City of Alexandria, Virginia
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MEMORANDUM
DATE: DECEMBER 7, 2021
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: MARK B. JINKS, CITY MANAGER /s/
DOCKET TITLE:
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Consideration of a City Grant/Equity Investment of up to $5 Million to the Alexandria Housing Development Corporation (AHDC) to Develop Affordable Mixed Ability Housing, Including 36 Homeownership Units, on Seminary Road.
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ISSUE: Consideration of a City grant/equity investment of up to $5 million to Alexandria Housing Development Corporation (AHDC) to develop a mixed ability housing community, including 36 affordable for-sale homeownership units and three condominium units to be owned and operated by Sheltered Homes of Alexandria (SHA) for individuals with developmental and/or intellectual disabilities.
RECOMMENDATION: That City Council contingent on land use approvals on December 18 including receipt of a positive 9.06 report from the Planning Commission by December 18:
(a) Approve a City Housing Opportunities Fund grant to AHDC of up to $3.9 million (including $250,000 of previously approved predevelopment funds) for the development of 36 affordable housing units;
(b) Approve an additional City equity investment through the transfer of city land valued at $0.8 million to $1.2 million to AHDC to complete its land assemblage for the project;
(c) Approve a City Housing Opportunities Fund grant of up to $1.1 million for construction of the SHA units; and
(d) Authorize the City Manager to execute the grant agreement and negotiate terms for the land transfer which are consistent with the project’s affordable housing purposes after all potential non-city funds have been secured.
BACKGROUND: The Seminary Road project involves three land parcels including 4547 Seminary Road, a five-bedroom single-family home owned by SHA and operated as a group home by DCHS; 4555 Seminary Road, a single-family home that is privately owned on which AHDC has a purchase option agreement in place; and 4574 Seminary Road, a vacant/unimproved parcel owned by City of Alexandria that is adjacent to Fire Station # 206. AHDC has proposed a mixed-ability, affordable housing development program that includes 31 townhome (for-sale) units and 8 flats-style condominiums in a small multifamily building. Five flats will be for-sale, and three will be owned by SHA to house up to 12 individuals with intellectual and/or developmental disabilities. The project supports two Housing Master Plan goals: (1) supporting affordable and workforce home purchase opportunities; and (2) providing safe, quality housing choices that are affordable and accessible to households of all ages and abilities.
The new SHA condominiums are designed to reflect current best housing practices for disabled persons by lowering the number of individuals served in each residential unit. Meeting this standard will result in an increase in the State’s housing services payment to DCHS on behalf of residents. The three 4-bedroom/4.5-bath units to be owned by SHA will be fully accessible, and an elevator will make the building visitable. Staff will be onsite daily with separate workspaces and bathrooms within the units. It is noted that residents of the group home that is part of the assemblage will be relocated within the City during construction and will have the right to return when the new units are complete. The Landlord Tenant Relations Board (LTRB) held a public hearing on November 3 after which it approved SHA’s proposed Relocation Plan.
The Seminary Road project is the second collaboration between AHDC and SHA: in 2020, the two nonprofit organizations partnered to renovate Bellefonte Apartments, a small SHA rental property in Del Ray which provides deeply affordable housing to 12 adults with special needs. The City’s Department of Community and Human Services (DCHS) provides staffing and services to residents. AHDC coordinated the long-term refinancing of Bellefonte’s project-based federal rental subsidies as well as relocation of impacted residents, and secured construction funding to enable substantial rehabilitation of the 1970’s era buildings. A loan from the City’s Housing Opportunity Fund funded stormwater improvements. AHDC also managed the renovation project, which included gutting the interior, and modifications to six ground level units to make them fully accessible. In addition, improvements included, installation of energy efficient appliances, new stormwater drainage systems and landscaping, and updated security features. Residents moved back to Bellefonte in April 2021 as the pandemic eased.
The 36 homeownership units proposed at Seminary Road will be affordable in perpetuity with equity sharing enforced through deeds of covenant restricting their terms of resale. The townhouse and flats-style for-sale units will be sold at prices, and with assistance, that makes them affordable to households with incomes up to 80% of the area median income (AMI). The units will be family-sized, with two and three bedrooms, and will be marketed to first-time homebuyers who either live and/or work in the City. The proposed sales prices are a function of the target AMI (Attachment 2), anticipated condominium or similar fees, unit size (square footage) and type (number of bedrooms), as well as availability of dedicated parking for the unit. The Seminary Road project presents a rare opportunity to create new affordable homeownership units, in particular townhouse style units, and will replenish some of the city’s "first generation" set-aside for-sale homes where affordability covenants - initially set for much shorter periods than is now required - have expired. It also creates equitable access to homeownership in a neighborhood where for-sale housing affordability does not exist.
With Community Impact Grant Funding from Virginia Housing, AHDC has partnered with The Champlain Housing Trust and with the Grounded Solutions Network to develop a shared equity program which AHDC hopes to replicate in other upcoming affordable ownership projects. The policies and guidelines created are anticipated to maintain long-term affordability through resale restrictions, outline stewardship and training requirements to help prospective homebuyers purchase affordable units understanding their rights and responsibilities, along with ongoing support to help them successfully maintain ownership, if/as needed. By potentially separating the value of the underlying land from the housing/improvements built through a community land trust (CLT) or CLT-like model, a significant portion of housing cost can be lowered for initial and future buyers and enable AHDC to remain involved in maintaining common areas and supporting owners. Housing staff are actively engaged in evaluating the ownership structures being considered to ensure that City expectations for long term homeownership affordability, as well as opportunities for wealth generation through appreciation, are met.
DISCUSSION: In September 2020, City Council approved predevelopment funds in the amount of $250,000 based on a proposed 55 to 65 rental unit concept, which included some SHA units. In response to staff and community feedback and to enhance options for affordable homeownership, AHDC subsequently revised its concept. To subsidize the costs involved in writing down sales prices to be affordable, AHDC has requested an equity investment of up to $3.9 million from the City (including the predevelopment amount), and has requested that the city parcel be donated to complete the assemblage. The City’s 4575 parcel is valued at about $0.8 million by the City’s Real Estate Assessment Office, and up to $1.2 million by AHDC. In exchange, the City will retain a stake in AHDC’s permanent leasehold interest (Attachment 2).
Additionally, SHA is providing land it owns valued at $905,000. The total development cost for the three units being created for SHA is $2 million, resulting in a gap of $1.1 million to cover construction of the 1.5 replacement units as well as 1.5 units that will supplement SHA’s housing capacity. Housing, DCHS, AHDC and SHA are exploring funding resources available to cover this gap, including State Housing Trust funds which prioritize production of permanent supportive housing for persons with disabilities. It is also possible a loan might be repaid from SHA program income since additional residents will be served by the project and contribute to rental revenue.
With regard to the homeownership units, the Seminary Road project has received a Virginia Housing (VH) Year 2 $2.5 million Amazon Impact REACH Virginia grant award, as well as a VH CIG grant to study affordable homeownership models. Other anticipated funding sources include up to $11.6 million in anticipated home sales proceeds, and up to $3 million in potential funding from other sources, including State and Federal Housing Trust Funds, the Federal Home Loan Bank of Atlanta and New Market Tax Credits. AHDC, and SHA will continue to collaborate to secure additional resources to cover the costs of the project and reduce the final city equity stake (grant) amount, At that point, a final determination can be made regarding what portion of the City’s funds should be characterized as a long-term investment to enable more equitable access to affordable homeownership in the City. AHDC will provide updates to AHAAC and to City Council regarding its progress in structuring the project and securing non-City financial support. Additional City and or Virginia Housing support for down payment and closing cost assistance - from legacy program resources - will be evaluated at that time. AHAAC unanimously approved AHDC’s request for an equity stake at its November 4 meeting.
The above recommendations are contingent upon the land use approvals for this project being approved by City Council on December 18, as well as receipt of a positive 9.06 report from the Planning Commission confirming that this proposed project is consistent with the City’s Master Plan.
FISCAL IMPACT: The $250,000 predevelopment funds were comprised of Housing Trust Fund dollars. Additional City funding support of up to $4.75 million as equity and/or grants to the project for AHDC and/or SHA will be derived from the Housing Opportunities Fund, which includes the Housing Trust Fund, federal HOME dollars, dedicated revenue, and revenue from the meals tax rate increase within the CIP account. Besides this, an equity investment valued at $0.8 million to $1.2 million will reflect transfer of the City parcel. Equity for development of the project will be drawn down at project milestones.
It has been the City’s policy to use the proceeds from the sale of City surplus land parcels to the City’s open space land acquisition fund where it is used to acquire additional land for open space creation or preservation. In this case neither Housing nor AHDC has the monies to pay the $1 million (the amount half-way between the City assessment office valuation and the AHDC market valuation) needed to keep the open space fund whole. Although the City would retain a level of ownership interest in the redeveloped Seminary road property, the practical effect of this transaction is to remove a parcel of open space from the City’s inventory for a generation or more. As a result, in order to keep the City’s open space fund whole, it is proposed that $1 million be added to the FY 2023 CIP open space fund account above and beyond $1.250 million that is already programmed for FY 2023 for open space acquisition.
ATTACHMENTS:
(1) Seminary Road Site Plan
(2) Chart illustrating Area Median Incomes Proposed to be Served (SHA residents have incomes at or below 30% AMI)
(3) Elevations depicting the proposed townhomes and multifamily building
STAFF:
Emily A. Baker, Deputy City Manager
Helen S. McIlvaine, Director, Office of Housing
Eric Keeler, Deputy Director, Office of Housing
Tamara Jovovic, Housing Program Manager, Office of Housing