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EXHIBIT 3 Judson Brown, City of Santa Ana October 27, 2022 Habitat Washington Avenue — Preliminary Financial Gap Analysis Page 9 It is important to note that this calculation will need to be revisited once sales of the units commence. At that point, the appraised market values of the homes and the defined Affordable Sales Prices will be utilized to determine the silent second mortgage amount. CONCLUSIONS / ISSUES FOR CONSIDERATION The following summarizes the conclusions of the KMA analysis: 1. Habitat is requesting $2.20 million in financial assistance from the City. Based on the currently available information, it is KMA's conclusion that the Project exhibits a $2.24 million financial gap. This represents a $36,000, or less than 2% differential. Thus, it can be concluded that Habitat's proposed financial assistance request is supported by the Project's current economics. 2. The Affordable Sales Prices cannot be finalized until the Project commences sales activities. It is likely that the actual Affordable Sales Prices will vary from the amounts estimated in this analysis. 3. KMA recommends that the City retain 10% of the City's financial assistance amount (or $220,000) until after the completion of construction. If the assumptions utilized in this analysis change materially, the financial gap analysis should be re-evaluated prior to the release of that amount to ensure that the $220,000 is still warranted by the Project. 4. It is important to note that the construction industry is currently experiencing extreme volatility with substantially high inflation. In addition, the financial markets are also experiencing volatility with respect to interest rates and underwriting standards. This analysis may need to be revised if the construction costs and/or financing assumptions vary from the estimates utilized in the analysis. City Council 21 — 17 12445✓2.20 19090.018.026