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HomeMy WebLinkAboutMINUTES - 09162008 - SD.4 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Joseph Villarreal, Executive Director DATE: September 16, 2008 SUBJECT: Revisions to Admissions and Continued Occupancy Plan to allow Rent Concessions SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: APPROVE revisions to the Admissions and Continued Occupancy Plan to allow Rent Concessions. II. FINANCIAL IMPACT: This change will positively impact the Authority's financial position as units that would otherwise be vacant are leased. Based on the mean portion paid by the Authority's public housing clients, each rent concession will average $276. This will immediately be offset by the ability to collect an operating subsidy from HUD. The operating subsidy averages $331 per unit. III. REASONS FOR RECOMMENDATION/BACKGROUND Housing Authorities rely on rents from tenants and subsidies from HUD to manage and maintain their public housing properties. When a unit is vacant the Authority loses both the rent for the unit and the operating subsidy from HUD since HUD will only provide subsidies for occupied units. Further, under HUD's Public Housing Management Assessment Program (PHMAP) housing authorities are rated based upon their vacancy level among other indicators. Agencies with vacancy rates of 3% or less will receive the maximum number of points under PHMAP while agencies with vacancy rates of 10% or greater will receive no points under PHMAP. The Authority's overall vacancy rate is currently 7%. The two most difficult properties to lease are Las Deltas with a vacancy rate of 17% and Bayo Vista with a rate of 7%. It is common among both residential and commercial property owners to offer incentives to potential renters when they face a market in which it is difficult to lease units or buildings. Likewise, if they have a particular property they are having trouble leasing they may offer incentives to potential renters. The most common incentive offered is a rent concession (a period of free rent). In residential properties this is usually one or two months of free rent, in commercial properties the period could be for a year or more. Other possible incentives include reduced security deposits, cash signing bonuses for longer lease terms and decorating allowances. CONTINUED ON ATTACHMENT: YES SIGNATURE C� Joseph Villarreal,Executive Director RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE V/APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON ��C/U APPROVED AS RECOMMENDE OTHER— VOTE THERVOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES THE BOARD OF COMMIS IO ERS N THE DATE SHOWN. ATTESTED OSEPH VILLARREAL,CLERK OF THE BOARD OF COMMISSIONERS AND EXECUTIVE DIRECTOR BY TY C:\Documents and Settings\jvillarreahLocal Settings\Temporary Internet Files\OLK37\BO C Rent Incentives.doc The proposed policy allows the Authority to offer rent concessions if either the vacancy rate at a given property or the overall vacancy rate drops to 3% or below. A vacancy rate of 3% was chosen as the trigger because the Authority will drop from an A grade to a B if the vacancy rate drops below 3%. The 3% rate should give staff enough time to lease units without dropping beyond a B grade at worst while balancing the need to not lose too much revenue due to rent concessions. While the proposed policy is primarily aimed at improving vacancy rates at Las Deltas and Bayo Vista, other developments will also occasionally be difficult to lease and thus the proposed policy is expected to have an impact throughout the Authority's jurisdiction. The proposed policy is not expected to completely resolve all of the Authority's difficulties in leasing units, but it will give families a greater incentive to rent a unit that is offered at a difficult to lease property as opposed to waiting for a unit somewhere else to become vacant. IV. CONSEQUENCES OF NEGATIVE ACTION: The proposed policy should ameliorate some of the difficulties the Authority faces in leasing units. Should the Board not approve this policy, then the Authority will continue to suffer a greater degree of lost revenue due to vacancies than is likely should rent concessions be offered to clients. Also, should the Board not approve this policy, then the Authority is more likely to see a reduction in its PHMAP scores than otherwise. CHAPTER 4 N. Plan for Unit Offers Rent Concessions When either HACCC's overall vacancy rate or the vacancy rate at a given property drops to 3% or below, staff will have the option of offering applicants one month's free rent as an incentive to lease. The decision to offer rent concessions must be approved by the Executive Director. Rent concessions can be offered at one property and not another. For example, rent concessions may be given at Las Deltas and Elder Winds until the vacancy rate improves to 2%, but no other properties. However, if rent concessions are offered at a given property, then all applicants to that property must be given the rent concession.