Staff Report - April 2, 2002 - Agenda Item

The purpose of this item is to present to the City Council and Redevelopment Agency Board (Agency) a proposed strategy for future housing acquisition and rehabilitation efforts in the City�s Focus Neighborhoods. This staff report will provide: 1) a refresher of the approved goals and implementing programs as identified by the 2002 Blue Ribbon Task Force on Affordable Housing; 2) an assessment of progress in meeting those goals and addressing community need; 3) a background on what has been accomplished to date in the Focus Neighborhoods; 4) an overview of the current budget and funding capabilities; and 5) a discussion on the proposed housing acquisition strategy for providing additional affordable housing specifically in the City�s Focus Neighborhoods.

In July 2003 and again in May 2005, the City Council and Redevelopment Agency Board held study sessions (the later in conjunction with the Planning Board) on the City�s Affordable Housing Program. Staff explained that at the forefront of the City�s Affordable Housing Program are the approved goals and implementing programs as identified by the Blue Ribbon Task Force on Affordable Housing (formed in 2002 and charged to develop recommendations for increasing Burbank�s inventory of affordable housing). These seven approved goals (and related programs) have served as a �road map� for the affordable housing program for the past four years. They are as follows:

Since their adoption, steps have been taken to address nearly all of these goals. Creating community in conjunction with housing has been the number one goal during that time. Activity/family resource centers in the focus neighborhoods are aimed at providing programming to build healthier families and stronger neighborhoods. In addition, to assist with this goal, a staff position was created exclusively dedicated toward building community, enhancing community engagement and fostering a more meaningful quality of life for all of Burbank�s residents. In the past three years, these neighborhoods have seen the early steps of community building and neighborhood synergy taking place through more deliberate communication and very specific outreach efforts.

In an effort to encourage balance and variety in housing, in all approved Agency-sponsored residential and mixed-use projects, developers were required to include an affordable housing component (with affordability components ranging between 10% and 30%). Furthermore, Redevelopment Law requires that residential development in project areas make 15% of the units affordable to Low and Moderate Income Households. The Burbank Redevelopment Agency has surpassed this goal and has a �bank� of units as more affordable units have been provided than statutorily required.[1] At the same time, Planning and Redevelopment Agency staff have been working with community stakeholders in developing an Inclusionary Housing Ordinance that proposes to require a certain percentage of units affordable for all residential development of a specified scale.

While the City and Agency have taken great strides in meeting the affordable housing needs of the community, the demand continues to outweigh supply. In a Burbank Housing Profile (completed in 2004; updated in 2006), the results of a Workforce Housing Survey include the following findings (over 700 surveys received):

The Housing Profile indicates that a median, single-family home in Burbank is well beyond the Ievel of affordability for moderate-income households. For example, the maximum affordable purchase price for a moderate-income, four person household is $219,600. The median priced three-bedroom home in Burbank is $665,000. This represents an affordability gap of $445,000.

As the table on the next page indicates, city-wide median rents are also well above the level of affordability for both very low and low-income households, as well as for many moderate-income households. The monthly affordability gap for very low-income households ranges from $346 for one-person households (studio units), up to $1,393 for four-person households (three bedroom apartments). Low-income households also face a sizable affordability gap, ranging from $249 to $1,255 per month, depending on household size. Even looking at the least expensive apartment rentals advertised, no market rate rentals are affordable to these income groups.

In high-priced markets such as Burbank, market rents are typically affordable to moderate-income households. However, in Burbank, median apartment rents are only affordable to one and two-person moderate-income households. Similar to very low and low-income households, larger moderate-income families with three or more members are most impacted, with few rental units of adequate size within their range of affordability.

Probably the most important partnership that the City of Burbank and Burbank Redevelopment Agency has formed to help meet the affordable housing needs in the community is the partnership with the Burbank Housing Corporation (BHC). The Burbank Housing Corporation was formed in 1997 to assist the Redevelopment Agency in acquiring and rehabilitating rental properties, and making units available to families with lower incomes. The Burbank Housing Corporation is a non-profit housing developer and a Community Housing Development Organization (CHDO) established by the City of Burbank to increase, preserve and develop affordable housing.

The Burbank Housing Corporation uses the revitalization and redevelopment model of the Elmwood neighborhood. The Burbank Housing Corporation�s high-quality, well maintained properties have a positive impact on the neighborhoods. The mission of the Burbank Housing Corporation is two-fold: 1) to develop, preserve and upgrade affordable housing opportunities for low and moderate-income Burbank residents; and 2) to provide services and programs that will enrich the quality of life for our residents and especially our youth.

What has made the Burbank Housing Corporation so effective in their partnership with the Redevelopment Agency is their long-term commitment to projects. In exchange for favorable financing through the Redevelopment Agency, the Burbank Housing Corporation rehabilitates deteriorated properties and makes sure the units remain affordable. They also make sure the properties are professionally maintained and that each project achieves self-sustainability.

To date, BHC has an inventory of over 200 units. Of those units, 170 will be (some properties are under construction) made available to very low, low and moderate-income households. This collectively represents an impressive 82% affordability component.

Through the Agency�s partnership with the Burbank Housing Corporation a variety of goals are being met including:

City and Agency Affordable Housing Efforts

To meet the affordable housing needs of the community, the Burbank Redevelopment Agency has taken a balanced approach by providing a variety of new construction and rehabilitation projects and programs while balancing available funds. These projects and programs have implemented several of the goals and objectives of the Blue Ribbon Task Force on Affordable Housing including but not limited to:

Implementation Status: Through site assembly and other assistance, the Agency has assisted with the following mixed income ownership developments:

Program: Continue acquisition/rehabilitation activities in focus neighborhoods.

Implementation Status: As mentioned, the Agency has partnered with the Burbank Housing Corporation to support its ongoing activities to acquire and rehabilitate properties in focus neighborhoods. Since its inception in 1997, this partnership has provided over 200 residential units.

Program: Continue single-family and multifamily rehabilitation assistance

Implementation Status: The Agency underwrites an active rehabilitation assistance program for private property owners (program was revised in July of 2004). The program consists of the following components: 1) deferred loans that provide below-market interest rates to moderate-income, owner-occupants of single-family dwellings that postpone the payment until the property is conveyed; and 2) multifamily, deferred loans offering below market interest rates. These deferred loans are partially forgiven at the end of the 15-year period in exchange for affordability covenants. The Agency also funds a grant program to very low-income, owner-occupants for code related, minor rehabilitation and accessibility improvements to single-family dwellings.

Affordable Housing Units in the Community

Through the efforts outlined above, and through federal government programs such as the Section 8 and Section 202 programs, there are over 2,400 affordable housing units available in the City. These units have been developed through the following programs (Exhibit A):

Based on the current estimate of housing units in the community of 43,338, and the activities described above, 5.6% of the City�s housing units are available to very low, low and moderate-income households. However, we should mention that other affordable housing may exist, but not necessarily due to our efforts or monitoring.

Except for the units developed through the Homeownership Program, the affordable units are all rental units and the majority will remain affordable in perpetuity (at a minimum 55 years). However, the rental units provided through the Residential Rehabilitation Loan Program have affordability covenants of 15 years. In addition, some units provided through early homeownership developments and the former Mortgage Assistance Program also have affordability covenants that will expire sooner.[5] However, as those programs continue to provide additional affordable units, staff expects that those units will be replaced with new units each year, ultimately resulting in a net increase.

Assuming the affordable units produced to date remain constant except for efforts though the Acquisition and Rehabilitation Program, staff has developed a housing acquisition strategy that proposes to focus future resources in the acquisition and rehabilitation activities in the focus neighborhoods. This concentrated effort has proven to revitalize neighborhoods while providing affordable housing.

As described, the Burbank Redevelopment Agency has a very active affordable housing program. Of particular importance, is the Agency�s effort in concentrating funds and resources in the five Focus Neighborhoods � Elmwood, Verdugo-Lake, Golden State, Peyton-Grismer and the most recent neighborhood Lake-Alameda (Exhibit B). The goal of these concentrated efforts is to make the greatest contribution in residential neighborhoods where revitalization and affordable housing is most needed. These neighborhoods were selected because of the socio-economic demographics of the area and the household and housing stock characteristics.

In addition, police records indicate these focus neighborhoods get more calls for service than the rest of the City. The most prominent incidents have been gang-related incidents and graffiti, loud disturbances and parking problems.

The Focus Neighborhood Program involves a multi-faceted approach to improving designated neighborhoods. Properties have been acquired and facilities such as activity/family resource centers have been programmed into the projects, which provide a service-enriched environment. The activities are part of the City�s overall efforts to improve living conditions as well as provide affordable rental housing � specifically meeting the Number 1 Goal of the Blue Ribbon Task Force on Affordable Housing � Creating Community in Conjunction with Housing. Within these neighborhoods, the City and Redevelopment Agency has provided funding assistance to the Burbank Housing Corporation (BHC) to acquire, rehabilitate and manage rental properties as long-term affordable housing.

As stated before, since 1997, the Burbank Housing Corporation has provided over 200 units in the community. The Burbank Housing Corporation�s future goals include increasing their inventory of affordable housing units in Burbank from 200 to 400 units by 2011 (an average of 40 units a year), and expanding affordable housing projects in the Lake-Alameda Focus Neighborhood. Proposed efforts are underway to allow BHC the financial ability to build capacity for providing these additional units.

Acquisition and Rehabilitation Efforts

Acquisition activity has, for the most part, been �opportunity purchases.� However, as the acquisition and rehabilitation program evolves, the Agency needs to incorporate a shift in attention to �targeted acquisitions.� This means giving specific attention to the critical mass and building on a more concentrated synergy.

There are several properties in four of the five focus neighborhoods that would be potential �targeted acquisition� candidates. Proposed criteria for future targeted acquisitions have been developed. Below is a summary of the proposed strategy for targeted purchases.

There will also be opportunities to purchase properties that come on the market that are not specifically targeted, but could be logical acquisition candidates because they may be less expensive to acquire or may require minimal rehabilitation. Those opportunity purchases may overlap with targeted properties depending on site-specific characteristics. There is a summary of the proposed strategy for opportunity purchases on the next page.

Based on the strategy outlined above, there are numerous acquisition opportunities in four of the five focus neighborhoods that meet the criteria and objectives described herein. The Elmwood Focus Neighborhood, however, has successfully transitioned from an �active� focus neighborhood into a state of ongoing maintenance. The important role of the achievement center will remain the nucleus of the Elmwood neighborhood.

In addition to future acquisition and rehabilitation efforts, there may be acquisition opportunities that the Agency can pursue for possible affordable homeownership projects in the focus neighborhoods. New owner-occupied residential developments in these neighborhoods would meet the Task Force goal of expanding homeownership opportunities; specifically for low and moderate-income purchasers. Furthermore, providing home-ownership opportunities for existing residents in the neighborhoods is another opportunity to spur neighborhood stabilization through pride of ownership as well as bridging the economic divide for residents already living in the neighborhood.

Future Affordable Housing Units in the Community

Using housing unit capacity projections outlined in the Land Use Element update currently underway, it is projected that there will be close to 50,000 housing units in the City by the year 2025 (current estimate is 43,338).[7] Assuming continued acquisition and rehabilitation efforts by the Burbank Housing Corporation and possible acquisition for home-ownership developments as previously described, with no change in the other project and program affordable units (to conservatively estimate expiring affordability

covenants), the percentage of affordable housing units in the City is estimated to remain about 6%.

With a proposed Inclusionary Housing Ordinance (ranging from 10% - 15%), the percentage of affordable housing units is estimated to increase to about 6.5% - 7%. This estimated increase is based on the following conservative assumptions:

FUNDING

The development of affordable housing in the community is a balance between the needs of the community and the Agency�s funding resources. The Agency has typically relied on two primary sources of funds to support affordable housing activities:

Based on an ending cash balance for Fiscal Year 05/06, the Agency will have approximately $10 million in available 20% funds and $800,000 in HOME funds for a total of $10.8 million to carry out the efforts outlined above for one year only (assuming a production of an additional 40 affordable units a year in addition to continuing the Rehabilitation Loan Program and any future homeownership projects in the City). Beginning in Fiscal Year 06/07, the Agency estimates a net $4.0 million in available 20% funds annually and $800,000 in HOME funds (assuming the Federal HOME program remains in place and current allocations remain fairly constant) for the production of affordable housing. Based on these conservative estimates, after the current year, the Agency does not have adequate resources through the Agency�s housing set-aside funds and HOME funds to produce 200 additional affordable units in the next five years (by 2011) as outlined above.[10]

Furthermore, after the time limit on the effectiveness of each plan has expired, the Agency shall have no authority to act pursuant to the plans except to pay previously incurred indebtedness and to enforce existing covenants and contracts. However, tax increment funds will continue to be allocated to the housing set-aside fund through the Debt Repayment and Tax Increment Receipt date for the production of affordable housing. The dates vary for each Redevelopment Project Area.

The table on the next page summarizes the Plan Limits for the City�s Redevelopment Project Areas.

	Golden State	City Centre	South San Fernando	West Olive
Date of Adoption	1970	1971	1997	1976
Acres	1,107	212	467	128
Plan Effectiveness	2012	2013	2028	2018
Debt Repayment & Receipt of Tax Increment	2022*	2023*	2043	2028
Incurrence of Debt	2004	2004	2017	2004
Power of Eminent Domain	Expired	2011	2009	Expired
Plan Amendments**	1973,1986,1994, 2004 & 2005**	1974, 1986, 1994, 2004 & 2005**	2004**	1994,2001, 2004 & 2005**

** Two plan amendments occurred; Project Area Merger (West Olive excluded) and SB 1045 (all areas).

In order to carry out the acquisition strategy as outlined above, staff can look to other funding sources to augment the housing set-aside and HOME funds.[12] Both housing set-aside and Federal HOME funds may be supplemented or �layered� on a project-by-project basis, with other sources to increase housing production. �Layering� other funds with the Agency�s housing set-aside funds triggers State prevailing wage requirements under current law (SB 975) resulting in increases to project costs of at least 20% - 30%. With limited resources, however, the need for additional affordable housing outweighs this additional cost.

The following is a listing of other funding sources the Agency may pursue to augment these funds:

The following is a summary of the benefits and issues associated with each additional funding source.

Community Development Block Grant (CDBG) funds may be used to assist in housing development through, for instance, land assembly activities. Use of CDBG funds, however, would restrict participation to very low and low-income buyers and renters requiring a higher subsidy. Furthermore, the status of this fund is unknown at this time. The Federal CDBG program is somewhat volatile with the current Administration and could face significant cuts. The Federal Section 202 (for senior housing) and Section 811 (for disabled persons) both subsidize construction costs and tenant rents. As described, however, these funds are geared toward specific segments of the population thereby limiting the use of funds.

Multifamily housing revenue bonds and tax credits both fund eligible development costs. Tax Credits serve as a form of developer equity often associated with Agency or Housing Authority-issued mortgage revenue bonds. Generally, both sources require a fully affordable project targeted to very low or low-income persons; again limiting the use of funds. State sources such as those through Proposition 46 generally are awarded through a competitive application process, not by formula allocations; and awards typically go to projects that are fully affordable to very low and low-income households.

Another means to augment the supply of affordable housing is through an In-Lieu fee as proposed for the Draft Inclusionary Housing Ordinance. Through an In-Lieu fee, a developer has the option to produce affordable units on-site or pay an In-Lieu fee to the City. Those funds would then be available to the City to produce additional affordable housing. In-Lieu fees could be a critical source of funds for the production of additional affordable housing in the community, and could augment the Agency�s resources.

Senate Bill 211 (SB 211) allows for the extension of pre-1994 Plans to extend their Plan Effectiveness dates for an additional 10 years; thus extending the time period for the receipt of tax increment and also increasing contributions to the housing set-aside fund (30% of tax increment going to the LMI Funds instead of the existing 20%). The Golden State, City Centre and West Olive Redevelopment Project areas would be eligible for the extension. Since the South San Fernando Redevelopment Project Area was adopted in 1997, that project area plan would not qualify. While additional funds would be available to produce affordable housing units, there are several significant special findings required and additional limitations on funds imposed. These include: 1) identifying that significant blight remains in the project area and that the blight cannot be eliminated without the deadline extensions;[13] 2) the requirement of statuatory pass-throughs to taxing entities (older project areas do not have this requirement as they were pre-AB 1290 plans);[14] 3) limitations on the use of housing funds specifically for very-low income households only as opposed to low and moderate-income households;[15] and 4) non-housing funds are strictly limited to the portion of the project area that was identified in amendment reports as containing blighted parcels and necessary and essential parcels for the elimination of the remaining blight.

Another funding source the Agency will aggressively pursue is seeking and applying for affordable housing grant funding in conjunction with the Burbank Housing Corporation. As the Burbank Housing Corporation expands its capacity to produce additional affordable housing units, grant funding will be a critical source of funds in the future.

Additional 80% tax increment funds can also be used for affordable housing activities. Such an action could result in fewer resources for public infrastructure improvements and other possible Agency activity in the City�s Redevelopment Project Areas. However, with the focus of the City and Agency on affordable housing efforts during the remaining plan limits of each Redevelopment Project Area, an additional contribution from tax increment revenues to the 20% funds could provide the resources to continue the City and Agency�s aggressive affordable housing strategy.

While Agency staff can pursue other possible funding sources to augment the funds needed for the creation of affordable housing, as outlined above, those funds have restrictions and may not be obtained. However, the Agency does have control over the use of 80% funds to, at a minimum, fund the gap for the production of an additional 200 units through the partnership with the Burbank Housing Corporation over the next five years.

As mentioned earlier in the report, while the City and Agency have taken great strides in meeting the affordable housing needs of the community, the demand continues to outweigh supply. A median, single-family home in Burbank is well beyond the Ievel of affordability for moderate-income households, and City-wide median rents are also well above the level of affordability for both very low and low-income households, as well as for many moderate-income households. Even market rate rents that are typically affordable to moderate-income households, are only affordable to one and two-person moderate-income households. At all income levels, families with three or more members are most impacted, with few rental units of adequate size within their range of affordability.

To meet these continuous affordable housing needs, Burbank will continue to offer an affordable housing program that is a balanced approach of projects and programs to best meet the needs of the community. Through the projects and programs outlined herein, the community has experienced: increased neighborhood stability; the beginning of community involvement from �vested� residents; property value stability; and consistent improvement of neighborhoods. The measurement of when the program has met its goals in one or more neighborhoods will be evident by the long-term �recycling� and voluntary upgrading of properties by the private sector and the evolution of the fabric of our neighborhoods, which will sustain the quality of life most Burbank residents are fortunate enough to enjoy.

While the physical benefits of the affordable housing program are relatively immediate, the true impact on the community typically takes longer to realize. For example, the Elmwood Achievement Center has been in operation for roughly eight years. Just now are we seeing some of the most meaningful transformations of the neighborhood. Some families, for the first time ever, are sending their children to college. These are some of the same children that were �founding participants� at the Elmwood Achievement Center. To help foster this kind of metamorphosis in a neighborhood, in all of the focus neighborhoods, is the ultimate goal of the Burbank affordable housing program.

The City has reached several important milestones so far: Elmwood has successfully transitioned into a �maintenance mode�; several projects have been completed or are underway in the other focus neighborhoods; community outreach and communication efforts are at an all-time high; and staff is beginning to see true community ownership of neighborhoods. However, because resources are limited, it will be increasingly important to target investments to those projects and programs that create the greatest synergy and positive impact within these communities.

Therefore, using the conservative projections outlined above, staff proposes the City and Redevelopment Agency continue to concentrate on implementing acquisition efforts in the Focus Neighborhoods (for both acquisition/rehabilitation projects as well as new homeownership developments).[16] In addition, staff will continue to implement the Rehabilitation Loan Programs and seek opportunities for future homeownership projects in the Redevelopment Project Areas and city-wide in order to replace affordable units with expiring affordability covenants.

Furthermore, staff proposes to fund the gap for the production of an additional 200 units through the partnership with the Burbank Housing Corporation (over the next five years). These efforts will maintain an average 6% affordable housing percentage in the City, and is estimated to cost at a minimum $10 million annually (based on the current market for the production of 40 units a year). As previously mentioned, a projected net $4.0 million annual revenue stream is expected in the housing set-aside fund thereby resulting in a $6.0 million funding gap beginning Fiscal Year 07/08.

To help bridge the gap, staff projects the use of an estimated $800,000 in HOME funds (as long as the funds remain available). In addition, staff proposes an additional $2.5 million tax increment contribution to the housing set-aside fund beginning in Fiscal Year 07/08 through Fiscal Year 10/11 (for an estimated $7.3 million in annual available funds for those four years). The remaining annual funding gap (approximately $2.7 million) could be bridged using proposed inclusionary In-Lieu fees (to the extent they are available),[17] leveraging grant funds and other possible, available funding sources.

Staff proposes that the City Council and Agency Board authorize staff to implement the proposed housing acquisition strategy described herein and consider an additional $2.5 million increased contribution from the Agency�s tax increment funds to the housing set-aside fund beginning in Fiscal Year 07/08 through Fiscal Year 10/11.

[1] The Agency has a surplus of 238 �inclusionary� units. Even if no more inclusionary units were developed, over 1,500 residential units would have to be constructed inside Project Areas before the Agency exhausted its current surplus of inclusionary units.

[2] These are only the affordable units. There will be 37 market rate units available in the Peyton-Grismer Neighborhood.

[3] Includes new owner-occupied residential development (67 units) and units made affordable through the previous Mortgage Assistance Program (8 units). Due to increased housing prices in the last several years, the Mortgage Assistance Program is not in existence at this time, however, the units purchased through the previous program continue to be monitored.

[4] Includes a Density Bonus project on Olive Ave.

[5] Later homeownership developments including Burbank Village Walk and San Fernando Walk have extended affordability covenants (45 years).

[6] For opportunity purchases the goal is not to meet specific criteria, however, to meet overall affordable housing goals and objectives.

[7] The Land Use Element Update assumes an additional 285 units per year will be built through the year 2025.

[8] Please refer to the Funding section of the report beginning on page 11 for additional information.

[9] Also includes acquisition efforts for new home-ownership projects.

[10] Based on recent acquisition and rehabilitation efforts in the Lake-Alameda Focus Neighborhood, it is estimated that it will cost on average $250,000 to acquire and rehabilitate one unit.

[11] In 2004, the Golden State, City Centre and South San Fernando Redevelopment Project Areas were merged for financial purposes. However, each redevelopment plan still maintains its individual plan limits. Includes changes for FY 2004 - 2005 ERAF Time Extensions.

[12] The Agency could bond the Low and Moderate Income Fund, however, bonding would mean committing future tax increment funds so that funds are available in the near term. Bonding of the housing fund, however, does not provide additional resources.

[13] The extension process would require a full plan amendment, public hearings, consultation with taxing-entities and the project area committee (PAC), if one exists, and may be appealed.

[14] These statutory pass-throughs may make the extension infeasible for older project areas like Golden State and City Centre that have no pass-throughs as the agency will receive less tax increment funds.

[15] For example, in no event can the agency make expenditures to assist production of more moderate-income units than the number of extremely low-income units it assists.

[16] It is important to note that AB 637 requires that Agency Housing Funds be used to assist housing for persons of very low and low-income in at least the same proportions as the total number of housing units needed for persons of very low, low and moderate-income as defined by a jurisdiction�s regional housing needs contained in the housing element. Accordingly, staff will budget approximately 66 percent of residential rehabilitation funds for very low and low-income borrowers and approximately 33 percent for moderate-income borrowers.

[17] The availability of Inclusionary In-Lieu fees assumes that fewer affordable units will be created than outlined in the tables on pages 10 and 11.

Council Agenda - City of Burbank