Long Beach could approve a template Tuesday night that would create a roadmap for developers using tax-exempt bonds to build or convert units in the city for moderate-income households while helping the city meet regional housing production goals.

The City Council will consider a proposed “Middle-income” housing program that would allow developers to partner with a joint powers authority to issue bonds to finance the construction of new housing, or to acquire existing buildings, so long as the units are reserved for moderate-income households.

Moderate income is defined as 80% to 120% of the area median income, which is $109,300 for a four-person household in Los Angeles County. The program could help the city make progress toward its Regional Housing Needs Allocation figure of 26,502, which includes 4,158 moderate-income units that need to be built to keep up with expected population growth.

Building housing for the “missing middle” has been a challenge because units for that demographic generally don’t qualify for subsidies like lower-income housing projects do. However, the city has recently ventured into allowing bonds to be used to build or acquire housing with the Oceanaire project Downtown and the Mid-Block development at the civic center.

The Mid-Block deal allowed the California Community Housing Agency to issue $490 million in tax-exempt bonds to buy and develop the site of the old city hall into two 290-unit residential buildings. Rent payments would cover the bond payments but local school districts, the county and other taxing agencies would forfeit about $137 million in property taxes.

However, the proposed program has been strengthened in some respects to ensure long-term affordability for future residents and recoup the city’s share of forfeited property taxes through a host fee, something that was applied in the Mid-Block deal approved in February.

Property taxes are the city’s largest revenue generator for its general fund.

Christopher Koontz, acting director of Development Services, said that project is still happening but it’s been delayed a bit by recent upheaval in the economy. Koontz said the proposed program provides more conservative financing requirements and would implement minimum annual deposits per unit to ensure proper upkeep of any buildings built or acquired through this process.

“It’s not zero risk, but I think we’ve limited it significantly,” Koontz said of the proposed program.

Koontz said that all of the units would be required to be affordable under the proposed program, but it would allow developers to use two different calculations set by the state’s Department of Housing and Community Development and the California Tax Credit Allocation Committee, which has higher income limits and generally allows for higher rents to be charged.

However, the proposed program requires that 50% of new construction units and a minimum of 25% of acquired units to be set at the lower state rental limits. The Mid-Block development could see nearly 80% of its units use the tax allocation committee rent schedule and charge residents more to live there. The rents using this calculation would be limited to 30% of monthly income.

Projects would also be subject to the city’s inclusionary housing ordinance that requires a percentage of units in new developments built Downtown or along Long Beach Boulevard to be set aside for very-low-income households or pay into an affordable housing fund to build those units off-site.

Because the city is not a partner of the financing, it’s not financially liable for the project if there was a default on the bonds. Koontz said in that scenario, additional debt could be taken on by the developer but the city would have some say in how that additional debt is applied.

Koontz said a default would not result in residents being forced to move out but could lead to some reductions in services as the building operator tries to limit its losses. The units would be subject to a 55-year covenant that would keep them affordable for moderate-income households.

While it’s not clear how often the program might be used by developers in the future, or how the City Council might change it before voting to adopt it, Koontz said the city is already talking to another developer that’s interested in building a project near Long Beach Boulevard.

City may seek bond funding to secure affordable units at new Civic Center apartments

Jason Ruiz covers City Hall and politics for the Long Beach Post. Reach him at jason@lbpost.com or @JasonRuiz_LB on Twitter.