HomeMy WebLinkAbout07/07/2009, C12 - ALLOCATE $325,000 FROM THE AFFORDABLE HOUSING FUND FOR THE PURCHASE OF AN AFFORDABLE HOUSING UNIT L i 1
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C I TY O F SAN LU I S O B I S P O
FROM: John Mandeville, Community Development Director
Prepared By: Michael Codron, Housing Programs Manager P46
SUBJECT: ALLOCATE $325,000 FROM THE AFFORDABLE HOUSING FUND FOR
THE PURCHASE OF AN AFFORDABLE HOUSING UNIT LOCATED ON
3591 SACRAMENTO DRIVE, UNIT #53, WITHIN THE BROAD STREET
MIXED USE PROJECT.
RECOMMENDATION
Approve the use of $325,000 from the Affordable Housing Fund to purchase an affordable
housing unit located on 3591 Sacramento Drive,Unit#53, and appropriate funds accordingly
Situation
On June 7, 2009, during a closed session meeting of the City Council to discuss real estate
negotiations, staff presented the Council with an opportunity to prevent the imminent foreclosure
of an existing affordable housing unit. The owners had not made payments in several months
and the City's efforts to assist in the sale of the unit to a new, income-eligible owner could not be
completed in time for a bank sale that was scheduled to occur on June 16, 2009.
As a result of the pending bank sale, the Council provided staff with the following direction to
ensure that the unit remains affordable:
1. Allocate a maximum of$325,000 towards a foreclosure prevention program to allow
the City to purchase and resell the inclusionary housing unit located on 3591
Sacramento Drive#53.
2. Authorize the City Manager to execute documents as required to implement this
purchase.
If the property had been sold at auction, the City would have lost the deed restrictions that were
obtained from the original developer at the time of construction, which provide for the long-term
affordability of the unit. However, based on the Council's direction, City staff was able to move
forward with the property acquisition. Escrow closed on Tuesday, June 16, 2009 and the City
now holds title to the unit.
Property Acquisition Cost
The property was purchased for a total of$309,225 plus $885.74 for closing costs, including the
escrow fee, taxes and HOA dues. The unit will be sold at the same price, $309,225 to an eligible,
moderate-income household. Closing costs for the sale are expected to be similar and will be
recovered through rental income on the unit until it is resold. Once the unit is resold, the
3591 Sacramento Drive,Unit#53 Page 2
proceeds from the sale, and all rental income derived in the interim, will be returned to the
Affordable Housing Fund. The entire process is expected to be cost neutral.
Why Step in to Prevent Foreclosure?
Staff recommended that the City Council take action to prevent foreclosure of the unit for three
reasons: (1)With each day the previous owners incurred more debt against the home because they
were not able to make payments; (2) if the unit had sold at the bank sale,the City would have lost
the affordable unit; and (3) there is a willing buyer who has agreed to occupy the home on a
rental basis until able to complete the purchase.
Next Steps—90-Day Rental Agreement and Resale
Now that the City owns the home, staff has prepared a rental agreement with a household that
hopes to move forward and purchase the unit. The household has been certified as a moderate-
income household, and has been pre-qualified for a loan. Under new Fannie Mae guidelines, the
resale of the home will take a minimum of 90 days. As discussed above, City staff expects the
rental income from the unit to cover all of the costs associated with temporary ownership of the
home.
Affordable Housing Fund Status
The current balance of the Affordable Housing Fund is $4,440,100. The City Council has
approved commitments of$2,801,414, leaving a balance of$1,636,686 available to allocate to
new projects. There is one pending proposal for $1 million from ROEM Corporation, which is
expected to be considered by the City Council in late July or early August. If the ROEM
proposal is approved,the net available for new programs would be$638,686.
The purchase price for the home was $309,225 and there was an additional $885.74 charged for
closing costs. Another escrow will be opened when the home is sold, and staff expects the
closing costs from the sale to be less than $2,000. Staff is requesting that the Council allocate a
maximum of$325,000 to the property to cover unexpected costs, such as maintenance items that
may arise while the City owns the home.
City staff expects to recoup the sales price of$309,225 in a three to six month timeframe through
resale of the unit. Once the unit is sold, the proceeds from the sale and all rental income from the
property will be returned to the Affordable Housing Fund. The entire process is expected to be
cost neutral.
FISCAL IMPACT
The recommended allocation would be paid out of the Affordable Housing Fund, which consists
of in-lieu fees collected under the City's Inclusionary Housing Ordinance. The fund may only be
used for projects that create or support affordable housing within the City of San Luis Obispo.
The project will have no impact on the General Fund.
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