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ADMINISTRATIVE REVIEW DRAFT The cost to acquire the units and preserve them as affordable would also be substantial. Based on comparable properties, the cost of acquiring a 73-unit apartment building could be over $10 million. Because the units are located within projects that include market rate units as well as affordable units, acquisition could cost even more than replacement. Moreover, the owners of the units in question may not be interested in selling the properties (or selling a share in ownership to a local non-profit to manage the affordable units). The cumulative gap between the market -rate rents and the subsidized rents for the 73 units is approximately $14,700 a month ($176,400 a year). Although direct subsidies to tenants and/or landlords to close the gap are not proposed at this time, the analysis suggests that it would be more cost-effective to preserve the units than to reconstruct the units or acquire the properties outright. Opportunities for Preservation The Government Code requires the City to identify local non-profit corporations which have the "legal and managerial capacity to acquire and manage" the at -risk units or the apartment complexes containing the at -risk units. The City is also required to identify the federal, state, and local financing and subsidy programs that may be considered to preserve these units. A number of non-profit housing developers are active in Alameda County and could assist San Leandro in the preservation of at risk units. Eden Housing has been the most active non-profit, with more than a dozen projects in the mid -County area. Other local non -profits include BRIDGE Housing, Mercy Housing, Citizens Housing, Resources for Community Development, and American Baptist Homes of the West (ABHOW). There are also private developers in the City, including the owners. of the at -risk projects themselves, who might be interested in participating in their preservation. Such developers may have access to state and federal tax credit funding, and to rehabilitation loans through the City's Redevelopment Agency. Potential funding sources to assist in the preservation of at -risk units include CDBG and HOME funds, and the 20 percent housing set -aside funds from the City's Redevelopment Agency. The City can use these funds to provide gap financing to assist non -profits in acquiring an ownership share in the complexes containing at risk units. In addition, the California Department of Housing and Community Development has a Multi -family Housing Program which provides deferred payment loans at three percent interest for the acquisition and rehabilitation of at -risk units. These funds are typically used to leverage additional investment from the private sector. The California Housing Finance Agency (CHFA) may also provide subsidy assistance for the acquisition of below -market projects. The City should also explore direct negotiations with at -risk project owners to extend the terms of the affordability restrictions. There may be financial incentives the City can offer, or disincentives to raising the rents to market levels. This is particularly true if the owner is seeking additional bond financing, rehabilitation assistance, or conducting other transactions which require City approval or participation. To the extent feasible, extensions of below -market rental agreements should keep the units affordable for as long as possible. Recent acquisition/rehabilitation loans granted by the City require affordability for 55 years —much longer than the 20-year term carried by most of the expiring units. HOUSING ELEMENT 3-31 SAN LEANDRO GENERAL PLAN