The Finance Committee of the Pasadena City Council will deliberate Monday on a proposal for the City to enter into an Affordable Housing Loan Agreement with Heritage Housing Partners LLC, in order to rehabilitate two buildings at 2322 E. Foothill Blvd. and convert them into a housing project for Transition Age Youth (TAY) students.
The two buildings – one built in 1924 and the other in 1972 – were acquired in escrow by Heritage Housing Partners (HHP) in January, a month after it was offered for sale, intending to purchase the property for $1.3 million. The escrow is scheduled to close on May 25.
In February, HHP requested City funding in the amount of $2.2 million to cover the purchase and its conversion into affordable rental housing for the TAY population in Pasadena, which includes Pasadena City College students.
Rehabilitation of the property will involve conversion of five vacant residential units previously used as non-permitted residential rental into six units of TAY housing, with potential focus on PCC students experiencing homelessness assisted with rent subsidy from PCC, the Pasadena Department of Housing said in an Agenda Report prepared for the City Council.
In the report, the Housing Department mentioned a recent UCLA study where it’s estimated that one in every five California community college students experience homelessness or are housing insecure. Community colleges have the highest rates of homelessness and housing insecurity across the state’s three public systems of post-secondary education, the study noted.
The Housing Department said it is now proposing the Affordable Housing Loan Agreement where the City extends out a loan to HHP in the amount of $2 million, of which $1.6 million will be drawn from the Inclusionary Housing Trust Fund, and $400,000 from ARPA (American Rescue Plan Act of 2021) funds.
HHP and the Housing Department said the total project budget would be $2,215,950, consisting of $1.3 million for the acquisition, $820,000 for property rehab construction, $69,450 for capitalized operating and replacement reserves, $15,000 for developer acquisition fee, $8,000 for construction period insurance, and $3,500 for transaction and title costs.
The agreement would stipulate that HHP, as the project developer, will use $200,000 in private funds, consisting of an anticipated grant from the Pasadena Community Foundation and a $15,950 contribution, to pursue the housing project.
The Housing Department said HHP is also exploring other potential sources, including additional grant funding. If HHP secures additional funding, the City’s loan may be reduced or may be used to subsidize operating costs as needed, the report said.
Another provision in the proposed agreement will say that if the operation of the project as TAY housing becomes financially unsustainable, the property may be operated as affordable rental housing for low-income persons at 60 percent of the Area Median Income (AMI).
Explaining the project’s fiscal impact, the Housing Department said approval of the agreement will increase the Housing Department’s fiscal year 2022 operating budget by $1,600,000 from the unappropriated fund balance of the lnclusionary Housing Trust Fund, leaving an unappropriated fund balance of approximately $1.26 million in the Fund. The City funding for this project will be in the form of a loan secured by a deed of trust. The debt service on the City loan would be paid from the project’s annual residual receipts which are not guaranteed.
The Housing Department said the recommendation was reviewed by the Internal Housing Loan Committee on April 7, 2022, and the committee has recommended approval.
From the Finance Committee, the recommendation is expected to be presented to the full City Council next Monday, April 25.
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