Attachment_D-_Trust’s_Application_for_SCAG_Grant.pdf

NOTICE OF FUNDS AVAILABLE (NOFA)

FOR LASTING AFFORDABILITY

PROGRAM APPLICATION

Funding for innovative housing finance, trust funds, catalyst funds, and new permanent funding sources.

Issued: June 7, 2023

Submit completed applications along with all required attachments to: housing@scag.ca.gov

Responses due by 5:00 p.m. on July 31, 2023

Applications can be submitted at any time during the application period. SCAG will consider all applications submitted during the application period received at the closing day and time.

More information at: www.scag.ca.gov/reap2021

Submit questions or request additional information by email with “NOFA Application” in the subject line to: housing@scag.ca.gov

Southern California Association of Governments

900 Wilshire Blvd., Ste. 1700

Los Angeles, CA 90017

To: housing@scag.ca.gov mailto:housing@scag.ca.gov http://www.scag.ca.gov/reap2021

REAP 2.0 PATH Program NOFA Program Application

Issued June 7, 2023

Table of Contents Introduction

Office Hours

Selection Process

Application

Submittal Checklist

Submittal Instructions

Technical Assistance Available

Administrative Provisions

Section 1. Application Terms and Signature

Section 2: Minimum Requirements

Section 3: Contact Information and Project Description

Section 4: Evaluation Criteria (Scored)

Introduction The Notice of Funds Available (NOFA) For Lasting Affordability allocates $45,000,000 in one-time grants to support programmatic level investments in housing trust funds, community land trusts, catalyst funds and nonprofit organizations that secure lasting affordability in compliance with the PATH program guidelines and the state REAP 2.0 guidelines. This includes funding to support transformative, innovative finance strategies that can be leveraged to increase supply, choice, and lasting affordability, and achieve a mix of housing types and rental and sales price ranges that provide a portion of housing for households at or below the area median income in infill areas.

Eligible activities are at a programmatic level, meaning that funding can be used to create or expand existing finance tools and loan products. Consultant support is available to develop business models, studies, and analysis to establish new or expand existing actions or capacities within housing trust funds, community land trusts, catalyst funds, revolving funds, and other public/private/philanthropic partnerships or nonprofit organizations that secure lasting affordability in compliance with the PATH program guidelines and the state REAP 2.0 guidelines; to achieve and maintain affordable housing at a regional scale. Through establishing a new or expanding an existing loan product or financing tool, the funding awarded can be used for any of the following actions:

• Consulting assistance and funding to establish or increase existing impact of a housing trust fund, community land trust, catalyst fund, revolving fund, and other form of public/private/philanthropic partnership, or to support a nonprofit organization securing lasting affordability in compliance with the Programs to Accelerate Transformative Housing (PATH) program guidelines and the state Regional Early Action Planning Grants of 2021 (REAP 2.0) guidelines to provide and maintain affordable housing at a regional scale.

• Actions and projects can include developing or increasing organizational capacity for a trust or fund including to develop a new or expand an existing loan product or funding tool that will be used for any of the following activities (please note that specific information required in Section 3, project description, and Section 4, evaluation criteria, for funding requests related to a loan product or financing tool):

o New strategies, and/or business models and structures for existing or emerging housing or land trusts that will lead to expanded affordable housing in infill areas (both through new construction and acquisition and conversion of existing buildings to affordable housing) helping to achieve the 6th cycle RHNA.

o Innovative Finance Products to explore new lending products, including loan products, leverage to secure additional funding, and activities in advance of having all necessary steps completed to construct a housing project in line with the program objectives.

o Predevelopment, Bridge and Gap Funding to support finance models and products for developing and maintaining affordable housing. Activities can include acquisition of existing residential buildings for preservation and conversion to affordable housing, predevelopment expenses, bridge financing (between predevelopment and permanent financing), and gap funding for affordable housing developments that have assembled primary funding sources but still have a remaining funding need. Projects must meet the REAP 2.0 program requirement to be transformative and must be able to start within 5 years of the expenditure date.

o Consulting Assistance to develop transformative finance strategies that can be leveraged to increase supply, choice, and lasting affordability, and achieve a mix of housing types and rental and sales price ranges that provide a portion of housing for households at or below the area median income in infill areas.

o Permanent Funding Sources Supporting a Trust or Fund identify and establish local and regional permanent funding sources for affordable housing, including general obligation and other bond initiatives, tax increment financing programs, in-lieu fee and residential or commercial/affordable housing linkage fee programs, revolving loan funds and other finance strategies creating permanent funding.

Depending on interest in the program, funding requests could be awarded in full or in part. Eligible applicants are broadly construed to include, but not be limited to entities that manage an established or planned Housing trust1 or land trust, or catalyst fund for, or have a mission-driven focus on, increasing Affordable Housing supply and lasting affordability. Applicants may include a public housing authority, joint-power authority, city, county, or nonprofit organization that secures lasting affordability.

SCAG will develop a bench of consultants to support awarded applicants develop business models and complete studies and analysis for new funding streams, as needed. Pending state approval of the funding schedule, an awarded applicant may request a direct suballocation of funds as a grant to use in a proposed new affordable housing loan product or financing tool to accomplish the activities listed above. If a direct grant is awarded, in Section 3 the applicant must provide as much detail about the loan product or financing tool as possible including anticipated underwriting, affordability terms and restrictions, target populations, 1 A distinct fund established by a government agency or nonprofit organization that receives ongoing dedicated sources of public or private funding to support the preservation and production of affordable housing and increase opportunities for families and individuals to access decent affordable homes.

and anticipated impact related to increasing housing supply, choice and affordability (see notes in Section

3.3 Project Description, and Section 4 the Evaluation Criteria). If a direct suballocation is awarded, the awardee is expected to fulfill all required administration and reporting requirements. For the funding application, resources, and more information on the NOFA and the PATH program as a whole visit:

www.scag.ca.gov/reap2021.

Office Hours SCAG staff is available to respond to questions and discuss proposed projects. Staff will begin holding weekly office hours once the call for applications period opens. An applicant does not need to have a project fully developed to participate in one-on-one consultations. Efforts will be made to accommodate meeting requests. There is no limit to the number of meetings possible. Interested applicants can visit SCAG’s REAP 2021 webpage at: www.scag.ca.gov/reap2021 to schedule an appointment.

Please email questions to housing@scag.ca.gov with the subject line “NOFA Application.” Inquiries made by any other means will not be answered. Effort will be made to respond within two (2) business days.

During each call for applications, staff will post all questions received along with responses. This will be done in batches on the REAP 2021 webpage.

Feedback on an application or a proposed project shared by SCAG staff should not be considered an indication the proposed application or project will be awarded funding.

Selection Process The application will be made available when the call is announced. The call will specify the period during which applications will be accepted. While the call is open, an applicant may amend a response that has been submitted up to the response due date and time (close of the call). Once the call is closed, no further amendments are allowed. Applicants are encouraged to take advantage of SCAG’s technical assistance that is available. More information is provided below and at www.scag.ca.gov/reap2021.

SCAG staff will review all responses received during the open call in two (2) stages: 1) Completeness (see the application submittal checklist) and 2) Technical Scoring and Evaluation.

The Completeness Review evaluates the completeness of the application and compliance with the submittal requirements. If all requirements are not met, SCAG staff will notify the applicant that the application is incomplete and will not be considered. Submitted application materials will not be returned.

Results of the Completeness review are final and may not be appealed. SCAG may, in its sole discretion, request clarification of any portion of an application from the applicant and its applicant team.

Applications that pass Completeness Review move to Technical Scoring and Evaluation, which evaluates projects based on the Project Application Scoring Criteria. All complete applications will be evaluated by a selection panel using the scoring rubric and evaluation criteria provided in Section 3 and Section 4 of the application. The selection panel may request additional information from applicants related to the scoring criteria. The evaluation for funding will consider the feasibility of the approach proposed to meet any current or future monitoring requirements or obligations. Please refer to the reporting requirements and compliance with REAP guidelines and State and Federal laws sections below and in the PATH guidelines for more information. SCAG does not currently have the capacity to monitor long term requirements and obligations in Affordable Housing development. The selection panelists’ scores for each application will be compiled to produce the final score. The selection panel will then meet to determine the final ranking of http://www.scag.ca.gov/reap2021 http://www.scag.ca.gov/reap2021 applications. Applicants will be notified of their score. Selected applications will be issued a conditional award letter and recommended for funding to the Regional Council. All conditional awards are provisional until approved by the Regional Council. Before executing the MOU, an applicant will need to provide additional information regarding the organization and capacity to receive and manage the grant funds.

Please refer to the risk assessment guidance document provided in the resources on the PATH Program website for more information (www.scag.ca.gov/reap2021).

Selection Process Timeline The following selection process timeline has been developed for NOFA funding area, subject to change.

Notice of Funds Available (NOFA) For Lasting Affordability

Application Opening and materials available: June 7, 2023

Application Workshop: June 14, 2023

Application Period, Consultation and Office Hours: June 7 – July 31, 2023

Application Due Date:

(Applications will not be considered after the application due date)

July 31, 2023

Closes at 5:00PM (Pacific Time)

Evaluation Period: August – September 2023

Conditional Notice of Awards issued: September 2023

Regional Council Approval of Awards: October 2023

Initiate Funding Agreements: Winter 2023

Application To be considered for the NOFA For Lasting Affordability Program, the applicant must be eligible and file a completed application with all required attachments before the close of the call for applications.

Submittal Checklist Please check each box in the lists below as each is completed.

The application includes the following sections, which must be filled out completely:

☒Section 1. Application Terms and Signature

☒ Section 2. Minimum Requirements

☒ Section 3. Contact Information and Project Description

☒ Section 4. Evaluation Criteria

The following attachments must accompany the completed application:

☒ Budget – Timeline – Scope – Deliverable (Use Provided Template)

☒ Three Project Area Maps (Guidance on creating and saving the maps is provided on scag.ca.gov/reap2021)

• Map showing that the project area meets the definition of infill;

• Map depicting the Disadvantaged Communities and Communities of Concern support by the project;

• Map of the Priority Growth Area(s) in the project area.

☒ Letter of Support (from a third-party organization that the project meets local housing needs)

Submittal Instructions The application must be submitted in pdf format with supporting materials with excel-based templates in excel format. All documents should be submitted as separate files.

The application package must be submitted as an attachment to an email sent to: housing@scag.ca.gov with “NOFA Application” in the subject line. An emailed drop box link is also acceptable.

Responses are due by July 31 at 5:00p.m.

Applications can be submitted at any time while the call is open. SCAG will consider all responses submitted during the open call as received at the closing time and day.

Technical Assistance Available While the call is open, an applicant may amend a response that has been submitted up to the response due date and time (close of the call). Once the call is closed, no further amendments are allowed.

Applicants are encouraged to take advantage of SCAG’s technical assistance during the open call, which includes information posted on the REAP 2021 webpage, assistance with questions during weekly office hours, and the option to schedule a one-on-one meeting to discuss the application, proposed project(s), and submittal requirements.

For information about technical assistance available, visit https://scag.ca.gov/programs-accelerate-transformative-housing-path..

Administrative Provisions SCAG’s Rights and Responsibilities SCAG reserves the right to change the requirements and policies described in this Program Application at SCAG’s sole discretion. SCAG is responsible only for what is expressly stated in the Program Application, any authorized written addenda, and any posted Questions and Answers. Such addenda shall be made available to each person or organization via SCAG’s REAP 2021 webpage (www.scag.ca.gov/reap2021). It is the responsibility of applicants to ensure, prior to submission, that their application reflects the most recent addenda information, program requirements, and policies. By submission of an application, each applicant acknowledges receipt of all addenda, if any, that are emailed or posted on the SCAG REAP 2021 website.

SCAG is not responsible for and shall not be bound by any representations otherwise made by any individual acting or purporting to act on its behalf if those representations conflict with Program Application requirements.

SCAG’S Discretion This NOFA does not commit SCAG to award a grant. SCAG expressly reserves the right, in its sole discretion, to reject any and all applications, and to disqualify any application that is incomplete, out of order, lacks required attachments, or contains other content errors, inconsistencies, misrepresented information, or other deficiencies. Forms provided in the Program Application must be used and information provided otherwise may be disregarded at SCAG’s discretion. SCAG reserves the right to waive disparities in a proposal if the sum and substance of the application is present. Furthermore, SCAG reserves the right to terminate this program at any time without prior notice.

Cost of Application Preparation The cost of application preparation shall be borne by the applicant. In no event shall SCAG be liable for any expenses incurred in the preparation and submission of the application.

Application is Property of SCAG Once submitted, each application becomes the property SCAG and becomes a public record. SCAG is not liable for the public disclosure of any information contained in an application.

Encumbrance and Expenditure Periods All funding awards must be encumbered, meaning the MOU between SCAG and the awarded applicant (sub-recipient) is executed, by January 30, 2024, unless extended in advance in writing by SCAG. Regardless of any extension funding awards must be encumbered before June 30, 2024. To meet the state program deadline and receive reimbursement, all invoices must be submitted to SCAG no later than December 31, 2025.

Reporting Requirements Sub-Recipient shall submit a Quarterly Report using the Sub-Recipient Report Template which will be provided in the executed MOU. The Sub-Recipient shall submit an Annual Report by February 10 of each year using the Annual Report Template which will also be provided in the executed MOU. When the project is finalized, the Sub-Recipient shall submit a Close-Out Report no later than 90 days after the Completion https://scag.ca.gov/programs-accelerate-transformative-housing-path https://scag.ca.gov/programs-accelerate-transformative-housing-path

Date, or April 1, 2026, whichever comes first. HCD has not yet provided the requirements for the Close-Out Report due to HCD by all grantees at the conclusion of the grant performance period, but the requirements will be provided when available.

Compliance with REAP Guidelines and applicable State and Federal laws

This program is subject to the REAP 2.0 Guidelines and all applicable State and Federal laws. If the proposed project involves construction or acquisition, the sub-recipient will be required to comply with additional requirements, including but not limited to prevailing wage, fair housing, ethics laws, non-discrimination and accessibility laws. Any property acquisition funded with public funds will be subject to additional requirements under applicable law including, but not limited to, enforceable nondiscriminatory covenants recorded in the property’s chain of title. If awarded funds, the sub-recipient will be required to enter into an MOU (and, if necessary, based on specific proposals, other regulatory agreements) with SCAG that requires the sub-recipient to comply with these guidelines and all applicable laws and to ensure, to SCAG’s satisfaction, that any sub-recipients, consultants, or contractors comply. Further, the sub-recipient will be required to indemnify SCAG for their failure to comply with any of the requirements and provide evidence of adequate continuing financial resources to satisfy these indemnity obligations.

Section 1. Application Terms and Signature A person duly authorized to sign for the organization (city manager, general manager, executive director, planning director or equivalent) must sign and certify the application. If this application is selected for funding, the information contained in this application will become the foundation of a funding agreement with SCAG. Applicants should be aware that SCAG may place stipulations on the project as a condition of the approval. These will be noted at the time of the funding recommendation. SCAG can also withdraw funding if the agency does not comply with the terms of the funding agreement.

Funding available under this Program Application is dependent upon SCAG’s receipt of Regional Early Action Planning Grant (REAP 2.0) funds from the State of California. In the event funds offered through this Program Application are not available, SCAG, at its sole discretion, may terminate its obligations resulting from this Program Application.

SCAG reserves the right, in its sole discretion, to reject any and all applications in whole or in part.

Acceptance by SCAG of an application under this Program Application constitutes agreement by the applicant as to all terms, conditions, requirements, and rules of the application but does not constitute a contract or commitment of any kind.

☒ I confirm that I have reviewed the Submittal Checklist and that all application sections and required attachments have been filled out completely and will be submitted together following the Submittal Instructions.

☒ To the best of my knowledge, all information contained in this application is true and correct. If awarded funding from SCAG, I agree that I will adhere to the program guidelines, as well as provide a local resolution evidencing authorization to execute a funding agreement and receive funds.

Click or tap here to enter text.

Signature

July 28, 2023 Date

Adam Eliason Print Name

Trust Manager

Title

Orange County Housing Finance Trust

Organization Name

Section 2: Minimum Requirements The following requirements establish eligibility to apply.

Section 2.1: Eligibility The applicant must meet the following criteria:

Eligible applicants are broadly construed to include, but not be limited to entities that manage an established or planned Housing trust2, community land trust, or catalyst fund for, or have a mission-driven focus on, increasing Affordable Housing supply and lasting affordability. Applicants may include a public housing authority, joint-power authority, city, county, or nonprofit organization that secures lasting affordability.

Does your agency/organization meet the applicant eligibility requirements as described above?

☒ Yes

☐ No

If your agency/organization does not meet the applicant eligibility requirements, do not proceed. Your organization is not eligible. For more information contact Jacob Noonan at noonan@scag.ca.gov.

Section 2.2: Project Meets Infill Definition Eligible projects must be entirely located in infill areas per the definition below.

Check all boxes that apply to your project. The project must be entirely within areas meeting Part A and Part B, and either Part C-1 or Part C-2. The State defines “infill”, for the purposes of the REAP 2.0 Program, as follows:

☒ Part A: The area consists of unused or underutilized lands

☒ Part B: Within existing development patterns

☒ Part C: That is or will be accessible to destinations and daily services by transit, walking, or bicycling and located in either:

☐ Part C-1: An urban center, urban corridor, or area with transit-supportive densities, OR

☒ Part C-2: An established community that meets all the following criteria:

☒ 2.1: The area consists of previously consisted of qualified urban uses

☒ 2.2: The area is predominantly surrounded (approximately 75 percent of the perimeter) by parcels that are developed or previously developed with qualified urban uses. In counting this, perimeters bordering navigable bodies of water and improved parks shall not be included, 2 A distinct fund established by a government agency or nonprofit organization that receives ongoing dedicated sources of public or private funding to support the preservation and production of affordable housing and increase opportunities for families and individuals to access decent affordable homes.

mailto:noonan@scag.ca.gov

☒ 2.3: No parcel within or adjoining the area is classified as agricultural or natural and working lands.

Is the totality of your project located in an infill area, as defined above?

☒ Yes ☐ No

If your project area meets the definition of infill, please follow the instructions provided at https://scag.ca.gov/programs-accelerate-transformative-housing-path to create and save an area map of your project area that visually identifies how all activities meet the definition of infill. This map must accompany your submitted application.

If your project area does not meet the definition of infill, do not proceed. Your project is not eligible.

Section 3: Contact Information and Project Description

Section 3.1: Applicant Information Agency or Organization Name: Orange County Housing Finance Trust

Jurisdiction (if applicable): Click or tap here to enter text.

Description of Agency/Organization or Mission Statement: The mission of the Orange County Housing Finance Trust is to strengthen the communities in Orange County by financing the development of affordable housing for homeless and low-income individuals and families

Address: 1 League #62335, Irvine, CA 92602

Application Contact: Adam Eliason Title: Trust Manager

Email: aeliason@ochft.org Phone: (909) 706-7193

Number of Applications Submitted: 2

If your agency is submitting multiple applications, please prioritize them below by Project Title:

Priority #1: Affordable ADU Loan Program

Priority #2: Predevelopment Loan Program

Priority #3: Click or tap here to enter text.

Section 3.2: Title and Service Area Funding Proposal Title:* Affordable ADU Loan Program

Geographical Focus Area:** Within Orange County Housing Finance Trust member cities and unincorporated areas of Orange County. The Trust includes 26 cities plus the unincorporated areas of the County.

*The NOFA funds at the programmatic level, please provide the title for the trust fund, loan product, or financing tool you wish to develop or increase. ** the geographic focus area is the absolute extent of the program’s envisioned reach; however, all eligible funding sites must meet the infill definition.

Subregion or COG: Orange County Council of Governments County: Orange County

Estimated Project Costs: $8,000,000

Requested Amount: $4,000,000

Local Match/Other Sources (Not Required): $4,000,000

Section 3.3: Project Description Please include a description of the proposed project and major deliverables. The project description should align with the information you include in the budget, timeline, scope, deliverables spreadsheet attachment.

In your project description, please discuss how your project helps to fulfill the Connect SoCal Housing Supportive Infrastructure Key Connection. The three areas in the PATH Program are intended to fulfill the Housing Supportive Infrastructure Key Connection in the Connect SoCal Plan. This Key Connection aims to reduce the cost of producing housing by increasing the capacity for housing construction, reducing permit timing and process, right-sizing parking strategies, addressing sewer/water and other utility infrastructure needs, establishing tax increment financing, regional housing and land trusts, and other approaches to creating permanent affordable housing and funding sources.

If your project includes a request for direct grant funding for a housing trust, land trust, catalyst fund, or similar program, please describe the loan product or financing tool and how the funds will be used to increase affordable housing beyond current capacities. Also include the underwriting assumptions, affordability requirements, and the organization that provides long-term monitoring. If the fund, loan, or tool is not yet established, please describe the expected lending parameters and how and when the fund, loan, or tool will be established. Please note if you are requesting consultant support to develop the program or business model, in your description, please provide outcomes, which should include projections for the number of units, target populations served, and affordability levels of housing anticipated annually.

Finally, please also discuss leveraging, possible partnerships, and other means of increasing funding for the program, and any means of recycling funds. [500-word limit]

The Orange County Housing Finance Trust is launching an innovative new Affordable ADU Loan Program (aADU) in August 2023 to provide subsidized loans to homeowners to construct infill, affordable rentals for 50% AMI tenants in cities throughout Orange County. This proposal builds off SCAG’s previous work on ADUs, including an ADU grant program for Trust member cities Laguna Beach, Buena Park, and Garden Grove. In line with the State’s investments in ADUs, SCAG specifically cited ADUs as a strategy within the Sustainable Communities Strategy by promoting diverse housing choices: “create incentives and reduce regulatory burdens for building context-sensitive accessory dwelling units to increase housing supply.”

Developing a financing solution that makes ADUs affordable to build and rent, then translating that product into a commercial loan is the follow-up action to reach the potential of ADUs in solving the affordable housing crisis. With this goal in mind, the Trust designed a scalable pilot loan program to ensure ADUs are creating certifiable affordable housing, are rapidly adopted by homeowners, and support municipalities in meeting RHNA goals.

The loans are up to $100,000; low-to-no simple, variable interest; partially forgivable; with balloon payments deferred up to 20 years; secured by a recorded deed of trust and 10-year affordability covenant.

Borrowers have minimum eligibility criteria with no income or credit score requirements, and a high loan-to-value limit of 90% to allow the most widespread participation. The Trust will provide monitoring and loan management, as well as the issuance of repaid funds, for the duration of the program, which is well within the typical 55-year commitment of their other loans to multifamily housing developments.

A few features of the loan are especially innovative. While there is no minimum time to participate before paying off the loan, the longer a borrower complies, the greater their accumulated financial benefits, including principal and construction interest forgiven, a prolonged period of below-market interest rate, and more latitude to time their repayment. The variable interest rate serves multiple purposes: higher rates to incentivize minimum and ongoing compliance, rates above-market after the loan term to encourage repayment, a housing-secure alternative to typical foreclosure remedies, and higher payments when noncompliant that convert any lost affordability time into future ADUs.

The underwriting assumptions for this loan are: secured by the ADU’s increased equity not principal residence equity; the additional equity will exceed the loan amount; other debt will be paid down during the 10-year affordability period increasing the security of the Trust’s loan before payment is required.

With the current funding from CalOptima, the program will fund an initial 34 ADUs, with applications accepted starting in August 2023. An additional $4,000,000 from SCAG would increase the volume to 68 ADUs in the first round. The Trust conservatively estimates that 75% of the loan principal will be repaid on average (the lowest possible repayment is $52,000, and the highest could be $300,000 or more if the borrower never fulfills loan obligations). Given this repayment estimate, the total number of ADUs could be 240 before funds are depleted.

Section 3.4: Connect SoCal Priority Growth Areas Priority Growth Areas (PGAs) follow the principles of center-focused placemaking and are locations where many Connect SoCal strategies can be fully realized. Projects do not need to be in PGAs to be eligible for funding. The map will help describe how your project contributes to regional transformative change, which is one of the evaluation criteria in Section 4.5.

Please use the SCAG Mapping Tool provided at the following link to create and save a map of your project area that visually identifies how all PGAs and check off which layers that apply below:

https://maps.scag.ca.gov/portal/apps/webappviewer/index.html?id=94a15b4f502d44c6941e6c0b718188

23. Instructions for using the SCAG mapping tool are available online at https://scag.ca.gov/programs-accelerate-transformative-housing-path. This map must accompany your submitted application.

☒ Job Centers

☒ Transit Priority Areas

☒ High Quality Transit Areas

☒ Neighborhood Mobility Areas

☒ Livable Corridors https://maps.scag.ca.gov/portal/apps/webappviewer/index.html?id=94a15b4f502d44c6941e6c0b71818823 https://maps.scag.ca.gov/portal/apps/webappviewer/index.html?id=94a15b4f502d44c6941e6c0b71818823

The Sustainable Community Strategy (SCS), which begins in Chapter 3 on Page 49 of the Connect SoCal plan, provides information on each PGA: http://scag.ca.gov/sites/main/files/file-attachments/0903fconnectsocal-plan_0.pdf?1606001176.

Note: Although listed as PGA in Connect SoCal, Spheres of Influence do not qualify for REAP 2.0 funding.

Section 4: Evaluation Criteria (Scored) All applications that meet the minimum requirements in Section 2 will be scored on how the project meets:

(1) the REAP 2.0 Program Objectives and SCAG Key Priorities, and (2) provides Transformative and Significant Beneficial impacts in relation to the following criteria. The maximum number of points possible for each criterion is provided in the chart below. More detail on each of the criteria is provided below as well as in Section 3.2 of the PATH Program Guidelines.

Evaluation Criteria Unweighted

Points Possible

Weighting Factor

Percent of Total

1 Lead to a Transformative Significant Beneficial Impact 25 45%

1.1 Accelerate Infill Development that facilitates:

- Housing supply,

- Choice, and

- Affordability

15 1 15%

1.2 Affirmatively Further Fair Housing (AFFH) 5 3 15%

1.3 Reduce Vehicle Miles Travelled 5 3 15%

2 Equitable Targeted Outreach 10 10%

2.1 Engagement with Disadvantaged and Historically Underserved Communities

5 1 5%

2.2 Inclusive, Diverse, and Equitable Engagement 5 1 5%

3 Leverage Partnerships, Policy Match, Building Local Capacity, Ability to Complete the Project, and Cost Effectiveness

25 25%

3.1 Existing or Prior Local Policy Commitment 5 1 5%

3.2 Partnerships or Financial Match 5 1 5%

3.3 Ability to Complete the Project and Cost Effectiveness

− Experience completing similar projects − Plan for ensuring project is completed on time and budget − Approach for ensuring cost effective use of funding

15 1 15%

4 Prioritize Disadvantaged Priority Populations 10 10%

4.1 Disadvantaged and Historically Underserved Priority

Populations

5 1 5%

4.2 Addressing Historic/Current Inequities and Priority Population Benefits

5 1 5% http://scag.ca.gov/sites/main/files/file-attachments/0903fconnectsocal-plan_0.pdf?1606001176 http://scag.ca.gov/sites/main/files/file-attachments/0903fconnectsocal-plan_0.pdf?1606001176

5 Contributes to Regional Transformative Change 10 10%

5.1 Transformative Approaches to Scale Housing Supply 5 1 5%

5.2 Regional Impact and Applicability 5 1 5%

Total 80 100%

4.1. Lead to a Transformative Significant Beneficial Impact (25 Points) Responses must attain a point score for each of the questions in this criterion to be considered for funding.

A score of less than one (1) disqualifies the application.

The following set of questions will ask you to describe how the project is a Transformative Planning and Implementation Activity providing a Significant Beneficial Impact (See definitions below) that leads to a substantial change in land use patterns, equity, and travel behaviors. Your response must attain a point score for this criterion to be considered for funding. A score of less than one (1) disqualifies the application.

Transformative Planning and Implementation Activities means:

Housing, planning, infrastructure investments supporting Infill development that facilitates Housing supply, choice and affordability, and other actions that enable meeting Housing goals that also result in Per Capita vehicle miles traveled reductions, including accelerating Infill development, supporting residents through realizing Multimodal Communities, shifting travel behavior through reducing driving, and increasing transit ridership.

Transformative Planning and Implementation Activities are meant to address these goals together and to lead to changes in land use patterns and behaviors. Transformative Planning and Implementation Activities shall be in furtherance of all the following:

a. State Planning Priorities, as described in Section 65041.1 of the Government Code.

b. Affirmatively Furthering Fair Housing pursuant to Section 8899.50 of the Government Code.

c. Facilitating Housing Element compliance for the sixth cycle Regional Housing Needs Assessment pursuant to Section 65302 of the Government Code prepared in accordance with Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code.

d. A region’s Sustainable Community Strategy, as described in paragraph (2) of subdivision (b) of Section 65080 of the Government Code, or Alternative Planning Strategy, as described in paragraph

(2) of subdivision (b) of Section 65080 of the Government Code, as applicable.

Significant Beneficial Impact means:

Demonstrating the potential to meet the REAP 2.0, Connect SoCal, and PATH program objectives by establishing and supporting the infrastructure for accelerating housing supply, choice, and affordability, affirmatively furthering fair housing, and reducing VMT by transforming current corridor-wide or area-wide housing policies, site planning, financial models, predevelopment and development processes, and homeownership patterns in a significant and quantifiable manner. Significant beneficial impacts must lead to substantial changes in land use patterns and travel behaviors.

In demonstrating significant beneficial impacts, applicants may consider rates of change (e.g., percent increase over a baseline), the magnitude of impact relative to variables or targets, the proportion of need achieved, and the impact relative to past trends, policies, and practices. Variables or targets may include but are not limited to benefitting households by income group; Regional Housing Needs Assessment;

housing units (new construction, preservation/conservation, and rehabilitation); density; infrastructure;

infrastructure capacity and accessibility; public space; community amenities; investments; Vehicle Miles Traveled reduction goals or targets; regional or local equity policies and programs included in an adopted RTP/SCS; and GHG reduction goals or targets.

4.1.1 Accelerate Infill Development that Facilitates Housing Supply, Choice, and Affordability (15 points)

Each response for this criterion must score a one (1) or greater to be eligible for funding. In each response, please include information about how the project connects to and implements the Housing Supportive Infrastructure Key Connection in the Connect SoCal SCS (see Section 2.3 for more information and a link to the Connect SoCal Plan).

A. Please describe how the project accelerates infill development that facilitates housing supply (5 Points).

Describe how the project will increase the capacity to achieve housing units. This can be described as, but is not limited to, feasibly increasing the potential for new housing in existing and newly zoned residential/mixed-use areas, achievably improving permitting process and standardizations, and other means of realistically increasing the ability to deliver new housing. In your response, please discuss the actions that will be feasibly completed, the measurable results anticipated, and how the project supports achieving the jurisdiction’s 6th cycle RHNA. [500-word limit]

With an estimated 1.5 million ADU-potential infill parcels, it is no wonder that the state of California thinks that ADUs are a powerful solution to increasing housing supply. Yet according to the Center for Community Innovation, inadequate financing is cited as the principal barrier twice as often as site limitations or lack of desire by homeowners. The problem is that ADUs are relatively new and thus unknown—lenders don’t know how to underwrite them—and low-wealth households don’t qualify for conventional products.

Relying on our experience as affordable housing lenders, the Trust is launching a transformative loan product that expands homeowner access and participation, ensures benefits for the most in need while furthering fair housing, provides RHNA credits to cities, and fills the knowledge gap for lenders, while laying the foundation for regional expansion to scale. Laser-focused on producing a successful loan product and generating best practices to share, homeowner eligibility is not artificially restricted by geography, income, home value, low debt, or design plans. The data will reflect the feasibility and willingness of homeowners to become mini-developers, including those previously excluded by conventional underwriting, making ADUs affordable for the owners. This is possible because the loan is secured against the future rents of the ADU and the increased equity after construction rather than existing equity—a model banks are exploring but stymied by a lack of data to offer themselves.

Cracking the lending lock will trigger a release of pent-up demand. Meeting that demand at scale prevents the program from offering more common assistance on predevelopment, development, loan, and tenant management—an unsustainable weight on staff. Instead, the loan is paired with professional services to comply with the covenant, doubling as an access point for tenants and advancing fair housing efforts. Cities are then supplied with certified RHNA credits by that same covenant and incentivized to streamline permitting to maximize access to the depleting loans.

A low-barrier, comprehensive ADU loan product has incredible potential to multiply the housing supply.

However, to siphon some for affordable housing takes a large-scale pilot covering multiple regions, set up to learn and share. We anticipate uncovering information about demand, development challenges including permitting, incentive tipping points, voucher limitations, and ideal ADUs and preferred tenants.

In short, what works, what doesn’t, and the real potential of ADUs as affordable housing.

The impact of our proposed actions of 68 successful loans to create very-low income ADUs with a comprehensive data set spanning finances to urban planning is immeasurable. Lenders could build from the data to offer their own ADU loans for non-affordable rentals, releasing more ADU supply. Those loans will expand ADUs to more low-income households who are now eligible based on future value. Cities and housing trusts in other regions can replicate the program and expand supply in their areas. As an almost pure loan program, detached from on-the-ground staff and considerations, even the state could replicate the program for those 1,500,000 potential ADUs.

B. Please describe how the project accelerates infill development that facilitates housing choice (5 Points).

Describe how the project will expand the types of housing possible. This can include, but is not limited to, feasibly increasing the potential to achieve housing types not common but for which there is an identified need in the community. Some examples of housing types include 2–4-unit properties, townhomes, limited-equity and shared equity co-operatives, and mid- and large-scale apartments and condominium projects.

In your response, please discuss the actions that will be feasibly completed, the measurable results anticipated, and how the project supports achieving the jurisdiction’s 6th cycle RHNA. [500-word limit]

Accessory Dwelling Units are typically small but next door to large homes. They are affordable in single-family zones that are, by design, not affordable. ADUs are ideal for seniors, transitional adults, and small households but share a driveway with housing for families. They fit in small spaces near established job centers or walkable corridors that large multifamily housing cannot reach. And ADUs are often single-story and open, making them ideal for mobility limitations, unlike the predominate two-story homes of Southern California. In their opposition to their neighboring structures, they represent choice and opportunity for their residents and their owners.

The Affordable ADU Loan Program facilitates housing choice by enabling the construction of an initial 68 ADUs throughout the county. Tenants have expanded options in location, size of home, and price point, giving them access to previously monolithic neighborhoods of single-family homes. By offering a substantial incentive for renting to voucher holders, the program also expands choice for housing choice voucher holders to more properties actively seeking them as tenants. Instead of accepting wherever accepts them, they can choose the right location and amenities to suit their needs and preferences. For those with special purpose vouchers, especially those experiencing chronic homelessness, their choices will now include at least 20 more mobility-accessible units but potentially up to 44 additional options.

Renters aren’t the only group with expanded choices through the aADU program. Homeowners also benefit from choice in their degree of participation, gaining flexibility and reassurances to make the ten-year commitment easy. For ADUs to offer renters an expanded selection of living arrangements, homeowners must be willing to become housing developers, property managers, and close neighbors. Combine that with the conscious and unconscious prejudices against those who live in affordable housing, and even the YIMBYs struggle to agree to participate. That unknowable risk has undermined affordable ADU loan programs from Los Angeles to Santa Cruz.

The Trust’s program gives homeowners a choice of their degree of participation with appropriate rewards to incentivize the options the program most desires. For instance, homeowners can choose to build their ADU to the mobility-accessibility standards and are rewarded with an extra $5,000 grant. They can rent to a voucher holder at 0% interest or a non-voucher-qualified tenant at 3%. They can even choose to lease to an unqualified tenant without leaving the program. Even with the best intentions, life can happen in ten years. A homeowner may decide that offering housing to their child studying at college or a brother going through a divorce is worth a few months at an above-market interest rate. We strongly feel that flexibility to step away if needed but come back when life adjusts reassures homeowners during their initial commitment, prevents exacerbating challenging situations with immediate repayment, and the lost affordability time is made-up for through the eventual repayment at the higher interest rate.

The actions already taken in designing a program centered around choice for borrowers and renters and the future action of collecting data around those choices will improve our understanding of how ADUs can be best used as affordable housing for RHNA credits, given that by their nature, someone needs to choose to invite a stranger into their backyard.

C. Please describe how the project accelerates infill development that facilitates housing affordability (5 Points). Describe how the project will realistically increase the range of rental and sales price points for housing with an emphasis on assuring lasting affordability for housing at extremely low, very low, low, and moderate ranges. In your response, please discuss the actions that will be feasibly completed, the measurable results anticipated, and= how the project supports achieving the jurisdiction’s 6th cycle RHNA.

[500-word limit]

The basic rule of creating housing for low-income residents is that an apartment can only be as affordable to rent as it was affordable to build. It is as accurate for multifamily housing as for financing accessory dwelling units. Therefore, the Affordable ADU Loan Program seeks to create affordability for both the tenant and the homeowner, increasing housing stability and security for all.

First, the loan creates affordability for the homeowner through the typical mechanism of a reduced interest rate, which reduces the weighted interest cost for all debt used to construct the ADU. Unlike traditional subsidies, this loan includes a forgiveness component that further reduces the debt burden for the homeowner. With a deferred payment after 20 years, the borrower can service one loan at a time, paying off more expensive debt first while under the affordability covenant and earning principal forgiveness. They have up to ten years of making market-rate rent at a below-market interest rate before the balloon payment is due. This spreads the payment burden to a manageable balance between new rental income and loan expenses.

That income is, of course, the rent paid by the very-low income tenant. With lower debt expenses to cover, the homeowner can now profitably lease at a highly reduced rate to ensure affordability for those earning 50% AMI. In creating this program, we carefully ensured that the project could “pencil out” for novice ADU developers. The investment in their home provides new cash and appreciation, increasing income and wealth and reducing the likelihood of displacement from their home. And it promises affordable housing for retirees, adult children, caretakers, or any other arrangement for sharing housing expenses after the affordability covenant.

Renters also benefit from long-term affordability through the price cycle of the ADU and the recyclability of the loan. As brand-new rentals, the ADUs would command their highest possible rents, but the covenant suppresses the rent to very low-income levels at that time. After ten years, the ADU is no longer as up-to-date, falling off its pricing zenith to a more moderate or low-income range. Thus, even without the covenant, time has worked to keep the ADU affordable as long as it remains a rental. In the meantime, the homeowner has repaid the original loan, and the Trust has issued another subsidized loan, creating one moderately priced and one very low-income ADU where previously there were none.

The final aspect of affordability is the subsidy itself, which is smaller and repaid faster than traditional government subsidies for affordable housing.