REPORT TO CITY COUNCIL
SUBJECT
Title
Action on the Carryover of FY 2023/24 Funding for the Operation of a 30-unit (90-private bedrooms) Homekey Interim Housing Development on Santa Clara County-Owned Land Located at the southeast corner of Lawrence Expressway and Benton Street (CEQA: Statutory Exemption under Government Code Section 65913.4, SB 35 Affordable Housing Projects) and Approve the Related Budget Amendment
Report
COUNCIL PILLAR
Promote and Enhance Economic, Housing and Transportation Development
BACKGROUND
On August 24, 2021, the City Council held a Study Session on Homeless Encampments and Vehicle Dwelling facilitated by the Police Department. This discussion addressed intervention strategies, including submitting an application to the California Project Homekey program to establish a transitional housing site for homeless people in Santa Clara. The City Council requested that staff return with further analysis and a potential proposal for a transitional housing project in Santa Clara utilizing Project Homekey funding.
In November 2021, the Santa Clara County Board of Supervisors asked staff at the County’s Office of Supportive Housing (OSH) to identify County-owned parcels for interim housing. The County evaluated sites based on several factors, including lot size, accessibility for construction equipment, proximity to transit, and access to utilities, medical services, and grocery stores. In addition, County staff considered the current location of permanent, interim housing options across the County and worked with local jurisdictions that were interested in expanding interim housing options in their communities. County staff identified the County-owned property located at the southeast corner of Lawrence Expressway and Benton Street as an underutilized parcel that could be made available for interim housing.
In late 2022, LifeMoves and the Sobrato Foundation approached the County with a proposal to build interim or supportive housing on the Benton/Lawrence County-owned site. County staff then reached out to City staff to discuss the proposal. As proposed, the project would be financed primarily through a California Project Homekey grant, County grant funding, and funding from the City. The proposal required an application to the third round of grant funding for the California Homekey Program.
On January 10, 2023, the City Council held a Study Session to discuss the first draft of the City’s homelessness response plan prepared by Homebase and City staff and recommended by the City’s Homelessness Taskforce. The presentation identified a lack of shelter and interim housing options in Santa Clara. During the Study Session, staff shared information about a potential Homekey opportunity at the Benton/Lawrence site. The City Council directed staff to conduct robust community outreach and to further explore a possible interim housing project at that location.
In early 2023, the City worked closely with the County’s Office of Supportive Housing and LifeMoves to create a project webpage and organize and promote two in-person and two virtual meetings to hear stakeholder input over the course of several weeks. The meetings were well attended, with 300-400 attendees at each meeting. The community raised a large number of concerns, with a key focus on the suitability of the site, impacts on public safety, general neighborhood compatibility, and the viability of the project. The project team made a significant number of changes to the project in response to community concerns including reduced density from an original proposal of 124 units to 30 units and changing the target population from singles/couples to families with children.
On May 2, 2023, the City Council approved the following motion in support of the project:
• Authorize the Office of the City Manager to negotiate and execute a three-party letter of intent between LifeMoves, the County of Santa Clara, and the City of Santa Clara that defined roles and responsibilities for the financing, operations and construction management for the Homekey grant application for the property located at Lawrence and Benton Street in a final form approved by the City Attorney;
• Authorize the County of Santa Clara to update the City of Santa Clara's Permanent Local Housing Allocation 5-year plan by adding activity six to the County's PLHA plan to assist persons who are experiencing or at risk of homelessness and allocating year 3, 4, and 5 funding, after deducting administrative costs, to the Benton/Lawrence interim housing to help fund operations; and
• Provide direction to return to City Council for approval of a budget amendment appropriating up to $5,500,000 from special revenue funds for operations at the Benton/Lawrence interim housing site; and include an Annual Review in the Letter of Intent.
On June 27, 2023, as part of the FY 2023/24 and FY 2024/25 Operating Budget Adoption, the City Council approved the transfer of $5,124,369 ($3,524,369 from the Housing Authority Fund and of $1,600,000 (Santana West Settlement) from the City Affordable Housing Capital Fund) to the City Affordable Housing Fund for the Benton/Lawrence Project. Including the City’s remaining balance of $1,470,000 in Permanent Local Housing Allocation (PLHA) funds, the City’s total contribution for this project amounts to $6,594,369.
Update on the Homekey Program
On June 14, 2023, the City Manager signed a letter confirming the City’s funding commitment and included specific conditions on the City’s support of the project. The letter noted that approval of the City’s final business terms will take the form of a Revenue Agreement that is subject to City Council approval. Such approval would occur closer to financing according to the City's general underwriting parameters and per requirements of the State Homekey Program, the County, and other funders. The agreement will require a restrictive covenant to be recorded and will be subject to terms and conditions to be negotiated between the parties that include restrictions on the use, operation, and occupancy of the project for families; submission of an annual management and security plan; and the creation of an oversight committee. If the project is awarded Homekey funds, these conditions will be implemented through the formal Revenue Agreement approved by the City Council. The City Manager funding commitment letter is included as Attachment 2.
The County then submitted a completed Homekey grant application for the project. Following the application submission, the County did not receive any notice of award from the California Department of Housing and Community Development (HCD). Between September 2023 through July 2024, HCD awarded over $818M in Homekey Round 3 funds to 49 projects across California. See Attachment 3 for a full list of the awarded projects. The majority of funds had been awarded and staff assumed the Benton/Lawrence project would not be funded. However, in August 2024, the County received a letter from HCD inquiring if the project was still viable and informing the County that an award was still under consideration but that previous identified funding sources would need to be reconfirmed.
HCD staff wish to close out Round 3 swiftly so they can issue a new notice of funding availability for Homekey+. Homekey+ is a new program that is different from Homekey Round 3. Homekey+ will not create interim housing but will focus on permanent supportive housing for veterans and individuals at risk of or experiencing homelessness and mental health or substance use challenges. Thus, Homekey Round 3 remains a unique opportunity to build interim housing for unhoused families with children in Santa Clara.
DISCUSSION
Proposed Project
The proposed project has not changed since it was voted on by the Santa Clara City Council on May 2, 2023. The proposed site for the project is vacant land located at the intersection of Lawrence Expressway and Benton Street near the Santa/Clara Sunnyvale border. The site is bordered by the expressway to the west, Calabazas Creek to the south, Church in Santa Clara to the west, and a commercial strip with a gas station, liquor store, 7-11, and other small businesses to the north. Residential apartments and single-family homes are located just beyond these adjacent properties.
The project would include new construction of modular structures with a permanent foundation consisting of 30 units with 90 private bedrooms. The residential component will be three stories and there is also a one story support services building. There will be 52 onsite parking spaces available. The target resident population will be families with minor children experiencing homelessness in Santa Clara County.
Bedrooms will have exterior private doors and will be configured with access to ensuite bathrooms, kitchenettes, and family lounge space. Additionally, groups of bedrooms can be “connected” to accommodate larger families. Common areas and staff areas will include security, intake, offices, break rooms, therapy rooms, flexible/conference room, dining hall/community room, outdoor dining and gathering areas, storage, restrooms, linen closet, laundry, client storage, kennels, bike storage, play area, pet area, and smoking areas.
LifeMoves will provide supportive services programming that will be inclusive, safe, non-stigmatizing, low-barrier, and welcoming. As at all LifeMoves shelters, this site will be operated according to “Housing First” principles and a harm reduction model that views each client as housing-ready and provides a safe space with support for clients to realize their goals of self-sufficiency and stable housing. In addition to basic services (safety, shelter, food, and hygiene), the program provides intensive case management and a broad range of other services, such as career counseling, housing locator assistance, financial literacy, benefits enrollment, health care referrals, substance abuse counseling, and behavioral health support services. Services critical to overcoming the trauma of poverty, long-term homelessness, and encounters with criminal justice systems will also be available. The site will be staffed 365/24/7 and will have program rules.
The vision for the project is to create a safe place where vulnerable families can have a dignified transition to self-sufficiency and stable housing. The project would prioritize families with children from Santa Clara and then families from other parts of the County. Certain registered sex offenders would not be placed at the site while children are living there. The site would be staffed 24/7 with no less than two to three staff working at any given time. LifeMoves would provide three meals a day, laundry facilities, intensive case management, employment/career support, referrals to legal support, benefits assistance, housing search assistance, access to family and child services, children’s programming, and behavioral health support on-site. Additional child services could potentially be added through partnerships with Head Start and other funded programs.
Funding Sources
The following tables summarize potential funding sources and include estimated amounts.
Sources for Construction Amount
Estimated Total Development Costs $35,141,771
Homekey Round 3 Capital Funds (Estimated) ($22,500,000)
Private Funding ($5,000,000)
LifeMoves ($5,000,000)
County Capital Grants ($2,641,771)
Estimated Gap $ 0
Sources for Operations
For operations, LifeMoves has committed up to $7 million over the years 1-6. The County can commit approximately $5,152,000 for the first five years. The County and LifeMoves are pursuing additional funding for operations in years 6-15. It is recommended that the City contribute $6.6 million for operations over a seven-year period. For reference, the City of Palo Alto committed $7 million over seven years and the City of San Jose committed $27 million over seven years for operating subsidies for their respective emergency interim housing sites.
Conclusion:
The scope of the Benton/Lawrence interim family housing development and services has not changed since the City Council voted to support the project on May 2, 2023. The local and regional need for more interim housing for families with children continues as more than 20% of unhoused residents are families with children. HomeKey Round 3 remains a unique opportunity to address this need as the City’s contribution of $6.6 million over 7 years would leverage nearly $34 million for construction ($22.5 million in State Homekey dollars and $11.5 million from the County and LifeMoves) and additional County and philanthropic funding for operations.
ENVIRONMENTAL REVIEW
The action being considered is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Government Code Section 65913.4. That statute was added to the Government Code by Senate Bill (SB) 35 in 2017, which provides for a ministerial approval, with no CEQA review, for certain types of affordable housing projects. Section 65913.4 contains a long list of requirements for projects to qualify; this project satisfies all of them:
• Affordability: At least 50% of the units must be dedicated as affordable to households at 80% AMI. This project will make 100% of the units affordable.
• Number of units: The project must contain at least 2 or more net new residential units; this project will have 30 units.
• Zoning and residential uses: The development must be located on a parcel zoned for residential uses, and at least 2/3 of the floor area of the development must be dedicated to residential uses. This project is zoned R1-6L single-family and will be 100% residential.
• Location: The development must be located on a property that is not within a coastal zone, prime farmland, wetlands, a high hazard severity zone, a hazardous waste site, a delineated earthquake fault zone, a flood plain, a floodway, a community conservation plan area, a habitat for protected species, or under a conservation easement. This site does not fall within any of those categories of land.
• Demolition of Residential Units: The project must not demolish any housing units that have been occupied by tenants in the last 10 years; are subject to any form of rent or price control, or are subject to a recorded covenant, ordinance, or law that restricts rents to affordable levels. This project will not demolish any units.
• Historic Buildings: The project must not demolish a historic structure that has been placed on a national, state, or local historic register. This project will not demolish any structures.
• Consistent with Objective Standards: The project must meet all objective standards of the Zoning Code at the time of SB-35 application submittal. With the density bonuses, incentives, and waivers authorized under the state density bonus law, the project is consistent with all applicable zoning standards.
• Prevailing Wages: All construction workers employed in the execution of the development must be paid at least the general prevailing rate of per diem wages for the type of work and geographic area. This project will pay prevailing wages.
• Subdivisions: The project must not involve a subdivision except in certain circumstances. This project does not involve a subdivision.
• Tribal consultation required: this is a standard part of the City’s CEQA process
FISCAL IMPACT
As part of the FY 2023/24 and FY 2024/25 Adopted Operating Budget, the City appropriated $5,124,369 for this project in FY 2023/24. Of this amount, $1,600,000 was transferred from the City Affordable Housing Capital Fund; this funding was part of the Santana West Settlement. The remaining $3,524,369 was transferred from available fund balance in the Housing Authority Fund. As this funding was appropriated in FY 2023/24, the Community Development Department’s Housing Division requests the carryover of the FY 2023/24 appropriation to FY 2024/25, as detailed in the table below.
Budget Amendment
FY 2024/25
|
|
Current |
Increase/ (Decrease) |
Revised |
|
City Affordable Housing Fund |
|
|
|
|
Fund Balance |
|
|
|
|
Beginning Fund Balance |
$4,215,984 |
$5,124,369 |
$9,340,353 |
|
|
|
|
|
|
Expenditure |
|
|
|
|
Capital Outlay |
$195,500 |
$5,124,369 |
$5,319,869 |
The City can also draw from the City’s Affordable PLHA fund which is administered by the County of Santa Clara on the City’s behalf. The PLHA fund is an entitlement from the State and the five-year 2019-2023 estimated fund balance is approximately $1,470,000. Together these funds would bring the City’s total contribution to $6,594,369. This amount is slightly less than the $7M originally anticipated for the project because the actual amount of PLHA funds available was less than what was projected. In addition, HCD, who administers PLHA, is now requiring a portion of PLHA funding to be set aside for homeownership activities.
COORDINATION
This report was coordinated with Finance, City Attorney’s Office, and City Manager’s Office.
PUBLIC CONTACT
Information regarding the Council meeting, proposed budget action, and Homekey update was sent through:
• An email on behalf of the City by the County’s Office of Supportive Housing to their project email list, which includes over 300 email addresses of individuals who requested updates on the project.
• Social media post on Nextdoor to the neighborhood near the Lawrence/Benton project site.
The Council agenda is posted on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
ALTERNATIVES
1. Decline to amend the budget or re-allocate PLHA funds towards the project.
RECOMMENDATION
Recommendation
1. Approve the FY 2024/25 budget amendment in the City Affordable Housing Fund, recognizing an increase to the beginning fund balance in the amount of $5,124,369 and increasing the capital outlay appropriation in the amount of $5,124,369 (five affirmative Council votes required for the use of unused balances);
2. Allocate the remaining balance of $1,470,000 in PLHA funds (for a total City contribution of $6,594,369) to secure state Homekey Round 3 funds to construct a three story 30-unit interim family housing development on a County-owned site at Lawrence Expressway and Benton Street
Staff
Reviewed by: Reena Brilliot, Acting Director of Community Development
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Map of the Proposed Benton/Lawrence Site
2. City of Santa Clara Enforceable Funding Commitment Letter
3. List of Homekey Round 3 Awardees
4. City Staff Report from May 2, 2023 City Council Meeting (RTC 23-591)
5. RTC 23-591 Part 1
6. RTC 23-591 Part 2
7. RTC 23-591 Part 3