Housing commission forwards $3 million adaptive-reuse bond program to city council

The City of Flagstaff Housing Commission voted unanimously to forward an adaptive reuse bond program to the City Council for final approval, advancing a plan to use $3,000,000 from the 2022 voter-approved housing bond to repurpose existing buildings into rental units. The program, presented by Justine Acosta, assistant housing director, would allocate bond funds on a per-unit basis and prioritize acquisition and rehabilitation of affordable rental units. Vice Chair Karen Flores presided over the discussion after Chair Davana McLaughlin recused herself from that agenda item. The commission agreed to a noncompetitive, first-come, first-served application process and to forgive loans after 30 years rather than the 50-year forgiveness used by the city's rental incentive bond program. The proposal limits bond funds to pay only for the affordable units within a mixed-rate development; market-rate units may exist in the same project but would not be funded by the bond. Ineligible uses listed in the draft policy include funding construction of new freestanding buildings, complete demolition, renovation of existing residential buildings, and improvements to undeveloped land. The policy requires projects to identify additional funding sources and provide signed letters of commitment or closed loan documents from other funders to demonstrate viability. Acosta said the commission's working group and outside legal counsel reviewed the draft policy and that the city aims for program approval by council in September, tied to a parallel zoning text amendment for single-use residential and adaptive reuse scheduled for Planning and Zoning Commission review on Aug. 13 and two council public hearings on Sept. 2 and Sept. 16. Commissioner Haley Zoroyah made the motion to forward the program to council; the motion was seconded and carried by a voice vote with no recorded opposition. Commissioners asked for clarity on eligible uses, affordability thresholds, and how the program interacts with existing incentives. Acosta confirmed that the bond funds are intended only for rental projects and that the program will count only the units designated as affordable when measuring per-unit awards toward the commission's goal of delivering 75 affordable units from this allocation. Next steps are for Housing staff to transmit the final program document to the City Council packet for consideration at the scheduled September hearings.