Item Description:
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Neg Agmts A2311816, PR00005351, and PR00005446 with Agate Housing and Services for the sale of property at 5637 Lyndale Ave S, Mpls (Metro Inn), corresponding forgivable acquisition loan, and affordability operating grant
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Resolution:
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BE IT RESOLVED, that the Executive Director be authorized to negotiate Purchase Agreement A2311816 with Agate Housing and Services, or an affiliated entity, for the sale of property located at 5637 Lyndale Avenue South, Minneapolis (PID 22-028-24-23-0036), for the provision of affordable housing, with an estimated receivable amount of $900,000, with normal and customary closing costs (estimated at $20,000) to be paid using funds from CP 1008593, Fund 37, DeptID 843400; that following review and approval by the County Attorney's Office, the Chair be authorized to sign the purchase agreement and associated documents on behalf of the Authority; and that the Controller be authorized to accept and disburse funds as directed; and
BE IT FURTHER RESOLVED, that $900,000 in sales proceeds be retained by the Hennepin County Housing and Redevelopment Authority for the provision of 38 units of rental housing restricted and affordable to households at or below 30 percent of Area Median Income (AMI), during the 30-year period July 12, 2023, through December 31, 2053; and that the Controller be authorized to accept and disburse funds as directed; and
BE IT FURTHER RESOLVED, that Executive Director be authorized to negotiate Forgivable Loan Agreement PR00005351 with Agate Housing and Services, or an affiliated entity, for 38 rental housing units located at 5637 Lyndale Avenue South, Minneapolis (PID 22-028-24-23-0036) to be restricted and affordable to households at or below 30 percent of AMI, during the period of July 12, 2023 through December 31, 2053, with a not to exceed amount of $900,000; that that following review and approval by the County Attorney’s Office, the Chair be authorized to sign the loan agreement and related associated documents on behalf of the Authority; and that the Controller be authorized to disburse funds as directed; and
BE IT FURTHER RESOLVED, that the Executive Director be authorized to negotiate Agreement PR00005446 with Agate Housing and Services, or affiliated entity, providing operating support and initial capitalized reserve funds for 38 rental housing units located at 5637 Lyndale Avenue South, Minneapolis (PID 22-028-24-23-0036) to be restricted and affordable to households at or below 30 percent of AMI, during the period of July 12, 2023 through December 31, 2027, with a not to exceed amount of $533,639; that following review and approval by the County Attorney’s Office, the Chair be authorized to sign the agreement on behalf of the Authority; and that the Controller be authorized to disburse funds as directed; and
BE IT FURTHER RESOLVED, that the remaining balance of pandemic recovery funding authorized under Resolution 22-HCHRA-0013 ($3,316,000 for the acquisition and repurposing of the Aqua City Motel and Robin Hotel) be reallocated for eligible costs, operations, staffing, and services to advance equitable housing recovery strategies through December 31, 2024, and the Controller be authorized to disburse funds as directed.
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Background:
In late 2020, the Hennepin County Housing and Redevelopment Authority (HCHRA) purchased four buildings, including the Metro Inn at 5637 Lyndale Avenue South, to provide protective shelter for individuals experiencing homelessness who were impacted by the COVID-19 pandemic (Resolution 20-HCHRA-0037). The Metro Inn was utilized as a protective shelter throughout the pandemic and is now undergoing conversion to permanent affordable housing (Resolution 22-HCHRA-0052).
Since 2020, under the HCHRA’s Single Room Occupancy (SRO) Housing Strategy, staff have been converting these and other properties to deeply affordable permanent housing. As part of its due diligence, staff completed a market and feasibility analysis of maintaining ownership of the Metro Inn and leasing to a non-profit entity to operate (Stevens Square Residence model, 21-HCHRA-0023), versus facilitating the sale of the property to an experienced affordable housing operator with long-term affordability restrictions (University Inn, 22-HCHRA-0051; and Robin Hotel, 22-HCHRA-0041). This analysis demonstrated that the HCHRA would meet HCHRA and Hennepin County housing goals more efficiently and effectively with the Metro Inn property under ownership by a private entity.
Following a competitive selection process, Agate Housing and Services was selected to purchase the Metro Inn from the HCHRA, subject to 30-year affordable housing restrictions. Agate Housing and Services (Agate) is a well-qualified local affordable housing provider. Consistent with Agate’s mission, they have committed to restricting tenancy of all 38 units to households at or below 30 percent of the Area Median Income (AMI); have committed to restricting rents of all 38 units to 30percent of AMI rents; and have committed to prioritizing people experiencing homelessness, all for a 30-year term. To support that affordability, the HCHRA will provide an acquisition loan to Agate, together with a 30-year deferred loan, promissory note, mortgage, and declaration of covenants and restrictions memorializing the HCHRA-required affordable housing commitment. Agate anticipates acquiring the property in Fall 2023, after rehab is complete, and leasing to tenants shortly thereafter.
In addition, an operating assistance agreement will provide financial support to ensure the long-term stability and quality of the housing units. A one-time capitalized reserve assistance from the HCHRA of $50,000 would seed capitalized reserves needed to maintain the building. An additional operational subsidy of $2,750 per unit for the first program year and up to a two percent increase annually thereafter, will support ongoing operations of the building while allowing rents to stay affordable to households with incomes below 30 percent of AMI. The subsidy amount was established after an analysis of operating costs across the HCHRA’s single room occupancy (SRO) properties and traditional affordable housing projects.
This agreement will have up to five five-year renewal options as mutually agreed upon by both parties, and subject to board approval.
The HCHRA’s SRO Strategy aims to re-introduce basic affordable housing into the market to meet the needs of individuals with extremely low incomes and resulting housing instability. This sale, acquisition assistance, and operating assistance allows the Metro Inn project to continue serving this purpose, while keeping daily costs over the full 30-year period to less than daily costs of emergency shelter for single adults.
Current Request: Authorize negotiation and execution of three agreements with Agate Housing and Services, or an affiliated entity, for an affordable housing project located at 5637 Lyndale Avenue South, Minneapolis: Agreement A2311816 for the sale of the property; Agreement PR00005351 for acquisition assistance with a total not to exceed amount of $900,000 from 7/12/2023-12/31/2053; and Agreement PR00005446 to provide a rental subsidy and capitalized reserve assistance not to exceed $533,639 from 7/12/2023-12/31/2027.
Impact/Outcomes: Approval of this request will create 38 units of permanent single-room occupancy housing for households at or below 30 percent of the area median income.
Housing Disparity Domain: Households of color are disproportionately housing cost-burdened at or below 30 percent of the area median income. This request creates 38 housing opportunities for people at or below 30 percent of the area's median income.
recommendation
Recommendation from County Administrator: Recommend Approval