SR-11-E
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Santa Monica, Cal ifornia, November 19, 1979
TO
Mayor and City Council
JI ~
FROM.
CIty Staff
NOV .2 -/ 1979
SUBJECT: Recommendation Regarding low/Moderate Income
Housing Activities
Backg round
On May 8, 1979 (Item 118), the Council directed the staff to locate and propose
potential low and moderate income coastal zone housing sites to acco~modate 22 to
25 dwelling units
The maximum land price indicated was $600,000.
Additionally, on July 24, 1979 (Item 11E), the Council authorized staff to prepare
a Request for Proposal (RFP) for the development of the 175 Ocean Park Boulevard
and Barnard Way sites for low and moderate income housing. The RFP was reviewed
by Council on July 31 and approved for distribution, with ~odifications, on that
date. Eight (8) proposals were received in response to the RFP.
Discussion
A. Survey of Vacant land
In response to the Council authorization, staff co~missioned Donahue and Company,
Inc , a real estate appraisal firm, to conduct a Citywide survey of vacant available
R3 and R4 zoned properties of 15,000 square feet or larger. The study was re-
stricted to R3 and R4 zoned parcels of 15,000 square feet or larger because of the
extremely restrictive HUD development standards which impose severe design constraints
on smaller developments, the loss of economy in construction and subsequent property
management, and the overall higher per unit subsidy requirements. Only vacant
parcels were surveyed because of the high monetary and social cost factors involved
with relocation and demolition of eXisting units.
II E.
MOV 2 7 1979
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Mayor and City Council
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November 19, 1979
The study, dated November 5, 1979, identified only three (3) currently listed
vacant parcels in the City which are in excess of 15,000 square feet. These
parcels of 2],000, 31,000, and 39,000 square feet are all located In the Ocean
Park area of the CIty, and are under a single ownership. The parcels are each
listed at 549.50 per square foot, or $1,336,500, Sl ,534,500 and Sl ,930,500,
respectively. These prices are generally supported by the eleven (11) recent
sales of vacant parcels cited in the survey. These sales (earliest in January,
1979, most recent in June, 1979) ranged from $29.00 per square foot to 5124.22
per square foot. The median price of all sales was $37.51 per square foot,
although the two June sales were each above $50.00 per square foot. The survey
also Identified twelve (12) additional vacant sites which are not on the market
due to the proposed development plans of the current owners.
The available CDBG funds presently budgeted for housing site acquIsition are
insufficient to purchase any of the sites identified in the survey. However,
during the course of the survey two (2) additional sites, each 11,200 square feet,
were noted at a listing price of $39.50 per square foot. These two sites, located
on Fifth Street between Bay and PaCific, and between Pacific and Strand, could be
acquired for a total of S884,800 which is within the budgeted fund amount. It IS
estimated that these combined sites could accommodate a maximum of 24 two and
three bedroom family dwelling units. The acquisition of these sItes may be a
prerequisite to the development of the City-controlled sites contained in the
RFP as more fully discussed below.
B. Development of Existing Sites
As noted In the 'IBackground" section, eight proposals \<Jere received in response
to the City1s RFP for housing development on the 175 Ocean Park Boulevard and
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Mayor and City Council
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November 19, 1979
Barnard Way sites. Based on current HUD and CHFA regulations and priority
systems, current and potential legal constraints, City and Coastal CommissIon
development restrictions, etc., it is highly improbable that the City could
successfully proceed with any of the developments outlined in the submitted
proposals.
The primary problem areas can be categorized under the headings of proportionality,
density and site restrictions, new HUD cost containment restrictions, the legal
status of the sites, and existing Coastal CommissIon conditions.
"Proportional ity" is the HUD response to the Congressional mandate to fund both
Ilelderly" and IIfamily'l housing developments. In order to "encouragell the develop-
ment of family housing, HUD has in essence cut off the funding of elderly housing,
particularly in localities such as Santa Monica which have previously received
housing funds for the elderly. The California Housing Finance Agency (CHFA) which
receives a set aside of Section 8 subsidy funds is operating under the same
mandate and has adopted a similar posture to HUD.
In as Much as the larger of the two existing City-controlled sites (Barnard Way)
IS deed restricted to subsidized elderly housing, HUD (and CHFA) has indicated
that the City must package the elderly housing component with a family component
In order to receive the necessary subsidy funds. Because of the larger size of
the Barnard Way site and the hIgher densities permitted for elderly housing
developments, It IS unl ikely that the com~itment of the 175 Ocean Park Boulevard
site to family housing would be sufficient to produce a fundable package Under
existing HUD Minimum Property Standards (MPS) the 39,000 square foot Barnard Way
site could accommodate as many as 60 elderly units, but the 28,800 square foot
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Mayor and City Council
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November 19, 1979
175 Ocean Park Boulevard site would be restricted to approximately 10 family
units. A six to one ratio of elderly to family units does not comply with
HUD's view of proportionality.
HUDls current extrapolation of the existing MPS (which prescribe open space
requirements, height restrictions, building layouts, etc.) result in a density
restriction of no more than 15 dwelling units per acre, which is approximately
three times more restrictive than Santa Monica's R2 zone liMitations. The MPS
also establishes acceptable site noise levels and details required attenuation
procedures. These procedures further restrict allowable densities, particularly
for sites such as the 175 Ocean Park Boulevard site which faces a street carrying
over 20,000 cars per day. Although HUD indicates a willingness to consider
"innovative design solutions" \...hich Mitigate HUD concerns with higher densities,
the submitted proposals describe densIties which are substantially in excess of
HUD gUidelines for family housing developments.
HUD has recently adopted new Section 8 regulations (effective NoveMber 5, 1979)
which stress an additional element--!'cost containment II The new construction
Section 8 program has proven to be an increasingly expensive proposition (as
have all housing programs, subsidized or nonsubsidized). In response to the
escalation in costs, HUD has revised theIr regulations in many significant
respects. The most pertinent changes with respect to Santa Monica's proposed
program are in the areas of a stiffening of the rent comparability guidelines
which have the effect of reducing allowable land costs, and a tightening of the
rules relating to the "1imitation on distributionl! \ooJhich \.,.il1 now restrict the
developer's annual return to 10% of "equlty!1 for family units, and 6% of "equityll
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Mayor and City Council
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November 19. 1979
for elderly units. Since Ilequity" will be generally defined as 10% of Ilreplace-
ment cost,1l and the replacement cost includes a maximum land price a1lowance,
the developer's ability to pay more than HUD-established land prices is substan-
tially curtai led. In other words. the offered land price wi 11 become a less
significant determinant in the City's developer selection process under the now
effective HUD regulations.
Given the ever increasing complexity of the Section 8 Housing Program. the
present legal status of the Parking Authority-owned site at 175 Ocean Park
Boulevard takes on additional signifIcance. State law requires the Council to
make certain proscribed findings as a prerequisite to the disposition of Parking
Authority property. Certain questions have been raised regarding the Council IS
ability to substantIate the required findings Regardless of the ultimate out-
COMe of any potential legal challenge to the development of the site for non-
parking uses, the potential for protracted litigation should be given consideration
prior to the final inclusion of the site in the Cityls current housing funding
proposal
As an additional consideration, the existing Coastal Commission permit for the
Ocean Park Redevelopment Project contains a condition that the existing housing
units at 175 Ocean Park Boulevard be rehabilitated and offered for rent to low
and moderate income households Any variation of this condition will require a
formal application to the State Coastal Commission.
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Mayor and City Council
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Novembe r 19, 1979
Summary
In order to facilitate HUD funding for the City1s proposed new construction
housing program, it now seems imperative that the City clarify HUD1s various
require~ents with respect to proportional ity, cost containment, and MiniMum
Property Standards interpretation, and revise its program to more nearly satisfy
those criteria. It is the Judgment of the staff that this revision will
necessitate the acquisition of additional sites, and the possible suspension of
consideration of the 175 Ocean Park Boulevard site.
Recommendation
It is recommended that the Council:
I. Authorize the City Manager to execute an offer to purchase the two parcels
of vacant property located on Fifth Street for a price not-to-exceed
$88~,800, subject to HUD approval of the use of CDBG funds for said
purchase; and
2. Authorize an amendment to the RFP dated July 31 J 1979, to include the
additional sites for 2~ units of family housing; and
3. Authorize the distribution of the amended RFP to the eight developers
qualifying under the original RFP; and
4. Clarify its pol ICY regarding the continued inclusion of the
175 Ocean Park Boulevard site as a family housing site in the current
RFP.
Prepared by: John Hemer
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U.S.Condomihiun Res?onse ~o t~e Staff Report concernlng Ocean
Park Hous~ng ~roposals. City Cauncll r~eting: 11/27/79
1) ~he S~aff report proposes that the City use its B~oc~ 8r~nt money
LO p~~chase pro?erty to replace the pro?erty named ?arcel T~o
(17S Ocea~ ?ark Blvd.). This pro?osal represenTs a subs~~nt~al
c~a~ge i~ ~he re~uest for pro?osal issued ~y ~r.e C~LY a~c as
SJC~ is a se~~CJS depart~re fro~ the procedure establishec for
the project.
2) ~te Staff report ?roposes that tr.e land on 175 Ocean Park
be reJlacec. T~is is a decision that was madE wit~out cons~lt~ng
~0e o~igir.al parT~es lD the Coastal CO~ffiission agreement.
=f the City Cou~cil wishes to replace that property the~
it sr.ould see~ to do so through renegotia~ing--after tr.e
bid for the ?ro:ect lS awarded. Then all parties conce~~ed can
Sl~ do~n ahd t~e ~atter can be arbitrated.
3) ~he parcels that are recommended for purcnase by the C~TY
~~e smal~ ~~d the n~mber of units t~at could be cOhstrucTec
on them ~ill r.o~ ~ake up for the large rounber of u~its for
senior cl~izeTIs t~at will be bUllt o~ 3ar~arc Way. HC~ has
s~atec that a~y ~ew project sho~lG bave a larger n~mber of faDl~Y
~nits tha~ senlO~ ~nlts. Ho'~ever, t~e parcels reco~Jended by
t~e staff report are ~ot big enough to accomplish that mandate.
~~ere~cre, t~e proje~t w~~l suffer as a ~esult.
~) ire ?arcels that U.S.Condominiur. i~cludes i~ i~s proposal
are large e~cugt to provlde a greater nunber of family u~~ts
~~an se~lor u~i~s. This is a conSlderable adva~tage and Wl:~
lns~re ~~e =avorab~e attentlon of t~e progra~ person~el a~
HU= ar.d C~?A.
5) 7he recose~da~~on by the City staff will cost the Clty
several hu~dred ~~ousand dollars. T~e lar.d under considera~lon
~~ll cost the ~~xpayers $884,800.JO. This sum wi~l be offse~
to a degree by developer contrlb~tior.s, ~ut the cost to ~he
TaX?ayers ~ill je hlg~ In the end. T~e U.S.Condo~l~~um proposal
coes net cost the City a~y money whatsoever.
6) ~~e s~a~f re~ort wil~ res~lt In a total developnent on
three propertles (Ba~~a~d Way a~d two lots O~ 5~h Street).
A ~otal 0~ 90 u~its could be co~strucTed on th~se parcels.
The U.S.CohjoF-iD~um proposal will develop ~our pro~ert~es
(Barnard ~ay, Ocea~ Fark, F~er Ave, and 14th Street); ~or
a to~al of 142 Sec. 8 un~ts.
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Submitted by John L. Hult to Santa Monica City Council Meeting
November 27, 1979.
Administrative Item, 11 E - Recommendations regarding low and
moderate income housing activities.
The City of Santa Monica solicited proposals to be submitted by
September 14, 1979 to negotiate for the purchase or lease of two
City controlled parcels and the development and subsequent manage-
ment of rental housing units for occupancy by low and moderate
income households. The Ci ty' s stated objective is "to facili tate
the development of housing units which will be available to low
and moderate income households" with additional conditions and
details. There was no specification that financing or subsidy
must involve HUD or CHFA~ rather .'innovative apuroach to financing
methods or physical design are solicited and wlil be given full
consideration.'. Yet the staff report and recommendations deal
only with the problems of seeking HUD and CHFA financing, and
not with the City's stated objective.
The qualifying proposal in which I participated in good faith and
at considerable personal sacrifice involves the establishment of
a non-profit corporation for the purpose of developing and operat-
ing the proposed housing under City monitoring. It will assure
the timely development of subsidized housing with available private
financial resources, and (subject to the desires of a development
committee) it could provides more housing. sooner, of higher quality,
greater subsidy. better environmental impact, with better parking.
more effective use of solar and wind energy, and with greater and
more beneficial use of secure open space than HUD or CHFA standards
or specifications. It could, furthermore, subsidize more public
parking for the area than has been nroposed for the total Parking
Authority parcels at 175 ocean Park~Blvd. to Hollister Ave. If
priority is given to housing applicants who are residents of Santa
Monica, this development would release comparable income housing
in Santa Monica for others and provide relief for the tight market.
This brief recital, and the submitted proposal, may appear too
incredibly virtuous for most to accept without elucidation. I
welcome the opportunity to describe and elaborate on the potential
developments.
For the Council's immediate action the following slight amendments
and additions to the staff recommendments are proposed:
1. Authorize the city Manager to negotiate an option to purchase
the two parcels of vacant property located on Fifth street for
a price not-to-exceed $884,800, subject to HUD approval of the
use of CDBG funds for said purchase; and
2. Authorize amendments to the RFP dated July 31, 1979, to include
the additional sites for 24 units of family housing; and invite
alternative proposals involving contracting the development for
a non-profit cor~oration that would arrange the financing and
operation; and -
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(cont. )
3. Authorize the distribution of the amended RFP to the eight
developers qualifying under the original RFP; and
4. Clarify its policy regarding the continued inclusion of the
175 Ocean Park Boulevard site as a family housing site in the
current RFP by specifically including the entire Parking Author-
ity site from Ocean Park Blvd. to Hollister Ave. as an alter-
native for consideration. and
5. Authorize the organization of a Development Committee serviced
by the Office of Environmental Services for the purpose of
achieving a timely community concensus on what to develop.
authorize funds for the committee (not to exceed $30,OOQ) to
engage architectural, financial, and operational consultants
in order to constrain the committee's planning options to
feasible ones; and require the consultant costs to be refunded
by the developer that is selected.
Respectfully,
~L.L~
John L. Hul t