SR 07-25-2023 13A 13.A
July 25, 2023
Council Meeting: July 25, 2023 Santa Monica, California
1 of 1
CITY CLERK’S OFFICE - MEMORANDUM
To: Mayor and City Council
From: Denise Anderson Warren, City Clerk, Records & Elections Services
Department
Date: July 25, 2023
13.A Santa Monica Housing Commission Report : Creating Equity - Affordable
Homeownership in Santa Monica
13.A
Packet Pg. 2021
Creating Equity
Affordable Homeownership in Santa Monica
Report by
Santa Monica Housing Commission
7 May 2023
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Acknowledgements
This report was created by the Santa Monica Housing Commission during the 2022-2023
program year. The Housing Commission comprises Commissioners Peter Borresen, Kate
Evarts, Dominic Gomez, Josh Hamilton, and Richard Hilton; Vice Chair Theresa Marasco;
and Chair Michelle Gray. This report originated with 2022-2023 Housing Commission Work
Plan items related to increasing affordable homeownership and is based on the initial hard
work of the Housing Commission Ad Hoc Affordable Homeownership Subcommittee,
comprising Commissioner and Subcommittee Chair Peter Borresen, Commissioner
Dominic Gomez, and Vice Chair Theresa Marasco. The initial work of the subcommittee
was discussed, revised, and expanded by the entire Housing Commission with the input of
Santa Monica residents and additional research by Commissioner Borresen, Vice Chair
Marasco, and Chair Gray.
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Table of Contents
1. INTRODUCTION ..................................................................................................................................... 3
1.1 Notes on terminology ............................................................................................................. 4
2. AFFORDABLE HOMEOWNERSHIP IN HOUSING POLICY ................................................................. 5
2.1 Fulfills stated city goals .......................................................................................................... 5
2.2 Preserves and expands affordability ....................................................................................... 6
2.3 Advances social, racial, and economic justice ....................................................................... 6
2.3.1 Social and economic justice ............................................................................................. 6
2.3.2 Racial justice ................................................................................................................... 7
2.3.3 Proposed HUD requirements ........................................................................................... 9
3. AFFORDABLE HOMEOWNERSHIP INVENTORY ............................................................................... 11
3.1 Existing housing ................................................................................................................... 11
3.1.1 Rent controlled units ...................................................................................................... 11
3.1.2 100% affordable units .................................................................................................... 11
3.1.3 Market rate units ............................................................................................................ 12
3.1.4 Inclusionary Units .......................................................................................................... 12
3.2 New housing ........................................................................................................................ 13
3.2.1 New 100% affordable single and multifamily properties ................................................. 13
3.2.2 New market rate and inclusionary units ......................................................................... 15
4. MEANS TO AFFORDABLE HOMEOWNERSHIP ................................................................................. 16
4.1 Existing funding .................................................................................................................... 16
4.1.1 For prospective home buyers ......................................................................................... 16
4.1.2 For organizations and municipalities .............................................................................. 17
4.2 Proposed actions for Santa Monica ..................................................................................... 19
4.2.1 TORCA 2.0 .................................................................................................................... 19
4.2.1.1 For rent controlled buildings and units................................................................................ 20
4.2.1.2 For market rate and inclusionary units ............................................................................... 21
4.2.2 HUD homeownership program ....................................................................................... 21
4.2.3 100% affordable rental housing conversion .................................................................... 22
4.2.4 Inclusion of for-sale units in new 100% affordable rental housing .................................. 22
4.2.5 Equalize fees ................................................................................................................. 23
4.2.6 Prioritize new market rate for-sale housing over new market rate rental housing ............ 23
4.2.7 New forgivable down payment assistance loan fund ...................................................... 24
4.2.8 New home purchase assistance office ........................................................................... 24
4.2.9 Community land trusts ................................................................................................... 24
4.2.10 Rent to own ................................................................................................................. 25
5. RECOMMENDATIONS.......................................................................................................................... 27
6. CONCLUSION....................................................................................................................................... 30
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1. Introduction
Home. Hogar. Words that evoke images of warmth, safety, and sanctuary. More than mere
shelter, home is a physical place where we live, play, work, and love, as well as a liminal,
emotional place of memory, security, aspiration, and identity. Both a springboard and an
anchor, home is the cornerstone of the fabled American Dream.
No wonder, then, that homeownership is such a widespread , cherished goal. In modern
capitalist societies, the only way to improve on one’s personal idea of home—existing or
aspirational—is to own one’s own home, including the land on which it lies. This ownership
physically manifests and makes permanent the stability of home.
Homeownership confers numerous benefits in addition to stability. It contributes to lower
and more controlled long term housing costs, builds personal and multigenerational wealth
through appreciation, enables environmental customization, and provides a means of self-
expression. Homeownership fosters pride, builds social equity, and strengthens
community.
Unfortunately, in Santa Monica homeownership and its many attendant benefits are
reserved exclusively for wealthy people, most of whom are white. From small condos to
sprawling mansions, the cost of owning residential real estate in Santa Monica is
prohibitively expensive for those with low to moderate incomes, including the vast majority
of Black and brown Santa Monica residents.
Affordable homeownership may not seem feasible in Santa Monica due to the high cost of
living, and therefore a poor use of limited city and federal resources. However, successful
programs in similarly costly cities like San Diego1 and New York City2 demonstrate
otherwise. Furthermore, affordable homeownership is particularly key to affirmatively
furthering fair housing—as new proposed HUD guidelines require—in cities with high costs
of living. As this report illustrates, affordable homeownership is vital to creating equity—
both literal and figurative, financial and societal.
The following report outlines multiple ways for Santa Monica to advance homeownership
parity, from converting existing housing stock to facilitating new construction, and utilizing
federal, state, and local funding from individual home purchase assistance programs to
grants for institutions and municipalities. Together with proposed Santa Monica
programming, these diverse sources of inventory and funding can be combined in myriad
ways to achieve the city’s affordable homeownership goals.
1 https://www.sdhc.org/housing-opportunities/affordable-for-sale-housing/
2 https://www.nyc.gov/site/hpd/services-and-information/hdfc.page
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1.1 Notes on terminology
In this report homeownership always refers to the purchase by one or more real individuals
of any form of private residence for the purpose of owner occupancy. This residence can
take the form of an individual unit in a multifamily building, an individual unit in a duplex or
triplex, a tiny house, a townhouse, a modular home, etcetera. Note that the initial
requirement of owner occupancy does not mean an owner can never rent or sell their unit
to another party, as building wealth is a key benefit of homeownership that affirmatively
furthers fair housing by facilitating upward mobility.
In addition, regardless of the form a private residence takes, in this report homeownership
always includes full or proportional fractional ownership of the property’s underlying land.
This stipulation is important because stored wealth and capital appreciation in residential
real estate is primarily attached to a property’s underlying land.
In this report the terms single family housing, home, unit, or property refers to a
freestanding private residence—for example a traditional house, tiny home, or modular
home—not the zoning or land use classification.
Finally, unless indicated otherwise, in this report the term voluntary homeownership model
refers to individual tenants’ ability to choose whether or not to purchase the housing unit
they live in, not building owners' ability to choose whether or not to participate in providing
for-sale units or converting rental units to for-sale units.
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2. Affordable homeownership in housing policy
Robust and effective housing policy requires multiple elements to satisfy the diverse
housing needs and desires of Santa Monica residents. These include market rate home
rentals, market rate home ownership, affordable home rentals, and affordable home
ownership. Housing policy in the City of Santa Monica currently addresses all but one of
these elements: affordable homeownership. This significant omission must be addressed
and remedied for multiple reasons, including the following.
2.1 Fulfills stated city goals
Affordable homeownership is an explicitly stated goal of the City of Santa Monica. On 31
March 2021, City Council updated the City of Santa Monica’s 6th Cycle (2021-2029)
Housing Element to include the requirement that the City of Santa Monica:
“Explore diverse opportunities for affordable homeownership and
transition from renters to owners by residents.”3
Santa Monica seems to have been thinking about affordable homeownership for years.
Since at least 2016, the application for the city’s Below Market Housing waitlist has
included a check box for applicants to indicate interest in homeownership opportunities.
Furthermore, on 11 March 2023 City Council voted unanimously to adopt council priorities
for the Fiscal Years 2023-2025 Budget that include the guiding principle of Racial Justice,
Equity, and Social Diversity:
The City of Santa Monica acknowledges the effects of generational and
institutional racism and discrimination, and its consequences that continue
to impact our residents and businesses. These lessons of our history
cannot be ignored. The City is committed to advancing racial equity and
social diversity to improve the wellbeing of people who live, work, learn,
play, and do business in our City and create a community where
differences in life outcomes cannot be predicted by race, class, gender,
disability or other identities. Everyone in Santa Monica must have an
opportunity to thrive4
3 https://www.hcd.ca.gov/housing-elements/docs/santa-monica-6th-draft070822.pdf
4 https://santamonica.gov/press/2023/03/11/city-council-adopts-priorities-and-provides-direction-for-2023-
2025-biennial-budget-process
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As demonstrated in section 2.3, opportunities for affordable homeownership are closely
tied to issues of racial justice, equity, and social diversity.
Finally, city staff have stated that California demands for affordable housing construction
may be met via affordable homes for-sale.5
Enabling low and moderate income individuals and families to own homes in Santa Monica
fulfills all of these vital city priorities.
2.2 Preserves and expands affordability
Since California mandated the end of vacancy control with the Costa-Hawkins Rental
Housing Act of 1995, base rents of rent controlled units in Santa Monica can be reset at
market rates with each new tenancy. This, in addition to the removal and redevelopment of
rent controlled buildings under the Ellis Act of 1985, has led to a continual and significant
loss of housing affordability in Santa Monica.6 Introducing new affordable homeownership
opportunities will help preserve and make permanent existing city housing affordability and
increase the total affordable housing stock in Santa Monica.
2.3 Advances social, racial, and economic justice
Homeownership contributes to lower housing costs, builds personal and multigenerational
wealth through appreciation, fosters stability, enables personalization, builds social equity,
and strengthens community. However, in Santa Monica only wealthy, and predominantly
white, people can afford to purchase houses or multifamily units and enjoy the numerous
benefits of homeownership. Dedicated efforts to expand diverse affordable homeownership
opportunities for low and moderate income Santa Monicans can change this disparity.
2.3.1 Social and economic justice
Affordable rentals serve an important purpose, particularly for short term and transitioning
residents. However, they do not enable long term Santa Monicans with low and moderate
incomes to realize the many benefits of homeownership. To do that, Santa Monicans of
modest means must have equal opportunities to own residential property through robust
affordable homeownership policies and programs.
5 Santa Monica Housing Commission meeting, 10 November 2022, agenda item 5A
https://santamonica.gov/media/HED/Housing/Housing%20Agenda%20Attachments/11-10-
22%20HC%20Agenda%20Final.pdf
6https://www.smgov.net/uploadedFiles/Departments/Rent_Control/Reports/Annual_Reports/2022%20Annual
%20Report.pdf
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In addition to helping lower and control long term housing costs, build wealth, establish
roots, personalize their homes, build social equity, and strengthen community, affordable
homeownership policies and programs will also qualitatively improve city housing stock for
the whole city, but particularly for low and moderate income residents.
In contrast with many affordable rentals, the conversion, design, and c onstruction of local
affordable housing for-sale will result in the creation of homes that more closely follow real
estate trends that reflect home buyers’ actual preferences. These include desirable location
and setting; proximity to preferred schools, parks, goods, and services; adequate square
footage; abundant natural light; pleasing, and not institutional, facades that complement
neighborhood aesthetics; and amenities like inviting common spaces, generous
landscaping, and sufficient parking. Such housing characteristics will improve quality of life
for low and moderate income residents while improving the overall quality of Santa
Monica’s housing inventory.
2.3.2 Racial justice
Social and economic injustice are particularly evident when analyzing racial disparities in
rates of homeownership.
US Department of Housing and Urban Development (HUD) Secretary Marcia L. Fudge
recently issued the following statement:
“Today, homeownership is the principal source of wealth creation for most
American households. Unfortunately, [National Association of
REALTORS® Research Group’s] report confirms that Black Americans
are being locked out of homeownership opportunities at an even higher
rate than a decade ago. It is critical that we bridge the racial
homeownership gap with intentional solutions that recogn ize both the
persistent history of discrimination and inequity, and the current crisis of
housing affordability.”8
The report to which Secretary Fudge refers, entitled 2023 Snapshot of Race and Home
Buying in America, shows more Americans own homes now than during any year following
the Great Recession, but Black Americans continue to face significant obstacles to
homeownership. Furthermore, rates of Hispanic American and Asian American
homeownership still trail th at of white Americans. Worse, the homeownership rate for Black
Americans is lower now than it was a decade ago.9
8 https://www.hud.gov/press/press_releases_media_advisories/hud_no_22_029
9 https://cdn.nar.realtor/sites/default/files/documents/2023-snapshot-of-race-and-home-buying-in-the-us-03-
02-2023.pdf
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Systematic and institutional harm to and theft from Black and brown people, particularly
regarding property ownership and once thriving communities, is widely documented.
Tactics including redlining, exclusionary zoning, racially restrictive covenants, and
displacement via eminent domain to build highways and other development were common
and caused the upheaval and destruction of untold numbers of individuals, families, and
communities nationwide.
According to Robert D. Bullard, an urban planning professor at Texas Southern University :
“If you look at Black and Latino neighborhoods, in terms of
homeownership, the loss of equity, the business corri dors that were
destroyed and the loss of community that highways have caused, the
damage is tremendous”10
These discriminatory practices occurred in Santa Monica in living memory. In order to
extend the Interstate 10 highway to the Pacific Ocean, the city leveled the Pico
neighborhood, forcing Black, Mexican, and Japanese residents to leave their longtime
homes and communities.11 Then, through eminent domain proceedings, the city razed the
historic Belmar Triangle to build the Santa Monica Civic Auditorium and part of the Los
Angeles County Courthouse grounds ,12 burning down homes and businesses that were
rented and owned by African Americans and other marginalized groups.13 The resulting
loss of affordable housing, deeply rooted community, and multigenerational wealth impacts
Black and brown Santa Monicans and their descendants to this day.
In recent years. the City of Santa Monica has made many efforts to advance truth and
reconciliation with historically marginalized and disenfranchised residents. These include
formal recognition of historically significant city sites,15 dedication to diverse city hiring
practices, the ongoing reframing project to address the prob lematic WPA mural in City
Hall16, and recently a formal apology by Santa Monica City Council17 for historical wrongs
committed by the city against Black residents.
Such efforts also include the Right to Return policy that took effect January 2022, which
allows up to one hundred people previously displaced from the Pico neighborhood and
10 https://www.latimes.com/projects/us-freeway-highway-expansion-black-latino-communities/
11 https://www.latimes.com/homeless-housing/story/2021-11-11/the-racist-history-of-americas-interstate-
highway-boom
12 https://alisonrosejefferson.com/wp-
content/uploads/2021/10/ReconstructionAndReclamation.FINAL_.12.21.2020 -3.pdf
13 https://www.smconservancy.org/property/belmar/
15 https://santamonica.gov/belmar-history-art
16 https://www.santamonica.gov/programs/acknowledge-and-reframe-together
17 https://www.argonautnews.com/community/discussing-santa-monica-s-black-apology/article_a5560aa8-
a288-11ed-bbaf-83d8cd59503a.html
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Belmar Triangle area and their descendants to receive priority status on the city’s Below
Market Housing waitlist.18 Placement on this list provides low and moderate income
individuals with opportunities to apply for local affordable rental units.
Sheryll Cashin, Georgetown University law professor and author of “White Space, Black
‘Hood: Opportunity Hoarding and Segregation in the Age of Inequality”, said this about
Santa Monica’s Right to Return policy:
“It’s an example of more of what needs to happen where a city looks
honestly at its past to understand that a lot of the dramatic inequality in the
present overlays with race”19
Unfortunately, providing historically marginalized and disenfranchised Santa Monicans with
the opportunity to apply for below market rental housing does little to restore the historical
homes, wealth, and once thriving community these residents and their descendants lost.
Nichelle Monroe, a local whose great-uncle is said to have been the first Black baby born in
Santa Monica over a century ago and whose architect grandfather, Vernon Brunson,
designed many buildings in the city, agrees.
Monroe thinks Santa Monica should make it easier for her family to purchase a home in the
city. While she’s proud that her family is featured in the educational materials lining the new
Belmar Triangle walking path, she says:
“But what else is there? The theft is still there. The generational wealth is
still gone.”20
To meaningfully begin to acknowledge and restore the depth and breadth of historical harm
to and theft from Black and brown Santa Monicans, we must turn to affordable
homeownership.
2.3.3 Proposed HUD requirements
Affordable homeownership is an integral part of achieving social, racial, and economic
justice. HUD concurs, having recently released a new proposed Affirmatively Furthering
Fair Housing Final Rule two years in the making. This proposed rule takes a significant step
18 https://www.latimes.com/homeless-housing/story/2021-12-26/santa-monica-to-people-long-evicted-by-
freeway-come-back-home
19 https://www.latimes.com/homeless-housing/story/2021-12-26/santa-monica-to-people-long-evicted-by-
freeway-come-back-home
20 https://www.latimes.com/homeless-housing/story/2021-12-26/santa-monica-to-people-long-evicted-by-
freeway-come-back-home
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towards addressing the country’s history of discriminatory housing policies and practices . It
responds to both President Biden’s directive, Memorandum on Redressing Our Nation's
and the Federal Government's History of Discriminatory Housing Practices and Policies ,25
and to HUD and Secretary Fudge's call to weave equity throughout HUD's work.26
“Affirmatively furthering fair housing means more than merely steering
clear of housing discrimination violations” said Demetria L. McCain,
Principal Deputy Assistant Secretary for Fair Housing and Equal
Opportunity. “Today, HUD is taking new, bold action to eliminate the
historic patterns of segregation that continue to harm American families.
This action will help make the purpose of the Fair Housing Act reality by
making it easier for local communities to identify inequities and make
concrete commitments to address them.”27
HUD’s new Affirmatively Furthering Fair Housing Final Rule expands upon previous HUD
policy, implementing opportunities for transparency and accountability while bolstering
economic equity for all American families. This proposed rule is just one part of a larger
Equity Plan being implemented by HUD.28 Affordable homeownership is a significant
component of HUD’s comprehensive new Equity Plan.
While this rule is awaiting adoption, American history and HUD policy have been moving
steadily in this direction and its mandates are expected take effect shortly. As HUD
Secretary Marcia L. Fudge concluded her previously cited statement on racial disparity in
homeownership:
“The Biden-Harris Administration and HUD will continue to prioritize
opening the door to homeownership for families —especially those who
have been systemically kept out over generations”29
As a progressive city dedicated to diversity, equity, and inclusion, Santa Monica should
take the initiative to adopt exemplary plans, policies, and practices that exceed existing
minimum fair housing requirements and embody the goals of forthcoming HUD rules. By
offering meaningful paths to affordable homeownership, Santa Monica can begin to fulfill
the forthcoming HUD requirement for inclusion of an equity plan in the 5-Year and Annual
Consolidated Plans, while modeling best practices for affirmatively furthering fair housing
for cities nationwide.
25 https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/26/memorandum-on-redressing-
our-nations-and-the-federal-governments-history-of-discriminatory-housing-practices-and-policies/
26 https://www.hud.gov/press/press_releases_media_advisories/HUD_No_23_013
27 https://www.hud.gov/press/press_releases_media_advisories/HUD_No_23_013
28 https://www.hud.gov/sites/dfiles/PA/documents/HUDEquity508compliant.pdf
29 https://www.hud.gov/press/press_releases_media_advisories/hud_no_22_029
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3. Affordable homeownership inventory
Providing affordable homeownership opportunities for Santa Monicans first requires local
housing inventory for purchase by prospective homebuyers. This inventory can come in
two forms: existing housing and newly constructed housing.
3.1 Existing housing
Santa Monica’s considerable existing rental housing inventory leaves room for some rental
units to be repurposed for purchase. The benefits of converting existing rental units to units
for purchase include ready availability and lower costs. While Santa Monica currently
prohibits the conversion of multifamily rental housing to for -sale multifamily housing,31 there
is precedent for changing this policy. For further discussion , see section 4.2.1.
3.1.1 Rent controlled units
As demonstrated by the original Tenant Ownership Rights Charter Amendment (TORCA),32
with appropriate legislation, existing rent controlled units can provide a repository of ready
affordable housing for sale. Furthermore, when occupied buildings that are subject to rent
control are placed on the market, their sale prices are frequently lower than their
replacement cost because rent control laws prevent new building owners from charging
existing tenants prevailing market rents. This presents a unique opportunity for nonprofit
parties to purchase discounted multifamily housing in order to facilitate tenants’ optional
subsequent affordable purchase of their units, as outlined in section 4.2.1.1.
3.1.2 100% affordable units
Existing 100% affordable rental buildings in Santa Monica also have the potential to be
converted to properties with affordable optional homeownership opportunities , wherein
existing tenants could purchase the units they occupy or similar units in the same or
comparable buildings. For further discussion, see section 4.2.3.
31 https://library.qcode.us/lib/santa_monica_ca/pub/municipal_code/item/the_charter_of_the_city_of_santa -
article_xx-2018
32 https://library.qcode.us/lib/santa_monica_ca/pub/municipal_code/item/the_charter_of_the_city_of_santa -
article_xx
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3.1.3 Market rate units
There is abundant and increasing market rate rental housing in Santa Monica, many units
of which stand vacant. Providing landlords with the option to convert some of these existin g
market rate rental units to purchasable units can provide valuable additional
homeownership opportunities for all Santa Monicans. Importantly, this option can also
provide increased opportunities for affordable homeownership , particularly when units are
purchased with low income and first time homebuyer assistance programs.
With more than 70% of Santa Monica residents renting their homes, numerous rental
vacancies awaiting formal inventory, and no shortage of new market rate rental
construction in various stages of development, enabling the optional conversion by
landlords of existing market rate rental housing to for-sale housing is a potentially time- and
cost-saving means of increasing affordable homeownership opportunities in Santa Monica.
To ensure meaningful expansion of homeownership opportunities in Santa Monica,
including affordable homeownership, city policy changes that permit such conversions
should include requirements that individual units be purchased by owner -occupants, with
minimum tenancy duration requirements of two years before an owner may sell or rent their
unit, and/or penalty fees to discourage real estate flipping. Such policy changes should also
ensure protections for existing tenants, including generous advance notice of conversion,
right of first refusal to purchase, and possible relocation compensation. If individual tenant
owned properties allow owners to subsequently rent their units, the rent charged should
conform to affordability requirements where deed-restrictions are present. For further
discussion, see section 4.2.1.2.
3.1.4 Inclusionary Units
A valuable potential source of affordable homeownership inventory is inclusionary units in
existing (and future) market rate rental projects. In concert with the optional conversion
mentioned above, all such inclusionary units should be eligible for similar optional
conversion with the key stipulation that the city maintain inclusionary units’ affordability by
deed restricting their sale. When inclusionary units are on the same site with accompanying
market rate units, this practice will have the added benefi t of affirmatively furthering fair
housing by integrating market rate and affordable housing, reducing the stigma of
concentrated and siloed affordable housing and improving low and moderate income
residents’ access to high opportunity, low poverty neighborhoods. For further discussion,
see section 4.2.1.2.
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3.2 New Housing
While Santa Monica’s land area is small, it has room and numerous projects slated for new
housing construction. Focusing new housing construction on homeownership instead of
rental housing can greatly increase the city’s affordable homeownership inventory, with
results that will benefit all Santa Monica residents and prospective homeowners, now and
in the future.
In addition to the rewards above, affordable homeownership policies and programs will
result in the qualitative improvement of city housing for low and moderate income
residents. Currently, the exclusive dedication of policy and resources to affordable ren tal
housing—particularly 100% affordable rental housing—leads to design and construction
choices that maximize utility and uniformity in order to minimize building time and cost.
These come at the real expense of livability and environmental and aesthetic choices that
maximize usability, comfort, and physical and mental health for tenants.
For example, 100% affordable housing buildings in Santa Monica are often identifiable by
their angular, flat, and modular facades composed of inexpensive industrial materials, the
absence of adequate green space, and sparse landscaping. The interiors of these units are
often small and utilitarian, including countertops finished with inexpensive, drab composite
materials to hide dirt and wear, and small windows that afford little natural light.
Again, in contrast with many affordable rentals, the conversion, design, and construction of
local affordable for-sale housing will result in the creation of units that more closely follow
real estate trends that reflect actual preferences of home buyers. These include desirable
location and setting; proximity to preferred schools, parks, goods, and services; adequate
square footage per unit to accommodate free movement, substantial in-unit storage, and
guests; abundant natural light; pleasing, and not institutional, facades that complement
neighborhood aesthetics; and amenities like attractive and comfortable common spaces,
generous landscaping, and sufficient parking. Such housing characteristics improve quality
of life for low and moderate income residents as well as the overall quality of Santa
Monica’s housing inventory.
3.2.1 New 100% affordable single and multifamily properties
There are currently thousands of affordable housing units in Santa Monica, virtually all of
which are rentals.35 There are also many 100% affordable housing projects in Santa
Monica that provide affordable rental housing and more continue to be built. Rather than
focusing exclusively on new rental housing, the city and existing and/or new nonprofit
35 See figures B-52 and B-53. https://www.santamonica.gov/media/Housing-Element-Update-2021-to-
2029/Adopted%20Appendix%20B%20Housing%20Needs%20Clean.pdf
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housing providers could invest resources into the design and construction of new 100%
affordable for-sale housing units in myriad forms.
One form this new construction could take is traditional multifamily buildings designed and
built for sale to qualifying low and moderate income buyers. Once all the units in a building
were sold, management and operations of the building and property could continue under
one of several common structures, for example, a condominium, community land trust, or
cooperative.
However, planning new construction offers opportunities for creative design that will
introduce visual interest to neighborhoods while maintaining their aesthetic continuity,
greatly benefiting both homeowners with modest incomes and their neighbors. New
construction could take the form of a property with diverse residential structures on it , for
example, ten tiny homes with optimized communal spaces. Alternately, a property could
include a duplex, triplex, or quadplex and one or more tiny homes or accessory dwelling
units (ADU).
A possible variation on the above illustrations involves mixed use projects wherein owner
occupied residential units benefit from having mixed use commercial facilities on site as an
additional source of revenue to help sustain the owners’ collective property. In addition to
the potential financial benefits of this configuration of 100% affordable for-sale housing,
mixed use developments create greater access to goods and services for tenant owners
and their neighbors.
With imagination and commitment to diversifying Santa Monicans’ affordable
homeownership options, creative and forward thinking nonprofits could design and build
diverse 100% affordable for-sale housing properties and mixed use properties that expand
current ideas of quality affordable housing. Such diverse combinations of structures and
densities can offer low and moderate income individuals and families the privacy, exterior
space, and lower density of traditional single family housing with the cost- and space-
saving benefits of multiple units on a single property.
Large areas of land in Santa Monica are bought by nonprofits using city loans which are
subsequently forgiven.36, 37 This permanent land transfer to third parties at little or no cost i s
currently used almost exclusively for affordable rental housing. Diverting some of the city’s
resources to affordable homeownership projects in lieu of affordable rental housing projects
would create a better and more diversified investment in Santa Monica residents,
neighborhoods, and community.
36 See figure B-53. https://www.santamonica.gov/media/Housing-Element-Update-2021-to-
2029/Adopted%20Appendix%20B%20Housing%20Needs%20Clean.pdf
37 See Grant Balance Reduction (1) on page 6 of linked document.
https://www.santamonica.gov/media/HED/Housing/2021-07-27_HousingTrustFundGuidelines.pdf
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3.2.2 New market rate and inclusionary units
Compared with traditional single family housing and even luxury condominiums, modest
market rate multifamily for-sale units provide a considerably less expensive, and therefore
more attainable, alternative for prospective homeowners. Smaller in size than traditional
houses, with significant cost per unit and land per unit savings, modest market rate
multifamily units are an important element of increasing affordable homeownership
opportunities for low and moderate income Santa Monicans.
While new high density rental apartment construction is common in Santa Monica,38 such
affordable multifamily for-sale construction is not. Shifting focus from the former to the latter
can provide residents with valuable affordable homeownership inventory.
Furthermore, new market rate multifamily for-sale construction could provide additional
opportunities for affordable homeownership via new policy that requires a minimum
percentage of deed restricted units in each new market rate building, which are sold solely
to qualifying low and moderate income homebuyers.39
38 https://smmirror.com/2022/12/ws-communities-files-first-santa-monica-builders-remedy-project/
39 San Francisco has a similar requirement. https://sf.gov/information/inclusionary-housing-program
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4. Means to affordable homeownership
4.1 Existing funding
4.1.1 For prospective home buyers
There are many different sources of financial assistance for prospective homebuyers of
modest means. The following is a non-exhaustive list of current homeownership assistance
programs.
HUD Housing Choice Voucher Homeownership Program
The Housing Choice Voucher (HCV) homeownership program allows families that are
assisted under the HCV program to use their voucher to buy a home and receive monthly
assistance in meeting homeownership expenses.
https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/homeownershi
p
California Housing Finance Agency Forgivable Equity Builder Loan Program
The Forgivable Equity Builder Loan gives first-time homebuyers a head start with immediate
equity in their homes via a loan of up to 10% of the purchase price of the home. The loan is
forgivable if the borrower continuously occupies the home as their primary residence for
five years. The Forgivable Equity Builder Loan is a forgivable subordinate loan program that
may only be used with a CalHFA first mortgage.
https://www.calhfa.ca.gov/homebuyer/programs/forgivable.htm
Los Angeles County Development Authority (LACDA) First-Time Homebuyers Home
Ownership Program
The Home Ownership Program (HOP) loan provides a second mortgage loan for first -time
homebuyers with an assistance amount of up to $85,000, or 20% of the purchase prices,
whichever is less. The loan provides down payment and/or closing assistance and is
secured with a Deed of Trust and Promissory Note. Santa Monica does not currently
participate in this program. https://www.lacda.org/home-ownership/home-ownership-
program#:~:text=The%20Home%20Ownership%20Program%20
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The California Housing Finance Agency MyHome Assistance Program
CalHFA Government Loans (FHA): MyHome offers a deferred-payment junior loan of an
amount up to the lesser of 3.5% of the purchase price or appraised value to assist with
down payment and/or closing costs. CalHFA Conventional Loans: MyHome offers a
deferred-payment junior loan of an amount up to the lesser of 3% of the purchase price or
appraised value to assist with down payment and/or closing costs.
https://www.calhfa.ca.gov/homebuyer/programs/myhome.htm
Neighborhood Housing Services of Los Angeles County NeighborhoodLIFT Program
In collaboration with Wells Fargo and NeighborWorks® America , provides eligible
homebuyers with $25,000 in down payment assistance on qualified properties ($27,500 for
veterans and service members, teachers, paraprofessionals, law enforcement officers,
firefighters, and emergency medical technicians). https://nhslacounty.org/lift/
The Golden State Finance Authority GSFA Platinum® Program
Financial assistance up to 5.5% of the first mortgage loan amount; assistance can be used
towards down payment and/or closing costs ; homebuyer doesn't have to be a first-time
homebuyer to qualify; perfect credit not required—FICO scores as low as 640 can qualify;
DTI up to 50% allowed in some circumstances ; 1-4 unit residences, condos, townhomes
and manufactured homes allowed; flexible income limits (low-to-moderate income); various
first mortgage loan types available to fit the needs of the homebuyer (FHA, VA, USDA , and
conventional financing). https://gsfahome.org/programs/dpa/platinum.shtml
4.1.2 For organizations and municipalities
There are many different sources of financial assistance for organizations and
municipalities that serve prospective homebuyers of modest means. The following is a non -
exhaustive list of such current and planned financial assistance programs.
HUD Family Self Sufficiency Program
The HUD Family Self Sufficiency (FSS) program is the nation’s largest asset building
program for low income families. The program currently serves around 65,000 participants
at over 700 Public Housing Authorities (PHAs). FSS is a voluntary program that uses a
combination of coordination of services and supports from community partners and an
escrow savings account to help participants grow their earned income and savings and
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increase their financial wellbeing overall. Upon graduation from the program, the average
family participating in FSS in 2021 had about $9,500 in savings. The $113 million-dollar
Family Self-Sufficiency (FSS) NOFO released in August 2022 is an historic expansion of the
program and central to HUD’s agenda for economic justice.
On 17 May 2022, HUD published a new FSS rule, taking a critical step towards making
FSS available to even more families. Among other changes, the rule permits any adult
household member, not only the official head of household, to enroll in the program , and
eliminates regulations that were potential barriers to program graduation. The rule also
eliminates a cap on savings that had been in place for higher -income families.40
FSS is usually administered by individual housing authorities, but it may also be
administered in conjunction with nonprofit organizations. The Santa Monica Housing
Authority (SMHA) stopped admitting participants to the FSS program in 2019; St. Joseph
Center still administers the program for existing participants who have yet to complete the
five year program.
https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/fss
California Department of Housing and Community Development Homeownership Super
NOFA
A one-stop shop for affordable homeownership projects and programs. The California
Department of Housing and Community Development (HCD), in accordance with Assembly
Bill 434 (Chapter 192, Statutes 2020), is working to make our homeownership program
funds accessible to more developers and communities. This funding provides loans and
grants to local public entities and nonprofits for homeownership development projects, self-
help technical assistance projects, mortgage assistance programs, owner -occupied
rehabilitation programs, shared housing programs, and programs for the acquisition of
manufactured housing for agricultural households. https://www.hcd.ca.gov/grants-and-
funding/programs-active/homeownership-super-nofa
HUD Self-Help Homeownership Opportunity Program NOFO
The U.S. Department of Housing and Urban Development (HUD) announced the
availability of $12.5 million through the Self-Help Homeownership Opportunity Program
(SHOP) for eligible national and regional nonprofit organizations and consortia with
experience providing or facilitating self-help housing opportunities. This funding opportunity
aims to develop decent, safe, and sanitary housing for low income persons and families
who would otherwise not have the opportunity to become homeowners. The continued
40 https://www.hud.gov/press/press_releases_media_advisories/HUD_No_22_142
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partnerships with local communities and organizations that SHOP funds facilitate will help
rebuild and revitalize neighborhoods and improve the lives of residents by expanding
access to affordable housing and homeownership opportunities.
https://www.hud.gov/press/press_releases_media_advisories/hud_no_22_165
4.2 Proposed actions for Santa Monica
4.2.1 TORCA 2.0
The City of Santa Monica passed the Tenant Ownership Rights Charter Amendment
(TORCA) in 1984 to enable tenants and landlords to negotiate the conversion of multifamily
building units into condominiums. Benefits included the potential transfer of equity from
landlords to tenants; increased housing security for tenants who continued to rent, as they
were protected from Ellis Act evictions ;43 and the numerous rewards of homeownership.
TORCA had several shortcomings. Conversion required tenants and landlords to negotiate,
which was not always easy or possible. The ability for owners to sell voluntarily vacated
units at market prices gave them incentive to persuade tenants to vacate their units. This
sometimes resulted in the harassment of renters by owners, and even by third parties who
offered to help renters purchase their units in order to flip them for sizable profits.44
Only seven percent of original renters bought and occupied their units under TORCA,45
likely a consequence of the above challenges and a lack of city engagement. TORCA
ended in 1996.46
The Santa Monica Housing Commission recommends that the City of Santa Monica make
policy changes to allow the conversion of existing rental units to for-sale units with the
express provisions detailed below. TORCA 2.0 is a placeholder name for this
recommended new legislation given its evolution from the original TORCA.
43 https://library.qcode.us/lib/santa_monica_ca/pub/municipal_code/item/the_charter_of_the_c ity_of_santa-
article_xx?view=all
44 Multiple private conversations between Commissioner Borresen and Santa Monica landlords, TORCA
tenants, and other interested parties circa 2005-2010
45 https://santamonica.gov/media/HED/Housing/Housing%20Agenda%20Attachments/HC%202 -2-
23%20Agenda%20Final.pdf
46 https://library.qcode.us/lib/santa_monica_ca/pub/municipal_code/item/the_charter_of_the_city_of_santa -
article_xx
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4.2.1.1 For rent controlled buildings and units
The Housing Commission recommends that City Council make policy changes to allow and
encourage the conversion of existing rent controlled units to for-sale units, with these
provisions:
1. Conversions of rent controlled buildings take place via the purchase of entire rent
controlled properties by nonprofit organizations or government intermediaries with the
primary goal of facilitating renters’ optional purchase of their units.
2. Any organization purchasing a rent controlled building via the above provision institute
deed restrictions to preserve housing affordability. Rental units remain subject to rent
control unless and until individual tenants choose to purchase their units , at which time the
units will be sold at an affordable rate.
3. All individual unit purchases in clude proportional ownership of the entire property’s
underlying land.
3. Tenants’ purchase of their units is strictly voluntary. No existing tenants are displaced by
this policy. Any organization that purchases a rent controlled building continue managing,
under rent control, the tenancies of those who do not wish to purchase their units .
4. There are no time constraints for tenants to purchase their units after property
acquisition.
5. Units that are vacant at the time of conversion, or that become vacant should renters
leave voluntarily, are sold with affordability covenants.
6. Once all units are sold, the managing organization retains no further ownership or
control of the property or land. The building would operate in a manner similar to other
owner occupied buildings.
7. Units purchased by tenants must be owner occupied. A minimum tenancy duration
requirement of two years before an owner may sell or rent their unit, and a flip tax and/or
penalty fee applies to tenants purchasing their units in order to ensure owner occupancy
and prohibit unit flipping. Proceeds from such taxes or fees may be returned to collective
tenant owners for property improvements.
8. If individual tenant owned properties choose to allow subsequent renting of units by
owners, rent charged must conform to affordability requirements where deed -restrictions
are present.
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4.2.1.2 For market rate and inclusionary units
The Housing Commission recommends that the City of Santa Monica make policy changes
to allow the conversion of existing market rate rental housing to for-sale units, with these
provisions:
1. Market rate buildings that are exempt from rent control may be converted to tenant
owned units.
2. Building conversion requires protection for existing tenants who wish to remain in their
units as renters without purchasing their units.
3. Converted buildings preserve the affordability of inclusionary units by converting them to
affordable for-sale units if and when ownership conversion takes place. These affordable
units are sold to qualifying low or moderate income buyers and include a minimum owner
occupancy duration of 2 years before an owner may sell or rent their unit, and a flip tax
and/or penalty fee to ensure owner occupancy and prohibit unit flipping.
4. If individual owner occupied properties choose to allow subsequent renting of units by
owners, rent charged by owners of affordable units must conform to affordability
requirements where deed-restrictions are present.
4.2.2 HUD homeownership program
The HUD Housing Choice Voucher (HCV) homeownership program allows families that are
assisted under the HCV program to use their voucher to buy a home and receive monthly
assistance in meeting homeownership expenses. The HCV homeownership program is
available only to families that have been admitted to the HCV program and each PHA has
discretion to determine whether to implement the HCV homeownership program in their
jurisdiction.
To participate in the HCV homeownership program, the HCV family must meet specific
income and employment requirements (employment requirements do not apply to elderly
and disabled families), be a first-time homeowner as defined in the regulation, attend and
satisfactorily complete the pre-assistance homeownership and housing counseling
program required by the PHA, and meet any additional eligibility requirements set by the
PHA.47
The HUD HCV homeownership program is a uniquely powerful tool for helping qualified low
income renters become first-time homebuyers, which enhances stability, contributes
47 https://www.hudexchange.info/programs/public-housing/hcv-homeownership/
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to lower and more controlled long term housing costs, and builds personal and
multigenerational wealth through appreciation in addition to the less tangible benefits of
homeownership. Significantly, this program can also assist HCV holders to transition away
from HUD assistance, making their vouchers available for new low income residents in
need of this housing assistance.
As such, the Housing Commission strongly recommends that the Santa Monica Housing
Authority Board direct SMHA staff to adopt participation in the existing HUD HCV and other
available HUD homeownership programs.
4.2.3 100% affordable rental housing conversion
Given the stated desire of the city to increase affordable homeownership, the Housing
Commission recommends that City Council direct staff to begin exploring this potential
subset of affordable homeownership inventory in two ways:
First, staff should conduct research to determine the legal, financial, and logistical feasibilit y
of working with existing and/or new housing nonprofit partners to convert 100% affordable
rental housing to a homeownership model whereby each tenant would be given the option
to purchase their unit.
Next, the city should engage directly with existing nonprofit housing providers currently
managing, constructing, or planning 100% affordable rental properties in Santa Monica to
gauge their willingness to consider such transitions and discuss how they could be
orchestrated.
The Housing Commission further recommends that, should this source of affordable
homeownership inventory prove feasible, the city encourage or require existing nonprofit
housing providers of 100% affordable rental buildings to transition their units to a voluntary
ownership model. If necessary, this may require buildings to migrate to new nonprofits that
will pursue ownership as a primary goal.
4.2.4 Inclusion of for-sale units in new 100% affordable rental housing
Furthermore, both to encourage the construction of 100% affordable for-sale housing and
to improve the quality of 100% affordable housing development units and properties, the
Housing Commission recommends the city explore the feasibility of requiring all new 100%
affordable housing projects to include a minimum percentage of for-sale units in each
100% affordable housing building, for example ten percent, with possible provisions that
may permit a lower or no percentage of for-sale units in a given building in exchange for
additional 100% affordable housing projects comprised of 100% affordable for-sale units.
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All such for-sale units must be owner occupied. They should require a minimum owner
occupancy duration requirement of two years before an owner may sell or rent their unit,
and a flip tax and/or penalty fee in order to ensure owner occupancy and prohibit unit
flipping. Proceeds from such taxes or fees may be returned to collective tenant owners for
property improvements. If individual owner occupied properties choose to allow
subsequent renting of units by owners, rent charged must conform to affordability
requirements where deed-restrictions are present.
4.2.5 Equalize fees
In Santa Monica, city fees48 and planning policies49 are biased against new for-sale housing
construction compared with new rental housing construction. These disparities may
discourage the construction of lower priced multifamily buildings occupied by tenant
owners in favor of rentals.
To encourage new construction of for-sale multifamily housing, the Housing Commission
recommends the City of Santa Monica equalize the treatment of new ownership
construction and new rental construction in planning and fee schedules so that one isn’t
privileged over the other.
4.2.6 Prioritize new market rate for-sale housing over new market rate rental housing
Again, compared with traditional single family housing and even luxury condominiums,
modest market rate multifamily for-sale units provide a considerably less expensive, and
therefore more attainable, alternative for prospective homeowners. Smaller in size than
traditional houses, with significant cost per unit and land per unit savings, modest market
rate multifamily units are an important element of increasing affordable homeownership
opportunities for low and moderate income Santa Monicans.
While new high density rental apartment construction is common in Santa Monica,50 such
affordable multifamily for-sale construction is not. And while rental housing serves an
important purpose, particularly for short term and transitioning residents , it does not enable
long term Santa Monicans with low and moderate incomes to realize the many benefits of
48 Affordable housing fees are $39.12 per square foot for apartments and $45.70 per square foot
for condominiums (effective 12/01/22; updated annually). https://www.santamonica.gov/housing-ahpp-
developers
49 See item G on linked page: On site affordable housing units must be rental units in rental projects. In
ownership projects, these affordable units may be rental units or ownership units.
https://library.qcode.us/lib/santa_monica_ca/pub/municipal_code/item/article_9-division_6-chapter_9_64-
9_64_050
50 https://smmirror.com/2022/12/ws-communities-files-first-santa-monica-builders-remedy-project/
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homeownership. Shifting focus from the former to the latter can provide residents with
valuable affordable homeownership inventory.
In light of this, the Housing Commission recommends that the city prioritizes new
construction of market rate for-sale housing over market rate rental housing until
homeownership rates equalize.
4.2.7 New forgivable down payment assistance loan fund
Dedicated financial assistance programs are vital to increasing homeownershi p among low
and moderate income individuals and families. The Housing Commission recommends that
the City of Santa Monica use local, state, and federal housing trust funds to establish
generous homeownership assistance programming that provides interest free or forgivable
down payment assistance to low and moderate income city residents who wish to
purchase affordable housing.
4.2.8 New home purchase assistance office
Buying a home for the first time is daunting. Navigating affordable homeownership
assistance programs is even more complex, difficult, and time consuming, particularly for
first time home buyers. The Housing Commission recommends that the city establish a
home purchase assistance office that will encourage homeownership, help prospective
buyers navigate the numerous and varied purchase assistance programs, monitor
ownership programs, and seek new ways to help Santa Monica residents , particularly
those with low or moderate incomes, buy a home.
4.2.9 Community land trusts
Community Land Trusts (CLTs) are organizations that own land and develop it through an
inclusive, community-based process.52 They originate in movements for racial, economic,
and environmental justice and have been used to combat Black land loss and
displacement, build community wealth, and strengthen community health and wellbeing.53
CLTs develop land according to a community’s needs, which can include anything from
open space to a multifamily rental housing project. However, CLTs are most often created
to provide affordable homeownership opportunities to low - and moderate-income
52 https://nhc.org/policy-guide/shared-equity-homeownership-the-basics/shared-equity-models-of-ownership/
53 https://www.lisc.org/our-stories/story/real-power-is-in-the-land-community-land-trustspast-present-and-
future/
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households. There are about 200 community land trusts in the US, and the model has
become popular in the UK as well.54
The CLT model is structured around a ground lease. The CLT owns land, which is leased to
households who purchase the homes that sit on CLT land. Removing th e cost of land from
the cost of purchasing the home provides a significant subsidy to the households. The
ground lease limits the amount for which the home can be sold, passing the subsidy on
from one homeowner to the next. CLTs also often retain the right to repurchase the home
in the case of foreclosure.55
CLTs and the community-based nongovernmental organizations (NGOs) that establish
them are generally grant fundable and attract foundation support. The NGO sector is
growing, with hundreds of CLTs nationwide. Some cities are also investing substantial
public funds in CLTs, as in Houston’s CLT bond issue and capital campaign totaling $140
million. Boston recently lost 2500 units of affordable housing in a single year when deed
restrictions expired, so the city now funds a network of CLTs across the metro area. Other
cities have made smaller initial investments, such as Lou isville, Kentucky which put $2.3
million into developing 10 CLT units, and is working with Grounded Solutions to expand
their programs.56
The Housing Commission recommends that the city research, create, and secure funding
for a community land trust pilot program to permanently acquire land and convert or erect
affordable for-sale housing in order to create opportunities for 100% affordable
homeownership with fractional underlying ownership of underlying land, under community
control, with or without mixed use space, in high opportunity, low poverty neighborhoods,
for low and moderate income Santa Monicans.
4.2.10 Rent to own
While there are many financial assistance programs for low and moderate income
individuals and families pursuing homeownership, these programs can involve standard
mortgage products that require participants have good credit and/or access to additional
savings. Not all low and moderate income prospective homeowners can be served via
these programs. However, rent-to-own programming can provide a gradual path to
homeownership for low and moderate income people who lack strong credit histories
and/or sufficient savings to utilize traditional homeownership assistance programs.
Typical rent to own opportunities advertised by private property owners can be predatory
schemes that result in higher monthly payments by tenants that nonetheless fail to result in
54 https://nhc.org/policy-guide/shared-equity-homeownership-the-basics/shared-equity-models-of-ownership/
55 https://nhc.org/policy-guide/shared-equity-homeownership-the-basics/shared-equity-models-of-ownership/
56 https://challenge.economicarchitectureproject.org/evolution-in-community-land-trusts
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homeownership because agreements include clauses whereby tenants forfeit all ownership
claims unless and until they have paid the entire home purchase price. Because this can
take a long time, tenants often move out before completing the purchase and forfeit equity
that might have been built under a contract with different conditions.
Municipal, nonprofit, and other organizations whose aims are to advance affordable
homeownership have an opportunity to create supportive, rather than predatory, rent to
own programming. One key potential difference between the two is fractional accrual of
equity by tenants with each payment, ensuring rent to own is not a decades long, all or
nothing bid for homeownership.
Therefore, the Housing Commission recommends that City Council direct staff to research
and report to City Council on the feasibility of and best practices for supporting rent to own
paths to affordable homeownership whereby a portion of paid monthly rents are credited
toward the purchase of that unit as well as proportional ownership of the underlying land.
Tenants accrue fractional ownership with each payment and retain rights to compensation
for such if they vacate their unit prior to completing its purchase. Rent to own programming
may be implemented by the city or via a nonprofit organization with the primary aim of
advancing affordable homeownership.
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5. Recommendations
The Santa Monica Housing Commission recommends that City Council urgently takes the
following actions to establish and increase avenues for affordable homeownership in Santa
Monica:
1. Create new city policy (e.g., TORCA 2.0) that:
A. Allows and encourages the conversion of existing rent controlled units to for-sale
units, with the following provisions:
i. Conversions of rent controlled buildings take place via the purchase of
entire rent controlled properties by nonprofit organizations or government
intermediaries with the primary goal of facilitating renters’ optional purchase
of their units;
ii. Any organization purchasing a rent controlled building via th is provision
institute deed restrictions to preserve housing affordability and rental units
remain subject to rent control unless and until individual tenants choose to
purchase their units, at which time the units will be sold at an affordable rate;
iii. All individual unit purchases include proportional ownership of the entire
property’s underlying land;
iv. Tenants’ purchase of their units is strictly voluntary, no existing tenants are
displaced by this policy, and any organization that purchases a rent
controlled building continue managing, under rent control, the tenancies of
those who do not wish to purchase their units ;
v. There are no time constraints for tenants to purchase their units after
property acquisition;
vi. Units that are vacant at the time of conversion, or that become vacant
should renters leave voluntarily, are sold with affordability covenants;
vii. Once all units are sold, the managing organization retains no further
ownership or control of the property or land and the building operate in a
manner similar to other owner occupied buildings;
viii. Units purchased by tenants must be owner occupied with a minimum
tenancy duration of two years before an owner may sell or rent their unit , and
a flip tax and/or penalty fee to ensure owner occupancy and prohibit unit
flipping;
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ix. If individual tenant owned properties choose to allow subsequent renting
of units by owners, rent charged must conform to affordability requirements
where deed-restrictions are present. (See section 4.2.1.1)
B. Allows the conversion of existing market rate rental housing to for-sale units, with
the following provisions:
i. Market rate buildings that are exempt from rent control may be converted
to tenant owned units;
ii. Building conversion requires protection for existing tenants who wish to
remain in their units as renters without purchasing their units;
iii. Converted buildings preserve the affordability of inclusionary units by
converting them to affordable for-sale units if and when ownership
conversion takes place and these affordable units are sold to qualifying low
or moderate income buyers with a minimum tenancy duration of two years
before an owner may sell or rent their unit ;
iv. If individual owner occupied properties choose to allow subsequent
renting of units by owners, rent charged by owners of affordable units must
conform to affordability requirements where deed-restrictions are present.
(See section 4.2.1.2)
2. Direct SMHA staff to adopt participation in the existing HUD HCV and other HUD
homeownership programs. (See section 4.2.2)
3. Begin exploring the potential of converting 100% affordable rental housing to for-sale
housing in the following ways:
A. Conduct research to determine the legal, financial, and logistical feasibility of
working with current and/or new housing nonprofit partners to convert 100%
affordable rental housing to a tenant-optional homeownership model on a per unit
basis;
B. Engage directly with existing nonprofit housing providers currently managing,
constructing, or planning 100% affordable rental properties in Santa Monica to
gauge their willingness to consider such transitions and discuss how they could be
orchestrated;
C. If feasible, encourage or require those current nonprofits to transition their units
to a tenant-voluntary ownership model, which may require buildings to migrate to
new nonprofits that will pursue ownership as a primary goal. (See section 4.2.3)
13.A.a
Packet Pg. 2050 Attachment: Santa Monica Housing Commission Affordable Homeownership Report (5826 : Housing Commission Update)
Santa Monica Housing Commission Affordable Homeownership Report 29
4. Explore the feasibility of requiring all new 100% affordable housing projects to include a
minimum percentage of for-sale units in each 100% affordable housing building, for
example 10%, with possible provisions that may permit a lower or no percentage of for-sale
units in a given building in exchange for additional 100% affordable housing projects
comprised of 100% affordable for-sale units. All such for-sale units should require owner
occupancy and a minimum owner occupancy duration of two years before an owner may
sell or rent their unit. If individual owner occupied properties choose to allow subsequent
renting of units by owners, rent charged must conform to affordability requirements where
deed-restrictions are present. (See section 4.2.4)
5. Equalize the treatment of new ownership construction and new rental cons truction in
planning and fee schedules so that one isn’t privileged over the other. (See section 4.2.5)
6. Prioritize new construction of market rate for-sale housing over market rate rental
housing until homeownership rates equalize. (See section 4.2.6)
7. Establish generous city programs using housing trust funds to provide in terest free or
forgivable down payment assistance to low and moderate income city residents who wish
to purchase affordable housing. (See section 4.2.7)
8. Establish a city home purchase assistance office that will encourage homeownership,
help prospective buyers navigate the various purchase assistance programs, monitor
ownership programs, and seek new ways to help Santa Monica residents buy their homes.
(See section 4.2.8)
9. Research, create, and secure funding for a community land trust pilot program to
permanently acquire land and convert or erect affordable for -sale housing in order to
create opportunities for 100% affordable homeownership with fractional underlying
ownership of land, under community control, with or without mixed use space, in high
opportunity, low poverty neighborhoods, for low and moderate income Santa Monicans.
(See section 4.2.9)
10. Direct staff to research and report to City Council on the feasibility of and best
practices for supporting rent to own paths to affordable homeownership whereby a portion
of paid monthly rents are credited toward the purchase of that unit and proportional
ownership of the underlying land. Tenants accrue fractional ownership with each payment
and retain rights to compensation for such if they vacate their unit prior to completing its
purchase. Rent to own programming may be implemented by the city or via a n onprofit
organization with the primary aim of advancing affordable homeownership. (See section
4.2.10)
13.A.a
Packet Pg. 2051 Attachment: Santa Monica Housing Commission Affordable Homeownership Report (5826 : Housing Commission Update)
Santa Monica Housing Commission Affordable Homeownership Report 30
6. Conclusion
Homeownership is the cornerstone of the American Dream. In addition to the financial and
material rewards of helping lower and control long term housing costs, building personal
and multigenerational wealth, and enabling environmental customization, homeownership
brings vital, less tangible benefits like providing a means of self-expression, fostering pride,
increasing social equity, and strengthening community. As such, homeownership is an
unparalleled means of improving individuals’ and families’ quality of life.
Santa Monica prides itself on being a diverse, equitable, and inclusive city. It has taken
great strides in acknowledging historical harms and facilitating the participation of
marginalized communities in creating a vibrant local cultural milieu. At this point in history,
diversity is still inextricably tied to socioeconomic diversity. Therefore, the city’s next steps
to advance diversity, equity, and inclusion must add ress the fact that diversity in Santa
Monica, as elsewhere, still exists at the expense of its least privileged residents.
While affordable rental housing is a key component of plans to remedy California’s and
Santa Monica’s affordable housing crisis, relegating low and moderate income residents
solely to rental housing perpetuates and exacerbates other economic and societal
disparities. These disparities are increasingly evident in Santa Monica given the high cost of
living, and the city must act swiftly and decisively to mitigate and more fully address them.
HUD Secretary Marcia Fudge correctly states that “homeownership is the principal source
of wealth creation for most American households .” As such, equity in Santa Monica—both
literal and figurative, financial and societal —is dependent upon the creation of affordable
homeownership opportunities. To strengthen the fabric of this community and ensure that
equity, diversity, and inclusion thrive here, Santa Monica must work to enfranchise and
empower those who are integral to the city’s character and success but not yet integrated
into both its tangible and intangible wealth.
Despite the high cost of living in Santa Monica, including some of the highest real est ate
prices in the country, affordable homeownership is possible here. Succes sful programming
in similarly expensive cities like San Diego and New York City demonstrates this. With the
commitment and creativity of city leaders, Santa Monica can strengthen its social, cultural,
and economic foundations while protecting and fortifying its most vital asset—the people
who live, work, play, and love here.
The Santa Monica Housing Commission thanks City Council for its consideration of this
report and the community informed recommendations herein. The Housing Commission
respectfully asks that the Mayor, Mayor Pro Tempore, and Councilmembers act swiftly to
begin the process of including all residents in the bounty, equity, and pride of
homeownership in Santa Monica.
13.A.a
Packet Pg. 2052 Attachment: Santa Monica Housing Commission Affordable Homeownership Report (5826 : Housing Commission Update)
From:Tara Barauskas
To:councilmtgitems
Subject:July 25th agenda, item 13A
Date:Friday, July 21, 2023 4:32:11 PM
Attachments:councilltr72123.pdf
EXTERNAL
Please distribute this comment letter regarding item 13A for next Tuesday’s agenda. Thank you!
Tara
Tara Barauskas, LEED AP
Executive Director
Community Corporation of Santa Monica
1423 2nd Street, Suite B
Santa Monica, CA 90401
(310) 394-8487 ext. 133
tbarauskas@communitycorp.org
www.communitycorp.org
I acknowledge with respect and gratitude the Tongva, Kizh, and Chumash Peoples on whose traditional
territory I live and work.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2053 Attachment: Written Comments (5826 : Housing Commission Update)
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2054 Attachment: Written Comments (5826 : Housing Commission Update)
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2055 Attachment: Written Comments (5826 : Housing Commission Update)
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2056 Attachment: Written Comments (5826 : Housing Commission Update)
From:SM Renters Rights
To:Gleam Davis; Caroline Torosis; Jesse Zwick; christine.para@santamonica.gov; Oscar de la Torre; Lana Negrete;
Phil Brock; councilmtgitems; Council Mailbox
Subject:From SMRR - Item 13.A - 7-25-23 Council Meeting
Date:Monday, July 24, 2023 11:04:47 AM
Attachments:230724 SMRR Letter regarding Item 13.A on 7.25.23 City Council Agenda.pdf
EXTERNAL
Dear Mayor and Councilmembers,
Please see the attached letter from SMRR regarding the 13.A agenda item for your July 25th Council meeting.
Thank you.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2057 Attachment: Written Comments (5826 : Housing Commission Update)
1
July 24, 2023
Re: Agenda Item 13A for July 25, 2023 City Council Meeting (Housing Commission
Report) – The Need for Further Study, Including Financial Modeling, to Determine
Whether Santa Monica Can Create A Fair, Effective and Efficient Affordable Home
Ownership Program
Dear Councilmembers:
Santa Monicans for Renters’ Rights (“SMRR”) has reviewed with great interest the Santa
Monica Housing Commission’s May 7, 2023 Report entitled “Creating Equity: Affordable
Home Ownership in Santa Monica” (“the Report”). SMRR has long shared the goal of creating
affordable homeownership opportunities, in addition to affordable rental opportunities, if it can
be done fairly, effectively and efficiently. For example, since 2008 each SMRR Platform
(adopted by a vote of the SMRR general membership) has provided:
The City should facilitate below-market-rate homeownership and rental
opportunities for very-low-income and low-income households that live or work
in Santa Monica. SMRR opposes condo-conversion schemes that create
displacement and harassment risks for existing residents.
SMRR Platform at Plank B.9.
SMRR appreciates the effort that the Housing Commission put into the Report, and SMRR
particularly appreciates the Housing Commission’s apparently strong agreement with SMRR that
any potential program for the conversion of rental housing to ownership housing must avoid
displacement and harassment risks for existing residents.1 However, for the reasons set out in
detail below, SMRR believes far more work must be done—including financial modeling (which
is completely absent from the Report)—before the Housing Commission, the City Council, or
the community can credibly determine whether any of the proposals put forward in the Report
represent sensible policy and/or a proper use of the City’s limited affordable housing funds.
Principles of good and responsible governance require that no decisions regarding potential uses
of taxpayer funds (or supporting legal changes) should occur until the additional work necessary
for a credible decision is performed by Staff and the Housing Commission, and vetted by the
City Council and the community.
1 For example, in order to avoid the risks of tenant harassment and displacement, the Housing
Commission recommends that a non-profit entity purchase a building before the process of
converting it to ownership housing commences. See Report at 20.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2058 Attachment: Written Comments (5826 : Housing Commission Update)
2
I. THE REPORT DOES NOT PROVIDE OR LINK TO INFORMATION ABOUT
EXISTING PROGRAMS IN OTHER JURISDICTIONS THAT IS SUFFICIENT
TO DEMONSTRATE THAT THE REPORT’S PROPOSALS ARE FAIR,
EFFECTIVE AND EFFICIENT USES OF THE CITY’S LIMITED RESOURCES
On the first page of the “Introduction” to the Report, the Housing Commission recognizes the
need to demonstrate that an affordable homeownership program can be implemented in Santa
Monica in a fair, effective and efficient manner:
Affordable homeownership may not seem feasible in Santa Monica due to the
high cost of living, and therefore a poor use of limited city and federal resources.
However, successful programs in similarly costly cities like San Diego1 and New
York City2 demonstrate otherwise.
1 https://www.sdhc.org/housing-opportunities/affordable-for-sale-housing/
2 https://www.nyc.gov/site/hpd/services-and-information/hdfc.page
Report at p. 3.
The Report makes no further reference to the San Diego or New York City programs, or to any
other existing local government program (although it does reference HUD rules that govern any
federally funded Section 8 homeownership program that a local housing authority may choose to
create). However, a review of the information on the cited websites reveals material differences
between the San Diego and New York City programs on the one hand, and the Report’s
proposals on the other hand—as well as the absence of critical financial information.
Consequently, SMRR respectfully submits that the Report’s citation to the existence of the San
Diego and New York City programs does not by itself constitute sufficient analysis to credibly
“demonstrate” that the Report’s proposals are viable and wise.
The San Diego Program
The San Diego program is 20 years old. It consists of 257 total units, which represents roughly
1/20th of one percent of the total housing stock in San Diego. This is equivalent to roughly 25
units in Santa Monica.
The San Diego units were constructed by private developers in either 2003 or 2006—a time
when land and construction costs (as well as the market value of the units) were much lower than
they are in Santa Monica today. The units then were sold to eligible lower or moderate income
homebuyers at below market prices affordable to them, with the San Diego Housing Authority
(“SDHA”) taking back a promissory note and second deed of trust for the difference between the
below market price paid and the actual market price of the unit at the time of the first sale (an
amount that the SDHA presumably paid to the private developer back in 2003 and 2006). The
homebuyers paid the purchase price through 30 year fixed-rate mortgages from third-party
lenders. The second loan is repayable to the SDHA as a balloon payment at the end of the 45 or
55 deed restriction period.
Unlike the proposals in the Report, the San Diego program guidelines require the purchasers of
the units to reside in them as their primary residence at all times (i.e., the homebuyers may not
rent the units to others). The guidelines also require (apparently like the proposals in the Report)
that any resales of the units during the 45 or 55 year deed-restriction period be made to the same
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2059 Attachment: Written Comments (5826 : Housing Commission Update)
3
income-type household as originally purchased the unit at a price the SDHA calculates is
affordable to such a household (a price that the guidelines state will be below the then current
market price). The new homebuyer must agree to abide by all the same program restrictions, and
must assume the obligation to repay the original loan by the SDHA at the end of the deed-
restriction period.
A large number of critical questions regarding the San Diego program are left unanswered by the
cited website. These include, but are not limited to:
Why has San Diego decided not to add any units to this program in the last 17 years?
What did it cost the SDHA to partially finance the original purchases back in 2003 or
2006, and what would it cost to replicate that aspect of the program model today?
What does it cost SDHA to administer the program?
Has SDHA incurred other costs (e.g., protecting the unit from foreclosure to the third-
party lender who financed the homebuyers’ portions of the purchase price, covering any
homeowner association dues or assessments missed by the homebuyers, etc.)?
Why did SDHA elect to require owner occupancy (i.e., preclude the homebuyers from
renting to others)?
How many of the original homebuyers have sold their units to date, and were those sales
voluntary or compelled to avoid foreclosure (e.g., due to missed mortgage payments, missed
Homeowners Association dues or assessments for major repairs, etc.)?
What financial gains, if any, have been obtained by persons who sold their units subject
to the affordable price resale requirement?
New York City Program
The New York City program is roughly 50 years old. It consists of more than 1100 limited-
equity cooperative buildings that, according to a March 2020 Curbed NY article that SMRR
located, include some 25,800 units. These units represent roughly 4/5ths of one percent of the
total units in New York City, which would equate to roughly 400 units in Santa Monica.
Many of these buildings were acquired by New York City in the 1970s and 1980s when the
landlords abandoned them (an acquisition pathway not available in Santa Monica), and then the
City rehabilitated them over time. More recently, some undisclosed number of buildings were
constructed (and, while not clear from the relevant website, maybe some other recent buildings
were acquired and rehabilitated).
The precise rules governing the original unit purchases apparently vary somewhat among the
buildings. Each homebuyer must meet the income restrictions imposed for the particular unit.
The precise mechanism for calculating sales price is not disclosed on the cited website (although
it necessarily is limited given the income restrictions on eligible purchasers and the nature of the
limited-equity cooperative model of affordable homeownership). The source of purchaser
financing likewise is not disclosed.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2060 Attachment: Written Comments (5826 : Housing Commission Update)
4
Unlike the proposals in the Report, the typical cooperative building in the New York City
program requires the purchasers of the units to reside in them as their primary residence at all
times (i.e., the homebuyers may not rent the units to others, although subletting during a
temporary absence may be allowed in some buildings). The typical cooperative building also
requires (apparently like the proposals in the Report) that any resales of the units be made to the
same income-type household as originally purchased the unit (which inevitably limits the resale
price well below market price). In addition, a portion of the profit on any resale must be paid to
the cooperative as a “flip tax” (which uses the money for repairs and maintenance), although the
percentage varies by building.
A large number of critical questions regarding the New York City program are left unanswered
by the cited website. These include, but are not limited to:
What did it cost New York City to recently construct new buildings (and, if applicable, to
recently acquire and rehabilitate non-abandoned buildings)?
What does it cost New York City to administer the program?
Has New York City incurred other costs (e.g., providing loans to individual homebuyers,
serving as a backstop to the cooperative buildings in the event mismanagement or unexpectedly
substantial repairs require infusions of funds, etc.)?
How do purchasers finance their purchases?
Why did New York City elect to require owner occupancy (i.e., preclude the homebuyers
from renting to others)?
How many of the original purchasers have sold their units to date, and were those sales
voluntary or compelled to avoid foreclosure (e.g., due to missed mortgage payments, missed
Cooperative dues or assessments for major repairs, etc.)?
What financial gains, if any, have been obtained by persons who sold their units subject
to the resale requirements?
Section 8 Homeownership Program
At a later point, the Report quotes in part and cites HUD’s online general “Overview” of the
Section 8 Housing Choice Voucher Homeownership program:
The HUD Housing Choice Voucher (HCV) homeownership program allows
families that are assisted under the HCV program to use their voucher to buy a
home and receive monthly assistance in meeting homeownership expenses. The
HCV homeownership program is available only to families that have been
admitted to the HCV program and each PHA has discretion to determine whether
to implement the HCV homeownership program in their jurisdiction.
To participate in the HCV homeownership program, the HCV family must meet
specific income and employment requirements (employment requirements do not
apply to elderly and disabled families), be a first-time homeowner as defined in
the regulation, attend and satisfactorily complete the pre-assistance
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2061 Attachment: Written Comments (5826 : Housing Commission Update)
5
homeownership and housing counseling program required by the PHA, and meet
any additional eligibility requirements set by the PHA.47
47 https://www.hudexchange.info/programs/public-housing/hcv-homeownership/
Report at 21. Although not mentioned in the Report, the cited website provides links that shed
some light on the nature of the existing programs in jurisdictions that have elected to stand up
such a HCV homeownership program. This limited information makes clear that mere citation
to the potential for such a program is not sufficient by itself to credibly demonstrate that
implementing such a program in Santa Monica is viable or wise.
In particular, the website links to a spreadsheet identifying the total number of new and ongoing
participants in each existing program for each year from 2015 through 2020. Sorting the
spreadsheet to California reveals that the (1) the 42 programs in California have a combined total
of about 400 participants, (2) there has been no growth in the number of participants in the
programs over that six year period, (3) the City of Los Angeles has a program with just 40
participants, and (4) San Francisco has a program with just four participants.
The website also links to a January 19, 2022 HUD webinar with representatives from what HUD
considers high performing programs in Columbus Ohio (a program that had averaged roughly 11
to 14 home purchases per year from the approximately 13,500 voucher holders), Fort Worth
Texas (a program that had averaged roughly 13 home purchases per year from the
approximately 6,000 voucher holders), Louisville Kentucky (a program that had averaged
roughly 25 home purchases per year from the approximately 11,000 voucher holders), and the
State of Michigan (a program that had averaged roughly 50 home purchases per year from the
approximately 29,000 voucher holders). The representatives from these jurisdictions—which
undoubtedly have far lower housing costs than Santa Monica—stated that the very high prices in
their markets as of January 2022 and low inventory had largely brought their programs to a
standstill at that time. The representatives also discussed the substantial administrative effort
historically required to make their programs successful.
This limited data leaves a large number of questions unanswered, including but not limited to the
following:
What did it cost Los Angeles to stand up its program?
What does it cost Los Angeles to administer its program?
Are there other costs that Los Angeles (or other jurisdictions) have incurred (e.g., the
need for pre- or post-closing financial assistance to the purchaser beyond the voucher
payments)?
How do participants in the Los Angeles program finance their downpayments?
What lenders finance the home purchases in the Los Angeles program?
What is the price of a unit that a participant in the Los Angeles program could afford?
What explains why the Los Angeles program consists of just 40 participants?
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2062 Attachment: Written Comments (5826 : Housing Commission Update)
6
What explains why there has been no growth in the Los Angeles program from 2015
through 2020?
What financial gains, if any, have participants in the Los Angeles program obtained (note
that HUD regulations prohibit participants from leasing or selling the properties while they
remain in the program)?
* * *
In short, SMRR believes a much deeper understanding of the existing programs referenced in the
Report is a necessary (but not sufficient) precondition to credibly evaluating whether those same
or somewhat altered programs could or should be adopted in Santa Monica.
II. THE REPORT DOES NOT PROVIDE ANY OF THE FINANCIAL ANALYSES
OF THE PROPOSED PROGRAMS AND POTENTIAL ALTERNATIVE USES
OF CITY FUNDS THAT ARE NECESSARY TO A CREDIBLE EVALUATION
OF THE REPORT’S PROPOSALS
In order to credibly evaluate the broad concepts recommended in the Report, pro forma financial
analyses of the proposed affordable homeownership programs also are necessary in order to
assess (1) what it would cost the City to design, fund and administer these programs, (2) how
many people at what income levels could feasibly utilize these programs, (3) what benefits
would the participants in these programs receive, and (4) what risks would the participants take
(e.g., incurring large unit or building repair costs, and potentially losing their homes if unable to
afford these costs). If these pro forma financial analyses suggest one or more programs could be
financially feasible and effective in Santa Monica, similar pro forma analyses would be needed
of alternative affordable housing programs in order to compare the cost-effectiveness of the
proposed programs and alternative programs. Assuming the comparative pro formas indicated
one of the proposed programs could be cost-effective, further financial analysis would be
required to determine the potential additional costs (if any) that adoption of the proposed
programs would have on remaining renters (e.g., would rents rise from a reduction in supply?).
The Report fails to supply any of this necessary financial analysis, and therefore does not provide
a credible basis for evaluating the Report’s proposed programs.
III. IF AND WHEN A CREDIBLE CASE IS PRESENTED FOR THE REPORT’S
PROPOSED AFFORDABLE HOMEOWNERSHIP PROGRAMS, OR SOME
ALTERNATIVE PROGRAM, ADDITIONAL ATTENTION WILL BE
REQUIRED TO ASSURE THE PROGRAMS ARE ADMINISTERED FAIRLY
Assuming the requisite work discussed in prior sections of this letter indicates that the Report’s
proposed programs could be effective and efficient, considerable additional work will be
required to assure that they are fair. As the discussion in Part I above of existing programs
makes clear, only a small number of persons will be able to take advantage of any affordable
homeownership opportunities. This means that the process for selecting who obtains these
benefits must be fair and must be viewed by the community as fair.
One obvious requirement is that those who have participated and will participate in the
evaluation and adoption of the currently proposed and any ultimately adopted programs must be
precluded from actually utilizing the programs (as sellers or buyers). Failure to adopt this rule
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2063 Attachment: Written Comments (5826 : Housing Commission Update)
7
would raise concerns that the evaluation and adoption process was guided by self-interest rather
than the community’s best interest, and would raise concerns that the selection process itself was
rigged to favor insiders. True or not, the appearance of impropriety would be anathema to good
governance principles and undermine community support for any ultimately adopted program.
Many additional potential criteria undoubtedly would come to mind, and would have to be vetted
both for validity and for legality (for example, prioritizing those with the longest period of
residence in the community, requiring residents of existing buildings all consent, etc.).
Consideration of such potential criteria is premature until there first is a potentially effective and
cost-efficient program to consider.
IV. IF AND WHEN AN APPARENTLY FAIR, EFFECTIVE AND EFFICIENT
PROGRAM IS IDENTIFIED, THE CITY SHOULD PROCEED WITH A PILOT
PROGRAM TO TEST WHETHER THESE THEORETICAL CONCLUSIONS
ARE BORNE OUT IN THE REAL WORLD
Prudence and good government principles dictate that, should it appear possible to stand up a
fair, effective and efficient affordable homeownership program, the City should begin with a
pilot program in order to determine whether there is proof of concept in the real world conditions
prevailing in Santa Monica. Council adopted this approach when it developed the Preserve Our
Diversity rent subsidy program, and valuable lessons were learned from both the initial pilot and
the expanded pilot programs.
* * *
In sum, SMRR supports the concept of an affordable home ownership program in Santa Monica
to the extent it can be fair, effective and efficient. The Report does not yet provide the necessary
data from which to make a credible decision about whether that is in fact possible. Council
should make no decisions unless and until the requisite data is developed.
Thank you for considering our views.
Sincerely,
Denny Zane Mike Soloff
Co-Chair, Santa Monicans for Renters’ Rights Co-Chair, Santa Monicans for Renters’ Rights
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2064 Attachment: Written Comments (5826 : Housing Commission Update)
From:oodfay48@gmail.com
To:councilmtgitems
Subject:Ítem: 13 A
Date:Monday, July 24, 2023 12:55:47 PM
EXTERNAL
Dear council members: The idea of the buying rental units is an interesting one.
Perhaps consider an easier way to keep people in their rent controlled units would be to have funds to help cover
one’s rent. Partial payments to the building owners.
This would be very beneficial to older tenants. A relatively simple procedure. Less red tape.
The city did this when the rents were raised 6%. It seemed to work out very well.
Thank you. Ms Steiner
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2065 Attachment: Written Comments (5826 : Housing Commission Update)
From:Leslie Lambert
To:councilmtgitems
Cc:Gleam Davis; Caroline Torosis; Christine Parra; Jesse Zwick; Lana Negrete; Phil Brock; Oscar de la Torre
Subject:Item 13A
Date:Monday, July 24, 2023 9:16:55 PM
Attachments:HousingProposal.docx
EXTERNAL
Attached are my comments on Item 13A on your July 25, 2023 agenda.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2066 Attachment: Written Comments (5826 : Housing Commission Update)
July 25, 2023
RE: Item 13A
Dear Mayor Davis, Mayor Pro Tem Negrete and Councilmembers:
I have read the proposal of the Housing Commission regarding homeownership opportunities for lower
income households. We all support increasing realistic and affordable homeownership opportunities for
income groups in Santa Monica who are currently priced out of our market. I encourage the City to pursue
approaches to bringing homeownership within the reach of moderate and middle income families. The
downpayment assistance and mortgage financing programs described in the Commission’s proposal could
help make this a reality and increase the economic diversity of our city.
The following are my thoughts regarding the impacts of the Commission’s proposals regarding lower
income housing.
Conversion of Existing 100% Affordable Housing Projects. I believe this to be infeasible given the legally
required fifteen-year Tax Credit compliance period. Tax Credit investors have purchased these credits and
would face enormous tax implications should this fifteen-year requirement not be met. This would
inevitably lead to litigation unless the nonprofit managing general partner can cover the costs of these
penalties. Further, receipt of a Tax Credit allocation from the State is premised on execution of a 55-year
deed restriction, stipulating that the rental units will remain affordable to extremely low, very low and
low income households.
Funding Support for New 100% Affordable Housing Projects. I assume that the Commission is proposing
that some or all of the 100% projects to be assisted by the City in the future be developed as
homeownership projects rather than rental projects. If this proposal proceeds, fewer affordable units
would be produced since there are not adequate leveraging sources for homeownership units. The
downpayment assistance and mortgage financing programs cited in the Commission’s proposal are
valuable in certain contexts, but I do not believe they would benefit extremely low, very low and low
income households. However, these programs would likely benefit moderate and middle income buyers.
Homeownership Costs. I believe that affordable housing costs, as defined by the State, would not be
adequate to cover the monthly costs of ownership. As an example, the affordable monthly housing cost,
defined by the AHPP is $663 for extremely low income households, $1,105 for very low income
households and $1,326 for low income households. (Family of 4, 2BR). Whether these amounts would be
sufficient to cover property taxes and insurance, homeowner association fees, private mortgage
insurance, utilities, and a mortgage payment is questionable. Further, it is probably not realistic to assume
tax benefits from mortgage interest deductions for extremely low and very low income households.
The Housing Commission cites HUD’s Section 8 Housing Voucher Homeownership Assistance Program as
a potential vehicle for making homeownership affordable to eligible lower income households. However,
reports indicate that the use of this program has been very limited in California. The City should explore
the reasons for this limited application. This is particularly important given the thousands of very low and
low income units included in the City’s RHNA and the resulting need to expedite affordable housing
production.
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2067 Attachment: Written Comments (5826 : Housing Commission Update)
Conversion of Inclusionary Units to Ownership Housing. Since all or the majority of recent inclusionary
rental units developed are affordable to very low income households, the feasibility of subdividing these
units to create individual homeownership units, together with the unlikelihood that very low income
households will be able to afford monthly costs, makes this a very questionable approach. Further, these
units are subject to the same 55-year deed restriction as the 100% projects.
Long Term Affordability. The Commission’s objective to provide wealth accumulation opportunities for
lower income people is a good one. However, given the substantial public subsidy that would be
necessary to make these units affordable, a meaningful equity sharing formula would be necessary to
avoid a “gift of public funds” scenario and to protect long term affordability. (To be clear, the City does
not “give away” money to nonprofits for housing development. Land acquisition loans are converted to
permanent financing and repayable from projects’ residual receipts.) An equity sharing requirement to
ensure long term affordability may not be compatible with a wealth accumulation goal. I am assuming
that the City will require the same 55 years of affordability that it currently imposes on affordable rental
units. I also assume that the City’s share of equity would remain with the unit to ensure future
affordability.
(As an affordable housing practitioner I administered first time homebuyers’ programs that imposed resale
controls (equity sharing) designed to keep the units affordable. These programs are very difficult to
administer since many lower income sellers resent the public agencies’ taking its share of equity upon
resale. A form of collective amnesia was common in terms of remembering the conditions on which the
deal was structured.)
Extremely Low Income Housing. The only source of affordable housing for extremely low income families
and individuals is 100% Affordable Housing Projects. Unquestionably this is the most vulnerable group
and the most likely to become unhoused if affordable housing is not provided. I question whether
homeownership is a viable option for those at the bottom of the income spectrum. It is important to
remember that State HCD has in the past allowed the City to count extremely low income units as very
low income units for the purpose of meeting RHNA goals.
I am confident that this is the start of a lively discussion about increasing homeownership opportunities
in Santa Monica while meeting our RHNA goals for very low and low income housing production. I am also
confident that a great deal more thought and research will be devoted to these issues. Thank you for the
opportunity to comment.
Sincerely,
Leslie Lambert, Sunset Park Resident
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2068 Attachment: Written Comments (5826 : Housing Commission Update)
From:Joni Pan
To:Gleam Davis; Phil Brock; Christine Parra; Lana Negrete; Jesse Zwick; Caroline Torosis; Oscar de la Torre;
councilmtgitems
Subject:Support for Agenda Item 13A - Affordable Homeownership in Santa Monica
Date:Tuesday, July 25, 2023 10:11:27 AM
EXTERNAL
Dear Santa Monica City Council Members,
I am writing to express my enthusiastic support for Agenda Item 13A, which aims to
promote Affordable Homeownership in Santa Monica. I believe that the proposed
policy changes, allowing the conversion of rent-controlled units into purchasable
units, will be a significant step towards increasing homeownership opportunities for
residents.
By facilitating the purchase of entire rent-controlled properties by nonprofit
organizations or government intermediaries, and implementing deed restrictions to
preserve housing affordability, this initiative demonstrates a thoughtful and balanced
approach. I appreciate that existing tenants will not be displaced, and homeownership
will remain accessible through voluntary purchases.
Encouraging owner occupancy, along with penalties to discourage unit flipping, will
ensure the long-term stability and affordability of these homes. I also commend the
provision for proportional ownership of the underlying land, promoting a sense of
community and shared responsibility.
In conclusion, I wholeheartedly support Agenda Item 13A, and I urge the City Council
to adopt these measures to foster affordable homeownership and strengthen our
community. Thank you for your dedication to addressing housing challenges in Santa
Monica.
Sincerely,
Joan
ITEM 13.A.
JULY 25, 2023
ITEM 13.A.
JULY 25, 2023
13.A.b
Packet Pg. 2069 Attachment: Written Comments (5826 : Housing Commission Update)