SR-9-A (52)
CI-A
eEl ~ ~ 1933
RMD:HSG:JM:PB:RB
Councl1 Meetlng
Santa Monlca, California
December 14, 1993
TO: Mayor and Clty Council
FROM: City staff
SUBJECT: Program Guidelines for Implementatlon of Ordinance 1615
Relatlng to tne Inclusionary Houslng Program
INTRODUCTION
This report transmits information and recommendations regarding
Program Guidelines for implementation of the City's Inclusionary
Housing Program, Santa Monica Municlpal Code Chapter 9.28. Staff
recommends that the Clty council (1) approve the Program Guidelines
as presented herein; (2) adopt a resolution adopting the maximum
sales prices and maximum allowable rents shown in Attachment 1 and
Attachment 2 to the Program GUldellnesi (3) direct staff to assess
an approprlate amount to set aSlde for a reserve fund for
exerclsing Options to Purchase, and to assess administrative costs
of operatlng the program, and to report back to Council as part of
the 1994-95 budget cycle; (4) dlrect staff to develop appropriate
forms of deed restrictlons as needed to implement the attached
gUldelines.
BACKGROUND
On November 6, 1990, the voters of the City of Santa Monica
approved Proposltlon R, addlng Sectlon 630 to the city Charter.
Proposltlon R requlres that the Clty Council at all times requlre
that not less than 30% of all rnultlfamlly residentlal hous1ng newly
constructed ln the Clty on an annual basls be permanently
1
, . - !. ~ 1993
,;,.- ......
q-A
affordable to and occupIed by low and moderate income households.
It further reqUIres that at least 50% of those unIts be affordable
to low income households, and the remainder be affordable to
moderate income households. The charter amendment defines low
lncome as not exceeding 60% of medIan lncome, and moderate income
as not exceeding 100% of median income.
At various meetings in 1991, City council considered strategies for
implementation of Proposition R. These discussions resulted in
adoption by city council on March 4, 1992, of OrdInance 1615, and
subsequent amendments, (hereinafter lithe ordinance") which requires
the prOVISIon of on si te inclusionary unI ts in certaIn
clrcumstances, and allows the payment of an In lieu fee ln other
circumstances. The ordinance further provides a method for
calculation of the number of required units, and establishes
standards for such inclusionary units, inCluding minimum sizes,
distributlon, design, and tenure.
The OrdInance requires that the CIty develop a list of income-
qualifIed households from which developers would select tenants and
purchasers.
The OrdInance establIshes prIorItIes for selection, and requires
that the CIty develop adnnnlstratlve gUldellnes for tenant and
purchaser selectlon.
2
The Ordinance specl.fies that deed restrictlons be utill.zed to
restrlct propertles sUbJect to thls ordlnance.
On June 9, 1992, the City Councl.l adopted a resolutlon establlshlng
a base price for In-Ileu fees to be pald under thls Program.
DISCUSSION
The Inclusionary Housing program Guidelines provide administrative
procedures for implementation of Ordinance 1615, as amended. The
GUldelines are based on (I) the framework establlshed by Ordinance
1615 and subsequent amending ordlnances; (2) comments on a draft of
these GUldelines received at a Housing Commission meetlng of
November 18, 1993; and (3) the followlng POllCY objectives:
· To ensure that eligible tenants can afford to rent or buy
incluslonary unlts.
· To provide predlctable rents and sales prices to
developers at commencement of constructlon.
· To provlde conslstency between program requirements and
typical fl.nancing requirements.
These Ob]ectlves gUlded staff in consldering several questlons,
which are dlscussed ln Attachment A.
SUMMARY OF PROGRAM GUIDELINES
ThlS sectlon descrlbes the maJor features of the proposed Program
GUldellnes WhlCh are attached to thlS report as Attachment B.
3
Sales price:
The Program GUldelines summarlze the requirements of the City Code,
and prov1de a method for determination of sales prices and rents of
inclus10nary units.
Under the Guidelines, the sales price of an inclusionary unit is
based on the amount of a mortgage that can be affordably amortized
over thirty years by a buyer who makes no more than the maximum for
that income category, plus a 10% downpayment. The mortgage amount
is calculated on the basis of maximum income, lnterest rates,
typical homeowner associat1on fees, and property taxes. The
GUldelines provide that staff utlllze an interest rate for fixed
rate loans, and calculate homeowner associatlon fees on the basis
of an annual survey of fees for newly constructed condominiums in
the city. They provIde factors for adJustIng the maXImum sales
price and rent by bedroom SIze, and calculate the maximum sales
prIces and rent for low and moderate income unIts for 1993 (see
Attachment 1 to the Program GUIdelInes) .
In order to allow developers increased certainty regarding the
requlred sales prlce for a unlt, the GUIdelInes lndicate that where
CertlfIcate of Occupancy lS Issued WIthIn 18 months of executIon of
the deed restrlctlon, the developer may sell the unit at the
affordable sales prIce In effect at the tIme the deed restrIctIon
4
is executed rather than the affordable sales price at the t1me of
sale.
Review of Plans:
The Guidellnes provlde for the Plannlng Department to reVlew
projects for conslstency with the Guidelines upon submlssion of an
application for approval.
Under the Ordinance, the size of an inclusionary unit must be
reasonably consistent with the size of a market rate unit. The
GUldellnes lndlcate that un1ts shall be conclusively presumed to be
reasonably conslstent if the inclusionary un1t 1S not less than 80%
of the average market rate un1t within the proJect.
Buyer and Tenant Eligibility Lists:
The Guidelines also describe procedures for establishment and
management of a buyer/tenant eligibl1ity llst. They provide for
the City to establish 11sts for both Pr10rity Appllcants, as
deflned by the Ord1nance, and Non-Priority app11cants. staff will
establIsh the in1 tlal order of each lIst by lottery, and will
prequalify a portion of the persons on the list, as necessary to
ensure a pool of applicants when units become available. Applicants
that are found lnellglble ~ay appeal such flndlngs.
The GUldellnes requIre appllcants to conflrm theIr cont1nued
lnterest In rema1nlng on the llst annually, and allow staff to
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close appl1cations 1f 1t determines that there 1S llttle llkelihood
of selection.
The GUldelines spec1fy that the City will provide developers wlth
names of up to 10 potential buyers or renters at a time. They
requ1re that applicants have a mlnimum household size, consistent
with other city housing programs, in order to be eligible for a
given unit, and that they not own other residential property.
Resale Restrictions:
The Guidelines provlde for execution of a deed restriction for all
inclusionary unlts, WhlCh wlll lnclude resale restrictions for all
for sale inclusionary units. These resale restrictions will grant
the City an option of Purchase for the Property for a period of 55
years. Upon notificatlon that an owner wishes to sell their
property, the CIty w1Il have 60 days ln WhICh to exercise its
optlon or deslgnate a buyer. In the event that the city does not
exercise the Option, the owner would be allowed to sell the unit to
anyone at the prIce prov1ded by the resale restrictlon.
The GUIdelines allow the city to charge an administrative fee of up
to 3% of the Resale Price to cover its cost in connection wIth the
sale of the un1t.
The Resale PrIce of the unIt w1ll be the lower of (1) the appraIsed
market value, or (2) the InIt1al sales prIce, plus an amount equal
to the lncrease in the Consumer Prlce Index, plus capltal
6
improvement, minus the cost of correctlon of deferred malntenance
or code v~olations.
In order to facllitate flnanclng for the purchase of inclusionary
units, the Guidellnes allow subordination of the resale restriction
to first trust deed loans, but provlde for the city to have an
option to purchase the property in the event of a default by the
owner on a first trust deed loan.
The restrictlons wlll
occupied by the Owner
rented.
also provlde that the property will be
as a prlncipal residence and will not be
Tenant Income Recertification and Monitoring:
The Guidelines requlre that owners of inclusionary rental units
recertify the lncome of tenants annually, and subml t annual
reports to the City. Owners wlll be requlred to terminate a
tenant's lease where the tenant refuses to provide necessary income
documentatlon, or where their lncome exceeds 100% of median lncome
for two consecutlve years, in the case of a low income unit, or
150% of median income for two consecutlve years, in the case of a
moderate income unlt.
No recertlflcatlon of lncorne wl1l be requlred for ownershlp unlts.
7
ADMINISTRATION:
The Program will be admlnlstered by the Land Use and Transporatlon
Management Department and the Housing and Redevelopment Division.
FINANCIAL/BUDGETARY IMPACT:
The Land Use and Transporation Management Department and Housing
and Redevelopment Divlsion will absorb the cost of operating the
program during this fiscal year. As part of the 1994-95 budgetary
process, staff wlll assess the cost of future administration of the
program for salaries for staff of the Land Use and Transporation
Management Department for review and processing of projects
submitted for approval, and for salarles for staff of the Housing
and Redevelopment Division of the Resource Management Department
for management of walting lists.
These costs may be partially or fully offset by any fees charged
for admln~stratlon of resale of the units. It is not possible,
however, to predlct the rate of resale of such units. A
slgnificant lag between the time cost begin to be incurred for
establlshment of the waltlng Ilsts and the tlme that the first
units are resold should be expected.
Staff recommends that ln order to avold potential loss of
affordablllty of an lncluslonary unlt, that the Clty establish a
revolvlng Incluslonary Houslng Reserve Fund. These funds would be
available to the Dlrector of the Resource Management Department to
8
allow the c~ty to exercise ~ts Option to Purchase Inclusionary
ownership unlts In event of a default on a superior loan. Allor a
portlon of the funds would be recouped upon subsequent sale of the
unlt by the c~ty. However, as these funds would not be needed
until such time as unlts are sold, staff recommends that thlS fund
be establlshed through the budget1ng process for next flscal year.
It is anticipated that a reserve of approximately $ 200,000.00 will
be needed; that this reserve will be funded by Inclusionary Housing
fees to be collected.
RECOMMENDATION:
It 15 recommended that ~he Clty Counc1l:
(1) Approve the Inclusionary Housing Program Guidelines
presented in this report.
(2) Adopt a resolutlon adoptlng the rnaXlmum sales prices and
maXlmum allowable rents shown 1n Attachment 1 and
Attachment 2 to the Program GUldelinesi
(3) Dlrect staff to assess an appropr1ate amount to set aside
for a reserve fund, expected to be funded by Inclusionary
Houslng fees, for exerclslng Optlons to Purchase, and to
assess admin1strative costs of operating the program, and
to report back to Counc11 as part of the 1994-95 budget
cycle.
9
(4) DIrect staff to develop approprIate forms of deed
restrictions as needed to
implement the Program
GU1delines.
Prepared by: Jeff Mathieu, D1rector of
Resource Management
Paula Burrier, Manager
Houslng and Redevelopment Division
Mary Strobel, Deputy City Attorney
Barry Rosenbaum, Deputy City Attorney
Robert Berry, Senior Administrative
Analyst
10
ATTACHMENT A
CONSIDERATIONS IN THE DEVELOPMENT OF THE PROGRAM GUIDELINES
staff was gUlded by several objectlves in the development of
the proposed Program Guidelines for the Incluslonary Houslng
Program. Firstl the gUldelines should seek to assure that eligible
tenants could afford to rent or buy inclusionary units. Second,
City requirements for rents and sales prices should be predictable
when a developer beglns construction. Third, the program should be
consistent with financlng requirements. These objectlves gUlded
staff as it looked at the following questions:
1. When should sales prices be determined?
Affordable sales pr.ices are based on income, interest rates,
and other factors which vary over time. While the ordinance
specifies that deed restrlctions shall be developed prior to
issuance of a building permit, and developers typically need to
define their financlal obligations prior to entering construction,
affordable prices may change prior to actual sale of the unit. In
order to meet the require~ents of the ordinance and to decrease the
risk to developers that changes in affordability could result in
requirements for sale at substantially lower prices that expected
at commencement of construct~on, the guidelines allow developers to
sell at the affordable sales price that was in effect at the time
of issuance of certificate of Occupancy, however in the event that
a Certif~cate of Occupancy is lssued wlthin 18 months of execution
of the Agreement Imposing Restrictlons on Real property, developers
may elect to sell the unit at the price in effect at time of
executlon of that Agreement.
2. What interest rate should be assumed in determininq
affordability of ownership units?
The Slze of a mortgage that a buyer can afford will depend on
the lnterest rate avallable to the buyer. These rates will vary
considerably dependln9 on whether the loan provldes a fixed rate or
a variable rate, and from lender to lender. Staff utilized a fixed
rate, since low and moderate income buyers may have limited ability
to make lncreased loan payments if the lnterest rate on an
adJustable loan lncreases. Since lnterest rates also fluctuate
cont~nuously, and 1 t lS dlfflcul t to predlct the direction of
future ~nterest rates, staff used an lnterest rate midway between
the hlgh and low rates avallable for the prlor year, for a Fannie
Mae 30 year loan.
3. What downpayment should be buyers be assumed to be able to
afford?
In order to qualify for a loan, buyers must demonstrate an
ability to make the necessary downpayment as well as to afford
monthly mortgage payments. Downpayment requirements may vary from
as little as 3% (under certain special lending programs) to 30% or
more. Since high downpayment requirements represent a significant
barrier to affordabil~ty for low and moderate ~ncome households,
staff assumed a 10% downpayrnent would be made. staff also assumed
that buyers would be required to purchase private mortgage
insurance, as is typically required with downpayments of this size.
4. What type of resale restriction should be used?
While the Inclusionary Housing Ordinance requires that the
units be "permanently affordable" to eligible households, buyers of
such units will seek a return on the~r investment. staff
considered three alternat1ve formulas for limiting the price at
which the un1t lS resold: (1) requiring resale at the prlce
established by the C1ty annually for sale of new units; (2)
allowing a preset appreciat10n in the unl t; and (3) allowing
appreciation at the rate of increase in the Consumer Price Index.
The f1rst alternat1ve, requiring resale at the affordable
pr1ce at that time, was reJected, as it could result in a loss of
value of the unit.
The second, allowing resale at a preset price, was rejected as
arbitrary. Staff recommends use of the Resale Restriction that
will provide the lower of either: (1) the appra1sed market value of
the property as establ1shed by a neutral appralser; (2) the in1tial
sales pr1ces, pause an amount equal to the percentage increase 1n
the Consumer Pr1ce Index for all Urban Consumers as the index most
familiar to the publ1C wh~ch is related to the rate of inflation.
5. ShOUld the city agree to subordinate its resale restrictioDs?
Wh1le lenders w1ll typ~cally requ~re that all resale
restr1ct1ons are subord1nated to the1r llens, th1S could result in
loss of an 1nclus1onary un1t lf a lender forecloses on a un1t where
the resale restrlctlon has been subord1nated to the lender's llen.
However, unless the City allows such subordlnatlons, buyers may be
unable to secure financ1ng to purchase units 1n the first place.
Therefore, staff recommends that the program allow resale
restrict10ns to be subord1nated, where the C1ty is glven an option
to Purchase the unit in the event of default. Staff further
recommends that approprlate funds be ldentlfied and set aside to
enable the C1ty to exercise th1S opt1on in event of a default.
6. Should residents of inclusionary units be required to move if
they become ineligible?
Wh1le households must meet income eligibillty guidelines when
then rent or buy an lnclusionary un~t, 1ncreases in thelr income
could result in their benef i ting from a program Wh1Ch they no
longer need. In order to assure that the inclusionary units
cont1nue to be available to benefit eligible households, the
proposed gU1delines require that tenants move from the inclusionary
unit if the1r income exceeds certa1n thresholds for two consecutive
years. These thresholds are set higher than the initial
eligibility llmits for renting the unit in order to avoid
establishing disincentives for upward mobility, and to provide
greater stability for both tenants and the community. Owners of
inclusionary units, on the other hand, would not be required to
sell their home as a result of increased household income.
ATTACHMENT B
INCLUSIONARY
HOUSING
PROGRAM
GUIDELINES
The Inclusionary Housing Program was established by Ordinance
1615 of the Santa Monica Munic1pal Code to lmplement Proposition R,
which was adopted by voters of the C1ty of Santa Monica in November
1990 I and requires that not less than 30% of all mul t1family-
residential housing newly constructed in the city be affordable to
and occup1ed by low and moderate lncome households. These
Guidelines summarize the requ1rements of the Ordinance and provide
guidelines for its implementation for both for-sale and rental
housing.
I. Program Requirements
The Inclusionary Housing program requires that not less than
thirty percent of the total number of new dwell1ng un1ts to be
constructed in any proiect (excluding density bonus units) shall be
affordable to households of low o~ moderate lncoroe.
A. Affordab1lity requlrement
Of the inclusionary units, at least half must be affordable to
low income households. Therefore, if only one unit must be
provided, the unit must be low income, and if an odd number of
units must be provided, there will be more low income than moderate
income units.
B. Units to be provided on-site
The follow1ng number of 1nclus1onary units are required when
on-site un1ts are provided:
Nu~her of Proposed
Units (excluding
density bonus units)
Low Income
units
Required
Hoderate Income
units
Required
2
3
4
5
6
7
8
9
10
11
12
13
1.4
15
1
1.
1.
1
1
1.
2
2
2
2
2
2
2
3
o
o
o
o
1.
1
1.
1
1.
2
2
2
2
2
16
17
18
19
20
3
3
3
3
3
2
2
3
3
3
For more than 20 un1ts, the number of inclus10nary units
required shall equal 30% (thirty percent) of the number of units
built; with any decimal fraction of 0.3 or more rounded up to the
nearest whole number, and any decimal fraction of less than 0.3
rounded down to the nearest whole number.
All required units must be provided on-site if either:
1. The proposed proj ect involves 20 or more units (excluding
density bonus units; or
2. The project is on a slte for which no category C removal
permit was issued prlor to February 18, 1992 (or was issued
after February 18, 1992, but app11ed for prior to February 18,
1992) and the developed use of the property on February 18,
1992 was multifamily and at least one unit was rented at or
below the follow1ng levels:
o bedroom
1 Bedroom
2 Bedroom
3 Bedroom
4 Bedroom
$ 761
870
1,033
1,180
1,322
Where a unlt was vacant on February 18, 1992, all required
units must be provided on site if the property was multifamily
and at least one unlt was rented at a level affordable to
moderate income households when last rented, as determined for
that time.
c.
In Lleu Fees allowed
In
lieu of
Feen) .
met:
some situations, the program allows payment of a fee in
provlsion of the unit on the project site (the "In Lieu
In Lieu Fees are allowed if the following tests are all
1. The proJect has less than 20 unlts (excluding dens1ty bonus
un1ts); and
2. The proJect had a Category C removal perm1t pr10r to
February 18, 1992, or had appl1ed for such a permlt prlor to that
date; and
2
3. The slte had no affordable mult1family un1ts on the site as
of February 181 1992, as defined by the ordinance, or where the
unit was vacant on that datel if the unit was not affordable when
last rented.
D. Amount of In Lleu Fees
Where payment of an In L1eu Fee is allowed, the requlred
inclusionary un1t number is determlned by rnult1plying the number of
units (exclud1ng density bonus units) in the proJect by 30%. The
first inclusionary unit must be affordable to low income
households, and the second to moderate income households.
Additional inclusionary units shall alternate between low and
moderate income units. Any fraction of a unit required shall not
be considered either a low or moderate ~ncome unit.
In Lieu Fees may be paid only for low income units, and any
fraction of a unit required. All moderate income units required
shall be provided on site.
The amount of the In Lieu Fee is determined by multiplying the
AdJusted Base In Lieu Fee by the number of low income units, or
fraction of a unit, for Wh1Ch the fee is being paid. The Base In
Lieu Fee is established from time to time by the City Council. As
of June 1992, the Base In Lieu Fee per unit is $51,000. This fee is
adjusted for inflation by the percentage change in the Consumer
Price Index (CPI) between the date of adoption of the Base In Lieu
Fee and the month ln WhlCh the payment lS made. The CPI used is
the index for Urban Wage Earners and Clerical Workers for All items
for the Los Angeles/Long Beach/Anaheim statlstical Area, as
published by the United States Department of Labor, Bureau of Labor
Stat1stics.
were:
As of June 1992, the In Lieu Fee and On-Slte required units
Numher Of proposed
Units (excluding
Density Bonus Units
Fee In Lieu of
Low Income Units
Units, June 1992.
Moderate Income
units Required On
On-site
2
3
4
5
6
7
8
9
10
$30,600
45,900
61,200
76,500
91,800
56,100
71,400
86,700
102,000
o
o
o
o
o
1
1
1
1
3
*After June 1992, the fee would be adjusted for 1nflation
E. 100% Moderate Income proiects allowed
Projects may provide for 100% of the un1ts in the project to
be affordable to moderate income persons, lnstead of providing the
required low 1ncome units or payment of In L1eu Fees.
F. Type of tenure
For rental projects, all on-site inclusionary units must be
offered for rent. In ownership projects, inclusionary unlts may be
either rental units or ownership units.
II. Sales Price
A. Method for determination
The Clty shall determine on an annual basis the maximum sales
price for ownership units under the Inclusionary Housing Ordinance.
The maximum sales price for a moderate income household shall be
the amount of a mortgage that can be affordably amortized over
thirty years by a buyer who earns no more than median income for a
four person household, as publ1shed by HUD annually, plus a
downpayment of 10% of the sales price. The maximum sales price for
a low lncome household shall be the amount of a mortgage that can
be amortized by a buyer who earns the median income household of
four persons, multiplied by 60%, plus a downpayment of 10% of the
sales price.
To calculate the mortgage amount, the affordable monthly
mortgage payment will be calculated using the formula
Monthly Income x 30% minus (-) typical homeowner association
fees m1nus (-) property taxes.
staff shall utllize the mldpo1nt between the h1gh and low
required Yleld for Fann1e Mae fixed rate 30 year loans durlng the
prl.or twelve months, plus the tYPlcal cost of prlvate mortgage
insurance, in calculating the maximum affordable mortgage.
Typical homeowner association fees shall be determined on the basis
of an annual survey of fees for newly constructed condominiums in
the Clty of Santa Monlca.
The maX1mum sales pr1ce shall be adJusted for bedroom Slze by
mult1plY1ng the unadJusted prlce by the follow1ng factors:
o Bedroom
1 Bedroom
2 Bedroom
3 Bedroom
0.70
0.80
0.95
1. 085.
4
Based on the above methodology, the maX1mum sales prices for
low and moderate 1ncome unlts for 1993 is shown on Attachment 1.
B. T1IDe of determlnat10n
The Maximum Sales Price shall be that pr1ce 1n effect at time
of lssuance of a Cert1ficate of Occupancy; however, 1n the event
that a certificate of Occupancy is issued wi thin 18 months of
execut10n of the Agreement Imposing Restrlctions on Real Property,
developers may elect to sell the un~t at the price 1n effect at
time of execution of that Agreement. The Agreement Imposing
Restrictions on Real Property must be signed and recorded prior to
securing a building permit.
XII.
HaxiDlum Rent.s
The city shall determine the maximum rent for all rental
incluslonary un1ts on an annual basis. The maximum rent for
moderate 1ncome households shall be equal to 30% of the monthly
income for households earning the median income for a four person
household, as published by the US Department of Housing and Urban
Development and adjusted for unit Slze. The max~mum rent for very
low income households shall be equal to 30% of the monthly income
for households earning 60% of the med1an income for a four person
household, as published by the US Department of Housing and Urban
Development, and adjusted for unlt Slze.
The unlt size factors provided in section IIA shall also be
used to adjust rents for rental un1ts. Based on th1S methodology,
the maximum rents for low and moderate income units are shown on
Attachment 2.
IV.
Buyer and Tenant Eligibility
Only low and moderate 1ncome households shall be ellgible to
occupy or own and occupy 1nclusionary un~ts. Households shall
earn no more than the maX1mum lncome as determlned by the city, and
adjusted by household Slze. However, in no case shall an owner be
requ~red to move by vlrtue of a change 1n income after purchase and
occupancy of the unit.
Maximum incomes for low and moderate 1ncome households for
1993 are shown on Attachment J.
The following lndlVlduals are lnel1gible to occupy an
lnclus10nary unlt:
(1) All employees and offlclals of the Clty of Santa Monica
or 1 ts agenc1es, author1 t1es, or commiss1on who have, by the
authorlty of their posltlon, pollcy-mak1ng authority or lnfluence
affect1ng Clty housing programs;
5
(2) The llnmediate relatives, employees,
ga~ning s~gn~ficant eCOnOInlC benefit from a
assoclation with publlC employees or officials;
or other persons
dlrect bus~ness
(3) The lmmediate relatives of the appllcant or owner,
lncluding spouse, children parents, grandparents, brother, slster,
father-in-law, mother-in-law, son-in-law, daughter-1n-law, aunt,
uncle, nlece, nephew, s1ster-ln-Iaw, and brother-in-law.
Appllcants for the waiting list may not own any other
residentlal property.
v. processinq of Applications for city Approval
Applicants for city approval for new construction of
multifamily housing (e.g. Conditional Use Permits or administrative
approval) shall submit to the city a completed Inclusionary Housing
Ordinance Compliance Form ind1cating how they intend to comply with
the requ~rements of the Inclusionary Housing Program (l.e., pay an
In Lieu Fee if allowed or build on site), whether the required
lnclusionary units will be for sale or for rent, and which units
are proposed for designation as inclusionary unlts.
Appllcants shall, whenever reasonably posslble, provide that
inclusionary units are evenly dlstributed throughout the project.
Applicants shall also ensure that there are not significant
identifiable differences between inclusionary and market rate
dwelling visible on the exterior of the dwel11ng unit, and that the
Slze and deslgn of the lncluslonary unit lS reasonably consistent
with the proposed market rate un1ts. The size of an lnclusionary
un1t shall be conclus1vely presumed to be reasonably cons1stent
with the size of proposed market rate units if the inclusionary
unit 15 not less than 80% of the size of the average market rate
unit w~thin the proJect. For units of lesser size the burden shall
be on the applicant to demonstrate that the unit is reasonably
consistant in size. However, ln no case shall the units be less
than the following:
0 Bedroom 500 square feet
1 Bedroom 600 square feet
2 Bedroom 850 square feet
J Bedroom 1,080 square feet
4 Bedroom 1,200 square feet
Incluslonary units shall have at least the same number of
bedrooms as the average dwelllng unlt In the proJect.
All lncluslonary unl ts ln a pro] ect or phase of a project
shall be constructed concurrently wlth the constructlon of market
rate dwelllngs ln the proJect or phase of that project.
6
The Plannlng Department w~ll reVlew the Incluslonary Housing
Ordinance Compllance Form for conslstency with these GU1delines,
and wlll calculate the number of requ~red un1 ts or In Lieu Fee
consistent with these Guidelines.
If the project is eligible to pay an In Lieu Fee and the
developer elects to pay an In Lieu Fee, fifty percent of any
requ1red fee shall be paid prior to issuance of a bUllding permit.
The remaining 50% shall be pa1d ln full prlor to 1ssuance
Certlflcate of occupancy for any units 1n the proJect. Payment of
this portion of the fee shall be secured by execution of an
lrrevocable letter of credit ln favor of the City, or other
security deposit acceptable to the City for the total amount of the
obligation. The letter of credit or other acceptable security
shall be delivered to the City prior to the issuance of a building
permit, and shall be released and returned to the developer
immediately upon payment in full of the In Lieu Fee.
If the proJect will conta~n on-slte incluslonary units, the
applicant shall execute and have recorded an "Agreement Imposing
Restrictlons on Real Property," prlor to lssuance of a building
permit, which shall document the requirements of these gUldelines.
VI. Buyer and Tenant Eligibility List Procedures
Developers shall rent or sell inclusionary unlts only to
persons referred by the City from a walting list of prospective
buyers and tenants for units developed under this program.
A. Establlshment of list
The City will establish a llst of persons interested in buying
or renting an lncluslonary unl t. Interested persons shall be
provided an informatlon package and application to complete, and
shall spec1fy the type of un~t for which they are applYlng, by
lndicating the following:
1. Ownershlp vs. rental
2. Bedroom Size
3. Low or moderate lncome
Persons who have been eVlcted pursuant to the Ellis Act,
Government Code Sectlon 7060, persons resldlng ln Santa Monica, and
persons worklng ln Santa Monlca shall be glven prlority for
lncluslonary unlts. Appllcants requestlng such prlorlty shall be
requlred to provlde documentatlon of thelr ellgiblllty for such
prlorlty status at the tlme of appllcatlon.
The Clty wlll establlsh the order of the lnltlal list by
holdlng a lottery among Prlorlty Appllcants, and a lottery among
non-Prlorlty Appllcants. Thereafter, applicants' names will be
added to the end of the list of either Priority Applicants, or non-
7
Priority Appllcants, as appllcable.
Appllcants may apply for more than one category of unit (e.g.,
both ownershlp and rental). As part of the application, applicants
will authorize the Clty to release their name to developers of
units under this program.
B. Qualiflcation of applicants and maintenance of waitlnq lists
The city will pre-qualify a sufficient number of persons as to
income and eligibility to ensure a sufflcient pool of applicants in
each list category. Staff will promptly notlfy applicants who are
found ineligible of the reason for their ineligibility, and will
provide them the opportunity to appeal such a finding within 30
days. All such appeals shall be reviewed by the Manager of the
Houslng and Redevelopment Division, whose determination shall be
final.
The city will, on an annual basls, update its applicant list
by requiring that applicants confirm their interest in remaining on
the waiting list in wrltlng. At the discretion of the Housing
Manager, staff may close the list to new applications at such times
as it may determine that there would be little likelihood of new
applicants being selected.
C. Referrals from wait~nq lists
Developers will be required to notify the Housing Division a
minimum of 60 days before they antlcipate recelvlng a Certificate
of Occupancy for the project. Upon request from a project owner,
the City shall provide the owner with a list of up to ten
applicants per available program unlt who have requested the type
of unit to be available. staff will send a notice of referral to
such appllcants, providing informatlon regarding how they may apply
to rent or buy the avallable unit.
Developers shall be responslble for screenlng all prospectlve
tenants or buyers, and provid~ng information regarding the
available unit. In the event that developers are unable to locate
a tenant or buyer within ten days of receipt of names from the
waiting list, they may request the names of additional applicants.
Applicants may be referred to flve proJects. After flve such
referrals, an appllcant's name wlll be placed at the end of the
walting list.
8
In order to quallfy to rent an Incluslonary Unlt, the
applicant must have the following minimum household Slze:
o Bedroom
1 Bedroom
2 Bedroom
3 Bedroom
1 person
1 person
2 persons
3 persons
Developers shall notify the city upon execut~on of any
agreement for sale of a unit and opening of a sale escrow.
D. Time llmlt for marketinq
Developers shall have up to 60 days from the date of issuance
of a Certificate of Occupancy to lease 80% of the inclusionary
rental units in a project. Developers shall be allowed 120 days to
sell 80% of any incluslonary ownership units in a project. The
number of units required to be rented/sold within this deadline
shall be determined by mUltiplying the number of inclusionary units
in the project by .8, and rounding up to the next whole number.
Developers shall be required to submit to the City a report
certify~ng compliance with these requirements.
Upon vacancy of an inclusionary apartment unit, the apartment
owner must notify the city of the vacancy and shall lease the
inclusionary unit to a person on the city waiting list within 30
days of vacancy.
VII.
Resale Restrictions on ownership units
The "Agreement Imposing Restriction on Real Property" will
provide that, upon sale of any inclusionary unit, the buyer shall
execute a "Resale Restriction Agreement and Option to Purchase",
which shall be recorded agalnst the t~tle of the un1t.
A. Method of sale
The restr~ction wlll provide the City with an Optlon to
Purchase the property for a period of 55 years. Owners wishing to
sell their property must notify the city. The city will have 60
days in whlch to exercise its option, or to designate a buyer. The
Clty or designated buyer w1l1 close escrow withln 120 days of
exercise of the option.
In the event that the C1ty does not exerClse the Opt1on to
Purchase, the Owner may sell the un~t to anyone at the prlce
provlded by the Resale Restrlct~on.
The Clty may charge an adm~nlstratlon fee of up to 3% of the
Resale Price to cover its costs ln connectlon with the sale of the
unit. The fee wlll be paid by the seller at close of escrow.
9
B. Resale prlce
The Resale Restrictlon wlll provlde that the price for resale
of the unlt shall be the lower of either:
(1) the appraised market value of the property as established
by a neutral appraiserj
(2) the inltial sales prlce, plus an amount equal to the
percentage increase in the Consumer Price Index for All Urban
Consumers, plus the value of any documented, permanent capital
improvements to the property approved by the City, mlnus the amount
determined by the City as needed to correct any deferred
maintenance costs or building code violations.
C. Subordination
The city will subordinate its Resale Restrlction to a
first Deed of Trust at the time of purchase, provided that the
first Deed of Trust does not exceed the purchase price of the
property.
D. Default and foreclosure
A Request for Notice of Default will be recorded along with
the Resale Restriction. The Resale Restriction will provide that
any Notice of Default will constitute an Owner's Notice of Intent
to Sell, and that the City may exercise lts purchase option in that
event. In the event that the City does not exercise this option
and the property is foreclosed upon, proceeds of the foreclosure
sale shall be used first to satlsfy lender liens, with any surplus
proceeds being paid up to the amount that the Owner would have
received if there was a sale without a foreclosure. The balance of
any surplus proceeds will be pald to the City.
E. Restrictions on use
The Resale Restrictlon wlll provlde that the property will be
be occupied by the Owner as a princlpal residence and will not be
rented or used for commercial purposes. This restriction shall not
prohibit home office use when such use is allowed by the Planning
Department.
VIII.
Tenant Income Recertification and Monitoring
Owners of pro) ects Wl th lncluslonary rental units will be
requl.red to subml. t, on an annual basls, a report to the city
llstlng the rent and name of the occupant for all inclusionary
rental units In the project, and the date of vacancy of any
lncluslonary un]. ts 1n the pro)ect. The City will ver lfy the
accuracy of these reports on a sample basls.
10
In additlonl owners of rental projects shall be required to
submit to the City annual certlflcations of income for each tenant
of an lncluslonary unlt, in a form speclfled by the Clty. Owners
shall be requlred to terminate the tenant's lease and rerent the
unit to an ellgible household in the followlng Clrcumstances:
1. Where a tenant refuses to provide necessary documentatlon
of income; or
2. Where the income of a tenant of a low income lnclusionary
unit is 100% or more of median household lncome, adJusted for
family size, for two consecutive years; or
3. Where the income of a moderate income inclusionary unit
is 150% or more of median household income, adjusted for
family size, for two consecutive years.
Income certifications must be accompanied by appropriate third
party documentatlon, such as W2s or pay stubs. Applicant income
will be determined by adding together the income of all household
members who are 21 years or older. Types of income to be included
are wages and salary, overtime pay, tips, business income if self-
employed, pensions or annuitles, Social Security and SSI, interest
and dlvidends, and Chlld support. The value of food stamps,
scholarsh~ps, and occasional income from casual jobs such as
babysitting will be excluded.
11
ATTACHMENT 1 CALCULATION OF MAXIMUM SALES PRICE
Median Income
Affordablllty Standard
Rate
Term
Unit
Bed AdJ
LOW INCOME UNITS
Percent of Median
Annual Income
Affordable Housmg Cost
Homeowner ASSociation Fees
Property Taxes
PMI
Affordable Mortgage Payment
Affordable Mortgage
Downpayment@ 10%
Sales Pnce @ 100/0 downpayment
MODERATE INCOME UNITS
Percent of Median
Annual Income
Affordable Housmg Cost
Homeowner ASSocIation Fees
Property Taxes
PMI
Affordable Mortgage Payment
Affordable Mortgage
Downpayment @ 10%
Sale Price @ 10% downpayment
1 0-4-93
$48,300
30%
7 455%
360
jUnadJUste~
1 bed
080
2 bed
095
3 bed I
1.085
o bed
070
60 00%
$28,980
725
200
64
25
436
62,590
6.954
$69,545 48,681 55,636 66,068 75.456
100 00% 1
$48.300 i
! 1,208 I i
200
122
48
837
, 120,229
i i
13,359
i $133.587 93.511 106,870 126,908 144,942
,
ATTACHMENT 2 MAXIMUM ALLOWABLE qENTS
Bedroom MaxlIllulIl Rent Maxllflultl Rent
Adjustment Low Income Moderate Income
Maximum Income $28,980 $48,300
Unadjusted Rent $725 $1,208
o 8edroom 0700 ! S507 ! $845 I
1 Bedroom 0800 I $580 I $966 [
2 8edroom o 950 I $6881 $1,1471
3 Bedroom 1 085 $786 $1,310 I
;
--'
10-5-93
ATTACHMENT 3 MAXIMUM ELIGIBLE INCOME
MEDIAN INCOME 1993
$48.300
ADJUST LOW MOD
FACTOR INCOME INCOME
HOUSEHOLD SIZE
60%
1000/0
1 PERSON
2 PERSONS
3 PERSONS
4 PERSONS
5 PERSONS
6 PERSONS
7 PERSONS
8 PERSONS
070 $20,286 , $33.810
080 $23,184 $38,640
090 $26,082 $43,470
1 00 $28,980 $48,300
1 07 $31,009 ~51 ,681
1 14 $33,037 $55,062
1 21 $35.066 $58,443 1
1 28 ~37,O94 $61.824 I
10-5-93
ATTACHMENT C: COMMENTS ON THE DRAFT GUIDELINES
The City distributed an earlier draft of the guidelines to varlOUS
persons who expressed interest ln the program and to the Housing
Commission. No written comments were received. The following is
a summary of the oral comments which were provlded by members of
the Hous1ng Commission ln response to the proposed Guidelines.
1. Monitoring: The Guidelines provide for the City to verify
the accuracy of annual reports submi tted by owners of rental
projects on a sample basis. One commenter felt that sample
verification ~s inadequate, and that more substantial mon~toring is
necessary. Staff recognizes the potential problem, and will
endeavor to undertake as large a sample as is feasible. Because
relatively few rental units are expected to be developed initially,
it should be possible to verify a high number of such reports.
2. Comparability: The original Guidellnes provided that
inclusionary units would be considered reasonably comparable to
market rate unlts 1f they were 80% of the size of the market rate
units. Some comments ind1cated that they felt this standard was
too stringent, would impose unreasonable costs on the developer,
and would restrict designs. The Guidelines have been modified to
provide the size of an inclusionay unit shall be conclusively
presumed to be reasonably consistent with the size of proposed
market rate units if the inclusionary unit is not less that 80% of
the size of the average market rate unit witin the project. For
unl ts of lesser S1ze thae burden shall be on the applicant to
demonstrate that the unit is reasonably consistant in size.
However, in no case shall the unlts be less that the minimun
requirement set forth in the guidelines.
3. Incentives for Development: Several comments concerned the
need for 1ncentlves for affordable development, in addition to the
requirements contained in the Inclusionary Housing Ordinance. It
was suggested that developers should be provided an information
package descrlblng 1ncentives ava11able to them, such as reduced
parking and expedit~ng processing. Whlle such incentives are
outside of the scope of these Guidelines, staff of the Planning
Department and the Housing and Redevelopment Department is meeting
to dlSCUSS preparation of such lnformational materials.
4. Home Office Use: The GUlde11nes prov1de that lnclus10nary
unl ts may not be used for commerCla 1 purposes. One comment
suggested that hone offlce use should be allowed. The Guidellnes
have been clar1fled to allow such use where allowed by the Plannlng
Department.
5. Payment of In-L~eu Fees: The GUldellnes requlre that at
least 50% of In Lleu Fees be pald and that the payment of the
remalning 50% be secured, prlor to issuance of a building permit.
On comment suggested that such payment should be deferred to reduce
development costs. As this requ1rement is contained in the
Ordlnance, th1.s suggestlon has not been lncorporated into the
GUldellnes.
CA:RAD:JP:PB:RB\incbase\pc
city council Meeting 12/14/93
Santa Monica, California
RESOLUTION NUMBER 8697
(City council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE MAXIMUM ALLOWABLE SALES PRICE AND
MAXIMUM ALLOWABLE RENTS
FOR THE INCLUSIONARY HOUSING PROGRAM
WHEREAS, the city Council of the City of Santa Monica
adopted Ordinance Number 1615 (CCS) on March 3, 1992 amending
Chapter 4A of the Municipal Code relating to the Inclusionary
Housing Program; and
WHEREAS, Santa Monica Municipal Code Section 9.28.100
provides that the city Council by Resolution shall establish and
adjust on and annual basis the maximum sales prices and maximum
allowable rents for inclusionary units under the Inclusionary
Housing Program.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1.
The maximum sales prices and maximum
allowable rents for inclusionary units under the Inclusionary
Housing Program are shown in Exhibits 1 and 2 respectively
attached hereto and incorporated herein by reference.
SECTION 2.
The Clty Clerk shall certify to the adoptlon
of this Resolution, and thenceforth and thereafter the same
shall be in full force and effect.
PPROVED ~S/fO FORM:
.J~~
J sePh Lawrence,
ting City Attorney
.
,
EXHIBIT l' CALCULATION OF MAXIMUM SALES PAICE
MedIan Income
Affordablllty Standard
Rate
Term
Unit
Bed. AdJ
LOW INCOME UNITS
Percent of MedIan
Annual Income
Affordable Housmg Cost
Homeowner Assocla[lOn Fees
Property Taxes
PMI
Affordable Mortgage Payment
Affordable Mortgage
Downpayment @ 100/0
Sales Pnce @ 10% downpayment
MODERATE INCOME UNITS
Percent or MedIan
Annuallncome
Affordable Housmg Cost
Homeowner AssOclatlOn Fees
Property Taxes
PMI
Affordable Mortgage Payment
Affordable Mortgage
Downpayment @ , 0%
Sale Price @ 1 Qe/o downpayment
10-4-93
$<18.300
30%
7 455%
3GO
Unadjusted 0 bed
1 070
1 bed
080
2 bed
095
3 bed
, 085
60 00%
$28.980
725
200
64
25
4136
62.590 I
I
6.954
$69:545 4 a , 681 55.636 66.068' 75.456
100 aO%l
$48,300 \
l
, ,208 i
200 !
, 22 \
48 i
j
637 )
120.229 I
I
, 3.353 I
I
i
I
I
I
I
I
I
f
I
I
I
1
I I
, I
)106,870 \126.908
14409421
$133.5a7 I
93.511
EXHIBIT 2 MAXIMUM ALLOWABLE RENTS
Bedroom Maximum Rent MaxllJlurn Rent
Adjustment Low Income Moderate Income
Maximum !ncome $28,980 $48,300
Unadjusted Rent $725 $1.208
::
o Bedroom I: 0700 I $,507 $845
1 Bedroom 0800 $580 $966
2 Bedroom 0950 1 $688 j $1 ,1 47
3 Bedroom I' 1.085 I $786 $1.310
-
10-5-93
Adopted and approved thts 14th day of December, 1993.
~1k
I hereby certIfy that the foregomg Resolution No 8697 (CCS) was duly adopted at a
meetmg of the City Council of the City of Santa Momca on the 14th day of December, 1993
by the following vote:
A YES: Councilmembers:
Genser, Holbrook. Olsen, Rosenstein, Vazquez.
Mayor Abdo
NOES. Counc1lmembers:
Greenberg
ABSTAIN: Councllmembers:
NONE
ABSENT: Councilmembers:
NONE
ATTEST:
~~~-LfM~
v City Clerk /