Report Prepared by: Mark E. Hamilton, Housing Program Supervisor, Housing Division, Department of Economic Development
Title
SUBJECT: Proposed Agreements with Habitat for Humanity to Administer Housing's Homeowner Rehabilitation Program Using Community Development Block Grant and HOME Investment Partnership Funds
REPORT IN BRIEF
Consider approving two proposed agreements with Habitat for Humanity (Habitat) totaling $400,000 from Community Development Block Grant and the HOME Investment Partnership Program funds modifying the City's Homeowner Occupied Rehabilitation Program.
RECOMMENDATION
City Council - Adopt a Motion:
A. Approving an agreement with Habitat for Humanity for the Homeowner Occupied Rehabilitation program in the amount of $250,000 as identified in the 2014 Department of Housing and Urban Development (HUD) Annual Plan with Community Development Block Grant (CDBG) funds from the 2015/16 Fiscal Year (accounts 018-1301-552-17.00);
B. Approving an agreement with Habitat for Humanity for the Homeowner Occupied Rehabilitation program in the amount of $150,000 as identified in the 2014 Department of Housing and Urban Development (HUD) Annual Plan with HOME Investment Partnership Program (HOME) funds from the 2015/16 Fiscal Year (accounts 033-1349-552-17.00); and,
C. Authorizing the City Manager to execute, and if necessary, make minor modifications to, the agreement described above as attached to this report and all associated documents.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to other than recommended by staff; or,
3. Deny; or,
4. Refer to City Manager or Housing Division for reconsideration; or
5. Continue to a future City Council meeting.
AUTHORITY
Section 200 of the City of Merced Municipal Code, City of Merced 2014 HUD Annual Plan and Title 24 of the Code of Federal Regulations, Part 570 (the U.S. Housing and Urban Development regulations concerning CDBG including Subpart K of these regulations) and HOME Investment Partnership Act; 24 CFR Part 92 - HOME Investment Partnership Program; 24 CFR Part 92.205 Eligible Activities: General.
CITY COUNCIL PRIORITIES
As provided for in the 2015-16 Adopted Budget and approved in the 2014 HUD Annual Action Plan.
DISCUSSION
Staff is requesting Council’s consideration of two agreements with Habitat for Humanity (Habitat) for the administration of the Homeowner Occupied Rehabilitation Program. Two agreements are required since funding for the Homeowner Occupied Rehabilitation Program is derived from separate funding sources, the Community Development Block Grant program and HOME Investment Partnership Program (Attachments 2 and 3). If approved, $250,000 will come from the Community Development Block Grant Program and $150,000 from the HOME Investment Partnership Program to fund the Agreements.
The proposed agreements are being requested after reviewing the progress of the program from the past year. Over the past year, Habitat had limited success and was only able to completely rehabilitate two properties. The number completed rehabilitations was disappointing because Habitat initially received over 426 inquires. Due to financial and equity constraints of the homeowners, 10 applications were processed, with only two households moving forward with rehabilitating their property. Both Habitat and the Housing Division believe there is a large need for rehabilitation of the City Housing Stock, but are no longer able to successfully implement the program as it is currently designed.
Current Rehabilitation Program: The current program provides a loan to income-qualified homeowners to rehabilitate their property. The loan amount is limited to 105% of the property value (at time of application) with a 3% simple interest rate. In order to qualify, the applicant’s total household income would need to be below 80% of average median income.
The current Rehabilitation Program has been in place with the City for many years. Economic conditions transpiring from the recession and downsizing of staff, the Housing Division outsourced the Homeowner Rehabilitation program to Habitat for Humanity. However, with the changing economy, many of the applicants withdrew their application preferring not to carry or create additional debt. In order to be able to reach the greatest economically challenged households living in substandard housing, staff is recommending changes to the terms of the current Rehabilitation Program.
Proposed Homeowner Rehabilitation Program: The proposed program would allow the property to be granted a maximum of $50,000 to be put towards rehabilitating the property. With the funds being granted, the existing property value would not be taken into consideration. In order to qualify the total household income would need to be lower than 80% of average median income with the amount fluctuating based on household size. Habitat feels these changes would allow them to have a greater success and better serve our community.
The proposed changes to the current Rehabilitation Program would better serve many of the economically challenged households currently in sub-standard housing conditions. Examples of sub-standard housing conditions include: installing insulation, replacing broken or boarded up windows, repairing Heating and Air Conditioning system, repairing the foundation, modernizing the electrical system with ground outlets, replacing a leaking roofs, repairing water damage, and removing mold and lead based paint.
Allowing funds to be granted for these types of repairs will allow Habitat to truly improve substandard housing that would not have been previously rehabilitated. The funds will primarily be used for the rehabilitations and for program management. Tasks associated with administering this program include refinement of program, outreach, household eligibility, work write-ups, solicitation and selection of contractors, periodic and final inspections, approval of contractor payments, and maintenance of the case files and other records.
The agreements will expire December 30, 2016, with an opportunity to extend the agreements to June 30, 2020. In the event the sub-recipient is not performing to the City's expectations or in compliance with HUD's regulations, the City reserves the right to terminate the agreement and reconcile any remaining funds.
Habitat will primarily be focusing their outreach efforts to the three target areas approved in the 2014 HUD Annual Action Plan (Attachment 1). However, the owner occupied rehabilitation program will be available to all income eligible households located within the City of Merced. For a household to meet basic eligibility requirements, the total income of all individuals living within the household must be below 80% of the average median income for Merced County.
Habitat has the experience and the capacity to implement the Home-Owner Occupied Rehabilitation program in our community. Carrying out the Rehabilitation Program is time and staff intensive. The partnership with Habitat for Humanity provides a platform for efficiency and broader program implementation.
IMPACT ON CITY RESOURCES
No appropriation of funds is needed.
The proposed agreements do not require expenditures from the General Fund. Funding used for the agreement with CDBG Funds will be from CDBG Supplies and Services / Professional Services account 018-1301-552-17.00 in the amount of $250,000. Funding used for the agreement with HOME Funds will be from HOME Supplies and Services / Professional Services account 033-1349-552.17-00 in the amount of $150,000.
ATTACHMENTS
Attachment 1 - Project Target Area Map
Attachment 2 - Habitat for Humanity CDBG Agreement
Attachment 3 - Habitat for Humanity HOME Agreement
Attachment 4 - CDBG Guidebook Chapter 3 - Sub-recipient Agreement