FROM:
Housing
SUBJECT:
Title
Lease Agreement for affordable housing community
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RECOMMENDATION:
Recommendation
Approve lease agreement between the Fontana Housing Authority and Aldea Fontana, LLC for the property located at 15186 Foothill Boulevard, more specifically identified as APN 1110-161-44, and authorize the City Manager or the City Manager’s designee to execute any documents necessary or approve to effectuate said approval.
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COUNCIL GOALS:
• Provide a diverse range of housing types and levels of affordability while addressing homelessness in the community by acquisition, substantial rehabilitation, and professional management of selected multi-family properties to provide more affordable units and reduce crime and code enforcement activity.
• Provide a diverse range of housing types and levels of affordability while addressing homelessness in the community by promoting diverse range of housing projects and levels of affordability.
DISCUSSION:
The City of Fontana has been actively addressing the growing demand for affordable and workforce housing. In recent years, we have observed a significant increase in housing needs driven by population growth, economic development, and changes in housing affordability. This demand underscores the necessity of expanding our housing portfolio to support diverse and inclusive community development.
The 78-unit multi-family development located at 15186 Foothill Boulevard represents a strategic opportunity to advance our housing goals. The development’s design and unit mix align with our objective to provide a range of housing options that cater to different income levels and family sizes.
The lease with a purchase option offers several strategic benefits to the City of Fontana. By opting for a lease agreement, the City can engage with the property and thoroughly assess its performance and suitability without the need for an immediate and substantial financial commitment. Moreover, this arrangement provides the City with crucial financial flexibility, allowing the Housing Authority to allocate resources to other pressing priorities while keeping the option open for future acquisition.
The lease with option to purchase structure allows the City the necessary time to identify and secure additional funding sources for the acquisition, ensuring that the eventual purchase aligns with long-term budgetary goals and financial strategies.
The net annual expense, after collection of rents from tenants, will be approximately $1,650,000. The operating budget for the community includes providing social programming services, which may include jobs training, general education for youth and adults, self-sufficiency training, as well as financial literacy training. This community is expected to serve residents of Fontana that earn 60% or less of the area median income.
Details of the Lease Agreement:
1. Lease Term: The proposed lease agreement covers a term of 5 years with the option to extend for an additional 5-year period.
2. Lease Payments: The lease payments will be $475,000 per quarter, or approximately $2,030 per month per unit, which is below market rates for similar units throughout the city.
3. Purchase Option: Upon execution of the lease, the City will pay a non-refundable purchase option fee of $500,000. This amount will be applied to the purchase price if the City decides to acquire the property. Should the City opt not to purchase, the $500,000 will be forfeited. The purchase price is fixed at $26,000,000 for 30 months from lease inception.
4. Maintenance and Upkeep: During the lease term, the City will be responsible for routine maintenance and upkeep of the property, ensuring it remains in good condition.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is $10,735,000 for the full term of the five-year lease utilizing housing funds. The impact for the current fiscal year is $2,927,000 which $1,900,000 is included in the 2024-25 budget (Project String 30200023-698) and $1,027,000 is not included in the 2024-25 budget. The required budget adjustments will be submitted in the next quarterly budget report. All future costs will be included in subsequent fiscal year budgets (Affordable Housing Trust Project String 30200023-698 and Low and Moderate Income Asset Funds 30200023-297).
MOTION:
Approve Staff Recommendation