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Council Meeting June 10, 1997 Santa Monica, California JUN 1 0 1997
To Mayor and City Council
From City Staff
Subject AuthOrization on Five Affordable Housing Projects to Include a Waiver In the
City's .'Agreement ImpOSing Restrictions on Real Property" of all Covenants,
ConditIons and Restnctlons In the event that the U S Department of HOUSing
and Urban Development (HUD) forecloses on the HUD Deed of Trust
INTRODUCTION
ThiS report recommends that City Council authOrize the mcluslon In the Planning Deed
Restriction of the language reqUired by HUD, including language terminating all covenants,
condItions and restnctlons m the event that HUD takes tItle to the affordable housmg
project by foreclosure on the HUD Deed of Trust
BACKGROUND
From time to time, as a condition of the CIty's approval of the plannmg permit. developers
of affordable hOUSing projects are reqUired by the CIty to sign an Agreement Imposmg
Restrictions on Real Property ("Planning Deed Restriction") For example, a developer
may be reqUIred to sIgn such a Plannmg Deed Restrrct/on when the developer /s gIven
such zoning incentives as additional height allowances, reduced Side yard setbacks or
reduced parkmg reqUirements
These same developers may also be seeking funds to assist In the development of the
affordable hOUSing project from the US Department of HOUSing and Urban Development
("HUD") HUD wants to be exempt from local regulation m the unlikely event that HUD
ever has to take over the operatIon of one of these projects Therefore, as a condItIon of
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awardmg grant fundmg to these projects, HUD reqUIres that certaIn language be Included
that terminates the covenants, conditIOns and restrictions set forth In the Planning Deed
Restriction If and when a foreclosure proceeding occurs and HUD takes tItle to a project
Five projects located In Santa Monica have currently received tentative HUD funding
reservations The grants that Will be awarded to these projects total $17 6 million and Will
be used for the construction of 214 permanent hOUSing units for very lOW-Income elderly
persons and for phYSically disabled persons
Prolect HUD Commitment Affordable Units
Project New Hope 52,400,000 25
Upward Bound $6,200,000 70
Lmcoln $3.000,000 40
4th Street $4,900,000 66
United Cerebral Palsy $1,100.000 .u
TOTAL $17.600,000 214
Smce 1993, HOUSing and Planning staff have been working with four of the five proJect
developers to obtain the necessary land use permits and to commence construction
HOUSing staff has been Informed by HUD staff that three of the five projects must close
escrow With HUD In the next thirty (30) to ninety (90) days or risk lOSing the HUD grant
funding
DISCUSSION
As a condition of making the HUD grant. HUD requires that the City's Planning Deed
Restnctlon for these proJects Include the follOWing HUD proVISions
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a) I n the event of a conflict between the City's Planmng Deed Restnctlon and
the HUD grant program reqUirements, the HUD grant program requirements shall
control,
b) In the event HUD takes title to the real property though foreclosure, all cove-
nants, conditions and restnctlons set forth In the City'S Planning Deed Restriction
shall terminate,
c) In the event any proVIsion In the City'S Planning Deed Restnctlon contradicts,
modifies or In any way changes the terms of the HUD Regulatory Agreement, the
HUD Regulatory Agreement shaH prevail and govern, and
d) No amendment to the City's Planning Deed Restriction shall be made WIthout
the prior written consent of HUD
HUD requires these prOVIsions In all HUD 202 and 811 grant funded projects In all
jUrisdictions
It IS unlikely that a matenal default and foreclosure Will occur, particularly for financial
reasons, since HUD does not require repayment of the grant as long as the proJect is being
operated as an affordable housmg project A default could occur In the event of gross
mismanagement of a project, the renting of apartments to Ineligible households, or the
abandonment or sale of the project Without pnor HUD approval The City Will req uest that
the City's Planning Deed Restriction and the HUD Deed of Trust Include language that Will
proVide the City an opportunity to cure any matenal default prior to the commencement of
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foreclosure proceedmgs by HUD on the HUD Deed of Trust HUD has prevIously agreed
to Include such language In the City's loan documents It should also be noted that the
HUD Los Angeles Office has never foreclosed on a HUD 202 or 811 grant project
Simultaneously with thIs staff report, Housmg staff IS requesting that HUD waive Its
requirement as set forth In this report However, staff has been mformed by attorneys for
HUD that such a waiver request may take as long as SIX (6) months to process Therefore,
In the event that Housing staff cannot obtam the HUD waiver prior to the reqUired HUD
clOSing date, staff requests permission to Include the HUD provisions set forth In this staff
report
FINANCIAL/BUDGETARY IMPACTS
The recommendations contained In thiS staff report have no budget or financial Impacts
RECOMMENDA TIONS
Staff recommends that the City Council authonze the inclUSion of the HUD reqUired
proVISions In the City's Agreement Imposmg Restrictions on Real Property, Including
language terminating all covenants, conditions and restrictions In the event of foreclosure
on the HUD Deed of Trust
Prepared by Jeff Mathieu, Director of Resource Management
Robert Moncrief. HOUSing Manager
Mike Strader, Senior Development Analyst
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