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BACKGROUND CaIHFA recently issued a Notice of Funding Availability (NOFA) soliciting applications for its HELP program. Please refer to the attached letter and related HELP program description dated February 26, 2007. The HELP program offers funding to local jurisdictions in the form of a 10-year loan at 3.5% annual interest that can be used for a wide range of locally determined affordable housing activities. The City has received two previous allocations of HELP funds: 1) in 2003 ($450,000) to establish a Down Payment Assistance program for low and moderate income buyers; and 2) in 2005 ($1,500,000) to provide gap financing for the Parkview assisted living facility project. DISCUSSION Housing Rehabilitation Program As the Council is aware, the City offers a Housing Rehabilitation Program to income- eligible Pleasanton home owners to make necessary improvements to their homes (see attached program brochure). Historically, the City's Housing Rehabilitation program has been limited to low and very low income households (80% or less of the Area Median Income, or AMI). In addition to prioritizing limited funding, this focus is also related to the sources that have been used to fund the program (primarily federal CDBG funds and local City Housing Funds). The City currently funds the Housing Rehabilitation program at approximately $100,000 per year through its allocation of federal Community Development Block Grant (CDBG) funds. In the past, City Lower Income Housing Funds have supplemented CDBG funds. Staff plans to submit an application for $500,000 in HELP funds from CaIHFA to provide expanded housing rehabilitation services to low and moderate income Pleasanton residents. Specifically, the HELP funds will be used to introduce a new component to the City's existing Housing Rehabilitation by making available loans of up to $50,000 for low and moderate income buyers to make major improvements to their homes. The loans would either be amortized (ten years at 3.5% annual interest) or deferred for ten years (with interest due at the end of the ten-year period) consistent with CaIHFA's terms for the HELP loan to the City. [As with the two prior HELP allocations, CaIHFA effectively loans the money to the City for ten years at 3.5% interest; the City is required to pay back the loan with interest at the end of the ten-year term.] Based on previous experience, the current Housing Rehabilitation program has primarily benefited seniors and single parent households. The proposed new program component is anticipated to broaden the pool of potential beneficiaries to include young first-time home buyers and other groups with moderate incomes who currently "fall through the cracks" in terms of available housing assistance. The introduction of this new program component to moderate income households would also permit the City to focus its other funding sources to serve the neediest populations with loans that are usually deferred until sale or transfer of the home. Although Pleasanton's housing stock is in generally good condition overall, a sizeable number of homes were constructed prior to 1980, and these are the "fixer-upper" homes Page 2 of 5