San Jose Department of Housing - Department

Innovative Financing Creates More Affordable Housing

In order to finance its programs, the City accesses funding from a variety of sources:

20% Housing Funds - The main source of funding for the Department is 20% Low- and Moderate-Income Housing Funds. As required by State law, 20% of the gross tax increment funds received by a Redevelopment Agency must be deposited into a Fund that assists in the preservation and production of affordable housing. Through a cooperation agreement with the Agency, the City's Housing Department is responsible for the administration of these funds. The 20% has grown with FY 2003/04 tax increment of $32.8 million. Due to current economic conditions, it is forecasted that the tax increment will drop to $30.1 million for FY 2004/05.

Supplemental Redevelopment Agency Funding - Over the last several years, the Redevelopment Agency has provided the Housing Department with supplemental funding, over and above the 20% Funds required by law to be set aside for affordable housing.

Bond Funds - In 1990, the City Council approved the Expanded Housing Program, whereby the City uses its 20% tax increment funds to issue bonds to finance affordable housing construction. This way the City can build more units sooner than if it relied solely on "pay-as-you-go" tax increment funds. For FY 2003/04, the City has borrowed approximately $70 million and has plans to borrow $110 million over the next five year period.

Interest/Repayments/Miscellaneous - Between $4 and $8 million is available annually from a variety of sources, with the largest source being loan repayments. Miscellaneous funds include fees received as a review agency for Federal and State Low-Income Housing Tax Credit (LIHTC) applications and bond issuance and compliance monitoring fees. In addition, the Department receives in-lieu payments from developers of market-rate housing projects in Redevelopment Project Areas where the developer has been relieved of the requirement to set aside 15% of the units in the development for lower- and moderate-income households to meet the mandate of State Redevelopment Law.

Housing Trust Fund - In early 1993, the City Council approved the establishment of a Housing and Homeless Fund with an initial balance of $1.9 million, with the purpose of providing funds to nonprofit organizations that seek to improve, increase or preserve the affordable housing stock and/or assist the homeless. In 2003, the Housing and Homeless Fund was amended to create the Housing Trust Fund. One-time direct services that are eligible for funding include, but are not limited to: general homeless assistance to individuals, including motel fees and transportation costs, support to shelter operators for capital expenses, administration of jobs programs for homeless individuals; and assistance to homelessness prevention programs such as default and foreclosure assistance, housing counseling, and rent payments to prevent eviction. The Housing Trust Fund is also expected to assist in meeting the housing needs of extremely low-, very low- and moderate-income persons and households and to assist agencies that serve the housing needs of these groups. The fund is forecasted to have a balance of $1.4 million at the end of FY 2003/04. It expects to receive $1.5 million from Proposition 46 during FY 2004/05.

Federal Funds - The Department receives funds from the following Federal sources: Community Development Block Grant (CDBG) funds; Emergency Shelter Grant funds; HOME Investment Partnership funds; and Housing Opportunities for People with AIDS (HOPWA) funds. While the Housing Department received $8.6 million in FY 2003/04, proposed program changes and funding reductions at the Federal level make future funding an unknown prospect.

Other Funds - When eligible, the Department actively seeks to obtain other funding. In the past, the Department has successfully secured funds from the State's California Disaster Assistance Program (CALDAP) and HUD's Rental Rehabilitation Program (RRP).