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Council Meetmg May 25, 1999 Santa MOnica, California
TO Mayor and City CouncIl
FROM City Staff
SUBJECT City Cou nC11 Resolution to Establish 1999 Maximum Allowable I ncome, Rents
and Purchase Prrces for On SIte Affordable Housing Unrts
INTRODUCTION
ThiS report recommends City Council adoption of a resolution establlshmg the maximum
allowable Incomes, rents, and purchase pnces for on site affordable housing Units
developed under Ordinance 1918, the Affordable Housing Production Program Ordinance
1918 reqUIres that the CIty CouncIl set maximum Income, rent, and purchase prrces each
year
BACKGROUND
On November 6, 1990, the voters of the City of Santa Monica approved ProposItion R
Proposition R reqUires that not less than 30% of all multifamily residential housing newly
constructed In the CIty each year be permanently affordable to, and occupIed by, low- and
moderate-Income households A low-income household IS defined as a household whose
Income does not exceed 60% of L A County median Income, adjusted by household size
A moderate-Income household IS defined as a household whose Income does not exceed
100% of the L A County median Income, adjusted by household size
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HAY 2 5 199
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On July 21, 1998, the City CouncIl replaced the former Incluslonary Housing Program
(Ordinance 1615) with Ordmance 1918, the Affordable Housing Production Program
Under Ordinance 1918, a developer may satisfy the City's affordable housing obligation
by paYing an affordable housing fee, by constructing affordable housing Units on site or off
s/te, or by chOOSing among other optIons When the developer chooses to bUIld affordable
Units on or off Site, the affordable Units may be eIther rented or sold The rents and
purchase pnces ofthese Units and the household Incomes of occupants are regulated and
mOnitored annually by the City Ordinance 1918 requires that the City Council establish
each year by resolution the maxImum allowable rents, household Incomes, and purchase
prices for on sIte affordable units
Annual adjustments to Income, rent, and purchase price limits are timed to cOincide With
the release of Income limits set forth by the U S Department of HOUSing and Urban
Development (HUD) Each year HUD estimates area median family Income for use In
determining Income elIgibility and rent limits for the Section 8 hOUSing program Pursuant
to Section 9 56 020 of Ordinance 1918, the City uses the HUD income limits as a basis for
the Income, rent, and purchase price limits under the Affordable HOUSing Production
Program The methodology used by the City to calculate these limits IS discussed below
Methodology for Calculating Maximum Rent, Income, and Purchase Prices
The 1999 HUD Los Angeles area median Income for a four person household IS $51,300
ThiS HUD Income limIt has not changed since 1995 As a result, the maxImum rents and
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purposes of this Ordinance, the multI-family residential dlstncts In the City are R2R, R2,
R3, R4, RVC, RMH, OPDuplex, OP2, OP3, OP4, NWOverlay, R2B, and R3R
(b) Subject to the exemptIons set forth In SectIon 3 of this Ordinance, the Planmng
Commission and City staff are hereby directed to disapprove all applications which have
not been deemed complete as of May 25, 1999, for tentative tract maps, tentative parcel
maps, administrative approvals, development review permIts, and conditIonal use permits
for any resIdential bUIlding or structure, including any hotel or motel, on properties located
In multi-family residential dlstncts In the City
SECTION 3 Exemptions The follOWing applications are exempt from the
proVISions of Section 2 of this Ordinance
(a) Applications for approval of permits involVing the erection, construction,
enlargement, demolition or moving of, and excavation and grading for any multiple
dwelling development Intended for rental housmg for persons of low and moderate Income
and which development IS financed by any federal, state or CIty hOUSing assistance
program or owned by any non-profit organization, prOVided the Director of Planmng
determines that such development IS m conformance With the General Plan and the Zoning
Ordinance and provided a deed restriction IS recorded restricting the development to such
purpose
(b) ApplicatIons for approval of permits Involving the erection, constructlon, and
excavation and grading for an additional reSidential dwelling umt on a site which currently
contains and Will maintaIn an eXisting SIngle famIly home
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calculated by taking 50% of the HUD median Income for the appropnate household size
Thus, the Income limit for a very low-income, four person household IS 50% of $51 ,300, or
$25,650
ExhIbit I shows how the 1999 HUD area medIan household Income of $51 ,300 IS adjusted
by the HUD adjustment factor for household SIze and by the targeted Income category to
determine the Income limIts for on sIte affordable housing Units
Maximum Allowable Rents
The Los Angeles area medIan Income for a four person household IS also used as a basIs
for calculatIng maxImum rents ExhIbIt 2 shows the formula used In thIS calculatIon
The factors contaIned In the formula Include- a) the targeted Income category, b) an
"affordablllty standard", and c) a bedroom adjustment factor
The targeted Income categories are 50, 60, and 100 percent of the Los Angeles area
medIan Income, as speCIfIed by OrdInance 1918 A "50 percent" four person household
has an Income of $25,650 (0 5 X $51,300)
The "affordablhty standard" relates to the proportion of household Income available to pay
rental housing costs, after other expenses--such as food, clothmg, transportation, and
medical expenses--are paid The real estate industry generally uses an affordablhty
standard of 30 percent ThiS is the standard used by HUD and the City
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Finally, the bedroom adjustment factor takes Into account the number of bedrooms In the
umt The bedroom adjustment factors are the same as those used by HUD for purposes
of calculating rents for the Section 8 hOUSing program In derlvmg the bedroom
adjustments factors, HUD makes certam assumptions about the average number of
persons OCCupYing a Unit of a gIven SIze, and the bedroom adjustment factors are very
Similar to the HUD adjustment factors for household sIze For example, the bedroom
adjustment factor for a 1 bedroom unit IS 0 7-the same as the Income adjustment factor
for a one-person household The HUD bedroom adjustment factors are as follows
o Bedroom 0,7
1 Bedroom 08
2 Bedroom 095
3 Bedroom 1 085
4 Bed room 1 225
The maximum rent for a lOW-Income, two-bedroom unit IS calculated as follows
(Median Income for 4-Person Household X Targeted Income Category (60%) X
Affordablhty Standard (30%) X Bedroom Adjustment Factor (0 95)) / 12 Months
or,
($51,300 X 60% X 30% X 0 95) /12 = $731 00
DUring 1999, maxlmu m rents for mcluslonary units developed under Ordmance 1918
cannot exceed the limits spelled out m Exhibit 2
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Adopted and approved tlns 25th day of May, 1999 I
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pL O'Connor, Mayor
State of Cahforrua )
County of Los Angeles) S5
CIty of Santa Maruca )
I, Mana M Stewart, CIty Clerk of the CIty of Santa Moruca, do hereby certIfy that the
foregomg Ordmance No 1944 (CCS) had ItS mtroductlon and adoptIon on May 25, 1999,
by the followmg vote
Ayes CouncIl members. McKeown, Femstem, Bloom,
Mayor Pro Tern Genser. Mayor O'Connor
Noes CouncIlmembers Holbrook, Rosenstem
Abstam None
Absent None
- ~.~-~~
Mana M Stewart, CIty <S:lerk
For the 1998/99 period, the homeowners assocIatIon fees are based upon the average
homeowners fee assumed In the financial feasIbility pro forma prepared In relation to
Ordinance 1918
The maxImum allowable purchase prices for low Income and moderate rncome unIts for
1999 are shown on Exhibit 3 The maximum purchase pnce for a very low Income, two-
bedroom umt IS $56,483, for a low Income, two-bedroom unit IS $73,202, and for a
moderate-Income, two-bedroom unit IS $140,081
ADMINISTRATION
MaXimum allowable rents and maximum purchase pnces are avaIlable to the public from
the Housmg and Redevelopment DIVISion and at the City Planning counter
BUDGETARY FINANCIAL IMPACT
There are no financial or budgetary Impacts
RECOMMENDATIONS
It IS recommended that the City Council adopt a resolution establishing the maximum
allowable Income levels, maximum allowable rents, and maximum allowable purchase
prices for on-Site affordable units per the requirements of Ordinance 1918 as shown In
Exhibit 1, Exhibit 2, and Exhibit 3 of thiS staff report
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Prepared by Jeff MathIeu, Resource Management DIrector
Bob Moncrief, Housmg Manager
Tad Read, Senior Administrative Analyst
Exhibits 1 1999 Maximum Allowable Income Levels for lncluslonary Housing
2 1999 Maximum Rents for Incluslonary Housing
3 1999 Maximum Purchase Prices for lncluslonary Housmg
4 ResolutIon Establ/shlng the 1999 Maximum Allowable Rents and
Maximum Allowable Purchase Prices for the Affordable Housing
Production Program
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EXHIBIT 1
1999 MAXIMUM ALLOWABLE INCOME LEVELS
For On Site Affordable Housing
MAXIMUM INCOME LEVELS
BY HOUSEHOLD SIZE AND NCOME CATEGORY
INCOME CALCULATION: (Median Income X Income Cate~on' X Hhld Adjustment Factor)
Median Income 1999 I $51.300 I "4 - PERSON HOUSEHOLD"
I-person o 7000
2-person 0.8000
3-person o 9000
4-person 1 0000
5-person 1 0800
6-person 1 1600
7 -person 1 2400
8-person 1 3200
~L-\XI:vnTM ~COME: LEVELS
Very Low I Low I Moderate
Household Size 50% 600/0 1000/0
I-Person $17,955 )21,546 $35,910
2-Person $20,520 524,624 541.040
3-Person )23.085 $27,702 $46.170
4-Person 525,650 $30.780 );51.300
5-Person $27,702 $33,242 $55,404
6-Person $29.754 Sl35,705 559,508
7-Person $31.806 $38.167 S63,612
8- Person S33.858 540.630 $67,716
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EXHIBIT 2
1999 MAXIMUM RENTS
For On Site Affordable Housmg
MAXIML'M RENTS BY
INCO:\1E CATEGORY AND UNIT SIZE
MONTHLY RENT CALCULATION:
(~1edIan Income X Income Category X Bedroom Adjustment Factor X Affordab1l1ty Standard) !I2
Median Income 1999: $51)00 "4 - PERSO~ HOUSEHOLD"
Affordability Standard. 30%
Bedroom Adjustments: OBdr 0700
IBdr 0.800
2Bdr 0.950
3 Bdr 1.085
4Bdr 1.225
l\1AXIMUM MONTHLY RENTS
Very Low- Moderate -
Unit Size 500/0 Low - 600/0 1000/0
O-BDRIyr $449 $539 $898
l-BDRM $513 $616 $1,026
2-BD&\1 $609 $731 $1,218
3-BDlU,1 $696 $835 $1,392
4-BDRM 5786 $943 $1,571
f:housmg/ share/excel/inclsnl99 rents
f :hoUSlng.'excel.'mclusn.:99 rents 54:99
I EXHIBIT 3 I
MAXIMUM PURCHASE PRICES FOR ON SITE AFFORDABLE HOUSING (1999)
Median Income (1999) $51,300
Affordablllty Standard 30%
Interest Rate 6 780%
Term (months) $360
Umt Unadjusted o bed 1 bed 2 bed 3bed
Bed Ad] 1 070 080 095 1085
VERY LOW INCOME UNITS
Percent of Median 50 00%
Annual Income $25,650
Affordable Housmg Cost (mo ) $641
Homeowner Assoclallon Fees (mo) $208
Property Taxes ( 1 25% [mo ]) $62
PMI ( 52% of loan amount [mo ]) $23
Affordable Mortgage Payment (mo } 5348
Affordable Mortgage $53,510
Downpayment @ 10% $5,946
Sales Price @ 10% downpaymenl $59,456 541,619 $47,564 $56,483 $64,509
LOW INCOME UNITS
Percent of Median 60 00%
Annual mcome S30,780
Affordable HOUSing Cost (mo ) 5770
Homeowner Association Fees (me) 5208
Property Taxes ( 1 25% [mo]) $80
PMI ( 52% of loan amount [mo ]) $30
Affordable Mortgage Payment (ma ) $451
Affordable Mortgage S69,349
Downpayment @ 10% $7,707
Sales Price @ 10% downpayment 577,054 $53.938 $61,644 $73,202 $83,604
MODERATE INCOME UNITS
Percent of Median 100 00%
Annual Income $51,300
Affordable Housmg Cost (mo j $1,283
Homeowner AsSOCiation Fees (mo 1 $208
Property Taxes' 1 25% [me )) $154
PMI ( 52% of loan amount [mo)) $58
Affordable Mortgage Payment S863
Affordable Mortgage $132.709
Downpayment@ 10% $14,745
Safe Price @ 10% downpayment $141,454 $103,218 $117,963 $140,081 $159,988
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. EXHIBIT 4
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City Council Meeting 5/25/99 Santa MOnica, California
RESOLUTION NUMBER 9402
(CIty Council Senes)
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE 1999 MAXIMUM ALLOWABLE RENTS AND
MAXIMUM ALLOWABLE PURCHASE PRICES
FOR THE AFFORDABLE HOUSING PRODUCTION PROGRAM
WHEREAS, the City Council of the City of Santa MOnica adopted Ordinance
Number 1918 (CCS) on July 21 t 1998, Santa MOnica MUnicipal Code Sections 9 56 ~
seq ("the Affordable Housmg Production Program"), and
WHEREAS, Santa MOnica Mun/clpal Code SectIon 9 56 100 provIdes that the
CIty Council by Resolution shall establish and adjust on an annual basIs the maximum
affordable rents and maximum affordable purchase pnces for affordable housing Units
under the Affordable Housing Production Program
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS
SECTION 1 The maxImum allowable Income levels and maximum
allowable rents and maXimum purchase pnces for affordable housing Units under
Ordinance 1918 are as shown In Attachment 1 attached hereto and Incorporated herein
by reference
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SECTION 2 The City Clerk shall certify to the adoption of this Resolution,
and thenceforth and thereafter the same shall be In full force and effect
APPROVED AS TO FORM
fuJi f) fL~~
Marsha Jone~outne .
City Attorney
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Adopted and approved thIs 25th of May, 1999
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Pam O'Connor. Mayor
I, Mana M Stewart, City Clerk of the City of Santa MOnica, do hereby certify that
the foregomg Resolution 9402(CCS) was duly adopted at a meetmg of the Santa
MOnica CIty CouncIl held on the 25th of May. 1999 by the follOWing vote
Ayes Councllmembers Femstem, Holbrook, McKeown, Rosenstein,
Bloom, Mayor Pro Tem Genser,
Mayor O'Connor
Noes Councllmembers None
Abstam Councllmembers None
Absent Councllmembers None
ATTEST
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Mana M Stewart, City Clerk