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Home My WebLink About10/04/2011, C2 - REMOVAL OF AN AFFORDABLE HOUSING DEED RESTRICTION FOR CITY-OWNED PROPERTY LOCATED AT 3591 SACRAMENT J C�, council MR��o/O j, acEnaa RepoiA ' "°° CITY OF SAN LUIS OBISPO FROM: Kim Murry, Acting Community Development Director Prepared By: Tyler Corey, Housing Programs Manager SUBJECT: REMOVAL OF AN AFFORDABLE HOUSING DEED RESTRICTION FOR CITY-OWNED PROPERTY LOCATED AT 3591 SACRAMENTO DRIVE,#53. RECOMMENDATION Adopt a resolution to authorize the removal of an affordable housing deed restriction for City- owned property located at 3591 Sacramento Drive, #53. DISCUSSION Background The City currently owns an affordable housing unit located on 3591 Sacramento Drive that has been for-sale since April 2011. The City originally held a Deed of Trust to secure long-term affordability of the unit. This property was purchased in July 2009 to prevent foreclosure and bank sale of the unit at market price. The City's deed restriction did not prevent the first lien holder from selling the home at market price in the event of foreclosure. In order to prevent loss of the deed restricted unit, Council approved the use of the Affordable Housing Fund to purchase the property at the 2009 affordable sales price ($309,225), and sell it to an eligible buyer at the same price as soon as possible. The home is a three-bedroom, attached condominium deed restricted at the moderate income level. On November 16, 2010, Council authorized sale of the unit to an eligible household (Attachment 2). At this time, the property was being rented to a qualified household that expressed interest in purchasing the unit. Ultimately, the tenant's financial situation precluded the transaction from occurring and the property has been vacant since February 2011. Steve Delmartini with San Luis Obispo Realty was chosen to represent the City during the transaction process. According to Mr. Delmartini, there has been significant interest in the property over the past several months; however, none of the prospective buyers qualified as eligible households under the City's affordable housing program due to their income and/or assets exceeding program requirements. EVALUATION Reasons for Removing the Deed Restriction The Council's approval of an emergency foreclosure prevention program was intended to retain the unit as part of the City's affordable housing inventory by purchasing the unit until sale to an C2-1 Council Agenda Report October 4,2011 Page 2 eligible household could be finalized. Long-term City ownership of affordable housing is not consistent with the goals of the City's Affordable Housing Program and involves substantial costs associated with staff time, maintenance responsibilities and Homeowner's Association dues. While rental income from the property initially offset these costs, the City's affordable housing program does not have the resources to manage the property over the long term. The property has been on the market since April 2011 and the price has been lowered twice and is currently offered at $279,000, which is approximately $30,000 to $40,000 below market value. Based on the City's affordability standards, the restricted sales price of the unit is $325,075, which is currently at or above market price. Since there are not eligible buyers at this price point, the property is being offered at $279,000. If the property sold at the current asking price to an income eligible buyer, the net loss to the Affordable Housing Fund could be as much as $35,000 depending on transaction costs, but the affordability of the unit would be maintained. With the current state of the housing market, some of the City's inclusionary housing units (moderate income attached condominiums) are not as attractive to buyers as they once were because the restricted sales price is at or above market price and prospects for selling the unit with a deed restriction are not good given the lack of offers from eligible buyers. Removal of the deed restriction would allow the property to be sold at market price, and would allow the Affordable Housing Fund to fully recover its costs to date, potentially with a small gain. According to Mr. Delmartini, units #38 & #40 in the development have recently sold for $309,000 and $320,000, respectively. Both of these units are similar three-bedroom condominiums that had multiple offers and sold over asking price. Mr. Delmartini believes the subject property would sell quickly without the deed restriction at the upper end of this price range, if not more, given its condition and amenities. Use of Proceeds from Property Sale Selling the property at market price would increase the funds that would go back to the Affordable Housing Fund to go towards other affordable housing projects that directly implement General Plan policies and programs. If the property sold at market price, the additional $30,000 to $40,000 over the current asking price would subsidize the development of an additional affordable housing unit at the low to extremely-low income categories providing a greater public benefit and more effective use of Affordable Housing Fund monies. In addition, it would also fully reimburse the City's investment holding ($309,225) in the property. CONCURRENCES The Planning Commission reviewed the disposal of the City-owned affordable housing property for General Plan conformity on October 27, 2010. The Commission found the proposed property sale to be in conformance with the General Plan. C2-2 Council Agenda Report October 4,2011 Page 3 FISCAL IMPACT Council authorized the use of $309,225 from the Affordable Housing Fund to purchase the property on a temporary basis. Proceeds from the property sale will refund the Affordable Housing Fund and allow money to go towards other affordable housing projects. The sale will have no impact on the General Fund. Transaction costs will be covered by Affordable Housing Fund monies.. ALTERNATIVES 1. Council may deny the proposal to remove the affordable housing deed restriction on the property. Action denying the proposal should include the basis for denial. Staff does not recommend this alternative because the property has been on the market since April 2011 and the City has not received any offers to date. In addition, the City is incurring monthly Homeowner's Association dues and property maintenance and utility costs that could go towards other affordable housing projects. 2. Council may lower the asking price of the property to $249,000 to attract a larger pool of potential eligible buyers. Staff does not recommend this alternative because sale of the unit at this price is approximately $70,000 below market value and would result in a loss to the Affordable Housing Fund of approximately $65,000. In addition, there is still no guarantee that there will be buyers for the unit at this price point. 3. Council may continue action, if more information is needed. Direction should be given to staff. ATTACHMENTS 1. Vicinity map 2. Council Resolution No. 10236A (2010 Series) 3. Council Resolution TACommunity Development\Afrordable Housing\GPC 110-10 CC Report(Deed Removal)2.doc C2-3 - Attachment 1 GS s9q� oe 3591 Sacramento#53] � geo ate P 0 VICINITY MAP 3591 SACRAMENTO #53 A Attachment 2 RESOLUTION NO. 10236A(2010 Series) A RESOLUTION OF THE CITY OF SAN LUIS OBISPO AUTHORIZING THE DISPOSAL OF THREE CITY-OWNED AFFORDABLE HOUSING PROPERTIESAND CITY MANAGER EXECUTION OF PROPERTY DISPOSAL DOCUMENTS (GPC 110-10) WHEREAS, the. Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,. California, on October 27, 2010, for the purpose of considering application GPC 110-10, a proposal to sell three City-owned affordable housing properties; and WHEREAS, California law requires that before the City acquires, or disposes of, real property, it must refer the item to the Planning Commission for a determination of conformity with the General Plan(Government Code Section 65402); and WHEREAS,the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on November 16,2010, for the purpose of considering Application GPC 110-10; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the City Council has duly considered all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW,THEREFORE,BE IT RESOLVED,by the City Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the Council makes the following findings: 1. Disposal of three City-owned affordable housing properties is consistent with General Plan goals and policies related to affordable housing because the proceeds from the sale will be used to support other affordable housing projects in the City and the sales will have no impact on the affordability of the units; which are encumbered by deed-restrictions to ensure long-term affordability. 2. The project is exempt from environmental review under Class 12, Section 15312(Surplus Government Property Sales),of the CEQA Guidelines. SECTION 2. Action. The City Council does hereby authorize the disposal of three City-owned affordable housing properties and City Manager execution of property disposal documents. R 10236A C2-5 Attachment 2 Resolution No. 10236A (2010 Series) Page 2 Upon motion of Vice Mayor Carter, seconded by Council Member Settle, and on the following vote: AYES: Council Members Ashbaugh, Marx and Settle, Vice Mayor Carter and Mayor Romero NOES: None ABSENT: None The foregoing resolution was passed and adopted this 16th day of November 2010. C y r JanMarx ATTEST: P Elaina Cano City Clerk APPROVED AS TO FORM: Stine Dietrick City Attorney C2-6 Attachment 3 RESOLUTION NO. XXXX-11 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO AUTHORIZING THE REMOVAL OF AN AFFORDABLE HOUSING DEED RESTRICTION FOR CITY- OWNED PROPERTY LOCATED AT 3591 SACRAMENTO DRIVE,#53 WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on November 16, 2010, for the purpose of considering application GPC 110-10, a proposal to sell three City-owned affordable housing properties; and WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on October 4, 2011, for the purpose of considering the removal of an affordable housing deed restriction for City-owned property located at 3591 Sacramento Drive, #53; and WHEREAS, the City Council has duly considered all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. BE IT RESOLVED, by the City Council of the City of San Luis Obispo as follows: Section 1. Findings. Based upon all the evidence, the Council makes the following findings: 1. Removal of an affordable housing deed restriction for City-owned property is consistent with General Plan goals and policies related to affordable housing because proceeds from the sale will be used to support other affordable housing projects. 2. Sale of the property at market price would subsidize the development of an additional affordable housing unit at the low to extremely-low income categories providing a greater public benefit and more effective use of Affordable Housing Fund monies. 3. The project is exempt from environmental review under Class 12, Section 15312 (Surplus Government Property Sales), of the CEQA Guidelines. Section 2. Action. The City Council does hereby authorize the removal of the affordable housing deed restriction for City-owned property located at 3591 Sacramento Drive, #53. C2-7 Attachment 3 Resolution No. (2011 Series) Page 2 Upon motion of seconded by and on the following vote: AYES: NOES: ABSENT: The foregoing resolution was passed and adopted this 4`h day of October 2011. Mayor Jan Marx ATTEST: Elaina Cano City Clerk APPROVED AS TO FORM: Christine Dietrick City Attorney C2-8