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Home My WebLink About12/04/2007, C5 - REQUEST FOR LOAN FORGIVENESS BY THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO (HASLO) FOR $6 council ° 124-07 ac,Enaa Report c t5a CITY OF SAN LUIS OBISPO FROM: John Mandeville, Director of Community Developt Prepared By: Peter Brown,Housing Programs Manager,,`06 SUBJECT: REQUEST FOR LOAN FORGIVENESS BY THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO (HASLO)FOR $600,000 FROM THE CITY'S AFFORDABLE HOUSING FUND AND A REALLOCATION OF$109,000 FROM N. CHORRO TO HUMBERT STREET MOYLAN TERRACE PROJECT. CAO RECOMMENDATION 1. Determine that the Housing Authority's request to convert the $600,000 Affordable Housing Fund loan to a grant meets City Affordable Housing Fund award criteria set by previous Council action. 2. Determine that the $109,900 in Affordable Housing Funds previously allocated to the Housing Authority for the development of 225 North Chorro should be shifted to the Humbert Street Moylan Terrace project, bringing the City's total contribution to $709,900. 3. Authorize the CAO to execute an agreement with the Housing Authority to convert the $600,000 loan to a grant and to re-assign the $109,900 previously awarded to the N. Chorro property development to the Humbert Street development. 4. Determine that HASLO's request for the immediate abandonment of Fredericks Street is premature and should be considered separately after discussion and analysis by the Public Works Department, once project development approvals have been received. DISCUSSION Established in 1999, the Affordable Housing Fund (AHF) implements the Inclusionary Housing Program and is funded by the payment of in-lieu affordable housing fees. Ordinance 1438 which established the fund describes it as a "fund 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." The current status of the Affordable Housing Fund is included in Attachment 1, including annual collections and expenditures by project recipient. This request by the Housing Authority does not impact the current available balance for other projects since the two funding amounts are existing allocations to HASLO. However, if the original loan is forgiven, the City would no longer anticipate being paid back the $600,000 previously agreed to by the Housing Authority. e5_1 A Housing Authority Request-Affordable Housing Fund Page 2 Affordable Housing Fund Balance As reflected in Attachment ly The net available balance in the AHF — after adjusting for the $600,000 payment to the Housing Authority (whether accounted for as a grant or long-term loan) —is $2.4 million. Use of Affordable Housing Funds The AHF, the first such fund established in San Luis Obispo County, is relatively unfettered by the "strings" associated with State and Federal funding, making it exceptionally flexible and valuable for meeting local housing needs. Projects receiving City funds must meet State law regarding prevailing wage requirements, and this means developers of most assisted affordable housing developments must pay prevailing wages. Since AHF can be allocated at Council's sole discretion, the process is simple, direct, and efficient; without the long lead times associated with multi-agency grants. AHF funds are the City's most direct financial tool to provide funding assistance for the purchase,rehabilitation or construction of affordable housing. Because the funds have been collected "in-lieu" from developers who chose to pay a fee instead of actually building required affordable housing, it is essential that Council allocate funds in a way that maximizes public benefits while considering both housing needs and opportunities. Council funding decisions must be guided by consistency, fairness, and reasonableness, and to assist that effort, Council adopted the following criteria in Resolution 9263 (2001 Series) when considering Affordable Housing Fund requests: 1. Eligibility. Use of the Affordable Housing Fund will increase or improve affordable housing and promote General Plan policies regarding housing and related community goals. 2. Need. There exists a substantial and overarching need for the type of housing to be assisted. 3. Suitability. The project to be assisted is appropriate for its location, both in terms of land use and design. 4. Urgency. There exists an urgent or overarching need for the type of housing to be assisted. 5. Financial Effectiveness. But for the requested assistance, the project would not be economically feasible; or AHF funding`leverages" significant additional funding from other sources. 6. Readiness..The project has all necessary City approvals and is ready to proceed. A funding request may not meet all of these criteria, or may only.partially meet one or more criteria. This is, by nature, a subjective process in which the criteria provide a way to compare requests against City housing objectives and other practical considerations. Requests that meet most or all of these criteria are more likely to maximize public benefit and merit City support. Even if a request appears to meet these criteria, Council may still opt not to fund a particular request or to fund only a portion of the request. Council may instead choose to "save up" in-lieu fees to wield a greater funding effect on a single large, future housing development or to offer a e,5 � i Housing Authority Request—Affordable Housing Fund Page 3 significant incentive to encourage a specific type of affordable housing. In the analysis set forth in the Funding Request section below, each of the six funding criteria are utilized in evaluating HASLO's request. Background The 4.27 acre site, long known as the "Humbert Street" property, is located at 851 Humbert Street, between the railroad and South Broad Street. The previous project proposed for this location was a cooperative housing development (shared living facilities that are cooperatively owned and maintained — unlike individually owned condominiums). It was primarily geared toward low income persons. After seeking and failing to receive several financial subsidies, including tax-credit financing,the Housing Authority determined that the subsidy needed was too great and that the development of the site as originally envisioned was not economically feasible. Currently, HASLO is considering a new proposal involving for-sale, condominiums known as "Moylan Terrace." While some of these units are designated for very low, low and moderate income residents, most (78%) are for a "workforce" income category (earning between 120%- 160% of the area median). While the City does recognize a need for housing at this income level, it does not yet have an affordability designation for"workforce." Staff previously proposed that the $600,000 be disbursed as a loan for the cooperative housing project. Loan terms were to include zero percent interest and the possibility that the City Council could forgive the loan during the five-year pre-development time period. Structuring this as a loan was originally thought to replenish the AHF for other affordable housing projects in the future, however primarily due to significant commercial development and builders choosing to pay in lieu fees rather than provide affordable housing on-site (fees are set low enough as to discourage providing housing on-site), the fund is robust. The prior loan also recognized the delayed delivery (5 years) of affordable housing with this project. The $600,000 of AHF funds would be used for soft costs/planning/architecture, etc., not construction of housing units. The reason why this request was not originally in the form of a grant is that a grant would be more appropriate if this project was approved and ready to proceed. The $109,900 in Affordable Housing Funds designated for the N. Chorro Street were to accompany a CDBG grant of $190,000 for site acquisition and predevelopment costs for a sixteen unit low income housing project at 225 N. Chorro. While both sets of funds were allocated to the HASLO project, after further analysis, it became apparent the site constraints of a small lot, lack of other funding secured by HASLO, and rising land and construction costs all came together to make that project infeasible. HASLO had no other option but to abandon the development plans. In early 2007, the $190,000 in CDBG funds were reallocated to an existing project that was able to meet federal timelines for readiness and expenditure (City ADA Curb Ramps) and the $109,900 in Affordable Housing Funds are still presently designated for a project on N. Chorro that is no longer viable. That site is being proposed for twelve market rate condominiums. Previously designated funds may be reallocated to a viable HASLO project such as Moylan Terraces. Cs'-3 Housing Authority Request-Affordable Housing Fund Page 4 Funding Request for Moylan Terrace The attached letter from the Housing Authority (Attachment 2) outlines their funding request, short proforma for development costs, and timing of project implementation. To summarize, the Housing Authority is requesting three things: 1. That the $600,000 previously allocated as a loan to assist in the acquisition of a site fora cooperative housing project be converted to a grant for a housing condominium project with 22% of the units "affordable"by city standards; 2. That the AHF previously awarded to HASLO for property acquisition of a site on N. Chorro (the $109,900 in funds were allocated but were not disbursed for that project) be re-assigned to the Humbert Street Moylan Ten-ace project; and 3. That HASLO be allowed to proceed with the abandonment of Frederick Street. Since the first two requests relate to using affordable housing funds, those are assessed here..At the conclusion of the section is the discussion on the Frederick Street abandonment. Elizibility and Need: The Housing Authority is proposing a new project that involves development of 80 condominiums for sale to families within a range of income categories (2 very low income, 10 low income, 6 moderate income and 62 "workforce." housing units). One concern is that 78% these units are designed for sale at a "workforce" housing level of affordability—for households earning between 120% and 160% of county median income. While the City will likely be reviewing its inclusionary housing program to consider, among other aspects of the program, the addition of a "workforce" category, that evaluation has yet to occur and hence this category is not currently identified as "affordable" in existing City ordinances. However, for the purposes of eligibility, the case can be made that $709,900 is eligible for "affordable housing" since the total project costs are about $28,000,000. With 22% of the units proposed meeting City standards for affordable housing, this request amounts to about 2.5% of the total project costs. A condominium housing project of 80 units geared primarily toward the workforce income category is a different kind of development for the Housing Authority and for the City's Affordable Housing Fund. In the past, AHF monies have been used for the benefit of lower income households. However, there is a need for "workforce" affordable housing in San Luis Obispo. At a median price of over$500,000,only 12% of County households can afford to buy a home. (City residents face an even more daunting hurdle to homeownership as the City median sales price exceeds that of the County as a whole.) The need is overarching and urgent as called for in AHF funding criteria # 2 and #4. The County of San Luis Obispo is considering a "workforce" housing category in the current draft inclusionary housing ordinance and the Housing Trust Fund recognizes this category by providing loans to projects at this income level. Housing Element Consistency: In light of AHF funding criteria #1 (Eligibility), the following Housing Element programs show how the project will "increase affordable housing and promote General Plan policies regarding housing:" Housing Authority Request—Affordable Housing Fund Page 5 Program 6.3.7 Consider amendments to the General Plan to rezone commercial areas for residential use and promote higher density, infill housing. The program goes on to list 7 specific areas to be considered for possible rezoning — area "a" is the Little Italy district and portions of the Broad Street corridor of which the subject site is specifically included in the map exhibit(see Attachment 3). Program 63.9 Balance City efforts to focus as much on infill and densification within City limits as on annexation of new residential land. The proposed project for a relatively dense housing is a perfect example of taking advantage of infill and densification sites within City limits, and will provide a needed residential component of "revitalization" of the Broad Street Corridor. Program 6.3.10 Seek opportunities with other public agencies and public utilities to identify, assemble, develop, redevelop, and recycle surplus land for housing. This is a golden opportunity to work with the Housing Authority and Union Pacific Railroad to obtain additional housing in the Broad Street corridor. Site Suitability and Urgency: A General Plan Amendment/Zone Change to R-3 has been approved which reflects the Council's determination that the site is suitable for housing development. The site is adjacent to the Villa Rosa condominium development. Housing in this location would be compatible with and carry out some of the residential and mixed-use land use patterns envisioned in the South Broad Street Corridor Plan. Further support for housing in this location is discussed below under Housing Element policies. HASLO is making the case that urgency is a major consideration for loan forgiveness and reallocation of funds. They are in a critical phase of development, planning and securing financing that without the designation of Affordable Housing Funds to the Humbert Street "Moylan Terrace" project,the housing development could be delayed indefinitely. Financial Effectiveness: The allocation of City funds to the project will be critical for HASLO to move forward. While the current request will not directly leverage other fund sources, it will put HASLO in the position of better being able to secure critical financing for the project. Without lender approval of project worthiness, HASLO can not continue to develop plans for the site. As planned,the project will eventually leverage multiple funding sources. Readiness: The project proposed by HASLO has yet to be submitted and reviewed through the public hearing process. While the Zone change has been approved to allow residential development of the property, the concept plan has changed from a proposal involving cooperative housing and apartments affordable to low income families, to a condominium development primarily targeted to "workforce" housing and construction of HASLO's main office building. This new proposal will require public hearings through the Architectural Review Commission, Planning Commission, and City Council. HASLO Offices are currently proposed in lieu of the cooperative housing. If Council supports the funding request, funding agreements should specifically limit use of City funds for design and construction of the dwellings and not offices because the ordinance establishing the use of the i O Housing Authority Request—Affordable Housing Fund Page 6 City's affordable housing funds explicitly requires that the funds be used"exclusively to increase and improve the supply of affordable housing" Using the funds for development of HASLO offices would contradict the ordinance. As a financing partner, the City can have input early in the process on design and site development issues. This opportunity is timely in light of the recent efforts associated with development of the South Broad Street Corridor Plan. The request does not meet the readiness criteria in that the project does not have all of the necessary approvals and is not ready to proceed, however, staff is supportive of the funding change in order to assist HASLO in showing good faith with the private lender that is investing in the community at this location. Frederick Street Abandonment Request HASLO has informally asked about the City's potential abandonment of Victoria Street through the site and in this request, has specifically asked that Fredericks Street be abandoned at this time. Staff informed HASLO that at present, a Victoria Street through- connection to Lawrence is critical to the circulation and redevelopment of the South Broad Street Corridor. Staff recommends that the Frederick Street abandonment be considered at the time a complete project has been submitted for evaluation and has preliminary approvals. It is pre-mature to consider this request at this time, however, unlike Victoria Street, there is no immediate .concern with an eventual Frederick Street abandonment. Summary The HASLO request for Moylan Terrace meets all of the findings"for Affordable Housing Fund allocation, with the exception of Readiness, and a strong case in Urgency and Financial Effectiveness. Although, an application for the project has not been submitted nor received its land use approvals (funding criteria #6 - Readiness), staff believes the request merits continued funding to assist with the soft costs associated with development of a successful project. The Housing Authority's organizational framework of developing and managing housing developments will be instrumental to the success of the project. Once complete, this project will provide much needed housing in the community and provide a housing alternative to a sector of the community that currently is not addressed. To require re-payment of the $709,900 at this time would make it extremely difficult for HASLO to obtain funding commitments during the pre-development stage when financing needs are critical to move the project forward. FISCAL RvWACT AHF funds have already been assigned to the project and are derived from the Inclusionary Housing in-lieu fees and not part of the General Fund. Housing Authority Request—Affordable Housing Fund Page 7 ALTERNATIVES 1. Deny the request for $600,000 from the AHF as a grant rather than a loan and deny the reallocation of the $109,900 from the North Chorro project to the Moylan Terrace project on Humbert Street. The City has traditionally allocated AHF funds as grants, however, staff from both HASLO and the City previously agreed to a loan for this site. The City can require that HASLO repay the loan on the current schedule or with an extended pay back period The City can also require that the allocation of funds toward North Chorro be reallocated to another project. This option is not recommended because it would severely limit HASLO's ability to secure construction loan approval and would significantly delay the project. 2. Consider CDBG (Community Development Block Grant) funds instead of the Affordable Housing Fund. CDBG funds have been awarded quite successfully by the City for property acquisition for affordable housing developments. In this case, however, the project would not qualify for use of CDBG funds. CDBG funds are for the benefit of lower income residents defined as "at or below 80% of the County median income." The proposed housing project is geared toward moderate income and workforce households at incomes from 80% to up to 160%of the County median. In addition, project funding is needed in December to secure loan terms and it would not be possible to provide CDBG funding in that timeframe. 3. Fund the request at a lesser amount. The $709,900 amount requested was chosen by staff and the Housing Authority for both pragmatic and economic feasibility reasons for the original cohousing project. The City has already committed both the $600,000 and the $109,900 to the Housing Authority. The amount is large enough to make a significant difference in Housing Authority's funding picture, while not impacting the current available balance of$2.4 million. Funding the request at a lesser amount would increase the "gap" in financing and jeopardize the feasibility of the project. 4. Deny the funding request all together. Staff does not support this approach, since it would undermine the City's efforts to take strong, innovative steps to address affordable housing needs and to continue working closely with the Housing Authority. Attachments: Attachment 1 -Affordable Housing Fund Status, 6-30-07. Attachment 2-Letter from Housing Authority requesting funds. Attachment 3-Vicinity Map. D-Pbn/pbrowa4MLD CCRpaHFRNHumben_fagive loan Attachment ent I Fiscal Status of Affordable Housing Fund Revenues,Expenditures and Changes in Fund Balance Revenues Expenditures Fund Balance Fiscal Year In-Lieu Fees Interest Total Note 3 Be inning_ _ Ending 2000-01 (Note 1) 193,700 8,200 201,900 201,900 2001-02 464,900 20,000 484,900 201,900 686,800 2002-03 747,800 28,300 776,100 (215,000) 686,800 1,247,900 2003-04 60,500 8,500 69,000 (30,000) 1,247,900 1,286,900 2004-05 323,300 32,500 355,800 (30,000) 1,286,900 1,612,700 2005-06 1,863,700 68,500 1,932,200 1,612,700 3,544,900 2006-07 1 627,200 160,500 787,700 530,000 3,544,900 3,802,600 Cumulative Total $4,281,100 $326,500 $4,607,600 $805,000 $3,802,600 Commitments No interest loan to Housing Authority for Humbert project (600,000) Laurel Creek(Tumbling Waters) project to provide match for BEGIN funds (400,000) First Time Homebuyer program to provide match for HOME funds (230,071) Housing Authority, North Chorro Project (109,900) Operating Support: SLO County Housing Trust Fund Second year, to be paid in 2007-08 30,000 Total Commitments 1,369,971 Net Available for New Programs at November 20, 2007 $2,432,629 NOTES A jt�C 1. 2000-01 is the first year that in-lieu fees were received. 3. Expenditure Summary To-Date PurposeYear 2002-03 Judson Terrace Lodge 215;000 2003-04 Operating Support: SLO County Housing Trust Fund 30,000 2004-05 Operating Support: SLO County Housing Trust Fund 30,000 2006-07 People's Self-Help Housing: Villas at South Higuera 500,000 2006-07 Operating Support: SLO County Housing Trust Fund 30,000 First Year of Two-Year Commitment Total $805;000 jay, h !t Q 2LO !.. �. OORTJMT� Housing Authority 487 Leff Street Post Office Box 1289 San Luis Obispo CA 93406-1289 of the City of (805) 543-4478 fax (805) 543-4992 San Luis Obispo Executive Director-secretary Carol Hatley November 15, 2007 Peter Brown Program Housing Manager Community Development Department 919 Palm Street San Luis Obispo, Ca 93401 Re: Request for affordable housing funds Dear Peter, ,As you are aware,the Housing Authority San Luis Obispo (HASLO) has an exciting new affordable project that will be coming before the City of San Luis Obispo for approval during the next year. This 80 unit affordable housing project is known as Moylan Terrace and is located on Humbert Avenue between Francis Avenue and Lawrence Drive. Originally HASLO purchased the property by obtaining an acquisition loan with a local bank, contributed $100,000 of their funds and used$600,000 in Inclusionary funds that were loaned from the City of San Luis Obispo. HASLO is now ready to pursue . entitlements and construct this affordable housing project. This project has been designed to maximize density,while being environmentally sensitive. The project will utilize as many green products and building methods during construction that are feasible, as well as the use of energy efficient products. These will be important aspects for the community,but also to keep ongoing costs to the homeowners reasonable. As currently presented in the business plan (attached) this project will be 100% affordable and will offer the following affordable unit mix: 2.5% Very Low Income (2 Units) 12.5% Low Income (10 units) 7.5% Moderate Income (6 units) 77.5% Workforce Housing (62 units) s City of San Luis Obispo November i �'s t� ? November 15, 2007 Peter Brown Page two To make this project financially feasible HASLO is requesting that the City of San Luis Obispo restructure the existing$600,000 loan, to a $600,000 grant. This allows the lender adequate loan-to-value ratio to proceed with the loan that we will need to cover the upfront soft costs, i.e. architect, engineers,etc. In addition, HASLO is requesting that the remaining$109,000 that was previously allocated to the North Chorro project be reallocated to this project. Those funds will also be utilized for the costs that need to be incurred to move the project through the Architectural Review and Planning approvals. Overall,we are anticipating approximately$1.5 million in Inclusionary funding that will be needed. However, since we do not quite meet the city's "readiness to proceed" criteria for requesting these funds, the above will assist HASLO in moving the project forward with the lender until the criteria can be met. In the interim, it was felt critical to let the City Council know the extent of funds that will be needed overall to maintain the affordable nature of the project. We are willing to change the estimated income levels and/or funding request if it later appears that the funding will support sales of some of the units at a lower level. The last request is for final approval to proceed with the abandonment of Frederick street. This was previously approved by the City Council contingent on an approved project plan. Being able to proceed with the lot line adjustment and have the surveyor plot out boundaries,will also assist the lender in knowing that the land is actually approved to be part of the project. Attached is the estimated proforma and development timeline. We are being optimistic in the time period, as we are dedicated to working with the city and all the consultants in bringing this forth as an approvable plan, as well as one that the city and future homebuyers can be proud of. We will have preliminary drawings by the architect to present at the meeting. Thank you for your consideration and assistance in this matter. Best Regards, Carol Hatley Executive Director Housing Authority of the City of San Luis Obispo chatley@haslo.org ® I p. Attakoh Hent 2 bc tin o a, o o 'o O O O O O O O O O 'O O O O O O O O N g N N y O O O O i O N O p Op O O O O Lo In OG O ��ddpp�� vpp m M O O O C O N 0 0 ONO O O CCM M M N O (fin p N Lo rw O M M O O N O O to O 01 p > 00 N O tri O O eN r� O tri W O� O O DD KI N O � _ O7 M n OO �O Lo d' O � �--� N pp � cM O Lo 00 lfi �D p Nr N C �o Lor+ Lf) a% d' v T %0 r� N N Lo fV Ln rrti rK N N v v v v v H ER ffl O O O O I!] O O O O (V O O C OLO LO LO CD r+ a .7 r0-I N M M fA O O O O ON cn r~ r N N O L � C W �p ry N O 'o 4) Q\ N ^^y O C m (fl d O N O D00 y 77 N' O1 Q V aC j Q m ca, a V r O Z G W o v V O y .y� O > OJ V p W ftl u U d bz ^ t3 d G G G R. O t� Q. O O �" a� O O O < C •Or. . �+ CC >~ o yam, bO y U o v s ❑ 6 v S U V U a v ,n Lar. O anU" V a iG 0.i F. C C. Rr Aw F Q W c • e November 15, 2007 Attachment MOYLAN TERRACE ESTIMATED DEVELOPMENT TIMEFRAME 1. Architectural Review and Planning Approval Staff and the consultants plan to work diligently with city staff to minimize the amount of time needed in these phases. Initial meetings have discussed grading issues,public works concerns, street right-of-ways, density and unit designs. The attached proforma estimates only twelve months in planning from start to finish. 2. Construction phase Once a building permit is secured, a 24 month construction period is anticipated. Site grading and preparation will be critical to meeting this timeframe. Designs of each "auto court"will have four to five variances, in order to minimize the impact on construction efforts. 3. Sales of units The Housing Authority will start working with the city on marketing and preparing homebuyers during the whole phase. Optimally,we would like to have all buyers in place and ready to close occupancy as soon as the final certificate of occupancy is issued. This would include advising them on income requirements,potential downpayment assistance programs, loan options and cash needs for closing costs. This will all be performed concurrently with construction. Therefore,potential homeowners' can watch the construction, as well as be prepared to close upon completion, which will minimize the interest carrying costs. In total, the current proforma allows for a three year timeframe from start to finish. Contingent on the city's approval of the current request,the lender is prepared to move forward,the architect is working on preliminary designs,the civil engineer is analyzing the grading and soil issues, and thus,we are ready to move forward and make this a viable project for both the Housing Authority, the city and the numerous first-time homebuyers that can enjoy the end product. C.S'ia- 851 HUMBERT ® 004-951-015 r.. •`~ Attachment 3 •y1\• • t %X1. CITY OF SAN LUIS OBISPO The information contained in this database is intended for informational use only. This information is provided for the convenience of users,but GEODATA SERVICES Joes riot necessarily cdnstitute precise property ownership or legal descriptions of any property,and should not be relied upon as an official 955 MORRO STREET roperty record.The City of San Luis Obispo makes every effort to ensure the accuracy of this data;however,the accuracy of this material.is SAN LUIS OBISPO,CA 93401 of guaranteed and users assume responsibility for independent verification of any and all information contained herein prior to use or reliance pon such information for any official purpose.The City San Luis Obispo disclaims any responsibility or liability for any direct or indirect 805 781-7167 Jamages resulting from the use of this data. N �� 11/20/2007 11:08 J a f U J LU O Q W O m OOO��\OG� • ism t C: B� MITCHELL G n� O,p 9 LAWRENCE 0 WSJ CEJ RECEIVED DEC 0 4 2007 FILE MEETING AGENDA SLO CITY CLERK �' ° DA's' y 0 ITEM #�5 Qq Of SM Lll,l�S OB1$PQ Department of Community Development Planning Division DATE: December 4, 2007 p'COUNC7 ® Am [3 FIRE CH. E TO: City Council Members RAfifi6MY 13 PW DIR Ken Hampian, City Administrative Office MtAK/®RIO 0 POLICE CHF C� pEPT HEADS Er REC DIA [3'UTIL DIR FROM: John Mandeville, Director Community Development p-_ r3"c�o k BY: Peter Brown, Housing Programs Manager 13 Clea q'COUKC. SUBJECT: Affordable Housing Standards "Above Moderate" Data Tables Per Council Member Carter's request, staff has modified the Affordable Housing Standard tables to reflect possible rent/sales prices for the proposed "Workforce" category, which is typically defined as 120% to 160% of the county median income. This category is shown as "Above Moderate" in the tables below, but the terms here are synonymous. While the County is currently proposing such a category in their draft inclusionary ordinance and the Housing Trust Fund recognizes this income level as one that qualifies for assistance, the City's current Affordable Housing policies do not apply to this income range. The Council will have an opportunity to consider adding this income category during a future update of the City's inclusionary housing ordinance. The additional row in each of the tables below was prepared by extending the existing methodologies for current categories (Very Low, Low, and Moderate) to reflect the income and rent/sales prices that would be addressed by a category of 120%-160% of current county median. The final formula and numbers may be slightly different to reflect incomes at the time of adoption or potential changes in the formula calculations. TABLE 1: 2007 ANNUAL INCOME LIMITS $ %of INCOME NUMBER OF PERSONS IN HOUSEHOLD Median GROUP 1 2 3 4 5 6 7 8 <50% VERY LOW 22,450 25,700 28,900 32,100 34,650 37.250 39.800 42,350 <80% LOWER 35,950 41,100 46,200 51,350 55,450 59,550 63,650 67,800 MEDIAN 44,900 51,400 57,800 64,200 69,300 74,500 79,600 84,700 <120% MODERATE 53,900 61,600 69,300 77,000 83.200 89,300 95,500 101,600 <160% ABOVE 171,840 1;82,240 92,480 102,720�' 110,880 11 119,200'1 -7,360 135,520 Above Moderate Income=City Council Memo Page TABLE 2: 2007 RENT/SALES STANDARDS INCOME TENUREIF DWELLING SIZE GROUP Maximum VERY LOW Monthly Rent $561 $643 $723 $834 $931 Sales Price $67,350 $77.100 $86,700 $100.125 $111,750 Monthly Rent $674 $771 $867 $1,001 $1,118 LOWER Sales Price $107,850 $123,300 $138,600 $160,200 $178,650 MODERATE MonthlyRent $1,123 $1,285 $1,445 $1,669 $1,863 Sales Price $188,650 $215,600 $242,550 280 350 312.550 ABOVE I Monthly Rent $1,796 $2,056 $2,312 . _ $2,670_ __, $2,980 MODERATEI Sales Price $25L440 $287.840 $323,680 $359.520 $388.080 "entry"MARKET Sales Rate WA $270-$300$325-$410$450-$550 $600-$700 Market rate used here is based on December MLS listings in 93401 zip code Rent Caps exceed current market rates. ' RECEIVED DFC 0 3 2007 December 3, 2007 SLO CITY CLERK I am objecting to the forgiveness of the$600,000 loan to the Housing Authority in Consent Agenda Item 5 on tomorrow's meeting agenda. I have enclosed some reading material that I could not email. There is an article from August 2007 Wall Street Journal explaining the hazards of excessive condominium development. Another article about how rental vacancies were expected to continue to decline with the addition of Cal Poly housing, unfortunately you chose to negate this savings to working class renters by allowing several apartment complexes to convert to condominiums. Finally a copy of the County's Affordable Housing Standards. With the vast majority of the proposed condominiums at 851 Humbert Street selling in excess of$280,000 they will be out of reach of the vast majority of working class families. If the Housing Authority were to continue with the original plan of cooperative housing the converting of the loan to a grant would be appropriate but more condominiums, especially with the glut we have now, does not make sense. Terry Mohan 2416 Santa Clara San Luis Obispo, CA 93401 �G (805) 215-3333 CODNN yacDD Dw CAO ; FIN DIR I RED FILE ACAO FIRE CHI-= ATTORNEY PW Dh MEETING AGENDA CLERKVORIG POLICE CHF I DEPT HEADS Ve REC DIR DATESA//67 ITEM # C5 �', ---- 2 UTIL DIR � p_ Z / W45 ,3'Hq DIR Y P�'v SLO County News Blog: SLO Renial Vacancies Page 1 of 2 , �,- SLO COUNTY NEIVVS SLOG sic rental vacancies More rental openings reduce rents in city of San Luis Obispo. For the first time in years, it's better to be a renter in San Luis Obispo. Landlords, long spoiled in a tight market, have been in the mood to make a deal. Vacancy rates have risen as Cal Poly students moved onto campus and wealthier renters have taken advantage of low-interest rates to buy homes. Some landlords have been left scrambling. 'I am renting to people that I might not have before," said Jackie Turner, San Luis Property Management's general manager. She said she's more likely to accept renters with pets or less-than-perfect creditthan she was in the past. Mike McNamara, who runs McNamara Real Estate, expects to see other landlords doing a better job of keeping up properties to woo renters. The apartment vacancy rate in the city of San Luis Obispo rose to 5.22 percent in September 2004 --the most recent month for which figures were available -- from 3.61 percent a year before, according to a survey of property managers by the UCSB Economic Forecast Project In September 2002, apartment vacancies stood at 1.18 percent, according to the project's report. Now, apartments are said to stay open for months rather than weeks. And, as of September 2004 renters were paying about 5.4 percent less In San Luis Obispo than they did a year before, and 7.1 percent than September 2002. 'When people handme a notice that they are vacating, I have a panic attack," Turner said. Drops in average rents and jumps in vacancy rates haven't been as big in the rest of the county. Landlords there, economists said, simply aren't facing the same pressures as San Luis Obispo. The city is home to an 805-bed on-campus apartment complex that opened 18 months ago, and it has some of the county's priciest homes. Students quickly rented rooms in the new Cal Poly project. Neighborhood groups long begged Cal Poly to build more campus housing, arguing that families and students should be separated. But that wish, when granted, hit local landlords. -What you are looking at Is one big supply shock," said Larry Souza, chief economist for the California Apartment Association. 'The good news is it didn't drive the vacancy rates up to 8 percent.' Vacancy rates In the 5 percent range are generally a sign of a stable, healthy rental market, according to the UCS8 economic report. http://www.slopages.com/blog/2005/02/slo-rental-vacancies.asp 12/18/2006 SLU County News 13log: SLU Rental Vacancies Page 2 of 2 i 'For rent" signs aren't just staying up longer on cheap student housing, either. More expensive apartments are being passed over as well. Higher-income renters are borrowing from friends and family to buy into the county's sky-rocketing housing market, according to Dan Hamilton, LIC Santa Barbara director of economics. "The rental market has been soft relative to housing," he said, "because interest rates are so low. People on the high end are scraping together money to got into a condo." For landlords, fewer renters means changes to the way they do business. "I think you'll see existing owners keeping things up more because it is just more competitive," McNamara said. "It is a good thing, in a way,' Turner said. "It is good for renters. And it is good for owners to keep their property up.' The best part for renters, she said, could be the deals they can get right now. An apartment that would have rented at an average $975 a month in September 2003 could be rented for an average of$923 a month as of September 2004. "Places that used to go - for over$1,000 are now going for under,'Turner said. "Even with lower prices, things are staying on the market longer than they used to." While McNamara said he's always advertised open vacancies in the spring -- rather than waiting until students return to town at the end of the summer •- he expect, more landlords to follow suit this year. "I think in the past landlords were very spoiled," McNamara said. 'You always had your leases end In the summer and you didn't really do any marketing. You would put up a sign and be Inundated with calls." Both said they are responding more Quickly to residents' concerns,too. "We are very nice," Turner said. "We just have to be a little more accommodating." With 2,700 more dorm mons set to open at Cal Poly by 2008, economist Souza said the pressure on landlords won't ease up. "If everything hits in 2008, you are going to look at vacancy rates declining over the next few months; he said, "but as those come on line, you'll see the rate spike up again." "->-:c+ ra 1.?n: aid re p:erii sca n_h The Tribune, Leslie Griffy http://www.slopages.com/blog/2005/02/slo-rental-vacancies.asp 12/f8/2006 JLU County News Blog: SLU Kental Vacancies Page 2 of 2 "For rent" signs aren't just staying up longer on cheap student housing, either. More expensive apartments are being passed over as well. Higher-income renters are borrowing from friends and family to buy into the county's sky-rocketing housing market, according to Dan Hamilton, UC Santa Barbara director of economics. "The rentaf market has been soft relative to housing," he said, "because interest rates are so low. People on the hiqh end are scraping together money to get into a condo." For landlords, fewer renters means changes to the way they do business. "I think you'll see existing owners keeping things up more because it is just more competitive," McNamara said. "It is a good thing, in a way," Turner said. "It is good for renters. And it is good for owners to keep their property up." The best part for renters, she said, could be the deals they can get right now. An apartment that would have rented at an average$975 a month in September 2003 could be rented for an average of$923 a month as of September 2004. "Places that used to go for over $1,000 are now going for under,"Turner said. "Even with lower prices, things are staying on the market longer than they used to." While McNamara said he's always advertised open vacancies in the spring -- rather than waiting until students return to town at the end of the summer -- he expects more landlords to follow suit this year. "I think in the past landlords were very spoiled," McNamara said. "You always had your leases end In the summer and you didn't really do any marketing. You would put up a sign and be Inundated with calls." Both said they are responding more quickly to residents' concerns, too."We are very nice," Turner said. "We just have to be a little more accommodating." With 2,700 more dorm rooms set to open at Cal Poly by 2008, economist.Souza said the pressure on landlords won't ease up. 'If everything hits in 2008, you are going to look at vacancy rates declining over the next few months," he said, "but as those come on.line, you'll see the rate spike up again." The Tribune, Leslie Griffy http-//www.siopages.com/biag/2005/02/slo-rental-vacancies.asp 12/19/2006 Affordable Housing Standards - Inland Areas SAN LUIS OBISPO COUNTY DEPARTMENT OF PLANNING AND BUILDING County Government Center San Luis Obispo, California 93408 Telephone 805 7815601 This bulletin summarizes the county's affordable housing standards for non-coastal areas, including maximum household incomes, home purchase prices and rents. These standards are effective January 19, 2007. Income limits: The state defines family income groups as follows: "Extremely Low Income"is defined by Health and Safety Code Section 50106 as 30%of county median income; "Very Low Income"is defined by Health and Safety Code Section 50105 as 50% of county median income; "Lower Income" is defined by Health and Satety Code Section 50079.5 as 80%of county median income; "Moderate Income"is defined by Health and Safety Code Seciton 50093 as 120% of county median income; "Workforce"is defined by Title 22 of the County Code as 160% of county median income. Persons in Extremely Low Very Low Lower Income Median Inco Moderate Workforce FamilyIncome Income Income 1 $13,500 $22,450 $35,950 $44,900 $53,900 IL $71840 2 $15,400 $25,700 $41,100 $51,400 $61600 $82240 3 $17,350 $28,900 $46,200 $57,800 169,300 11 $9 2,484 1 4 $19,250 $32100 $51350 $64,200 C$77000 $102720 $20,800 $34650 $55450 1 $69,300 $83,200 $110,880 6 $22,350 $37,250 $59,550 $74,500 $89,300 $119,200 7-7 $23,850 $39,800 $63,650 $79,600 $95500 $127,360 $25,400 $42,350 67,800 $84,700 101,600 135520 Sample maximum sales prices: (see footnotes) Unit Size Extremely Low Very Low Lower Income Moderate Workforce Bedrooms Income Income Income Str1i]R$28,000 2,000 $49,000 $75,000 $153,000 $215,000 $58,000 88,8G0 $178.000 $249,000 2 1 $34,000 $68,000 $102,000 1 02,000 IL $282,000 3 11 $39,000 F $77,300 IL $115,000 11 $226,000 11 $315,000 IF-4 $44,000 $84,900 $126,000 $246,000 $341,000 Note 1: Homeowner association fee asuumed at$150 per month. Note 2: Mortgage financing assumed at 7.22%fixed rate for 30 years(per HSH Associates for week ending 08/17/07). Note 3: Prices shown are preliminary estimates and may be revised. Note 4: Actual sales price limits will be determined by the County on a case-by-case basis. Updated: 8222007 z3- -a6`ate WSJ'cm . . _ ently under stress. Whereas asingle- DEFA4ILTLINES family home builder generally con- structs units as orders come in,a condo developer builds all at once and hopes for the best,increasing the risk.So while Condo Troubles the speculative overhang of newly con- structed single-family homes may have Further Squeeze peakedin the full for earofethe Condo gluts across the coun- try starting to bit now.. Property Lenders With single-family homes,"you put up a couple of model homes and build Full Force of Glut Is Felt the rest as you get sales contracts."saYS James Haughey,director of research at As Buyers Back Out; Reed Construction Data in Norcross,Ga. But you have to build the entire...build- `More of er �the Iceberg-' ing before you can sell a single condo:' In 2006,the number of new condo- By A.IIt F RANGOS minium units completed jumped 145%to 102,800,from 41,900 in 2003,according to the U.S.Census Bureau.Last year was For the nation's real-estate lenders, the other shoe maybe about to drop:con- the highest level since 1985, when dominiums. 135,800 units were built.So far this year, Alreadyplaguedbyrisinghome loan 48,354�ts�ebeen built and another defaults and foreclosures among over- 72,000 are under construction,accord- ing to New York research firm Reis Inc. stretched consumers, major markets Downtown San Diego can expect across the country—including parts of Please turn to page A4 Florida, California and Washington, D.C.—are seeing rising foreclosures and bankruptcies of entire condo projects. The problems are emerging as some buyers who signed contracts to buy new condos two to three years ago,when con- struction was just starting,seek ways to back out as they encounter trouble get- ting financing in the suddenly dicey mortgage market.Falling prices are forc- ing appraisals down,so banks aren't will- ing to lend the full amounts that people committed to in the sales contract. "Closings that are scheduled to take place are not taking place,"says Marvin Moss,a North Miami'Beach real-estate attorney:He is siring several developers to help clients get out of contracts. The condo market,while tied to the housing market overall,behaves differ- 900di►t9 the Market New condominium units completed . .................:............_ . 2M% 12 M3 W 106 I ' t Commercial bank lending. ff forconddprojects " J i • 40.......... .._. _..... ...._: I I -- 2000 T1 02 9 04 105 D6, W° + soureec be'wu eur¢ao:iaesiyhe nnatraa: ' ,_ l 1 -. CL . tdos Adding to I nder S44 eze Continued frorn Page One condo builder that failed to convert a half-dozen 2,900 new units to arrive on the market in the next apartment complexes into condos in Florida The year,according to real-estate investment broker- company also blames the recent credit crunch for age Marcus&Millichap.HessamNadji,a managing its woes.In March 2006,Tarragon paid$54 million director at the Encino,Calif,firm,estimates it will for a 249-unit complex near Orlando.Tarragon re- take as long as 18 to 24 months for the most satu- named it Ballantrae and began renovations,hoping rated markets to buy up the glut of condo inven- to sell the garden apartments and townhome units tory—if the economy overall stays strong. as condos for around$300,000 apiece.But the mar- Miami is in worse shape:The city added 4,549 ket had turned, and buyers were nowhere to be condo units in 2006 and 3,276 so far this year.An- found.Meanwhile,many renters had left,leaving other 7,985 will be delivered by the end of the year, Tarragon to refill the complex to restart cash flow. with another 8,260 slated for 2008 to 2011,accord- At the time,Chief Executive William Friedman ing to Reis,for a grand total of 24,070 news units described the outcome as akin to"opening a bottle between 2006 and 201L of flat champagne."Tarragon made a half-dozen "More of the iceberg is being revealed,but we similar purchases and is in the process of selling haven't seen it all yet,"says Norman Radow,an At- most of its Florida assets.It took a$125 million lanta real-estate investor who works with lenders charge to its financial statements to reflect how to rescue distressed condo complexes. muchless it expects to get forthese properties d= Typically,condo developers are required to pay it paid for them. off construction loans shortly after construction is Triton,CBRE and Tarragon all declined to com- completed.But with sales stalled,more developers ment. are defaulting,creating headaches for banks and Left holding the bag are the banks and real-es- real-estate funds that financed the projects. - tate investment funds that lent money to people Delinquencies on condo-construction loans such as Farbod ZohourL an Atlanta developer who have already jumped to 4%from 1%over the past took out$300million inloansfor more than adozen year.That is after lending by commercial banks to projects in 2005 and 2006.Within a year,all were i condo projects ballooned to$3L3 billion in 2006 foreclosed or had filed for bankruptcy protection. from$8.4bd1ionin200%accordingtoForesightAn- In a sign of how widespread the condo frenzy alytics LLC,an Oakland,Calif,research firm.These was among lenders, Mr. Zohouri's financing figures don't include the large amounts flowing into sources ranged from tiny local banks to Lehman condos from hedge funds and investment banks. Brothers,which lent him$180 million for two 0r- One of the biggest condo lenders, Chicago's lando condo-conversion projects that flopped.Sev- Corus Bankshares,has begun to see its$3.7 billion eral commercial banks lent him moneyfor five sepa- portfolio of condo loans deteriorate in quality.The rate projects,despite his relatively small operation value of the bank's nonperforming assets has sky- and spotty track record,which included a settle- rocketed to to$242 million in the quarter ended ment with the federal government on mortgage- June 30 from$620,000 a year ago.Thebankcontin-' .-kickback allegations. ues to be profitable,and made three new condo Mr.ZohourL who goes by"Fred,"says he is"an loans worth$400 million,thoughit predicts darker honest person"who isworkinghardtogethisinves- , times are ahead."It wouldnot surprise us to see an tors moneyback He says because of possible legal even greater impact on earnings over the next sev- actions,he can't explain exactly what went wrong. eral quarters,or even years,depending on when Underlying the defaults was alooseningoflend- themarketimprove%"ChiefExecutiveRobert Glick- -frig standards.In the past,wary of the high risks man said in a note to shareholders. posed by condo sales,lenders such as commercial The failures so far have been concentrated banks would give money to condo projects with the among developers that bought properties at the understanding that if the condos duhft sell,the de- top of the market in late 2005 or early 2006.The veloper could rent them and still repay the loan worst collapses alsohave so farinvolvedcondo con-. That would limit the amountbanks would lend to a: versions Developer Triton Real Estate Partners of project,because the cash generated from renting Annapolis,Md,bought a Rockville,Md,complex units is slow and steady and can cover a smaller known as the Pavilion in November 2005 for$117 amount of debt than the amount generated from C million,with plans to pump inanother$30 million selling all units within ayear of completion,as most, to upgrade and sell off the units.There are 434' condo projects aim to do. units,so the average price it paid was$271,000 a But in the Latest boom,ahost of nonbank lend-' uniLT tonchangedthenametotheldontereyand ers began throwing cash at condo projects,allow-, Ir offered the one-to three-I edro6m iuiifs forire- ing developers topayprIces forland and buildings tween$300,000 and$500;000. such that they couldpay back the loans only if the = The sales didn't materialize andTriton faded to units sold at high prices pay its lender,CBRE Realty Finannmof Hartford, Mr. Radow, the Atlanta real-estate investor, Conn.,which.forgclosed on the poperty,in May. says troubles in the condo market stem from the With the sales market on tare rocks,the.lenderbad proliferation of new players in the real-estate fi=' to write down the project's vahieby$7.9 mullion, na ld world,many of whom never went through forringthecompanytorecorda$4.6mallionloss in badd dozenmaforsourcesom,tber merra' the second'quarter. The commercial property lender,incorporated as a real-estate uvestment nine debt,the riskiest—and pota tialyr most re- trust,has stopped making newinvestmemsS;idat, warding parts ofreal-estate finance.inPast five , most missed a$17 mMico-payment on a line of years hedge fimds,real-estate ftmds,prlvateegouy M&from Wacitmria Corp.It hopes to restart the and ccmmtmity banks aII ut Imo the act. sales program at the Monterey complex shortly. "4Vho are managlttg all the fimds?"MtRadow. Another casualty of the:condo bust is publicly" asks."Where did all the real-estate experts come traded.Tartagon Corp.,an apartment owner and from?"