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Home My WebLink AboutWS3 - IP6 Memo - Affordable Housing Fund Distribution Formula Item: WS. 3 STAFF PRESENTATION TO FOLLOW : T CITY OF IOWA CITY 410 East Washington Street Iowa City, Iowa 52240- 1826 (319) 3S6-5000 (319) 356-5009 FAX www.icgov.org r 1�^ham® I, CITY OF IOWA CITY ,� =,Zqh MEMORANDUM Date: March 25, 2024 To: Geoff Fruin, City Manager From: Tracy Hightshoe, Neighborhood & Development Services Director Re: Affordable Housing Fund — Proposed Changes to the Distribution Formula In FY17 the City established an Affordable Housing Fund which dedicates local general funds for affordable housing projects and activities. The budget for the fund has been $1,000,000 annually since FY19. A 3% increase is proposed in the upcoming FY25 budget for a total of $1,030,000. The City uses a distribution formula to outline how funds will be utilized to support affordable housing in our community. The distribution formula is updated periodically with the existing version in place since FY20. Recently, the City increased financial support to Shelter House to provide low barrier overnight shelter adjacent to the GuideLink Center through the winter months. To incorporate this activity, staff recommends the following changes to the distribution formula: FY24 Budget: $1,000,000 FY25 Proposed Budget: $1,030,000 Existing Distribution Proposed Distribution 50% Housing Trust Fund (HTF) $500,000 49% Housing Trust Fund (HTF) 1 $500,000 20% HTF- LIHTC Projects $200,000 15% HTF- LIHTC Projects $150,000 7.5%Opportunity Fund $75,000 7.5% Opportunity Fund $75,000 7.5% Healthy Homes $75,000 4% Healthy Homes $45,000 10% Housing Placement Services 11% Housing Placement Services ($70,000 Security Deposit/$30,000 ($80,000 Security Deposits/ Landlord Risk Mitigation) $100,000 $30,000 Landlord Risk Mitigation) $110,000 5% Emergent Situation 1 $50,000 1 5% Emergent Situation $50,000 Winter Shelter $0 1 10%Winter Shelter $100,000 $1,000,000 $1,030,000 'Administration allowed is 8%for regular fund, 5%for LIHTC projects. Proposed FY25 HTF Administration total is $47,500. A description of the set asides are provided for your reference below, along with a discussion of any proposed changes in each category. Housing Trust Fund of Johnson County (49% regular allocation, 15% LIHTC)— Provides no interest or below market loans to support affordable housing projects such as construction or rehabilitation of affordable rental, owner occupied, and transitional housing as well as shelter facilities. Loan funds that are repaid to the Trust Fund continue to be utilized for additional affordable housing projects in the community. The Trust Fund accepts applications on a quarterly basis for housing projects that benefit households with incomes less than 80% of area median income (the vast majority of funded projects benefit households with 60% or less area median income). City funds must support projects located in Iowa City and encourage housing and residential facilities throughout all neighborhoods in Iowa City. March 28, 2024 Page 2 Staff recommends a reduction of the set-aside for Low Income Housing Tax Credit (LIHTC) projects. The Trust Fund holds one allocation round for LIHTC projects annually. If needed, the Trust Fund can utilize their regular allocation to supplement a LIHTC application. Opportunity Fund (7.5%) - Funds set aside for affordable housing opportunities that arise throughout the year. Prior unutilized land banking funds (from original distribution formula) and unused funds from the Healthy Homes and Emergent Situations set asides are applied to the Opportunity Fund at the end of the fiscal year. The current balance of this set-aside is $208,000. The funds can be spent on the purchase of available land for affordable housing, but also new programs that address the safety and accessibility of existing homes. Recent examples of housing activities utilizing Opportunity Funds include the purchase of the 724 Ronalds St. for the ICCSD Student Built House, relocation assistance to Forest View residents not eligible for ARPA funds, and additional funding to the Security Deposit Assistance program administered by CommUnity Crisis Services during the pandemic. No changes are recommended for this set aside. Healthy Homes (4%) - Program provides up to $7,500 in rehabilitation assistance to improve indoor air quality to income eligible households, renter or owner occupied. In the last few years, we have seen a decline in the number of referrals from the school based clinics and medical offices for children with asthma or other respiratory problems. Due to the reduced referrals, the City has used these funds to assist CDBG, HOME or GRIP recipients improve indoor air quality if a resident in the home has a lung disorder such as asthma or COPD, as verified by a medical professional. Due to the decreased referrals, the proposed amount is reduced. If the funds are depleted, but needed to assist a household, funds can be taken from the Opportunity Fund if available. Staff recommends reducing this set aside from $75,000 to $45,000. Housing Placement Services (11%) - Dedicated to programs that assist tenants with low incomes and those who find it difficult to find housing due to various reasons such as prior evictions, criminal histories or bad landlord references. The City provides $70,000 for security deposit assistance, administered by CommUnity Crisis Services. Due to demand levels, the funds are typically depleted before the end of the fiscal year. Due to the high need for security deposit assistance, staff recommends increasing this set aside from $70,000 to $80,000. Partnering with Shelter House, a landlord risk mitigation fund was capitalized last year with $30,000. The funds provide a protection for landlords willing to rent to the tenants identified above by covering excessive damages, lost rent or legal fees incurred beyond the security deposit, up to $3,500. The program began in July 2023 and to date, four tenants have been housed with two property owners using the security of risk mitigation funds. At this time, no claims have been submitted against this fund. The committing of funds for the landlord risk mitigation program has had a slow start. Staff recommends that if these funds are not utilized in the prior year, the balance is applied to security deposit assistance. For example; if $5,000 is paid out in claims in FY24, in FY25 an additional $25,000 will be allocated to security deposit assistance and Shelter House will be paid $5,000 to restore the risk mitigation fund to $30,000. Emergent Situations (5%)— Reserved for emergent situations where housing assistance is needed urgently, the unanticipated cost is due to actions not within their control, and the applicant can't wait for other funding opportunities. Prior examples include relocation assistance to income qualified residents required to move due to a redevelopment project or a mobile home park closure, and winterization of mobile homes. March 28, 2024 Page 3 No changes are recommended for this set aside. Winter Shelter (10%) — Provides a temporary, low barrier shelter adjacent to the GuideLink Center for up to 40 additional beds for residents during the winter months. With increased financial support, Shelter House will operate the shelter for 15 weeks starting in December each year, maintain two employees present for all hours of operations, and have an employee with brain health and crisis services expertise available to serve the winter shelter exclusively. Staff recommends that 10% or $100,000 in FY25 be allocated to the winter shelter. Absent alternative direction, the above-described changes to the distribution formula will go in effect on July 1, 2024. STAFF PRESENTATION CONCLUDED CITY OF IOWA CITY 410 East Washington Street Iowa City, Iowa 52240-1826 (3 19) 356-5000 (319) 356-5009 FAX www.icgov.org