Pursuant to Carlsbad Municipal Code (CMC) Sections 21.85.110(D) and 21.85.120, all fees collected under the Inclusionary Housing Ordinance shall be deposited into a Housing Trust Fund and expended for the affordable housing needs of lower-income households, consistent with the General Plan Housing Element and the Carlsbad Municipal Code.

The Housing Trust Fund receives revenue from a variety of sources, including interest from loans, housing credit purchases, housing impact fees, and interest earned on the fund balance. The Fund is intended to aid in the production, acquisition, rehabilitation and preservation of housing affordable to extremely low-, very low- and low-income households, and those experiencing homelessness.

The Housing Trust Fund significantly contributes to the success of the city’s inclusionary housing program. The Housing Trust Fund has been an indispensable tool to attract other funding sources to affordable housing projects, leveraging the city’s investment up to five times with outside funding sources. With its diversity of revenue sources, the Housing Trust Fund has provided sustained support for the inclusionary housing program, resulting in approximately 2,300 affordable homes in Carlsbad. Here is a listing of all affordable rental properties. City staff present an Annual Report regarding HTF revenue and expenditures. Here is the most recent Annual Report for Fiscal Year 2021-22.

HTF Eligible Projects

On Dec. 12, 2020 the City Council adopted City Council Policy No. 90 which outlines the priorities, expectations and policies for HTF administration.  Funding from the HTF should be leveraged to the extent feasible with state, federal and private sector subsidy capital and is intended to aid in the production, acquisition, rehabilitation and preservation of housing affordable to extremely low-, very low- and low-income households, and those experiencing homelessness.

Housing Trust Fund dollars may be used for new construction, acquisition and/or rehabilitation, subsidy or other means to assist other governmental agencies, nonprofit groups and private organizations or individuals in creating or maintaining affordable housing. Housing Trust Fund dollars may be used to provide new affordable rental or ownership housing units.

Housing Trust Fund dollars shall not be used to satisfy a development's inclusionary housing requirement but may be used to assist in exceeding the requirement by increasing the number of affordable units and/or expanding affordability to very low- or extremely low-income households, or to encourage a preferable product type.

Requests from the HTF

Currently, the HTF application process is an open application with no due dates. This is because the Housing & Homeless Services Department works with developers at varying stages of project concept and feasibility to determine the most effective use of HTF to increase the supply of affordable housing in Carlsbad. Contact the Housing & Homeless Services Department to discuss your project early in the process. A formal application with necessary due diligence exhibits will be submitted when the project is ready for review. Project commitments are only made for 24 months, so projects should not move forward too early, or they risk losing their funding commitment.

Financial assistance requests will be evaluated by the Affordable Housing Policy Team and presented to the Housing Commission for review and recommendation to the City Council. The City Council is the final decision-maker for financial assistance requests.

Project Evaluation

If there are more requests for HTF assistance than funding available the review process shall be guided by General Plan Housing Element policies and programs, the Inclusionary Housing Ordinance, and the following general affordable housing priorities, in descending order:

1. Construction of new affordable housing
2. Preservation of housing at-risk of conversion to market rate
3. Acquisition/rehabilitation of distressed/at-risk affordable housing
4. Rental assistance and homelessness programs
5. Land acquisition for future affordable units
6. Conversion of market rate units to affordable housing

Projects will be evaluated on the following criteria:

1. Projects that provide the greatest benefit per dollar of funds spent towards the lowest household income groups. Priority shall be given to projects that best assist the lowest income levels.
2. Projects that demonstrate higher equity in the project.
3. Projects that demonstrate a lower loan-to-value ratio.
4. Projects that have other funding sources identified and committed.
5. Projects that benefit the highest percentage of lower income families, provide the lowest affordability, include the greater percentage of affordable units or maintain longer periods of affordability.
6. Projects that use Housing Trust Fund dollars as a match or to leverage other conventual and below-market resources, including tax credits, state and federal funding programs and other funding sources.
7. Projects proposed by an applicant with a successful history of project development and/or property management, as appropriate.

Form of Financial Assistance

City HTF dollars must be expended within 24-months following fund commitment.

For new construction and acquisition/rehabilitation projects, Housing Trust Fund dollars are intended to offer "gap" financing. The subsidy required should be the minimum amount necessary to both ensure the feasibility of a project and the affordability of the units. Projects are expected to support as much debt as feasible and to attract as much equity investment as is typical for similar projects.

Whenever Housing Trust Fund dollars are used for the creation, acquisition, and/or rehabilitation of affordable housing, the city shall impose enforceable requirements on the owner of the housing units that the units remain affordable for a period of not less than 55 years for rental units, or 30 years for ownership units, in accordance with CMC Chapter 21.85. The affordability restriction requirements described in this section shall be enforced by a covenant running with the land.

1. When Housing Trust Fund dollars are used to create affordable rental housing, long-term affordability shall be enforced by restricting rents that may be charged to tenants.

2. When Housing Trust Fund dollars are used to create affordable ownership housing, long-term affordability shall be enforced by imposing resale restrictions that maintain an equitable balance between the interests of the owner-occupant and the city.

3. When Housing Trust Fund dollars are used to fund programs which are not described above, the city shall develop appropriate mechanisms to ensure ongoing affordability.

The financial assistance structure may take several forms and is tailored to the financial needs of the individual projects and is negotiated on an individual basis depending upon project cash flow and the senior lender's underwriting guidelines. Low-interest loans are the generally preferred form for distributing housing trust fund dollars for work in all stages of housing development. Example forms of assistance may include fixed interest rate loans, interest-only, deferred payment and/or residual receipts loans, land acquisition and ground lease-back.

Recently Completed Projects

In 2017 and 2020 the City Council approved financing for the Windsor Pointe affordable housing project.  The project, developed by Affirmed Housing, offers permanent supportive housing project for homeless household with serve mental illness and affordable housing for other low-income households with a veteran preference. The project is 48 units located on two non-contiguous sites in the Barrio neighborhood, at 965 Oak Ave. and 3606 Harding St. 

As part of the city’s affordable housing efforts, the city has purchased affordable housing units at risk of converting to market-rate with the intent to resell them to eligible lower-income buyers, thereby preserving, extending and enhancing the existing affordable housing stock in Carlsbad. Most of the units utilized Community Development Block Grant (CDBG) funding, but one unit was purchased and rehabilitated with HTF. Some of the costs (improvements and homeowner association fees) were incurred in FY 21-22. Upon resale, some revenue will be returned to the HTF.

Summary of Pipeline Projects

The City Council has approved loan commitments from the HTF in the amount of $6.78 million. The projects for these loan commitments are described below.