Title
Recommendation to Authorize the City Manager to Execute a Twenty-Five Month Agreement with Rise Housing Solutions to Provide Inclusionary Housing Homeownership Buyer Selection Services, Based on the Updated Annual Below Market Rate Homeownership Lottery Procedures, with a Total Compensation Amount Not-to-Exceed $180,000. (City Manager 20621840)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Ordinance 30-16, Inclusionary Housing Requirements for Residential Projects, is a mechanism for the development of affordable homeownership and rental housing in the City of Alameda (City). The City has multiple inclusionary housing homeownership projects simultaneously becoming available over the next two years. Historically, each developer has selected a third-party administrator to market, conduct the lottery process and underwrite applications of the prospective buyers of their affordable housing units. Staff proposes creating a single application process for all homeownership opportunities within the City during a twelve month timeframe in order to increase access and efficiency for applicants. Staff recommends proceeding with Rise Housing Solutions to provide Inclusionary Housing’s Below Market Rate (BMR) Homeownership buyer selection services for a twenty-five-month term and total compensation not-to-exceed $180,000. See Exhibit 1. These costs will be reimbursed by the housing developers who use the service to fill their inclusionary housing units.
BACKGROUND
Ordinance 30-16, Inclusionary Housing Requirements for Residential Projects, is a mechanism for the development of affordable homeownership and rental housing in Alameda. Implementation of this ordinance is referred to as the Inclusionary Housing Program. When market-rate housing of five or more units is proposed, the City requires the development of homes or rental units that are affordable to very low-, low- and moderate-income households. For residential developments of nine (9) or fewer units, the requirements of this section may be satisfied by paying an in-lieu fee. The City administers various programs, including the BMR Housing Ownership Program and other programs related to the sale or lease of inclusionary housing. The City has approximately 150 households that have purchased or rented a BMR unit or participated in other housing programs.
On July 10, 2018, City Council approved changes to the Inclusionary Housing Guidelines, including adding a preference point for eligible Almada Unified School District employees and limiting the maximum number of points to two.
On May 15, 2023, staff posted a Request for Proposals (RFP) for consulting services for the Inclusionary Housing Program. On July 5, 2023, City Council approved Rise Housing Solutions to provide Inclusionary Housing Program management and compliance services. These services include working with buyers after the conditional approval has been issued, annual compliance monitoring to ensure continued occupancy by eligible owners or renters and assisting existing BMR homeowners with refinancing or selling their homes. Additional detail is available in staff report 2023-3157 <https://alameda.legistar.com/LegislationDetail.aspx?ID=6268883&GUID=F6FE99B3-B9A9-4B06-9C60-8B9F197D7255>, which authorized the City Manager to execute a one-year agreement with Rise Housing Solutions. Rise Housing Solutions presented a highly qualified team that provided a clearly defined and comprehensive proposal. Rise Housing Solutions has a contract with LandSea for Alameda Marina to manage the marketing and buyer selection process from application to loan closing for the BMR units. In developing and implementing the marketing plan on behalf of LandSea, Rise Housing demonstrated an understanding of the City requirements and successfully identified prospective buyers in advance of construction completion.
DISCUSSION
The City’s Inclusionary Housing Program provides BMR homes for sale or rent at an affordable cost to qualified purchasers or renters. Developers of new residential projects are required to provide BMR homes concurrently with market rate homes to fulfill the developer’s inclusionary housing obligation. For BMR units that will be sold, it is the developer’s responsibility to select buyers who meet the qualification parameters of the Inclusionary Hosing Program and to submit an application for each buyer to the City for review and approval . The City makes the final determination as to whether the submitted applicant is a qualified purchaser. Each developer selects a third-party administrator to market, conduct the lottery process and underwrite applications of the prospective buyers of their affordable housing units. Staff finds that there is a wide variance in the quality of third-party administrators and Rise Housing has provided high quality, reliable services, both to the City and in the marketing and application process for LandSea. Because the City has multiple Inclusionary Housing homeownership projects available simultaneously for the first time, rather than have each developer marketing its own units, staff proposes a single application process so that applicants only need to complete one application to be considered for all homeownership opportunities that may be offered in any given approximate 12-month period. The actual time period would be tied to the annual announcement of income limits.
Application Process Changes - Annual Lottery
Staff is updating the application process from the marketing plan through the lottery and file review. See Exhibit 2. As the Program Administrator, Rise Housing would market the program, hold information workshops and conduct an annual lottery. The lottery would be conducted approximately 30 days after the State of California Housing and Community Development posts annual income limits, which is typically in the spring. Applications would be reviewed in lottery order, adjusted for City Council approved preferences, and ranked accordingly (e.g., households with two preference points would be reviewed ahead of households with one preference point and those with one point would be reviewed ahead of those with none). Currently, households may receive two preference points if a member of the household works for the Alameda Unified School District or one preference point if a member of the household lives or works in Alameda. All other households receive zero preference points. All households must provide supporting documentation to substantiate the preference points claimed at the time of application.
Households that do not enter the annual lottery during the initial opening may still submit an application at a later date. Those applications will be reviewed after the files from the lottery have been reviewed. Applications submitted after the lottery will first be ranked by the number of preference points and then by the application submission date. For example, an application from a household with two preference points that submitted after the lottery would be reviewed after the two-point households that entered into the lottery and ahead of a household with one preference point. Furthermore, if there are multiple households who submitted after the lottery with the same number of preference points, then those households will be reviewed in order of submission date within the preference point group.
As homes become available, applicants would have the opportunity to opt in and express an interest in being considered for any available home that is offered for their income category. Full applications will be requested from households who have opted in to be considered for a specific home or batch of homes. Once an application has been reviewed and conditionally approved, an applicant may proceed and get under contract. If the household declines to proceed with the home for which they are eligible, they will retain their position in the ranking. If, however, that same household opts in for a second, different opportunity, goes through the process to have their file underwritten and once again declines, then their application will be moved to the end of the line.
Benefits to Both Developer and Prospective Buyers
The proposed process will benefit both developers and buyers. The goal is to identify buyers in advance of construction completion so units can be filled more quickly. Developers will benefit from economies scale with marketing costs spread across developments. They will also have a dedicated pipeline of interested buyers. Lastly, the third-party administration costs are also lower.
There are also benefits for buyers. For the past six months, the City had multiple lotteries for different properties and buyers had to compile packages and submit for each lottery for which they wanted to be considered. Under the new process, prospective buyers will submit a single application that can be used for multiple properties. Prospective buyers will have the opportunity to opt in when they would like to be considered and hold their place in line if they choose not to do so for one opportunity. We are also hopeful that this process will lead to less competition for buyers between developments. By having an annual process and an open application portal throughout the year, buyers will be able to apply on their own schedule. Most importantly, applicants will coordinate with a single entity throughout the BMR homebuying process. If successful, a similar process will be implemented for BMR rental units.
Recommended Program Administrator
Based on staff’s positive experience with Rise Housing on the Inclusionary Housing Program management and compliance as well as their work on marketing and applications for LandSea, staff recommends an agreement with Rise Housing Solutions to provide Inclusionary Housing Program buyer selection services to establish lottery lists for BMR homes that become available for sale in 2024 and 2025. The Rise Housing Solutions team brings over a decade of program design and management experience with deed-restricted affordable homeownership, affordable rental, down payment assistance loan, foreclosure recovery, home rehabilitation, and inclusionary housing programs.
Scope of Work
Rise Housing Solutions will perform the tasks summarized below and detailed in the proposed Service Provider Agreement (Agreement), attached as Exhibit 1:
1. Program Marketing Plan & Marketing Plan Implementation
• Create a phased, fair housing compliant marketing plan to include timeline, clear step-by-step marketing activities and application process for BMR units available for sale in Alameda in 2024 and 2025.
• Market the BMR units each year in accordance with an agreed upon marketing plan.
2. Website for Ongoing Program Administration
• Create a clear dedicated website/webpage describing the BMR lottery process, eligibility requirements, anticipated BMR opportunities and Frequently Asked Questions (FAQ).
3. Waitlist Creation and Management
• Respond to all calls and emails from the public.
• Prepare online application for each income category to be entered into lottery that will screen for initial eligibility and preference criteria based on stated information.
• Provide lottery number to each eligible applicant.
• Conduct a public lottery drawing for each income category to determine the ranking order for program eligibility and approval for BMR sales that year.
• Communicate lottery ranking results to all entrants.
4. Qualification Of Purchasers in Initial Eligibility Screening, Application Processing and Document Collection
• Conduct a full application workshop customized to the BMR program.
• Process and underwrite selected applications from lottery ranking to determine if they meet eligibility requirements as set forth in the Marketing plan.
• Collect all required documents from the applicant.
• Prepare approval package for the City to obtain City approval to enter into contract
• Provide a detailed report on each file in process to the City and developers, as requested.
5. BMR Final Approval and Loan Document Preparation for Closing
• Track each application with lenders.
• Draft BMR documents and route with instructions for signatures and notarizing at the City.
• Coordinate pickup and delivery of executed documents to title and track file through all stages of escrow to ensure conforming loan is secured and a timely close of escrow.
Next Steps
Staff recommends approval of a 25-month agreement, with total compensation not-to-exceed $180,000. All work performed under this contract would be on a reimbursement basis, payable by the developer/seller.
If the Agreement is approved, Rise Housing Solutions will begin work on May 22, 2024.
ALTERNATIVES
• Authorize the City Manager to execute the agreement with the total compensation not-to-exceed $180,000.
• Do not authorize the execution of the agreement. Each developer would continue to be responsible for hiring contractors to do this work. Staff does not recommend this option as it adds cost and complexity to the BMR homebuying process.
FINANCIAL IMPACT
There is no financial impact to the General Fund because funding for the proposed Agreement with Rise Housing Solutions would be on a pass-through basis with funds paid out of Housing In-Lieu (Fund 206) budget and reimbursed by the developer through escrow at closing.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with Alameda Municipal Code Chapter 30-16 - Inclusionary Housing Requirements for Residential Projects and supports Strategic Plan priority to House All Alamedans and End Homelessness, project HH3: Further the preservation, rehabilitation, or construction of affordable housing in Alameda. This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Authorize the City Manager to execute a 25-month agreement with Rise Housing Solutions to provide buyer selection services, substantially in the form of the attached agreement, with a total compensation amount not-to-exceed $180,000.
Respectfully submitted,
Amy Wooldridge, Assistant City Manager
By,
Lisa Fitts, Housing and Human Services Manager
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Agreement
2. Updated Annual Below Market Rate (BMR) Homeownership Lottery Procedures