PURPOSE

The purpose of this report is to:  1) provide information to the Burbank Redevelopment Agency Board to consider Affordable Housing Loan Agreements to assist the Burbank Housing Corporation to acquire residential properties located at 1726-1728 Elliot Drive and 1730 Elliot Drive for the purpose of providing affordable housing; and 2) recommend the City Council approve the 1730 Elliot Relocation Plan.

BACKGROUND

Since 1997, the City of Burbank has implemented a pro-active approach to neighborhood revitalization in partnership with the Burbank Housing Corporation (BHC).  By investing resources to improve the housing stock, provide affordable housing opportunities, and develop neighborhood-based Family Resource Centers, we have improved the living conditions of residents in the Elmwood, Verdugo-Lake, Golden State, Peyton-Grismer, and most recently the Lake-Alameda Focus Neighborhoods.    

In 2002, the City and BHC began implementing neighborhood revitalization efforts in the Peyton-Grismer Focus Neighborhood.  Since that time, BHC has worked with the City to acquire and improve over 100 distressed housing units in that neighborhood.  BHC currently owns and manages a 7-unit apartment building at 1721 Elliot Drive and is in the process of rehabilitating 10 additional residential units at 1729-1735 Elliot Drive.  In addition, BHC is in the process of rehabilitating 60 residential units at 1801-1815 Grismer Avenue and has completed construction of the Peyton-Grismer Family Resource Center.  BHC has completed rehabilitation of 1801 Grismer Avenue and 1733 Elliot Drive within the last month (Exhibit A).

These efforts have contributed to improving the living conditions of residents in the Peyton-Grismer Focus Neighborhood.  However, more opportunities exist for revitalizing this important neighborhood.  Staff and BHC have identified other distressed properties for targeted revitalization and have discussed the benefits of providing home ownership opportunities to the lower-income families currently living in our Focus Neighborhoods by attracting long-term stakeholders and instilling pride of ownership in those neighborhoods. 

In May 2005, at a Joint Study Session on Affordable Housing with the Planning Board and City Council, staff discussed a concept for providing affordable home ownership opportunities to lower and moderate-income families living in our Focus Neighborhoods.  Increasing home ownership opportunities will complement our current revitalization efforts and contribute towards stabilizing our Focus Neighborhoods. 

Home Ownership Development Opportunity

In July 2005, staff and BHC identified an opportunity in the Peyton-Grismer Focus Neighborhood for targeted revitalization and development of such an affordable home ownership project.  The properties identified for the proposed home ownership project are located at the northeast corner of Keeler Street and Elliot Drive (Exhibit A). 

The table below identifies the properties proposed for the development and shows the number of units, parcel sizes, and zoning designation for each property.  The properties are located within two multiple family zoning designations.  The property on Keeler Street is located in an R-3 zone and the properties on Elliot Drive are zoned R-4.  Combined, the parcels measure approximately 21,732 square feet. 

Properties for Proposed Future Home Ownership Project

The residential neighborhood immediately adjacent to the proposed project site is zoned R-4 to the north and east along Peyton Avenue and Grismer Street, respectively, and R-3 to the west of Keeler Street.  There are a number of single-family residential homes along Keeler Street, some with one or two additional units built in the rear of the property.

Staff has contracted with the architectural firm of RTKL Associates Inc. to develop site plan design options for the proposed home ownership project.  Depending on the project design, staff expects to be able to attain a density of eight (8) units on the site, which translates to 16 units per acre, well below the current R-3 density standards.  Development of eight (8) units would not increase the density currently existing on the site and would complement the existing lower density residential uses along Keeler Street while improving public safety and removing some blighted properties on Elliot Drive.  The project would provide an important transition or linkage between the adjacent R-3 and R-4 zones.

Staff and BHC are in discussions with Habitat for Humanity of Greater Los Angeles (Habitat) to assist BHC in developing the properties.  Habitat has expressed an interest in participating in the proposed project and is currently working on a development proposal for staff�s review.  Staff intends to bring an Owner Participation Agreement for the proposed home ownership development with BHC and Habitat for the Agency�s consideration in March 2007.

Property Acquisitions

BHC has made great progress in negotiating with the property owners and acquiring properties for the proposed home ownership project.  The Agency Board has supported these efforts by entering into Affordable Housing Loan Agreements and providing financing to assist BHC to acquire two of the four properties identified for the proposed affordable home ownership development � 1902 Keeler Street and 1722 Elliot Drive.

In July 2005, BHC acquired the property located at 1902 Keeler Street.  The purchase price was $500,000.  The property is located at the northeast corner of Keeler Street and Elliot Drive and consists of a single-family house and detached garage.  The house was one of the more distressed properties on Keeler Street.  BHC performed minor rehabilitation on the property and it is currently occupied by a moderate-income household at an affordable rent.  The acquisition of 1902 Keeler Street provided the cornerstone property for the proposed home ownership project.

In April 2006, BHC acquired a second property identified for the proposed home ownership project; a four-unit residential property located at 1722 Elliot Drive.  The purchase price was $650,000.  This property was visibly one of the most blighted properties in the City and the living conditions were substandard in all of the units.  Pursuant to the Affordable Housing Loan Agreement with the Agency, BHC acquired the property and relocated the tenants to improved housing conditions.  One of the tenants is currently residing in a BHC property in the Peyton-Grismer Neighborhood.  In addition, BHC cleared the junk and debris from the property, abated lead based paint and asbestos contaminates, and demolished the substandard housing units. 

Opportunity to Purchase 1726-1728 Elliot Drive and 1730 Elliot Drive

Recently, BHC has entered into separate purchase agreements with the owners of the two remaining properties identified for the proposed affordable home ownership development � 1726-1728 Elliot Drive and 1730 Elliot Drive.  The purchase of these two properties will complete the acquisitions necessary for the proposed home ownership development in the Peyton-Grismer Focus Neighborhood.  These acquisitions are contingent upon the Agency providing financing to BHC for the purchases. 

ANALYSIS

Proposed Acquisition of 1726-1728 Elliot Drive

In September 2006, BHC entered into a purchase agreement with the owner of the property at 1726-28 Elliot Drive (Property).  The site is approximately 4,548 square feet and is located directly adjacent to BHC�s property at 1722 Elliot Drive.  The property contains a single family home and a partially improved second dwelling unit.  The single family home is approximately 950 square feet and contains three bedrooms and one bathroom.  The building permits indicate that the detached second dwelling unit was originally the garage for the residence and was legally converted into a studio unit containing approximately 365 square feet of living space.  The studio unit is incomplete as to the interior finish and is not currently rentable. 

The purchase agreement between BHC and the seller includes a purchase price of $687,000 and relocation/moving assistance of $50,000 to the property owners.  In addition, BHC will allow the owners to continue residing in the property for up to six months after the close of escrow and the owners have agreed to maintain the property and pay all utilities in lieu of paying rent during the six month leaseback period.  BHC has requested Agency financing assistance to purchase the Property (Exhibit B).  Escrow on the Property is scheduled to close on December 8, 2006, contingent upon Agency Board approval of financing for the acquisition.        

Purchase Price of the Property and Relocation Assistance

BHC�s original purchase offer for the Property was $625,000.  Through their real estate sales agent, the property owners made an initial counter offer of $750,000.  After continued negotiations, BHC and the property owners agreed upon the sales price of $687,000 for the property. 

Otis E. Hackett & Associates, the Agency�s real estate appraiser, appraised the Property and determined its value to be $625,000.  The appraisal analyzed seven, two-unit residential sale transactions to estimate the Property�s market value.  All of the sales analyzed occurred within Burbank and consisted of two-on-a-lot properties, similar to the subject Property.  The seven comparable sales occurred between September 2005 and June 2006.  The sales prices ranged from $575,000 to $756,000.  Using the comparable sales and adjusting for comparison factors such as market conditions (date of sale), location, site size, room count and living area, parking, and building age and condition, the appraisal concluded a market value of $625,000 for the Property. 

The agreed upon purchase price of $687,000 stays within a ten percent (10%) margin of the appraised market value.  Because the purchase price is within the range of sales prices for other comparable properties, staff believes that the ten percent (10%) margin above the appraised value is within acceptable limits for the Property, which is essential to the proposed home ownership project. 

BHC will also provide the property owners with relocation and moving assistance totaling $50,000.  The relocation and moving assistance may aid the property owners to obtain comparable replacement housing to meet their needs.

The total estimated cost to purchase the property is $746,500.  This amount includes the purchase price of $687,000, relocation assistance of $50,000, and closing costs, taxes, and title insurance of $9,500.

Summary of Loan Agreement for 1726-1728 Elliot Drive

Agency staff has prepared for Agency Board consideration the attached Affordable Housing Loan Agreement with BHC that would finance the Property acquisition and relocation assistance to the property owners (Exhibit C).  The estimated Agency loan in the amount of $746,500 is summarized in the table below.

Under the terms of the proposed Loan Agreement, the Agency will provide a no-interest, deferred repayment loan to BHC in the amount of $746,500.  Burbank Housing Corporation will be responsible to use the loan proceeds to acquire the Property and pay all closing costs and provide relocation assistance to the property owners.  The Agency loan will be secured by a first priority deed of trust on the Property.  The loan may be refinanced by the Agency at a future date to provide financing for the proposed affordable home ownership development. 

BHC Equity Contribution

BHC will provide an equity contribution of approximately $16,000 to pay for operation and maintenance of the property during the interim period as plans are being developed for the proposed home ownership development.  These funds will be used by BHC to pay for the annual property taxes and insurance on the Property as well as maintenance and property management expenses.   

Proposed Acquisition of 1730 Elliot Drive

In October 2006, BHC entered into a purchase agreement with the owner of the property at 1730 Elliot Drive.  The site is approximately 4,550 square feet and is located directly adjacent to and behind BHC�s property at 1902 Keeler Street.  The property contains a single family home with a one-car detached garage.  The home is approximately 735 square feet and contains two bedrooms and one bathroom.  The home is currently renter occupied.

The purchase agreement between BHC and the seller includes a purchase price of $495,000.  In addition, BHC will pay approximately $3,000 in closing costs, taxes and title insurance.  Otis E. Hackett & Associates, the Agency�s real estate appraiser, appraised the Property and determined its value to be $500,000.  BHC has requested Agency financing assistance to purchase the property (Exhibit B).  Escrow on the property is scheduled to close on December 8, 2006, contingent upon Agency Board approval of financing for the acquisition.

Relocation Plan

As a result of the proposed acquisition of 1730 Elliot Drive, one renter household will be displaced from the property and will require relocation assistance.  Agency staff has contracted with Pearce Consulting Inc. (PCI) to prepare the Relocation Plan for 1730 Elliot Drive (Relocation Plan) and provide professional relocation assistance to the household displaced from the property.  The displaced household will be eligible for relocation assistance pursuant to California Relocation Assistance Law and Real Property Acquisition Guidelines, and in accordance with the Relocation Plan.

The Relocation Plan establishes a comprehensive relocation assistance program, including advisory and financial assistance that will be provided to the displaced household.  Relocation assistance to be provided includes the following: 

• Explanation of relocation rights and benefit options;

• Assistance completing relocation claims, rental applications and appeals forms, as requested;

• Assistance in locating comparable, decent, safe and sanitary replacement housing;

• Moving assistance payments; and

• Replacement housing payments, including rental assistance or down-payment assistance.

Generally, replacement housing payments are determined based upon monthly housing need over a 42-month period and limited to $5,250 per household plus an allowance for moving expenses.  However, in this circumstance, a combination of factors, including the low rent currently paid by the household, and the high cost of replacement housing available in the market, may create a need for additional replacement housing payments.  If required, replacement housing payments exceeding $5,250 may be determined based upon the difference between the household�s current rent or 30% of gross income, whichever is less, and the market rent for a comparable replacement unit of sufficient size to accommodate the household over a 42 month period.

As part of the Relocation Plan, PCI performed a rental housing survey to identify comparable replacement housing units in close proximity to the property.  The survey identified an adequate number of available market-rate units to meet the potential needs of the household to be relocated.  The rents for the available replacement housing units exceed the rent currently paid by the household by as much as $1,150 per month. 

The total, actual amount of replacement housing payments to be provided to the household has not yet been determined.  The maximum budget for replacement housing payments and moving allowance payments is estimated to be $50,000.  This amount includes up to $48,300 ($1,150 x 42 months) for replacement housing payments and $1,425 for moving assistance payments.   

Summary of Loan Agreement for 1730 Elliot Drive

Agency staff has prepared for Agency Board consideration the attached Affordable Housing Loan Agreement with BHC that would finance the property acquisition.  The estimated Agency loan in the amount of $498,000 is summarized in the table below.

Under the terms of the proposed Loan Agreement, the Agency will provide a no-interest, deferred repayment loan to BHC in the amount of $498,000.  Burbank Housing Corporation will be responsible to use the loan proceeds to acquire the property and pay closing costs.  The Agency loan will be secured by a first priority deed of trust on the property.  The loan may be refinanced by the Agency at a future date to provide financing for the proposed affordable home ownership development.  In addition, the Agency will be responsible for providing relocation assistance to the displaced household currently residing in the property.  The estimated budget for the relocation assistance is $50,000.  Thus, the total cost to the Agency for acquisition and relocation is estimated to be $548,000.

Performance and Affordability Requirements for Both Properties

Separate Loan Agreements have been prepared for 1726-1728 Elliot Drive and 1730 Elliot Drive.  The Loan Agreements require that BHC maintain each property as affordable rental housing for low or moderate-income households until such time as the properties are redeveloped for the proposed affordable ownership housing pursuant to the Agency approving an Owner Participation Agreement with BHC.  If the properties are not redeveloped for the proposed affordable home ownership project, the Loan Agreements require BHC to maintain the properties as affordable rental housing for a period of fifty-five (55) years.

The term of the Agency�s loan for each property is five years, during which time BHC is required to achieve specific performance objectives related to the proposed home ownership development.  If funding for the acquisitions is approved, during the next several months, BHC will be working with Habitat for Humanity on designing the proposed project and obtaining necessary entitlements to be ready to commence construction of an affordable ownership housing development on the site, subject to approval by the Agency Board.  The Agency Board will need to consider a future Owner Participation Agreement (OPA) with BHC for developing the properties. 

CONCLUSIONAgency staff and BHC have identified an opportunity in the Peyton-Grismer Focus Neighborhood for development of an affordable home ownership project.  The properties identified for the proposed home ownership project include: 

• 1902 Keeler Street;

• 1722 Elliot Drive;

• 1726-28 Elliot Drive; and

• 1730 Elliot Drive.

With Agency assistance, BHC has already acquired 1902 Keeler Street and 1722 Elliot Drive.  In addition, BHC has entered into purchase agreements to acquire the properties at 1726-1728 Elliot Drive and 1730 Elliot Drive.  The purchase of these two properties will complete the acquisitions necessary for the proposed home ownership development in the Peyton-Grismer Focus Neighborhood.  BHC has requested the Agency�s assistance to acquire the properties for use as affordable rental housing until such time as they enter into a future Owner Participation Agreement with the Agency to develop a proposed home ownership project on the site. 

ENVIRONMENTAL REVIEW

The Agency, acting as the lead agency pursuant to California Environmental Quality Act (CEQA), has determined that the proposed acquisitions and use of properties for affordable housing is categorically exempt under CEQA guidelines section 15301 pertaining to the use of existing facilities.  Public Notices of Environmental Decision have been posted at the Planning Division counter. 

FISCAL IMPACT

The fiscal impact to the Agency is estimated at $1,294,500 for the proposed Loan Agreements with BHC to acquire the properties at 1726-1728 Elliot Drive and 1730 Elliot Drive.  The specific costs associated with the acquisition of each property are summarized in the table on the following page.  There are currently sufficient funds in the Focus Neighborhood Account Number 305.CD23A.70005.0000.13057 for the proposed costs.

RECOMMENDATION

Staff recommends that the Agency Board adopt the proposed resolutions approving of the attached Affordable Housing Loan Agreements between the Burbank Redevelopment Agency and Burbank Housing Corporation.  Staff also recommends that the City Council adopt the proposed resolution approving the 1730 Elliot Relocation Plan.

EXHIBITS

Exhibit A -      Map

Exhibit B -      Letter from BHC

Exhibit C -      Affordable Housing Loan Agreement � 1726-1728 Elliot Drive

Exhibit D -      Affordable Housing Loan Agreement � 1730 Elliot Drive

Exhibit E -      1730 Elliot Relocation Plan

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