Oakland Municipal Code Art. IV Anti-Displacement and Affordable Housing Bond Law Program

This Article IV provides for an Affordable Housing Program, consisting of projects, programs and financing mechanisms to expend the designated $100 million of affordable housing bond funds included as part of a measure authorizing a City general obligation bond on the November 2016 ballot (Bond Measure KK) (the "affordable housing bond funds").

This Affordable Housing Program prioritizes strategies, programs and projects to help long-term Oakland residents and their families avoid displacement. It helps preserve Oakland's diverse communities and addresses the destabilizing displacement effects resulting from substantial rent increases, family incomes not keeping pace with housing costs, and housing supply not meeting current and projected demand. Additionally, it prioritizes strategies that increase the supply of affordable housing for those households most vulnerable to displacement, including extremely low income renters, and limited income seniors, veterans, and people with disabilities.

Alameda County voters will consider a $580 million general obligation bond measure for housing (Alameda County Affordable Housing Bond, Bond Measure Al) on the November 2016 ballot (the "County housing bond" or the "County bond"). If passed, the County bond will provide an estimated $89 million for construction of new affordable housing and other eligible uses in Oakland. Oakland's affordable housing bond authorization has been designed to complement the County's housing bond by prioritizing resources for protecting vulnerable Oaklanders from being displaced from their current homes, while the County bond authorization focuses on financing new affordable housing construction.

Unless the context otherwise requires, the following definitions shall govern the construction of the City's Affordable Housing Program as provided in Article IV herein.

"Affordable housing" means housing that is provided at an affordable rent or affordable housing cost to certain income groups as described in this Program. The terms "affordable rent" and "affordable housing cost" shall be as defined in California Health and Safety Code Sections 50053 and 50052.5 and their implementing regulations.

"Extremely low income household" shall be as defined in California Health and Safety Code Section 50106 and its implementing regulations.

"Lower income household" shall be as defined in California Health and Safety Code Section 50079.5 and its implementing regulations.

"Moderate income household" means persons and families of low or moderate income as defined in California Health and Safety Code Section 50093 and its implementing regulations.

"Very low income household" shall be as defined in California Health and Safety Code Section 50105 and its implementing regulations.

(Ord. No. 13403, § 2, 11-29-2016)

The top priority for the City's affordable housing bond funds will be helping those who are homeless and protecting vulnerable Oaklanders from being displaced from their homes.

If both the County housing bond measure and the City bond measure pass in November, 2016, the County bond's approximately $89 million in Oakland proceeds will be used for new construction of affordable housing projects and other eligible expenditures, while the City's affordable housing bond funds will be used only for acquisition, preservation, and/or rehabilitation projects that protect existing affordable housing and bring other existing housing stock under affordability protection. These restrictions on the use of the City's affordable housing bond funds will apply for the first three years from the date of bond measure passage. Notwithstanding the above, the City's affordable housing bond funds may be used to match County bond funds on new construction affordable housing projects irrespective of the three-year restriction.

If the County housing bond does not pass in November 2016, the Council shall determine the most appropriate mix of eligible expenditures to address anti-displacement and long-term affordability goals. Additionally, if, after three years from the date of County bond passage, market conditions or the availability of properties causes rehabilitation and preservation efforts to slow, the Council shall determine the appropriate mix of eligible expenditures to address anti-displacement and long-term affordability goals at that time.

The order of priority in spending the City's affordable housing bond funds shall be as follows:

(a) The first priority shall be the acquisition, preservation and/or rehabilitation of affordable housing.

(b) If the County housing bond measure does not pass, the next priority shall be the development and construction of new affordable housing projects.

(c) If the County housing bond measure passes, the City's affordable housing bond funds shall be used only for acquisition, preservation, and/or rehabilitation of affordable housing projects, or for new construction of affordable housing only as a match for County bond funds, for the first three years from the date of bond measure passage. Thereafter, the City's affordable housing bond funds may be used for development and construction of new affordable housing projects whether or not the City is matching County bond funds, but the first priority shall continue to be the acquisition, preservation and/or rehabilitation of affordable housing.

(Ord. No. 13403, § 2, 11-29-2016)

The City's affordable housing bond funds may be spent on the acquisition, preservation, rehabilitation, and/or new construction of affordable housing as set forth in this Chapter. The California Constitution provides that general obligation bonds may only be used to finance the acquisition or improvement of real property. Financing equipment, supplies, routine maintenance, or ongoing operations is not permitted.

The City may use the affordable housing bond funds designated for affordable housing projects directly to acquire, rehabilitate, preserve or construct affordable housing, or indirectly as loans, grants, or other disbursements to qualified individuals, business entities, or government agencies for such affordable housing projects. The City shall adopt policies that prohibit discrimination against households with Section 8 assistance, and that reduce barriers for formerly incarcerated people and people who are undocumented in order to improve the housing stock to habitability and health and safety standards.

The following activities shall be eligible uses of the City's affordable housing bond funds:

1. Protect existing homes (rental).

• Purchase and/or rehabilitate rental properties that are currently affordable to lower income households because of their age, declining condition, or location, and establish long-term affordability requirements.

• Acquire and/or rehabilitate rental properties that have expiring subsidy contracts or regulatory agreements making them high-risk for conversion to market rents, and extend or establish long-term affordability requirements.

2. Protect existing homes (home ownership).

• Acquire and/or rehabilitate unrestricted for-sale housing and ensure long-term affordability through shared equity models such as deed restrictions and community land trusts.

3. Protect existing homes (rental or ownership).

• Finance the acquisition and/or rehabilitation of vacant or blighted properties to address health and safety concerns, correct code violations, and return uninhabitable properties to the City's housing stock as long-term affordable housing.

• Support the purchase of tax-defaulted properties from Alameda County for use as long-term affordable housing.

4. Homeowner assistance.

• Assist lower income, senior, and/or disabled homeowners living in hazardous housing conditions and/or at risk of losing their homes due to deferred maintenance with improvements to their units.

5. New construction (rental or ownership).

• Finance the site acquisition, predevelopment, development and construction of new affordable rental or homeownership housing (subject to restrictions and priorities set forth elsewhere in this Chapter).

(Ord. No. 13403, § 2, 11-29-2016)

Not more than 15 percent of expended City affordable housing bond funds may be used for housing affordable to persons and families of moderate income as defined in California Health and Safety Code Section 50093(b).

In allocating affordable housing bond funds to projects, the City shall give preference to housing affordable to extremely low income households. The City shall spend a minimum of 20 percent of affordable housing bond funds for housing for extremely low income households. This requirement must be satisfied for and will be applied against the entire authorized affordable housing bond amount, but, in order to allow the expeditious awarding of funds, does not necessarily have to be achieved for any single project or program. This 20 percent requirement may be waived by the City Administrator by returning to Council if, after five years from the issuance of the first bond, the City Administrator determines that there is a reasonable chance that the 20 percent set aside for extremely low income housing may not be spent. The City Administrator shall report annually to the City Council on progress in meeting this requirement.

(Ord. No. 13403, § 2, 11-29-2016)

The following is a summary of programs that could be funded from affordable housing bond funds. The summary is illustrative only, and is not intended to be an exclusive list of programs or uses eligible for bond funding. The City Council or the City Administrator may authorize the use of affordable housing bond funds for programs and projects in addition to the programs listed below, subject to conformance with the provisions of this Chapter that set forth eligible expenditures, funding priorities, and income targeting.

Acquisition, Rehabilitation, and Preservation Program

Description:

Council Resolution No. 86125 C.M.S., passed on April 19, 2016, created the Affordable Housing Acquisition, Rehabilitation and Preservation Program. The program funds (1) loans to developers or owners of affordable housing to assist in the acquisition and/or rehabilitation of existing multifamily housing properties for use as affordable housing, (2) loans to developers of affordable housing to assist in the acquisition of land or nonresidential properties for development as affordable housing, and/or (3) loans to developers or owners of affordable housing to acquire and/or preserve restricted affordable housing or acquire affordability covenants on unrestricted housing that is otherwise affordable and in imminent risk of loss. The goal of the program is to preserve, increase, and improve the supply of affordable housing available in the City in part by assisting nonprofit and for-profit developers to remove properties from the market, renovate them, and restrict their rents or sales prices for long-term affordability. These funds can be used for property acquisition and holding costs, rehabilitation costs, and all soft costs associated with these processes, including without limitation environmental assessments, appraisals, legal costs, architectural and engineering expenses, and developer fees. Acquisition/rehabilitation funds can target a range of property types including small rental properties, small-to-medium properties, larger buildings, and single room occupancy buildings. Private property owners could participate in the program and obtain rehabilitation funds if they accept the 55-year or more affordability requirements.

Length of Affordability:

Affordability restrictions for the program would be set to the maximum amount allowed by law, but in no case less than 55 years. The City may require that participating owners grant the City a first right of refusal to purchase the property if the property is sold during the affordability period.

Income Target:

Projects receiving affordable housing bond funds under the program are required to target certain income levels within each project. At acquisition, all tenants will be able to stay in their homes regardless of income (tenant incomes are expected to range from very low income to moderate income). As existing tenants choose to leave and new tenants move in, property owners will be required to fill vacancies with lower income households at or below 60 percent of area median income for the Oakland area ("AMI"). Rents will be adjusted to be affordable to households who are at or below 60 percent of AMI until an average of 80 percent of AMI for the project is achieved. For homeownership, eligible buyers must be moderate income households or below. Projects with deeper affordability levels shall be prioritized. The City will establish a scoring mechanism in the application process that requires applicants to meet a certain threshold point level to qualify for funding. That point system will include significant weight for providing a viable plan for targeting extremely low income households within a reasonable period of time.

Loan/Subsidy Amount:

A loan of up to $150,000 per unit on average is projected; however, the per unit loan/subsidy amount for the program shall be periodically reviewed and revised accordingly to ensure feasible subsidy amounts that reflect current market conditions.

Rental Rehabilitation Program

Description:

The goal of the Rental Rehabilitation Program is to facilitate the physical improvement of rental housing in the City to ensure housing habitability for lower income households. This program seeks to expand and improve the existing federal, state and local programs by providing financial assistance in exchange for affordability restrictions on the rehabilitated units.

Length of Affordability:

Affordability restrictions for the program would be set to the maximum amount allowed by law, but in no case less than 55 years.

Income Target:

As existing tenants choose to leave and new tenants move in, property owners will be required to fill vacancies with lower income households at or below 60 percent of AMI. Rents will be adjusted to be affordable to households who are at or below 60 percent of AMI until an average of 80 percent of AMI for the project is achieved. The City will establish a scoring mechanism in the application process that requires applicants to meet a certain threshold point level to qualify for funding. That point system will include significant weight for providing a viable plan for targeting extremely low income households within a reasonable period of time.

Loan Amount:

A loan amount of $50,000 per unit on average for the building is projected; however, the per-unit loan amount shall be periodically reviewed and revised accordingly to ensure feasible subsidy amounts that reflect current market conditions.

Homeowner Rehabilitation Program

Description:

This program will assist lower income and senior homeowners living in substandard housing conditions and/or at risk of losing their homes due to deferred maintenance. Homeowner rehabilitation loans would be eligible uses for bond funds only if they fund improvements to real property. Further, appropriate policies would need to be developed to ensure long-term affordability with respect to the property.

New Construction Program

Description:

The purpose of new construction is to support the creation of new affordable rental properties, helping to create long-term affordability in a neighborhood.

Length of Affordability:

Affordability shall be maintained for at least 55 years based upon the industry standard or the requirements of leveraged financing sources.

Income Target:

Projects that are new construction generally shall serve lower income households at or below 60 percent of AMI.

Loan/Subsidy Amount:

A subsidy amount of $165,000 per unit is projected; however, the per-unit loan/subsidy amount shall be periodically reviewed and revised accordingly to ensure feasible subsidy amounts that reflect current market conditions.

(Ord. No. 13403, § 2, 11-29-2016)

The City Administrator is hereby authorized to adopt rules and regulations consistent with this Chapter as needed to implement this Chapter, subject to the review and approval of the Office of the City Attorney, and to develop all related forms and/or other materials and take other steps as needed to implement this Chapter, and make such interpretations of this Chapter as he or she may consider necessary to achieve the purposes of this Chapter.

(Ord. No. 13403, § 2, 11-29-2016)