That the City Council:
A.  Approve a professional services agreement with Mercy Housing Living Centers to provide scattered-site Permanent Supportive Housing (PSH) in La Habra; and

B.  Authorize the City Manager to utilize Program Design Option #1 as outlined in Mercy House's Proposal; and

C.  Authorize the City Manager, if units are available and if an individual or family does not meet the criteria of program design Option #1, to utilize Program Design Option #2 as outlined in Mercy House's Proposal; and,

D.  Authorize a budget appropriation of $25,219 to cover the expenses associated with providing one-year of PSH for one unit of housing under Option #2, as necessary. 

Since 2016, the City of La Habra has allocated hundreds of thousands of dollars to assist with the development of solutions that provide unhoused individuals in La Habra access to temporary and transitional housing, along with supportive social services. For example, through its partnership with the cities of Anaheim, Brea, Fullerton, the City of La Habra has contributed funds to construct The Bridges at Kraemer Place, a County-owned facility in Anaheim that provides transitional sheltering for unhoused individuals in the North Service Planning Area (SPA). La Habra has also been a leader in advocacy of legislation to facilitate efforts to shelter and house unhoused individuals.  One such piece of legislation, AB 346, signed into law in 2017, authorized redevelopment successor agencies to use a portion of their remaining affordable housing funds for the development of emergency shelters, supportive housing, and services meant to help unhoused individuals.

While emergency and transitional shelters offer much needed temporary housing for those homeless willing to accept services, there are far fewer housing options available to those individuals who are ready to exit short term housing and live in longer term supporting housing environments. Studies conducted by United Way, Jamboree Housing, and the University of California - Irvine, determined that in 2017/2018 there was a need to construct 2,700 additional permanent supportive housing (PSH) units throughout Orange County.  In order to address the PSH units needed, the County of Orange directed each SPA to identify opportunities for PSH in their respective areas.  In efforts to collaboratively address PSH, on May 7, 2018, City Council adopted Resolution No. 5839, to collaborate with North SPA to identify opportunities for PSH. 
 
In 2017, homeless encampments appeared in several areas around Orange County, including the Santa Ana River Trail, the Santa Ana Civic Center, and various other public and private areas, including parks, beaches, flood control channels, railroad right-of-ways and other open spaces. The 2017 Point in Time Count estimated that there were 4,800 unhoused individuals in Orange County, with La Habra having 45 verified unhoused individuals living within city boundaries. Homeless advocates filed the OC Catholic Worker et al lawsuit against the County of Orange and several Orange County cities related to policies and procedures related to homelessness, as well as the perceived lack of adequate services and facilities made available to unhoused individuals.  

In 2018, North SPA, which includes the cities of Anaheim, Brea, Buena Park, Cypress, Fullerton, La Habra, La Palma, Los Alamitos, Orange, Placentia, Villa Park, Stanton and Yorba Linda, working closely with the County, began to identify strategies to address homelessness, including the possibility of developing regional shelters to provide needed services. Two locations were identified for the construction and operation of new Navigation Centers (Center) to provide shelter and services to unhoused individuals in the North SPA, one in Buena Park and the other in Placentia. 

On April 1, 2019, the City Council approved a Memorandum of Understanding (MOU) with the North SPA to memorialize financial commitments and terms of responsibility for each participating North SPA city related to the construction and operation of the Centers. The MOU covers a ten-year period, which can be extended by mutual agreement of the participating cities. Under the terms of the MOU, the host cities of Buena Park and Placentia entered into third party agreements for the day-to-day operation of the Centers. La Habra's initial financial contribution toward the acquisition and construction of the centers was a one-time funding commitment of $262,600, of which $173,086 came from SB 2 - Permanent Local Housing Asset Funds (PLHA), with the balance coming from residual Successor Agency Low and Moderate-Income Housing Asset Funds (LMIHAF).

La Habra's annual contribution towards ongoing operational costs of the Centers was approximately $178,958 per year and was covered by the City's allocation of PLHA funds; however, on July 15, 2019, the City Council revised the MOU and incorporated new cost share estimates for La Habra's participation in the Centers' operational costs. The new cost share estimates increased the cost of the one-time acquisition and construction cost from $262,600 to $264,068 and increased on-going operations costs for the first year from $178,958 to $286,854.  These increases were covered through Successor Agency housing funds, as well as PLHA funds.

In efforts to further assist with efforts to decrease homelessness, staff reached out to two providers of PSH: City Net and Mercy Hosing Living Centers (Mercy House). The goal was to find a service provider that could help the City provide PSH units in La Habra that could be made available for local unhoused individuals/households that had ties to the La Habra Community. In May 2021, City staff met with City Net to discuss their proposal to provide outreach and bridge housing services. Under their proposal, City Net would have provided these services by removing unhoused individuals from the streets, placing them in motels or apartments within the City of La Habra, and providing full wrap-around (supportive services), while working on crafting potential long-term housing solutions. City Net proposed to rent/lease four rooms per year to assist unhoused individuals. The annual cost to provide four rooms per year, plus provide street outreach, case management and bridge housing services, was $354,400 per year. Staff chose not to pursue this proposal as the City was in the process of transitioning from contract street outreach to internal service provision with new staff hired by the Community Services department, as well as the cost level for the services.

In October 2021, City staff reached out to Mercy House to discuss the possibility of Mercy House providing "scattered site" PSH.  Under their scattered site program, Mercy House proposed to enter into master leases with various residential property owners to lease housing units throughout the City. Mercy House would then enter into a sublease for these units with individuals or families in need of PSH, including supportive services such as case management and other wrap-around services.  Mercy House provided the two options discussed below to help meet the City's needs for PSH.  Staff is recommending approval of Option #1, with an option of authorizing the City Manager to utilize Option #2, as needed.

Mercy House PSH Option #1 - Preference for La Habra Residents or North SPA Residents
Under Option #1, Mercy House provides PSH by entering into a master lease with a property owner and then would enter into a sublease agreement with an individual or family receiving assistance. Under Option #1, rents and services would be funded through the U.S. Department of Housing and Urban Development (HUD) Permanent Supportive Housing Continuum of Care grant, which is eligible for continual renewal by HUD.  Under this option, households qualifying for this program would have to be documented as chronically homeless and must be by referral from the Family Coordinated Entry System (FCES).  Mercy House would prioritize providing PSH to households as follows:

Current FCES data indicates that there is at least one family that meets the above criteria under Priority #1, 11 families that meet the criteria under Priority #3, and several other families that may meet the criteria of Priority #2. However, eligibility would need to be verified using other resources in addition to FCES data.  

Mercy House PSH Option #2 - City of La Habra Retains the Ability to Send Direct Referrals to Mercy House for PSH
Under Option #2, Mercy House also provides PSH by entering into a master lease with a property owner and then entering into a sublease agreement with the individual or family receiving assistance.  However, under this option, the City would have the ability to directly refer an individual or family to Mercy House for services, rather than having Mercy House identify households using the criteria in Option #1. 

Because Mercy House would not prioritize households based on FCES data, but rather would fill units based on City referrals, Mercy House would not be able to fund PSH with the HUD grant. If the City were to utilize Option #2, the City would be required to provide the needed funding to cover the cost of PSH, at a cost of approximately $25,000 per unit, per year. Funds to accommodate Option #2 services are currently available through the City of La Habra's PLHA budget allocation should the City elect to utilize Option #2.

Staff recommends that the City Council approve a pilot program with Mercy House for a period of 12 months, effective August 1, 2022, through July 31, 2023, which is consistent with HUD's grant requirements. Under this pilot program, the City would employ Option #1, allowing Mercy House to utilize HUD's grant and FCES to prioritize household receiving services.  Under the pilot program, Council will authorize Mercy House and the City to provide scattered-site PSH of at least one unit, but no more than three units, in the City.

Staff further recommends the City Council approve the use of Option #2 as a secondary option during the term of the agreement. This would allow the City to house a La Habra based individual or family, assuming a housing unit is available, that may not meet the criteria of Option #1 because the household is not in FCES system and/or has not been determined as chronically homeless. An example would be if the Police Department or school district refers a family that has been living in their car to the City for assistance. If a housing unit is available, Mercy House and the City could agree to provide PSH for the household and the City would fund the expense of the PSH for the duration of the one-year lease. By authorizing staff to enter into an agreement with Mercy House that provides the City with the flexibility to pull from both the FCES system (Option #1) and, if necessary, provide direct referral and funding to Mercy House (Option #2), the City can continue to expand its role in providing critically needed supportive housing services to the unhoused population in La Habra.

Under Option #1 there would be no financial impact on the City.  All costs for this pilot program would be covered by the HUD's Permanent Supportive Housing Continuum of Care grant that Mercy House receives.

Under Option #2, should the City make a direct referral to an individual/household that does not meet the requirements under Option #1, the City would agree to pay Mercy House up to $25,219 for one unit, per year.  Funds to cover this cost are currently available from the City's annual PLHA budget allocation. 

There is no General Fund impact by approving this agreement for either PSH service option.

City Council Goal 6 - Community Outreach and Civic Engagement, Objective E - Build and maintain partnerships and collaborations with other local government agencies, the business community, non-profit organizations, and the faith-based community