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CC - Item 4B - Approval of Changes to Rehabilitation Program• TO: HONORABLE MAYOR AND MEMBERS ROSEMEAD CITY COU CIL FROM: vk-~Ay MANAGE DATE: February 15, 2006 • RE: APPROVAL OF CHANGES TO THE CITY'S RESIDENTIAL REHABILITATION PROGRAM The current guidelines for the City's Community Development Block Grant (CDBG) funded residential rehabilitation program have been in effect since 1996. Since that time, there have been significant increases in construction costs, as well as changes in regulations. In response, staff proposes to make changes in the following areas: ■ Increase in amounts for Handyman Grants, Rebates and Deferred Loans; Creation of a Deferred Loan with interest for households who are not handicapped/disabled or over the age of 62; ■ Expand the Lead Testing and Lead Remediation grants to cover asbestos testing and asbestos remediation in owner-occupied single-family homes within the City that participate in the Residential Rehabilitation program. COUNCIL AGENDA 2/28/06 Item No: IV - CC- B 0 TO: HONORABLE MAYOR AND MEMBERS ROSEMEAD CITY COU CIL FROM: vk_~ MANAGEN DATE: February 15, 2006 RE: APPROVAL OF CHANGES TO THE CITY'S RESIDENTIAL REHABILITATION PROGRAM The current guidelines for the City's Community Development Block Grant (CDBG) funded residential rehabilitation program have been in effect since 1996. Since that time, there have been significant increases in construction costs, as well as changes in regulations. In response, staff proposes to make changes in the following areas: ■ Increase in amounts for Handyman Grants, Rebates and Deferred Loans; Creation of a Deferred Loan with interest for households who are not handicapped/disabled or over the age of 62; Expand the Lead Testing and Lead Remediation grants to cover asbestos testing and asbestos remediation in owner-occupied single-family homes within the City that participate in the Residential Rehabilitation program. Approval of Chan!Rs to the City's Residential RehabilAn Program, 2 Background/Discussion Handyman Grants, Rebates and Deferred Loans In 1996, the City Council approved changes to the City's Residential Rehabilitation program. These included the addition of covenants on the grant program to discourage speculation and creation of an emergency grant for households with severe emergency needs. Overall grant amounts for the Handyman Grant, Rebate and Deferred Loan have not been raised since the program's inception in 1981. Construction costs have risen dramatically in the last two years, especially for lumber and concrete. Consequently, the program is no longer able to complete most of the required work for improvements. In the last year, staff finds that it must eliminate items from the work write up because bids consistently come in above the limits allowed under the program. The City's Residential Rehabilitation program is designed to assist owner- occupants of single-family homes within the City with property repairs and improvements in order to maintain the City's housing stock. These programs are for owner-occupants of single-family homes within the City who earn less than 80% of the median income for Los Angeles County (currently $36,700 for a single person family and $52,400 for a family of four). Grant: The Handyman Grant is designed for those over the age of 62 and those who are handicapped/disabled. It is used to make interior and exterior repairs associated to hazards and code deficiencies, as well for handicap ramps, grab bars and other ADA improvements. If funds are available after making required repairs, then general improvements such as painting are allowed. If the owner sells the property within one year of receipt of a grant, then the owner must repay 50% of the grant to the City. When the Handyman Grant was established, the $6,000 threshold was sufficient to cover a re-roof. At this time, it is no longer possible, in most cases, to complete a re-roof with this grant since the average roof job costs around $8,000 - $10,000, excluding contingencies. In the most recent grants, homeowners have had to eliminate window reglazing or replacement, floor repair, ceiling repair due to rain damage and bathroom repairs in order to make roof repairs. It is recommended that the City Council increase the grant amount from $6,000 to $10,000. Rebate: The Rebate program is available to households without regard for age or disability. Funds are available for code deficiencies and general property improvements, including ADA improvements. The rebate program is meant to cover 50% of cost, up to $10,000. In our most recent rebate, the amount covered only approximately 30% of the construction costs, excluding contingency, for roof, stucco, driveway repair, installation of smoke alarms, permits and dump Approval of Chanj?s to the City's Residential Rehabilln Program, 3 fees. It is recommended that the City Council increase the rebate from $10,000 to $15,000. Deferred Loan: The current loan is a maximum of $35,000 for households who are handicapped/disabled or over the age of 62. Loans are used to correct interior and exterior code violations and to make general property repairs. Funds may also be used for handicap ramps, grab bars and other ADA improvements. Funds are repaid to the City when the property is sold or where there is a change or transfer of title. There is no interest. Currently, bids for work under the deferred loan are coming in at $40,000, excluding contingency. Households have to eliminate items from work write ups, such as weatherization, floor covering, paint and other improvements in order to be able to repair the most dangerous of code deficiencies and items. It is recommended that the City Council increase the deferred loan amount from $35,000 to $40,000. Loan: The currently has a low-interest loan program for households who are not over the age of 62, handicapped/disabled. Over the last ten (10) years that the City has had the low-interest loan program, only one (1) household has qualified through the bank for this loan. Because programs are restricted to households below 80% of median income, it is difficult for families to qualify for loans with monthly payments, even when they have equity in the house. Of those that have applied for this program, some are near elderly, but do not meet the age 62 restriction of the Affordable Housing Act. It is recommended that the City Council eliminate the Low Interest Loan and create a 3% annual simple interest Deferred Loan w ith the same terms and conditions as the 0% Deferred Loan. In summary, because of price increases, staff proposes revised amounts in the programs as follows: Handyman Grant: Raise the threshold of the grant to $10,000 to allow for increase in construction costs. Maintain the repayment covenant at 50% grant repayment in event of sale within one (1) year of receipt of grant. Rebate: Raise the threshold of the grant to $15,000 to allow for increase in construction costs. Deferred Loan: Raise the grant threshold to $40,000 to allow for increase in construction costs. Maintain current underwriting criteria regarding home equity and indebtedness. 3% Deferred Loan: Create a Deferred Loan at 3% simple interest per year for households below 80% of median income who are not over the age of 62 or handicapped/disabled. Loan would be subject to same covenants, underwriting and deed of trust requirements at the Deferred Loan. Approval of Chan'Ps to the City's Residential Rehabilit~on Program, 4 Asbestos Testing and Remediation California EPA and federal law under 40 CFR Part 61 now require the inspection and abatement of any asbestos in renovations of 160 square feet of building materials or 260 linear feet of pipe insulation. The use of asbestos in residential construction was banned in 1980. Units constructed before this time may have asbestos in any pipe insulation or flooring. Because of this, staff proposes to expend the Lead Testing grant and Lead Remediation Grant to cover the cost of testing and remediation of asbestos in properties that participate in the Residential Rehabilitation program. RECOMMENDATION Staff recommends that the City Council approve proposed changes to the City's Residential Rehabilitation and Lead Remediation Guidelines and documents.