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Home My WebLink AboutRES. No. HA-30PALM DESERT HOUSING AUTHORITY STAFF REPORT REQUEST: ADOPT RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY AUTHORIZING A RENTAL RATE INCREASE AND ESTABLISHING A PROCEDURE FOR SETTING RENTAL RATES, ANNUALLY. SUBMITTED BY: JANET M MOORE, HOUSING AUTHORITY ADMINISTRATOR DATE: MARCH 9, 2006 CONTENTS: PDHA RESOLUTION NO. HA- 30 Recommendation: By minute Motion that the Housing Authority: 1. Adopt Resolution No. HA - 30 , a resolution of the Palm Desert Housing Authority establishing a procedure for setting rental rates for Palm Desert Redevelopment Agency owned rental units, and 2. Authorize the Chief Administrative Officer to execute all documents that may be necessary to facilitate the application of annual rent increases. Executive Summary: Approval of this request will authorize the Palm Desert Housing Authority (the "Authority") to establish a procedure for setting the rental rates for units (the "Units") owned by the Palm Desert Redevelopment Agency (the "Agency"). In addition, the Authority will establish a benchmark for maximum rental rates based on area market rental rates, by doing so, the Authority is ensuring that its rental rates are keeping pace with the market. It will also allow us to more accurately place the units produced towards the Stipulation quotas and the Regional Housing Needs Allocation (RHNA) in the correct income categories based on the household's actual income. The proposed procedure and suggested annual adjustments ensure that the maximum rental rates do not exceed the amount allowable by law. Discussion: In January of 1998, the Agency purchased 725 units from Riverside County Housing Authority and authorized the Authority to operate them. During that same year, as part of the transition, the Authority Board adjusted the rental rates to a standard rental schedule. Because the tenant base was not going to be 'market', the Authority did not clearly authorize market rent increases at that time. Nor did the Authority establish a rent schedule for future P6402\0001 \872582.3 STAFF REPORT ADOPT RESOLUTIONS NO HA -30 MARCH 9, 2006 PAGE 2 OF THE HOUSING AUTHORITY increases. In turn, the Authority's rental rates have not kept pace with the area market rental rates, which have increased significantly. Each year, affordable rents are calculated based on HUD income limits set for Riverside County. However, because our maximum rental rates have not been adjusted, higher income tenants receive much more subsidy than is actually needed and this creates a substantial gap between the rental schedule allowed by law and the Authority's maximum rental rate. For example, a family of four at the low income range using affordability guidelines can afford to pay up to $1,150 including utilities for a two bedroom unit; however, that family would only pay our current maximum rental rate of $775. This represents an excessive subsidy. Rose Sweet of R. F. Sweet and Associates conducted an appraisal analysis of current market rent of each specific project and respective unit mix. The analysis substantiates staffs concerns that the our maximum rental rates need to be adjusted. Therefore, in order to adjust rents annually, staff recommends that the procedure for setting rental rates is as follows: 1. For Units acquired, developed, rehabilitated , or otherwise assisted pursuant to the Stipulation, which are required by the Stipulation to be available to and occupied by persons and families whose income is between 20 percent and 65 percent of the area median income, maximum rental rates will be established in accordance with the terms of the Stipulation. 2. For all other Units, a. Maximum rental rates will be immediately set at the amount recommended by the appraisal analysis conducted by Sweet and Associates. b. Beginning April of 2006, maximum rental rates shall be set bi-annually in accordance with a survey of market rental rates. c. In the intermediate year between surveys, maximum rent may be set in accordance with the annual increase in area median income. What staff expects to happen with this adjustment is that more of the tenants currently listed as 'market' will qualify for an affordable rent based on household income. This will mean that fewer tenants will see the increases that are shown on the attached schedule, although the total impact can not be known until certifications are completed, which will be done as part of each lease renewal. Tenants currently paying rent based on income between 20% and 55% of the area median income will not be affected unless the tenant has had a change in income during the lease term. Some tenants at 65% and 75% will be affected but only to the extent that their income will allow. P6402\0001 \872582.3 STAFF REPORT ADOPT RESOLUTIONS NO HA -30 OF THE HOUSING AUTHORITY MARCH 9, 2006 PAGE 3 Although the recommended maximum rental rate schedule still remains below the rental rates allowed by law (as shown on the attached), a one-time adjustment to the new maximum rental rates could be in excess of $150 per month. This increase could be a hardship to some families, so, staff is recommending the following method of implementation: 1. Rental rates for vacant Units will immediately be adjusted to the new maximum rental rates. 2. Maximum rental rates for occupied Units will be phased in as follows: a. If the increase is less than or equal to $50, the full amount of the rental rate increase will be implemented at lease renewal. b. If the increase is more than $50, the rental rate will be increased by $50 at lease renewal and by $50 every six months thereafter until the rental rate equals the maximum rental rate. c. If the unit or property on which the unit is located is in need of renovations, the rental rate increase may be deferred until completion of the renovations. Staff recommends approval of said resolution adopting a procedure for setting rental rates annually to ensure that rents are adjusted to keep pace with market rental rates. The Housing Commission reviewed this request on March 8, 2006 and is forwarding the request for final review and action. Submitted by: 11.&,6/4-ee Ja¢et/M. Moore Ho sing Authority Administrator JMM:JG:pl A•proval: Department Head: Dave Yrigoy Director of development/Housing Iopment Carlos Orteg Executive Director Paul Gibson, Director of Finance P6402\0001 \872582.3 Analysis of Maximum Rents Current Proposed Maximum NEW Rent Maximum Riverside County COMPLEX #Br / #Ba Charged Rent Maximum Allowable (Only applies to households whose Affordable Housing Cost exceeds the Market Rent for the (S = Studio) by PDHA Area) RENT 0 75% One Quail Place 2/2 775 925 1045 2/1 715 900 963 1/1 695 850 874 California Villas 1/1 640 725 874 Catalina Gardens 1/1 525 750 843 S 425 650 711 Desert Pointe 2/1 635 825 857 1/1 550 725 802 S 465 600 683 Las Serenas 2/1 600 800 929 1/1 550 700 747 Neighbors 2/2 600 825 1011 Pueblos 1/1 650 725 874 Taos Palms 2/1 615 850 929 Laguna Palms 2/1 675 750 929 1/1 575 700 747 S 550 600 683 February 2005 RESOLUTION NO. HA-30 A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY ESTABLISHING A PROCEDURE FOR SETTING RENTAL RATES FOR PALM DESERT REDEVELOPMENT AGENCY OWNED RENTAL UNITS WHEREAS, the Palm Desert Housing Authority (the "Housing Authority") wishes to set forth a procedure for the Chief Administrative Officer or his designee (the "Chief Administrative Officer") to set rental rates annually for units owned by the Palm Desert Redevelopment Agency ("Agency Units") and to increase rents charged for Agency Units in accordance with such rates; NOW, THEREFORE, THE PALM DESERT HOUSING AUTHORITY HEREBY FINDS, DETERMINES, RESOLVES AND ORDERS AS FOLLOWS: Section 1. The Chief Administrative Officer shall set maximum rental rate amounts for Agency Units to be effective each year on July 1st in the following manner: A. For Agency Units acquired, developed, rehabilitated, or otherwise assisted, which are required to be available to and occupied by persons and families whose income is between 20 percent and 65 percent of the area median income, maximum rental rates shall be established in accordance with the terms of that certain Stipulation for Entry of Judgement in Case No. Indio 51143, as subsequently amended (the "Stipulation"). B. For all other Agency Units, (i) Immediately upon adoption of this Resolution, the Chief Administrative Officer shall set maximum rental rates as recommended by the appraisal analysis conducted by Sweet & Associates dated December 31, 2004 and on file in the office of the Housing Authority Secretary. (ii) Beginning in April of 2006, the Chief Administrative Officer shall cause to be conducted a bi-annual survey of area market rental rates for rental units similar in size and unit mix to the Agency Units and shall set maximum rental rates in accordance with the survey results. For example, the market rental rate for a two -bedroom unit in a duplex may be established as the maximum rental rate for a two -bedroom Agency Unit in a duplex. (iii) In the intermediate year between surveys, the Chief Administrative Officer may increase maximum rental rates by the same percentage as the percentage increase from the previous year to the current year P6402100011869149.6 1 in area median income. (iv) The Chief Administrative Officer may establish maximum rental rates at an amount that is Tess than the market rental rate to compensate for an unusual property condition. (v) In no event shall the maximum rental rate for any Agency Unit exceed the affordable rent for that unit as calculated in accordance with Health and Safety Code Section 50053. Section 2. A. For those Agency Units described in Section 1.A. hereof, after proper notice has been given, the Chief Administrative Officer shall set the rental rate for each unit determined pursuant to Section 1.A. B. For all other Agency Units, after proper notice is given, the Chief Administrative Officer shall set the rental rate for each unit at the maximum rental rate determined for that unit. Any rental rate increase shall be implemented in the following manner: (i) For vacant units, the full amount of the rental rate increase shall be implemented immediately. (ii) For occupied units, (a) if the rental rate increase is Tess than or equal to $50, the full amount of the rental rate increase shall be implemented at lease renewal, (b) if the rental rate increase is more than $50, the rental rate shall be increased by $50 at lease renewal and by $50 every six months thereafter until the rental rate equals maximum rental rate, and (c) if the unit or the property on which the unit is located is in need of renovations, the rental rate increase may be deferred until completion of the renovations or the increase(s) may be Tess than otherwise provided for pursuant to subparagraphs (i) and (ii) of this paragraph B. Section 3. Tenant income in all cases shall be adjusted for family size and shall be sufficient to pay affordable rent as determined for that unit in accordance with the Stipulation or Health and Safety Code Section 50053. P6402\0001\869149.6 2 Section 4. The Chief Administrative Officer may take any other action which he believes is necessary or desirable to implement the intent of this resolution so long as such action is not inconsistent with the terms hereof. PASSED, APPROVED, and ADOPTED by the Palm Desert Housing Authority, this 9T" of March, 2006, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: Jim Ferguson, Chairman PALM DESERT HOUSING AUTHORITY ATTEST: Rachelle D. Klassen, Secretary PALM DESERT HOUSING AUTHORITY P6402\0001\869149.6 3