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City of San Leandro 2023-2031 Housing Element Update 2-42 Acquisition/Rehabilitation If this property was 100 percent deed restricted affordable housing with an expiring regulatory agreement, transferring ownership of an at-risk project to a non-profit housing provider is one of the least costly ways to ensure that the at-risk units remain affordable for the long term. By transferring property ownership to a non-profit organization, low-income restrictions can be secured, and the project would become potentially eligible for a greater range of governmental subsidies. Under AB 1521 noted above, there are now proscribed steps for owners of deed restricted properties to take prior to the expiration of those affordability requirements. This law requires that the owner consider an offer to purchase the deed-restricted units. Since only a portion of the property has deed-restricted units, it is unclear how a transaction like this could occur. Also, the feasibility of this option depends on funding sources to buy and potentially rehabilitate the property which might be challenging since it is not a 100 percent deed restricted property. Another option to preserve the affordability of this at-risk project is to support a Joint Power Authorities purchase of the property. If this option is exercised, it would require deed restrictions for 100 percent of the residential units but also allows for bond financing that would allow the owner to maintain the project as affordable housing. City staff are currently participating in an Alameda County-wide working group to identify joint powers agreement terms and conditions that would ensure meaningful long-term affordability if this path was pursued. Construction of Replacement Units To understand the significance if these at-risk units are lost from the supply of city affordable housing, the City has prepared a hypothetical analysis that identifies the cost of construction of new regulated housing to replace these at-risk units if they are converted to market-rate units. The cost of developing housing depends upon a variety of factors, including density, size of the units (i.e., square footage and number of bedrooms), location, land costs, and type of construction, as discussed in the Non-governmental Constraints section of Chapter 3, Housing Constraints. According to the 2019 TCAC staff reports, the typical cost of construction for below market rate housing in Alameda County in 2019 was $726,469 per unit. The total cost to replace the 35 at-risk affordable units with new construction would be approximately $25.4 million. Rental Subsidies The City does not have a rental subsidy program and the property at risk is not currently a property with a contract for tenant subsidies with HUD or the Housing Authority of the County of Alameda. Therefore, rental subsidy is not an option for these units at risk of expiration. Cost Comparison The above analysis attempts to estimate the cost of preserving the at-risk units under various options. However, because different projects have different circumstances and therefore different options available, a direct comparison would not be appropriate. In general, providing additional incentives/subsidies to extend the affordability covenant would require the least funding over the long run, whereas the construction of new units would be the costliest option. Unfortunately, providing rent subsidies would be less costly, but this option is not available as the City does not operate such a program.