To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: Approval of $2,766,142 PLHA and $4,197,500 HOME Loan and Related Documents for the Mayfair Affordable Housing Project
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
1. APPROVE and AUTHORIZE a loan of Permanent Local Housing Allocation (PLHA) funds in the amount of $2,766,142 and HOME Investment Partnerships Program (HOME) funds in the amount of $4,197,500, for a total loan amount of $6,963,642 to Mayfair Affordable Housing LP, a California limited partnership, for the construction of an affordable housing development known as Mayfair Affordable Housing, located at 11690 San Pablo Avenue in El Cerrito.
2. APPROVE and AUTHORIZE the Director of Conservation and Development, or designee, to execute (i) a Loan Agreement evidencing the County’s loan of $6,963,642 of HOME funds and PLHA funds to Mayfair Affordable Housing, (ii) a HOME/PLHA Regulatory Agreement and County Regulatory Agreement to be recorded against the property, (iii) a Deed of Trust to be recorded against the property, (iv) an Intercreditor and Subordination Agreement with the City of El Cerrito, (v) a HOME Promissory Note to reflect the $4,197,500 HOME loan, and (vi) a PLHA Promissory Note to reflect the $2,766,142 PLHA loan.
3. FIND, as the responsible agency, that on the basis of the whole record before the County including the California Environmental Quality Act (CEQA) review prepared by the City of El Cerrito, as the lead agency, that the development is categorically exempt under CEQA Guidelines Section 15168; and DIRECT the Conservation and Development Director, or designee, to file a Notice of Exemption for Mayfair Affordable Housing with the County Clerk, and pay any required fee for the filing.
FISCAL IMPACT:
No General Fund impacts. PLHA funds are provided to the County as a grant on a formula application basis through the State’s Department of Housing and Community Development. HOME funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD). HOME CFDA #14.256.
BACKGROUND:
The Mayfair Affordable Housing development site is located at 11690 San Pablo Avenue in the City of El Cerrito. The development site is currently a vacant and underutilized infill site adjacent to the El Cerrito Del Norte BART Station and next to a newly constructed market-rate housing project. The development will create more affordable housing opportunities near high quality transit for car-free living. The development will include the new construction of five stories on top of a ground floor concrete podium, which includes 69 rental units (a mix of studio, one-, two-, three-, and four- bedroom units), 34 parking spaces, management offices, and community spaces. The units will be affordable to households earning between 30 and 60 percent of area median income (AMI) and will include one manager’s unit.
The development’s amenities will include a podium level courtyard that will be shared by all residents on the property. The courtyard will include outdoor lounge seating, play areas, dining, and BBQ area. There will be a ground floor community room with a kitchen for community events, bicycle parking, shared laundry room, secure card key access, and security cameras. In addition, the project will include an all-electric design and Green Point Rated Gold Status.
Of the 69 total units, 18 of the units in the development will be designated as County-assisted HOME units, of which ten units are also designated as PLHA-assisted units. In addition, the project will include 17 Project-Based Section 8 vouchers. For all federally funded projects, a minimum of five percent of the total number of units must be accessible to people with physical disabilities, and an additional two percent of units must be accessible to people with auditory and visual disabilities, as defined in the Uniform Federal Accessibility Standards. This development will require a minimum of four units reserved and accessible for persons who are physically disabled, and two units reserved and accessible for persons who are hearing and visually impaired.
Funding Sources
On June 7, 2022, the Board of Supervisors (Board) approved an award of $2,766,142 in FY 2022/23 PLHA funds to BRIDGE Housing Corporation (Bridge) for the construction of the Mayfair Affordable Housing project. On May 9, 2023, the Board approved the award of $4,197,500 in FY 2023/24 Measure X/Local Housing Trust Fund (LHTF) monies to Bridge for construction of the project. On March 5, 2024, the Board approved a substantial amendment to the County’s FY 2021/22 HOME funds to recapture HOME funds from two stalled projects and allocated additional HOME funds to the Mayfair Affordable Housing project to bring the total allocation to $4,197,500 in HOME funds, plus an additional $50,000 for project delivery costs. The FY 2023/24 Measure X/LHTF funds were swapped out of this project for the FY 2021/22 HOME funds in the same amount to the project. On December 6, 2023, the project obtained an award for tax credits and bonds, has all funding awarded to the project, and will begin construction in June 2024.
Bridge has formed a limited partnership, Mayfair Affordable Housing LP, to develop and own this project. The HOME/PLHA funds will be provided by the County in the form of a 55-year residual receipts loan. The HOME/PLHA loan will bear a three percent simple interest rate. There may be some loan repayments if the project has a surplus cash flow (surplus cash is also known as "residual receipts") during the operation of the development. Affordability and use restrictions are incorporated into the HOME/PLHA loan documents. The County will have a HOME/PLHA Regulatory Agreement with a 20-year HOME term of affordability, as well as a County Regulatory Agreement that will maintain affordability of the units following the expiration of the HOME term for a total term of 55 years. Additional non-County financing for the development includes a City of El Cerrito loan, City of El Cerrito Hope VI Main Street loan, State Affordable Housing Sustainable Communities loan, State Infill Infrastructure Grant loan, a private construction loan, and 4% tax credits.
Through this action, the Director of Conservation and Development, or designee, is authorized to execute subordination agreements and estoppels that are consistent with the subordination terms in the Loan Agreement. Due to the high construction costs and limited revenue from the restricted rents, the total amount of the financing provided to the project will likely exceed the value of the completed project. Even though the proposed equity investment from low-income housing tax credits is substantial compared to the amount of long-term debt, the partnership agreement will have numerous safeguards of the investor's equity. These safeguards essentially subordinate the County’s debt to the investor’s equity. Therefore, the County HOME and PLHA funds may not be fully secured through the value of the property. However, the HOME and PLHA program funds are granted, not loaned, to the County, so the County general fund will not have any exposure as a result of this loan. The County structures its HOME and PLHA investments as loans rather than grants to maintain involvement in the financial team in the event the project experiences any serious issues over the 55-year term.
Environmental Review
National Environmental Policy Act (NEPA): HOME projects are subject to NEPA and 24 CFR Part 58 environmental regulations. The NEPA review for this project is complete and the required mitigation actions are included in the loan agreement. The County, as a responsible agency under CEQA, concurs with the City of El Cerrito’s CEQA determination and will file the appropriate notice with the Recorder's Office.
CONSEQUENCE OF NEGATIVE ACTION:
If the HOME and PLHA loan is not approved and legal documents not executed, the developer will not be able to construct the project in a timely manner.