% for new ownership housing is feasible. In lieu fees for projects that did not provide the on-site housing units of $14,000 per rental unit and $12,000 per ownership unit were suggested in the study.
Current Support for Affordable Housing Programs
The City of Long Beach has two separate but related programs in place to provide affordable housing. The Community Development Department includes two bureaus that are committed to providing housing opportunities for low to moderate-income families. A council memorandum dated September 18, 2006 highlighting the existing programs is attached.
Affordable housing programs target subsidies and other programs based on the percentage of income compared to the Area Median Income (AMI) or Median Family Income (MFI). Very low income is defined as below 50% of AM I, with moderate income defined as 120% of AM I, and low income in between.
The Housing Authority Bureau is wholly funded by Federal Housing and Urban Development funds. In FY2007, $65 million in funding is earmarked for the programs including Housing Choice Voucher (formerly known as Section 8), helping 6,250 households, and Family Self-Sufficiency serving 1,150 participants with referrals for training, job development, childcare, and transportation assistance, among other programs.
The Housing Services Bureau has FY2007 funding of nearly $124 million, which includes carryover revenues from prior fiscal years. The larger components of the revenues include redevelopment set-aside ($44.3 million), Housing Bond Proceeds ($49.9 million), and HOME Grants ($23 million). These funds are targeted toward providing affordable housing opportunities through new construction or rehabilitation of affordable housing units and assistance to qualified homeowners for home improvement loans and to qualified first-time buyers for home purchase. At present, there are four projects providing 158 affordable units under construction, 320 rental apartment units under rehabilitation, and 248 additional affordable units in pre-construction or pre- rehabilitation stage. The Bureau is also in the process of acquiring 16 individual sites for new housing opportunities.
These projects are a response to the City's Regional Housing Needs Assessment (RHNA) allocation from the Southern California Association of Governments. Long Beach has a RHNA allocation of 1,464 housing units for FY 2000-2005. While overall, the RHNA numbers have been exceeded by 365%, production of moderate income housing only reached 32% (94 units produced compared to a RHNA allocation of 296), and 198% for very low-income households.
The Housing Services Bureau is in the process of developing a silent second mortgage home ownership program that will also address the needs of above moderate income households (120% to 150% AMI). This new program will provide supplemental mortgage support to encourage first-time homeownership.
There are also existing fees for affordable housing in the current condominium conversion process. While existing tenants are offered the first opportunity to purchase their units, those that cannot afford to buy the units, or who choose not to, and are income-qualified are offered $3,700 in relocation benefits. In the coastal zone, a replacement housing in lieu fee of approximately $30,000 is required for each converted condominium unit that was previously affordable to a low or moderate income tenant, should the developer not provide a replacement housing unit on site.
TIMING CONSIDERATIONS
The City Council action of September 19, 2006, requested staff to return within 90 days. In December, Vice Mayor Lowenthal requested that the item be brought back on January 23,2007, after the holiday season, so that more focus could be brought to this important item.
The Housing Trust Fund has been established by previous Council action. There are no specific timeframes for identifying additional revenue sources or for the expenditure of those funds.
FISCAL IMPACT
The establishment of any new tax revenues will require a 2/3 vote of the electorate to implement. The transfer of existing or future revenues from existing sources will require budgetary amendments, subsequent to considering any negative impacts on the funds.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
SUZANNE M. FRICK
DIRECTOR OF PLANNING AND BUILDING
PATRICK H. WEST
DIRECTOR OF COMMUNITY DEVELOPMENT
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APPROVED: |
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GERALD R. MILLER |
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CITY MANAGER |