Title
Approval of a Resolution Authorizing a Revised and Amended Real Estate Purchase and Sale Agreement with Low Income Housing Institute
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Move approve a resolution authorizing a revised and amended real estate purchase and sale agreement with Low Income Housing Institute.
Report
Issue:
Whether approve a resolution authorizing a revised and amended real estate purchase and sale agreement with Low Income Housing Institute.
Staff Contact:
Jacinda Steltjes, Housing Manager, Community Development, 360.753.8482
Presenter(s):
None - Consent Calendar Item
Background and Analysis:
In spring 2022, City of Olympia and Thurston County partnered to purchase property in Olympia along Franz Anderson Rd. SE for utilization as affordable housing. Olympia issued a Solicitation of Interest seeking a development team to acquire and develop tax parcels 58900000300, 58900000301, 58900000400, 58900000500, 58900000600 into Permanent Supportive Housing on February 17, 2023. Proposals were due March 27, 2023.
Staff representing the City of Olympia, City of Lacey, City of Tumwater, and Thurston County reviewed and rated the responsive proposals in spring 2023 and selected Low Income Housing Institute (LIHI) to develop the project.
Franz Anderson Permanent Supportive Housing Project
The project is occurring at approximately 527 Franz Anderson Rd. SE and consists of 70 units of low-barrier studio and one-bedroom housing units for low-income single adults and couples. Up to 35 of the units will be available to households with incomes up to 50% of Area Median Income, $43,000 for a one-person household and $49,150 for a two-person household. The remaining units will be available to households with incomes up to 30% of Area Median Income, $25,800 for a one-person household and $29,500 for a two-person household. Tenants will pay no more than 30% of their annual income on rent and utilities. Twenty-eight of the units are intended for households with incomes up to 30% AMI and rents will be subsidized by Housing Choice and Apple Health and Home vouchers. An on-site property manager will reside in an additional unit. Optional on-site supportive services will be provided to tenants by a behavioral health service provider.
The project’s capital development stack consists of funding from Thurston County, City of Lacey, City of Tumwater, Thurston Regional Housing Council, equity resulting from a Washington State Housing Finance Commission 9% Low Income Housing Tax Credit (LIHTC) award, Washington State Department of Commerce’s Housing Trust Fund, Apple Health and Home capital funding, and LIHI. Local funding is structured as a grant while state funding from the Housing Trust Fund and Apple Health and Home is structured as low-interest loans. LIHI anticipates closing on its financing by December 2026 and beginning construction on-site by March 30, 2027. The project has a 14-month build timeline and is expected to be complete by late spring/early summer 2028. Once complete, LIHI will both own and manage the site.
An interlocal agreement between City of Olympia, Thurston County, City of Lacey, and City of Tumwater states that the local funding will be pooled and managed by City of Olympia. That agreement governs the conditions by which local funding will be made available for the development of the project. The Real Estate Purchase and Sale Agreement between City of Olympia and LIHI governs the conditions by which Olympia will sell the property to LIHI.
Real Estate Purchase and Sale Agreement
A Real Estate Purchase and Sale Agreement between City of Olympia and LIHI was executed on June 21, 2023. The agreement states that the City will sell the property to LIHI for $1 once the capital financing is in place. The sale price supports efforts by the City of Olympia to encourage development of affordable housing with supportive services. A low sale price makes the development of the project possible by reducing the total development cost. By reducing the total development cost, LIHI is able to reduce the debt that it must take on to build the project and thereby the amount of funding it needs to collect from rents to service that debt.
In exchange for a low purchase price, LIHI agrees to operate the project in perpetuity as Permanent Supportive Housing. This is defined by RCW 36.70A.030(33) as subsidized, leased housing with no limit on length of stay that prioritizes people who need comprehensive support services to retain tenancy and utilizes admissions practices designed to use lower barriers to entry than would be typical for other subsidized or unsubsidized rental housing, especially related to rental history, criminal history, and personal behaviors. A restrictive covenant will be executed as part of the sale and will run with the property.
The agreement has been amended three times to date to extend the due diligence period as LIHI pursued financing to construct the Franz Anderson Permanent Supportive Housing project.
Revised and Amended Real Estate Purchase and Sale Agreement
The Real Estate Purchase and Sale Agreement is now being amended for a fourth time to include more robust amendments. Many of the these were agreed upon by the local funders (Olympia, Lacey, Tumwater, and Thurston County) as part of the second amendment to the interlocal agreement governing how $6,775,000 in local funds from the jurisdictions will be made available for the development of the project. These amendments are now being incorporated into the Revised and Amended Real Estate Purchase and Sale Agreement, which governs the conditions by which the City of Olympia will sale the property to LIHI. The two agreements are closely related as LIHI is unable to construct the project without the discounted sale of the property as well as the local funding.
Current amendments to Real Estate Purchase and Sale Agreement are detailed below.
1. Revise and Amend Prior Conditions of REPSA
The amended agreement calls attention to the fact that this version of the Real Estate Purchase and Sale Agreement revises and amends the terms and conditions of the prior Real Estate Purchase and Sale Agreement.
2. Definitions
The amended agreement updates the RCW citations defining the terms “affordable housing” and “Permanent Supportive Housing”. These citations have changed since the original agreement was executed.
3. Revised Unit Mix
The amendment revises language referencing the unit mix of the project. The prior agreement stated the property would be developed as 70 units available to households whose income does not exceed 30% of Area Median Income. The agreement is amended to include a revised unit mix in which no more than 35 housing units will be designated for households with incomes up to 50% Area Median Income ($43,000 for a one-person household and $49,150 for a two-person household) and the remaining 35 units will be designated for households with incomes that do not exceed 30% Area Median Income ($25,800 for a one-person household and $29,500 for a two-person household). This unit mix has been approved by the project’s other funders, including Housing Trust Fund and Washington State Housing Finance Commission as well.
Approximately 54% of the project’s funding will come from equity resulting from a 9% Low Income Housing Tax Credit program award. The change to the unit mix is in response to feedback LIHI received from several 9% LIHTC program equity investors in 2025 and into 2026 that they are unwilling to invest in projects in which all units are designated for 30% or below AMI households. Investors currently consider these types of projects too risky because the projects rely heavily on federal subsidies from programs that have traditionally been considered stable and reliable but have recently experienced or been proposed to experience significant structural changes to how the program operates.
4. Project Based Housing Vouchers
The agreement is amended to include the words “as they become available” in reference to the expectation that LIHI will pursue project-based housing vouchers to support operations of the units. LIHI has secured 18 Housing Choice vouchers and 10 Apple Health and Home vouchers already. This amendment makes clear that should an opportunity to pursue additional project-based vouchers arise, LIHI will pursue the opportunity.
5. Priority for Placement of Tenants
The agreement previously required LIHI to use the Thurston County Coordinated Entry system to place single adults and couples exiting Olympia tiny house villages associated with the State’s Encampment Resolution Program (ERP) into the Franz Anderson project. The Revised and Amended Real Estate Purchase and Sale Agreement amends this language and prioritizes for the following populations for placement into the project:
• Single adults and couples exiting Franz Anderson tiny house village; and
• Single adults and couples exiting Maple Court; and
• Single adults and couples whose last known address was within Thurston County, Washington, and who are active in Thurston County’s Coordinated Entry system; or
• Persons who are from Encampment Resolution Program (ERP) sites in Thurston County, Washington and are part of the ERP program.
This amendment helps to create a continuum of housing types available to unhoused people as they transition from living outdoors to ERP supported tiny homes or enhanced shelter sites and then to permanent supportive housing as they stabilize and are ready. The amendment also ensures that adults and couples participating in Thurston County’s Coordinated Entry system will be prioritized for housing at the Franz Anderson Permanent Supportive Housing project before people engaged in homeless response systems in other Washington counties.
6. Service Provider
The Agreement is amended to more clearly communicate that a behavioral health service provider, either Sea Mar Community Health Centers or an equivalent provider, will provide the optional services at the Franz Anerson Permanent Supportive Housing project. The previous agreement named Sea Mar Community Health Centers specifically as the provider
7. Utilization of Regional Funding
The agreement was amended to clarify where local, regional funds originate. Previous versions of the agreement stated that City of Tumwater and Thurston County intended to contribute State and Local Fiscal Recovery Funds (SLFRF) to the project. Those entities are now contributing General Fund or other local funds to the project. The agreement is also amended to reference the General Fund and other local funds being contributed by partner jurisdictions but also the funding contributed by the Thurston Regional Housing Council.
8. Placed in Service Date
The goal of having the project placed in service by April 2026 is revised to include a new placed in service goal date of June 2028. This date aligns with project’s current development timeline of closing on financing by December 2026, beginning construction by March 2027 and carrying out a 14-month construction period.
9. Quarterly Reports & Project Updates
The agreement is amended to include new language requiring LIHI to provide to City of Olympia quarterly reports on operations of the project as well as provide periodic project updates to Regional Housing Council. This will help reassure local funders that LIHI is meeting performance expectations, achieving positive outcomes for the project’s tenants, and following best practices for facility management.
Climate Analysis:
A Revised and Amended Real Estate Purchase and Sale Agreement allows LIHI to purchase the property and move forward into development. The project will be located near a high-frequency transit corridor with bus service every 15 minutes along Martin Way SE. The development will comply with the Washington State Evergreen Sustainable Development Standards which require building in a way that safeguards health and safety, increases durability, promotes sustainable living, preserves the environment, and increases energy and water efficiency.
Equity Analysis:
The amended agreement permits the project to continue moving forward toward development so that it may serve vulnerable households in Olympia and Thurston County. The project will serve residents whose incomes do not exceed 50% of area median income by household size. The project addresses existing gaps in affordable housing availability and provides housing for marginalized populations who are over-represented in the county-wide homeless system.
According to a Housing Needs Assessment produced in January 2021 by Thurston Regional Housing Council, there are two critical housing gaps that hinder Thurston County’s ability to address both short-term and long-term homelessness. Those gaps are a lack of Permanent Supportive Housing and of housing units which are affordable to households whose income is at or below 30% of area median income by household size.
Washington State’s Growth Management Act calls for jurisdictions to plan to accommodate future population growth at various income levels. According to data produced by Thurston Regional Planning Council, a total of 3,594 new Permanent Supportive Housing units will be needed in Thurston County by 2045. Olympia 2045: Comprehensive Plan calls for just under 1,100 new Permanent Supportive Housing units to meet the project need over the next roughly 20 years.
Neighborhood/Community Interests (if known):
Affordable housing is of high interest to the community and has ranked as one of the community’s top priorities in the past three community engagement surveys.
Financial Impact:
The Revised and Amended Real Estate Purchase and Sale Agreement provides for the sale of the property to LIHI for $1.
Options:
1. Move approve a resolution authorizing a revised and amended real estate purchase and sale agreement with Low Income Housing Institute.
2. Move approve, with amendments, a resolution authorizing a revised and amended real estate purchase and sale agreement with Low Income Housing Institute.
3. Do not approve the resolution and provide staff with direction on next steps
Attachments:
Resolution
Amended & Restated Real Estate Purchase and Sale Agreement_Tracked Changes
Amendment 3 to Real Estate Purchase and Sale Agreement
Amendment 2 to Real Estate Purchase and Sale Agreement
Amendment 1 to Real Estate Purchase and Sale Agreement
Real Estate Purchase and Sale Agreement