Title
Recommendation to Authorize the Interim City Manager to Execute a Twenty-Four Month Agreement with Rise Housing Solutions to Operate the Below Market Rate Purchase Program with a Total Compensation Amount Not-to-Exceed $102,000. (City Manager 20621840)
Body
To: Honorable Mayor and Members of the City Council
From: Adam W. Politzer, Interim 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 developments that are anticipated to open units for sale in Fall 2026 through 2028. This agreement would continue services provided by Rise Housing Solutions (Rise Housing) to provide Inclusionary Housing Below Market Rate (BMR) Homeownership buyer selection services through the BMR Purchase Program, including marketing the units, conducting the lottery process and underwriting applications of prospective buyers. The proposed agreement is for a twenty-four-month term and total compensation not-to-exceed $102,000. See Exhibit 1. These costs will be fully reimbursed by the housing developers who use the service to fill their inclusionary housing units and does not impact on the City’s General Fund.
BACKGROUND
Implementation of Ordinance 30-16 is referred to as the Inclusionary Housing Program. When market-rate housing of nine or more units is proposed, the City requires the developer to build 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 Housing and Human Services Division (HHS) administers various programs, including the BMR Housing Ownership Program and other programs related to the sale or lease of inclusionary housing.
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 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&FullText=1>), which authorized the City Manager to execute a one-year agreement with Rise Housing. Rise Housing presented a highly qualified team that provided a clearly defined and comprehensive proposal.
On May 21, 2024, City Council approved the creation of a single application process for all homeownership opportunities within the City to increase access and efficiency for applicants. That action included City Council approval of a two-year contract with Rise Housing to provide buyer selections services for BMR units for sale in the City. This effort fulfilled the HHS Road Home strategic plan project to create City buyer selection services. Prior to the single application process implemented by HHS staff and Rise Housing, each developer selected a third-party administrator to market the units, conduct the lottery process, and underwrite applications of the prospective buyers of their affordable housing units. People interested in purchasing a BMR unit were required to separately apply to each development, which is an extensive and detailed process for each application.
Adoption of this single application process expedited the sale of below market rate units and lowered vacancy rate for these projects. Since 2024, over 120 households have purchased or rented a BMR unit in Alameda.
DISCUSSION
The City’s Inclusionary Housing Program provides BMR homes for sale or rent at an affordable cost to qualified purchasers and 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, developers currently have the choice to use the City’s Buyer Selection Services or retain the responsibility by separately contracting the services out to another agency. The requirement to use the City’s process may be implemented through the amended inclusionary housing policy that will come before City Council for approval. In both instances, the City reviews ownership files and makes the final determination as to whether the submitted applicant is a qualified purchaser. If a developer chooses to operate their own lottery, they must select 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, leading to extended vacancies and low-transparent processes. Working with Rise Housing has provided a standard, best practice process available to all developers that is transparent for prospective buyers.
As the Program Administrator for the City’s BMR Purchase Program, Rise Housing oversees the process to identify eligible buyers and support the buyers through purchasing the property. This includes marketing the program, holding information workshops and conducting annual lotteries. A lottery is conducted annually in conjunction with the release of the State of California Housing and Community Development annual income limits, which is typically in the spring. The next lottery is tentatively scheduled for June 30, 2026. Applications are reviewed in lottery order, adjusted for preferences previously approved by City Council (such as Alameda residents and Alameda Unified School District employees), and ranked accordingly. For example, 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 one preference point if a member of the household works for the Alameda Unified School District and one preference point if a member of the household lives or works in Alameda, for a maximum of two preference points. 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.
The City’s BMR Purchase Program benefits the City, the developers, and the buyers. This program aims to identify buyers in advance of construction completion so units can be filled more quickly. Developers benefit from economies scale with marketing costs spread across developments and are provided with a dedicated pipeline of interested buyers. Additionally, the third-party administration costs are lower than those for developers contracting separately for these services. It is important to note that in the past multiple lotteries would be offered for different properties and buyers had to compile packages and submit applications for each separate development. Under the City’s process, prospective buyers submit a single application that can be used for multiple properties, which significantly streamlines efforts for potential buyers and creates more opportunities for them. Outside of a loan officer, applicants coordinate with a single entity, Rise Housing, throughout the BMR homebuying process.
Over the last two years, many developers chose to opt in and one opted out of the City’s program. Rise Housing successfully filled all available units made available through the BMR Purchase Program. The developer who opted out had significant challenges filling all their units in a timely manner. They continued to have vacant BMR units for over a year’s time. Ultimately, they opted-in to fill their final units through the City’s program operated by Rise Housing and the units were successfully filled within a few months. It’s important to note that this process is for purchase of affordable housing units and the City does not currently have a similar rental lottery process. HHS staff is working to develop an updated process to fill BMR rental units.
Based on staff’s positive experience with Rise Housing on the Inclusionary Housing Program management and compliance, their work on marketing and applications for LandSea and Launch developments, and their ability to successfully run the current City’s BMR Purchase Program, staff recommends an agreement with Rise Housing to continue operating the BMR Purchase Program to establish and manage lottery lists for BMR homes that become available for sale between 2026 and 2028.
The Rise Housing 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.
ALTERNATIVES
• Authorize the Interim City Manager to execute the agreement with the total compensation not-to-exceed $102,000.
• Do not authorize the execution of the agreement. Each developer would be responsible for hiring firms to do this work. Staff do not recommend this option as it adds cost, delays, 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 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 Interim City Manager to execute a twenty-four month agreement with Rise Housing Solutions to operate the Below Market Rate Purchase Program with a total compensation amount not-to-exceed $102,000.
Respectfully submitted,
Amy Wooldridge, Assistant City Manager
By,
C’Mone Falls, Housing and Human Services Manager
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibit:
1. Rise Housing Agreement