In early July the Davis Redevelopment Agency became the owner of the homes in DACHA. The foreclosure auction finally occurred after legal hurdles were breached when a judge dismissed efforts by Neighborhood Partners to declare involuntary bankruptcy.
A long series of events led to this outcome. The city of Davis had previously decided to lower the cost of shares and monthly payments to the members of the Co-Op. Included in that was a refinance by the city of Davis, meaning that the Redevelopment Agency became the effective bank for DACHA.
The Redevelopment Agency of the City of Davis now owns twenty single-family homes formerly owned by DACHA. The City Council acting as the Redevelopment Agency now needs to decide what to do with them.
Staff recommends the City Council do the following:
First, “Authorize the Redevelopment Agency to enter into month to month rental leases with the residents of the sixteen occupied units to allow them to continue residing at their current addresses with the monthly rental payments and occupancy terms to be consistent with the affordable housing covenant and previous arrangements under DACHA during the interim period until the City and Agency have determined a more permanent use for the twenty
units now owned by the Agency.”
Second, “Authorize and direct staff to pursue options for use of the four vacant units and any future vacant units, including but not limited to short-term rental housing and transitional housing to be used by families at-risk of homelessness, during the interim period.”
Third, “Direct staff to explore permanent uses of the twenty affordable housing units, including but not limited to affordable rental housing, limited equity cooperative housing, and affordable ownership options with capped appreciation, and to return with a recommendation to Council and the Redevelopment Agency no later than January 2011.”
The city staff also recommends the Redevelopment Agency Board do those three things and in addition, “Approve the necessary budget adjustment and authorize the Agency Executive Director to approve expenditures of up to $25,000 in total for necessary repairs in order to maintain and achieve habitability of the housing units, as needed.”
According to the staff report, “Staff is recommending that the Agency offer a lease to the sixteen households currently occupying the units on a month-to-month basis, once habitability of all units is verified, until such time as the Agency and the City determine future use of the properties.”
This would ostensibly comply with the goal of continuing to provide affordable housing units to members who are income-qualified to reside in the units. “Doing so avoids displacement of the existing residents and provides the Agency an immediate source of revenue on these newly owned assets,” wrote the staff report.
Furthermore, staff is recommending that the sixteen units continue with the previous agreement in terms of cost and other terms.
Staff also recommends that “Options be considered for the vacant units that could include use as transitional housing for families or short-term rental housing during the interim period. A short term use would provide the Agency with some revenue, but might require the Agency to market the units and identify and qualify potential renters willing to enter into leases while the future of the units is yet undetermined.”
The staff report continued, “Providing affordable housing, even on a transitional basis, would be consistent with City and Agency goals for the units but in recent discussions with Davis Community Meals it sounds like there might not be available staff or a high demand for such housing on a short-term basis.”
Furthermore, “Providing these units as transitional housing would not produce the same revenue as a more conventional rental housing agreement. Staff estimates the revenue lost on a transitional housing use would range from $3,300 to $3,650 per unit during the interim period, as opposed to renting the units at an affordable rate.”
“By providing staff direction on the interim use of these properties, the Agency and the City can then direct staff to investigate options for the future use of the properties,” the report read.
While it appears likely that these homes will remain limited equity, affordable units, the long term use of this cooperative is still in doubt. “At this time, staff is recommending that all potential uses be considered, including but not limited to affordable rental
housing, limited equity cooperative housing, and affordable ownership options with capped appreciation. The interim use of the properties will provide staff with the necessary time to research options and make a recommendation to the Agency and City on use of the properties.”
The report further recommends setting a January 2011 deadline to return this issue and re-evaluate the project.
The real question therefore is not what happens in the short-term but what happens in the long term. There are council members who are concerned that this model was never sustainable to begin with. They argue that the carrying charges, the monthly payments, and the share cost were unaffordable for the middle income people that the project was designed for.
The city hoped that a refinance of the loan on more favorable terms would address the problem. However, once Neighborhood Partners won judgment against DACHA and placed a levy on their assets, DACHA was unable to pay their loan payments to the Redevelopment Agency, they defaulted on their loan, and thus the city decided to foreclose on DACHA and take it over.
What went wrong is a critical question, with all sides pointing the finger at each other. Our concern from the start has been the role of staff. However, council by a 3-2 vote denied a third-party investigation into what happened.
The larger question is still one about affordable housing in general, DACHA being the latest problem for the city in this area. The new council will have to decide how much of a priority this is. With the current affordable housing requirements, the city is only required to provide 15 percent of their housing for those making as low as $58,000 while another ten percent goes to those making $36,000. Much of the housing that has been developed in recent years have produced huge homes that are costly.
I think we need an overall discussion on affordable housing with the new council. What are the goals? What models should we employ to bring about affordability at least for some housing. How can we better meet the needs of Davis renters and work with the university to provide more student rental units?
The question in the post-DACHA era is how can Davis produce housing that is affordable for its citizens in an era that is also not likely to see expansion outside of the city’s current boundaries.
—David M. Greenwald reporting
It is important to remind everyone that:
The carrying charges set for each of the DACHA units were all done within the guidelines set by the city.
The budget for every home was approved by the city, and the income of each incoming member was reviewed by the management company as meeting city guidelines and every household was fully approved as income qualified by the city.
The financing plan for every DACHA home was approved by the city as meeting city income guidelines.
NP provided numerous reports to city staff saying that the city’s pricing formula did not work. (Katherine Hess said she did not know how the pricing formula had been arrived at). NP showed the City staff and Council how DACHA was overcharged about $400,000 for the 20 homes. City staff adopted each of our recomendations and brought the prices down on later homes but would not reduce the overcharge on the 20 DACHA homes.
David Thompson, President, Twin Pines Cooperative Foundation
July 25, 2010 Part 1.
Dear Mayor Saylor and Members of the Davis City Council:
Twin Pines Cooperative Foundation would like to comment on the staff report you have received on DACHA.
The City has expended an enormous amount of time, energy and effort on the twenty (20) affordable homes that are the subject of the Resolution. These efforts were not always well conceived or seemingly lawful. We believe that this City Council will have to learn from the mistakes of the past and ensure that they are not repeated. Accordingly, it is important that you understand one fundamental truth – the City foreclosed on the homes because DACHA’s members failed to pay their monthly financial obligations.
We think that city staff should make certain facts known to provide the needed due diligence to the City Council before any action is taken on the long term disposition of the DACHA homes. We think the City is at risk of foregoing millions of dollars of RDA income if it follows present staff recommendations.
A.Request for a report to the City Council and the public on did city staff monitor and take action when DACHA did not meet Regulatory Agreement requirements; what was owed to City by DACHA at foreclosure; were all debts to DACHA paid by the members; did staff fulfill the due diligence to City Council on DACHA and a report on legal costs associated with DACHA paid for from public funds.
•We would like to ask staff to provide a report to the City Council on the status of DACHA at the time of foreclosure. In conformity with the Regulatory Agreement signed by both the City and DACHA, the city is provided with certain financial and organizational information and is entitled to obtain other financial information. The staff report to the City should show for example; what did DACHA owe to the City at the time of foreclosure; how much has the city written off; what previous debts were carried forward from the time of the re-finance; what efforts did city staff take to have DACHA pay its monthly mortgage; were the DACHA members allowed to forego paying their rents against their investment share so that it cost them nothing to not pay their rents and therefore their obligations to the City; were the existing board members current on their obligations to DACHA; did city staff take any action under the Regulatory Agreement to enforce its rights; were the existing board members eligible to serve during the foreclosure period; what was the balance sheet of DACHA at the time of foreclosure; what due diligence did the city carry out relative to enforcing the DACHA board members obligations to the City; what did and do the DACHA members presently each owe to DACHA (not by name but by coded number 1-16), We think the City Council should inform the public how much income the City has forgiven, deferred or written off so that DACHA could pay its legal bills and how much the City has now spent on legal bills associated with DACHA?
We believe that all of this information should be provided to the City Council prior to there being any future arrangements made with the DACHA members.
July 25, 2010 Part 2.
Dear Mayor Saylor and Members of the Davis City Council:
B. We request that the original legally enforceable Regulatory Agreement be reinstituted; that the Regulatory Agreement and the rents be returned to being set at 110%; that all DACHA households be re-qualified, and that there should be no possible gift of public funds to those who do not income qualify.
•There are what appear to be a number of errors in the staff report that should be corrected. One in particular, should be revised so that the City Council has the full facts at its disposal. As the Regulatory Agreement was entered into by a DACHA board that was composed of improperly seated members the rents should be re-set at the former 110% of median income.
•The present DACHA members were all income qualified at the previous Regulatory Agreement which set qualification at 110% of median income. The revised Regulatory Agreement was ratcheted down to set rents at 80% of median income. The staff report appears to repeat that the residents have income qualified. However, Danielle Foster said in her sworn testimony in the arbitration that none of the DACHA members had gone through a requalification at 80% of median income. DACHA members have only been income qualified at 110% of median income.
•We believe that a third party, Legal Services of Northern California (Woodland) should review the original income qualification material and then conduct a new income qualification to test which DACHA members income qualify to receive a rent level set at 80% or below of median income.
•We do not think that many of the DACHA members’ income qualify at 80% of median income. The question should then be asked are DACHA members being improperly subsidized by Davis citizens. The information TPCF has provided to the Courts appear to show that DACHA members are receiving a substantial annual subsidy to which they are not income qualified (over $5 million of subsidy to which they may not be entitled). Is this sum of money a gift of public funds? Transparency is needed on this issue.
C: We request that TPCF’s existing rights be honored; that all parties list and acknowledge their mistakes and that an independent investigation is carried out to prevent the illegalities and improper actions this from ever happening again.
•TPCF’s rights are still an issue and are impacted by these actions.
•We add again that this should have been settled a long time ago. The limited equity co-op model works and DACHA should work. TPCF has the capacity to help make it work and remains interested in making it work
•Earlier this month the City Attorneys asked us to enter into mediation, we replied that we would and we never heard again except to learn that foreclosure had occurred. That was a sharp loss of the City’s good faith?
•We request again that the City Council direct its staff to hire independent legal counsel (with the approval of TPCF) to conduct an investigation and make a determination; as to whether the City’s activities and involvement with DACHA were unlawful or inappropriate and why DACHA board and members were allowed to break the law and the requirements of the Regulatory Agreement;. Absent such an investigation the City’s credibility and reputation will be compromised with cooperatives and private entities that might otherwise invest their time, effort and money into affordable housing projects in the City.
•We hope that the new council and its leadership will be more transparent and open than the previous council in its dialogue and actions relating to DACHA and limited equity housing cooperatives.
Since the city’s RDA has now taken possession of the DACHA homes, does DACHA still exist? From what I heard at the City Council meeting last night, the city’s RDA now owns 20 homes it is rehabilitating to ensure habitability, and then will decide what to do with as it sees fit as city owned property. It didn’t sound as if DACHA exists anymore…