COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Housing

DATE:

April 29, 2010

BOARD MEETING DATE:

May 11, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors (Sitting as the Board of Commissioners of the Housing Authority of the County of San Mateo)

FROM:

Duane Bay, Director, Department of Housing
William Lowell, Executive Director, Housing Authority

SUBJECT:

Adopt Resolutions authorizing the Housing Authority of the County of San Mateo to submit an application to the Department of Housing and Urban Development (HUD) to remove El Camino Village and Midway Village from Public Housing status, and the Department of Housing to establish a Housing Authority affiliated not-for-profit organization.

RECOMMENDATION:

1. Adopt Resolution No. 2010-04 authorizing the Executive Director of the Housing Authority to submit a Disposition Application to the Department of Housing and Urban Development (HUD) to remove El Camino Village and Midway Village from Public Housing status; and

2. Adopt Resolution No. 2010-05 authorizing the Director of the Department of Housing to establish a Housing Authority not-for-profit affiliate, San Mateo County Housing Authority, Inc. (SAMCHAI).

BACKGROUND:

Following extensive research, public meetings and Board consultations, the Housing Authority is prepared to submit an application to HUD that will enable the conversion of its two Public Housing developments, El Camino Village (30 units) in unincorporated Colma, and Midway Village (150 units) in Daly City, from public housing status to a project-based model funded by Section 8 vouchers. Execution of this strategy will increase revenue for the developments by approximately 50% and enable greater housing choice by residents, as the voucher program allows voucher-holders to utilize their vouchers anywhere in the United States.

Section 18 of the National Housing Act of 1937 authorizes public housing agencies (PHAs) to dispose and even demolish public housing developments as a strategy to address such issues as an obsolete physical plant, financial unsustainability, or deterioration of the surrounding community. While obtaining approval for such dispositions is a long and difficult process, it has become an increasingly popular alternative for housing authorities that are seeking a more stable financial and operational footing for their local affordable housing assets.

Before HUD will formally review the disposition application, the Board of Commissioners is required to approve a resolution authorizing the application to HUD. Also, HUD does not permit public housing properties to be disposed directly to the local housing authority. Rather, housing ownership must be transferred to another entity, such as a controlled not-for-profit instrumentality or another nonprofit organization. As such, the Board is further requested, by separate resolution, to authorize the establishment of a Housing Authority-controlled instrumentality. Once the application is approved by HUD and the not-for-profit has been established, the Housing Authority present the Board with a request to approve the specific terms of the real estate transfer to the controlled not-for-profit affiliate.

DISCUSSION:

Asset Repositioning. In the summer of 2007, the Housing Authority began a systematic review of its properties to assure “maximum asset utilization,” that is, to determine the highest and best use from an affordable housing perspective. The goals of the review are to ensure long-term operational and financial feasibility of real estate assets and to optimize land use. Two of the three properties owned by the Housing Authority, El Camino Village and Midway Village are designated as public housing under federal rules. (The third project, Half Moon Village, stands outside the public housing inventory, but has been included in the portfolio review due to the development’s age and inefficient physical layout.)

HUD provides annual allocations of operating and capital funds to the Housing Authority for the two public housing developments. However, neither subsidy is adequate to address the projects’ long-term sustainability, and amount to only about half of the amount of income that would be available if the same developments were voucher-based. A long-term Section 8 voucher contract will also put into place a method of financing for the possible long-term redevelopment of Midway Village.

During the past two-and-a-half years, the Housing Authority has provided periodic updates to the Housing, Health and Human Services Committee, most recently at its April 20, 2010 meeting. The concept was first presented to the Board of Supervisors/Commissioners in August 2007. The conversion plan has also been part of the Housing Authority’s Board-approved Annual Plans for 2008, 2009 and 2010.

Long-Term Planning. Once the public housing developments are converted to project-based voucher developments, the Housing Department will begin a planning process to look at the long-term operational and development needs of both complexes. El Camino Village is only ten years old, but is encumbered with substantial debt incurred during its development to cover large cost overruns. Midway Village was built in 1975. A recently completed physical needs assessment tallied $16.1 million in needed repairs and improvements. Given the substantial required capital improvements and that a portion of the Midway Village site has a long troubled history with toxic soil remediation, the department will need to begin an extensive consultation and planning process with the Board and other stakeholders to create the most appropriate vision of new affordable housing uses for at least a portion of the site.

Creation of Housing Authority Not-For-Profit Affiliate. Section 18 requires that removal of units from public housing inventory must involve conveyance to another entity, through either transfer of title or execution of a long-term lease (e.g., lease term greater than 12 months). After investigating various options for disposition, including transfer to an existing private nonprofit partner, the Housing Authority has determined that creation of an HA-affiliated not-for-profit to acquire the properties is the best strategy. This not-for-profit will be known as San Mateo County Housing Authority, Inc. or SAMCHAI. Creation of this not-for-profit entity requires Board authorization.

Resident Consultation. The Housing Authority undertook a comprehensive resident consultation process that was completed in January 2010 for El Camino Village and March 2010 for Midway Village. The Housing Authority informed the residents that, if the application is approved by HUD, all qualified households would each receive a voucher which they can use to remain at their respective development or to move elsewhere. A moving assistance and relocation firm has been hired to assist in working with the tenants. This firm attended all the resident meetings. Moving assistance will be provided to households that choose to move within 6 months of HUD approval of the disposition application and granting of the new vouchers.

All of the resident feedback has been very positive with regard to conversion to voucher-based housing. At this point, the major issue is maintaining expectations about whether and when HUD will approve an application. Qualified households will obtain their vouchers only after HUD approval of the disposition application and a subsequent HUD approval of a separate application for replacement vouchers.

Below-Market Sales Price. The disposition application covers only the first phase of removing the two public housing developments from the PHA inventory. The Housing Authority proposes to sell El Camino Village and Midway Village to SAMCHAI for $1 each plus the assumption of existing debt. El Camino Village has debt of approximately $1.4 million plus interest and Midway Village has debt of $1 million.

Timing. The process from disposition application submission, HUD review and approval, and the subsequent application and approval of replacement vouchers, is estimated to span 8 to 12 months. The possibility exists that HUD may not approve the application.

Board Resolution. County Counsel has reviewed and approved the Resolution as to form.

Vision. Approval of the requested actions contributes to the Shared Vision 2025 outcome of a livable community by permitting the Housing Authority more flexibility and access to resources to continue its core mission of serving very-low income households efficiently and effectively.

FISCAL IMPACT:

There is no Net County cost associated with the actions requested herein. All funding related to these actions will come from the Housing Authority’s HUD funding allocations. Project-based vouchers will provide approximately 50% more income per unit compared with public housing rent and subsidies. It is estimated that under the proposed change in funding model, income at Midway Village will increase approximately $720,000/year and income at El Camino Village will increase approximately $144,000/year.