With redevelopment financing no longer an option in Morgan Hill, city and state officials are in search of new funding sources to provide affordable housing to local low- to moderate-income families.
Last year, the Morgan Hill Redevelopment Agency collected about $3.9 million in tax-increment property tax revenues to help private developers fulfill the city’s affordable housing requirements, and to assist first-time home buyers seeking below-market-rate houses.
Most of that money was spent, and represents 20 percent of the total tax increment revenue collected by the RDA last year – and an amount required by state law to be set aside by all RDAs for affordable housing efforts. That assistance in Morgan Hill just last year included about $1.6 million for 31 loans to low- to moderate-income first-time home buyers, and a $275,000 loan to South County Housing to renovate 52 Crest Avenue apartment units – a “very low-income” housing complex.
But the redevelopment agency closed Feb. 1, due to a state law that redirects the agency’s revenues and assets to the general funds of the city and county, as well as to public education. Without that revenue and other funding sources drying up, no one yet knows how the future demands for affordable housing will be met.
“We saw the writing on the wall last summer,” said Dennis Lalor, president and CEO of the nonprofit South County Housing. “(Redevelopment) is a significant source of development financing. We’ve had redevelopment financing in hundreds of units we’ve created in Morgan Hill. The commitment and policies are in place, but the funding is going to be another challenge. At the same time, other state and federal programs are stressed.”
Meanwhile, the need for affordable housing promises not to disappear, and the city’s requirement to fulfill that demand will remain in place with or without public development financing. The Morgan Hill general plan housing element – a state-mandated projection of future housing needs – says that between 2007 and 2014 about 62 percent of new housing units in the city would have to be allocated for extremely, very low, low and moderate income families.
Lalor added that the Morgan Hill RDA has an “exemplary record” for providing housing that is affordable at all income levels.
The biggest advantage of RDA housing or construction loans is the money helps the developer or buyer gain leverage for more funding from other sources. “Pre-development (financing) is the hardest thing to get, and that made it extremely valuable,” Lalor said.
South County Housing predates the Morgan Hill RDA, which was created in 1981. Since the RDA’s inception, the developer has built six low- to moderate-income rental developments and six such subdivisions in Morgan Hill, Lalor said.
Projects include affordable apartments at the downtown Skeels building, Depot Commons, 60 units at Sunrise Meadows, about 16 units at Jasmine Way, and even a development that caters to teachers and public safety workers off Watsonville Road.
Though not affiliated with South County Housing, one of the most high-profile projects funded by the “housing set-aside” dollars is the six-home Habitat for Humanity development on Cory Drive, to which the RDA loaned more than $500,000 in 2008.
South County Housing and the network of similar private and public affordable housing agencies and advocates throughout the state are in the process of setting up a trust fund for affordable housing financing to replace the loss of the RDA, Lalor said.
The city can still use future repayment of outstanding affordable housing loans, as well as rent payments, for future low- to moderate-income projects, City Manager Ed Tewes said.
After the RDA was dissolved, the city council appointed itself the “successor housing agency” to administer those loans and projects that were in progress at the time of the closing of redevelopment. The successor agency will be eligible to use any tax increment revenue left over after the former RDA’s annual debt and contract payments are made, if the new “oversight board” chooses to direct such funds to affordable housing, Tewes explained.
The city also has a “housing mitigation fund” to which developers over the years have contributed cash fees when they were unable or unwilling to completely fulfill their affordable housing requirements.
“The successor agency clearly is not going to be as rigorous as the former redevelopment agency, but it does have assets and the potential for future income,” Tewes said.
A bill working its way through the legislature is trying to replace the sizable slice of the affordable housing finance pie lost with redevelopment. Senate Bill 654 would allow cities to continue using current housing fund balances and a portion of future property tax revenues for housing efforts. The bill passed the Senate last week, but not with the two-thirds majority that would enact it immediately as an “urgency” measure. The law would go into effect Jan. 1, 2013, if it gains assembly approval and the governor’s signature.
In Morgan Hill, that bill would keep about $1.8 million in the local housing fund, protected from redistribution by the oversight board – but only if lawmakers can make the measure take effect sooner than its expected starting date.
- $3.9 million: 20-percent RDA housing revenues raised and spentlast year.
- $275,000: Loan to South County Housing to rehab 52very-low-income units in Crest Avenue apartments (total RDA historyloans to Crest Avenue complex are $6.3 million).
- $1.6 million: Loans to 31 low to moderate income first-time homebuyer families, leveraging about $12 million in local real estatetransactions.
- $400,000: Pre-development financing for 40-unit Bella TerraSenior housing project.
- $5.2 million: Construction of the 49-unit Horizons SeniorApartments on Central Avenue, for affordable to very-low-incomeseniors.
- $140,000: Block funds for the rehab of the 24-unit Crossingsapartment complex, for very low-income households.
- $375,000: For nearly 60 grants and loans for senior housingremodeling.
- $150,000: For 30 mobile home repair grants.
- $20,900: Six grants to clean up blighting influences such asgraffiti.
- $127,500: Four grants to install safety or security relatedimprovements on 17 properties.
- $70,000: Senior and housing related services such as meals,recreation, specialized senior care, fair housing advice.
