County Fund for Housing Policy

Adopted May 23, 2017

This County Fund for Housing Policy document has been prepared by the Sonoma County Community Development Commission (“Commission”) to articulate the policy priorities, criteria, and objectives for the development of affordable rental and ownership housing funded through the Sonoma County Fund for Housing (“CFH”). This document is updated periodically to reflect new and updated policy priorities, information, and/or regulations. 

1.1 Purpose

 The County of Sonoma (“County”) established the County Fund for Housing in 2003 to provide financial assistance for the development and preservation of affordable housing located in Sonoma County.

1.2 Parties

 “Sonoma County Community Development Commission” refers to the staff of the Commission. “Board of Commissioners” refers to the members of the Sonoma County Board of Supervisors in their capacity as the Board of Commissioners of the Sonoma County Community Development Commission. “Board of Supervisors” refers to the Sonoma County Board of Supervisors.

1.3 Authority

The Sonoma County Board of Supervisors delegated the administration of the CFH to the Commission, which is governed by the members of the Board of Supervisors in their capacity as the Sonoma County Board of Commissioners. This Policy has been approved by the Board of Supervisors and the Board of Commissioners.

The Executive Director of the Commission is hereby authorized to interpret this Policy, to accept and process funding proposals per the provisions of this Policy and applicable funding source rules, to present eligible funding proposals to the Board of Supervisors and Board of Commissioners for their consideration, and to administer loans pursuant to the criteria established in this Policy and the County Fund for Housing Administrative Procedures (Administrative Procedures) and the Sonoma County Affordable Housing Program Homeownership Policies. The Executive Director may also, to the extent necessary, make minor administrative and/or procedural changes to this Policy.

 Only the Board of Supervisors has the authority to make final approvals of funding decisions.  

1.4 Sonoma County Community Development Committee

 The Sonoma County Community Development Committee (“Committee”), appointed by the Board of Commissioners, serves as the advisory body to the Commission. Generally, the Commission shall present CFH funding proposals to the Committee in a public hearing. The Committee’s recommendations, public comments, and Commission comments and recommendations shall be presented for approval to the Board of Supervisors. 

1.5 Funding Sources

 CFH receives funds from multiple local sources, including, but not limited to: 

• County of Sonoma General Fund
• County of Sonoma Reinvestment and Revitalization Funds
• Developer In-Lieu Fees
• Transient Occupancy Tax
• CFH loan processing fees, interest, and loan repayments

The purpose of the CFH is to develop, preserve, and accelerate the pace of development of below market-rate housing for low-, very low-, and extremely low-income households. To achieve this purpose, CFH resources shall be used to provide loans and grants to qualified developers, public entities, groups, and individuals to undertake activities which create, maintain, or expand the County’s affordable housing stock.

 CFH resources shall be used to further the goals expressed in the County’s General Plan Housing Element, and in the current Board of Supervisors Strategic Priorities, adopted April 4, 2017, and as periodically amended. The Commission or County may adopt more specific housing priorities from time to time, and may request proposals that address those goals more specifically through a request for proposals, or through a notice of funding availability. The following objectives are high priorities, and the weighting of each objective against others may vary at the Commission’s or County’s discretion: 

• Creation or preservation of the greatest number of affordable housing units, affordable to the lowest-income populations.
• Creation of housing opportunities throughout the County, in incorporated cities as well as in the unincorporated County, so that housing is effectively distributed throughout the County. Specific locations may be prioritized based on the County’s Regional Housing Needs Allocation or other needs assessments or market studies which may be periodically undertaken by the Commission or the County.
• Utilization of Housing Opportunity Sites identified by the County and sites identified by the incorporated cities and town in Sonoma County.
• Integration with health and human service systems and programs designed to aid those people experiencing poverty to live independently or to achieve economic self-sufficiency.
• Collaboration with local jurisdictions and other funders of affordable housing.

3.1 Proposal Solicitation

3.1.1 Notice of Funding Availability / Request for Proposals

The Commission may solicit funding proposals by several competitive methods, including but not limited to an annual Notice of Funding Availability, and/or a request for proposals for a specific project or to address specific policy goals. 

3.1.2 Commission-Sponsored Proposals

The Executive Director may also submit to the Board of Supervisors and the Board of Commissioners a funding proposal on the Commission’s behalf. The Executive Director may bring the proposal to the CD Committee for its consideration and to gather public input before submitting the proposal to the Board of Supervisors and the Board of Commissioners. 

3.1.3 Special Circumstances

In the event that the Commission offers publicly owned land for development as part of a request for proposals process under the auspices of the CFH program, the award may, with the approval of the Board of Supervisors and the Board of Commissioners, include a commitment of future years’ CFH funding, to best facilitate the development process. 

3.2 Project Evaluation / Funding Criteria

Proposals shall be evaluated based on how well the proposed project addresses the following policy areas: 

• County Fund for Housing Policy Priorities. Proposals should address the priorities set forth in Section 2, Policy Priorities, as well as any additional priorities set forth by the Commission or the County via a notice of funding availability or request for proposals.
• Project Sponsor Qualifications and Experience. Project sponsors must demonstrate qualifications and experience per Section 3.3, Eligible Project Sponsors.
• Cost Effectiveness and Feasibility. Acknowledging that the CFH is a limited resource, project sponsors should demonstrate that the proposed project will be cost-effective and will leverage other funds in order to maximize the benefit to the community of the County’s investment. 
  
  If necessary or appropriate, specific criteria shall be stated in a notice of funding availability or request for proposals.

3.3 Eligible Project Sponsors

Non-profit or for-profit project sponsors are eligible to receive funds for eligible activities as described in Section 4, Eligible Uses of Funds. Only project sponsors who are qualified to perform the activities for which they request funds shall receive money. For this purpose, “qualified” means that the sponsor has prior relevant experience and organizational capacity and is financially stable. Specific requirements, if any, shall be stated in a notice of funding availability or request for proposals. 

3.4 Eligible Projects

Generally, eligible projects would include but not be limited to: 

• Development projects which create affordable housing units
• Projects which preserve existing affordable housing units, through acquisition and/or rehabilitation
• Rental housing projects, including properties that provide Permanent Supportive Housing
• Below-market-rate homeownership projects
• Housing for special needs populations
• Group homes
• Properties that will house residents receiving services from another County department, especially the Department of Health Services, the Human Services Department, and/or the Probation Department

CFH resources shall not be used to meet the inclusionary or workforce housing requirements required of developers by the jurisdiction in which the project is located. Project sponsors may request CFH assistance upon a showing that CFH resources will create a deeper level of affordability consistent with the level of investment, or otherwise exceed the jurisdiction’s minimum requirements.

3.5 Threshold Criteria / Other Conditions

3.5.1 General Plan Consistency

Proposed projects shall be consistent with the General Plan in the jurisdiction in which they are located. For projects in the unincorporated County, the Sonoma County Permit and Resource Management Department (PRMD) shall review applications and determine whether or not proposed projects are consistent with the County’s General Plan. For projects within an incorporated city or town in Sonoma County, project sponsors shall obtain certification from the appropriate jurisdiction as to whether or not the proposed project is consistent with its General Plan. 

3.5.2 Site Control

The project sponsor shall possess site control or own the site at the time of application. An executed long-term lease or option to execute a long-term lease, signed option or purchase agreement, or equivalent legally enforceable instrument may satisfy this requirement. The site control instrument shall be valid for at least twelve months after the anticipated date on which the Board of Supervisors approves the CFH awards. 

3.6 Exceptions to Project Eligibility Criteria

Any requests for exceptions to these project eligibility criteria require the approval of the Board of Supervisors.

4.1 Predevelopment

Eligible predevelopment expenses may include, but are not limited to, architecture and engineering fees, soils testing and other environmental review expenses, and project management expenses.

 CFH funds shall not be used to pay for the project sponsor’s overhead and general costs of operation or costs associated with site search. 

4.2 Site Acquisition

Eligible site acquisition costs may include, but are not limited to, purchase agreement deposits, option payments, the purchase price of the site, due diligence studies and legal expenses related to the acquisition, repayment of the loan(s) that originally financed the purchase of the site (i.e., take-out financing), and other purchase costs such as buyer’s share of closing costs (i.e., holding costs such as liability insurance and prorated property taxes, provided the project is not then currently operational). The purchase price shall not exceed the appraised value of the land. 

4.3 Construction

Eligible direct construction costs may include, but are not limited to, demolition, on- and off-site improvements, construction of new residential units, construction of non-commercial common structures that are an integral part of a residential development, and rehabilitation of multifamily rental housing units.

Certain construction-related indirect costs are also eligible, including, but not limited to, project management, developer impact fees, building permit fees, and costs of state- and federally mandated tenant and business relocation. 

4.4 General Cost Eligibility Provisions

CFH funds shall not be used to pay late or penalty fees, or the project sponsor’s overhead and general costs of operation. Eligible expenses initially paid for with the project sponsor’s own or borrowed funds may be reimbursed with CFH proceeds provided such expenses were incurred in the three years prior to closing of the CFH financing. 

CFH resources may be invested in eligible projects in the form of loans or grants. In all cases, the Commission shall seek to minimize the amount of funds it invests in a single project, in order to maximize the number of projects and units facilitated with CFH. From time to time, the Commission, with guidance from the Board of Commissioners, may limit the amount of CFH assistance per affordable unit it will consider investing into certain project types.

 The Commission shall generally prefer loans, to ensure that public funds are returned to the Commission over time to be reinvested.   

The analysis of the amount and type of CFH required to render any project financially feasible will consider other factors, including whether the project will be competing for tax credits or other public resources. 

5.1 Loans

The minimum CFH loan amount for any project shall be $100,000. The maximum loan amount shall vary over time, and in no case shall the maximum loan exceed the amount of CFH funds available in a single program year, unless a commitment of funding from future years is included by recommendation of the Executive Director and approval of the Board of Supervisors. Further, the amount of CFH invested as a loan in any single project shall not exceed the amount necessary to render the project financially feasible, considering then-current conventional underwriting standards, and capital available from other sources. 

Loans shall carry interest rates approved by the Commission, and repayment obligations and schedules shall be based on the project’s available cash flow after payment of required operating expenses, reserves, and any required debt service, as applicable. For projects eligible for and utilizing federal Low Income Housing Tax Credits, CFH financing may be structured to be compatible with applicable program and investor requirements. Requirements related to residual receipts calculations and payment obligations are further described in the Administrative Procedures. 

5.2 Grants

The Commission may consider investing funds in the form of grants or equity contributions, if repayment over time, even from residual receipts, is considered highly unlikely based on the project type, population served, and a related analysis of income potential from the property. This will generally not be the case for projects financed with tax credits.

6.1 Regional Housing Needs Assessment Apportionment

 For projects located in an incorporated city or town, the Commission and the Sonoma County Permit and Resource Management Department shall work cooperatively with the incorporated city or town to share Regional Housing Needs Assessment (RHNA) credit. 

6.2 Number of CFH-Assisted Units

 At a minimum, the percentage of units within a project that are considered to be CFH-assisted shall be proportionate to the ratio of CFH funds to the Total Development Cost for the project.

6.3 Compliance with Other Applicable Funding Policies

 CFH-funded projects shall comply with this Policy, the Administrative Procedures, and the Sonoma County Affordable Housing Program Homeownership Policies. 

6.4 Compliance with Applicable Laws and Regulations

 6.4.1 Living Wage Ordinance

All project sponsors shall comply with Article XXVI – Living Wage, in Chapter 2 of the Sonoma County Code

6.4.2 California Environmental Quality Act

If applicable, all projects must receive local environmental clearance in accordance with the requirements of the California Environmental Quality Act (CEQA).

 6.5 Timeliness

 6.5.1 Site Acquisition Timeliness Requirements

Funds for site acquisition shall be spent within 18 months of Board of Supervisors approval of the CFH award. As specified in the Administrative Procedures, the project sponsor must satisfy all conditions of approval required for entering into a Funding Agreement within 12 months of Board of Supervisors approval of the CFH award.

 If this timeliness requirement is not met, the funds shall be reprogrammed.

 6.5.2 Construction Timeliness Requirements

Reimbursement for eligible expenses shall be initiated within 24 months of Board of Supervisors approval of the CFH award. As specified in the Administrative Procedures, the project sponsor shall satisfy all conditions of approval required for entering into a Funding Agreement within 12 months of Board of Supervisors approval of the award. All funds shall be disbursed within 30 months of Board of Supervisors approval of the CFH award.

 If this timeliness requirement is not met, the funds shall be reprogrammed.

 6.5.3 Extensions

Extensions of up to 12 months may be granted for good cause at the discretion of the Executive Director if she or he determines that there were unforeseen circumstances that caused the need for more time.

 6.6 Specific Program Requirements for Rental Housing Projects

 6.6.1 Affordable Rental Housing Agreement

Concurrently with recording of the CFH loan deed of trust, the Commission shall record an Affordable Rental Housing Agreement (ARHA) with the developer. The ARHA shall memorialize the affordability restrictions and other requirements that attach to the CFH loan and shall run with the land.

 6.6.2 Affordability Period

All assisted units in rental developments shall remain affordable for a minimum of fifty-five (55) years.

 6.6.3 Income Limits

Income limits for occupants of CFH-assisted units are published annually by the Commission. All CFH-assisted rental units shall initially be restricted and affordable to very low-income households as defined by the US Department of Housing and Urban Development (HUD), adjusted for household size. After initial qualification, a household occupying a very low-income unit may have its income increase to 80 percent AMI (low-income).

 6.6.4 Affordability and Physical Distribution of the Rental Units

The Commission shall approve the affordability mix of the development. The CFH-assisted units shall be distributed by unit size, amenity mix, and income affordability throughout the entire development.

CFH-assisted units in the development shall be floating units: Upon recertification of household income, if a household no longer qualifies to occupy an extremely low-income unit, that unit shall become a very low-income unit and the next available CFH-assisted unit shall become an extremely low-income unit. Upon recertification, if a household no longer qualifies as a low-income household, the developer may charge that household market rate for that unit, and the next available non-CFH-assisted unit shall be designated as a very low-income CFH-assisted unit.

 6.6.5 Rent Limit

Maximum tenant-paid rent limits for CFH-assisted units are published annually by the Commission. The rent limit is calculated using the formula in California Health & Safety Code 50052.5 and 5005.3.

 The appropriate utility allowance as published annually by the Sonoma County Housing Authority shall be deducted from the gross rent limit to determine the maximum tenant-paid rent.

 6.7 Specific Program Requirements for Homeownership Projects

 6.7.1 Affordable Housing Development Agreement

Concurrently with recording of the CFH loan deed of trust, the Commission shall record an Affordable Housing Development Agreement (AHDA) with the developer. The AHDA shall memorialize the affordability restrictions and other requirements that attach to the CFH loan and shall run with the land.

The Commission shall record the CFH AHDA against only the CFH-assisted parcels or units. In the same escrow in which an eligible home buyer purchases a CFH-assisted affordable unit, the Commission shall record either an affordability covenant or an option agreement with the buyer granting the Commission the first option to purchase the unit.

 6.7.2 Occupancy and Income Limits

Income limits for CFH-assisted units are published annually by the Commission. CFH-assisted ownership units shall be reserved for and sold to first-time homebuyer households at or below 120 percent of the area median income (AMI) for Sonoma County as established by the US Department of Housing and Urban Development (HUD), adjusted for household size. Further, at least 20 percent of all CFH-assisted ownership units must be restricted and affordable to low-income households, adjusted for household size.

For example, to meet the minimum affordability requirements of the CFH program, an ownership development containing 10 CFH-assisted units would have the following affordability profile: 

• 20 percent or two of the assisted units restricted and affordable to households at or below 80 percent AMI, adjusted for household size.
• The balance of the assisted units restricted and affordable to households at or below 120 percent AMI, adjusted for household size.

Affordable Housing. Housing which costs no more than 30 percent of a low-, very low-, or extremely low-income household’s gross monthly income. For rental housing, the residents can pay up to 30 percent of gross income on rent plus tenant-paid utilities. For homeownership, residents can pay up to 30 percent on the combination of mortgage payments, taxes, insurance, and Homeowners' dues.

Area Median Income (AMI). The income figure representing the middle point of all Sonoma County household incomes. Fifty percent of households earn more than or equal to this figure and 50 percent earn less than or equal to this figure. The AMI varies according to the size of the household. As of May, 2015, the AMI for a four-person household in Sonoma County is $75,900.

Affordable Housing Agreement. A contract with the Commission executed by the developer of a residential project, and recorded against the subject property, that limits the sales price and/or monthly rent of specified dwelling units within the project, limits the income level of the household occupying the specified units, establishes a time period during which the specified units shall continue to be sold and/or rented at affordable prices, and which may contain administrative, enforcement, or other provisions to ensure that the specified units are sold and/or rented to targeted households at affordable sales prices and/or monthly rent over the entire term of the agreement.

CFH-assisted unit. A residential unit that is subject to rent or purchase price and occupancy restrictions as a result of the financial assistance provided by the CFH, as specified in the Affordable Housing Agreement.

Covenant. An agreement or promise to do or not to do a particular act or to use or not use property in a certain way (see Affordable Housing Agreement).

Executive Director. The executive director of the Sonoma County Community Development Commission, and/or the designee of the director.

Extremely low-income household. A household whose gross annual income does not exceed thirty percent (30%) of the median income for Sonoma County as established by the U.S. Department of Housing and Urban Development, adjusted for household size.

Funding Agreement. An unrecorded document setting forth the terms and conditions imposed upon the borrower in order to receive CFH financing.

Housing Opportunity Site. A parcel or parcels of land designated by the County for affordable housing in compliance with the General Plan housing element and Section 26.89.050(F) of the Sonoma County Zoning Regulations.

Low-income household. A household whose gross annual income does not exceed eighty percent (80%) of the median income for Sonoma County as established by the U.S. Department of Housing and Urban Development, adjusted for household size.

Market-rate unit. A dwelling unit in a residential project that is not restricted by an affordable housing agreement, and which is not expected to be provided as affordable to an extremely low-, very low-, or low-income household.

Option Agreement. An agreement granting the Commission a first right either to purchase an affordable ownership unit for a price established through a formula under the Agreement, or to assign the Commission’s first right to an eligible buyer to purchase the affordable ownership unit at that price.

Permanent supportive housing. Rental housing with no limit on length of stay, occupied by a special needs population, which is linked to onsite or offsite services that assist the supportive housing resident in retaining the housing, improving his or her health status, and maximizing his or her ability to live and, where possible, work in the community.

Regional Housing Needs Allocation. The state-mandated process to identify the total number of housing units (by affordability level) that a jurisdiction must accommodate in its Housing Element.

Residual Receipts. The amount by which a project’s gross revenue exceeds its annual operating expenses in a particular calendar year.

Special needs populations. Special needs populations can include the elderly, persons with physical, mental, or behavioral disabilities, persons with HIV/AIDS, and/or persons with alcohol or drug addictions.

Sonoma County Community Development Commission. The Sonoma County Community Development Commission is established as a separate public and corporate entity pursuant to Section 34110 of the California Health and Safety Code, whose Board of Commissioners is comprised of the same members of the Sonoma County Board of Supervisors.

Sonoma County Board of Commissioners. The governing Board of the Sonoma County Community Development Commission, comprised of the same members of the Sonoma County Board of Supervisors.

Sonoma County Board of Supervisors. The governing board of Sonoma County and of various special jurisdictions. The Board of Supervisors is comprised of five supervisors elected from supervisorial districts for four-year terms. 

Transitional housing. Supportive housing for persons or families in transition from homelessness to permanent housing.

Very low-income household. A household whose gross annual income does not exceed fifty percent (50%) of the median income for Sonoma County as established by the U.S. Department of Housing and Urban Development, adjusted for household size.

Very Low-Income Households (VLI). Households earning between 31 and 50 percent of the Sonoma County AMI.