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CC - ACTION ITEM: (1) Discussion and Direction on the Submission of a Grant Application under the California Department of Housing and Community Development Homekey+ Notice of Funding Availability; and (2) If Desired, Direction to the City Manager to Submit an Application under Homekey+; and (3) Other Direction to the City Manager as Deemed Appropriate.
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Meeting Date: February 24, 2025
Contact Person/Dept.: Tevis Barnes/Housing and Human Services
Phone Number: (310) 253-5780
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Attachments: Yes [] No [X]
Public Notification: (E-Mail) Meetings and Agendas - City Council (02/19/2025)
Department Approval: Tevis Barnes, Housing and Human Services Director (02/03/2025)
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RECOMMENDATION
Staff recommends the City Council (1) discuss and provide direction on the submission of a grant application under the California Department of Housing and Community Development (HCD) Homekey+ Notice of Funding Availability (NOFA); and (2) if desired, direct the City Manager to submit an application under Homekey+; and (3) provide other direction to the City Manager as deemed appropriate.
BACKGROUND/DISCUSSION
Notice of Funding Availability - Homekey +
The California Department of Housing and Community Development (HCD), in collaboration with the California Department of Veteran Affairs (CalVet) issued a Notice of Funding Availability (NOFA) dated November 26, 2024, for the Homekey+ Program. Homekey + makes $2.145 billion dollars available statewide for the creation of Permanent Supportive Housing (PSH) for households with behavioral health challenges. The amount of $599,296,672 is specifically earmarked for Los Angeles County.
Eligible applicants under the Homekey+ NOFA include cities, counties, and all other state, regional and local public entities. These entities may apply jointly with a nonprofit, or for-profit corporation, a limited liability company (LLC) and /or a limited partnership (LP) as a co-applicant.
The official Homekey+ application was released on January 28, 2025. The grant application submission due date is May 30, 2025, or until funds are exhausted, whichever occurs first. Homekey+ applications for funding awards will be funded on a first come first served basis, so early submission is imperative to be competitive for funding.
Award announcements are continuous and are expected to begin June 2025.
Eligible Activities
Eligible project types under the Homekey+ include:
• Acquisition or rehabilitation, or acquisition and rehabilitation, of motels, hotels, hostels, apartments or homes, assisted living residences, manufactured housing, commercial properties, and other buildings with existing uses that could be converted to PSH.
• Master leasing of properties for PSH.
• New construction of dwelling units
• The purchase of affordability covenants and restrictions for units.
Construction and Occupancy Deadlines
If awarded funding under Homekey+, there are very restrictive program deadlines. The program deadline dates begin 60 days after the Homekey+ conditional award letter date. The awarded projects will be subject to the following deadlines, summarized below:
• New construction projects must break ground within 6 months.
• New construction projects must be completed in 24 months.
• All other eligible uses as described above must be completed in 12 months.
• Full occupancy must be achieved 90 days upon completing construction.
Application Evaluation Criteria
Based on the provisions of the Homekey+ NOFA, a competitive application submission must score a minimum of 100 points to be eligible for funding. The evaluation criteria include:
• Site Control
• Cost Containment
• Sustained Operating Leverage
• Experience and Coordination
• Community Impact
• Site Selection
• Relocation Impact
If should be noted that site control is imperative for a competitive application. Site control is critical in the grant evaluation process and an applicant must show the project will not be hindered by delays due to lack of site control. An applicant must show evidence that the project is viable and will be completed by the Homekey+ deadlines defined above.
Capital and Operation Match
For the required capital match, the Homekey+ applicant will be obligated to contribute a minimum of $100,000 per unit for any proposed project.
For operations, applicants are required to demonstrate a minimum three-year commitment to provide operating funds to qualify for the Homekey+ award for operating expenses. Additional local match may result in additional Homekey+ funding, for a period up to five years. To meet the operational match requirement, non-Homekey+ sources may be obtained from any source, including any federal, state, local, private, or philanthropic source.
Potential Projects for Application Submission
Staff reviewed various sites for the Council to consider during its deliberation on the matter of potential projects to submit an application under Homekey+. These potential projects included new construction and motel conversion of interim housing to PSH. The following potential projects were investigated for consideration for a Homekey+ submission. Also detailed below is the viability of each proposed project.
New Construction - Martin B. Retting Gun Store Site
• The Martin B. Retting Gun Store was acquired by the City and is a viable option for a PSH new construction project because of the evidence of site control
• The future disposition of the Martin B. Retting Gun Store is currently undergoing a citywide engagement process to determine the best use of the site.
• The cost of a new construction project is a minimum of $600,000 per unit. As an example, based on the size of the site, 35 units could be considered which would translate to a minimum capital cost of $21 million. The City would need to identify the source of funds to support a new construction project. It is understood that the City’s General Fund is currently in a structural deficit.
New Construction - Venice Parking Lot
• The City has site control of a parking lot on Venice Boulevard., Los Angeles CA. The parking lot was purchased by the former Redevelopment Agency as overflow parking for the Culver City downtown.
• The Council can contemplate improvements to the Venice parking lot to include a modular-type housing project. In 2019 the City studied the Venice parking lot as a potential site for an emergency housing shelter. An updated study would be necessary. The site has the potential to accommodate up to 10 modular structures including structures for staff and services.
• Because the site is in the City of Los Angeles, the City has limited control of the planning and permitting process. The City would need to go through the City of Los Angeles planning and permitting process which could be lengthy and hinder the project from meeting the construction and occupancy deadlines prescribed by the Homekey+ NOFA.
Motel Conversion to PSH - Paradise Inn and Suites
• The City has already entered into a long-term leasing agreement under the Motel Master Leasing Program to provide 27 units of interim housing including daily meals and weekly medical clinic. As a potential project, the interim housing units could be converted to PSH.
• The City would need to garner site control in the form of a leasing or purchase agreement. HCD requires a minimum 30-year lease commitment for PSH. Staff has approached the motel owner about acquisition or an extended lease period. The motel owner is not interested in selling the property or entering into a lease agreement for the minimum commitment defined by HCD.
• To be considered a PSH unit, there must be a means to prepare and store food. This means that full kitchens or kitchenettes would need to be installed in each unit to be considered permanent housing. Because of the age of the building, this would be a full rehabilitation project. This is a large investment for the City for a property that is not held as a City asset.
• Under the capital matching requirement, the City would need to contribute a minimum of $100,000 per unit. This translates to a minimum of $2.7 million the City must earmark for this project.
• Based on the building's age, extensive upgrades and/or replacement of all major systems, including the installation of a sprinkler system, would also be necessary.
• Using a per unit rehabilitation cost estimate similar to the City’s current Project Homekey PSH site where kitchenettes were installed and many major of the building systems were upgraded or replaced, the per unit cost is estimated at $200,000 per unit. This translates into an estimated total rehabilitation cost of $5,400,000. Considering the property’s current condition and the potential for unforeseen expenses, the estimate could vary significantly.
• The construction timeframe to install kitchens/kitchenettes could not be completed within the 12-month period defined by HCD.
• All the current occupants would need to be relocated during construction. This would slow the construction process and cause stressful disruption to the occupants.
• Under the Homekey+ NOFA there is also a match requirement for operations. HCD will provide three years of operations if an applicant can show evidence of three years of matching funds. HCD will provide four years of operational funds, if the applicant can show a match of four years. Five years of operations will be provided if the applicant shows evidence of match for five years. The City currently supports the Project Homekey Interim and Supportive Housing Project at $5 million a year. A similar commitment for the Paradise Inn and Suites for 27 units would require an operations budget of $1.8 million a year.
Motel Conversion to PSH - The Rodeway Inn
• Conversion of the Rodeway Inn to PSH faces the same challenges as the conversion of the Paradise Inn and Suites detailed above.
• In addition, the Rodeway Inn is also challenged by its immediacy to the sensitive receptor of single-family homes.
FISCAL ANALYSIS
There is no financial impact for the Council to deliberate on the submission of an application under Homkey+. Depending on Council direction to staff regarding potential projects, the City’s General Fund will be impacted due to both the capital and operational match requirements under Homekey+.
Depending on the Council's direction, staff will return with more definitive figures surrounding cost and financial impacts. Though more analysis is needed, for a motel conversion project, the City would be faced with a minimum capital outlay of $2.7 million and an annual operations financial commitment of $1.8 million.
For a new construction project, the minimum impact for capital cost would be $21 million and $2.4 million annually for operations. The operations costs are based on the City’s current annual $5 million commitment to the PHK Interim and Permanent Supportive Housing Project.
ATTACHMENTS
None.
MOTIONS
That the City Council:
1. Discuss and provide direction on the submission of a grant application under the California Department of Housing and Community Development Homekey+ Notice of Funding Availability ; and
2. If Desired, direct the City Manager to submit an application under Homekey+; and
3. Provide other direction to the City Manager as deemed appropriate.