New Hope is the non-profit arm of Yolo County Housing and owns, operates, and manages Cottonwood Meadows Apartments in Woodland CA. This 47-unit property was built in 1987 and since acquiring it in 2001, New Hope has maintained it as an affordable complex for very-low-income senior/disabled residents. Forty-six (46) of the units are rentals and there is one (1) onsite manager unit.
New Hope had a regulatory agreement for a subsidy program called the Rental Housing Construction Program (RHCP) which required a certain percentage of units in the complex maintain a rental amount at or below fair market rents for very low-income seniors. This regulatory agreement ended in 2017 which allowed New Hope to raise rents from $641/month to $774/month effective March 1, 2017, for all units in the complex. New Hope has maintained this $774/month rent for the property since that time which has kept the property deeply affordable but has led to insufficient funding for crucial infrastructure upgrades and repairs resulting in significant deferred maintenance costs.
New Hope’s construction consultants are finalizing the cost estimate to address the deferred maintenance issues which includes dry rot and siding replacement, a new roof installation, and likely will include replacement of the original HVAC system, new paint, and potentially water/sewer updates. The anticipated total amount of the cost estimate is likely to range from $1.5 million to $2.0 million.
To correct this situation and to avoid it from reoccurring, staff from multiple teams have been meeting for the past 4 months to review several options. The main goals of our efforts was to come up with a solution that does not displace or cause any significant financial hardship to current residents, that allows the complex to maintain its affordability and focus on senior/disabled residents, that creates a path forward for a more successful financial outlook, and allows the critical infrastructure/deferred maintenance to be addressed.
Staff identified a solution to address the needs and meet the goals outlined above which is awarding project-based vouchers (PBVs) to 25 units at Cottonwood Meadows. Of the 46 units available to rent, 21 have tenants in them that have tenant-based vouchers, so placing 25 PBVs on the property would ensure that all current tenants are covered by a voucher. Department of Housing and Urban Development (HUD) PIH Notice 2017-21; 24 CFR 983.51(b) outlines instances where project selections can be made without a competition if they are awarded based on a previous qualifying competition. New Hope has received approximately $175,000 in multiple CDBG rounds within the past 3 years, which staff confirmed with (HUD) that this meets the requirements as a qualifying competition. Staff have worked with HUD to approve Yolo County Housing allocating 25 project-based vouchers for the Cottonwood Meadows property. The other piece of the solution to address the critical infrastructure needs would be New Hope securing a construction loan to cover the costs of the deferred maintenance/infrastructure improvements needed.
The reason this solution is recommended by staff is that by ensuring all current residents are covered with a voucher it will allow New Hope to raise the rents based on an upcoming rent comp study that will be completed by a third-party per HUD, but the voucher subsidy would cover the increase in rent and thus not cause any significant financial harm to existing residents.
Staff believe that the independent comp study will likely allow rents to be raised to somewhere in the $1,400-$1,500 range which would increase annual revenue to New Hope for Cottonwood Meadows by approximately $300,000 annually. Additionally, staff have submitted a request to the Yolo County Board of Supervisors (Attachment B) for $500,000 in American Rescue Plan (ARP) funding to support the deferred maintenance/infrastructure needs. The increased funding from the vouchers would allow New Hope to secure better terms on a construction financing loan, the ARP funding would decrease the size of the loan we would need to obtain thus allowing New Hope to pay off the debt in a timelier manner and simultaneously begin building a healthy reserve which would allow New Hope to maintain the property as an affordable senior/disabled property in perpetuity.
Staff will be providing an update to New Hope in December of this year. Staff is recommending that the Commission approve the non-competitive award of 25 project-based vouchers to New Hope Community Development Corporation for Cottonwood Meadows Apartments today.
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