Title
Rental Rehabilitation Grant and City Loan to KBR Investments (NB)
This item involves a request for the City Commission to consider the approval of loan financing for the rehabilitation of a rental housing project to provide affordable housing to very low and low-income tenant households.
Explanation
The Rental Construction Program (RCP) improves the living conditions of very low and low-income families through rehabilitation of substandard rental housing units located within the city limits of the City of Gainesville. In order to receive funding for a project, the owner/developer must follow certain RCP guidelines such as: provide matching funds for the project, rent the units to very low and low-income families, provide annual family income certification information, provide rent levels that are affordable to very low and low-income families as determined by the U.S. Department of Housing and Urban Development (HUD), comply with the Federal Section 8 Housing Quality Standards and City of Gainesville building codes. As with all of the City's housing programs, funding for the RCP is made available to eligible investors on a first-come, first-ready, first-served basis. The RCP is advertised annually and applications are accepted until the funding cycle is determined by the City to be closed.
Mr. Kraus is proposing to renovate an 11-unit apartment building with site improvements (parking lot and fencing) located at 1690-98 NE 16th Avenue. Each unit contains one bedroom and one bathroom. Upon completion, these rental housing units will be leased to very-low and low-income households. The current approved RCP guidelines allows a maximum forgivable grant award of 50% for eligible project costs, not to exceed $7,500 for each one-bedroom unit. In addition, a low interest loan is available for up to 25% of eligible project costs. Upon completion of the repairs, the property will provide decent, safe and affordable rental housing. In an effort to maintain the livability of the property, staff will work with KRB Investments and Gainesville Police Department (GPD) to incorporate crime suppression provisions at the site.
HCD staff has completed a financial and construction feasibility of the project. The total cost of the project is estimated to be $78,000. The Program can provide Mr. Kraus with a $39,000 Due-on-Sale loan, plus closing costs associated with the project. Mr. Kraus is required to provide a 50% match of the remaining costs of the project in the amount of $39,000. At this time, Mr. Kraus does not have the full amount of the matching funds required to complete the project. As such, Mr. Kraus is requesting a repayable loan from the City to finance the gap between his cash investment and the total amount of the matching funds required for the project. As a result, Mr. Kraus is requesting for the City to provide a $20,000 low-interest loan to combine with his $19,000 cash equity to meet the matching funds requirement as required by the RCP. The overall goal of the RCP is to improve and maintain the stock of housing available to very low and low-income families to provide opportunities for decent, safe and affordable rental housing. If funded, this project will help the City to continue its goals to increase the amount of affordable housing and low cost housing throughout the City.
Fiscal Impact
The Investor has cash equity to fund a portion of the rehabilitation (approximately $19,000). The Housing & Community Development Division has funds available in its HOME Rental Construction Program budget to fund the project and to provide the $20,000 loan to Mr. Kraus to complete this rental housing project.
Recommendation
The City Commission: 1) approve the award of a $39,000 Rental Rehabilitation Due-on-Sale loan; plus soft costs and closing costs associated with the project; 2) approve the $20,000 loan with a 3% interest rate and 10-year term; and 3) authorize the Housing & Community Development Division to execute all necessary grant and loan closing documents, subject to approval by the City Attorney as to form and legality.