Title
Approval to Submit HUD Section 18 Disposition Application (Ordinance S-46222)
Description
Request to authorize the sale of 130 Scattered Sites single-family homes pursuant to a U.S. Department of Housing and Urban Development (HUD) approved plan for disposition. This report further requests to authorize the City Manager, or his designee, to submit a HUD Section 18 Disposition Application for 40 vacant Scattered Sites single-family homes, and if approved, proceed with the disposition at a cost up to $150,000, to be paid with federal funds, and request authorization for the City Controller to disburse all funds related to this item. There is no impact to the General Fund.
Report
Summary
The Scattered Sites Single-Family Homes Program began in 1990 to encourage qualified Public Housing residents to become homeowners. Over the next 25 years, very few households transitioned to home ownership and the portfolio became too costly to operate due to reductions in federal subsidies for capital improvements and operating expenses. In addition, the age of the properties, the distance between homes, and the lack of uniform systems continue to drive escalating operating expenses. At this time, the Housing Department (Housing) is seeking to dispose of all the Scattered Sites single-family homes. To date, Housing has obtained City Council approval to dispose of 299 homes through HUD’s Section 32 Home Ownership Program and Housing is seeking approval to dispose of an additional 130 homes through HUD’s Section 18 Disposition Program. In both programs, vacant homes are identified for sale, no current residents are relocated to facilitate the disposition.
The Section 18 Disposition Program allows homes designated as Public Housing to be sold “as is.” With approval, Housing will submit an initial application to HUD seeking to dispose of 40 vacant Scattered Sites single-family homes. Each residence will be sold at a minimum of 90 percent of the property's appraised value based on the deficiencies identified through the buyer's home inspection and/or market demand. Homes will be appraised within six months of the date of sale. If minor repairs are required for a buyer to obtain financing, Housing will arrange to have the repairs completed. Homes will be sold to low-income owner occupants whenever possible. Approximately 20 of the 40 homes will be sold to any qualified buyer, including non-owner occupants. These homes will be available to any qualified buyer due to the excessive rehabilitation required to obtain financing, or the appraised value exceeding an amount low-income buyers can afford. Housing will utilize contracts for listing the homes, and for providing housing counseling and down-payment assistance for applicable low-income buyers. Housing will use the proceeds from each sale to support the continuing operations of the Department’s remaining Public Housing units, and leverage public housing redevelopment via the Rental Assistance Demonstration Program.
Both the Section 32 and Section 18 programs offer homeownership opportunities for low-income residents, however not all homes in the current portfolio are suitable for low-income households. Recognizing the physical condition or location of a home can be a barrier for low-income buyers working to obtain financing, Housing is converting 24 homes previously approved for disposition through the Section 32 program to disposition under the more flexible guidelines of the Section 18 program. Housing will continue to assess the condition of each home and market demand to determine which disposition program will be most successful prior to submitting additional applications to HUD.
Financial Impact
Disposition costs up $150,000 will be paid with federal funds. There is no impact to the General Fund.
Concurrence/Previous Council Action
This item was recommended for approval at the Land Use and Livability Subcommittee meeting on Nov. 20, 2019, by a vote of 3-0.
Public Outreach
On Aug. 16, 2018 a notice was sent to residents within the Scattered Sites Portfolio informing them of the Housing Department's intention to seek approval to dispose of homes through HUD’s Section 18 Disposition Program. The seven-member Public Housing Resident Advisory Board met on Oct. 1, 2019 and approved a Significant Amendment to the Department’s 2019-2020 Annual Agency Plan. The Significant Amendment included a description of the Department’s intention to dispose of 40 Scattered Sites homes through the Section 18 Disposition Program. A Public Hearing was held on Oct.15, 2019, to obtain comments on the Significant Amendment. No comments were received.
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Housing Department.