Title
Recommendation to Consent to an Assignment and Assumption of Affordable Housing Agreement at Independence Plaza (703 Atlantic Avenue) to Alameda Affordable Housing Corporation and Authorize the City Manager to Negotiate and Execute all Necessary Documents. (Community Development 266)
Body
To: Honorable Chair and Members of the Successor Agency of the Community Improvement Commission
EXECUTIVE SUMMARY
The Housing Authority executed an Affordable Housing Agreement with the Community Improvement Commission for the property known as Independence Plaza and located at 703 Atlantic Avenue. The Housing Authority is seeking consent to transfer the property to its wholly controlled, title-holding, nonprofit affiliate, known as the Alameda Affordable Housing Corporation, to comply with federal contracting guidance.
BACKGROUND
In 1989, the Community Improvement Commission (CIC) and the Housing Authority of the City of Alameda (AHA) executed an Affordable Housing Agreement (Agreement), which regulates the 186-unit Independence Plaza development located at 703 Atlantic Avenue as affordable senior housing and provides a CIC-funded operating subsidy. This Agreement was amended twice for time extensions, in 2004 and 2010, and ensures that affordability for very low-, low-, and moderate-income seniors is preserved until 2026. The amended Agreement is attached as Exhibit 1. Section 8 of the Agreement permits AHA to transfer all or part of its rights and interests as owner with consent of the CIC. This approval authority is now vested with the Successor Agency of the CIC.
The Housing Authority is the contract administrator for the Section 8 program in the City of Alameda (City), which includes Housing Assistant Payment (HAP) contracts for both the Housing Choice Voucher (HCV) and Project Based Voucher (PBV) programs. Additionally, AHA owns real property which is supported by the HCV and PBV programs.
In 2017, the U.S. Department of Housing and Urban Development (HUD) published PIH Notice 2017-21 that clarifies HAP contract requirements for Public Housing Authority-owned units. Attachment A, Section 5, of the Notice states: “Because the HAP contract administrator and the owner cannot be the same legal entity (i.e., the PHA acting as contract administrator cannot execute a contract with itself as the owner of the PBV or HCV units), the PHA must establish a separate legal entity to serve as the owner.” To this end, AHA created a wholly controlled nonprofit corporation, Alameda Affordable Housing Corporation (AAHC), to serve as a title-holding company to comply with the contracting guidance issued by HUD. AAHC has no employees and contracts with AHA for any professional services needed.
AAHC is a IRS designated 501(c)3 nonprofit corporation. As a wholly controlled entity, the AHA Board of Commissioners is also seated as the Board of Directors of AAHC. For audit purposes, the two entities are designated as blended component units and their financials are presented as combined. In 2018, four properties were successfully transferred from AHA to AAHC. In 2020, the balance of AHA’s portfolio will be transferred to AAHC per the Board of Commissioners’ vote on November 20, 2019.
DISCUSSION
The AHA has received a conditional award of Project Based Vouchers for 25 units at Independence Plaza. However, AHA cannot execute this contract as both the contract administrator and property owner, per the HUD guidance described above. AHA will therefore execute a ground lease with AAHC, but remain in fee title, thereby allowing AHA to enter into the HUD contract. There will be no change in operation or use in the property’s use for affordable housing, which is consistent with the AHA’s mission to provide quality, affordable, safe housing.
The AHA is requesting the Successor Agency’s consent to authorize an assignment and assumption of the Agreement to AAHC, which regulates the improvements as affordable housing, as well as authorization for the City Manager to negotiate and execute the documents related thereto. This proposed assignment and assumption from the AHA to AAHC is specifically related to the AHA’s ability to renew the HUD voucher contracts to continue assisting the low-income seniors who reside at Independent Plaza.
The Assignment and Assumption Agreement is attached to this report as Exhibit 2. The AHA also has a senior lender, who will require review and approval of the Assignment and Assumption Agreement, which is happening simultaneous to this request for consent. This approval includes modifications to this document required by the senior lender, which are consistent with the intent of this approval of consent to assignment of the rights and interests as outlined in the Agreement.
ALTERNATIVES
Staff recommends that the Successor Agency consent to the Assignment and Assumption Agreement described above.
The City Council could choose not to consent. The possible implication if a HAP contract cannot be executed, there is a potential loss of affordable housing subsidy after the Agreement expires in 2026. Specifically, 25 very low-income senior households would lose the rental subsidy and the safety net that the voucher program provides in the Bay Area market of escalating housing costs. The rental subsidy for Independence Plaza is approximately $579,000 per year.
FINANCIAL IMPACT
There is no financial impact to the General Fund from consenting to Assignment and Assumption Agreement.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed consent to the Assignment and Assumption Agreement is consistent with the CIC’s Affordable Housing Agreement.
ENVIRONMENTAL REVIEW
The proposed consent to the Assignment and Assumption Agreement does not require environmental review under California Environmental Quality Act (CEQA) because it constitutes an administrative activity of the City that will not result in direct or indirect physical changes to the environment and hence, it is not a project. CEQA Guidelines, Section 15378 (b) (5).
CLIMATE IMPACTS
There are no climate impacts.
RECOMMENDATION
Consent to an Assignment and Assumption of Affordable Housing Agreement at Independence Plaza at 703 Atlantic Avenue and authorize the City Manager to negotiate and execute all necessary documents.
CITY MANAGER RECOMMENDATION
The City Manager concurs with the staff recommendation.
Respectfully submitted,
Debbie Potter, Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Amended Affordable Housing Agreement
2. Consent and Assignment and Assumption Agreement
cc: Eric Levitt, City Manager