The future of the city’s largest affordable housing development has become a topic of contention between two public agencies.
The Vista Aliso senior housing project on Wesley Drive, formerly the site of Aliso School, is currently owned and operated by National Church Residences.
The organization purchased the property from the Laguna Beach Unified School District in the 1980s — with an option extended to the district to repurchase the property in 2041 for $1.
In order to conduct renovations to the property, made up of 71 low-income senior housing units, the group says it needs tax credits that would be obtained through a new loan.
To gain those credits, the housing provider must show a “useful life” as low-cost senior housing for 55 years from the new loan’s fund date.
Since 21 years have already elapsed since the original agreement was signed, National Church Residences would need the district to extend its option to repurchase for another 21 years.
That means the district would not be able to use the land or sell it until around 2062.
“We’re trying to refinance the building because it’s in dire need of repairs,” said Patrick Hagan of National Church Residences in Ohio. “If this refinance doesn’t work, there are no other options.”
Because the Vista Aliso property was developed in the late 1980s under HUD’s Section 202 program, a large reserve for maintenance and renovations was not written into the loan.
Hagan said that the organization has been trying to refinance the property for the past two years.
City steps in
The matter had been on the back burner until recently, when Laguna Beach City Manager Ken Frank wrote a letter to district Superintendent Theresa Daem indicating the City Council’s support of the option extension request.
In her written response, Daem said that although the school board cares deeply about seniors, its first priority is the children of Laguna Beach.
School district officials aren’t pleased that the church group sought the help of the city before even presenting a formal proposal to the district.
The matter came to the city’s Housing and Human Services Committee in May, and the committee unanimously approved a resolution to ask the City Council to support the request.
Former Laguna Beach Mayor Paul Freeman is working with the church group.
“There’s been some resistance to extending the lease,” Freeman claimed.
“There is a substantial amount of maintenance and renovation that’s required, and they feel the only way to do this is to restructure the debt to create enough money to put back into it,” Freeman said.
“The plan would generate $1 million, which would be put right back into the property.”
Option extension discussed
The district has been aware of the group’s option extension objective for two years.
“In July of 2005, NCR approached the district and wanted to extend the option to repurchase another 20 years; in other words, to restore the 20 years that had elapsed,” said Norma Shelton, assistant superintendent for business services.
“No incentive was offered to the district at that time.”
Shelton said that no further contact from the group was received until Oct. 2006, when Freeman approached Shelton as a representative of National Church Residences.
Freeman asked Shelton whether the district would be amenable to extending the option for about 20 years in exchange for $100,000, Shelton said.
“I said that I would like to gather information from him and a formal proposal, and that I would take that forward to the board,” Shelton said.
In anticipation that the proposal was on its way, Daem asked Shelton to acquire an appraisal for the property.
Shelton received an appraisal of $10,500,000, with appraised annual income of $454,781.
A projected 2041 appraisal amount, using historical data from the past 20 years, brought the property value to more than $26 million, if it remained zoned as an institutional property.
The district does not anticipate turning it back into a school; rezoning could dramatically increase its value.
“It is a tremendous asset for the district,” Shelton said.
But the proposal never materialized.
“Nothing formal has ever occurred,” Shelton said.
State housing compliance
Freeman said that he went to the city before making a formal proposal to the district in order to “underscore the importance to the community of maintaining affordable housing.”
The city is required to maintain a minimum inventory of affordable housing units.
“Because Vista Aliso now is part of the city’s affordable housing stock, the city would be out of compliance with state affordable housing requirements if the district takes it back,” Freeman said.
He also discounts the significance placed on the property by the district.
“I question whether there is a lot of value to be gained,” Freeman said.
Elderly housing program
National Church Residences was founded in 1961 by a Presbyterian minister in Ohio.
“It’s the nation’s largest owner and operator of affordable and disabled senior housing,” Freeman said.
It built Vista Aliso as a Section 202 project in the late 1980s.
The Section 202 Supportive Housing for the Elderly program has created more than 200,000 apartments since 1959.
The U.S. Department of Housing and Urban Development provides interest-free capital advances to private nonprofits to develop the housing.
The advance never has to be repaid, so long as the project serves very low-income seniors for at least 55 years in California.
HUD also provides rental assistance.
Demand for such units remains high; the American Assn. of Homes and Services for the Aging found there are nine seniors waiting for each 202 unit that becomes available.
Vista Aliso’s location in Laguna Beach has made it all the more desirable.
Although the units are only 324 to 433 square feet in size, some offer ocean views, and the development is close to a bus stop and a shopping center.
Tax credit funding
Low-Income Housing Tax Credits have been used in the creation of more than 1,000,000 housing units since the program’s creation in the Tax Reform Act of 1986.
About $5 billion in funds is available annually in the program.
Low-Income Housing Tax Credits are only available to for-profit companies, but a law passed a few years ago makes it possible to use the credits in Section 202 housing, by providing nonprofits the option to partner with an investor.
National Church Residences would remain as operator should the Vista Aliso refinance go through.
“It’s not in their interest to relinquish control over the property,” Freeman said.
The group has used such credits to refinance and renovate three properties in Southern California as its initial venture in the new program, using $6.4 million in tax credit equity, of which more than $2 million is being used for renovations, according to National Church Residences.