SR-407-000-03 (5)
RM:JM:BM:TR:SG:f:/…/Word/Staff Reports/2002 Affordable Housing Program.doc
City Council Meeting: September 10, 2002 Santa Monica, California
TO: Mayor and Councilmembers
FROM: City Staff
SUBJECT: Recommendation to 1) Adopt a Resolution Establishing Year 2002
Maximum Allowable Rents and Purchase Prices for the Inclusionary
Housing Program (Ordinance 1615) and 2) Adopt a Resolution
Establishing Year 2002 Maximum Allowable Rents and Purchase Prices
for the Affordable Housing Production Program (Ordinance 1918)
Introduction
This report recommends that the City Council 1) adopt a resolution establishing maximum
allowable rents and purchase prices for inclusionary housing units developed under the
Inclusionary Housing Program (Ordinance 1615); and, 2) adopt a resolution establishing
maximum allowable rents and purchase prices for on-site and off-site affordable units
developed under the Citys Affordable Housing Production Program (Ordinance 1918).
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Background
In November 1990, Santa Monica voters 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 the L.A. County median income, adjusted by household size. A moderate-
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income household is defined as a household whose income does not exceed 100% of the
L.A. County median income, adjusted by household size.
In March 1992, the City Council adopted Ordinance 1615, the Inclusionary Housing
Program, to implement Proposition R. On July 21, 1998, the City Council replaced
Ordinance 1615 with Ordinance 1918, the Affordable Housing Production Program.
Both Ordinance 1615 and Ordinance 1918 require that the City Council establish by
resolution on an annual basis the maximum affordable rents and maximum purchase prices
for affordable units. Even though Ordinance 1615 has been superceded by Ordinance
1918, the requirements of Ordinance 1615 still apply to housing developments for which a
development application was deemed complete prior to March 1, 1998.
Discussion
Maximum Allowable Income
Ordinances 1615 and 1918 require that the Maximum Allowable Income be based upon the
median Los Angeles County income, adjusted by household size, as determined by HUD.
The following describes how the Maximum Allowable Income is calculated and adjusted
based upon applicable income categories and household size.
Calculation of income limits for affordable units in Santa Monica begins with the 2002 HUD
area median income for a four-person household: $55,100. This amount represents an
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increase of $600 over the 2001 amount. The income limit is adjusted for the number of
persons actually in the household (HUD's household adjustment factor).
Ordinance 1615 targets two different income groups: 1) low-income, and 2) moderate-
income. Ordinance 1918 targets three different income groups: 1) very low-income, 2) low-
income, and 3) moderate-income. These income groups are defined as follows:
Very low-income: Household income at or below 50 percent of the area
median, adjusted by household size;
Low-income: Household income at or below 60 percent of the area median,
adjusted by household size; and,
Moderate-income: Household income at or below 100 percent of the area
median income, adjusted by household size.
Exhibit 1 shows how the 2002 HUD area median household income of $55,100 is adjusted
by household size and by the targeted income category to determine the maximum
allowable levels for all affordable housing units.
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Maximum Allowable Rents
Maximum allowable rents are also based upon the Los Angeles County area median
income for a four-person household. Exhibit 2 shows the formula used in this calculation.
The formula includes the following variables: a) the targeted income category, b) the
affordability standard, and c) the bedroom adjustment factor.
The "affordability standard" is the maximum percentage of household income which may be
used to pay rental housing costs while still leaving enough to pay other necessary
expenses--such as food, clothing, transportation, and medical expenses. Thirty percent
(30%) is the standard used by HUD and the City.
The "bedroom adjustment factor" is used to adjust the rent based upon a presumed
relationship between the number of bedrooms and the number of household occupants.
Bedroom adjustment factors are the same as those used by HUD for calculating rents in
the Section 8 program and rely on certain assumptions established by HUD about the
average number of persons occupying units of a given size.
During 2002, maximum rents for inclusionary units developed under Ordinance 1615 and
Ordinance 1918 cannot exceed the limits as shown in Exhibit 2.
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Maximum Purchase Price
Ordinance 1615 and Ordinance 1918 establish different methodologies for calculating
maximum purchase prices of for-sale units. For-sale units developed under Ordinance
1615 are subject to the Inclusionary Housing Program Guidelines. For-sale units
developed under Ordinance 1918 are subject to the Administrative Guidelines for the
Affordable Housing Production Program. Their respective methodologies are described
below.
For-Sale Prices - Ordinance 1615
Under Ordinance 1615, calculation of the maximum purchase price starts with a deter-
mination of the applicable household income. Household income determines how much a
household can afford in monthly payments, including mortgage, taxes, insurance, and other
relevant costs. Ordinance 1615 caps the proportion of household income that may be
applied toward housing payments at 30 percent.
Calculation of the maximum sales price for year 2002 includes the following additional
assumptions as required by the Inclusionary Housing Program Guidelines:
Down payment of 10 percent
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Loan term of 30 years
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Interest rate of 6.7% (based upon fixed rate loans using the midpoint between
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the high and low required yield as set by Fannie Mae during the most recent
twelve month period (in this case, 4/16/01 - 4/12/02)
Homeowner Association Fees of $323 (Average HOA fee based on telephone
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survey of Realtors and Developers in Santa Monica by Hamilton, Rabinovitch,
and Altschuler, May 2001)
Property Taxes at the assessment year rate of 1.25%
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Private Mortgage Insurance at 0.52% of the loan amount.
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Once the annual calculation is made, the maximum purchase price remains fixed
throughout the year.
The maximum allowable purchase prices for low-income and moderate-income units
subject to Ordinance 1615 for year 2002 are shown in Exhibit 3.
For-Sale Units - Ordinance 1918
Under the Administrative Guidelines for the Affordable Housing Production Program
adopted by City Council on October 5, 1999, the maximum purchase price for affordable
condominiums developed under Ordinance 1918 varies from sale to sale depending upon
an income qualifying households ability to obtain conventional bank financing, applicable
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interest rates, and other conventional lending standards and criteria.
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Budget/Financial Impact
There are no financial or budgetary impacts.
Recommendations
It is recommended that the City Council 1) adopt the attached resolution establishing
maximum allowable rents and purchase prices for inclusionary housing units developed
under the Inclusionary Housing Program (Ordinance 1615); and, 2) adopt the attached
resolution establishing maximum allowable rents and purchase prices for on-site and off-
site affordable units developed under the Citys Affordable Housing Production Program
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(Ordinance 1918).
Prepared by: Jeff Mathieu, Director of Resource Management
Bob Moncrief, Housing and Redevelopment Manager
Tad Read, Housing Coordinator
Steve Goldmaker, Administrative Analyst
Exhibits: 1 Year 2002 Maximum Allowable Income Levels for On-Site & Off-Site
Affordable Housing
2 Year 2002 Maximum Allowable Rents for On-Site & Off-Site Affordable
Housing
3 Year 2002 Maximum Allowable Purchase Prices for Inclusionary Housing
Units Developed Under Ordinance 1615 CCS
4 Resolution Establishing the Year 2002 Maximum Allowable Rents and
Maximum Allowable Purchase Prices for the Inclusionary Housing
Program
5 Resolution Establishing the Year 2002 Maximum Allowable Rents and
Maximum Allowable Purchase Prices for the Affordable Housing
Production Program
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EXHIBIT 1
YEAR 2002 MAXIMUM ALLOWABLE INCOME LEVELS
For On-Site & Off-Site Affordable Housing
MAXIMUM INCOME LEVELS
BY HOUSEHOLD SIZE AND INCOME CATEGORY
INCOME CALCULATION: (Median Income X Income Category X Hhld Adjustment Factor)
"4 - PERSON HOUSEHOLD"
Median Income Year 2002:
$55,100
HOUSEHOLD ADJUSTMENT FACTOR
1-person0.7000
2-person0.8000
3-person0.9000
4-person1.0000
5-person1.0800
6-person1.1600
7-person1.2400
8-person1.3200
MAXIMUM ALLOWABLE INCOME LEVELS (ANNUAL)
Moderate
Very Low Low
100%
50%60%
Household Size
1-Person$19,285$23,142$38,570
2-Person$22,040$26,448$44,080
3-Person$24,795$29,754$49,590
4-Person$27,550$33,060$55,100
5-Person$29,754$35,705$59,508
6-Person$31,958$38,350$63,916
7-Person$34,162$40,994$68,324
8-Person$36,366$43,639$72,732
EXHIBIT 2
YEAR 2002 MAXIMUM ALLOWABLE RENTS
For On-Site & Off-Site Affordable Housing
MAXIMUM ALLOWABLE RENTS BY
INCOME CATEGORY AND UNIT SIZE
MONTHLY RENT CALCULATION:
(Median Income X Income Category X Bedroom Adjustment Factor X Affordability Standard) / 12
"4 - PERSON HOUSEHOLD"
$55,100
Median Income Year 2001:
30%
Affordability Standard :
Bedroom Adjustments:
0-Bdrm0.700
1-Bdrm0.800
2-Bdrm0.950
3-Bdrm1.085
4-Bdrm1.225
MAXIMUM ALLOWABLE RENTS (MONTHLY)
Very LowLowModerate
50%100%
Unit Size60%
0-BDRM$482$579$964
1-BDRM$551$661$1,102
2-BDRM$654$785$1,309
3-BDRM$747$897$1,495
4-BDRM$844$1,012$1,687
Exhibit 3
YEAR 2002 MAXIMUM ALLOWABLE PURCHASE PRICES
For Inclusionary Housing Units Developed Under Ordinance 1615
Median Income (Year 2002)$ 55,100
Affordability Standard30%
Interest Rate (4/16/01-4/12/02)6.700%
Term (months)360
UnitUnadjusted0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Bedroom Adjustment10.70.80.951.085
VERY LOW INCOME UNITS
Percent of Median50%
Annual Income$ 27,550
Affordable Housing Cost (per month)$ 689
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% [per month])$ 53
PMI (.52% of loan amt. [per month])$ 20
Affordable Mortgage Payment (per month)$ 293
Affordable Mortgage$ 45,471
Down Payment @ 10%$ 5,052
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 50,523$ 35,366$ 40,419$ 47,997$ 54,818
LOW INCOME UNITS
Percent of Median60%
Annual Income$ 33,060
Affordable Housing Cost (per month)$ 827
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% per month)$ 72
PMI (.52% of loan amt. per month)$ 27
Affordable Mortgage Payment (per month)$ 404
Affordable Mortgage$ 62,597
Down Payment @ 10%$ 6,955
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 69,552$ 48,687$ 55,642$ 66,075$ 75,464
MODERATE INCOME UNITS
Percent of Median100%
Annual Income$ 55,100
Affordable Housing Cost (per month)$ 1,378
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% per month)$ 152
PMI (.52% of loan amt. per month)$ 57
Affordable Mortgage Payment (per month)$ 846
Affordable Mortgage$ 131,099
Down Payment @ 10%$ 14,567
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 145,666$ 101,966$ 116,532$ 138,382$ 158,047
EXHIBIT 4
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE 2002 MAXIMUM ALLOWABLE RENTS AND
MAXIMUM ALLOWABLE PURCHASE PRICES
FOR THE INCLUSIONARY HOUSING PROGRAM
City Council Meeting 09/10/2002 Santa Monica, California
RESOLUTION NUMBER ____________
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE 2002 MAXIMUM ALLOWABLE RENTS AND
MAXIMUM ALLOWABLE PURCHASE PRICES
FOR THE INCLUSIONARY HOUSING PROGRAM
WHEREAS, the City Council of the City of Santa Monica adopted Ordinance Number
1615 (CCS) on March 3, 1992, Santa Monica Municipal Code Sections 9.28 et seq. ("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 an annual basis the maximum
allowable rents and maximum allowable purchase prices for inclusionary units under the
Inclusionary Housing Program; and
WHEREAS, the City Council of the City of Santa Monica adopted Ordinance Number
1918 (CCS) on July 21, 1998, Santa Monica Municipal Code Sections 9.56 et seq. ("the
Affordable Housing Production Program"), replacing Santa Monica Municipal Code
Sections 9.28 et seq.; and
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WHEREAS, Santa Monica Municipal Code Section 9.56.40 provides that multifamily
projects for which a development application was deemed complete prior to March 1, 1998
shall be subject to the provisions of Santa Monica Municipal Code Sections 9.28 et seq. as
they existed on the date the application for the project was deemed complete.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The maximum allowable rents and maximum purchase prices for
inclusionary units developed under the Inclusionary Housing Program are as shown in
Attachment 1 attached hereto and incorporated herein by reference.
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:
___________________________
Marsha Jones Moutrie
City Attorney
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Attachment 1
YEAR 2002 MAXIMUM ALLOWABLE PURCHASE PRICES
For Inclusionary Housing Units Developed Under Ordinance 1615
Median Income (Year 2002)$ 55,100
Affordability Standard30%
Interest Rate (4/16/01-4/12/02)6.700%
Term (months)360
UnitUnadjusted0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Bedroom Adjustment10.70.80.951.085
VERY LOW INCOME UNITS
Percent of Median50%
Annual Income$ 27,550
Affordable Housing Cost (per month)$ 689
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% [per month])$ 53
PMI (.52% of loan amt. [per month])$ 20
Affordable Mortgage Payment (per month)$ 293
Affordable Mortgage$ 45,471
Down Payment @ 10%$ 5,052
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 50,523$ 35,366$ 40,419$ 47,997$ 54,818
LOW INCOME UNITS
Percent of Median60%
Annual Income$ 33,060
Affordable Housing Cost (per month)$ 827
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% per month)$ 72
PMI (.52% of loan amt. per month)$ 27
Affordable Mortgage Payment (per month)$ 404
Affordable Mortgage$ 62,597
Down Payment @ 10%$ 6,955
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 69,552$ 48,687$ 55,642$ 66,075$ 75,464
MODERATE INCOME UNITS
Percent of Median100%
Annual Income$ 55,100
Affordable Housing Cost (per month)$ 1,378
Homeowner Assoc. Fees (per month)$ 323
Property Taxes (1.25% per month)$ 152
PMI (.52% of loan amt. per month)$ 57
Affordable Mortgage Payment (per month)$ 846
Affordable Mortgage$ 131,099
Down Payment @ 10%$ 14,567
0 Bdrm1 Bdrm2 Bdrm3 Bdrm
Sales Price @ 10% Down Payment$ 145,666$ 101,966$ 116,532$ 138,382$ 158,047
EXHIBIT 5
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE 2002 MAXIMUM ALLOWABLE RENTS AND
MAXIMUM ALLOWABLE PURCHASE PRICES FOR
THE AFFORDABLE HOUSING PRODUCTION PROGRAM
City Council Meeting 9/10/2002 Santa Monica, California
RESOLUTION NUMBER ____________
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA ESTABLISHING
THE 2002 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, 1998, Santa Monica Municipal Code Sections 9.56 et seq. ("the
Affordable Housing Production Program"); and
WHEREAS, Santa Monica Municipal Code Section 9.56.100 provides that the City
Council by Resolution shall establish and adjust on an annual basis the maximum
affordable rents 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 rents for affordable housing units
developed under the Affordable Housing Production Program are as shown in Attachment
1 attached hereto and incorporated herein by reference.
SECTION 2. The purchase price of for-sale units shall be established on a
unit-by-unit basis in accordance with Section 6 of the Administrative Guidelines for the
Affordable Housing Production Program of the City of Santa Monica, approved by the City
Council on October 5, 1999.
SECTION 3. 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:
___________________________
Marsha Jones Moutrie
City Attorney
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ATTACHMENT 1
YEAR 2002 MAXIMUM ALLOWABLE RENTS
For On-Site & Off-Site Affordable Housing
MAXIMUM ALLOWABLE RENTS BY
INCOME CATEGORY AND UNIT SIZE
MONTHLY RENT CALCULATION:
(Median Income X Income Category X Bedroom Adjustment Factor X Affordability Standard) / 12
"4 - PERSON HOUSEHOLD"
Median Income Year 2002:
$55,100
Affordability Standard :
30%
Bedroom Adjustments:
0-Bdrm0.700
1-Bdrm0.800
2-Bdrm0.950
3-Bdrm1.085
4-Bdrm1.225
MAXIMUM ALLOWABLE RENTS (MONTHLY)
Very LowLowModerate
Unit Size50%60%100%
0-BDRM$482$579$964
1-BDRM$551$661$1,102
2-BDRM$654$785$1,309
3-BDRM$747$897$1,495
4-BDRM$844$1,012$1,687