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SR-072308-8ACity Council and Redevelopment Agency Meeting: July 23, 2008 Agenda Item: To: Mayor and City Council Chairperson and Redevelopment Agency From: Andy Agle, Director of Housing and Economic Development Subject: High Place East Affordable Homeownership Demonstration Project Recommended Action Staff recommends that the City Council and Redevelopment Agency approve the following project parameters on a one-time basis for 1943-59 High Place (High Place East): 1. Subordination of the affordability restrictions in the land-use deed restriction to bank loans if required by lenders; 2. A resale price formula based upon the Area Median Income (AMI) index; 3. Indemnification by the City of the project sponsor from potential risk with respect to challenges of the facial validity of the City's resale price and income eligibility restrictions; 4. Homebuyer Selection Policies included in Attachment A; and 5. A loan amount for this homeownership project that conforms to the. Housing Trust Fund Guidelines limit for affordable rental housing projects. Executive Summary Creating opportunities for affordable homeownership continues to be an important policy goal within the City's housing programs and policies. Consistent with this community goal, the City Council and Redevelopment Agency (Agency) in October 2005 approved housing trust fund financing to a moderate-income affordable homeownership demonstration project concept known as "High Place East". The project sponsor is Community Corporation of Santa Monica (CCSM) and the ownership is structured using a nonprofit Community Land Trust (CLT) model. During project predevelopmerit, two issues surfaced which challenge project feasibility and represent a departure from existing City policy: first, subordination of the affordability restrictions, and second, indemnification by the City. Another issue that has emerged involves 1 conforming the resale price formula to an AMI index that is more broadly used for affordable housing. This report also provides recommendations on the homebuyer selection policy in response to previous Council/Agency direction. Finally, staff recommends that the loan amount for the proposed affordable homeownership project conform to the Housing Trust Fund Guidelines for affordable rental housing. -R Although not a subject of this report, the High Place East project is part of a larger development which includes 47 units of rental housing on the adjacent site. By concurrently developing these projects, economies of scale are anticipated which should result in cost savings. Approval of the subject recommendations is needed at this time so that the development of both projects can move forward concurrently. Background This project will provide affordable homeownership opportunities over the long term via resale price restrictions and does not include equity sharing. Limited equity is achieved by paying down the mortgage and the increase in the resale price based upon the AMI index (see 10-24-05 Information Item to Council). Following the Council's October 2005 approval of housing trust fund financing to the High Place East affordable homeownership demonstration project concept, staff provided an Information Item to the Council/Agency in March 2006. This item provided further information on the proposed Community Land Trust ownership structure, an update on the acquisition and predevelopment loan from the City/Agency and a summary of best practices for homebuyer selection. The Information Item indicated staff would return to the CouncillAgency for approval of the Homebuyer Selection Plan. Discussion. Affordable homeownership is an important community objective. as indicated by the City's Housing Element and the Consolidated Plan. However, opportunities to create such housing are limited due to the high cost of development (land and construction) in Santa Monica and the necessary public financing subsidies. As a demonstration project, the High Place East project is the first publicly subsidized development in Santa Monica that endeavors to produce a significant number of homeownership units affordable to moderate income households. Due to the uhique characteristics of this proposed project, several policy matters of concern. to both the City/Agency and CCSM 2 have surfaced that require consideration and direction from the Council/Agency. These matters affect project feasibility and represent a departure from City policy precedents. Subordination The High Place East project was approved by the Planning Commission as an all- affordable homeownership project. The project entitlements are conditioned upon, among other items, affordability restrictions that will be contained in a land-use deed restriction recorded as a covenant on title to the property. The project entitlements are established in the Statement of Official Action, and the project received various planning incentives for affordable housing, including, in part, a density bonus, front yard and side yard set backs, and reduced parking standards. The land-use deed restriction serves as the mechanism to implement and preserve the. project's affordability and establishes a pricing formula and income eligibility criteria. However, lenders providing construction and homebuyer financing to an affordable housing project generally require either that this covenant be subordinated to their loan or they significantly reduce the amount of financing provided to mitigate potential investment losses. In the particular case of the High Place East project which is structured as a CLT, Fannie. Mae -the single largest source of secondary market financing for commercial banks in the United States -will not purchase mortgages for units within a CLT unless the affordability covenant is subordinated to the bank loan. Without the estimated $8,700,000 in homebuyer loans from bank financing, the High Place East project is not economically viable. Subordination of the City's land-use deed restriction would vary from the existing Affordable Housing Production Program Guidelines (Guidelines) and could jeopardize the long-term affordability anticipated for such affordable housing projects. The Guidelines currently allow subordination of the resale price restrictions to a first trust deed loan for low income homeowners at the time of purchase, but not to moderate income homeowners or construction loans. Loss of affordability could result from a foreclosure on the construction loan or a homebuyer loan which in turn could eliminate the resale price restriction and income eligibility requirement. However, staff recommends subordination because .this 'loss of affordability' risk is mitigated by the -3- right of the CLT/City/Agency to cure a loan default and/or purchase a unit for the resale price. These rights will be specified in a Subordination Agreement, the City's Regulatory Agreement and the CLT Ground Lease for the project, which authorize the City to act during a loan default and foreclosure in the event the CLT. does not. With these mitigations, staff recommends: aone-time approval of subordination of the land- use deed restriction for this High Place East affordable homeownership demonstration project. Resale Formula Index Resale restrictions are placed on the units and focus on preserving affordability for future homebuyers rather than increasing homebuyer equity. Most rental housing affordability formulas in California utilize the Area Median Income index, published by the State for the Los Angeles County area. Staff has determined that this index provides the best indicator of affordability and recommends this index for use in the High Place East resale formula. The use of the AMI index differs from current City policy established in the Affordable Housing Production Program Administrative Guidelines (Guidelines), which uses the Consumer Price Index (CPI) in its resale formula methodology. This CPI method has not been implemented widely, and when the City Council considers updates to the Guidelines later this year, staff will recommend that the AMI methodology be used for all affordable ownership units. At this time, staff recommends aone-time waiver from the Guidelines to use the AMI index for the High Place East affordable homeownership demonstration project. City Indemnification of Project Sponsor Indemnification refers to the assumption of liability by one entity for the benefit of another entity. CCSM, as the project sponsor and main entity in the proposed CLT, has expressed concerns about proceeding with the High Place East project unless the City commits to defend and indemnify the CLT from homebuyer challenges to the resale price and income eligibility restrictions. However, as a public sector entity, the City must safeguard its resources and limit its exposure to litigation. The proposed indemnification -4- shall be limited to third-party claims challenging the facial validity of the City's resale price restrictions and homebuyer income eligibility requirements. The proposed indemnification shall not apply to any other claims arising from the CLT's administration of the homeownership program, and claims arising from the CLT's negligence or willful misconduct. Additionally, a clear and comprehensive homebuyer education program that discloses the many limitations and restrictions associated with maintaining affordable homeownership should contribute significantly toward strengthening buyer understanding. Therefore, staff recommends aone-time indemnification as described above for this affordable homeowner demonstration project. Homebuyer Selection Policies A detailed draft of the High Place East Homebuyer Selection Plan (Plan) is provided in Attachment A. City Council direction will be incorporated into the final Plan. The Plan is intended to provide a fair and equitable approach to the selection of income eligible households. Key components of the Plan include: 1) priority for Santa Monica residents and workers (local preference); 2) comprehensive outreach and marketing strategy; 3) maintenance of an interest/waiting list; 4) pre-qualification of applicant households; 5) extensive homebuyer education program; and 6) lottery. As an experienced affordable housing developer and property owner/manager, CCSM has successfully established a fair and efficient household selection process for its rental properties (roughly 1,400 units}. CCSM maintains its own waiting list, complies with applicable fair housing requirements and has continuously managed its properties with occupancy levels near 100%. Therefore, staff believes that CCSM is well equipped to handle the High Place East selection process for homeownership units as discussed in the Plan. City Funding Amount The City Council and Redevelopment Agency previously approved the existing housing trust loan for acquisition and predevelopment costs associated with High Place East, as -5- mentioned in the Background section of this report. The current estimated development budget sources and uses, as well as the purchase price economics, are provided in Attachment B. A homebuyer would need to secure a bank loan estimated at $182,000 and a down payment estimated at $11,000. Total development costs are estimated at $24,596,500 of which $14,544,000 or $323,200/unit in City funds have been requested. The proposed subsidy amount is within the current Housing Trust Fund Guidelines per- unit subsidy limit of $386,000. Since there are no corresponding guidelines for affordable homeownership projects, staff recommends that the High Place loan amount conform to the Housing Trust Fund Guidelines limit for affordable rental housing. Commission Action On December 12, 2007 the Planning Commission approved the project's Environmental Impact Report, Development Review Permit, tentative map, and Statement of Official Action. The Housing Commission has been briefed on the High Place East project multiple times over the past few years and has expressed its continued support. The Housing Commission considered the matters recommended in this report at its meetings on June 19 and July 17, 2008. The Commission recommendations will be presented orally at the Council meeting. Public Outreach The concept of homeownership as a viable option for Santa Monica was initially explored through a collaboration between the residents of the Pico neighborhood and CCSM. In 2003, two community forums were sponsored. by CCSM to discuss affordable housing issues with .representatives of the Pico neighborhood. At these forums, community members expressed interest in affordable homeownership for first- time homebuyers. In response to this feedback, CCSM convened a study group comprised of Pico community leaders to explore and consider all aspects of affordable homeownership. The study group prepared a report which endorses affordable homeownership for moderate income households, and this information was presented in an October 2005 staff report to City Council. -6- Financial Impacts & Budget Actions The housing trust fund loan amount to the High Place East project is currently estimated at $14,544,000, which does not exceed the Housing Trust Fund Guidelines- limit of $386,000 per unit for new rental construction. To date, $3,095,000 has been loaned to this project and $11,449,000 of additional funds is available in the following accounts: HOUSING TRUST FUND ACCOUNTS Account # Amount ', H15004907.589000 subledger 17900 $ 1,113,638 H15004908.589000 subledger 17900 $ 4,905,669 H15004908.589000 subledger 18800 $ 246,000 H15004909.589000 subledger 17900 $ 5,183,693 Total: $11,449,000 Prepared by: Jim Kemper, Housing Administrator Forwarded to Council: Andy Agle, D Economic De Attachments: Attachment A: Attachment B: sing and _ P. nt Ewell Department Cit anager Homebuyer Selection Plan Estimated Project Budget and Purchase Price Economics -7- Attachment A COMMUNITY CORPORATION of SANTA MONICA 1423 SECOND STREET, SUITE B, SANTA MONICA, CA 90401 (310)394-8487 FAX 395-4336 June 13, 2008 DRAFT High Place East. Homebuyer Selection Policies (Draft #9) These policies are intended to serve as a guide to select homebuyers for the High Place East homes. The first section consists of criteria that will be used to deteimine who is eligible to purchase a home. The second section consists of selecting a buyer from a qualified pool of applicants. FAIR HOUSING CCSM will comply with all fair housing laws and will make affirmative efforts to insure equal access to scarce affordable housing opportunities. CCSM will not discriminate on the basis o£ Race; Color; Ethnicity; Religion; Sex; National origin; Disability; Family status; or Sexual orientation. CCSM will generally follow HUD Affirmative marketing guidelines to the extent practical, which are enumerated below. The objective of the HUD marketing guidelines is to ensure that project owners design and employ a marketing plan that promotes fair housing by ensuring outreach to all potentially eligible households, especially those least likely to apply for assistance. Therefore, the marketing will consist of actions that provide information and otherwise attract eligible persons to available housing without regard to race, color, national origin, sex, religion, familial status (persons with children under 18 years of age, including pregnant women), or disability. Affirmative marketing activities, at a minimum, shall include: 1. Insuring that advertised project includes the"Equal Housing Opportunity logo or statement. 2. Posting the HUD Fair Housing poster in the Developer's/Owner's office. 3. Soliciting application from persons in the housing market who are least likely to apply for the housing without the benefit of special outreach efforts. 4. Maintaining file records containing all marketing efforts (e.g., newspaper advertisements, file memorandums documenting phone inquiries, copies of inquiry letters and related responses, etc.) With changing demographics, there are also additional challenges when marketing to an eligible population that is limited English proficient (LEP). CCSM. will: • Translate its marketing material to serve this population, Page 1 of ] 0 Attachment A Work with the language minority-owned print media, radio and television stations, Partner with faith-based and community organizations that serve minority communities. Provide a list of language translation service agencies for buyers who need legal document assistance. Homebuyer Selection Criteria There-will be two sets of criteria to identify qualified homebuyers fordhe High Place East homes available for sale. The first set of criteria consists of the Threshold Criteria. All potential applicants must meet these Threshold Criteria in order to purchase ahome. -Once it is determined that an applicant meets the Threshold Criteria, it can then be determined if they meet any of the applicable Priority Criteria. There is no requirement that applicants meet any of the Priority Criteria in order to purchase a home. However, these criteria will provide a method for establishing priority in meeting the City of Santa Monica and CCSM's goals,. Both sets of criteria are discussed below. INITIAL THRESHOLD CRITERIA The first step in selecting applicants for the available homes is to assure that they meet all of the initial threshold criteria. These criteria are listed below. 1. Applicants must be at least 18 years of age. 2. Prior to being selected for a unit, applicants must sign an informed consent statement indicating that they are aware that the ownership units is price restricted at resale. 3. Income limitations will differ by household size, which will be expressed as a percentage of the Median County Income. There will be no specific asset limits on applicants, however any income imputed from assets will be included in the calculation of household income. 4. Applicant must be a first time homebuyer. First time homebuyer is defined as a person who has not owned a home within the prior three (3) years, except for in the following cases: a. A displaced homemaker who, while a homemaker, owned a home with his/her spouse. A displaced homemaker is an adult who has not, within the preceding two years, worked on a full-time basis as a member of the labor force for a consecutive twelve month period and who has been unemployed or underemployed, experienced difficulty in obtaining or upgrading employment and worked primarily without remuneration to care for his/her home and family. b. A single parent who, while married, owned a home with his/her spouse or resided in a home owned by the spouse. c. An individual who owns or owned, as a primary residence during the prior 3 year period, a dwelling unit whose structure is (1) not permanently affixed to a permanent foundation in accordance with local and state regulations or (2) not in compliance with state, local or model building codes and cannot be brought into compliance with such codes for less than the cost of constructing a permanent structure. (Section 102, BEGIN Program Guidelines) 5. Regarding eligibility of CCSM employees or spouses of CCSM employees, board members or relatives of an employee or board member, please see Exhibit A. The CCSM conflict of interest policy will apply to this project. In addition, the following individuals, by virtue of Page 2 of 10 Attachment A their position or relationship within the City of Santa Monica, are ineligible to occupy an affordable housing unit: a. All employees and officials of the City of Santa Monica or its agencies, authorities, or commissions who have, by the authority of their position, policy-making authority or influence over the implementation of this Chapter and the immediate relatives and employees of such City employees and officials; b. The immediate relatives of the applicant or owner, including spouse, children, parents, grandparents, brother, sister, father-in-law, mother-in-law, son-in-law, daughter-in-law, aunt, uncle, niece, nephew, sister-in-law, and brother-in-law. (Santa Monica Municipal Code'9.56:110. Added by Ord. No. 1918CCS § 1 (part), adopted 7/21!98). PRIORITY CRITERIA Permanent Displacement, Local Residency & Employment: Applicants who have been permanently displaced or are facing permanent displacement from housing in Santa Monica due to the Ellis Act, owner-occupancy, removal permit eviction, earthquake, fire, flood or other natural disaster, cancellation of Section 8 contract by property owner and governmental action, such as code enforcement, will receive first priority over other applicants. Applicants who are either residents of the City of Santa Monica and/or working in the City of Santa Monica at least 36 hours per week for at least six (6) months will receive second priority over other applicants (City of Santa Monica, Affordable Housing Production Program, Administrative Guidelines, Section 7A). MORTGAGE PRODUCTS/CRITERIA CCSM will have the right to approve or disapprove of any mortgage lender. CCSM will provide potential buyers with a list of preferred lenders to facilitate the mortgage process. Generally, the following criteria will be applied to the mortgage process: 1. Applicants must pre-qualify with a preferred mortgage lender prior to the lottery selection. 2. Applicants cannot qualify for a loan with a co-signer, unless the co-signer has also been approved by CCSM, based on a review of the financial capacity of the co-signer to fulfill the borrower's obligations. 3. All mortgage products, for both purchase and refinance, must be approved by CCSM. Buyers may use commonly available mortgage products, however predatory and negatively amortizing loan products will not be approved. 4. There will be a minimum 5% down payment required from borrower's own funds. This may be included as a portion of the down payment required by a conventional lender to qualify for a commonly available mortgage product (City of Santa Monica, Affordable Housing Production Program, Administrative Guidelines, Section 6A). 5. In addition to income or debt. burden requirements by a conventional lender to qualify for a commonly available mortgage product, there will be at least a 28% housing cost-to- income mortgage ratio, per California Health and Safety Code 50052.5. There will also Page 3 of 10 Attachment A be a maximum 42% housing cost-to-income ratio to ensure the buyer's ability to make mortgage payments. Homebuyer Selection Process Once qualified applicants have been identified using the above threshold and priority criteria, the homebuyer selection process will determine the actual selection of families for each home. The steps in the system are generally laid out below. Exhibit B shows a detailed explanation of how potential buyers will progressthrough the lottery system. The general steps that each potential homebuyer will have to complete include: 1. Interest Form (to be placed on Interest List) Z. Interest List 3. Project Orientation (to describe CLT structure and resale restrictions) - A photo identification will be required at the time of the orientation. 4. ProjectApplication, including down payment source and a $50 application fee 5. Application Review Tier 1: review of applicant provided information 6. Homebuyer and CLT Education Session. A photo identification will be required of all participants. 7. Lender Pre-Qualification 8. Complete Education process 9. Lottery 10. Application Review'Tier 2: 3`d Party Verifications 11. Review Documents (CLT, Ground Lease, HOA, BEGIN) /Independent Legal Review 12. Sign Purchase Contract and enter escrow 13. Apply for Loan from Lender 14. Approve all documents and sign a Letter of Stipulation acknowledging the specific restrictions contained in their Ground Lease or Deed Restriction. 15. Complete sale and close escrow These steps are discussed below in greater detail. The final homebuyer selection shall be subject, to eligibility certification by City. INTEREST LIST /PROJECT ORIENTATION About six months prior to construction completion, CCSM will invite all potential applicants who express interest in homeownership to fill out a simple interest form with income and household size information. Applicants will be required to attend a seminar that will provide information on the project, CLT structure, and resale restrictions. Completed interest forms will be databased and all names will be placed on the list. Sample information that will be gathered on the interest form is included in Exhibit C. This interest list will serve as the primary Page 4 of 10 Attachment A marketing tool for the available homes. PROJECT APPLICATION AND FIRST TIER REVIEW About four months prior to construction completion, all potentially income-eligible persons on the interest list must fill out a detailed project application. An example of information that will be gathered in the project application is included in Exhibit D. Once applicants fill out the detailed project application, the applications will be reviewed in two stages to determine whether they meet the threshold and priority criteria. The First Tier review will take place prior to lottery selection. This will consist of reviewing the applicant provided information to determine qualification. If the applicant qualifies based on self-provided information, s/he will move on to the Education sessions, pre-qualification by a lender and the Lottery. The applicants who do not qualify will end the process here or request an appeal within fourteen (14) days of disqualification to the CCSM Board Property Management Committee. The CCSM Board Committee-will review the request and any additional information provided. If the appeal is upheld, the applicant will be entered into the Lottery. If the appeal is denied; the process ends here. HOMEBUYER EDUCATION AND CLT TRAINING Those applicants who have qualified after the first tier review, must attend the homebuyer education classes. The sessions will cover basic homebuyer education and a more detailed CLT orientation and education session. The course will be twelve (12) hours and will cover what happens in the event of default; the risk of over encumbrance, and the Community Land Trust's and City of Santa Monica's Right of First and Second Refusal. Applicants will be required to provide a completion certificate prior to purchasing a home. The homebuyer education course will be offered by a qualified non-profit organization that specializes in homebuyer education: Each participant is required to complete the classes to qualify for the lottery. Please refer to Exhibit B for the detailed process. SELECTION PROCESS Applicants who have completed the application and passed the first tier review may be entered into the lottery. To participate in the lottery, applicants must submit all application materials, receive lender pre-qualification and complete educational sessions prior to the lottery cutoff date. At the time of the lottery, all applicants will be assigned random numbers that start with either an "L" (for local preference) or a "N" (for non-locals). (See Priority Criteria, Local Residency or Employment Section for definitions.) Those with the lowest L-numbers will be given the first priority to purchase available units. The remaining applicants will constitute a `waiting list' in the event that some lower numbered applicants are unable or later choose not to purchase. Subsequent applicants will be offered units in the order of their lottery numbers. PROJECT APPLICATION AND SECOND TIER REVIEW The lowest numbers in the lottery will be selected for second tier review, consisting of third party verifications of all provided information. At this time, applicants going through the second tier review will be asked to provide a deposit, per the Department of Real Estate's regulations. Page 5 of 10 Attachment A Buyers will have 30 days from execution of the purchase agreement to close escrow and complete the purchase. Duririg the 30 days, buyers will also complete their review of all of the documents (HOA, CLT Ground Lease and BEGIN documents). If the deadlines are not met or the buyer does not get approved for the loan, then the buyer with the next lowest lottery number will have the opportunity to purchase the home. In terms of selecting which buyer will purchase which unit in the project, this will be determined on a first-come, first-served basis. For example, person number one in the lottery will have first choice of their unit and person number two will have second choice and so on. SELECTION OF BUYERS UPON SUBSEQUENT RESALE OF UNITS Homeowners seeking to resell their units shall notify CCSM if their intent to sell and use CCSM's list of interested buyers. CCSM will maintain a list of interested potential buyers for a period of approximately five years from completion of the project, based on the initial list that was established when the project was first developed. Subsequent to the first five years, CCSM will periodically open the list for additional buyers, as needed. CCSM will alert persons on the list regarding the availability of the unit for purchase. Homeowners may select buyers without regard to their position on the waiting list. Upon selection of a buyer, CCSM will determine whether the buyer meets program income requirements, and will provide educational information to the buyer regarding the terms of the Grourid Lease or Deed Restriction, including resale restrictions. Buyers will be required to comply with similar educational requirements as the initial purchasers of the units. Buyers-will also be required to sign a Letter of Stipulation acknowledging the specific restrictions contained in their Ground Lease or Deed Restriction Page 6 of 10 Attachment A EXHIBIT A: CCSM Policy Regarding Renting of Units to Employees and Board Members will apply to the sale of units at this property. COMMUNITY CORPORATION of SANTA MONICA 1423 SECOND STREET, SUITE B, SANTA MONICA, CA 90401 (310)394-8487 FAX 395-4336 Annroved CCSM Policy Regarding Leasing to Relatives of CCSM em l~oyees and Board members (as a reed by the Board of Directors on 1(/11/02) Definition of Relative: any person who has a blood, marriage or legal guardianship relationship CCSM will be delineated into 2 categories: Management & Staff. Management = Board Members, Executive Director, Director of Property Management, Director of Development, Controller, and Occupancy and Compliance Manager Staff =all other employees not mentioned under "Management" category Policv retarding "Staff' emplovees: • Rule #L in general, applicant must be on the Marketing List • Rule #2: applicant is not eligible for units that are "open to the general public" -~ the reason for this is that unlike the marketing list method, units "open to the general public" are handled on afirst-come-first-served basis. Therefore, we want to make sure that there is no internal advantage from being,"tipped off' by a CCSM employee. The mere appearance of impropriety resents an extraordinary burden on CCSM. • An exception to rules #1 and #2 would be if the relative meets CCSM's definition of a SM-based No fault eviction as defined as follows and with CCSM-accepted verification: Santa Monica residents who have been displaced or will be permanently displaced from housing in SM as a result of the following: - A redevelopment project as defined by California's Community Redevelopment Law - Ellis Act, owner-occupancy or removal permit eviction - Cancellation of Section 8 contract by property owner or - Governmental Action such as Code enforcement • CCSM Leasing personnel are prohibited from processing applications from their own relatives • All applications from relatives must have fma] written approval from the Director of Property Management • In general, CCSM employees themselves cannot live at CCSM units. Special exceptions based on legitimate business reasons will be considered but these will require the Board Member's written approval. • Spouses of employees are not eligible for CCSM units but emancipated minors and children 18 years and older are eligible. • All leasing staff will sign a written policy statement to make sure that they are aware of the policy and that non- compliance will result in disciplinary action: egregious violations in the sole discretion of CCSM may result in termination of employment. Policv retarding "Management" Employees: • The only time a relative of Management-level employees would be eligible is when the relative falls under the Santa Monica No-Fault Eviction definition. page '/ of 1 ~ EGUAL HOUSING Attachment A EXHIBIT B: LOTTERY PROCEDURE Interest Form [nterest List Marketing Project Orientation: CLT Structure, Resale Restrictions - Project Application Review Tier 1: Based Apolication on Applicant provided information Qualify Don't Qualify ~ R Orien[ation/Education Sessions 14 day anneal Pre-qualification by Lender Upheld Denied Stop Complete Education LOTTERY SELECTION Number Picked Local Vs. Non-Local Application Review Tier 2: 3rd Party Verifications Denied Stop Don't Qualify Qualify 14 day anneal Applicant Review of Documents (CLT, HOA, (:rnnnd i eacr RF(;iNl Upheld Loan Denied Stop Page 8 of 10 Sign Purchase Contract & enter escrow (L numbers are preferred over N numbers) Apply for Bank Loan Bank Loan Approved Complete Sale and Close Escrow Not Picked Stop Independent Legal Review (optional) Attachment A EXHIBIT C INTEREST FORM The interest form will gather general information about each household and will be required for a family to be placed on the interest list. Sample information that will be collected includes: • Name of all household members • Age of all household members Income information, generally the household income • General employment information • Contact information including phone numbers, address and email • Race and Ethnicity for data purposes • Lender • Primary Language • Photo ID of all household members • Proof of citizenship or legal document indicating status of all members of household 18 or over • Assets • Marriage Certificate /Domestic Partnership Page 9 of ] 0 Attachment A EXHIBIT D PROJECT APPLICATION The project application will collect detailed information on the applicant and will be used to determine eligibility and priority for t-he a specific unit. This application will collect the following information: • Names of all household members. • ~s Dates of birth of all household members. • Income information, including current pay stubs and most recently filed Income Tax Return. Additionally, the applicant must provide proof of any alternative sources of income including social security, disability, child support, eta • Detailed information on the employment status of every person over 18 in the household, including place of employment, length of employment, and salary. • A recent copy of the applicant's credit report. • Amount of time living at current address. If the applicant has lived in their current home for less than one year, they will be required to list prior address for the past five years. • Contact information including phone numbers, address and email. • Race and Ethnicity for data purposes • Lender • Primary Language • Photo ID of all household members • Assets • Criminal background • Identify head of household Page ] 0 of ] 0 ATTACHMENT B HIGH PLACE EAST -ESTIMATED PROJECT BUDGET AND PURCHASE PRICE ECONOMICS The estimated development costs will be funded by a variety of sources as identified below. A conventional lender will provide financing during the construction period which will be repaid byhomebuyer mortgages, downpayments, and BEGIN Program proceeds in the form of soft seconds. The City was awarded a BEGIN Program grant of $1,350,000 to administer a soft second program to the High. Place buyers. To date, the City has committed $3,095,000 toward acquisition and predevelopment expenses of which $2,084,687 has been advanced. CCSM has requested an additional $11,449,000 for a total loan amount of $14,544,000 to fill the financing gap summarized below. The estimated City subsidy of $323,200 per unit is within the current Housing Trust Fund Guidelines per unit subsidy limit of $386,000 for a two or more bedroom unit. 1943 -1959 High Place ; TOTAL ESTIMATED DEVELOPMENT COSTS Land Acquisition $ 1,761,600 $ 39,147/ unit Development $ 22,834,900 $ 507,442/ unit TOTAL: $ 24,596,500 $ 546,589/ unit TOTAL ESTIMATED FUNDING SOURCES. City/Agency Housing Trust Funds $ 14,544,000 $ 323,200/ unit BEGIN Grant $ 1,350,000 $ 30,000/ unit Homebuyer Loans & Downpa ment $ 8,702,500 $ 193,389/ unit TOTAL: $ 24,596,500 $ 546,589/ unit 1 Buyer Economics The following tables show that the purchase price for a moderate income household will be $223,389. Buyer debt service will be limited to the first trust deed mortgage that will be provided by a conventional lender based on a 30 year fixed rate loan of 6.76%. Debt service is not required for the BEGIN loans since BEGIN repayment is deferred for 30 years. Closing costs (not reflected below) will be covered by the buyers. Initial Costs $ Per Unit Total Development Cost 546,589 Cit Subsid 323,200 Initial Purchase Price 223,389 Initial. Financing $ Per Unit 15 TD Mort a e (30 r; 6.76%) 182,218 BEGIN Deferred Loan (30 yr; 0%) 30,000 Downpa ment (5%) 11,171 Initial Purchase Price 223,389 2 g -~- ~7~a31v Version #5 7/23/2008 Conflicts between City's AHPP (MC 9.56) and State affordable housing programs, including Redevelopment Category AHPP State Programs InCOfYt@ Limits (low) 60% of AMI or less per Federal HUD (9.56.020) In conflict different ercenta e & index Income ~ImItS 100% of AMI or less per Federal HUD (9.56.020) In conflict (moderate) different ercenta e & index Rent Limit /Housing 30% of low income for rental In conflict Cost Low 38% of low income for ownership (9.56.100) (different percentages and gross incomes) Rent Limit /Housing 30% of moderate income for rental In conflict Cost Moderate 38% of moderate income for ownershi p (different percentages and gross incomes) Initial Purchase Price service debt at front-end ratio of no less than 33% and no In conflict (moderate Income) greater than 38%. Max back end ratio is 41 %. (different minimum front-end ratio, different maximum monthly housing cost to income percentage, and different urchase rice calculation methodolo Resale Price Lower of: appraised market value or initial sales price + In conflict Calculation (moderate increase in CPI + value of capital improvements - (based on median income growth, price calculated based income deferred maintenance on the parameters of the initial purchase price above) Down Payment 5% In conflict No down re wired Minimum Unit Size Different from AHPP (TCAC) One BD 600 sf 500 sf Two BD 850 sf 750 sf Three BD 1,080 sf 1,000 sf Four BD 1,200 sf 9.56.050 b 1,200 sf Over-Income Residents If exceed 140% of moderate income limit, must vacate unit within one year In conflict (Resident can stay in unit, but Next available unit must be affordable at the a ro riate income level. Only low-income and very low-income households shall Eligibility Requirements be eligible to occupy or own and occupy affordable Very low, low and moderate income housin units. 9.56.110 a Page 1 of 1