Consideration and Approval of Professional Services Contract:   Izabel Homes Funding/Development and Mortgage Lending Project

1. Award the Professional Services Contract to Habitat for Humanity of Northern Arizona; and
2. Approve Contingency Authority to the City Manager in the amount of 10% per phase. 
3. Authorize the City Manager to execute the necessary documents.

The goal of the Izabel Homes Funding/Development & Mortgage Lending Project is to provide permanently affordable housing to Flagstaff’s low to moderate income residents.  To facilitate this goal, Izabel Homes is part of Flagstaff’s Community Land Trust Program (CLTP).  Under this program, the City of Flagstaff maintains ownership of the land indefinitely.  The completed homes will be owned by qualified households, and the land leased through a 99-year, renewable ground lease.  Homeowners who participate in this program must meet income and other eligibility requirements.
 
The Izabel Homes Funding/Development & Mortgage Lending Project includes the development of six (6) single-family homes, and the mortgage lending services to low to moderate income households purchasing the homes. This Professional Services Contract is for all six homes; however each phase will be issued a separate Notice to Proceed and may have separate value engineering and contingency specifications. Each phase of the contract will include funding, construction, income eligibility and lending. The first phase is for one house.

Houses will be built in phases. Habitat for Humanity of Northern Arizona (HFHNA) will complete all remaining phases of the Izabel Homes project (6 homes) by 12/31/2020. HFHNA will provide funding for the development and sale of the Izabel Homes project including costs associated with construction, homebuyer selection, mortgage financing, sale of home and reporting. The City of Flagstaff will designate a 10% contingency per phase, to be used only if needed. HFHNA projects that phase one of the build will cost approximately $110,000 to which the City will designate a 10% contingency of $11,000.

HFHNA has a grant to assist with building phase one of Izabel Homes, which is set to expire at the end of this calendar year. The agency would like to apply their grant funding during this construction season, which will require obtaining a Certificate of Occupancy by December.

Yes.  Council has made multiple decisions regarding the purchase and infrastructure development of the parcel.  Most recently Council approved Loven Contracting, Inc. to provide the CM@Risk services for Phases I (2010), II (2011) III (2012) and IV (2013).

 

• Approve the Professional Services Contract; or
• Reject the Contract and direct staff to pursue alternative delivery methods; or
• Reject the Agreement and choose to pursue homeownership goals through alternative mechanisms.  This will require addressing the vacant land in some fashion.

Previous work on this project includes the purchase of the site, remediation of environmental and safety hazards, and the elimination of blight conditions through the removal of hazardous buildings with Community Development Block Grant funds.  Other improvements include the installation of curb and gutters, sidewalks, utility extensions, and infrastructure developments.  The first, second third and fourth phases of residential construction are complete.  Ten homes have been added to the City’s Land Trust Program and have been sold to low and moderate income households. 
 
Starting in 2010 a Construction Manager At Risk (CMAR) procurement process was used to select Loven Contracting, LLC to build the sixteen homes in City authorized phases.  Loven Contracting has done a wonderful job of not only constructing quality homes, but also of being a true partner in being mindful of costs in the delivery of the ten (10) homes completed so far. 
 
Market changes, specifically changes in the lending market, impacted the pace of sales in the most recent phase, with one of the four homes in the phase remaining on the market for more than a year. The target population for this project is a challenging one to serve with homeownership in the very strict lending market of current day.  There was sufficient interest and qualified households in the fourth phase of Izabel Homes. In fact, three contracts were written and were unable to secure financing to close on the home.  In a different lending market, these clients would have likely been able to obtain a mortgage.
 
As lending has been the most significant hurdle to providing homeownership opportunities to low-income households in the Izabel Homes project, a new model for delivery of the last six (6) homes is being implemented. In May, staff conducted a Request for Statement of Qualifications (RSOQ) to identify a non-profit quality builder that also can provide lending achievable by the target population. HFHNA was the successful respondent to the RSOQ and has the organizational capacity not only to build the houses, but to provide mortgage financing through Habitat International.

When complete, Izabel Homes will include 16 single-family, detached residences for sale to qualified families.  There are six homes remaining to be built.  The homes will be included in the Community Land Trust Program (CLTP) to make them permanently affordable.  The earthwork and driveway improvements necessary for the remaining six homes were completed with Phase III in order to gain efficiencies that saved the project approximately $15,000.00.  The City’s investment will remain in the land, provide ongoing permanent affordability to households in the community, generate ongoing property tax revenue for the general fund, and supply lease fees that will assist in long term administration of the units.

No new or ongoing general fund dollars are involved in this Professional Services Contract. HFHNA will be funding the construction and lending pieces of this project (approximately $110,000 for the first home), and the contingency funding (approximately $11,000) will come from Housing Section’s existing resources designated for use for affordable housing. 

The purpose of this project is to provide permanently affordable workforce housing to Flagstaff’s low to moderate-income residents, thus improving the quality of community housing opportunities for residents as well as assist in retaining Flagstaff’s workforce.  The City maintains ownership of the land indefinitely.  The homes will be owned by qualified households, and the land leased through a 99-year, renewable ground lease.  Previous Council direction led to the homes being designed to maximize energy efficiency and all four phases have been awarded a Sustainable Building Award – Intermediate Level – by the Coconino County Sustainable Building Program. Construction of highly energy efficient homes has community benefits, as well as long-term benefits for the homeowners, making the homes inherently more affordable by reducing ongoing utility costs.  As the market appreciates, the homes will become comparatively even more affordable to lower income populations.  Additionally, HFHNA will utilize local contractors and community volunteers for the house build.

Consult: In planning and implementation of the previous phases of Izabel Homes, many community partners were consulted from real-estate, design and lending to non-profit and construction industries. The recent RSOQ process comprised a selection committee that included representatives from the design, engineering and construction industries.