HomeMy WebLinkAbout04/02/2002, PRESENTATION - HOUSING TRUST FUND THOUGHTS MING AGENDA
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Housing Trust Fund Thoughts Directory-{e pto
George J.Moylan
In written and verbal communications with you I have mentioned the potential for the
establishment of a Housing Trust Fund. In discussing that possibility I will not insult your
intelligence by addressing the needs for affordable workforce housing in our community.
As.political leaders and managers of one of our larger employers you-are fully aware of
the affordable housing crisis facing this county.
The Center for Community Change's website indicates there are now 257-housing trust
funds in the country and more are being formed on a regular basis. You may have read
recently about the funding of one in Los Angeles and you may be aware there are
concerted, well-supported, efforts in Congress to develop a National Housing Trust Fund.
However, several questions and concerns about the proposed Housing Trust Fund's
establishment in the County of San Luis Obispo exist and I may in a position to help
you understand some of the rationale prompting our efforts.,.
Financing Vehicle—The Housing Trust Fund will.be a financing vehicle to provide
gap financing for affordable workforce housing.It.will not replace or compete with any
jurisdiction's approval system.'Developments will not receive final commitments of
funding until after they are approved by the Planning Commission,City Council,
Architectural Review Commission, Cultural Heritage Commission, or.any.other City
committee or department. The Housing Trust Fund will neither be an owner nor a
developer of affordable housing. Its job is to provide the monies needed to'make'
developments that provide affordable work force housing for families and individuals
financially-feasible.
Availability of Funds—Trust Fund monies will be available to private developers as
well as public providers of housing such as us,our non-profit affiliate, People's Self:Help
Housing Corporation, Affordable Homes, Inc. I could envision a scenario where the City
itself could ask for financial assistance from the Trust Fund. The proposal is that 40%of
the available funds be committed to "special needs"clients as represented by members of
the San Luis Obispo Supportive Housing Consortium and 601/o of the funding be.set-
aside for families and individuals whose family income is less than 1206/o of County
median income. Funds could be used for single-'family.and multi-family housing, for
commercial/residential mixes, and for other innovative solutions to the problem. Funded
activities could include acquisition of future sites, on-site and off-site construction,
interest-write-downs, acquisition of existing properties, and for a variety of other
activities involved in the provision of housing for low and moderate-income residents.
Funding would be"seed"money, it would not be for the full cost of the activity and
hopefully would be made in the form of"loans"which would provide for replenishment
of the Trust Fund.
Leveraging of Funds—Nationally Housing Trust.Funds leverage,i.e. attract other
funds, in a ratio of at least 5:1. For every Trust Fund dollar a minimum of five other
dollars,usually through long-tern financing, are brought to a development. In other
words if we can generate $5 million a year in the county we can bring at least another$25
million to the county for affordable work force housing. Actually we typically do a little
better than 5 to 1 with our developments. For instance there is $300,000 in CDBG
funding in our about to be built 433 Pacific Street senior development, where our total
cost will be in the vicinity of$2.4 million. Thus an 7:1 leveraging
Assist You Not Competing With You—Please do not view the Housing Trust Fund
as competition with any funding mechanisms you have in-place, i.e. the exclusionary
housing fund, Community Development Block Grant funding, etc. It's not. It is planned
and will be designed to assist you in meeting the community's housing needs, as well as
assisting you in addressing your housing element issues with the State of California. It
could be of major assistance to you in developing infill housing and providing a compact
form to our community while protecting our open space. Such development is going to be
expensive and the Housing Trust Fund monies may well be key to whether or not an infill
development is feasible. The Blackstone Hotel rehabilitation may add to the community
and provide needed housing for a segment of our population.But it may never be
financially feasible. Housing Trust Fund monies could address the feasibility issue.
I testified before you rather recently as to the financial needs of Judson Terrace in
developing units for the frail elderly, almost$2 million dollars in local funding. Requests
of that magnitude quickly exhaust the financial resources available to the City in CDBG,
HOME and exclusionary housing funding. Again, Housing Trust Funds can help meet
some of those funding needs and free other funds for other needed community
improvements.
Structure of Trust Fund—We envision the fund to be structured as a 501 (c) (3 )
non-profit corporation. Other possibilities include a community foundation but it appears
the 501 (c) (3)is better suited to the job at hand. Whatever,the case we anticipate it to be
operated by a Board of 12 to 15 people who represent the various communities who
commit to the trust fund. That Board could function under the auspices of a new non-
profit, or as the creation of an existing non-profit or an existing public agency. Those
who have worked closely with government for many years are acutely aware of turf
issues, equitable representation,return on investment, and other issues.
Funding of the Trust Fund—There appears to be some confusion around this issue
and I want to add my thoughts for your consideration. There can be no long term funding
of the Housing Tnist Fund from any communities general fund. We must develop
dedicated revenue sources from a variety of taxes and fees, i.e. transient occupancy taxes,
real estate transfer taxes, dump fees, sales taxes, or any other source,preferably where
there is a nexus between the funding source and affordable housing. However, initially
there may be a role for contributions of monies from the cities and the county from
general revenues, inclusionary housing funds,block grants, etc. to provide a financial
start-up base for the Trust Fund. We also anticipate a concerted effort to involve local
employers and the public at large in an on-going fund-raising effort. However,the
experience of the 257 trust funds in the country to date is that to be successful dedicated
revenue sources are needed.
We certainly don't have all the answers to all questions yet, but our leadership team is
committed to finding those answers. And in that quest we want to work with you and
your staff on resolving any and all concerns that the City of San Luis Obispo might have.
Thus our request to you is simple: Commit to working with us in developing a Housing
Trust Fund that will benefit all low and moderate income residents of the City and
County of San Luis Obispo.
Respectfully,
George J. Moylan
Executive Director
MPFTINAGENDA
_;2 02 ITEM # f°re_n
cimc o u p c,l m c m o nA n b u m
March 1, 2002
NCIL CDD DIR
TO: City Council AO ❑ FIN DIR
0 El FIRE CHIEF
FA- ORNEY ❑ PW DIR
FROM: Ken Hampian WLERKIORIG ❑ POLICE CHF
❑ D;1&TIAIII!S d REC DIR
L1TIL DIR
SUBJECT: Affordable Housing Trust Fund Q( 0 HR DIR
Overview r/
Representatives of the Affordable Housing Trust Fund are beginning a series of presentations to
all cities in the County, and to County government. The presentation to the Board of Supervisors
was made last week, and a presentation to the SLO City Council is planned for April 2, 2002.
Exploring the potential for participating in the Trust Fund is included in the work program for
the Council's Major City Goal related to affordable housing.
The mission of the Affordable Housing Trust Fund is one that we can all support: "...to increase
the number of units of affordable housing for low and moderate income County residents. " The
difficulty begins in determining how to go about achieving the mission. The purpose of this
memorandum is to sensitize Council members to some significant challenges associated with the
proposal, as presently crafted, prior to the Council presentation on April 2nd.
What is Being Asked of the Cities and County
As presently crafted, the success of the fund depends upon "...a $S million annual fund made
possible through the dedication of public resources from the County along with its seven cities".
Attached is an article Trust Fund advocates recently published in a national newsletter which
outlines the proposed contributions. As noted in the article, "Each jurisdiction is being asked to
provide funds to the Trust Fund from their existing revenues until a permanent source of funds is
identified and implemented. " The proposed level of funding level from the City of San Luis
Obispo is $1.3 million annually.
In the original Trust Fund proposal, potential sources of "existing revenues" were outlined,
including several General Fund sources (e.g. sales, TOT, and utility taxes) and a number of fees,
including inclusionary housing fees. Other ideas include proceeds from the sale of public lands,
a ballot measure to establish a long term funding source, and private contributions.
The Conceptual Difficulties
After becoming aware of the details of the proposal, the city managers and County CAO invited
Trust Fund leader, Anita Robinson, to meet with us at a breakfast meeting to share our practical
"on the ground" concerns. While we had a very open and useful discussion, these concerns have
not been addressed in subsequent Trust Fund work. Therefore, on Tuesday, February 26, 2002,
at the invitation of city managers, another meeting was held to discuss these issues. Those
attending the meeting included Trust Fund leaders Anita Robinson, George Moylan, and Ann
Travers. Representatives of the city managers included Atascadero city managers Wade
McKinney, Arroyo Grande City Manager Steve Adams, and myself. David Edge, County CAO,
and Jim Grant, County ACAO also attended the meeting.
In summary, we started by expressing our support—and our councillboard support— for the goal
of increasing the supply of affordable housing. We emphasized, however, that achieving the goal
would depend upon recognizing and addressing several practical issues—both financial and
governance-related—that are currently a part of the concept. These issues include:
1. Even in "good times", cities and the County do not have General Fund monies available
to fund such a new, ambitious program—a program designed to address a problem that
transcends municipal government (this is true in SLO, and it is especially true in all other
County cities,where resources are scarcer yet). In addition,most cities strongly resist
earmarking General Fund monies—the fund that exists to support basic City services and
unforeseen needs or emergencies;
2. We are most certainly not in "good times". As we know from our Mid-Year Budget
Report earlier this week, our sales tax and TOT combined are expected to be down $1.8
million by June 2003. In addition, the conventional wisdom is that the greater financial
threat is coming with the 2003-04 budget, when the State may have an even larger deficit;
3. Therefore, a dedicated source of new revenue is the best way to support the Trust Fund.
However, this will require a ballot measure campaign, which will admittedly require a lot
of hard work,while offering uncertain results;
4. In terms of non-General Fund sources, some cities (like SLO) have"inclusionary housing
funds". The question with respect to such funds shall be: What assurances would a city
have that transferring funds to a new, 15 person decision-making body (with only one
city representative) will result in more benefits than could be achieved"going it alone"?
5. How would all of this relate to the challenge of achieving State housing goals? For
example, would cities get"credit" for helping to fund projects outside their city limit?
There were many other points made during our breakfast meeting, including discussion of
potential benefits, such as leveraging other funds, technical assistance, and advocacy. However,
achieving the goal is much easier said than done, and will be made more difficult if the current
conceptual problems are not recognized and addressed in the further development of the
program. We hope that our breakfast meeting helped better frame these challenges, and that they
will be recognized and discussed as Trust Fund leaders appear before the various cities. We shall
also have the opportunity to observe and learn from the County's follow-up to this issue.
Attachment: Newsletter Article
Cc: Staff distribution G:Hampian/memos/affordable housing fund
e San Luis Obispo Hous- All housing developed
ing Consortium has through the Trust
' -
brought together a broad Fund will be neighbor-
community base to propose and ad- hood appropriate and
vocate for a housing trust fund to ad-
meet all local building
dress housing needs throughout the codes and ordinances.
County and its seven cities.For nearly The Fund will support
two years,the consortium has worked such activities as: con- �� �� `'
carefully to craft a proposal that in- struction of new units; 1�. �rt �� ?
vo]ves all elements of the County, rehabilitation of exist- f`�? a, r �; ,.�:, ,.o,,,,°.40°w„
bringing the cities and county to- ing buildings; acquisi- HONG
gether to work on housing issues,and tion of land for afford-
educating the community at-lar e able hOusin develo Affordable bousing provided in north San Luis Obispo County by
g g p- People Self Help Housing. SOW-Ce:Housing Consortium.
about the widespread housing needs
that exist in this rapidly growing Consortium;the low-income com-
county of California central coast. " munity; the disabled community;
the construction or homebuilding
San Luis Obispo's median home price � industry; the business or agricul-
tural$285,000 is affordable to only 22% industry; the banking or eco-
of the county's residents.A report by nomic development industry; and
the Economic Advisory Committee ment;conversion of non-residential tourism.The Commission will de-
to the Board of Supervisors in the to residential use; assistance to en- termine eligibility guidelines, re-
summer of 2001 expressed concern able low income households to own view and select proposed projects,
that"...the lack of housing for locally their own homes; assistance to en- assess need, provide oversight, re-
employed persons could undermine able families to obtain rental hous- port on the activities and progress
the county's economic viability."The ing; and other activities. Sixty per- of the Fund,and make all decisions
City of Paso Robles provides one ex- cent of the funds will support de- regarding use of Housing Trust
ample of the County's housing velopment of housing for families Fund revenue.
crunch: a family earning the city's and individuals that have incomes
median income of approximately up to 120% of the county median
$47,000 a year would qualify to buy a income ($60,000 for a family of
$150,000 home with 10% down. four).Forty percent of the funds will
However, the City's median-priced be used to provide housing to per-
home costs $221,000. This story is sons with special needs. It is esti-
repeated throughout the County. mated that the proposed fund could One of the most innovative aspects
support 600-1,000 additional units of this proposal is the plan to gain
The Consortium believes one way within the first five years. cooperation from the County and
to help address the critical need for its seven cities. There are several
affordable homes throughout the The proposed housing trust fund benefits to a Countywide Housing
County is the creation of a housing will be incorporated as a 501(c)(3) Trust Fund. These include: by
trust fund.They are proposing a$5 nonprofit corporation governed by combining revenues from indi-
million annual fund made possible a Commission representing various vidual cities, sufficient revenues
through the dedication of public segments of the county, including: can be generated to develop
resources from the County along participating jurisdictions, the San needed housing; the countywide
with its seven cities. Luis Obispo Supportive Housing fund will be able to better lever-
age additional public and private The San Luis Obispo Supportive
funds; aii6 the fund will enable Housing Consortium has twenty ' 0
long range planning to address member agencies and has created • • • • •
existing needs and innovative a Leadership Team with represen- . . -
projects appropriate to neighbor- , • -
hoods throughout the county.ty' ililn g QrI U1 T ) e
developed the, ices the jobs and Affordable Homes, Inc.
A sharin formula has been devel- AIDS Su ort Network
aped that ties e jobs and hous- ilo;jsillic ifnba!7i,. ' an exists In Pp
Alliance for the Mentally III
ing imbalance that exists in each ;such a;' jhe seven jUiiSdiciions and Cosa Solana
of the seven jurisdictions and the g Behavioral Health Services
County. ac jurisdiction is being :11e CoUn!y, Department of Social Services
ase to provide funds to the Economic Opportunity Commission of
Housing Trust Fund from their tatives from key segments of the S.L.O. County
existing revenues until a perma- community to help direct the cam- Housing Authority soof S.L.O.
u
R
Independent living Resource Center
nent source of funds is identified paign.The proposal will go before Life Steps Foundation
an implemented. The attached the County Board of Supervisors Loaves&Fishes of Paso Robles
chart outlines e proposed con- early in 2002 and will then be pre- National Alliance for the Mentally III,
tributions. Potential sources of sented to several cities within the S.L.O. County
revenue include: a portion of ex- County.The thoughtful construe- North County Women's Shelter
isting sales tax revenues; a portion tion of this housing trust fund pro- & Resource Center
of existing real estate transfer tax posal promises to be a model for OPTIONSPeople's Self-Help Housing Corporation
revenues; a portion of existing city/county housing trust funds S.L.O. Non-Profit Housing Corporation
transit occupancy tax revenues; throughout the country. 1 Sojourn
and existing fees collected through Transitions-Mental Health Association
developer agreements and Contact: Rachel Richardson, AIDS Support Women's Shelter Program of S.L.O.
inclusionary zoning requirements; Network, P.O. Box 12158, San Luis Obispo, Work Training Center
among others. CA 93406,(805-781-3660)
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1999 Housing Jobs/Housing Proposed
Jurisdiction Population 1999 Jobs Units Ratio Contributions
Arroyo Grande 15,848 7,490 6,641 1.1278 $386,058
Atascadero 25,215 5,980 9,603 0.6227 $483,196
Paso Robles 22,275 10,890 8,767 1.2422 $550,621
Grover Beach 12,520 2,680 5,370 0.4991 $233,537
Morro Bay 9,775 3,080 6,037 0.5102 $204,132
Pismo Beach 8,397 2,960 5,026 0.5889 $182,290
San Luis Obispo 42,446 32,090 18,776 1.7091 $1,299,500 V
SLO County 102,843 10,340 39,685 0.2606 1
TOTAL 239,319 75,510 99,905 0.7558 $5,000,000
Mtt I INU AGENDA
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city of sAn tuis oBispo
990 Palm Street, San Luis Obispo, CA 93401-3249
March 26, 2002
10�26NCIL DD DIR
MEMORANDUM ❑ FIN DIR
0 ❑ FIRE CHIEF
6RNEY ❑ PW DIR
TO: City Council CLERK ORIG ❑ POLICE CHF
VIA: Ken Hampian, CAO, EADS ID REO DIR
An
FROM: John Mandeville, Community v opment Director 0 HR DIRUTILDIR
BY: Jeff Hook, Associate Plann
SUBJECT: Information on the City's Affordable Housing Incentives
Given the recent and forthcoming discussions of affordable housing, I thought it would
be helpful to provide Council with a summary of City programs that promote affordable
housing development. Please contact Jeff Hook or me if you have further questions on
the City's affordable housing incentives.
1. Inclusionary Housing Program. In March 1999, San Luis Obispo adopted the first
inclusionary housing requirement in the County. The requirement applies to both
residential and commercial development. In new residential subdivisions, 15% of the
dwellings built must be sold at prices affordable to low- and moderate-income
households. Most new commercial projects must include affordable housing, build it
offsite, or pay into a citywide affordable housing fund. Affordable units must remain
so for either 30 years or, for for-sale properties, the owner may chose to participate in
the "shared equity program." In this program, the owner may sell the affordable
property within six years of initial sale by sharing the property's built up equity value
with the City upon resale of the affordable unit. Funds generated are then used to
develop additional affordable housing. So far, the program has produced about 75
affordable units and generated over one-half million dollars in in-lieu housing fees.
2. The Affordable Housing Fund. The Affordable Housing Fund, established in
March 1999, implements the City's Inclusionary Housing Requirement. It provides a
fund for the collection of in-lieu fees and for the disbursement of those funds for
affordable housing projects citywide. Ordinance 1438 states "the fund is established
and administered by the City, containing in-lieu fees and other funds held and used
exclusively to increase and improve the supply of affordable housing." The
ordinance also says the fund shall be administered by the Finance Director and is
allocated "at the discretion of the City Council." Potential uses, award procedures
and criteria were set by the City Council in December 2001 (Resolution 9263). Last
year, Council earmarked $215,000 of the Fund to Judson Terrace Lodge to build a 32-
unit apartment project for frail, low-income elderly persons. The Fund has a balance
of$544,883.
3. Affordable Housing Incentives (Ch. 17.90 of SLOMC). Adopted in 1985, the
incentives are part of the City's Municipal Code and describe benefits available to
OThe City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities.
�,, Telecommunications Device for the Deaf(805)781-7410.
Affordable Housing ft._.:ntives
Page 2
affordable housing developers. Possible incentives include residential density
bonuses, fee reductions or waivers, city installation of off-site improvements, direct
city financial assistance, subdivision, zoning or other exceptions to city standards, and
other incentives that may be negotiated between the City and developer. For
example, the incentives allow a residential density bonus by right of at least 25
percent for developers building five or more dwelling units with at least 20 percent of
the units sold or rented at prices affordable to seniors or to very-low, low or moderate
income persons.
4. Community Development Block Grants. Since 1994, the City has provided over
$3.17 Million in CDBG funds for the purchase and improvement of affordable
housing.
5. Waiver of Development Review and Meter Installation Fees for Affordable
Housing Projects. In 1995, Council adopted Resolution No. 8415 which exempts
very-low and low income affordable housing developments from all planning,
building or engineering development review fees and from water meter and sewer
installation fees.
6. Waiver of Citywide Development Impact Fees For Affordable Housing Units.
In 2000, Council adopted Resolution No. 9131 waiving city-wide development
impact fees (traffic, water, wastewater) on new dwellings that either: 1) exceed the
minimum number of affordable units required by the City's Inclusionary Housing
Requirements; or 2) are built, owned and managed by the San Luis Obispo City
Housing Authority, government agencies or not-for-profit housing agencies. The
waiver reduces cost for a typical single-family house by about$11,000.
7. Relaxed Parking Standards for Affordable Housing. Under City Zoning
Regulations (17.16.060.K), housing occupied exclusively by very low or low-income
households, as defined by the State, requires one car and one bicycle space per
dwelling unit.
8. Utilities Assistance Program For Low-Income Residents. The City helps low-
income residents with their utility costs through a Low Income Assistance Program,
consisting of: 1) Rate Assistance. There is a 15% reduction of the standard rate for
water and sewer for qualified, low income customers. 2) Payment. Assistance.
Economic Opportunity Commission (EOC) administers the Payment Assistance
Program. Customers are eligible once, every two years, to have one billing period
paid depending on the availability of funds; and 3) Water Efficiency Assistance.
Utilities Conservation staff provides customers receiving either Rate Assistance or
Payment Assistance with free information and water audit services to help control the
cost of their water bills.
In addition, City staff regularly serves as a resource to promote affordable housing in the
Community and with Cuesta College and Cal Poly. For example, staff from several City
departments have been meeting with a private student housing developer to discuss
Affordable Housing h._-ntives
Page 3
process, financing opportunities and design for a potential 250-unit private student
housing complex in San Luis Obispo. Community Development Department
management staff serves on the Cal Poly Campus Planning Committee and on the Cuesta
College Student Housing Committee. Through this role, City staff continues to support
institutional efforts to meet the housing needs of students, faculty and staff.
Attachment: 2002 Affordable Housing Standards
Jh/Uhousing/affordablehousingincenaves3-02
city of
San IDIS OBISPO
AFFORDABLE HOUSING STANDARDS
2002
Purpose
These standards apply to all development projects within the City. They set maximum rental
costs or sales prices based on income level and dwelling size and are used by developers,
citizens, housing groups, City staff and commissions, and housing agencies. The Community
Development Director implements the standards. Besides defining the often misunderstood term
"affordable housing", the standards promote the construction of housing which meets residents'
needs and help explain the City's housing requirements. In addition, the City uses these
standards to determine if housing projects are "affordable" and qualify for density bonuses,
financial assistance or other types of incentives. For more information about these standards, call
the City's Community Development Department at (805) 781-7170.
The City's requires new development projects to provide affordable housing for very-low, low, or
moderate income households by: 1) building affordable housing in conjunction with new
residential or commercial development, or 2) by paying an "in-lieu fee" to support the
development of affordable housing citywide, or 3) by contributing real property, including land
or existing dwellings, to be used as affordable housing, or 4) by a combination of these methods.
To help offset costs of providing affordable housing, the City has adopted Affordable Housing
Incentives (SLOMC Ch. 17.90). State and local law allows residential density bonuses and
certain other incentives in return for developers agreeing to construct affordable housing.
Additional information on incentives is available from the Community Development
Department.
How the Standards Are Determined
These standards are prepared by the Community Development Department and are updated
periodically to show income limits for the County of San Luis Obispo as published by the State
Department of Housing and Community Development (HCD). These limits are shown in Table
1. By law, the upper income limit for "very-low income" households is 50 percent of the median
County income; the upper limit for "lower income" households is 80 percent of the median
County income; and the upper limit for "moderate-income" households is 120 percent of the
median County income.
Households with more than eight persons
For all income groups, the income limits for households larger than eight persons are determined
as follows: For each person in excess of eight, add eight percent of the four-person income limit
to the eight-person income limit and round the sum to the nearest $50. For example, the nine-
person very-low income limit is .08X $25,150 = $2,012; then $2,012 + $33,200 = $35,212;
rounded to the nearest $50= $35,200.
6-99
Rev.3102
f
2002 Affordable Housing Standards
Page 2
TABLE 1: 2002 ANNUAL INCOME LIMITS ($)
INCOME NUMBER OF PERSONS IN HOUSEHOLD
GROUP
1 2 3 4 5 6 7 8
VERY LOW 17,600 20,100 22,650 25,150 27,150 29,150 31,200 33,200
LOWER 28,150 .32,200 36,200 40,250 43,450 46,700 49,900 53,100
MEDIAN 35,200 40,250 45,250 50,300 : 54,300 58,350 62,350 66,400
MODERATE 42,250 48,300 54,300 60,350 65,200 70,000 74,850 79,650
How To Determine Affordable Rents Or Sales Prices
To determine affordable rents or sales prices, follow these three steps: 1) find the "income
group" in Table 1, based on the number or persons in the household and gross annual household
income; 2) determine the number of bedrooms in the dwelling to be bought, rented or sold; and
3) Use Table 2 to find the maximum affordable rent or sales price based on the income group and
number of bedrooms. When the number of persons in the household is not known, the City's
affordability standards for both rent and sales prices assume the following household sizes
corresponding to the number of bedrooms in the dwelling:
• Studio unit: use the income limit for one-person household.
• One-bedroom unit: use the income limit for a two-person household.
• Two-bedroom unit: use the income limit for a three-person household.
• Three-bedroom unit: use the average of limits for four and five-person households.
• Four-bedroom unit: use the income limit for a six-person household
Affordable Rent Limits
The maximum monthly rents, including costs of utilities, to qualify as affordable housing are
listed in Table 2. For example, the maximum monthly rent cost for a two-bedroom dwelling
which is affordable to a lower-income household can be found in Table 2 by reading across the
row labeled "Lower, Maximum Monthly Rent" and then finding $679 under the column heading
"2-Bedroom." Rent'limits are based on formulas set by state law and are computed as follows:
• For very-low income households: Affordable monthly rents shall not exceed 30% of 50%
of the annual median County household income for the number of persons expected to reside
in the unit, divided by 12, and adjusted for household/unit size (Health & Safety Code
50105).
• For lower-income households: Affordable monthly rents shall not exceed 30% of 60% of
annual median County household income divided by 12, and adjusted for household/unit size
(H&S Code 50079.5).
Rev.3/02
J
2002 Affordable Housing Standards
Page 3
• For moderate-income households: Affordable monthly rents shall not exceed 35% of
110% of the annual median County household income divided by 12, and adjusted for
household/unit size (H&S Code 50093).
Affordable Sales Prices
The maximum sales prices for affordable housing are based on a formula that accounts for what a
typical very-low income, low-income or moderate-income household can afford to pay for
housing, following HUD guidelines. Sales price limits are determined by multiplying the annual
income limit of the income group, adjusted for household size, by 2.5 for very-low and lower
income households, and by 3 for moderate income households. For example, the maximum sales
price for a 2-bedroom dwelling would be 2.5 X $36,200 = $90,500 for a three-person, lower-
income household; and 3 X $54,300 = $162,900 for a three-person, moderate-income household.
TABLE 2: 2002 RENT/SALES AFFORDABILITY STANDARDS
INCOME DWELLING SIZE
GROUP TENURE
STUDIO I-BDRM 2-BDRM 3-BDRM 4-BDRM
[MODERATE
RY LOW MAXIMUM MONTHLY $440 $604 $566 $654 $729
RENT
MAXIMUM SALES $44,000 $50,250 $56,675 $65,375 $72,875
PRICE
LOWER MAXIMUM MONTHLY $528 $604 $679 $785 $875
RENT
MAXIMUM SALES $70,375 $80,500 $90,500 $104,625 $116,750
PRICE
MAXIMUM MONTHLY $1,129 $1,291 $1,452 $1,678 $1,872
RENT
MAXIMUM SALES $126,750 $144,900 $162,900 $188,325 $210,000
PRICE
Maximum rent shall include a reasonable allowance for utilities paid directly by tenant (gas,
electricity, water, sewer, trash collection), but not cable TV or telephone. Sales prices may
exceed these amounts only if the City determines that the down payment, plus buyer's closing
costs and monthly payments (PITI) excluding utilities over the life of the financing, provide a
level of affordability equivalent to the maximum sales price financed at prevailing market terms.
Rev.3/02
2002 Affordable Housing Standards
Page 4
Long-term Affordability
Rental housing affordability is maintained through recorded agreements between a property
owner and the City, its Housing Authority, or another housing provider approved by the City.
These agreements shall specify: a) the maximum rents based on the same formula which
established initial rent levels as a condition of City approval; b) the term for which rental units
must remain affordable; and c) terms under which affordability is maintained after sale or
transfer of the property. By City ordinance, affordable dwelling units must remain affordable for
a minimum of 30 years, or as otherwise required by State law.
There are two different approaches to maintaining long-term affordability for owner-occupied
units: 1) the property owner agrees to maintain the designated dwelling unit as affordable for at
least 30 years; or 2) the property owner agrees to participate in a "shared equity purchase
program" as described in the City's Inclusionary Housing Requirement. The decision on which
approach to use is up to the affordable housing developer or buyer. Under the long-term
affordability program, the housing must remain affordable for at least 30 years from the
original date of sale or rental. Affordability terms are secured by a promissory note and deed of
trust, recorded on the property prior to or concurrent with the initial occupancy (for rental units)
or sale of the property. The promissory note is based on the monetary difference between the
initial purchase price and the initial appraised value as an "affordability loan" or "silent second"
payable to the City. The loan accrues interest at a rate set by the City when the note is executed,
amortized over 30 years. Monthly payments (principal plus interest) on the affordability loan are
typically waived as long as eligible residents continue to own and reside in the property. Upon
sale, transfer, gift or inheritance of the property, the City, its Housing Authority, or a non-profit
agency approved by the City, shall have first right of refusal to purchase the property at its
current appraised value. The consideration for the City's first right of refusal shall consist of 1
percent of the remaining affordable loan balance. The balance of the City's loan, after deducting
the I% first right of refusal cost, shall be credited toward the purchase price if the City, its
Housing Authority or non-profit agency chooses to exercise its purchase option.
Under the equity-sharing program, the buyer of an affordable dwelling enters into an
agreement with the city guaranteeing affordability for at least 6 years after the initial date of sale.
Upon resale of the property, the agreement ensures that the City's equity share returns to the City
for use in other affordable housing developments. The City's equity share is based on the
difference between the property's market value and the actual price paid by the homeowner,
divided by the market value, or the amount of subsidy provided by the city, divided by the
property's market value. Affordable units sold before the sixth year are subject to an additional
"Equity Recapture Fee" ranging from 25 to 100 percent of the property's built up equity.
jM housing/affordablehousingstandards2002 Rev.3/02