to Consider $75 Million Line of Credit for Housing
By Lookout Staff
April 22 -- Worried the City could lose opportunities
to build affordable housing with only $10 million a year in hand,
the City Council will consider establishing a $75 million line of
credit when it meets Tuesday night.
Under its current “pay-as-you-go” strategy, the annual funding
produces roughly 25 two and three-bedroom units, which falls far short of meeting
the need in Santa Monica’s skyrocketing rental market, City officials
The line of credit from Bank of America would allow the City’s Redevelopment
Agency to accelerate “the near-term funding of affordable housing by expanding
available capital to take advantage of opportunities as they arise,” housing
“This leveraging of set-aside funds enhances the City’s ability
to more immediately address the need for affordable housing and avoids inflationary
increases in land and construction costs,” James Kemper, the City’s
acting housing administrator, wrote in a report to the City Council.
A $75 million line of credit, Kemper said, “represents a balance between
creating new affordable housing finance opportunities and the cost of the bank
commitment fee associated with a line of credit.”
The current financing method “does not leverage the Agency’s ongoing
revenue stream and results in missed affordable housing opportunities if sufficient
funding is unavailable when desirable properties emerge,” Kemper wrote.
A $75 million line of credit increases the near-term funding available for
affordable housing development while retaining several million dollars annually
for pay-as-you-go funding, he wrote.
Staff proposed the line of credit after determining it would be a better strategy
than borrowing from the City’s revolving investment funds, officials said.
Bank of America was chosen over Citigroup and JP Morgan, because it “provided
the best proposal regarding the overall cost of establishing the line of credit,
including origination and commitment fees, and the interest rate,” Kemper
“The goal of leveraging affordable housing revenue is to accelerate near-term
affordable housing development (this includes newly constructed housing and
acquisition and rehabilitation of existing housing) to better meet the community’s
immediate needs,” according to the report.
The credit line will be needed to keep up with the rising cost of producing
affordable housing -- which has steadily increased in recent years from $150,000
a unit to nearly $400,000.
The five-year line of credit will cost the City $250,000 to administer, according