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HomeMy WebLinkAboutReport CCPC-HEDRA - Joint CDA Mtg - LAHA City Council Memorandum To: Planning Committee of City Council and HEDRA From: John Hinzman, Community Development Director Alex Menke, Economic Development Coordinator Date: July 22, 2024 Item: Local Affordable Housing Aid Action Requested: Discuss the potential participation of the Dakota County Community Development Agency (CDA) in providing housing assistance via use of the City’s Local Affordable Housing Aid (LAHA) funding. Dakota CDA representatives will be present at the meeting to provide further detail. LAHA: Starting this year, Metro Area counties and cities will receive two installments of sales tax dollars that are dedicated to constructing, maintaining, and providing affordable housing options. Two annual payments are scheduled for July 20th and December 26th. The funding comes from a 0.25% sales tax and the amount distributed to each county and city is determined by a “distribution factor”. The City’s distribution factor is 0.7257% of the total revenue from that tax. The total 2024 payment is estimated to be $114,387.44 which represents tax revenue collected for five months between October and February. The annual amount in forthcoming years will be higher. Funds must be spent by December 31 of the fourth year that the aid was received. Funds must be spent on qualifying projects or be transferred to a local housing trust fund. Qualifying projects include the following: • Emergency rental assistance for households earning less than 80 percent of area median income as determined by the United States Department of Housing and Urban Development • Financial support to nonprofit affordable housing providers in their mission to provide safe, dignified, affordable and supportive housing; and • Projects designed for the purpose of construction, acquisition, rehabilitation, demolition or removal of structures, construction financing, permanent financing, interest rate reduction, refinancing, and gap financing of housing to provide affordable housing to households that have incomes which do not exceed: o For homeownership projects, 115% of the greater of state or area median income as determined by the United States Department of Housing and Urban Development o For rental housing projects, 80% of the greater of state or area median income as determined by the United States Department of Housing and Urban Development • Housing developed or rehabilitated with funds under this section must be affordable to the local work force If aid received under this program is used for demolition or removal of existing structures, the cleared land must be used for the construction of housing to be owned or rented by persons who meet the income limits described above. If an aid recipient uses the aid on new construction or substantial rehabilitation of a building containing more than four units, the loan recipient must construct, convert, or otherwise adapt the building to include: • The greater of: o At least one unit o At least 5% of units that are accessible units, as defined by section 1002 of the current State Building Code Accessibility Provisions for Dwellings Units in Minnesota, and include at least one roll-in shower • The greater of o At least one unit o At least 5% of units that are sensory-accessible units that include: ▪ Soundproofing between shared walls for first and second floor units ▪ No florescent lighting in units and common areas ▪ Low-fume paint ▪ Low-chemical carpet ▪ Low-chemical carpet glue in units and common areas Dakota County CDA: The CDA currently provides several housing programs and aid for communities within the County including Hastings. Programs identified by the CDA for potential use of the City’s LAHA dollars are summarized below. Further information on the programs is also attached. Home Improvement Loan Program Purpose: “Provide low- and moderate-income households the means to maintain the safety and integrity of existing homes, to remove architectural barriers in homes to allow independent living for the handicapped, and to reduce lead-based paint hazards.” • Program started early 1980s • Current program: 0% interest, deferred loan to qualified low- and moderate-income homeowners o Max loan = $35,000 o Min loan = $15,000 • Loan payable when property homeowner no longer occupies, sold, refinanced o CDA puts 30-year mortgage against property to retain legal rights • Repayment is required Radon Mitigation Grant • Pair with Enhanced Home Improvement Loan Program • HUD now requires radon testing for all federally funded programs o Radon mitigation required if test is over 4 pCi/L o Dakota County has higher than average radon, many homes over the limit • ~$3,000-$3,500 for testing and mitigation system Preservation and New Construction Gap Financing • Expand existing CDA-administered gap financing resources for residential multi-family and single-family preservation and new construction • Details to be determined, but structure would mimic primary gap funding source • Example: Aster House o $2.218 million gap (funded with TIF and HOPE (levy)) Attachments: • Home Improvement Loan Program • Radon Mitigation Grant • Preservation of New Construction Gap Financing Project Proposal: Enhanced Single-Family Home Improvement Loan Program Project Purpose: Expand the existing CDA-administered Home Improvement Loan Program to include additional Local Affordable Housing Aid (LAHA) funding. Please see the attached brochure for information about the Home Improvement Loan Program. Project Objectives: 1) Continue to improve the housing stock of Dakota County. 2) Expand existing program with proven results to more income-eligible residents of County. 3) Provide cities and county with a way to use LAHA for an existing countywide housing program. 4) Diversify funding resources for existing CDA program. Project Outcomes: 1) Increase number of homes improved from 60-70 per year to 115-120 per year after Year 2 of new program. Project Details: •Provide deferred 0% loans of up to $35,000 for home improvement projects. •Home improvement projects prioritize health, safety, and structural integrity issues. o Common improvements include new roofs, siding, HVAC systems, windows, building foundation or other structural updates, accessibility improvements, kitchens and bathrooms(accessibility). o Other improvements would be considered if they address health and safety issues or otherwise improve the value of the home. Common improvements are repairs or replacement of detached garages, kitchens and bathrooms (non-accessibility), driveway replacement/repair •Homeowners must be income eligible and meet other CDA program requirements, e.g. own and reside in home, meet credit standards, be current on property taxes, properties must be at least 15 years old, etc. o CDBG funds require 80% AMI cap o LAHA requires 115% AMI cap •Have one application for homeowners; eliminates any confusion for homeowners. •Eligible HO with incomes at or below 80% AMI could use either countywide and city CDBG and LAHA. •Eligible HO with incomes between 81-115% AMI would use only countywide and city LAHA as they are available. •Program income generated from LAHA would be used for future home improvement loans, similar to the CDBG program. CDA would track program income and deposit into individual city accounts. See attachments for current AMI limits Project Funding: •Current CDBG entitlement funding totals $1,193,635 for FY 2023, which includes cities’ and Dakota County CDBG allocated to CDA’s HO Rehab program. •CDA spends approximately $1,725,800 to rehab 70 homes in a fiscal year, on average. o Current CDBG allocation will fund about 37 loans at $32,000/ea. o Program income from previous CDBG loans supports another 15 more per year. o Takes about 18 months to fully expend a year’s worth of CDBG and program income. o Funds are replenished annually, provided Congress funds the CDBG program. •Future LAHA – CDA estimates it could successfully deploy an additional approximately $1,400,000 to rehabilitate an additional 55 loans per year after first full year of additional funds. •Individual cities contributing to program would have separate subaccounts that will be tracked by CDA staff. Project Staff: •Existing staff: o 1 FT Rehab Coordinator o 1 FT Rehab Advisor o 1 FT PSA o 2 Rehab Advisor contractors – each takes 5-7 files per year, total of 15 •Additional staff needed for LAHA funds: 1 additional FT Rehab Advisor Project Reporting: The CDA would provide annual reports to participating cities and Dakota County. The annual report would include the following: o Community’s contribution to program that fiscal year o Number of loans using LAHA o Program income generated Attachments: 1.CDA Home Improvement Loan Brochure Proposed Project: Dakota County Homeowner Radon Testing and Mitigation Grant Program Project Purpose: The average radon level in Minnesota is more than three times higher than the U.S. radon level. This is due to our geology and how our homes operate. Minnesota homes are closed up or heated most of the year, which can result in higher levels of radon. In Minnesota, more than two in five homes have radon levels that pose a significant health risk. Exposure to radon over a prolonged period can lead to lung cancer. Minnesota Department of Health website The Environmental Protection Agency (EPA) has set the action level at 4 pCi/L (picocuries of radon per liter of air). The Minnesota Department of Health recommends installing a radon mitigation system when the radon level is at 4 pCi/L or higher. Between 2 and 4 pCi/L, a radon mitigation system should be considered to lower the level as much as possible. The average indoor radon level in Dakota County is 3.6 pCi/L as determined by radon test results from AirChek, an at-home radon testing company. There is no safe level of radon in a home. The proposed Homeowner Radon Testing and Mitigation Grant program would provide free testing services to income-eligible residents, and would provide free mitigation services for those income-eligible residents whose homes have radon levels greater than 2.6 pCi/L. A lower radon level was chosen as the benchmark in order to reduce radon levels in existing homes as much as possible. Project Objectives: 1) Continue to improve the housing stock of Dakota County. 2) Reduce potential future risk of lung cancers in Dakota County residents. 3) Provide cities and county with a way to use Local Affordable Housing Aid (LAHA). Project Outcomes: 1) Test at least 40 homes in Dakota County for radon per year. 2) Install radon mitigation systems in all homes assessed for radon with levels greater than 2.6 pCi/L per year, subject to available funding. 3) Reduce the number of homes with high radon levels. Mitigation systems would be required to reduce radon to < 2.0 pCi/L. Project Details: • Provide grants to assess for and mitigate radon when levels are 2.6 pCi/L or greater. • Homeowners must own and reside in home, be current on property taxes, and be income eligible. o CDBG funds require 80% AMI cap o Sales tax funds require 115% AMI cap See attachments for current AMI limits •Homeowners who qualify for CDA Home Improvement Loan, MHFA RLP Loan, Energy Assistance, Weatherization automatically will be eligible for the Radon Grant Program. o Homeowners would need to sign a grant agreement if they are recipients of the above-listed program. •Homeowners who do not qualify for the above-listed programs may apply for the Radon Grant Program with a separate application. o A separate application process will be developed if this program is established. o Homeowners would need to sign grant agreement. •Homeowners will solicit bids from two licensed mitigators; CDA will evaluate bids for cost reasonableness. •CDA will pay mitigators upon completion of project and satisfactory clearance test numbers (< 2.0 Project Funding: •Funding exclusively through LAHA funds. •Estimate program would need $200,000 per year to assess for and install radon mitigation systems in 40 homes. •Individual cities contributing to the program would have separate subaccounts that will be tracked by CDA staff. Project Staff: •The Radon Mitigation Grant program would use existing CDA staff. No additional staff would be needed. Project Reporting: The CDA would provide annual reports to participating cities and Dakota County. The annual report would include the following: o Community’s contribution to program that fiscal year o Number of grants using LAHA funds Attachments: 1.EPA Radon Zones Map 2.EPA Radon Risks Chart Radon Zones Map The U.S. Environmental Protection Agency (EPA) created this map to identify areas with the potential for elevated indoor radon levels. The EPA Map of Radon Zones helps national, state, and local organizations implement radon-resistant building codes. The map should not be used to determine if a home in a given zone should be tested for radon. Homes with elevated levels of radon have been found in all three zones. All homes should be tested for radon. What do the colors mean? Zone 1 (red zones) Highest potential; average indoor radon levels may be greater than 4 pCi/L (picocuries per liter) Zone 2 (orange zones) Moderate potential; average indoor radon levels may be between 2 and 4 pCi/L Zone 3 (yellow zones) Low potential; average indoor radon levels may be less than 2 pCi/L 12 A Citizen’s Guide to Radon l THE GUIDE TO PROTECTING YOURSELF AND YOUR FAMILY FROM RADON THE RISK OF LIVING WITH RADON continued RADON RISK IF YOU SMOKE It’s never too late to reduce your risk of lung cancer. Don’t wait to test and fix a radon problem. If you are a smoker, stop smoking. Note: If you are a former smoker, your risk may be lower. RADON RISK IF YOU’VE NEVER SMOKED Note: If you are a former smoker, your risk may be higher. *Lifetime risk of lung cancer deaths from EPA Assessment of Risks from Radon in Homes (EPA 402-R-03-003). **Comparison data calculated using the Centers for Disease Control and Prevention’s 1999-2001 National Center for Injury Prevention and Control Reports. Radon Level If 1,000 people who smoked were exposed to this level over a lifetime*. . . The risk of cancer from radon exposure compares to**. . . WHAT TO DO: Stop Smoking and. . . 20 pCi/L 10 pCi/L 8 pCi/L 4 pCi/L 2 pCi/L 1.3 pCi/L 0.4 pCi/L About 260 people could get lung cancer About 150 people could get lung cancer About 120 people could get lung cancer About 62 people could get lung cancer About 32 people could get lung cancer About 20 people could get lung cancer 250 times the risk of drowning 200 times the risk of dying in a home fire 30 times the risk of dying in a fall 5 times the risk of dying in a car crash 6 times the risk of dying from poison (Average indoor radon level) (Average outdoor radon level) Fix your home Fix your home Fix your home Fix your home Consider fixing between 2 and 4 pCi/L (Reducing radon levels below 2 pCi/L is difficult) Radon Level If 1,000 people who never smoked were ex- posed to this level over a lifetime*. . . The risk of cancer from radon exposure compares to**. . . WHAT TO DO: 20 pCi/L 10 pCi/L 8 pCi/L 4 pCi/L 2 pCi/L 1.3 pCi/L 0.4 pCi/L About 36 people could get lung cancer About 18 people could get lung cancer About 15 people could get lung cancer About 7 people could get lung cancer About 4 people could get lung cancer About 2 people could get lung cancer 35 times the risk of drowning 20 times the risk of dying in a home fire 4 times the risk of dying in a fall The risk of dying in a car crash The risk of dying from poison (Average indoor radon level) (Average outdoor radon level) Fix your home Fix your home Fix your home Fix your home Consider fixing between 2 and 4 pCi/L (Reducing radon levels below 2 pCi/L is difficult) Project Proposal: Residential Preservation and New Construction Gap Financing Program Project Purpose: Expand the existing CDA-administered gap financing resources for residential multi-family and single-family preservation and new construction to include Local Affordable Housing Aid (LAHA) funding. The CDA currently administers other gap financing tools such as the Dakota County levy-funded HOPE Program and federally-funded HOME Program. Project Objectives: 1) Continue to improve and add to the affordable housing stock of Dakota County. 2) Provide cities and county with a way to use LAHA for an existing countywide housing program. 3) Increase and diversify gap financing resources. Project Outcomes: Currently the CDA is providing gap financing to an average of two - three new construction multi-family projects and an average of three - four single-family projects (both new construction and preservation). Project Details: The CDA is fortunate to have a variety of affordable housing finance resources including the annual Low-Income Housing Tax Credit allocation, an annual tax-exempt bond allocation, and gap finances including the locally- funded HOPE Program and the federally-funded HOME Program. With this level of resources, the CDA is typically aware of any potential, significant affordable housing developments that are looking to come into Dakota County. The CDA has staff who work regularly with developers from concept to fully- financed and constructed affordable housing developments, both preservation and new construction, throughout Dakota County. The CDA has in-house knowledge and expertise on underwriting these projects. Cities may allocate LAHA funds to increase the amount of gap financing available in their communities for preservation and new construction. Cities can rely on the CDA’s underwriting capabilities to structure these complex financial deals on the behalf of their LAHA dollars. The details on how the LAHA dollars will be structured in a preservation or new construction affordable housing project will need to be determined, but initial thoughts are the structure would mimic the primary gap funding source (i.e. HOPE, HOME). Project Funding: • The CDA Board of Commissioners has traditionally allocated $1.5 million of HOPE funds annually to provide gap financing to two multi-family projects. • The CDA also administers the HOME Program that has approximately $800,000 annually for gap financing to support preservation and new construction residential projects. • Future LAHA – The CDA will work with cities to identify multi-family and single-family residential projects that need gap financing. • Individual cities contributing to the program would have separate subaccounts that will be tracked by CDA staff. Project Staff: • Existing staff: o Housing Finance Manager o Community Development Coordinator o Director of Comm & Econ Development • Additional staff needed for LAHA funds: None. • Cost to City Partners: Nominal admin fee. Project Reporting: The CDA would provide annual reports to participating cities. The annual report would include the following: o Community’s contribution to program that fiscal year o Number of projects that received LAHA gap financing o Details of projects including: number of units, income limits of units, details of loan terms, etc.