Larkspur to pull out of rental housing authority

Larkspur has decided to withdraw from a joint powers authority intended to foster the creation of housing for moderate-income renters.

The City Council’s 4-0 vote on Wednesday came after an apartment complex that the joint powers authority purchased defaulted on its senior bond obligations.

“I would like to withdraw and I have no interest in rejoining the JPA because it was just a disaster,” said Councilmember Scot Candell.

Councilmember Sarah Margulies said, “I am still committed to trying to find paths to affordable housing in this community, but I don’t see any reason to remain a member of the JPA that hasn’t provided us any value, any transparency or communication channel.”

The joint powers authority, the California Community Housing Agency (CalCHA), was formed by the Kings County Board of Supervisors in 2019 to issue tax-exempt bonds throughout the state to finance the acquisition of market-rate properties for conversion to income- and rent-restricted rental housing. Marin County, Santa Rosa and Berkeley are also members.

Once a local government joins CalCHA, its jurisdictional boundaries are expanded to include those of the local agency. When CalCHA acquires an apartment complex, the site becomes exempt from property taxes and other property assessments.

After Larkspur joined CalCHA in 2019, the authority issued tax-exempt municipal bonds to purchase Serenity at Larkspur, a 342-apartment complex at 700 Lincoln Village Circle, in a $226.5 million deal.

According to a regulatory agreement included in the offering, when apartments become vacant at Serenity, they must be rented to households earning between 80% and 120% of the area median income for Marin County. For a four-person household, that would mean $149,300 to $223,900 a year.

Because of the default, however, there is a risk that the maximum renters can earn will be increased.

In their final report recommending Larkspur’s withdrawal from CalCHA, Candell and Councilmember Stephanie Andre wrote, “Serenity has not met its goal of providing significant rent benefits to middle income renters. After 5 years, the property is only 59% leased to middle income renters.”

“Taxpayers of Larkspur, Marin County and other local agencies are subsidizing the essential housing program at Serenity by forgoing approximately $3 million a year in property taxes,” they wrote.

They estimated that taxpayers had foregone $14 million in taxes over the last five years.

“This decision now gives the Marin County Assessor’s Office the opportunity to review and assess whether Serenity should remain tax-exempt,” Andre said Friday.

In June, Larkspur-based Catalyst Housing, Serenity’s former project administrator, formulated a recapitalization plan that called for temporary new leasing procedures to allow for leasing to over-income tenants, if apartments have been vacant for a period of time or if there are no program applicants available for vacant apartments.

“We came out strongly opposed to that,” Andre said. “That would completely eliminate any benefits for middle-income tenants.”

In March, however, bondholders replaced Catalyst with the Waterford Property Co. As a result, Andres said she doubts Catalyst’s plan will go forward.

“While Catalyst is disappointed with the decision to change project administrators, we serve at the direction of ownership,” said Stefan Friedman, a spokesperson for Catalyst. “Since the establishment of the project, Serenity has become home to more than 200 low- and moderate-income households.”

A Waterford representative, Alicia Muller, spoke at the council meeting on Wednesday, asking the city to delay its decision.

“I’m here to ask for a stay on behalf of Waterford,” Muller said. “We did not cause the issues at the property, but we were hired because of our expertise in affordable housing operations to fix them.”

Muller said Waterford is working with the bondholders and CalCHA to come up with a restructuring plan.

Speaking during the public comment period of the council meeting, James Holmes of Larkspur said, “This is an example of a public-private partnership where all the benefit has gone to the private people who were paid up front and continue to be paid up front, and there’s been negligible benefit to the public.”