Finance committee backs $1.45 million contingent loan for 46-unit affordable housing project on Hope Avenue

The Santa Barbara City Finance Committee voted unanimously March 11 to recommend that the City Council approve a $1,450,000 loan to the Housing Authority to support development of a 46-unit affordable rental project at 15 South Hope Avenue.

Laura Doubles, the city’s housing and human services manager, told the committee the loan would be secured by a deed of trust and a new 90-year affordability control covenant and that the funding commitment is intended to strengthen the Housing Authority’s low-income housing tax credit application due March 18. “This is 1 of 2 projects that was submitted to the state housing and community development department under the local housing trust fund program,” Doubles said, noting the city’s award announcement from the state was delayed and could arrive at the end of March.

The project would be built on a 53,910-square-foot vacant parcel at 15 South Hope Avenue, near Upper State Street across from La Cumbre Plaza. The Housing Authority plans to build 46 family rental units — 17 studios, 13 one-bedrooms and 16 two-bedrooms (one two-bedroom designated as a manager unit) — and operate the property. Fifty percent of the units (23) would be restricted for people with developmental or mental health disabilities, and the development would accept Section 8 rental assistance, Doubles said.

Doubles described proposed loan terms as a 30-year residual-receipts loan from the city’s affordable housing fund at 3% simple interest, maturing in 2055; repayments would be due only when the project reports positive cash flow. “It will be written as a residual receipts payment where there’s only a payment due when there’s positive cash flow on the project,” she said. She cautioned the committee that because the tax-credit award decision is pending, the city’s loan approval would be rescinded if the state award is granted and used instead.

Committee member Harmon, who moved the staff recommendation, asked about mechanics and disbursement timing: whether the city would place funds in escrow and when interest would begin to accrue. Doubles said typical practice is that full escrow and disbursement occur only after financing is fully committed through the tax-credit and other sources, so the city funds “may not be dispersed.”

Dale Azam, deputy executive director for the Housing Authority, said the city loan strengthens the Authority’s application and helps on a tiebreaker score used by tax-credit reviewers. “The public soft loan improves our tiebreaker score and it increases our chance we’ll get the tax credit award,” Azam said.

Doubles provided a financial snapshot: the Housing Authority purchased the land for $5,400,000; the presentation listed estimated direct construction costs of $30,000,000 and a total project cost of $41,250,000. She said the city’s $1,450,000 loan would reduce the affordable housing fund reserve from about $4,300,000 to $2,800,000 and would represent roughly 3.5% of the project’s new-build cost. The presentation included per-unit and developer-fee figures; some per-unit numbers in the transcript were unclear.

Member Harmon moved the staff recommendation; Member Santa Maria seconded. The committee recorded a roll-call vote: Committee Member Santa Maria — yes; Committee Member Harmon — yes; Chair Friedman — yes. The motion passed unanimously.

The staff recommendation the committee approved asks the City Council to: (1) adopt an ordinance approving a loan agreement between the City and the Housing Authority for $1,450,000 for development at 15 South Hope Avenue, to be secured by deed of trust and a 90-year affordability control covenant; and (2) adopt a resolution amending the FY 2025 budget to increase affordable housing fund appropriations by $1,450,000 funded by fund reserves, with both the loan and appropriation to be rescinded should the City receive the state Local Housing Trust Fund award for the project.

Committee members emphasized support for the income mix and long-term affordability in the proposal. Chair Friedman said the project “dovetails into the different ranges of incomes … the 30 and up to the 60% of AMI,” and expressed hope the timing issue can be resolved so building can proceed. The committee adjourned after the vote.

Votes at a glance

- Motion: Move staff recommendation to recommend Council adopt ordinance approving a $1,450,000 loan agreement with the Housing Authority for development at 15 South Hope Avenue; loan to be secured by deed of trust and a 90-year affordability control covenant; contingent rescission if the state Local Housing Trust Fund award is granted. Also: adopt a resolution amending the FY 2025 budget to increase affordable housing fund appropriations by $1,450,000 from fund reserves, reversible if state award occurs. - Mover: Member Harmon. Second: Member Santa Maria. - Vote: Santa Maria — yes; Harmon — yes; Chair Friedman — yes. Tally: Yes 3, No 0, Abstain 0, Absent 0, Recused 0. Outcome: approved.