The Elk Grove City Council on Sept. 8 unanimously approved a $6 million loan for a $104 million affordable housing project on Bruceville Road, between Big Horn and Laguna boulevards. The project is known as The Lyla.

As a 294-unit family apartment complex, The Lyla will become the city’s largest affordable housing project. The second largest affordable housing project in Elk Grove is the Seasons at Laguna Ridge apartments, a 222-unit senior housing project at Bruceville and Bilby roads.

Vice Mayor Stephanie Nguyen was absent from the meeting and the council’s 4-0 vote.

City Council Member Pat Hume expressed his support for this project.

“This project was just hard to ignore, because of the sheer numbers that they’re bringing forward, and the location,” he said. “It’s really the prime infill property within the city of Elk Grove when it comes to affordable housing, adjacent to services and transit and all the things that check the box.”

The loan will be made from the city’s Affordable Housing Fund, which is generated from new market rate development from both residential and non-residential developments.

Since the city’s incorporation in 2000, the city has funded about 1,800 affordable housing units.

Included in The Lyla project are studio units, which are unique to other affordable housing units in Elk Grove.

About 58 of the units will be available at the median income level, which has never been included in any other affordable housing project in the city.

Sarah Bontrager, the city’s housing and public services manager, explained the type of people who would qualify for those median-income level units.

“These units would be available to families who have relatively few options for affordable housing within the city, but who may still not be able to afford market rate apartments,” she said.

She also mentioned that the city believes that there will be adequate demand for all sizes of units within The Lyla.

Amenities of The Lyla will include a swimming pool, a children’s play area, a plaza area, and a minimum of 15 hours per week of on-site social services, including after-school programs. The project is also near public transit.

The project, which will be built on six parcels and shielded from commercial uses by trees, will be located near Laguna Community Park, the Wackford Community Center, the Target shopping center, and Laguna Creek High School.

The project’s developer, Pacific West, plans to mainly develop the project through tax credits and tax-exempt bonds. Also sought by the developer is $6.5 million in deferred developer fees.

Bontrager referred to The Lyla as a “fairly expensive” project.

“Per unit, (The Lyla) works out to be about $353,000 per unit,” she said.

However, Bontrager noted that the city subsidy request was “relatively low,” at $20,619 or about 6% of the cost per unit.

Bontrager mentioned that the Lyla has various strengths, including the developer’s experience.

“The (developer) owns over 100 projects, including three in Elk Grove – Avery Gardens, Bow Street (Apartments) and The Gardens at Quail Run,” she said. “They have two projects pending (in Elk Grove).”

Because of its size, The Lyla will have three on-site managers.

Bontrager noted that the project has various weaknesses, including that the developer fee significantly exceeds city standards. She also said that the project’s services budget may need to be increased in the future to provide high-quality services to this project.

Bontrager mentioned that, because the project’s replacement reserve deposit cannot sustain the project throughout a 55-year period, the city expects that the project would eventually need to be recapitalized for the purpose of making major improvements.

“Typically, that happens around Year 15 to Year 20,” she said.

Bontrager added that many of the project’s weakness are not uncommon for such transactions.

“It’s common for rent projections to be less than operating expense projections, and there are ways that developers can make up for that, such as having a lower-than-expected vacancy rate,” she said.

“This project, for example, has projected a 5% vacancy rate, but what we’re seeing in our affordable housing at this point is 0% vacancy rate.”

At this time, the city is confident that the unit sizes at their associated income levels at The Lyla will all have adequate demands, Bontrager noted.

She also noted that if the project was demonstrating a significant profit, the developer would not need city funds to have The Lyla built.

“We recognize that most affordable housing is going to need some amount of city financing in order to come to fruition,” she said. “And in return for making this loan, the developer is committed to making units affordable for 55 years.”

The developer is additionally committed to help with the city’s homelessness issue by placing households that are experiencing homelessness at the top of the project’s waiting list, for units in which they qualify.

Mayor Bobbie Singh-Allen summarized The Lyla project as “something that will go towards fulfilling a lot of needs in our community, with our affordable housing shortage.”