HOU - Item 4A - Senior Housing Rental Rates`i � 1 •
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FROM: JEFF ALLRED, EXECUTIVE DIRECTOR
DATE: SEPTEMBER 27, 2011
SUBJECT: SENIOR HOUSING RENTAL RATES
SUMMARY
The City Council will consider authorization of rental rate adjustments for future tenants at the
Angelus Senior Housing facility and the Garvey Senior Housing facility in accordance with
federal Section 8 housing guidelines. Existing monthly rents are no longer sufficient to cover
the operating costs for the Angelus Senior Housing facility, and this will also be the case for the
Garvey Senior Housing Facility in the near future. Existing tenants at these facilities will not be
affected by the proposed rental rate adjustments.
Staff Recommendation
That the City Council authorize rental rates for any future tenants to be set in accordance with
current Section 8 guidelines and be maintained in accordance with Section 8 rates on an
ongoing basis for new tenants. Prospective new tenants would have to demonstrate a gross
income at 40% or less of the Area Median Family Income. Rental rates would be set at 30% of
gross income.
BACKGROUND /ANALYSIS
The Rosemead Housing Development Corporation was created on March 11, 1992 for the
purpose of developing affordable senior housing within the City along with providing
rehabilitation loans for low- income owner occupied dwellings. When the first senior housing
project was established, the Angelus Senior Housing facility, a monthly rental rate for tenants
was established at $250 per month for a single occupant with one bedroom, $300 per month for
two occupants with one bedroom and $450 for two bedrooms with the intention that the monthly
rental rates were designed to fall within the Section 8 guidelines while covering the operating
costs of facility. The monthly rents have remained the same since first being set. A separate
agreement was made which stated that the Redevelopment Low /Moderate Housing Funds
would be used to cover the costs of the ground lease and City overhead for the facility. The
combination of these two funding sources was intended to provide for long term sustainability of
the facility.
The second low- income senior housing facility was built on Garvey Avenue next to the Garvey
Community Center and similar operating and ground lease documents were approved on
August 13, 2002. Once again, monthly rents were designed to cover the ongoing operating
costs of the facility while contributions from the Redevelopment Low /Moderate Housing Fund
would cover the ground lease and city overhead. The monthly rents were set at the same rates
as discussed above for the Angelus facility.
MM NO, �,
APPROVED FOR CITY COUNCIL AGENDA:
Rosemead Housing Development Corporation Meeting
September 27, 2011
Page 2 of 3
For the fiscal year 2009 -10 the Senior Housing facilities collected tenant rents and minor
miscellaneous fees in the amount of $420,072. Operating expenditures for the facilities totaled
$731,839. This resulted in an operating deficit of $311,767 for the fiscal year. The Community
Development Commission's Low /Moderate Housing Fund transferred $250,000 to the Senior
Housing facilities which reduced the operating deficit to $61,767 for the fiscal year. This deficit
was ultimately absorbed through the existing fund balance of the Housing Development
Commission. For the 2010 -11 fiscal year, the Community Development Commission authorized
an additional transfer of $105,000 from the Low /Moderate Housing Fund, above the initial
$250,000, to offset the operating deficit and increasing maintenance costs of the facilities.
While many years ago when the facilities were first built, the Redevelopment Low /Moderate
Housing Fund contribution along with rents were sufficient to cover the operating expenses;
however, that is no longer the case. As the facilities get older, it's anticipated that the costs for
repairs and general operations will continue to grow, despite efforts to be as efficient as possible
such as the installation of the solar electric panels.
In order to determine how other low- income senior facilities are surviving and remaining
financially solvent, staff surveyed some low- income senior housing complexes in neighboring
cities to determine what parameters were being utilized to set monthly rental rates. The survey
found that all complexes are utilizing guidelines similar to those of Section 8 for setting their
rates. Surrounding city guidelines set rental rates at 30% of gross income with a maximum
income level of 50% of the Area Median Family Income (AMFI). Section 8 actually allows for
rental rates to now be set at 40% of gross income, but surrounding cities have elected to remain
at the previous standard of 30% mainly due to the large waiting lists that already exist under the
more strict guidelines and the fact that they are currently able to remain financially solvent. The
RHDC has set the maximum income level at 40% of AMFI and still currently has a five to seven
year waiting list. Staff does not recommend increasing it to 50% to match other surrounding
communities due to the long existing waiting list with more restrictive requirements.
If the rental rates were amended to be charged in accordance with adjusted gross income, one
bedroom rates currently set to $250 or $300 depending on the number of tenants would be
calculated on an annual basis for future tenants based upon the income figures reported. In
order to get a better idea of how this change would affect rates, we examined the incomes of
existing tenants even though they would not be affected by the change. Based upon the
reported income of existing tenants, the rental rate of a one bedroom unit would range from
$204.70 to $647.48. Over time as units were vacated, the ability to collect increased rents would
begin to help offset the existing operating deficit.
A short -term solution to help offset the deficit will be to increase the contribution from the
Low /Moderate Housing Fund. As previously stated, the Low /Moderate Housing Fund presently
contributes $250,000 annually to supplement the operations of these two facilities. While the
fund could absorb some additional costs in the short term, it must be noted that the
Low /Moderate Housing Fund will only remain as long as the project areas of the Community
Development Commission are in existence and Project Area 1 is set to expire in a few years. At
that time Project Area 2 will only be in effect and last fiscal year it generated approximately
$240,000 for the Low /Moderate Housing Fund. Due to the current economic conditions, it is
uncertain what type of property tax growth will be experienced in this project area.
Rosemead Housing Development Corporation Meeting
September 27, 2011
Page 3 of 3
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
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Michelle Ramirez
Community Development Manager