Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: Adoption of Resolutions Authorizing the Submittal of Joint Applications and Participation in the State of California Housing and Community Development (HCD) Homekey Grant Program with Two Affordable Housing Developer/Applicants
REPORT IN BRIEF
Considers adopting resolutions authorizing the submittal of joint applications for participation in HCD Homekey Grant Program with CC915 Merced, Inc. and Shangri-La Industries LLC.
RECOMMENDATION
City Council - Adopt a motion:
A. Adopting Resolution 2023-43, a Resolution of the City Council of the City of Merced, California, authorizing a joint application to and participation in the Homekey Program with CC915 Merced, Inc.; and,
B. Adopting Resolution 2023-44, a Resolution of the City Council of the City of Merced, California, authorizing a joint application to and participation in the Homekey Program with Shangri-La Industries LLC; and,
C. Authorizing the City Manager or Deputy City Manager to execute the Standard Agreements if selected for such funding and any amendments thereto, and any related documents necessary to participate in the Homekey Program; and,
D. Authorizing the Finance Officer to make any budget amendments necessary for the implementation of the use of the Homekey Program; and,
E. Authorizing the use of pooled cash until reimbursement if one or both projects are granted awards from the Homekey Program.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, with modifications; or,
3. Deny the request completely; or,
4. Refer to staff for reconsideration of specific items as requested by Council; or,
5. Continue to a future City Council meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
As provided for in the 2022-2023 Adopted Budget and the City Council’s Pro-Housing Policies.
DISCUSSION
The State of California HCD has issued a NOFA for funding under the Homekey Program, Round 3. A copy of the NOFA is attached. This funding program is highly competitive, and awards are awarded based on a first come basis. Applications are being accepted through July 28, 2023, or until the funds are exhausted. Approximately $736 million of Homekey Program (Homekey) grant funding is available to sustain and rapidly expand the inventory of housing for people experiencing homelessness or At Risk of Homelessness and who are, thereby, inherently impacted by or at increased risk for medical diseases or conditions due to the COVID-19 pandemic or other communicable diseases.
Homekey is an opportunity for state, regional, and local public entities to develop a broad range of housing types including, but not limited to, hotels, motels, hostels, single-family homes and multifamily apartments, adult residential facilities, and manufactured housing, and to convert commercial properties and other existing buildings to Permanent or Interim Housing for the Target Population.
Because COVID-19 impacts people experiencing or at risk of homelessness throughout California, HCD is working to ensure jurisdictions throughout the state have an equitable opportunity to apply for Homekey funds. The state has been divided into regions; the City of Merced is part of the San Joaquin Region. The San Joaquin Region also includes Fresno, Kings, Kern, Madera, San Joaquin, Stanislaus, and Tulare. The region has been allocated just over $43 Million, with a discretionary balance of just over $20 Million that can be granted across the state.
Eligible Projects - HCD will consider a variety of innovative housing solutions as eligible Projects. The following list of eligible Projects is not exhaustive.
1. Conversion of nonresidential structures to residential dwelling units.
2. Conversion of commercially zoned structures, such as office or retail spaces, to residential dwelling units.
3. Adult residential facilities, residential care facilities for the elderly, manufactured housing, and other buildings with existing residential uses.
4. Multifamily rental housing Projects.
5. Excess state-owned properties.
6. Existing Homekey Assisted Units, previously awarded under Rounds 1 and 2 of Homekey funding, are ineligible for funding under this NOFA.
7. The Homekey program is intended to support the development of housing units and will not fund congregate shelter. Other funding sources should be considered for congregate shelter types of Interim Housing.
Homekey Round 3 Key Items
• Funding - Of the $736 million in Homekey grant funds, $435 million is derived from the state's direct allocation of the federal Coronavirus State Fiscal Recovery Fund (CSFRF), which was established by the American Rescue Plan Act of 2021 (ARPA) In addition, $301 million is derived from the state's General Fund to supplement the acquisition of, and to provide initial operating subsidies for Homekey sites.
• Projects receiving an award from the state's direct allocation of the federal ARPA must expend the funds within eight months of the date of award. The portion of a Project's award associated with State General Fund must be expended by June 30, 2026.
• Capital Award Per Door - $150,000 - $200,000. Higher level of support for Homeless Youth or Youth At Risk of Homelessness, and Chronically Homeless.
• Capital Match - 1:1 up to an additional $100,000 per door.
• Operating Award per Unit - $1,000 -$1,400 per Assisted Unit per month.
• Operating Match - Two (2) years if Applicant commits three (3) years of operating funding; Three (3) years if Applicant commits four (4) years of operating funding.
• Capital Expenditure Deadline - Eight (8) months from the date of the award, per statute.
• Occupancy Deadline - Full occupancy must be achieved by 15 months from date of award letter.
• Affordability Covenant - The Grantee shall duly encumber all Permanent Housing Projects with a 55-year Affordability Covenant.
Proposed Projects
• CC915 Merced, Inc.
This is the second Homekey Resolution that the City Council has been asked to support with this developer. The previous one was for a 21-unit, container home project to provide permanent supporting housing for veterans at 73 South R Street. The project was awarded $4.2 Million in Homekey Round 2 funding and is currently under construction. The goal was to create a small village concept to provide permanent supportive housing for Veterans.
The proposed project site is located at 125 E.13th Street in Merced. This project is also a container home project of new development construction. It is in close proximity to the Merced County Navigation Center, Behavioral Health Services and on the G Street bus line making this an idea location for serving the homeless and at risk of homeless population. The single parcel is just over 2.6 acres and has a High to Medium Density Residential General Plan designation and a corresponding R-3-1.5 Zoning designation. A Site Plan is being prepared.
The project will provide 55 restricted units for homeless and chronically homeless and at least one unrestricted unit for the resident manager. The plan is for a modular development comprised of 10-12’ x 40’ shipping containers that will provide 35 studio units, 10 1-bedroom units, and 10 2-bedroom units to be operated as permanent housing. Each unit, measuring approximately 150-500 square feet, will have its own kitchen and bathroom. Along with the living units, the development will have a community room, management office, and indoor and outdoor common areas. The goal of Homekey CC915 Merced is to establish a new model of micro subdivision, or pocket village, to rapidly deploy modular affordable housing that addresses the scale of rising homelessness.
In addition to the physical development Homekey also supports the operations of the facility and requires a service plan as part of the application. The co-applicant has been working with other partners to provide services under the plan. Those include Merced County Behavioral Health and Recovery Services, Human Services Agency, and Rescue Mission Merced.
The project is seeking approximately $10,125,000 in Homekey Funds. The Homekey funding is the primary source being sought. Per HCD’s directions, the resolution shows approximately twice the amount sought up to $35,000,000 to avoid having to go back to council should the award be larger than the initial request.
The project partner has begun preliminary work on the application including working with the County of Merced on their supportive services plan, submission of a Homekey Intake Survey, and HCD approval to submit an application for Homekey Round 3.
• Shangri-La Industries, LLC
Shangri-La Industries, LLC is an experienced affordable housing developer that is new to Merced. They have completed affordable housing projects in Santa Monica, Hollywood, Salinas, and San Bernardino.
They propose to purchase the Motel 6 at 1983 E. Childs Avenue and convert it into an 80-unit studio apartment complex with permanent supportive housing for chronically homeless and homeless individuals. The single parcel is nearly 4 acres and has a Thoroughfare Commercial designation in the General Plan and a corresponding C-T Zoning designation. This location was selected due to its proximity to reliable neighborhood amenities such as affordable transportation, grocery stores, and recreational activities that help create a stable and supportive environment for residents. Rehabilitation will include kitchenettes in each unit, hard surface flooring, repainted exteriors and interiors, refreshed landscaping with low-flow irrigation and drought-tolerant plants. Safety design elements will include perimeter fencing, entrance rolling gate, security cameras with remote web-based monitoring, electronic access control systems, Bluetooth smart locks at each unit, and upgraded fire life safety systems with a fully sprinklered structure. It will also include green elements such as low flow plumbing fixtures, LED lighting, and an energy efficient HVAC system.
The operations will be conducted via their partner, Step-Up. They are also seeking assistance from the County for supportive services.
The project is asking for approximately $20,000,000 in Homekey Funds. The Homekey funding is the primary source being sought. Per HCD’s directions, the resolution authorizing the application should indicate approximately twice the amount sought, up to $35,000,000.
Shangri-La completed their Homekey Intake Survey and expects to have HCD permission to apply before the date of this council meeting. Completed applications are due no later than July 28, 2023, or as soon as possible to be competitive.
IMPACT ON CITY RESOURCES
Homekey funding is currently not included in the Fiscal Year 2022-2023 adopted City Budget or the proposed FY 23-24 Budget. The approval actions by the City Council provides authorization to apply for the grant, and authorization for the Finance Officer to make any Budget Amendments or appropriations necessary for the implementation of the use of the Homekey Program Funds, should they successfully be granted, including the use of pooled cash if necessary.
ATTACHMENTS
1. Homekey Notice of Funding Availability, Round 3 (NOFA)
2. Resolution 2023-43
3. Resolution 2023-44