At its next meeting on October 7, 2026, Sonoma’s City Council will consider allocating $1.25 million from its Affordable Housing Trust Fund as an incentive to to develop construction, acquisition, rehabilitation, or preservation of affordable housing within the city. What follows is the staff report on the agenda item.
The City of Sonoma faces a persistent shortage of housing that is affordable to lower-income households, essential workers, seniors, and families. High land and construction costs, limited developable land, wildfire and water-supply constraints, and the loss of naturally occurring affordable units all make it difficult for the private market alone to deliver housing at rents and prices working households can afford.
The City’s 2023–2031 Housing Element (6th Cycle) establishes goals, policies, and programs to meet the City’s Regional Housing Needs Allocation (RHNA) of 311 units, including 83 units for very low-, 48 units for low-, and 50 units for moderate-income households. Housing Element Program 7 Affordable Housing Funding Sources identifies the City’s role in funding and supporting developers to secure outside funds. One objective is to work with developers and housing providers to identify at least 2 affordable new development projects, including at least 42 extremely low, 41 very-low, and 48 low income units, and 1 rehabilitation or conversion project that would assist at least 10 very low and 10 low income households. Issuing a Notice Of Funding Availability (NOFA) is a direct implementation step that supports the City’s objective.
At the end of calendar year 2025 the City issued building permits for 57 units during this housing element cycle. To meet the City’s Regional Housing Needs Allocation (RHNA), 254 units are still needed, including 82 units for very low-, 45 units for low-, and 25 units for moderate-income households. The City has been made aware of opportunities for new affordable housing projects and conversion of units to affordable units that need gap financing.
NOFA is intended to provide competitive gap financing to qualified developers of affordable housing in Sonoma. Local funds are most effective when they leverage state, federal, and private sources such as Low-Income Housing Tax Credits, State Housing & Community Development (HCD) programs (e.g., Multifamily Housing Program, Housing Accelerator, Homekey+), Federal Home Loan Bank Affordable Housing Program (AHP) funds, County funds, and conventional debt. Staff recommends the Council use affordable housing trust funds to prioritize projects that are financially feasible, ready to proceed, and deliver deep and long-term affordability.
The City’s Affordable Housing Trust Fund gets its money from fees paid by developers when new development does not provide the required affordable housing, as well as fees charged to help offset a project’s impact on the need for affordable housing. As of July 2026, the fund balance is $2.8M, of which $1.25M is uncommitted and recommended to be available for this NOFA.
| Term | Staff Recommendation |
| Total funds available | Up to $1,250,000 |
| Eligible applicants | Nonprofit and for-profit developers, community land trusts, and limited partnerships with demonstrated experience developing, owning, and managing affordable housing in California |
| Eligible activities | New construction; acquisition and rehabilitation; conversion of existing buildings; preservation of at-risk or naturally occurring affordable housing; predevelopment costs for projects |
| Eligible project location | Within the City limits of Sonoma |
| Eligible households | Lower-income households at or below 80% of Area Median Income (AMI), as published annually by HCD/HUD for Sonoma County |
| Minimum affordability | At least 100% of assisted units restricted to households at or below 80% AMI; priority for units at or below 60% AMI and 30–50% AMI |
| Affordability term | Minimum 55 years for rental; minimum 45 years for ownership (with resale/recapture provisions); recorded regulatory agreement and deed of trust |
| Funding form | City is open to various financial structures based on what the developer needs. Development teams should identify if assistance is needed, in what form it is needed and how much is needed, and then verify this need. Operating costs are not eligible for City funding. |
| Maximum award per project | $250,000 to $1,250,000 |
| Minimum leverage | Every $1 of City funds must leverage at least
$4 of non-City funds |
| Application format | Single-round with deadline (see Timeline) |
Threshold Requirements
To be eligible for scoring, applications must demonstrate:
- Site control (fee title, executed purchase agreement, option, or long-term ground lease), unless proposal is to purchase a site;
- Consistency with the General Plan, Development Code, and applicable zoning, or a clear pathway to approval, including State density bonus and streamlining laws where applicable;
- A complete development budget, 15-year operating pro forma, and sources and uses showing a financing gap that the City’s funds will help close;
- Evidence of developer and property management experience by providing a pro forma and budget documents that demonstrate their financial capacity to deliver the project;
- Compliance with applicable prevailing wage, fair housing, and relocation laws;
- Adoption of an affirmative fair housing marketing plan, with local preference to the extent allowed by law; and
- A reasonable timeline to close financing and start construction, if applicable, upon
Proposed Scoring Criteria
Criterion Points
Depth and duration of affordability (share of units at or below 50% AMI, extremely
low-income units, term beyond 55 years) 25
Project readiness (entitlements, site control, CEQA status, design, and schedule) 20
Financial feasibility and leverage (committed and pending non-City funds, reasonable costs, cost per unit, City dollars per unit) 20
Developer capacity and experience (track record, local presence, property management plan) 15
Housing priorities (special-needs or supportive housing, family units with 2–3+ bedrooms, seniors, workforce, or persons with disabilities) 10
Location and community benefits (proximity to transit, services, schools, jobs; walkability; infill or reuse; sustainability and wildfire-resilient design; resident services) 10
Total 100
Applications must score a minimum of 70 points to be recommended for funding. Staff may recommend partial funding, conditional commitments, or no award if no application meets minimum criteria.
Evaluation and Award Process
- City staff conducts completeness review and score applications within 10 business days of the deadline.
- Underwriting and scoring by a review panel consisting of the Community Development Director, future Administrative Services Director, and a County Community Development Commission staff member.
- Recommendation to City Council at a public meeting with a summary of applications, scores, underwriting analysis, and proposed conditions.
- Council award of a conditional funding commitment at a public
- Negotiation and execution of a Loan Agreement, Promissory Note, Deed of Trust, and Regulatory Agreement, in a form approved by the City Attorney.
Awards will be conditioned on securing all remaining financing; completing California Environmental Quality Act (CEQA) review and project entitlements before any funds are disbursed; and compliance with all City and legal requirements. The City reserves the right to reject any or all applications and to amend or cancel the NOFA.
Proposed Timeline
Milestone Target Date
Council approves NOFA [Month Day, 2026]
NOFA released and publicized [+1 week]
Optional developer workshop / Q&A [+3 weeks]
Applications due [+8 weeks]
Staff review and scoring complete [+12 weeks]
Council award consideration [+14 weeks]
Loan documents executed Within 6 months of award
Outreach
Staff will publish the NOFA on the City website, distribute it through the Sonoma County Community Development Commission, the Non-Profit Housing Association of Northern California (NPH), Housing Land Trust of Sonoma County, Burbank Housing, MidPen Housing, Eden Housing, and other regional developers, and post it through City social media and e-newsletters.
Policy Options & Staff Recommendations:
- One or more than one award of funding. A single $1.25 million award can meaningfully move a larger project but concentrates Splitting awards helps more projects but may not provide enough funding to be decisive.
- Staff recommends retaining flexibility and therefore not specifying in the NOFA whether the Council will fund one or more than one application.
- Ownership housing. The guidelines allow ownership projects, but rental projects will generally deliver more affordability per dollar and for a longer term.
- Staff recommends that ownership projects be allowed but that rental projects be given
- Funding Specify loan type, if inclined.
- Staff recommends being open to various financial structures based on what developer needs but the City Council may want to specify the loan type it is willing to support.
Environmental Review:
Authorizing release of a NOFA is not a “project” under CEQA because it is an organizational or administrative activity that will not result in a direct or indirect physical change in the environment, and it does not commit the City to any specific project (CEQA Guidelines §§ 15060(c)(3), 15378(b)(4)–(5)). Any funding commitment will be conditioned on completing appropriate environmental review of the specific project before any funds are disbursed or the City takes a binding action.
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