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HomeMy WebLinkAboutItem 5g. Amendment to the Garden Street Terraces Affordable Housing Agreement to Convert 1Below Rate Rental Unit to 1 Below Market HomeOwnership Unit Item 5g Department: Community Development Cost Center: 4008 For Agenda of: 6/4/2024 Placement: Consent Estimated Time: N/A FROM: Timmi Tway, Community Development Director Prepared By: Owen Goode, Assistant Planner: David Amini, Housing Coordinator SUBJECT: AMENDMENT TO THE GARDEN STREET TERRACES AFFORDABLE HOUSING AGREEMENT TO CONVERT ONE BELOW MARKET RATE RENTAL UNIT TO ONE BELOW MARKET HOMEOWNERSHIP UNIT RECOMMENDATION Approve the Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, to approve the conversion of one Below Market Rate Rental Unit to a Home Ownership Unit within the City’s Below Market Rate Housing Program ,” with an option to purchase offered to the existing moderate -income tenant, for the Garden Street Terraces project POLICY CONTEXT Both homeownership and rental units that meet the rental or sales price standards, as established by the City and that are made available for very-low, low, and moderate income persons or households, and that are subject to deed restrictions or other instruments that ensure the housing remains affordable for a predetermined period , are considered affordable housing. The proposed action to modify an affordable housing agreement to convert a rental unit to a home -ownership unit within the City’s Below Market Rate Housing Program does not conflict with any 6th Cycle Housing Element Policies or Major City Goal for Housing and Homelessness to support housing options for all. The continued ownership and maintenance of the subject rental unit required as part of the Garden Street Terraces project has become an undue burden on the owner, so t he owner has requested to convert the unit to a below market rate homeownership unit in order to facilitate sale to an income eligible buyer. Converting the rental unit to a for sale unit would allow an income eligible buyer to reside in the home . This would help accomplish the owner’s goal of transferring title to the property as well as the City’s goal of retaining its stock of affordable housing. DISCUSSION Page 155 of 422 Item 5g Background On June 1, 2010, the City Council adopted Resolution Numbers 10182 and 10183 certifying an environmental impact report and approving use permit and tentative tract map for the 1119 Garden Street property. These resolutions allowed the owner to construct and operate a mixed-use building on the property, formerly referred to as Garden Street Terraces, and were later amended by the City Council on November 1, 2011, by Resolution Number 10312 and on March 4, 2014, by Resolution Number 10504. The project completed construction in 2021 and is comprised of 20,000 sq.ft. of retail space, 8 residential units, 64 hotel rooms, and 41 private parking spaces . The original requirement to provide below market rate housing as a public benefit to support the approval of the project was to provide three low-income housing units, which was 9% of the 33 residential units proposed within the project. As the project was modified, and the total number of units proposed was reduced from 33 to 8, the final requirement was to provide two moderate-income rental units located off-site at the Parkwood Apartments located on Southwood Drive , exceeding 9% of the final eight residential units proposed within the project. An Affordable Housing Agreement (Agreement) was executed for the two moderate-income rental units (Attachment B). The owner of one of the units has requested to convert the unit to a for-sale (Attachment C). The Affordable Housing Agreement recorded on the property requires approval by the decision-making body that approved the project (per Section 5.7 of the original Affordable Housing Agreement) to approve any major modifications to the Agreement. In this case, the City Council was the approving body for the project, and therefore, the request to amend the Agreement is before the Council for consideration. The unit to be converted is currently occupied by an eligible renter who has been duly qualified by the City’s affordable housing administrator. In order to help secure housing stability for this renter and upon confirmation of eligibility, the City intends to offer a first right of option to purchase the property to the tenant, who has expressed inter est in and ability to purchase the home. In the event that the current tenant is no longer eligible to purchase the home or would like to pursue other housing opportunities, the tenant shall have the option to reside in the unit for the remainder of the le ase agreement or for at least 90 days, whichever is greater. The first right of option to purchase the property by the tenant will be included in the amended Agreement. The other unit subject to the Agreement has been previously sold and continues to be maintained as a moderate income rental unit. Under this proposed amendment, one unit would maintain its status as a rental unit and the other would be converted to an ownership unit. Previous Council Action City Council approved the final design for the Garden Street Terraces Project on March 4, 2014, by Resolution Number 10504. Page 156 of 422 Item 5g Public Engagement Members of the Public will have an opportunity to provide public comment prior to or during the City Council meeting. CONCURRENCE The Community Development Director concurs with the recommended action. ENVIRONMENTAL REVIEW The California Environmental Quality Act (CEQA) does not apply to the recommended action because the action does not constitute a “project” under CEQA Guidelines Sec. 15378. FISCAL IMPACT Budgeted: N/A Budget Year: 2023-24 Funding Identified: N/A Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund $0 $0 $0 $0 State Federal Fees Other: Total $0 $0 $0 $0 The conversion of this unit type will not impact the City fiscally. ALTERNATIVES 1. Council could decide to not approve the conversion of the rental unit to a homeownership unit. This action is not recommended by staff because converting the unit to an ownership unit provides flexibility for the owner and promotes upward mobility for the current renter or prospective buyer. This alternative would result in no change to the property and the owner would be required to continue to maintain the home as a Below Market Rate rental unit, compliant with the City’s standards. The owner may continue to pursue selling the unit, but it would still maintain its status as a rental unit. 2. Council could approve the conversion of the rental unit to a homeownership unit but not approve the first right of option to purchase to the existing tenant. This action is not recommended by staff because the current tenant has expressed interest in purchasing the unit with the condition that they are deemed an eligible buyer per the City’s Below Market Rate Housing Standards. Approving this alternative could create a challenge for the current tenant in pursuing other housing opportunities. Page 157 of 422 Item 5g ATTACHMENTS A - Draft Resolution approving the Conversion of one Below Market Rate Rental Unit to a Home Ownership Unit B - Recorded Below Market Rate Housing Agreement C - Garden Street SLO Partners Conversion Request Page 158 of 422 R ______ RESOLUTION NO. _____ (2024 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, TO APPROVE THE CONVERSION OF ONE BELOW MARKET RATE RENTAL UNIT TO A HOME OWNERSHIP UNIT WITHIN THE CITY’S BELOW MARKET RATE HOUSING PROGRAM WHEREAS, on March 4, 2014, the City Council approved Resolution Number 10504, to allow for the construction and operation of a mixed -use building located at 1119 Garden Street, referred to as Garden Street Terraces, and WHEREAS, the project approval included a public benefit provision to provide 2 Moderate-Income rental units located off-site, and WHEREAS, an Affordable Housing Restriction Agreement and Declaration of Restrictive Covenants was entered into on March 26, 2018 (the “Agreement”), to deed restrict 2 Moderate-Income rental units, and WHEREAS, the owner has requested to convert one of the units to an ownership unit so that it may be sold to an eligible buyer subject to the City’s Below Market Rate Housing Standards and Purchase Guidelines, and WHEREAS, the City Council of the City of San Luis Obispo conducted review of the request on June 4, 2024, as a consent agenda item and has duly considered all evidence and recommendations by staff. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Determination. The City Council finds and determines that the request is consistent with implementing the City’s Housing Element and Major City Goals to expand housing opportunities for all and approves of the conversion, subject to the following conditions: 1. The Agreement shall be amended to convert one moderate-income rental unit to an ownership unit and shall be deed restricted for no less than 45 years upon sale to an eligible buyer. 2. The home shall not be sold until the amendment to the Agreement, in a form satisfactory to the Community Development Director, is executed by all parties. The Community Development Director is authorized to execute the amendment, and any other agreements necessary to carry out the purposes of this request, on behalf of the City. 3. In order to ensure housing stability for the existing tenant and upon confirmation of eligibility for the City’s below market rate homeownership program, the existing tenant shall be offered a first option to purchase the unit. Facilitation of this option shall be the responsibility of the Community Develop ment Director or their designee. Page 159 of 422 Resolution No. _____ (2024 Series) Page 2 R ______ 4. In the event that the existing tenant is not an eligible buyer or decides not to purchase the home, they shall be entitled to reside in the unit for the remainder of the lease agreement or reside in the unit for 90 days aft er approval of this resolution, whichever is date is later. 5. The eligible buyer of the homeownership unit shall execute a Promissory Note, which shall be secured by a Deed of Trust in favor of the City. The Promissory Note shall include provisions restricting the occupancy, resale, and refinancing of the unit. Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _______________ 20 24. ___________________________ Mayor Erica A. Stewart ATTEST: ______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ______________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________ Teresa Purrington City Clerk Page 160 of 422 Page 161 of 422 Page 162 of 422 Page 163 of 422 Page 164 of 422 Page 165 of 422 Page 166 of 422 Page 167 of 422 Page 168 of 422 Page 169 of 422 Page 170 of 422 Page 171 of 422 Page 172 of 422 Page 173 of 422 Page 174 of 422 Page 175 of 422 Page 176 of 422 Garden Street SLO Partners, LP 505 Bath St Santa Barbara, CA 93101 Garden Street SLO Partners, LP 505 Bath St Santa Barbara, CA 93101 November 21, 2023 Owen Goode Community Development 919 Palm Street San Luis Obispo, CA 93401 Dear Owen: Our unit at 1023 Southwood Dr Unit C, San Luis Obispo, CA 93401 is currently deed restricted moderate “rental”. We have attempted to sell this unit for more than 2 years. We have toured more than 50 groups though it. We have been under contract several times, but ultimately no one has followed through to complete the purchase. The unit is in Parkwood Village, which is a great community. We performed a complete remodel of the unit when we purchased the unit in 2018. Other units within the same complex have sold quickly. The issue keeps coming back to the rental deed restriction. We are asking the City to change the designation from “rental” to “owner occupied”. We are not requesting a change in restriction level just simply in type. In fact, the current tenant would like to purchase the unit- a true move up opportunity. We have been working with City staff since September 2021 on better understanding the restriction and the process to change it. We have been informed that this would need to go to City Council. We were recently made aware that when proposing a new project in San Luis Obispo, the developer can choose between rental and owner occupied – something that we didn’t realize when we signed the Affordable Housing Restriction Agreement in 2018. We are hoping we can be granted this same opportunity now. We appreciate your consideration of our request. Kind Regards, Garden Street SLO Partners, LP Patrick Smith Partner DocuSign Envelope ID: 32330DDE-31B7-45FC-95E5-809E4E56E34C Page 177 of 422 Page 178 of 422