Consideration and Adoption of Resolution No. 2025-44: A resolution adopting the Adaptive Reuse Bond Program, which provides framework for the expenditure of approximately $3,000,000 in general obligation bond funds for the creation of affordable rental units.
 

1. Read Resolution No. 2025-44 by title only
2. City Clerk reads Resolution No. 2025-44 by title only (if approved above)
3. Adopt Resolution No.2025-44

Consideration of the Adaptive Reuse Bond Program for the expenditure of general obligation bond funds totaling approximately three million dollars ($3,000,000) to be provided as forgivable loans to eligible developers of affordable rental housing.

There is no financial impact to the city’s general fund.
This program will provide loans utilizing general obligation bond funds, as approved by Flagstaff voters in the November 2022 election.
Summary of loan terms:

• Individual loans will require Council approval; total awards not to exceed $3,000,000
• 30-year minimum term
• 0% interest and no payments during 30-year term
• Loan forgiven after 30 years of compliance with program requirements

Approval of this resolution will result in the creation of an adaptive reuse program specifically for the creation of affordable rental housing.

In 2022, Flagstaff voters approved Proposition 442, which authorized up to $20 million in general obligation bonds and funding categories for affordable housing.  On November 7, 2023 Council adopted Resolution No. 2023-51 establishing the City of Flagstaff Rental Incentive Bond program with an allocation of $5 million in general obligation bonds.  One of the funding categories is “Repurpose Existing Buildings into Affordable Rentals.” The Housing Commission provided feedback on the program in March 2025 and recommended the program for approval for this new program at its July 2025 meeting.
 

1. Revise the proposed program.
2. Reject the proposed program and provide further direction.

Housing Bond Background
Proposition 442 – “Creating Rental and Ownership Opportunities for Residents of Flagstaff” identified four affordable housing spending categories totaling $20 million dollars and was approved in the November 8, 2022 General Election. Per the City of Flagstaff Information Pamphlet, one of the approved spending categories is described below:

Repurpose Existing Buildings into Affordable Rentals (Approximately $3,000,000)
“Funding in this area will allow the City of Flagstaff to partner with private developers, non-profits included, to repurpose existing and available buildings and spaces into rental opportunities for the residents of Flagstaff. Housing units are not the only benefit this activity will provide. In addition to the creation of an estimated 75 rental units, currently vacant space in Flagstaff will transition to occupied homes.”

The initial program requirements were developed in late 2024 based on interviews with local non-profits and the affordable development community. A working session to further refine the program requirements with the Housing Commission was held in March 2025. The revised program was presented to the Housing Commission on July 24, 2025 and was recommended for Council approval.

Program Overview
The purpose of this program is to encourage the adaptive reuse of available existing buildings so they may be repurposed as affordable rental housing. The program will offer a simple application and award process while maintaining the necessary safeguards surrounding expenditure of public funding.
The application process will be non-competitive, with funds awarded to applicants on a pass/fail basis. Projects that meet every requirement across the three categories below will be eligible for funding. If the project fails to meet any of the criteria, it will be ineligible.

Project Details

• Property Eligibility: Property must be located within City limits and provide proof of ownership, a contingent purchase contract, a lease agreement providing the applicant the right to operate the proposed residential use onsite for the minimum affordability period, or a letter of intent to purchase or lease the property. Applicant must also provide documentation that the proposed residential use is permitted within the underlying zoning district, per the City Zoning Code.
• Eligible Uses: Program funds may be used for costs relating to the acquisition and rehabilitation of new affordable rental housing in existing buildings, including purchase, renovation, and rehabilitation.
• Ineligible Uses: Program funds may not be awarded to pay for any costs related to the construction of new freestanding buildings, renovation of market-rate units, renovation of existing residential units, complete demolition of buildings, or the improvement of undeveloped land.
• Affordability Period: The minimum required affordability period is thirty (30) years from the Certificate of Occupancy and shall be sustained regardless of any transfer of ownership, such transfer subject to the terms and conditions of the City loan documents.
• Area Median Income Limit (AMI): The project must provide affordable units at an average of 80% AMI or less, with a maximum household income of 100% AMI.
• Affordable Rent Methodology: Unless other funding sources require otherwise, the City's Affordable Rent & Income Limits shall be used.

Cost Per Affordable Unit
Applications requesting $40,000 or less per affordable unit will be eligible. Funding will be awarded on a per-unit basis to meet the 75-unit goal: $3,000,000 / 75 = $40,00. While funding will only be awarded to support the creation of affordable rental units, this program does not prohibit market-rate units within the same project.

Leveraged Funding
Additional funding sources beyond City program funds are required and will be evaluated for project viability, sustainability, and other metrics. All funding sources must be provided, including current and signed letters of commitment from pending funders or loan documents from closed funders.

Lastly, during the creation of this program, Housing staff collaborated with the City’s Zoning Code Manager to ensure adaptive reuse projects seeking this funding would have a path to by-right development. A related zoning code amendment providing incentives for affordable adaptive reuse projects is currently going through the public hearing process and, if approved by Council, will be effective in November 2025.

Goal LU.9. Focus reinvestment, partnerships, regulations, and incentives on developing or redeveloping urban areas.
Goal NH.3. Make available a variety of housing types at different price points, to provide housing opportunity for all economic sectors.
Policy NH.3.1. Provide a variety of housing types throughout the City and region, including purchase and rental options, to expand the choices available to meet the financial and lifestyle needs of our diverse population.
Policy NH.3.3. Increase the availability of affordable housing for very low-income persons, through innovative and effective funding mechanisms.
Policy NH.3.5. Encourage and incentivize affordable housing.
Policy CC.2.10. Educate the community and developers on the benefits of adaptive reuse and create policies to incentivize the reuse of historic buildings to maintain their integrity.
 

HA-1: Create housing options for households at all income levels and family sizes occupied by local residents.
HA-2: Connect people to equitable housing solutions.
 

Create 1: Incentivize the creation of affordable units through various programs and mechanisms.
Protect 2: Ensure affordable housing is a part of every Flagstaff neighborhood and work to address disparate impact as part of any development or redevelopment.
Preserve 1: Encourage the adaptive reuse of buildings.