title
Presentation, discussion, and possible action regarding an award from the 2024 HOME American Rescue Plan Non-Congregate Shelter Invitation to Apply for The Other Ones Foundation
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RECOMMENDED ACTION
recommendation
WHEREAS, the HOME American Rescue Plan (HOME-ARP) division entered into a contract with The Other Ones Foundation on April 26, 2024, for $3,224,229 in nonprofit capacity building/operating costs to support the organization while it prepared to apply for a HOME-ARP Non-Congregate Shelter (NCS) award;
WHEREAS, the Governing Board approved publication of the 2024 HOME-ARP Non-Congregate Shelter Invitation to Apply (ITA) on July 11, 2024, which made available $56,511,877 (later amended to $64,005,338) for the development of non-congregate shelters;
WHEREAS, The Other Ones Foundation submitted its application for NCS for Camp Esperanza II for $50,000,000 on December 30, 2024; and
WHEREAS, HOME-ARP staff has reviewed the Application and prepared an NCS Project Analysis and recommends award of $48,420,179 in HOME-ARP funding, which is the amount of HOME-ARP eligible costs;
NOW, therefore, it is hereby
RESOLVED, that the award of HOME-ARP NCS in this Board Action Request for up to $48,420,179 is hereby approved in the form presented at this meeting, subject to conditions as described within the NCS Project Analysis; and
FURTHER RESOLVED, that the Board’s approval is conditioned upon satisfaction of all conditions of the NCS Project Analysis, and completion of any other reviews required to assure compliance with applicable rules and requirements and in accordance with the timeframe described further herein.
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BACKGROUND
TDHCA was allocated $132,969,147 of funds from HUD under Section 3205 of the American Rescue Plan Act, which was later increased to $133,474,575 due to a HUD reallocation. HUD issued waivers and new activities from HOME annual funds into HOME-American Rescue Plan (HOME-ARP) in the Community Planning and Development Notice 21-10 and Appendix (HUD 21-10). Per HUD CPD Notice 21-10, a non-congregate shelter (NCS) is one or more buildings that provide private units or rooms as temporary shelter to individuals and families and does not require occupants to sign a lease or occupancy agreement. NCS must have, at minimum, units with a bathroom sink, toilet, bath and/or shower; smoke detector; carbon monoxide detector; and either unit kitchens/kitchenettes or a communal space with communal kitchens.
As reflected in its HOME-ARP Allocation Plan, as amended, NCS development funds will only be awarded to recipients who first receive the HOME-ARP nonprofit capacity building and operating funds (NCO). The NCO funds were initially targeted in areas that met criteria demonstrating need for at least a medium-scale (50 units) NCS.
In July 2023, the Department conditionally awarded The Other Ones Foundation (TOOF) NCO funds. After submission and review of the application, TOOF entered into a Contract for $3,224,229 in NCO funds that began in April 2024 for a three-year period.
In July 2024, the 2024 HOME-ARP NCS Invitation to Apply released $56,511,887 (later amended to $64,005,338) for NCS acquisition, construction, reconstruction, or rehabilitation of a medium to large scale HOME-ARP NCS. Occupants of the NCS would have to meet the definition of a HOME-ARP qualified population, which includes persons experiencing homelessness and other vulnerable populations.
For the 2024 HOME-ARP NCS ITA Initial Release, the maximum request was up to $50,000,000, and 100% of the HOME-ARP eligible costs. The loan structure provides interest as low as 0% and deferred forgivable or deferred interest and principal, for no more than 15 years, but not shorter than the Federal Restricted Use period. The Federal Restricted Use period for the NCS will be 15 years for new construction.
The NCS activity is based loosely on rental development rules, with many waivers and alternative requirements to account for the differences between development of a shelter and development of a rental property. For example, in a shelter there is no rental income. So, NCS applications need to show the availability of alternative sources of operating funds other than rental income. HOME-ARP funds are ineligible to be used for shelter operating per HUD CPD Notice 21-10. Therefore, the Applicant was required to submit a plan for securing non-HOME-ARP sources of operating funds such as private, local, state, or federal funding sufficient for any operating gap associated with the NCS.
Because of the waivers and lack of rental income, NCS projects are not underwritten in the same way that rental projects are. The size, structure, and income requirements for the NCS vary from rental projects so that many of the tests of traditional multifamily underwriting would not apply. In addition, shelters can also use different building techniques than general rental housing, such as tiny homes. Therefore, for the NCS Applicants, a Project Analysis is prepared rather than an underwriting report.
When possible, staff compared building and operating costs to permanent supportive housing developments (which may have smaller unit sizes, larger common areas, and higher operating costs than general population rental housing) and operating costs to existing emergency shelters in the same location.
Based on the Project Analysis, staff is recommending approval of this HOME-ARP NCS activity.
|
App. ID |
Application Name |
Recommended HOME-ARP Award |
Project Type |
Source and Layering |
City |
|
25800 |
Camp Esperanza II |
$48,420,179 |
New Construction |
HOME-ARP |
Austin |
Application Number 25800: Camp Esperanza II
The Other Ones Foundation, nonprofit 501(c)(3), is the proposed owner of Camp Esperanza II, in Austin, Texas, which is proposed to be a new construction NCS. The address of the proposed construction is 626 Bastrop Highway, Austin, TX, on a parcel of land owned by the Texas Department of Transportation which will be leasing the land to Camp Esperanza II. The total cost of the proposed new construction is $49,462,512, down from the original $50,000,000 requested in HOME-ARP funds upon Application. The change in the amount was due to clarifications of scope of work. Upon review of the Application, staff identified up to $48,420,179 in HOME-ARP eligible costs, which is the recommended HOME-ARP award amount. The remaining funds in the amount of $1,042,333 will come from The Other Ones Foundation’s owner contributions, with shelter operating costs anticipated from the City of Austin and private donations.
Description: Camp Esperanza II is a 325-unit new construction NCS with all units containing a bedroom and a bathroom. The location of Camp Esperanza II is adjacent to Camp Esperanza I, which consists of 200 tiny homes without individual bathrooms. The Esperanza I and II Community maintains low-barrier entry into services and utilizes person centered, strengths-based, trauma informed, and harm-reduction perspectives. Of the building costs for Esperanza II, about 58% is for the Headquarters building (which includes 100 NCS units), and about 42% are for tiny homes. The Headquarters will also include, but are not limited to multipurpose meeting rooms, centralized kitchen, cafeteria, Health and Wellness Center, laundry services, library, kitchen, and office space to support social services and site-based supportive services designed to hasten a person’s exit from homelessness and transition into permanent long-term housing. The use of the Headquarters’ amenities will be restricted for Esperanza II occupants.
Esperanza II proposes the construction of 225 tiny home NCS units, and 100 NCS units in the Headquarters building. The costs for each unit type vary but as reflected in the Project Analysis, costs fell within the anticipated range for each unit type based on staff assessment of other tiny homes and other supportive housing.
Camp Esperanza II will commit all 325 units for Qualified Populations (QPs) through the Federal Compliance Period. QPs include persons experiencing homelessness and other vulnerable populations. Because shelters are not able to charge rent, there will be no fees for the residents. The Other Ones Foundation will also be responsible for utilities.
Financing and Regulatory Terms: The $48,420,179 HOME-ARP Loan will be in first lien position with a 15-year term at 0% interest, and no amortization. If there is no non-compliance during this time period, this loan may be forgiven. The loan structure and details are located in Attachment A, Esperanza II NCS Project Analysis.
Operating sources were key to show financial feasibility for Esperanza II, as required in HUD CPD Notice 21-10. The City of Austin’s Public Health Committee indicated at its April 28, 2025, meeting that operating support for Camp Esperanza II could be forthcoming, and confirmation of this commitment is a condition of the HOME-ARP NCS prior to loan closing, as indicated in the NCS Project Analysis. A letter of support was also submitted by the City of Austin’s Homeless Strategy Office specifying operating amounts per unit.
Per HUD Notice 21-10, the Department was required to evaluate: (1) the appropriate skills and experience related to development of shelters or similar facilities, (2) prior experience operating shelters, (3) budget, timeline, and sources and uses, and (4) proposed operating budget, which if any gaps are identified includes a plan to secure additional private, local, state, or federal funding sufficient for successful operating of the project. These items and more were addressed in the Project Analysis.
Organizational Structure: The proposed borrower is The Other Ones Foundation, which includes principals as indicated in the organization chart included in the NCS Project Analysis.
Risks and Mitigation: As listed in the Project Analysis, the risks and mitigation are restated below:
In looking at the proposal for Esperanza II overall, staff has identified several risks of proceeding and has also provided comments on the potential mitigation of those risks.
• The amount of the HOME-ARP award for development of Esperanza II and the estimated operating costs are both quite significant as compared to the organization’s current budget. The proposed award for Esperanza II’s development ($48.4 million) is more than three times the current budget of the organization which was $14.9 million in fiscal year 2024. The annual operating budget for Esperanza II of $7.5 million will increase the overall yearly budget of The Other Ones Foundation by approximately 50%. Such large and rapid growth may post a risk if the organization’s capacity is unable to adapt to that growth. There may also be a risk of cash flow shortages during construction, especially during the start of construction in which deposits and other startup costs arise.
o TDHCA staff has worked to prepare The Other Ones Foundation through a HOME-ARP nonprofit capacity building/operating Contract of $3,224,229 which started April 26, 2024. As of July 2025, The Other Ones Foundation is 60% expended on the nonprofit Capacity building/operating Contract. The Other Ones Foundation has hired additional staff (especially in their accounting division, data entry, human resources and information technology division), rented office space, and managed a transition of leadership through the Contract.
o Staff has modified the draw process for HOME-ARP NCS to allow for more draws than is typically allowed for rental developments.
• If Esperanza II does not continue to operate as an emergency shelter during the Federal Compliance Period or if there is any other noncompliance with HUD regulations, then the full amount of the HOME-ARP loan would be due to be repaid by The Other Ones Foundation and the loan foreclosed upon. The loan amount is not forgiven yearly; it is forgiven at the end of the Federal Compliance Period. Foreclosure and repayment of funds from Esperanza II may also jeopardize The Other Ones Foundation’s other programs, including Esperanza I, since The Other Ones Foundation is responsible for the entire amount of the repayment (e.g., no LLC or other entity was created to own the NCS). In the event of a foreclosure by TDHCA on the NCS buildings due to noncompliance, TDHCA would become the owner of the improvements on the parcel (e.g., the NCS buildings themselves). In this case, TDHCA would seek to identify an alternate nonprofit to take over the property, and TxDOT would need to agree to the new owner.
o The initial support from the City of Austin’s Public Health Committee and Homeless
Strategy Office at the Meeting on April 28, 2025, shows understanding of the commitment level needed to support Esperanza II as one of the city-run emergency shelters. A challenge of this source is that from the meeting minutes shelter operators appear to be expected to raise funds from other sources, so the city can recapture some of the operating costs and redistribute to other shelters. However, the estimates in the pro forma in this project analysis do not show that the maximum amount from the City of Austin’s Public Health Committee would be needed if The Other Ones Foundation’s fundraising efforts result in higher than 2% increase per year.
• TDHCA is the major contributor of building funds at 97.9% of all costs.
o While TDHCA is the largest contributor for building funds, City of Austin Public Health Committee may be providing operational costs over the 15-year Federal Use Period that are more than double the building funds from TDHCA.
Conditions: As listed in the Project Analysis, the conditions are restated below. If the conditions are not met within 12 months of Contract execution, then the award amount may be revised, or the award may be rescinded.
Conditions in the Contract. Throughout the Contract term, The Other Ones Foundation must meet the requirements in the Contract.
1. If the conditions prior to closing are not met within 12 months of Contract execution, then the award amount may be revised, or the award may be rescinded at staff’s sole discretion.
2. If the Development Owner chooses to expand access to the Headquarters for general operations or persons not living at Esperanza II, a cost allocation plan must be submitted to the Department and determined to be reasonable for the access allowed. Any additional funds added to the Development to pay for the portion of the Headquarters with expanded access must be added to the Development by month 12 after loan closing, but no later than October 2027. The Contract and loan amount would be reduced according to the funds added for the expanded usage.
3. During construction, to address the noise abatement requirements the Other Ones Foundation must incorporate structurally insulated panels (SIPs) into the wall assemblies of the new buildings similar to the existing, adjacent Esperanza NCS Community buildings. The panels will consist of an insulating, fire resistant (ASTM E119) foam core sandwiched between two structural facings. At the mid-construction physical inspection, The Other Ones Foundation must submit photographic evidence of the installation of the SIP, the spec sheets (product information) and both and owner and architect/engineer’s certifications on their company letterhead verifying installation.
4. If Department review of Davis Bacon and Related Acts (DBRA) requirements results in required corrections, The Other One Foundation will make the requested corrections timely. If requested labor standard corrections (if any) are not made by the sixth draw, then funds will be held until the corrections on the previous draws have been made.
Conditions before Closing. Prior to closing the HOME-ARP NCS loan, The Other Ones Foundation will submit:
1. Updated application exhibits: Operating Expenses, Development Cost Schedule, Schedule of Sources, and documentation necessary to support any changes from previous review.
2. Substantially final construction contract between The Other Ones Foundation and its contractor with Schedule of Values.
3. Quotes from property insurers to support the estimated annual amount of insurance.
4. Development Owner must provide a Shelter Manual or other document that shows occupancy admission requirements that allows for access to HOME-ARP’s Qualified Populations.
5. Development Owner shall provide to the Department before the Loan Closing Date, executed estoppel letters or certificates from each and every lienholder on the Property providing the current status of each prior loan, if other loans are included in the final financing.
6. Fidelity Bond Insurance and Payment and Performance Bond.
7. Environmental mitigation efforts including evidence of submission of the stormwater prevention plan submission to TCEQ.
8. Letter from an attorney confirming the tax code under which The Other Ones Foundation has a tax exemption on the improvements, including the percentage of the tax exemption.
9. Confirmation of any pending operating sources for at least a two-year period. Funding from any government entity must be approved by its governing body, inclusive of confirmed amounts and funding terms of operating expenses for Esperanza II will be required.
10. Confirmation that operating payment terms from the entity that will provide a majority of the operating funds will include the right to assign the operating contract to TDHCA in case of foreclosure or instrument in lieu of foreclosure.
11. Title Policy in the amount of the loan as TDHCA as an additional insured.
12. Prior to closing, The Other Ones Foundation may be asked to submit applicable documentation to show that all legal, construction, and financial paperwork is complete.
Should any terms of the proposed capital structure change or if there are material changes to the overall development plan or costs, the analysis must be re-evaluated and adjustment to the terms of TDHCA funds may be warranted.
Recommendation: The HOME-ARP Division recommends an award of up to $48,420,179 in the form of a Deferred Forgivable HOME-ARP construction to permanent loan at 0% interest and a 15-year permanent term, dependent on The Other Ones Foundation meeting the conditions listed in the Project Analysis.