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2007, the City received a new allocation from CaIHFA in the amount of $250,000 and this amount was matched with $250,000 in LIHF monies to form a total loan pool of $500,000. The DPA program experienced a surge in activity since last September due in part to the Council and Commission changes made to the program guidelines, the softening of the local housing market and the affordable units available at the Birch Terrace development. As a result, all DPA funds have now been committed and pending the processing of all outstanding loans, the program will be without funds. A summary of the most recent loans is as follows: • Seven (7) loans to buyers of Birch Terrace BMR townhomes (5 low; 2 moderate) • One (1) loan to the buyer of a resale BMR home in Canyon Creek (1 low income) • Three (3) loans to buyers of market-rate homes (2 low; 1 moderate) Notwithstanding the lack of funding, staff continues to receive interest in the program and the current adjustments in house prices may make it feasible to match qualified buyers with appropriately priced homes. To address this funding issue, at its meeting of May 15, 2008, the Housing Commission reviewed options for continuing the program and took action recommending the City Council approve $300,000 from the LIHF to provide continued program funding. In addition, in recognition that the City was the sole lender, the Commission recommended the maximum loan amount be reduced from $60,000 to $20,000. [To date only three of the 15 loans have been at the $60,000 level while the remainder have been at $40,000 or less. The maximum City loan since September 2007 has been $30,000.] As a result of this Commission action, staff is presenting this item for Council consideration. DISCUSSION The DPA program has been a key element in the City's programs for below- market home ownership, and the recent increase in demand demonstrates that there is strong interest and need for this program. While staff recognizes that the majority of the loans issued recently were related to the Birch Terrace development, adjustments in housing costs currently make the program viable for the purchase of market-priced homes. As a result, continuation of the program, at some level, may have value in providing increased opportunities for first time buyers. Notwithstanding the potential need for the program, considering the lack of grant funding, program modifications are necessary to assure the program remains consistent with City funding levels. Staff has identified several alternatives for the DPA as follows: Option 1 -Terminate the DPA program altogether Page 3 of 5