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HomeMy WebLinkAboutRes HA-62 - Procedure for Setting-Implntng HA Rental RatesPALM DESERT HOUSING AUTHORITY STAFF REPORT REQUEST: ADOPT RESOLUTION NO. HA-62 RESCINDING RESOLUTION NO. HA-51, AND AMENDING THE PROCEDURE FOR SETTING AND IMPLEMENTING RENTAL RATES SUBMITTED BY: Janet M. Moore, Director of Housing Jessica Gonzales, Management Analyst DATE: March 27, 2014 CONTENTS: Resolution HA- 62 Resolution HA-51, adopted on March 14, 2013 Recommendation By Minute Motion that the Housing Authority: 1. Waive further reading and Adopt Resolution No. HA - 62 rescinding Resolution HA-51 and amending the procedure for setting and implementing rental rates annually; and 2. Authorize the Executive Director to take any other action which he deems necessary to facilitate, modify, establish and implement annual rent increases so long as such action is not inconsistent with the procedures in said Resolution. Executive Summary Approval of this request will amend the procedure for setting and implementing rental rates annually for Palm Desert Housing Authority ("Authority") owned and operated affordable rental units. The Maximum Rent will now coincide with other state and/or federal programs and provide options to adjust the Authority's market rent to be comparative to other similar if not alike units located within a reasonable distance. Background On March 14, 2013, the Authority Board adopted Resolution No. HA-51 amending the Rent Setting Policy that was originally adopted on August 24, 2006. The amended policy included changes in reference to the Authority due to the elimination of redevelopment. The manner of setting maximum rent was also changed in accordance with the fair market rents in effect at the time for each unit type as published by the U.S. Department of Housing and Community Development ("HUD") for Riverside County. After the 2013 rental rates for the Authority Units, that became effective July 1, 2013, were implemented, staff found that the 2013 rental rates (based on "Fair Market Rent" ("FMR") set by HUD for Riverside County) impacted tenants that were in the higher income categories (roughly 65% and up) by increasing their rents between $150 and $300+ per month. Several factors caused this dramatic increase including: 1. In 2011 the median income for Riverside County decreased from the 2010 median income causing a decrease in the 2011 rent calculations based on income. Staff Report Approval of the Procedure for Setting Rental Rates, Resolution HA- 62 March 27, 2014 Page 2 2. Also, in 2011 the legislation to eliminate the former Palm Desert Redevelopment Agency ("former PDRDA") did not allow the former PDRDA (or the Authority as operator) to enter into new leases with tenants. This caused the Authority to revert all leases to a 'month to month' basis for two years, adjusting only for income changes and not the maximum rent. 3. In 2012, the policy requirement for a bi-annual market survey by an outside entity was not completed because no new contracts could be entered into, so the maximum rent was not adjusted that year either. As such, rental increases were minimal because the only increases again were based on changes in income up to the old maximum rent. 4. In 2013 the median income increased to its 2010 level, however, the demand for rental housing due to the foreclosures in the Coachella Valley caused rental rates to increase due to the lack of availability of similar units. This pushed the maximum rent over the 65% income level. Due to this unusual and extraordinary set of circumstances, it was necessary to implement the increases on the basis of reasonableness. The Executive Director asked staff to conduct a local survey of rents for similar units. After comparing the survey to the FMR's, FMR's appeared to be more compatible to newer complexes in the City such as the Enclave and the Vineyards as opposed to units that are similar to the Authority units like the Regent (formerly Saint Tropez). Rents were then increased based on the local survey which were much lower than the adjustment to FMR. In order to allow annual adjustment to the Authority's market rent due to unforeseeable market and median income changes, staff suggests implementing additional options for the Executive Director to set and adjust Authority's market rent and establish a reasonable implementation plan for rental increases when necessary. Staff recommends the Authority Board adopt the attached resolution rescinding Resolution HA- 51, and amending the procedure for setting and implementing rental rates annually for Authority owned and operated affordable rental units. Fiscal Impact There is no fiscal impact with this request. Submitted by: a Gonzales, ement Analyst /2441/. M. Wohlmuth1, Executive Director ON.. . Moore, Director of Housing SAY HOUSG AUTH 5-0 -g-7- 6Vr(-/ G:\HOUSING\JESSICA GONZALES\HOUSING AUTHORITY\RENTAL RATES\RENTAL POLICY\2014 AMENDMENT\SR- HA - AMENDING RESOL HA-51 RENTAL RATE POLICY FINAL.DOC RESOLUTION NO. HA- 62 A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY RESCINDING RESOLUTION NO. HA-51, AND AMENDING THE PROCEDURE FOR SETTING RENTAL RATES AND THE IMPLEMENTATION THEREOF WHEREAS, the Palm Desert Housing Authority (the "Housing Authority") wishes to amend the procedure, 1) to set and implement annual rental rates and maximum rent for residential rental units owned and/or operated as affordable by the Palm Desert Housing Authority ("Authority Unit(s)") for the purpose of providing affordable housing to persons and families of low or moderate income and 2) to increase rents charged for Authority Units in accordance with such rates; NOW, THEREFORE, THE PALM DESERT HOUSING AUTHORITY HEREBY FINDS, DETERMINES, RESOLVES AND ORDERS AS FOLLOWS: Section 1. Setting Annual Rental Rates and Maximum Rent A. The Executive Director shall set annual rental rate amounts for Authority Units to be effective each year on July 1st or 30 days from the date that the area median income limits are published by the California Department of Housing and Community Development ("HCD"), whichever is later, in the following manner. For Authority Units acquired, developed, rehabilitated, or otherwise assisted, which are required to be available to and occupied by (a) persons and families whose income is between 20 percent and 65 percent of the area median income, or (b) by persons and families of low or moderate income, annual rental rates shall be set in accordance with the terms of that certain Stipulation for Entry of Judgment in Case No. Indio 51143, as subsequently amended (the "Stipulation") to adhere with state regulations adopted pursuant to California Health and Safety Code section 50052.5, 50053, 50079.5, 50093 and 50105 as they existed prior to 1990 and as interpreted at that time by Title 25 California code of Regulations, 6900 et seq., and any amendments made thereto. B. In no event shall the annual rental rate for any Authority Unit exceed the affordable rent for that unit as calculated in accordance with Health and Safety Code Section 50053 and as interpreted by Title 25 California code of Regulations, 6900 et seq., or exceed affordable rent as determined by any state, federal, or other public agency guidelines that provide supplemental rental assistance to the persons of that unit or on behalf of that unit. For tenants that receive such supplemental rental assistance and whose maximum rent, calculated by the assistance provider, is less than the maximum or market rent established by this policy, the rent calculated by the assistance provider shall be the maximum amount changed for that unit. C. The Executive Director shall set maximum rents concurrently with the annual rental rates each year as follows. RESOLUTION NO. HA - 62 i. For all Authority Units, which are required to be available at an affordable housing cost to persons and families of low or moderate income, maximum rent shall be set by unit type in an amount equal to the lesser of: a. The Fair Market Rents in effect at the time the annual rental rates are set, pursuant to Section 1. A. of this Resolution, as published by the U.S. Department of Housing and Community Development ("HUD") for Riverside County; or b. The Housing Authority of the County of Riverside ("HARivCo") Voucher Payment Standards, including any reasonableness adjustments. ii. The Executive Director may establish and/or revise market rents (the "Authority Market Rents") by unit type for the Authority Units based on either: a. A survey of current rents for units within the City, which are comparable to the Authority Units, using newspapers, Internet research, property owner interviews, property manager interviews, published market analysis for the area, or rental magazines, that indicates the maximum rent for any unit, established according to C.i. above, exceeds the rent that is comparable for the area by 10% or more for a studio or 1 bedroom unit or by 15% or more for a 2 or more bedroom unit; or b. A professionally prepared comparative area market analysis of rental rates for rental units similar in size and unit mix to the Authority Units. iii. The Executive Director may reduce rental rates below the Authority's Market Rate for any Authority Unit to compensate for the unusual property condition of such unit. Section 2. Implementation of Rental Increases A. For each Authority Unit, after proper notice is given; i. Any increase in the annual rental rate established pursuant to Section 1. A. of this Resolution shall be implemented upon vacancy or at lease renewal, except if the unit or the property on which the unit is located is in need of renovations, the rental rate increase may be deferred by the Executive Director until completion of the renovations or the increase(s) may be Tess than otherwise provided for pursuant to Section 1. A. of this Resolution. ii. Where the implementation affects public, federal or local rental assistance, or in instances where 12-month leases are required for other purposes, the full amount of the rental rate increase shall be 2 P6402\0001\869149.6 G:\HouSiNG\Jessica Gonzales\HOUSING AUTHORITY.RENTAL RATES\Rental Policy,2014 AmendmentlResolution Amending HA-5I Rental Rate Policy FINAL.doc RESOLUTION NO. HA - 62 implemented at lease renewal or as may otherwise be required in connection with such rental assistance, including any calculations pursuant to Section 1. B. of this Resolution. iii. The Executive Director, in his or her sole discretion, may determine that the full amount of the maximum rent increase pursuant to Section 1. C. i. should not be implemented and that such increase should instead be phased in pursuant to an implementation plan, which implements a series of reasonable increases until the full maximum rent increase has been realized or until vacancy of the unit. Section 3. Tenant income shall be calculated pursuant Title 25 California Code of Regulations, Section 6900 et seq. and adjusted for family size. Tenant income shall be sufficient to pay affordable rent as determined for that unit in accordance with Title 25 California Code of Regulations, Section 6900 et seq., the Stipulation or Health and Safety Code Section 50053. Section 4. Utility Allowances as prescribed in Health and Safety Code Section 50053, shall be set in accordance with the utility allowances in effect at the time the annual rental rates are established in accordance with Section 1.A. for each unit type as published by HARivCO. Section 5. The Executive Director may take any other action which he deems necessary to facilitate, modify, establish and 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 27th day of March, 2014, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: Van G. Tanner, Chairman PALM DESERT HOUSING AUTHORITY ATTEST: Rachelle D. Klassen, Secretary PALM DESERT HOUSING AUTHORITY 3 P6402\0001\869149.6 G:\HousING\Jessica Gonzales\HOUSING AUTHORITY'RENTAL RATES Rental Policy'2014 AmendmentResolution Amending HA-51 Rental Rate Policy FINAL doc