2009-108-Adopting Revised Below Market Price Housing Guidelines And Repealing Resolution 2008-121~~
RESOLUTION 2009 -108
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
ADOPTING REVISED BELOW MARKET PRICE HOUSING GUIDELINES AND
REPEALING RESOLUTION 2008-121
WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 29.10,3000 through
29.10.2040 establishes a Below Market Price (BMP) Housing Program to assist low and moderate
income Los Gatos citizens purchase homes at prices below market value; and
WHEREAS, the Program requires construction of dwellings that persons and families of low
and moderate income can afford to rent or buy, and assures to the extent possible that the resale
prices of those dwellings units and rents, if they are rented, will be within the means of persons and
families of low and moderate income; and
WIIEREAS, the Program helps the Town meet State mandated housing goals; and
WHEREAS, this resolution revises the Town of Los Gatos Below Market Price Housing
Program Guidelines.
NOW, THEREFORE, BE IT 1ZESOLVED, that Town Council of the Town of Los Gatos
(1) repeals Resolution 2008-121; and (2) adopts the Town of Los Gatos Below Market Price Housing
Program Guidelines attached as Exhibit A.
PASSED AND ADOPTED at a regular meeting of the Town Council held on the Sty' day of
October, 2009, by the following vote:
COUNCIL MEMBERS:
AYES: Joe Pirzynski, Steve Rice, Mayor Mike Wasserman
NAYS: Diane McNutt and Barbara Spector
ABSENT: None
ABSTAIN: None
SIGNED: ~/,~
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTES
._ c
CLERK ADMINISTRATOR OF TIIE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA.
Exhibit A
TOWN OF LOS GATOS
BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES
I. Ptiupose
A. Purpose: The overall purpose of the Below Market Price (BMP) Housing
Program is to provide the Town of Los Gatos with a supply of affordable housing.
While the program is available to all qualified applicants, the general intent of the
program is to provide affordable housing for households who work or currently
live in Los Gatos. The main goal is to increase the housing supply for households
that have median and low incomes compared to the median income for Santa
Clara County and meet the housing needs identified in the Town's General Plan
Housing 1/lement. 'The Program further intends to ensure, to the greatest extent
possible, that rent and re-sale of these housing units will remain affordable to
median and low income levels in perpetuity. Although the Town has afee-in-
lieu of constructing actual units option for defined circumstances, the primary
objective of the BMP Program is to obtain actual "rental" or "for sale" .housing
units rather than equivalent funds. All off-site BMP units. shall be constructed
within the Town of Los Gatos. The construction and occupancy. of the BMP unit
is determined according to these Town Council established guidelines and
Ordinance No. 2009-
B. Enabling Legislation: The Below Market Price Program is governed by Division
6 of the Town Code. The BMP Program is ,administered under these .Below
Market Price Housing Program Guidelines.
II. Below Market Price Housing Requirements -General
A. ~1pplicabilitX: The BMP Program requirements shall apply to all residential
development projects that include five (5) or more residential units or parcels
which involve:
1. New construction of ownership or rental housing units, including mixed
use developments and addition of units to existing projects, or
2. Subdivision of property for single family or duplex housing development,
or
3. Conversion of rental apartments to condominiums or other common
interest ownership, or
4. Conversion ofnon-residential use to residential use.
B. Number of BMP Units: All residential developments consisting of five (5) or
more units are required to participate in the BMP Program. The requirements for
participation increase by development size as shown below:
BMP Guidelines Page 1
1. Five (5) to Nineteen 19 market rate units: The developer shall provide a
minimum number of BMP units equal to ten (10) percent of the number of
market rate units.
2. Twenty (20) to one hundred (100) market rates units: The developer shall
provide a minimum of BMP units as determined by the following formula:
Number of BMP units = (,225 x total # of market rate units) - 2.5
This formula acts to increase the number of BMP units required, as a
percentage of market-rate units, from 10% to 20% over the range of 20 to
100 market rate units.
3. One hundred and one (101) units or more: The developer shall provide a
minimum number of BMP units equal to twenty (20) percent of the
number of market rate units.
BMP dwellings within a project of rental units shall also be rental units. BMP
units within a project of owner-occupied units shall also be designated as units for
purchase, BMP units within a project that contains both rental and owner-
occupied units shall also be designated as both rental and as units for purchase, in
a ratio similar to that of the market rate units.
The Town and developer may negotiate to provide more BMP units than required
by the rules listed in these guidelines to fulfill a development's Community
Benefit requirements.
C. Fraction of a BMP Housin~Units: In determining the number of BMP units
required, any decimal fraction of .5 or above shall be rounded up to the nearest
whole number,
D. Residential In-Lieu Payments: The general intent of the BMP Program is to
provide the Town of Los Gatos with a supply of affordable housing for
households who work or currently live in Los Gatos. However, there may be
circumstances when the construction of the BMP unit is impractical or there are
unusual circumstances that make the construction of the unit inconsistent with
Town policy. The Town, at its sole discretion, may consider an in-lieu payment
alternative to the required BMP unit in the case of Planned Unit development with
an underlying zone of IIR or a residential developments with five (5) to nine (9)
units. Prior to approving the in-lieu fee alternative, the applicant must
demonstrate to the satisfaction of the Town why a BMP unit caimot be (1)
developed on the same site as the market rate units, and if it cannot be provided
on the same site then, (2) develop at an appropriate off-site location within the
'T'own limits. If the developer provides sufficient justification that both of these
alternatives are not viable, then a fee in-lieu option may be considered. The
required in-lieu fee is as established by a separate resolution and is to be paid to
the Town prior to issuance of the certificate of occupancy for the market rate
BMP Guidelines Page 2
residential unit that triggered the BMP requirement. Tlie provision for a BMP unit
applies if the project is built under the rules of an overlay zone unless the rules of
the overlay zone provide otherwise.
The in-lieu fee shall be equal to the amount of six (6) percent of the building
permit valuation for the entire project. The total building permit valuation shall
be determined by the Town Building Official.
Fees shall be paid prior to or at time of final occupancy as follows:
1. Multi-Family Owner Occupied Developments: Prior to occupancy of each
phase, a proportional amount of fees shall be paid, as determined during
the Planning approval process.
2. Multi-Family Renter Occupied Developments: Prior to occupancy of each
phase, a proportional amount of fees shall be paid, as determined during
the Planning approval process.
3. Single-Family Planned Developments:. At time of final occupancy for
each unit.
L. Housing Fund: In-lieu fees will be deposited into the Town's Affordable Housing
Fund. Applications and or recommendations for use of remaining funds will be
reviewed as received. Possible use of the funds include, but is not limited to; the
following:
1. Subsidizing the cost of owner occupied units to make them affordable to
low/moderate income households
2. Purchasing rental units to make them affordable to lowhnoderate income
households
3. Purchasing land for the future development of affordable housing
4. Developing affordable housing
5. Supplementing of affordable housing projects developed through the Los
Gatos Redevelopment Agency
6. Funding administration of the program, as approved by the Town Council
in its annual budget process
F. Off-Site Construction: The Town Council may consider off-site construction of
BMP touts for continuum care facilities and for Hillside Residential (HR) Zone
District and residential developments with five (5) to nine (9) units projects that
have provided sufficient justification to the Town that an on-site BMP unit is not
viable.
G. Phasing of the Construction of On- and Off-Site BMP Units: On- and off-site
BMP units shall be constructed and Certificate of Occupancies secured
concurrently with or prior to the construction of the market-rate units. The BMP
requirement will be calculated on the basis of the whole development. The 1 ovv~l
Council may grant an exception to these phasing requirements during the Plaimed
BMP Guidelines Page 3
Development project approval process for condominium conversion
developments.
II. Affordability Agreement: The developer of "for sale" BMP units shall enter into
an affordability agreement with the Town. The agreement will ensure that the
BMP units are sold to qualified buyers and will be released by the Town through
the escrow process once the BMP is sold to a qualified buyer.
III. Characteristics of BMP Units
A. Size of units: The size and design of BMP dwelling units shall be reasonably
consistent with the market rate units in the project. The Town and developer may
negotiate regarding the size of units if more units than required are to be provided
under the Community Benefit requirements. BMP units should be provided
proportionately in the same unit type mix (number of bedrooms) as the market
rate units. In consideration of the household size of the households on the current
program interest list, the Town and developer may negotiate to provide a greater
proportion of a particular unit type. There shall not be significant identifiable
difference between the BMP and market-rate units visible from the. exterior. The
size and design of the BMP units must be reasonably consistent with the market-
rate units in the development.
B Location of units: BMP units shall be dispersed throughout the development, to
the extent feasible; in all buildings, on each floor, and in each project phase. A
concentration of BMP iulits in one location is not desirable and will enerally not
be allowed.
C. Finish of units: The external appearance of BMP units should be indiscernible to
that of the market rate Louts in the project. The internal finish of BMP unts
should be identical to that of the market rate units in the project, except that the
developer may request Town approval of substitutions for luxury interior finishes,
appliances, or fixtures, if such substitutions do not violate any Town code
requirement.
D. Project racilities: All project facilities and amenities, including parking, must be
available on the same basis to the BMP units as to the inarlcet rate units in the
project, to the extent feasible.
IV. The BMP Unit Purchase Process; Buyer Selection, and BMP Unit Sale and Resale
Procedures.
A. Owner Occupied Units
1. Applicant Eligibility
BMP Guidelines page 4
a. Household Income: In order to be eligible to purchase an owner-
occupied BMP unit, an applicant's annual household income must
be no greater than 1.00% of the Median Family Income (MFI),
adjusted for household size, as defined by the United States
Department of Housing and Urban Development (HUD) for the
San Jose, CA Primary Metropolitan Statistical Area (PMSA).
Household assets, such as real property, may also be considered in
determining eligibility.
b. Housing Costs: In order to be eligible to purchase an owner-
occupied BMP unit, an applicant must also demonstrate the ability
to pay monthly housing costs. The monthly housing cost shall
include the following factors:
1. unit price
2. current lending rates
3. estimated property taxes
4. estimated homeowner's insurance costs
homeowners' association fees, if applicable
5. other expenses as determined necessary by the lender
c. 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.
2. First Time Home Buyers: The Below Market Price (BMP) Program is for
First Time Home Buyers. A First Time Home Buyer, by definition, is an
applicant whose name has not appeared on a residential title in the
counties covered by the Association of Bay Area Governments (ABAG)
or Association of Monterey Bay Governments (AMBAG) which are
Alameda, Contra Costa, Marin, Monterey, Napa, San Benito, San
Francisco, San Mateo, Santa Clara, Santa Cruz, Solaro and Sonoma for at
least three (3) years prior to application. 1/xception is made for people who
were homeowners prior to a divorce settlement and tenants residing in a
rental apartment proposed to be converted to a condominium or other
common interest ownership prior to a Notice of Intent to Convert the
development to an ownership residential unit.
B. Buyer Selection: A point system is used to establish a ranking of applicants for
the purchase of an available unit. Applicants will be ranked according to total
points and must have at least one point to be eligible to purchase a unit. In
addition, applicant households must contain at least the same number of persons
as the number of bedrooms in a unit, at the time of application, in order to be
eligible to purchase that unit, if the unit contains three bedrooms or more.
BMP Guidelines Page 5
All points are calculated per household, not for each individual within the
household. ror example, a household in which two members are senior citizens
would receive six points for senior citizen status, not twelve points for two
members having senior citizen status. Points are awarded as follows:
Six points:
a. 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
tune of application or married couples living together when at least
one spouse is 62 years of age or older at time of application.
b. 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.
c. Disabled 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.
The definition of "disabled" for the purpose of assigning points
under this section shall be that used by the U.S. Social Security
Administration for the purpose of determining eligibility for Social
Security disability benefits.
d. Households required to relocate their residence as a result of
Council action or mobile home park closure.
e. Regular Full-Time and Regular Part-Time 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.
f. 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.
2. Four points:
a. Persons who live in the Town of Los Gatos at time of application
and who have lived in the Town at least the prior two years.
b. 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.
3. Two points:
BMP Guidelines Page 6
a. Households who have lived in the Town for at least 10 years and
have moved out within the last ten years prior to the time of
application.
b. Household size is worth two points per person.
4. One point:
a. Households who live or work within Santa Clara County at the
time of application.
b. Households with an annual household income at or below 60% of
the Median Family Income (MFI), adjusted for household size, as
defined by the United States Department of Housing and Urban
Development .(HUD). for the San Jose, CA Primary Metropolitan
Statistical Area (PMSA).
5. A lottery will be used to rank each qualified applicant in the case of a tie.
6. Applicants are provided the opportunity to purchase available units in
order of point ranking, from most points to least points. An applicant has
two opportunities to refuse to purchase a unit before being removed from
the current applicant pool.
7. Applicants who do not qualify for a particular project or who are not
provided the opportunity to purchase a unit ~in a particular project shall
retails their eligibility to apply for future projects.
8. An applicant must obtain pre-approval for a mortgage loan within one
week after notification of eligibility to purchase a unit. The applicant
must submit documentation of loan approval within three weeks of
notification of eligibility to purchase a unit.
9. Exception to the Buyer Selection Process: An exception to the Buyer
Selection Process may be granted to a resident of a rental apartment that is
proposed to be converted to an "owner occupied" condominium or other
common interest ownership development. In order to qualify for the
exception, the resident must have resided in the rental apartment prior to
the issuance of the Notice of Intent to Convert the development to an
ownership project and shall meet the financial eligibility requirements to
qualify for a BMP unit. The resident shall .lie provided first right of
refusal, regardless of point rai~lcing, for units in the following order:
a. The unit they reside in if it is designated as a BMP unit..
b. Any other available BMP unit.
BMP Guidelines Page 7
C. Determination of Initial Sellin Pg rice: BMP units shall be priced to be affordable
to households in two income categories: Median Income Households (those
whose income is above 80%, but no greater than 100%, of the County Median
Income); and Low Income Households (those whose income is above 50%, but no
greater than 80%, of the County Median Income).
1. Fifty percent (50%) of the units in a project shall be priced to be
affordable to Median Income Households; fifty percent (50%) shall be
priced to be affordable to Low Income Households. Whenever the
calculations result in fractional units, then the number of units priced to be
affordable to Low Income Households shall be rounded up to the next
whole number, and the number of units priced to be .affordable to Median
Income Ilouseholds shall be rounded down to the next whole number,
including zero (0). The following table applies this formula to projects
with 1, 2, and 3 units:
Total Number of
BMP Units in Project Units Priced for
Low Income IIouseholds Units Priced for Median
Income Households
1 1 0
2 1 1
3 2 1
The Town .and developer may negotiate regarding the affordability mix of
units, to fulfill a development's Community Benefit requirements.
The affordability level of a Lunt shall be for the purpose of setting the
initial selling price only, and do not prevent its sale to any household
eligible to purchase an owner-occupied BMP unit, as set forth in these
Guidelines.
2. Annually, the Town shall set the initial unit sales price for each unit type
(number of bedrooms), for each of the two income categories. These
initial sales prices shall be set using the most recent Median Family
Income (MFI) figures from the United States Department. of Housing and.
Urban Development (HUD) for the San Jose, CA Primary Metropolitan
Statistical Area {PMSA), and through the following calculations:
a. For units to be priced to be affordable to Median Income
Households: the average of the 100% MFI annual income and the
80% MFI annual income (assuming household size appropriate to
size of unit) xMultiplier =Initial Sales Price.
BMP Guidelines - Page 8
1. Assumptions of household size by size of unit are as
follows:
Household Size
Studio 1
1 Bedroom 1
2 Bedroom 2
3 Bedroom 3
4 Bedroom 4
These assumptions of household size by size of unit shall
be for the purpose of setting the initial sales price only, and
do not prevent the sale of any unit to any household eligible
to purchase an owner-occupied BMP unit, as set forth in
these Guidelines.
b. For units to be priced to be affordable to Low Income Households:
the average of the 80% MFI annual income and the 50% annual
income (assuming household size appropriate to size of unit) x
Multiplier =Initial Sales Price.
c. Calculation of Multiplier. A Multiplier shall be calculated, based
on reasonable assumptions about unit sales prices, based on the
most recent comparable sales of BMP units; current lending rates,
as determined by the most recent Primary Mortgage Market
Survey (PMMS) conducted by the Federal Home Loan Mortgage
Corporation (Freddie Mac); and related costs;. and using the
following formula:
1. Determination of Total Housing Cost: Sample sales price -
10% down payment =mortgage. Am1ua1 debt service on
mortgage + annual property taxes + annual homeowners
fees -~- annual private mortgage insurance (PMI) =Total
Aimual Housing Cost.
2. Determination of Minimum Household Income: Assuming
one-third of household income goes for housing expenses,
Total Arulual Housing Cost x 3 =Minimum Aimual
Household Income.
3. Determination of Multiplier: Sample Sales Price/Minimum
Amiual Household Income =Multiplier.
BMP Guidelines Page 9
Copies of the initial sales prices, and the calculations made, shall
be available on request from the Town's Community Development
Department.
D. Deed Restrictions: Council approved Deed Restrictions shall be recorded with
each Below Market Price dwelling unit.
L. Resale of Units:
1. If the owner elects to sell his/her unit, the Town must be notified in
writing by the owner.
2 When a Below Market Price dwelling unit becomes available for resale,
the Town shall set the resale price and make the unit available for
purchase through the BMP process.
3 The Town determines the resale price in accordance with the deed
restriction recorded on the property.
F. Occupancy of Units:
Consistent with the deed restriction that will be recorded on the subject property,
the household purchasing a BMP unit must occupy the unit as his or her primary
residence during lris or her ownership of said unit.
V. 12equirements for BMP Rental Development
A. Administration: The program shall be administered by the Town or its designee.
B. Applicant IJligibility
1. Household Income: In order to be eligible to rent a BMP rental unit, a.
household's annual income must be no greater than 80% of the Median
Family Income (MFI), adjusted for household size, as defined by the
United States Department of Housing .and Urban Development (HUD) for
the San Jose, CA Primary Metropolitan Statistical Area (PMSA). Priority
will be given to those households whose income is less than 50% of the
MFI. Household assets may also be considered in determining eligibility.
2. Abilit• try Rent; A tenant's. ability to pay monthly rent will also be
considered in determining tenant eligibility.
C. Tenant Selection: 1 he property owner or manager of the development shall
market the BMP unit(s), and solicit rental applications. Applications from tenants
selected by property owner or manager will be forwarded to Town or designee for
verification of income eligibility.
BMP Guidelines Page 10
D. Management
BMP rental units shall be managed by the property owner or manager in
the same manner as other units in the development.
2, Tenants of BMP rental units are eligible to receive conciliation and
mediation services provided through the Town's Rental Dispute
Resolution Program except as they regard rent increases.
E. Unit Rents: Rents may not exceed 80% of the most current Fair Market Rents as
determined by the Santa Clara County Housing Authority.
F. Annual Review: If a tenant's income increases so that it falls between 80 and 100
percent of MFI, then the rent may be increased in accordance with the Town's
Rental Dispute Ordinance; and the unit shall still be considered a BMP Rental
Unit. However, if a tenant's income exceeds 100 percent of MFI, the rent may be
increased to the average rent of similar units in the complex; in this latter case, the
unit will no longer be a BMP unit and the next available unit that is comparable in
size shall be designated as a BMP unit in its place, and must be rented to an
eligible household so that the number of BMP units within the project remains the
same.
G. Deed Restrictions: Council approved Deed Restrictions shall be recorded for each
Below Market Price rental dwelling unit.
V 1. RENTAL UNITS -NEW SECOND DWELLING UNITS
A. Administration: The program shall be administered by the Town or its designee.
B. Second Unit Incentive Pro rg am: 29..10.310 of the Town Code, may choose to
participate in the Second Unit Incentive Program (SUIP) as referenced in Section
29.10.320(a) of the Town Code and as set forth below.
The SUIP consists of a no interest construction loan to a property owner
who intends to develop a new second unit. The loan amount shall be
determined based on the sduare foot construction cost as set forth in the
current version Uniform Building Code as adopted by the Town for new
construction and remodels. The loan amount will be calculated at 100%
of the construction cost if the unit is income and rent restricted to serve
households with incomes below 50% of the Median Family Income
(MFI), adjusted for household size, as defined by the United States
Department of Housing and Urban Development (HUD) for the San Jose,
CA Primary Metropolitan Statistical Area (PMSA), or 80% of the
construction cost if the unit is income and rent restricted to serve
households with incomes below 80% of MFI.
BMP Guidelines Page 11
2. When a property owner participates in the .SUIP, a deed restriction shall be
recorded on the property. The deed restriction shall stipulate the rental
rate, tenant income level, duration of affordability and loan repayment
requirement as well as any other criteria as determined appropriate by the
Town.
3. A SUIP loan to construct a second unit within the Central Los Gatos
Redevelopment Project area shall be funded using Redevelopment
Affordable Housing Funds and shall remain affordable for 55 years. A
SUIP loan to construct a second unit outside the Central Los Gatos
Redevelopment Project area shall be fielded using BMP Program Funds
and shall remain affordable for ~ 30 years. The SUIP affordability
restrictions as set forth in this section may only be amended by action of
the Town Council.
4. A tenant's ability to pay monthly rent will also ~be considered in
determining tenant eligibility.. Applications from tenants selected by the
property owner or manager will be forwarded to the Town or its agent for
verification of income eligibility. Rental agreements shall be submitted to
the Town or its agent to verify compliance with the provisions of this
section. Tenants are eligible to receive conciliation and mediation
services provided through the Town's Rental Dispute Resolution Program
except as they regard rent increases.
5. Units targeted to households with incomes up to 80% of the Median
Family Income (MFI) shall have rents restricted to 80% of Fair Market
Rents as determined by the Santa Clara County Housing Authority. Units
targeted to households with incomes up to 50% of CMI shall have rents
restricted to 50% of fair Market Rents as determined by the Santa Clara
Co>rmty Housing Authority. Tenant rents and incomes will be monitored
a>mually.
(Adopted by Resolution 2009- September , 2009)
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