TO: Board of Supervisors
FROM: Ryan J. Alsop, Chief Executive Officer
REPORT BY: Jennifer M. Palmer, Director of Housing & Community Services
SUBJECT: Approval of Updated Affordable Accessory Dwelling Unit Loan Program Underwriting Guidelines
RECOMMENDATION
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Approve and adopt the updated underwriting guidelines for the Napa County Affordable Accessory Dwelling Unit Forgivable Loan Program. (No Fiscal Impact)
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BACKGROUND
On February 8, 2022, the Board received a presentation on affordable housing program investment opportunities. The Board directed staff to return with recommendations supporting modification and further investments in the Proximity Workforce Housing Assistance Program and Accessory Dwelling Units (ADU’s). On April 19, 2022, the Board received a second presentation which included possible actions and investments related to both programs. The Board directed staff to support increased ADU production by developing programs and forgivable loan underwriting guidelines that support market rate and affordable ADU production. On November 29, 2022 the Board adopted the first version of the Affordable Accessory Dwelling Unit Forgivable Loan Program underwriting guidelines. The Program provides forgivable construction loans for ADU development to homeowners in Napa County who occupy their home as their primary residence in exchange for the following commitments:
1. The construction of a new ADU at the primary residence; and,
2. The commitment to rent the unit to an individual or household earning at-or-below 80% Area Median Income (AMI); and,
3. The commitment to a maximum monthly affordable rent for 80% AMI households for a period of not less than five years or 60 months.
Loans are available to homeowners anywhere in Napa County who occupy their homes as their Primary Residence. All units assisted by the Program will be subject to an affordability covenant for the rental term of five years or 60 months. For each 12-month period in which the borrower is compliant, 20% of the AADU Forgivable Loan will be forgiven, including interest. Upon certification of 60 months of program compliance, the AADU Forgivable Loan will be fully forgiven. A borrower who has received an AADU Forgivable Loan may “opt out” of the Program at any time by reimbursing the County for remaining portion of the forgivable loan, including the remaining interest due. At the time of either certification of 60 months of Program compliance, or op-out and repayment of the outstanding loan amount, the County will remove the Affordability Covenant recorded on the unit.
The program has been operating for over three years as a pilot program. Program Staff are proposing updates to the current underwriting guidelines, based on feedback received from the public and to ensure Today’s action requests the approval and adoption of an updated version of the Affordable Accessory Dwelling Unit Forgivable Loan Program underwriting guidelines, based on real time program implementation and both applicant and stakeholder feedback. The primary changes to the guidelines are as follows:
1. Updated rebates offered to the applicant aligned to current statewide rebates and local priorities.
2. Reflect current annual income and maximum rent amounts per California Department of Housing & Community Development.
3. Clarifying eligible and ineligible costs.
FISCAL IMPACT
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Is there a Fiscal Impact? |
No |
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Where is it budgeted? |
Housing & Community Services |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
The update to the ADU underwriting guidelines is discretionary in that there is no mandate to update or change the guidelines. |
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Is the general fund affected? |
No |
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Consequences if not approved: |
If the updated guidelines are not approved the program will continue to operate under the current guidelines. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.