HomeMy WebLinkAboutCED Affordable Housing Funding Recommendation and Upcoming Notice of Funding Availability____________________________________________________________________________________
FOR CITY CLERK ONLY
Council Meeting: December 2, 2024
Disposition: Resolution 15358 x Accepted report
Agenda Item No: 4.g
Meeting Date: December 2, 2024
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: Community and Economic Development
Prepared by: Micah Hinkle, Director
Alexis Captanian, Housing Manager
City Manager Approval: ______________
TOPIC: AFFORDABLE HOUSING FUNDING RECOMMENDATION AND UPCOMING NOTICE
OF FUNDING AVAILABILITY
SUBJECT:
RESOLUTION AUTHORIZING THE APPROPRIATION OF $252,000 TO SUPPORT THE
ACQUISITION OF A NINE-UNIT APARTMENT BUILDING AT 1400 LINCOLN AVENUE FOR
THE PRESERVATION AS AFFORDABLE HOUSING
INFORMATIONAL REPORT ON THE STATUS AND SCOPE OF JOINT NOTICE OF
FUNDING AVAILABILITY WITH THE COUNTY OF MARIN IN JANUARY 2025
EXECUTIVE SUMMARY: On September 26, 2024, the City of San Rafael (City) received a request to
fund the acquisition of a nine-unit apartment building at 1400 Lincoln Avenue to permanently preserve
nine units of existing affordable housing. City staff evaluated the application and developed the
recommendation provided in this report.
Additionally, this report provides information on the upcoming release of a joint notice of funding
availability (NOFA) with the County of Marin. The NOFA includes up to $500,000 from the City’s
Affordable Housing Trust Fund, plus funds available through the Marin County Housing Trust Fund and
Community Development Block Grant. City staff anticipates the NOFA will be issued in mid-January, and
staff plans to present award recommendations to the City Council at their second meeting in April.
RECOMMENDATION:
Staff recommends the City Council:
1.Adopt a resolution to authorize the appropriation of $250,000, plus administrative costs estimated
at $2,000 or less, from the Affordable Housing Trust Fund for the acquisition and preservation of
1400 Lincoln Avenue as a 100 percent affordable housing project, and to authorize the City
Manager to execute all documents, including a funding agreement, required to disburse the funds.
2.Accept the 2025 Notice of Funding Availability report.
BACKGROUND:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
The City is committed to creating and preserving affordable housing for the San Rafael community. It
maintains an Affordable Housing Trust Fund to support the efforts of affordable housing developers and
owners. Two types of fees are deposited into the fund:
1)Affordable Housing In-Lieu Fee: Developers who are creating market-rate housing can pay an in-
lieu fee rather than providing below-market-rate units within their residential project to satisfy their
affordable housing obligation.
2)Commercial Linkage Fee: Developers of certain commercial projects must pay a commercial
linkage fee to offset the additional need for affordable housing that the new commercial use is
anticipated to create.
As of September 2024, the affordable housing trust fund has an unencumbered balance of $955,104.
The City periodically issues a Notice of Funding Availability (NOFA) to invite qualified organizations to
request funding for the preservation or development of affordable housing. The most recent NOFA
process concluded in July 2023. The City will be participating in a joint NOFA with the County of Marin in
January 2025 to allow for stronger coordination of funds and reduce the administrative burden on
applicants.
This year, the City Council approved implementing a rolling application process for acquisition projects
seeking funding from the Affordable Housing Trust Fund during periods outside of an active NOFA. On
September 26, staff received an application from Canal Alliance requesting funding for the acquisition of
a nine-unit apartment building at 1400 Lincoln Avenue to preserve the units as permanently affordable
housing. In October, Community and Economic Development Department staff evaluated the application
using the criteria listed in Section 5 of City Council Resolution No. 14760, Guidelines for the
Administration of the Affordable Housing Trust Fund, including:
•Community benefit
•Development team’s capacity
•Management team’s capacity
•Readiness to proceed
•Leverage and collaboration
•Per unit subsidy
Additionally, staff evaluated whether the funding request aligned with the four goals established in the
City’s 2023-2031 Housing Element:
1.End and prevent homelessness in San Rafael.
2.Combat housing discrimination, eliminate racial bias, and undo historic patterns of segregation.
3.Ensure housing habitability and maintenance.
4.Meet housing needs through various housing choices and affordability levels throughout the City.
City staff met in mid-October to discuss the application, form a preliminary recommendation, and identify
the need for additional information. Staff scheduled a follow-up call with the applicant in late October to
gather additional information and presented a final evaluation and recommendation to the City Manager
in early November.
ANALYSIS:
1) Acquisition Funding Request – 1400 Lincoln Avenue
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
The City received a gap funding request of two hundred fifty thousand dollars ($250,000) for the
recent acquisition of the Paloma Arms Apartments, a low-rise apartment building built in the early
1960s at 1400 Lincoln Avenue. The rents at this property are below market rate without any
government subsidy or restriction. This type of affordable housing that occurs naturally is most at risk
of conversion to market-rate. The acquisition by Canal Alliance will result in the preservation of nine
units as affordable housing, including two one-bedroom units, six two-bedroom units, and one three-
bedroom unit (17 bedrooms total). Receipt of City funding would be contingent upon the recordation
of a deed restriction on the property, reserving all nine units for low-income households, with rents at
or below 60% of Marin County Area Median Income 1. Table 1 summarizes the funding request.
Table 1: Summary of Funding Request
Address
(Project Type) Request Sponsor Units Total Cost
(per unit)
Funding Request
(per unit)
1400 Lincoln Ave
(Acquisition) Gap Funding Canal Alliance 9 $3,120,000
($346,667)
$250,000
($27,778)
Funding Sources: Before the acquisition, the applicant secured 2.4 million dollars in grants and loans
from Tam Pacific, La Raza Development Fund, and Marin Community Foundation, plus Canal Alliance’s
capital. Canal Alliance has pending funding applications with the County Housing Trust Fund ($450,000)
and the City Housing Trust Fund ($250,000). To achieve the sales price of 3.1 million dollars within the
purchase timeline, Canal Alliance and the Marin Community Foundation provided $700,000 in bridge
funds to fill the gap, allowing the applicant additional time to secure funding. With the aid of this bridge
funding, Canal Alliance and the seller closed escrow on the property on October 30, 2024.
The Board of Supervisors will consider Canal Alliance’s funding request at their regular meeting on
December 10. The Board of Supervisors awards funding to housing projects in jurisdictions across Marin
County, including San Rafael. Notably, projects in incorporated areas of Marin County are only eligible
for funds from the County if the city or town government contributes financially to the project. Table 2
below offers a summary of the current and recommended funding sources for this project.
Table 2: Acquisition Funding Sources
Funding Source Status Amount
Canal Alliance Capital Committed $470,300
Marin Community Foundation Grant Confirmed $100,000
Tam Pacific Grant Confirmed $100,000
La Raza Development Fund Grant Capital Confirmed $250,000
Marin Community Foundation Loan Confirmed $1,500,000
City of San Rafael Affordable Housing Trust Fund
Grant Recommended $250,000
County of Marin Housing Trust Fund
Pending - Contingent
on City contribution,
per County policy
$450,000
Total Sources $3,120,300
1 Marin County Area Median Income (AMI) is set by the United States Department of Housing and Urban Development (HUD
AMI) and published by the Marin Housing Authority.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4
Funding Recommendation: Staff recommends awarding the applicant’s requested amount of $250,000
based on the following evaluation:
•Affordable Housing Preservation. The project preserves existing, unrestricted, affordable
housing for the long term. Per the City’s Affordable Housing Trust Fund guidelines, all rental units
supported by City funds are income- and rent-restricted for at least 55 years.
•Location. The property is in a High Resource Area, associated with positive economic,
educational, and health outcomes for low-income families—particularly long-term outcomes for
children. Thus, the project aligns with the City’s Housing Element goals to foster a range of
housing choices.
•Tenant Stability. The acquisition prevents the displacement of current low-income tenants. At
the time of acquisition, all tenant households reported incomes below 80% of the Area Median
Income.
•Applicant’s Relevant Skills and Experience. Canal Alliance is a local nonprofit that serves San
Rafael community members. Since the early 2000s, the organization has owned 12 units at Marin
Villa Estates that are deed-restricted for households earning very low and low incomes.
•Funding. The applicant has sought and secured funding from multiple public and private sources.
The request for City funding, which constitutes only 8 percent of the total project cost, helps close
a gap and enables a potential award from the County Housing Trust Fund.
•Reasonable Per Unit Subsidy. At approximately $28,000 per unit, the requested City subsidy is
consistent with prior City Council awards for this project type and affordability level.
•Project Scale. Larger affordable housing developers do not typically seek to acquire properties
of this size, and there are fewer funding sources available, so the City’s role is critical in supporting
organizations pursuing projects of this scale.
Accordingly, staff recommends awarding Canal Alliance $250,000 for the acquisition of 1400
Lincoln Avenue based on the factors outlined above.
The application for 1400 Lincoln Avenue was submitted through the rolling application process for
acquisitions. Funding available to applicants through the rolling application is capped at $250,000 per
fiscal year. If approved, this award would fully expend the award funds allocated to the rolling
application process for fiscal year 2024-2025. The additional $2,000 is to cover administrative costs.
2) Upcoming Notice of Funding Availability
In addition to supporting affordable housing projects on a rolling basis, staff is preparing to participate
in the County of Marin’s upcoming NOFA in January 2025. Through this joint NOFA, the City will invite
qualified organizations to submit requests for funding for the preservation or development of 100
percent affordable rental or ownership housing projects in San Rafael. The City and County will use
a joint application. The County will evaluate funding requests for its housing trust fund, as well as
Community Development Block Grant (CDBG) and HOME Investment Partnerships Program
(HOME) funds. City staff will continue to evaluate all applications for City funding and present
recommendations to the City Council for consideration per the City’s trust fund guidelines.
Funding applicants will be selected through a competitive process. Qualified responses may be
awarded in full or in part, and funding may be awarded to one or more projects depending on the
number of responses received and how each response addresses the City's affordable housing goals.
Responses shall be evaluated, and recommendations for funding will be made using the selection
criteria included in the NOFA. Any award of funding must be approved by the City Council.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 5
Based on the City’s current fund balance and pending award, staff recommends issuing a NOFA in
the amount of five hundred thousand dollars ($500,000), reserving some funds to pay for the
administration of the Below Market Rate Rental and Ownership Programs. The Below Market Rate
Rental and Ownership Programs monitor rental and ownership units with affordability restrictions to
ensure that tenants and homeowners are income-qualified and that rent and home prices match the
affordability restriction in place.
Guidelines and Goals for the NOFA: NOFA responses must meet the guidelines provided in the
San Rafael City Council Resolution No. 14760, Guidelines for the Administration of the Affordable
Housing Trust Fund (“Guidelines”).
Successful responses will also contribute to the affordable housing goals provided in the City of San
Rafael Housing Element and the County of Marin Consolidated Plan, the latter of which is currently
being updated for 2025 through 2029. The Housing Element provides San Rafael’s affordable
housing goals, while the consolidated plan is a five-year strategic plan for federal funding programs,
including the Community Development Block Grant (CDBG) program and the HOME Investment
Partnerships program (HOME). Both sets of goals are included in the NOFA to ensure that awardees
will also be competitive for an award of the City’s share of CDBG and HOME funds, which the County
administers.
Proposed Timeline: The County of Marin anticipates issuing the NOFA in January 2025, with
responses due four to six weeks after the NOFA’s release. Staff will then evaluate responses and
bring forward funding recommendations to the City Council in the spring of 2025. Below is a tentative
timeline.
Table 3: 2025 NOFA Schedule (tentative)
Funding Application Opens & Applicant Workshops January
Funding Application Closes February
Application Review Period Late February through mid-April
Award recommendations are presented to the San Rafael
City Council for consideration
April
Requirements for Consideration: Qualified responses must demonstrate the following minimum
qualifications.
Eligible Projects:
•Acquisition/Rehabilitation, including conversion of market-rate housing or adaptive reuse of
buildings to affordable housing.
•New Construction of affordable housing, including the residential portions of mixed-use and
live/work projects that meet the affordability requirements of the Guidelines.
Eligible Applicants:
•Nonprofit organizations that qualify under Section 501(c)(3) of the Internal Revenue Code.
•For-profit developers of affordable housing. For-profit developers experienced in residential
development may also partner with a 501(c)(3) nonprofit organization.
Eligible Activities:
•Land or property acquisition.
•Predevelopment (architecture, engineering/soil, environmental, financial analysis).
•Construction (site preparation, construction, materials).
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 6
•Conversion of market-rate housing or non-residential buildings to deed-restricted affordable
housing.
•Any other activity determined by the City that helps address affordable housing goals and
priorities as established by the City Council.
Developer Team Minimum Requirement:
•Expertise and experience of the developer team designing and constructing successful
affordable housing projects locally or within similar communities in the Bay Area.
Project Minimum Requirements:
•Meet all requirements provided in the Guidelines.
•Demonstrate site control or ability to achieve site control, including but not limited to a
purchase sale agreement, executed deed or contract of sale, or letter from a public agency or
other entity agreeing to convey property and including the terms and conditions of such a
transfer.
•Return on city investment is based on population needs and the number of units created
through the creative use of design, materials and construction techniques, and financing.
•Reasonable per unit City subsidy is evaluated by the need of the target population, project
type, and cost-effectiveness (cost per person, externalities, reserves, leveraging).
Additional Considerations:
•Project readiness in the form of approved entitlements and building permits, as well as state
and federal funding.
•Located within a quarter mile of transit, provides units for larger families, serves very-low-
and/or extremely-low-income households, or includes 20 percent or more permanent
supportive housing.
•Contributes to meeting the City’s goals for new housing development and the Regional
Housing Needs Allocation (RHNA).
City of San Rafael Affordable Housing Trust Fund – Recent Activity: Table 4 below lists
Affordable Housing Trust Fund revenues and expenditures greater than $20,000 in fiscal years 2023-
24 and 2024-2025. During this time, the fund received one significant commercial linkage fee payment
in the amount of $507,944.
Table 4: Affordable Housing Trust Fund – Major Transactions in Fiscal Years 2023-2025
Date Address Transaction Entity Amount
07-17-2023 TL Manor NOFA Loan BRIDGE Housing ($1,000,000)
07-17-2023 Novato St NOFA Grant Canal Alliance ($200,000)
09-06-2023 326 Mission In-Lieu Fee Payment Aldersly $507,944
10-13-2023 Admin – BMR Ownership Marin Housing ($86,040)
05-31-2024 3301 Kerner NOFA Grant Eden Housing ($250,000)
08-30-2024 Admin – BMR Ownership Marin Housing ($86,298)
COMMUNITY OUTREACH:
Staff will announce the NOFA on the City’s website and provide notices to local and regional affordable
housing owners and developers. Staff will also distribute the announcement to over 4,000 contacts via
the County of Marin’s listserv for federal grants and housing updates. The City will then join a virtual
applicant workshop with County staff to educate potential applicants, and staff will engage in follow-up
conversations with applicants as needed.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 7
FISCAL IMPACT:
The total anticipated cost for the grant award plus administrative costs is $252,000. Staff requests an
appropriation of $252,000 from the Affordable Housing Trust Fund No. 243. Adequate funds are available
to support this request. As of September 2024, $955,104 is available in the Affordable Housing Trust
Fund. If the recommendation is fully funded, approximately $703,104 will be left unencumbered in the
fund.
Staff's recommendation is to issue the $250,000 award as a grant, consistent with prior awards of this
size.
As of September 2024, the Affordable Housing Trust fund balance was $955,104, sufficient to support
this NOFA and the funding recommendation for 1400 Lincoln Avenue.
OPTIONS:
The City Council has the following options to consider on this matter:
1.Adopt the resolution and accept the report.
2. Adopt a modified resolution.
3.Adjust the NOFA funding amount and allocate additional funds to the rolling application process.
4.Direct staff to provide additional information or otherwise adjust the NOFA.
5.Take no action.
RECOMMENDED ACTION:
Staff recommends the City Council:
1.Adopt a resolution to authorize the appropriation of $250,000, plus administrative costs
estimated at $2,000 or less, from the Affordable Housing Trust Fund for the acquisition and
preservation of 1400 Lincoln Avenue as a 100 percent affordable housing project, and to
authorize the City Manager to execute all documents, including a funding agreement, required
to disburse the funds.
2.Accept the 2025 Notice of Funding Availability report.
ATTACHMENTS:
1. Resolution
Page 1 of 2
RESOLUTION NO. 15358
RESOLUTION AUTHORIZING THE APPROPRIATION OF $252,000 FROM THE AFFORDABLE
HOUSING IN-LIEU FEE FUND (FUND #243), INCLUDING $2,000 IN ADMINISTRATIVE COSTS,
FOR ACQUISITION OF A NINE-UNIT APARTMENT BUILDING AT 1400 LINCOLN AVENUE FOR
PRESERVATION AS A 100% AFFORDABLE HOUSING PROJECT, AND AUTHORIZING THE CITY
MANAGER TO EXECUTE ALL DOCUMENTS INCIDENTAL TO THE FUNDING
WHEREAS, on January 21, 2020, the City Council adopted Resolution No. 14760, establishing
Guidelines for the Administration of the Affordable Housing Trust Fund; and
WHEREAS, on September 3, 2024, the City Council approved the implementation of a rolling
application process for the Affordable Housing Trust Fund, with up to two-hundred and fifty thousand
dollars ($250,000) in funding available per year from the Housing In-Lieu Fee Fund to support affordable
housing property acquisitions; and
WHEREAS, the City received an application from Canal Alliance requesting $250,000 in funding
for the acquisition of a nine-unit apartment building at 1400 Lincoln Avenue; and
WHEREAS, the application was reviewed using the evaluation criteria listed in Section 5 of the
Guidelines for the Administration of the Affordable Housing Trust Fund; and
WHEREAS, based upon this evaluation criteria and the needs for local support for the
preservation of affordable housing, a funding recommendation has been developed; and
WHEREAS, the City has sufficient funds in the Housing In-Lieu Fee Fund #243 to issue the
recommended grant and the funding recommendation meets the criteria for use of the funds.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael does
as follows:
Section 1. The City Council authorizes the following affordable housing expenditure from the Housing
In-Lieu Fee Fund, subject to City requirements for issuing grants for affordable housing:
i. $250,000 grant from the Housing In-Lieu Fee Fund (#243), including up to an additional $2,000
in administrative costs, for Canal Alliance for acquisition of nine existing units at 1400 Lincoln
Avenue. The project will be restricted at 60% of Marin County Area Median Income set by the
United States Department of Housing and Urban Development (HUD AMI) as published by the
Marin Housing Authority. The affordability term shall last for 55 years.
Section 2. The City Council authorizes the City Manager to execute all documents and agreements
incidental to the affordable housing fund expenditure authorized in this Resolution, in a form to be
approved by the City Attorney.
I, LINDSAY LARA, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly
and regularly introduced and adopted at a regular meeting of the City Council of said City held on
Monday the 2nd day of December 2024, by the following vote, to wit:
Page 2 of 2
AYES: COUNCILMEMBERS: Bushey, Hill, Kertz, Llorens Gulati & Mayor Kate
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
LINDSAY LARA, City Clerk
