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Community Development Block Grant (CDBG) Rental Housing Rehab Program Copyrighted August 6, 2018 City of Dubuque Consent Items # 10. ITEM TITLE: Community Development Block Grant (CDBG)Rental Housing Rehabilitation Program SUMMARY: City Manager recommending that the Moderate-Income Rental Rehabilitation Program Funded by CDBG be restored under new program guidelines. SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Approve ATTACHMENTS: Description Type CDBG Rental Housing Rehabilitation Program-NNM City Manager Memo Memo Staff Memo Staff Memo Rental Rehab Program Description Supporting Documentation THE CITY OF Dubuque � AIFA�erlwGh UB E '�� III► Masterpiece on the Mississippi Z°°'�w'2 7A13 2017 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Community Development Block Grant (CDBG) Rental Housing Rehabilitation Program DATE: July 30, 2018 On March 21 , 2018, new guidelines for the Moderate-Income Rental Rehabilitation Program were presented to the Community Development Advisory Commission. On May 16, 2018, the Community Development Advisory Commission approved the Moderate-Income Rental Rehabilitation Program as presented. A final review of the financing guidelines within the program was completed in June 2018. The small changes made to the program at this time were deemed to be nonsignificant by the Community Development Advisory Commission and therefore the approval of the program in May 2018 allows the program to move forward under the new guidelines. Acting Housing & Community Development Department Director Alexis Steger is recommending the Moderate-Income Rental Rehabilitation Program Funded by CDBG be restored under new program guidelines. I concur with the recommendation and respectfully request Mayor and City Council approval. �� �� ��� Mic ael C. Van Milligen �� � MCVM:jh Attachment cc: Crenna Brumwell, City Attorney Teri Goodmann, Assistant City Manager Cori Burbach, Assistant City Manager Alexis M. Steger, Acting Housing & Community Development Department Director THE CTTY OF Dubuque DUB E i'�� � � � �. Masterpiece on the Mississippi zoo,.z�,z•zo„ TO: Michael C. Van Milligen, City Manager FROM: Alexis M. Steger, Acting Housing & Community Development Director DATE: July 29t", 2018 RE: Community Development Block Grant (CDBG) Rental Housing Rehabilitation Program INTRODUCTION Starting in the 1990's, the Housing & Community Development Department administered a Moderate-Income Rental Rehabilitation Program using CDBG funding. The Moderate-Income Rental Rehabilitation Program stopped in 2008 while the program was re-evaluated, and staff was reallocated to housing rehabilitation. The Housing & Community Development Department is recommending the Moderate- Income Rental Rehabilitation Program Funded by CDBG be restored under new program guidelines. BACKGROUND In 2008, Federal Regulations changed rehabilitation standards. At this time the City of Dubuque decided to focus on making changes to the Housing Rehabilitation Program to ensure the continued success of that program. Rental Rehabilitation continued to be part of the Capital Improvement Program (CIP) budget to fund activities such as Accessibility, Single Room Rehabilitation and Emergency Loans. However, the Moderate-Income Rental Rehabilitation Program Guidelines would need to be changed to continue that portion of the program. Over the next ten years, the Rental Rehabilitation Program continued to receive loan proceeds in the amount of$25,000, on average, from the loans provided prior to 2009. Some of these proceeds were used for additional loans given for the Accessibility Program, and Emergency Loans Program. However, a significant portion of the proceeds remained in the Rental Rehab Capital Improvement Project. In FY 2017, the Housing and Community Development Department anticipated re- starting the Moderate-Income Rental Rehabilitation Program under new guidelines and asked for a $50,000 yearly allocation from City Council in the FY 2017 budget. This $50,000 per year was approved in FY 2017, FY 2018 and FY 2019. On March 21St, 2018 new guidelines for the Moderate-Income Rental Rehabilitation Program were presented to the Community Development Advisory Commission (CDAC). At this time a public hearing was held, and no comments were received. On May 16�h, 2018 the CDAC approved the Moderate-Income Rental Rehabilitation Program as presented. A final review of the financing guidelines within the program was completed in June 2018. The small changes made to the program at this time were deemed to be non- significant by the CDAC and therefore the approval of the program in May 2018 allows the program to move forward under the new guidelines. DISCUSSION The new Moderate-Income Rental Rehabilitation Program Guidelines are intended to help provide safe, decent, and sanitary affordable rental housing to the residents of the City of Dubuque. The program requires all projects to assist low-moderate income residents, which limits the amount of rent that can be charged after receiving assistance from the City. Assistance for CDBG funding will be in the form of forgivable loans for up to 75°k of the cost of the rehabilitation work not to exceed $15,000 per unit. Forgivable loans (principle and interest) will be limited to $15,000 per unit at 1 .5°k interest, but additional non- forgivable loans can be issued for an additional $5,000 per unit at 2°k APR over a term not to exceed 10 years. Forgivable loans will be forgiven over a five-year period if all requirements in the Agreement for the first five years have been met. 0°k will be forgiven in the first five years and then 20°k will be forgiven each year after, for up to five years. Should a participant fail to stay within the rent requirements and/or keep the units up to required building codes, the entire loan amount (with interest) will be due immediately. This program covers the rehabilitation of existing rental units. The rehabilitation is limited to certain activities and can not be attributed to any feature that is considered recreational, such as fireplaces, decks or outbuildings. This program does not provide loans for new construction. Property owners must demonstrate that the property to be rehabilitated and other properties owned, managed, or otherwise under the control of the financing recipient in the City of Dubuque, are in compliance, or making progress towards compliance, with applicable City codes and ordinances, including the International Property Maintenance Code. BUDGETIMPACT In FY 2019, the City Council allocated $50,000 to the Rental Rehabilitation Program, which already had a balance of$245,609 for a total of$295,609 available in FY 2019. The Housing and Community Development Department has received three separate applications for this program. These three applications would use all currently allocated funds to rehabilitate 34 units should they all qualify and be approved for the program. 2 RECOMMENDATION I respectfully request City Council approval of the new Moderate-Income Rental Rehabilitation Program Guidelines as presented. Cc: Jennifer Larson, Budget Director Erica Haugen, Community Development Specialist Community Development Advisory Commission 3 Dubuque THE CTTY OF � uF�eeup Rental Rehabilitation Program �V B E ��Illi Maste iece on Yhe Mississi i ?o;:�o;; Administered by: Housing& Community Development � pp 350 W 6th St, Suite 312 Dubuque, lA 52001 Program description prepared by: Erica Haugen, Community Development Specialist &Alexis Steger, Acting Housing &Community Development Director Date Prepared: 07/06/2018 Present for comment to: Community Development Advisory Commission Housing Commission Dubuque Area Landlord's Association Dubuque Realtors Association Dubuque NAACP Friends of Fair Housing Inclusive Dubuque Neighborhood Group I. PROGRAM PURPOSE The City of Dubuque is committed to ensuring there is an available and accessible stock of quality, rental housing at a variety of price points. The Rental Rehabilitation program provides low interest and/or forgivable loans to projects that meet identified rental housing needs in the City of Dubuque and are consistent with the City Council Goals and Priorities and the Consolidated Plan. Standard contract requirements concerning Affirmative Action,the Americans with Disabilities Act, Affirmatively Furthering Fair Housing, applicable wage laws, and all other applicable laws regulating Community Development Block Grant Funding apply. II.SCOPE OF THE PROJECT A. PROJECT DESCRIPTION In order to ensure the continued availability of safe, decent, and affordable rental housing for low and- moderate income residents of the City of Dubuque, Housing and Urban Development (HUD) Community Development Block Grant (CDBG)funds are being made available for the rehabilitation of rental properties. Please refer to the attached document: CDBG Rehabilitation Standards for additional details. Eligible Projects In order to be considered forfinancing, applicants must meet the following requirements: 1. Be legally capable of entering into a binding agreement; 2. Be a U.S. Citizen or legally admitted resident alien; 3. Be the property owner of record; 4. Demonstrate that the property to be rehabilitated is economically viable and the borrower(s), if applicable, will have the economic ability to repay the funds; 5. Be current on all personal and business income and property taxes, and mortgage payments on subject property; 6. Demonstrate the property to be rehabilitated and other properties owned, managed, or otherwise under the control of the financing recipient in the City of Dubuque, are in compliance, or making progress towards compliance, with applicable City codes and ordinances, including the International Property Maintenance Code; 7. Not-for profits corporations are eligible to apply. The corporation must be a 501(c) 3 or 4 tax exempt organization. Eligible Properties 1. The property must be located in the City of Dubuque. 2. Eligible properties may be publicly or privately owned; and residential or mixed use. 3. Transitional as well as permanent housing, including group homes and SROs, is allowed. 4. Property must pass an environmental review approved by City of Dubuque official before funds will be committed. Support for the preparation, evaluation, and submission of the environmental review is provided by City staff. 5. Property must meet all applicable State and local code requirements and must meet the housing quality standards in 24 CFR 982.401 by project completion. 6. Properties constructed or manufactured before 1978 must be inspected for lead-based paint hazards. If deteriorated paint is found it must be properly remediated in compliance with the Lead Safe Housing Rule. Eligible Expense Categories The following categories of expense shall be considered eligible for funding under the program. 1. All work identified as not meeting the housing quality standards in 24 CFR 982.401 or applicable localstandards; 2. Repair or replacement of major housing systems in danger of failure; 3. Improvements designed to remove material and architectural barriers that restrict the mobility or accessibility of the unit; 4. Improvements necessary to eliminate or reduce lead-based paint hazards; 5. Energy-related repairs or improvements; 6. Architectural, engineering or related professional services required in the preparation of rehabilitation plans and drawings or write-ups; 7. Costs for processing and settling the financing for a project, such as credit reports, fees for title evidence, fees for recordation and filing of legal documents, building permits, private appraisal fees and fees for an independent rehabilitation cost estimate. 8. Relocation assistance for tenants that will be temporarily displaced, and permanent relocation if the unit qualifies for such relocation based on the number of occupants allowable within the approved footprint of the unit. 9. Repair or replacement of substandard flooring or fixture generally perceived as necessary for living in a rental unit, that does not relate to recreational or entertainment facilities. Please note that Federal Labor Standards, including the payment of prevailing wages under Davis-Bacon, may apply to the project. Ineligible Expense Categories The following categories of expense shall be considered ineligible for funding under the program. 1. Propertyacquisition; 2. Refinancing of existing debt; 3. New construction of building additions or additional rental dwelling units; 4. New construction of decks, fireplaces, outbuildings, or recreational or entertainment facilities; 5. Construction items and expenses that are completed before project approval. Type of Assistance Assistance for CDBG funding will be in the form of forgivable loans for up to 75%of the cost of the rehabilitation work not to exceed $15,000 per unit. Forgivable loans (Principle and Interest) will be limited to$15,000 per unit at 1.5% interest, but additional non-forgivable loans can be issued for an additional $5,000 per unit at 2% APR over a term not to exceed 10 years. Forgivable loans will be forgiven over a five-year period if all requirements in the Agreement have been met. 20%will be forgiven each year for those five years. Single family homes, duplex and multi-family homes with less than 7 units may apply for up to$25,000 per unit, for any 2+ bedroom units; however, forgivable loans will still be limited to$15,000 per unit. Any assistance over$15,000 per unit will be available at 2% APR over a term not to exceed 10 years. Assistance provided by non-CDBG funding sources may be forgivable or non-forgivable loans at 2% APR, for a term not to exceed 10 years, depending on the requirements set forth by that funding. Loans will still be restricted to$15,000 per unit for forgivable loans and $20,000 or$25,000, depending on the number of bedrooms in the unit, for non-forgivable loans. Rehabilitation Standards Housing that is being rehabilitated with HUD funds must meet all applicable state and local codes, rehabilitation standards and ordinances, and zoning ordinances at the time of project completion. The work being undertaken must comply with the standards set forth in the City of Dubuque Rehabilitation Standards that are intended to assure that improved housing is livable, healthful, safe, and physically sound. The housing must also meet ADA and Fair Housing accessibility requirements, where applicable. Property Standards a. Acquired and/or rehabilitated housing must meet all applicable local codes, rehabilitation standards, ordinances, and zoning ordinances the time of project completion. Housing must all meet the housing quality standards in 24 CFR 982.401. The property must also meet all applicable requirements of the Lead Safe Housing Rule 24 CFR 35. b. Any rehabilitation work must be done in compliance with the City of Dubuque Program Rehabilitation Standards. c. Rental project owners must maintain the housing in compliance with all applicable State and local requirements, and the housing quality standards in 24 CFR 982.401 through the affordability period. Tenant Income Eligibility Requirements 1. All assisted single unit structures must be occupied by low-to-moderate income households as defined in 24 CFR 570.3. 2. An assisted two-unit structure must have at least one unit occupied by a low-to-moderate income household as defined in 24 CFR 570.3, and 3. An assisted structure containing more than two units must have at least 51% of the units occupied by low-to-moderate income households as defined in 24 CFR 570.3. Initial Project Rents 1. Properties being assisted with CDBG funds must comply with the rent limitations determined by HUD and explained in 24 CFR 92.252(a). 2. All initial project rents will be approved in accordance with 24 CFR 888.111. 3. All units being assisted must accept housing assistance for the term described under"Subsequent Rents" Subsequent Rents a.The maximum rents are recalculated by HUD on a periodic basis and will be made available to rental project owners/managers. b. Owners of CDBG-assisted rental housing must annually provide information on rents and tenant occupancy to demonstrate compliance with program requirements through the affordability period. Amount of Citv Assistance Per Unit Minimum Period of Affordabilitv in Years U to $25 000 10 ears or for the term of the loan whichever is less FederalLaborStandards These HUD requirements apply to rehabilitation projects with 8 or more CDBG-assisted units and apply to the entire project, not just the portion funded by CDBG funds. If a grant contract is awarded and Davis-Bacon will be triggered, labor standards requirements will be described in detail in the contract with the City. Additional information can be obtained in the HUD Contractor's Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects at https://www.hud.�ov/pro�ram offices/administration/hudclips/�uidebooks/4812LR Records The following represents, some but not all, of the records required to be maintained: 1. For each unit occupied by a low-and-moderate income household, the size, ethnicity, gender identity of head of household, and income of the household; 2. The rent charged (or to be charged) after assistance for each dwelling unit in each structure assisted; and 3. Information necessary to show the affordability of the units occupied (or to be occupied) by low-and-moderate income households. 4. Documentation to demonstrate any non-residential property included in the project meets a national objective for Community Development Block Grant and an identified community need. B. OBJECTIVES To provide safe, decent, and sanitary affordable rental housing to the residents of the City of Dubuque. C. NEEDS/EXPECTATIONS 1. Projects must assist low-and-moderate-income persons in the City of Dubuque. 2. It is expected that projects will meet documented community needs. This includes needs identified in the City of Dubuque Consolidated Plan located here: www.citvofd u buq ue.or�/831/Consol idated-Plan 3. Any additional funding needed to make the project viable must be secured in order for a contractto be executed. 4. Projects must be shovel-ready, meaning that rehabilitation work will begin in the calendar year in which the contract is awarded. 5. Projects must be delivered in a cost-effective manner with measurable performance outcomes. 6. It is expected that all or a portion of funds will be targeted to areas of greatest need. 7. Housing providers are expected to Affirmatively Further Fair Housing, as demonstrated by an Affirmative Marketing Plan. 8. Non-residential portion of project must assist low-and-moderate income persons or areas in the City of Dubuque. D. CURRENT OPERATIONS This is a new CDBG program and, as such, subject to revision based on comments from public, housing providers, and housing residents. E. MAXIMUM FUNDING The amount of funding available for Rental Rehabilitation in the Fiscal Year 2019 Annual Action Plan is $295,609. The City of Dubuque Fiscal Year 2019 budget allocates $50,000 to Rental Rehabilitation. Funding availability for Fiscal Year 2020 and beyond are subject to City Council approval and Federal Funding. The City reserves the right to reject any and all proposals and to negotiate the terms of the contract, including the award amount, with the selected proposer prior to entering into a contract. III. APPLICATION a) Proposal Organization and Format— Required Form b) Proposals should be submitted using the City of Dubuque Community Development Block Grant Application. c) This application requires that resumes of key staff be attached to the application. Multiple Proposals Multiple proposals from a vendor will be permissible, however each proposal must conform fully to the requirements for proposal submission. Each such proposal must be separately submitted and labeled as Proposal #1, Proposal #2, etc. Required Copies Proposers are required to submit one electronic copy in either PDF or Word format to City of Dubuque Housing & Community Development.