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Item 12 Staff Report Adopt Resolution Amending Rules, Procedures and Criteria for the Town's Below Market Price Housing ProgramTOWN OF LOS GATOS COUNCIL AGENDA REPORT DATE: May 11, 1992 TO: MAYOR AND TOWN COU CIL FROM: TOWN MANAGER COUNCIL AGENDA DATE: 5-18-92 ITEM NO. 11 iqq g SUBJECT: ADOPT RESOLUTION AMENDING RULES, PROCEDURES AND CRITERIA FOR THE TOWN'S BELOW MARKET PRICE HOUSING PROGRAM RECOMMENDATION: Adopt the attached resolution amending rules, procedures and criteria for the Town's Below Market Price (BMP) Housing Program. BACKGROUND: The Town's General Plan contains an inclusionary zoning ordinance; the ordinance states that all new residential developments must sell a prescribed number of units at below market rates to low and moderate income households. If the units are rental units, they must be rented to very low and low income households at fair market rates. The resolution also provides for cases in which a payment of funds can be made to the Town in lieu of providing units; BMP in -lieu funds are used to further the Town's affordable housing goals including implementing the BMP Housing Program. The program includes 17 owner - occupied units and two rental units. Income guidelines used to determine eligibility are updated periodically by the Federal Government. These guidelines are then incorporated into the BMP resolution. The attached resolution includes the most recent income guidelines and discusses other recommended procedural revisions. DISCUSSION: The amended resolution contains the following revisions: Applicant Priority A point system is included to provide clearer ranking of applications. The current system places several households in a top category. The eventual buyer is then chosen at random through a lottery. For example, the current system places single heads of household in second position, the point system will provide applicants additional points if they work in the Town. Allocation of points spreads the ranking of applicants; this results in a clearer ranking and reduces the arbitrary element of the current system. PREPARED BY: Regina A. Fal Community RAF:dr CSD05:A:\CNCLRPTS\amend.bmp ATTACHMENT: Draft Resolution s Djrector DISTRIBUTION: See Page 2 for Distribution List 5/11/92 1:17 pm File # Reviewed by: 16...Attorney ClerFinance Treasurer COUNCIL ACTION/ACTION DIRECTED TO: PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION AMENDING RULES, PROCEDURES AND CRITERIA FOR THE TOWN'S BELOW MARKET PRICE HOUSING PROGRAM May 11, 1992 Loan Approval To sell units within six months, the resolution states that the highest ranked applicants must secure financing within two weeks after they have been notified of the ranking. The amended resolution clarifies the requirement: applicants must obtain pre -approval for a loan within one week and submit documentation of loan approval within four weeks of notification to purchase the unit. Applicants' inability to obtain financing for a mortgage loan has often slowed the sale of units. Deed restrictions placed on the property allow the Town six months to find a buyer and sell the unit. If the unit is not sold within six months, the owner's obligation to sell the unit at the below market price is eliminated. Closing Costs Closing costs, under the amended resolution, will be charged to the buyer and seller of the unit consistent with the units' previous sale/purchase. This clarifies the statement that costs shall "be shared by the buyer and seller." Leasing Purchased Units To clarify the policy on leasing purchased units, owners of BMP Housing units will not be allowed to lease, rent, or sublet their units for more than twelve months within a ten-year period. Rents The amended resolution limits rents to 30 percent of a household's income. The current resolution states that rents cannot exceed fair market rents established for State rental housing programs. The State subsidizes these rents; since the Town does not provide a subsidy, it is reasonable to require lower rents so that the units are, actually affordable. Exhibit A, Income Guidelines, has been revised to reflect income guidelines effective December 1, 1988. Median income for a family of four has increased from $47,400 to $51,000. Exhibit B, Sales Price Ranges, has been revised to reflect current income guidelines. This exhibit uses a formula to calculate sales price ranges for housing units. A "multiplier" is calculated and applied to the various household income levels to determine housing unit prices which are affordable to households at 80 percent, 100 percent and 120 percent of the County's Median Income. The formula assumes that no more than 30 percent of a household's income would be allocated to monthly housing costs. Exhibit C, Fair Market Rents, has been updated to reflect current rates. FISCAL IMPACT: No additional fiscal impact. The Town contracts with Community Housing Developers which implements the program. Program and contract oversight is provided by the Community Services Department. DISTRIBUTION: Dan Mountsier, Community Housing Developers, 255 N. Market, Ste. 290, San Jose 95110 RESOLUTION RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS SPECIFYING RULES, PROCEDURES AND CRITERIA FOR THE TOWN'S BELOW MARKET PRICE HOUSING PROGRAM THIS resolution establishes the rules, procedures and criteria that will be used to administer the BMP Housing Program as requested pursuant to Zoning Ordinance Sections 3.90.100 through 3.90.135. RESOLVED: GENERAL PROVISIONS A. Every multifamily rental dwelling project at the time of building permit, every residential condominium or planned development residential subdivision at the time of subdivision, and every community apartment project and every residential stock cooperative apartment or unit project at the time of subdivision if the transaction involves subdivision, or at the time of sale, if it does not, shall contain one or more BMP dwellings according to the rules listed below with the following exception: Any planned development with an underlying zone of HR, shall only be required to pay an in -lieu fee as established by section F of this resolution. 1. Projects containing five or more but fewer than twenty market rate units must provide a number of BMP units equal to 10 percent of the number of market rate units. 2. Projects which include 20 to 100 market rates units must provide BMP units as determined by the following formula: Number of BMP units = .225 (total # of market rate units) - 2.5 3. All projects in excess of 100 market rate units must provide a number of BMP units equal to 20 percent of the market rate units. CSD08:a:\RESOS\C5051892.R01 -1- 4. Whenever the calculations of below market price units result in a fraction of one-half or more, the number of units to be reserved is increased to the next whole number. B. Applicant Priority of purLhasc-ur rental: Point system to establish applicant rating and ranking. a. Fimt priority. Six points: (i) Senior citizens who reside in the Town at the time of application and have lived in the Town for at least the prior two years. A senior citizen is defined as any person 62 years of age or older at time of application or married couples living together when at least one spouse is 62 years of age or older at time of application. (ii) Salaried Town employees as defined in the Town's Personnel Rules, who have been employed by the Town for a period of no less than 12 months prior to the time of application. (iii) Senior Citizens who have lived in the Town for at least two years and have moved out of the Town within the last five years prior to the time of application. (iv) Handicapped persons who reside in the Town at the time of application and who have lived in the Town for at least the prior two years. (v) Households which are required to relocate their residence as a result of Council action. b. Second priority. Five points: Single heads of household with dependent children who reside in the Town at the time of application and have lived in the Town for at least the prior two years. CSD08:a:\RESOS\CS051892.R01 -2- c. Third priority: Four points: Persons who live in the Town of Los Gatos at time of application and who have lived in the Town for at least the prior two years. d. Fourth prrut ity. Three points: Persons who work in the Town of Los Gatos at time of application and have worked in the Town for at least the prior two years. e. fifth priority. Two points: at -time -of -applieatiotrairci-are-eligible-aecording-to-famitr size and income criteria. Households who have lived in the Town for at least 10 years and have moved out within the last five years prior to the time of application. One point: Households who live or work within Santa Clara County at the time of application and are eligible according to family size and income criteria. Household size is worth two points per person. Applicants will be ranked according to total points and must have at Least one point to be eligible for consideration. 2. Household Size/Unit Size: The objective of the BMP Housing Program is to maximize the number of people who may benefit from the BMP housing units. Applications for any unit will first be prioritized according to prioritreategories the point system above and then in order of household size. schedule shall be used to detcrmiiie eligibility. CS008:a:\RESOS\C5051892.R01 inimum 2 - Maximum 4 Family Mcmbcrs -3- l�o dlstinctiuiriS lnadc bctW Cell adults aiid LhI cn. 1'or challlpll.,, a mod. C. Confidentiality Client information is confidential and not considered public information except for statistical information on the BMP units and general demographic information on the buyers and renters of BMP housing units. Through implementation of the BMP program the Town is attempting to provide a supply of low -moderate income housing not to set the occupants of such housing apart from the general community, attaching a stigma to the occupants. Furthermore, no public interest is served by disclosure of this information. The address of the projects containing BMP units (not the individual units) may be provided as well as a range of sales prices. II. OWNER OCCUPIED UNITS A. Applicant Eligibility 1. Household Income: Income limits are set according to household size and range from 80 percent - 120 percent of the Santa Clara County Median Income, as determined by the Federal Department of Housing and Urban Development. Current income guidelines are attached as Exhibit A. 2. Buyer Qualification: a. A buyer's qualification is determined by the family's ability to make the monthly payments for the unit. The monthly housing cost shall include the following factors: Unit Price Current Lending Rates Estimated Taxes Estimated Insurance Costs Homeowner's Fees Other expenses as determined necessary by the lender. CSD08:a:\RESOS\CS051892.R01 -4- b. All persons must qualify for their own mortgage without assistance from the Town. Qualifications must include the ability to pay taxes, insurance, closing costs and any homeowner association fees in addition to the mortgage. c. shall be shared by the buyer and seller. For a resale unit, the closing costs and title insurance shall be shared by the buyer and seller in a manner consistent with the previous sale/purchase of the unit. For a new unit, the fee shall be shared by the Town from the in -lieu fees, and the buyer. B. Buyer Selection 1. Applications determined to be eligible according to Section II. A. will be prioritized in accordance with the criteria of point system described in Section I.B. 2. A lottery will be used to rank each qualified applicant withi-tr each -of the five priority-- ategorics. in the case of a tie. 3. An applicant has two opportunities to refuse a unit before being removed from the current applicant pool. 4. Applicants who do not qualify for a particular project shall retain their eligibility. 5. The highest ranked applicant must of notification of their obtain pre -approval for a loan within one week after notification of its eligibility to purchase the unit. The applicant must submit documentation of loan approval within four weeks of notification of its eligibility to purchase the unit. C. Determination of Initial Selling Price 1. The initial sales price of the unit will be determined by consultation between the Town Manager or delegate and the developer within the price range outlined in Exhibit B, "Initial Selling Price." The Manager CSD08:a:\RESOS\CS051892.R01 -5- is authorized to approve changes in specifications to lower the price of the BMP units which do not violate any Town code or ordinance requirements, such as changes in carpeting, lighting fixtures, etc. The initial price will be set by a BMP price agreement, which must be signed by the Town Manager and the developer prior to the Planning Commission review of the project. 2. The initial price of a unit may include direct construction costs and may include a proportionate share of the costs of providing utility services, required on -site improvement, financing and premium points, loan standby fees, landscaping and parking, provided that the price shall not exceed an amount which will allow a range of qualified buyers (as defined above) to purchase a unit. 3. The initial price shall not include cost of land, builder's profit, marketing costs, planning, promotional or advocacy expenses, options preliminary drawings, preparing working drawings and specifications, off -site improvements, public agency fees, bonds, insurance, recreational facilities and engineering and architectural fees related to construction. 4. The range in which the initial selling price shall be set will be determined through completion of the following calculation on an annual basis (See Exhibit B): a. Calculation of the Housing Multiplier i. Determination of Total Housing Cost Sales Price - 10 percent down payment = mortgage + Annual Debt Service + Taxes + Homeowners Fees + PMI CSDOB:a:\RESOS\CS051892.R01 = Total Housing Cost ii. Determination of Minimum Household Income Assume 30% of household income to go towards housing: -6- Total Housing Cost/.30 = Minimum household income iii. Determination of Multiplier Sales Price/Minimum Household Income = Multiplier b. Initial Sales Price Ranges Minimum and maximum sales prices are established by completing the following formula for a range of family sizes: Income (80, 100, and 120 percent of median income) x multiplier = sales price. D. Deed Restrictions 1. All Below Market Price dwelling units must be owner -occupied except as noted in 2. below. 2. An Owners of a Below Market Price dwelling units is are not permitted to lease, rent, sublet, or otherwise assign his interests their interest in the property, except that the property may be leased for Iimitedperiods return. a maximum of 12 months within a 10-year period. Tenants will be limited to persons whose annual income is less than 80 percent of the County's Median Income as defined by the Federal Department of Housing and Urban Development. Priority will be given to those households whose income is less than 50 percent of the median income as defined by H.U.D. Income guidelines determined by H.U.D. are set forth in Exhibit A. Rents will be restricted to as detonnined by I I.U.D. for implementation of wi1's agent -and the o7 . thirty percent of the maximum H.U.D. income for low income households. Household size will be assumed as follows: studio and one bedroom - 1 person: two bedrooms - 3 persons: three bedroom - 4 persons. All leases must be arranged through the Town or its designee and the Owner must accept qualified tenants. CSD08:a:\RESQS\C5051892.R01 -7- 3. In order to lease a unit under the terms of 2. above, the owner must still be qualified within the income limits of the Below Market Price Program in effect at the time of the lease, otherwise the owner must sell the unit. 4. The Town has the right of first refusal on the sale of the BMP units. The Town must exercise its right of refusal within six months from notice of availability of a unit. The developer has second right of refusal on first sale of all new units if the Town is unable to find a buyer. S. Resale provisions are provided in Section E. below. E. Resale of Units 1. If the owner elects to sell his/her unit, the Town must be notified. 2. When a Below Market Price dwelling unit becomes available for resale, the owner must allow the Town to set the resale price and make the unit available to other program applicants. 3. The Town, after receiving a recommendation from the Agent will determine the resale price in accordance with the deed restriction recorded on the property. 4. Agent notifies the next qualified buyer in the application pool. F. In -Lieu Fees 1. Establishment of Fee: Projects with five or more but less than ten units may pay a fee in - lieu of building a BMP unit in order to comply with the requirements in Section I.A. Hillside Planned Developments with five or more residential building sites shall require the payment of an in -lieu fee. The fee shall be equal to the amount of six percent of the building permit valuation for the project. The total building permit valuation is determined by the chief building official. 2. Fees will be paid prior to or at close of escrow of each unit. CSD08:a:\RESOS\C5051892.R01 -8- 3. In -lieu fees will be deposited into the Town's Affordable Housing Fund. Funds will be used, in part, for administration of the program. Applications/recommendations for use of remaining funds will be reviewed as received. Possible use of the funds include, but is not limited to, the following: landbanking writing down the cost of owner occupied units to make them affordable to low/moderate income households purchasing rental units for renting to eligible tenants III. RENTAL UNITS A. Administration The program shall be administered by an agent of the Town or its designee. The age,lt-is-respensible-for-deteimiiiing applican eligibilitraiid lv itwtug B. Applicant Eligibility 1. Household Income: In order to be eligible, applicants must have a household income under 80 percent of the County's median income as defined by the Federal Department of Housing and Urban Development. (See Exhibit A, attached.) 2. Ability to Pay Rent A tenant's ability to pay monthly rent will also be considered in determining tenant eligibility. C. Tenant Selection 1. Applications determined to be eligible according to paragraph B, above, will be prioritized in accordance with the eritcria point system established in of Section I.B. of this resolution. 2. If necessary, a lottery will be used to rank each qualified applicant within each of the five p1 ie1 itiein the case of a tie. 3. An applicant has two opportunities to refuse a unit before being CSO08:a:\RESOS\CS051892.R01 -9- removed from the current applicant pool. D. Management 1. BMP rental units shall be managed in the same manner as other units in the development. 2. Tenants are eligible to receive conciliation and mediation services provided through the Town's Rental Mediation Program except as they regard rent increases. E. Unit Rents Tenants will be limited to persons whose annual income is less than 80 percent of the County's Median Income as defined by the Federal Department of Housing and Urban Development. Priority will be given to those households whose income is less than 50 percent of the median income as defined by H.U.D. Income guidelines determined by H.U.D. are set forth in Exhibit A. Rents will be Tederal Departlncm of IIousing Urlrcu cvc pffielit. Cuii iit l�lrts- re . restricted to thirty percent of the maximum H.U.D. income for low income households. Household size will be assumed to be as follows: studio and one bedroom - 1 person; two bedrooms - 3 persons; three bedrooms - 4 persons. F. Annual Review If a tenant's income increases so that it falls between 80 and 100 percent of the County's Median income, then their rent will be set at 30 percent of their annual income; and, the unit shall still be considered a BMP Rental Unit. However, if a tenant's income exceeds 100 percent of the median, the rent will be at market rate; in this latter case, the unit will no longer be a BMP unit and the next available unit must be rented to an eligible household so that the number of subsidized units remains the same. FURTHER RESOLVED, this Resolution 1990-213 is repealed CSD08:a:\RESOS\CS051892.R01 -10- PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos held on the 18th day of May, 1992 by the following vote: COUNCIL MEMBERS: AYES: ABSENT: ABSTAIN: SIGNED: ATTEST: MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CSD08:a:\RESOS\CS051892.R01 -11- EXHIBIT A CURRENT INCOME GUIDELINES DETERMINED BY FEDERAL DEPARTMENT OF HOUSING & URBAN DEVELOPMENT REVISED 4/17/91 OF MEDIAN 50 80 100 120 Persons In Household 1 20200 26600 40400 48500 2 23100 30400 46700 55450 3 25950 34200 51900 62300 4 28850 38000 57700 69200 5 31150 41050 62300 74800 6 33450 44100 66900 80300 7 35750 47100 71500 85800 8 38100 50150 76200 91400 Revised Guidelines, Incorporated into Resolution: 1986-45 Date: 4/6/86 Revised through Resolution 1988-45 Date: 2/6/88 Revised through Resolution 1989-53 Date: 4/24/89 Revised through Resolution 1990-213 Date: 10/15/90 Revised through Resolution Date: CSD01:A:\reports\GUIDELIN.HUD EXHIBIT B INITIAL SALES PRICE RANGES 1. Calculation of the Housing Multiplier To calculate the initial sales price ranges the Town of Los Gatos multiplies the current income guidelines (determined by the Federal Department of Housing and Urban Development) by 2.28. Assumptions: * Loan: 12%, 30 Year * Private Mortgage Insurance: .44% of Loan Amount * Underwriting Ratio: a. Determination of Total Housing Cost Total housing cost no more than 30% of total income EXAMPLE A EXAMPLE B Sales Price $130,000 $50,000 10% down - 13,000 - 5,000 $117,000 $45,000 Annual Debt Service $12,969 $ 4,988 (12%, 30 Years) Taxes (rate of 1.15%) 1,495 575 Homeowners Fees ($100 mo.) 1,200 1,200 PMI (Private Mortgage Ins.) .44% 515 198 Total Housing Cost $16,179 $ 6,961 b. Determination of Minimum Household Income Total Housing Cost 0.3 c. Determination of Multiplier Sales Price Minimum Household Income Average multiplier = 2.28 EXAMPLE A EXAMPLE B $16,179 $6,961 0.3 = $ 53,930 0.3 = $23,203 EXAMPLE A EXAMPLE B $130,000 $50,000 53,930 = 2.41 23,203 = 2.15 -2- 2. Initial Sales Price Ranges The following chart reflects the sales prices affordable for families at 80, 100, and 120 percent of the County median. (Income X 2.28 = Sales price). SALES PRICES Household Size 80% 100% 120% 1 60,648 92,112 110,580 2 69,312 106,476 126,426 3 77,976 118,332 142,044 4 86,640 131,556 157,776 5 93,594 142,044 170,544 6 100,548 152,532 183,084 7 107,388 163,020 195,624 8 114,342 173,736 208,392 Unit Size Studio 1-2 People 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom RECOMMENDED SALES PRICE RANGE $60,648 to $110,580 60,648 to 126,426 69,312 to 157,776 86,640 to 183,084 93,594 to 208,392 Revised Guidelines, Incorporated into Resolution 1986-45 Date: 4/7/86 Revised through Resolution 1989-53 Date: 4/24/89 Revised through Resolution 1990-213 Date: 10/15/90 Revised through Resolution Date: CSDOI:A:\HOUSING\SLSPRICE.RNG DELETE EXHIBIT EXHIBIT-G FAIR MARKET RENTS CURRENT FAIR MARKET RENTS AS DETERMINED BY THE FEDERAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT BEDROOMS RENT Studio $610 1 747 2 878 3 1098 4 1229 5 1413 6 1598 Rent levels in effect as of 10/1/91 Incorporated by Resolution 1986-139 Date: 8/4/86 Revised through Resolution 1988-45 Date: 2/16/88 Revised through Resolution 1989-53 Date: 4/24/89 Revised through Resolution 1990-213 Date: 10/15/90 CSDO4:A:\HOUSING\BMPRENTS.9O RESOLUTION 1992-88 RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS SPECIFYING RULES, PROCEDURES AND CRITERIA FOR THE TOWN'S BELOW MARKET PRICE HOUSING PROGRAM THIS resolution establishes the rules, procedures and criteria that will be used to administer the BMP Housing Program as requested pursuant to Zoning Ordinance Sections 3.90.100 through 3.90.135. RESOLVED: GENERAL PROVISIONS A. Every multifamily rental dwelling project at the time of building permit, every residential condominium or planned development residential subdivision at the time of subdivision, and every community apartment project and every residential stock cooperative apartment or unit project at the time of subdivision if the transaction involves subdivision, or at the time of sale, if it does not, shall contain one or more BMP dwellings according to the rules listed below with the following exception: Any planned development with an underlying zone of HR, shall only be required to pay an in -lieu fee as established by section F of this resolution. 1. Projects containing five or more but fewer than twenty market rate units must provide a number of BMP units equal to 10 percent of the number of market rate units. 2. Projects which include 20 to 100 market rates units must provide BMP units as determined by the following formula: Number of BMP units = .225 (total # of market rate units) - 2.5 3. All projects in excess of 100 market rate units must provide a number of BMP units equal to 20 percent of the market rate units. CSD08:a:\RESOS\CS051892.R88 -1- 4. Whenever the calculations of below market price units result in a fraction of one-half or more, the number of units to be reserved is increased to the next whole number. B. Applicant Priority Point system to establish applicant rating and ranking. Six points: (i) Senior citizens who reside in the Town at the time of application and have lived in the Town for at least the prior two years. A senior citizen is defined as any person 62 years of age or older at time of application or married couples living together when at least one spouse is 62 years of age or older at time of application. (ii) Salaried Town employees as defined in the Town's Personnel Rules, who have been employed by the Town for a period of no less than 12 months prior to the time of application. (iii) Senior Citizens who have lived in the Town for at least two years and have moved out of the Town within the last five years prior to the time of application. (iv) Handicapped persons who reside in the Town at the time of application and who have lived in the Town for at least the prior two years. (v) Households which are required to relocate their residence as a result of Council action. Five points: Single heads of household with dependent children who reside in the Town at the time of application and have lived in the Town for at least the prior two years. Four points: Persons who live in the Town of Los Gatos at time of application and who have lived in the Town at least the prior CSD08:a:\RESOS\CS051892.R88 -2- two years. Three points: Persons who work in the Town of Los Gatos at time of application and have worked in the Town for at least the prior two years. Two points: Households who have lived in the Town for at least 10 years and have moved out within the last five years prior to the time of application. One point: Households who live or work within Santa Clara County at the time of application and are eligible according to family size and income criteria. Household size is worth two points per person. Applicants will be ranked according to total points and must have at least one point to be eligible for consideration. 2. Household Size/Unit Size: The objective of the BMP Housing Program is to maximize the number of people who may benefit from the BMP housing units. Applications for any unit will first be prioritized according to the point system above and then in order of household size. C. Confidentiality Client information is confidential and not considered public information except for statistical information on the BMP units and general demographic information on the buyers and renters of BMP housing units. Through implementation of the BMP program the Town is attempting to provide a supply of low -moderate income housing not to set the occupants of such housing apart from the general community, attaching a stigma to the occupants. Furthermore, no public interest is served by disclosure of this information. The address of the projects containing BMP units (not the CSD08:a:\RESOS\CS051892.R88 -3- individual units) may be provided as well as a range of sales prices. II. OWNER OCCUPIED UNITS A. Applicant Eligibility 1. Household Income: Income limits are set according to household size and range from 80 percent - 120 percent of the Santa Clara County Median Income, as determined by the Federal Department of Housing and Urban Development. Current income guidelines are attached as Exhibit A. 2. Buyer Qualification: a. A buyer's qualification is determined by the family's ability to make the monthly payments for the unit. The monthly housing cost shall include the following factors: Unit Price - Current Lending Rates - Estimated Taxes Estimated Insurance Costs Homeowner's Fees Other expenses as determined necessary by the lender. b. All persons must qualify for their own mortgage without assistance from the Town. Qualifications must include the ability to pay taxes, insurance, closing costs and any homeowner association fees in addition to the mortgage. c. For a resale unit, the closing costs and title insurance shall be shared by the buyer and seller in a manner consistent with the previous sale/purchase of the unit. For a new unit, the fee shall be shared by the Town from the in -lieu fees, and the buyer. B. Buyer Selection 1. Applications determined to be eligible according to Section II. A. will be prioritized in accordance with the point system described in Section I.B. CSOOB:a:\RESOS\CS051892.R88 -4- 2. A lottery will be used to rank each qualified applicant in the case of a tie. 3. An applicant has two opportunities to refuse a unit before being removed from the current applicant pool. 4. Applicants who do not qualify for a particular project shall retain their eligibility. 5. The highest ranked applicant must obtain pre -approval for a loan within one week after notification of its eligibility to purchase the unit. The applicant must submit documentation of loan approval within four weeks of notification of its eligibility to purchase the unit. C. Determination of Initial Selling Price 1. The initial sales price of the unit will be determined by consultation between the Town Manager or delegate and the developer within the price range outlined in Exhibit B, "Initial Selling Price." The Manager is authorized to approve changes in specifications to lower the price of the BMP units which do not violate any Town code or ordinance requirements, such as changes in carpeting, lighting fixtures, etc. The initial price will be set by a BMP price agreement, which must be signed by the Town Manager and the developer prior to the Planning Commission review of the project. 2. The initial price of a unit may include direct construction costs and may include a proportionate share of the costs of providing utility services, required on -site improvement, financing and premium points, loan standby fees, landscaping and parking, provided that the price shall not exceed an amount which will allow a range of qualified buyers (as defined above) to purchase a unit. 3. The initial price shall not include cost of land, builder's profit, marketing costs, planning, promotional or advocacy expenses, options preliminary drawings, preparing working drawings and specifications, off -site improvements, public agency fees, bonds, insurance, recreational CSD08:a:\RESOS\CS051892.R88 -5- facilities and engineering and architectural fees related to construction. 4. The range in which the initial selling price shall be set will be determined through completion of the following calculation on an annual basis (See Exhibit B): a. Calculation of the Housing Multiplier i. Determination of Total Housing Cost Sales Price - 10 percent down payment = mortgage + Annual Debt Service + Taxes + Homeowners Fees + PMI = Total Housing Cost ii. Determination of Minimum Household Income Assume 30 percent of household income to go towards housing: Total Housing Cost/.30 = Minimum household income iii. Determination of Multiplier Sales Price/Minimum Household Income = Multiplier b. Initial Sales Price Ranges Minimum and maximum sales prices are established by completing the following formula for a range of family sizes: Income (80, 100, and 120 percent of median income) x multiplier = sales price. D. Deed Restrictions 1. All Below Market Price dwelling units must be owner -occupied except as noted in 2. below. 2. Owners of Below Market Price dwelling units are not permitted to lease, rent, sublet, or otherwise assign their interest in the property, except that the property may be leased for a maximum of 12 months within a 10-year period. Tenants will be limited to persons whose C5008:a:\RESOS\CS051892.R88 -6- annual income is less than 80 percent of the County's Median Income as defined by the Federal Department of Housing and Urban Development. Priority will be given to those households whose income is less than 50 percent of the median income as defined by H.U.D. Income guidelines determined by H.U.D. are set forth in Exhibit A. Rents will be restricted to thirty percent of the maximum H.U.D. income for low income households. Household size will be assumed as follows: studio and one bedroom -1 person; two bedrooms - 3 persons; three bedroom - 4 persons. All leases must be arranged through the Town or its designee and the Owner must accept qualified tenants. 3. In order to lease a unit under the terms of 2. above, the owner must still be qualified within the income limits of the Below Market Price Program in effect at the time of the lease, otherwise the owner must sell the unit. 4. The Town has the right of first refusal on the sale of the BMP units. The Town must exercise its right of refusal within six months from notice of availability of a unit. The developer has second right of refusal on first sale of all new units if the Town is unable to find a buyer. 5. Resale provisions are provided in Section E. below. E. Resale of Units 1. If the owner elects to sell his/her unit, the Town must be notified. 2. When a Below Market Price dwelling unit becomes available for resale, the owner must allow the Town to set the resale price and make the unit available to other program applicants. 3. The Town, after receiving a recommendation from the Agent will determine the resale price in accordance with the deed restriction recorded on the property. 4. Agent notifies the next qualified buyer in the application pool. CSD08:a:\RESOS\CS051892.R88 -7- F. In -Lieu Fees 1. Establishment of Fee: Projects with five or more but less than ten units may pay a fee in - lieu of building a BMP unit in order to comply with the requirements in Section I.A. Hillside Planned Developments with five or more residential building sites shall require the payment of an in -lieu fee. The fee shall be equal to the amount of six percent of the building permit valuation for the project. The total building permit valuation is determined by the chief building official. 2. Fees will be paid prior to or at close of escrow of each unit. 3. In -lieu fees will be deposited into the Town's Affordable Housing Fund. Funds will be used, in part, for administration of the program. Applications/recommendations for use of remaining funds will be reviewed as received. Possible use of the funds include, but is not limited to, the following: landbanking writing down the cost of owner occupied units to make them affordable to low/moderate income households purchasing rental units for renting to eligible tenants III. RENTAL UNITS A. Administration The program shall be administered by the Town or its designee. B. Applicant Eligibility 1. Household Income: In order to be eligible, applicants must have a household income under 80 percent of the County's median income as defined by the Federal Department of Housing and Urban Development. (See Exhibit A, attached.) 2. Ability to Pay Rent A tenant's ability to pay monthly rent will also be considered in CSD08:a:\RESOS\CS051892_R88 -8- determining tenant eligibility. C. Tenant Selection 1. Applications determined to be eligible according to paragraph B, above, will be prioritized in accordance with the point system established in Section I.B. of this resolution. 2. If necessary, a lottery will be used to rank each qualified applicant in the case of a tie. 3. An applicant has two opportunities to refuse a unit before being removed from the current applicant pool. D. Management 1. BMP rental units shall be managed in the same manner as other units in the development. 2. Tenants are eligible to receive conciliation and mediation services provided through the Town's Rental Mediation Program except as they regard rent increases. E. Unit Rents Tenants will be limited to persons whose annual income is less than 80 percent of the County's Median Income as defined by the Federal Department of Housing and Urban Development. Priority will be given to those households whose income is less than 50 percent of the median income as defined by H.U.D. Income guidelines determined by H.U.D. are set forth in Exhibit A. Rents will be restricted to thirty percent of the maximum H.U.D. income for low income households. Household size will be assumed to be as follows: studio and one bedroom - 1 person; two bedrooms - 3 persons; three bedrooms - 4 persons. F. Annual Review If a tenant's income increases so that it falls between 80 and 100 percent of the County's Median income, then their rent will be set at 30 percent of their annual income; and, the unit shall still be considered a BMP Rental Unit. However, if a tenant's income exceeds 100 percent of the median, the rent will CSOO8:a:\RESOS\CS051892.R88 -9- be at market rate; in this latter case, the unit will no longer be a BMP unit and the next available unit must be rented to an eligible household so that the number of subsidized units remains the same. FURTHER RESOLVED, that Resolution 1990-213 is repealed PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos held on the 18th day of May, 1992 by the following vote: COUNCIL MEMBERS: AYES: Randy Attaway, Joanne Benjamin, Steven Blanton, Brent N. Ventura, Mayor Eric D. Carlson NAYES: None. ABSENT: None. ABSTAIN: None. SIGNED: ATTEST: /s/ Eric D. Carlson MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA /s/ Marian V. Cosgrove CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CSD08:a:\RESOS\CS051892.R88 -10- EXHIBIT A CURRENT INCOME GUIDELINES DETERMINED BY FEDERAL DEPARTMENT OF HOUSING & URBAN DEVELOPMENT REVISED 4/17/91 OF MEDIAN 50 80 100 120 Persons In Household 1 20200 26600 40400 48500 2 23100 30400 46700 55450 3 25950 34200 51900 62300 4 28850 38000 57700 69200 5 31150 41050 62300 74800 6 33450 44100 66900 80300 7 35750 47100 71500 85800 8 38100 50150 76200 91400 Revised Guidelines, Incorporated into Resolution: 1986-45 Date: 4/6/86 Revised through Resolution 1988-45 Date: 2/6/88 Revised through Resolution 1989-53 Date: 4/24/89 Revised through Resolution 1990-213 Date: 10/15/90 Revised through Resolution 1992-88 Date: 5/18/92 CSD01:A:\reports\GUIDELIN.HUD EXHIBIT B INITIAL SALES PRICE RANGES 1. Calculation of the Housing Multiplier To calculate the initial sales price ranges the Town of Los Gatos multiplies the current income guidelines (determined by the Federal Department of Housing and Urban Development) by 2.28. Assumptions: * Loan: * Private Mortgage Insurance: * Underwriting Ratio: a. Determination of Total Housing Cost Sales Price 10% down Annual Debt Service (12%, 30 Years) Taxes (rate of 1.15%) Homeowners Fees ($100 mo.) PMI (Private Mortgage Ins.) .44% Total Housing Cost b. Determination of Minimum Household Income Total Housing Cost 0.3 c. Determination of Multiplier Sales Price Minimum Household Income Average multiplier = 2.28 12%, 30 Year .44% of Loan Amount Total housing cost no more than 30% of total income EXAMPLE A EXAMPLE B $130,000 $50,000 - 13,000 - 5,000 $117,000 $45,000 $12,969 $ 4,988 1,495 575 1,200 1,200 515 198 $16,179 $ 6,961 EXAMPLE A EXAMPLE B $16,179 $6,961 0.3 = $ 53,930 0.3 = $23,203 EXAMPLE A EXAMPLE B $130,000 $50,000 53,930 = 2.41 23,203 = 2.15 -2- 2. Initial Sales Price Ranges The following chart reflects the sales prices affordable for families at 80, 100, and 120 percent of the County median. (Income X 2.28 = Sales price). SALES PRICES Household Size 807 100i 1207 1 60,648 92,112 110,580 2 69,312 106,476 126,426 3 77,976 118,332 142,044 4 86,640 131,556 157,776 5 93,594 142,044 170,544 6 100,548 152,532 183,084 7 107,388 163,020 195,624 8 114,342 173,736 208,392 Unit Size Studio 1-2 People 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom RECOMMENDED SALES PRICE RANGE $60,648 to $110,580 60,648 to 126,426 69,312 to 157,776 86,640 to 183,084 93,594 to 208,392 Revised Guidelines, Incorporated into Resolution 1986-45 Date: 4/7/86 Revised through Resolution 1989-53 Date: 4/24/89 Revised through Resolution 1990-213 Date: 10/15/90 Revised through Resolution 1992-88 Date:5/18/92 CSDO1:A:\HOUSING\SLSPRICE. RNG May 18, 1992 Los Gatos, California 9211 PROJECT/TRAFFIC SIGNAL/WIMBLEDON AND WINCHESTER COMPLETION NOTICE (08A.35) Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council authorize the Mayor to execute and the Town Clerk to record a Certificate of Acceptance and Notice of Completion for Project 9211, the signalization of Wimbledon Drive and Winchester Boulevard. Carried unanimously. 9209 PROJECT/REFORESTATION/DOWNTOWN BUSINESS DISTRICT TREE REPLACEMENT/COMPLETION NOTICE (08B.35) Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council authorize the Mayor to execute and the Town Clerk to record a Certificate of Acceptance and Notice of Completion for Project 9209, the Reforestation of the Downtown Business District. Carried unanimously. CONGESTION MANAGEMENT AGENCY/TRANSPORTATION IMPROVEMENT PROGRAM PROJECT PRIORITIES (09.38) Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council accept staff report confirming the selection and priority of projects submitted to Santa Clara County Congestion Management Agency for funding under the 1993 Transportation Improvement Program. Carried unanimously. PUBLIC ART/SELECTION POLICIES/RESOLUTION 1992-78 (10.20) Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1992-78 entitled, RESOLUTION OF THE TOWN OF LOS GATOS ADOPTING PUBLIC ART SELECTION POLICIES AND PROCEDURES AND RESCINDING RESOLUTION 1988-185. Carried unanimously. YOUTH ADVISORY COMMISSION/COMMENDATIONS (11.20) RESOLUTION 1992-79, 1992-80, 1992-81, 1992-82, 1992-83, 1992-84, 1992-85, 1992-86 & 1992-87 Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolutions 1992-79 through 1992-87 entitled, RESOLUTIONS OF THE TOWN OF LOS GATOS COMMENDING: KIRSTEN FISH 1992-79 KIM KOLERUS 1992-80 KRISTEN SWAN 1992-81 BROOKS BRODERICK 1992-82 PATRICIA ERNSTROM 1992-83 ELEANOR HARWOOD 1992-84 ADAM BROWN 1992-85 PATRICIA LOWE 1992-86 SETH WHEATLEY 1992-87 which commends the Youth Advisory Commissioners for their service on the Commission during the 1991-92 year. Carried unanimously. BELOW MARKET PRICE HOUSING PROGRAM/BMP/RESOLUTION 1992-88 (12.19) Motion by Mr. Blanton, seconded by Mrs. Benjamin, that Council adopt Resolution 1992-88 entitled, RESOLUTION OF THE TOWN OF LOS GATOS REVISING THE RULES, PROCEDURES AND CRITERIA FOR THE TOWN'S BELOW MARKET PRICE HOUSING PROGRAM. Carried unanimously. TC: D3: M M051892 2