Submitted By
Ahmad M. Zayyad, Deputy Village Manager/Interim Director of Development Customer Services
Reviewed By
Erin E. Baynes, Assistant to the Village Manager
Agenda Item Title
Title
A Resolution Authorizing a Single-Family Housing Rehabilitation Loan and a Lead Hazard Reduction Grant (SFR-102)
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Overview
Overview
The purpose of the Single-Family Housing Rehabilitation (SFR) Loan Program is to address and correct deteriorated and blighted homes throughout the Village. The eligible homeowner requests a deferred loan of $25,000 and a lead hazard reduction grant of $22,860 from the Village.
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Recommendation
Recommendation
Adopt the Resolution
Background
Using Community Development Block Grant (CDBG) funding from the U.S. Department of Housing and Urban Development (HUD), the Single-Family Housing Rehabilitation (SFR) Program provides loans to low and very low-income owners/occupants of single-family properties to correct documented or potential code violations, address deficiencies, and make general property improvements. There are two loan products to support program goals: 1) A deferred-payment loan program that provides no-interest loans of up to $25,000, deferred for repayment for 20 years; and 2) an emergency loan program that provides no-interest loans of up to $5,000 per unit, deferred for repayment for 5 years, for correction of single emergencies, code violations of an emergency nature, or life-endangering circumstances. A minimum contingency of 10% is added to the loan principal to cover any unforeseen conditions and is removed from the loan if not used.
The primary eligibility criteria for all loans are as follows: 1.) The household income must be within HUD income limits; 2.) There must be adequate equity; 3.) Rehabilitation work must be primarily code-related, basic repair work. For each eligible applicant, the Neighborhood Services Department determines financial eligibility, inspects the property, and prepares a detailed scope of work with a line-by-line item cost estimate. Using the scope of work, the homeowner invites contractors pre-qualified by the Village to bid on the project. The homeowner is responsible for selecting the contractor, however, the accepted bid cannot be more than 10% above the cost estimate or more than 15% below the cost estimate.
As of January 10, 2002, lead hazard reduction activities are required on any federally-funded housing rehabilitation project. Three levels of lead hazard procedures exist. For projects under $5,000, the contractor must not create any hazards, including the creation of lead dust. For projects between $5,001 and $25,000, all deteriorated surfaces, containing lead in the affected areas, must be stabilized with no new hazards created. For projects over $25,001, lead hazards in the affected areas must be removed.
Since the Village's maximum loan amount is $25,000, only interim controls are required to alleviate deteriorated lead-based paint surfaces. The Village contracts with an independent lead inspector to perform a lead risk assessment for each property and identify all lead-based paint surfaces. The contracted lead inspector also provides the Village with a list of deteriorated surfaces that must be controlled. Using the Lead Inspection Report, staff develops specifications for the lead hazard reduction work that are incorporated into the scope of work. The successful contractor must either provide documentation that they have certified lead workers on staff or that they have a lead-certified subcontractor that can handle the specified work. Any subcontractors must meet all Village eligibility requirements. CDBG funds for lead work are given to the property owner as a grant following the model of the Cook County HOME Program.
SFR-102 is:
1) A $25,000 rehab loan to the low-income owner/occupant household of this property. The owner’s income qualifies for a deferred-payment loan. The $25,000 includes a $24,550 rehabilitation cost, as seen on the bid spreadsheet, plus a contingency of $450 to cover unforeseen problems during construction. The mortgage amount is $25,000. If the entire contingency is not used, an Amended Mortgage will be recorded on the title for the exact amount of the loan.
2) A $22,860 lead hazard reduction grant.
The funding for this request is the CDBG revolving loan fund, totaling $25,000. The CDBG Revolving Loan fund is comprised of re-paid CDBG single-family loans that are paid back when the loan recipient sells their home or transfers the title to another entity. The $25,000 mortgage is deferred for repayment until a transfer of title or a date 20 years from the date of loan approval (June 11th, 2024). The mortgage and note are written in the amount of $25,000, the $24,550 principal plus the contingency of $450.
The scope of work is detailed on the Loan Summary Form with additional detailed information about this project. The owner meets all program eligibility requirements, including the three major criteria for income, equity, and eligible scope of work.
The project was put out for bid. Three contractors attended the scheduled walkthrough. Two contractors submitted bids. Both bids were over the cost threshold allowed by HUD. The project was put out for rebid. Two bids were submitted and were within the cost threshold allowed by HUD.
Fiscal Impact
Funding from the Village loan is from Fund 2020, the Community Development Revolving Loan Fund. This proposed loan will reduce the $175,000 fund balance by $25,000 to $150,000 (Account #2020.46206.101.585613).
Funding for the Village lead grant is from Fund 2083, the Community Development Block Grant Fund. This proposed grant will reduce the $99,150 budgeted amount for Lead Hazard Reduction grants by $22,860, leaving $76,290 (Account #2083.46201.101.585612).
DEI Impact
These programs are designed to assist low- to moderate-income individuals who are within HUD income limits.
Alternatives
The program provides benefits to the Village in maintaining and improving its housing stock. If the funds are not awarded to individual recipients, the Village will not meet its goals under these programs as committed to HUD. The alternative is to not adopt the Resolution.
Previous Board Action
N/A
Citizen Advisory Commission Action
All loan and grant requests are reviewed by the Housing Program Advisory Committee (HPAC) before they are presented for Board approval. This request was reviewed by HPAC on May 15, 2024 and recommended for approval.
Anticipated Future Actions/Commitments
None
Intergovernmental Cooperation Opportunities
None