07 Attachment 3 - Draft Resolution
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Resolution 20 - October 6, 2020
RESOLUTION 2020-
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
APPROVING MODIFICATIONS TO THE BELOW MARKET PRICE
HOUSING PROGRAM AND GUIDELINES.
WHEREAS, the Below Market Price Housing Program and Guidelines were
adopted by the Town in 1976; and
WHEREAS, on April 9, 2019, the Town Council Policy Committee held a public
hearing to consider possible modifications to the Below Market Price Housing Program
and Guidelines. The Policy Committee continued the matter to August 27, 2019, and
directed staff to bring back possible modifications to the Below Market Price Housing
Program Guidelines for further discussion; and
WHEREAS, staff prepared draft modifications for the Policy Committee’s
consideration; and
WHEREAS, on August 27, 2019, September 24, 2019, November 25, 2019, and
January 28, 2020, the Policy Committee held public hearings to consider modifications
to the Below Market Price Housing Program Guidelines; and
WHEREAS, this matter was regularly noticed in conformance with State and
Town law and came before the Planning Commission for public hearing on August 12,
2020; and
WHEREAS, on August 12, 2020, the Planning Commission held a public hearing
to consider modifications to the Below Market Price Housing Program Guidelines. The
Planning Commission recommended that the Town Council approve the modifications
with additional modifications; and
WHEREAS, this matter was regularly noticed in conformance with State and
Town law and came before the Town Council for public hearing on October 6, 2020; and
WHEREAS, the Town Council finds that the modifications are consistent with the
General Plan and its Elements and that the modifications are exempt from the California
Environmental Quality Act, Section 15061 (b)(3).
ATTACHMENT 3
Draft Resolution to
be modified by Town
Council deliberations
and direction.
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Resolution 20 - October 6, 2020
NOW, THEREFORE, BE IT RESOLVED:
1. The Town Council of the Town of Los Gatos adopts the modifications to
the Below Market Price Housing Program and Guidelines as follows:
Exhibit A
TOWN OF LOS GATOS
BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES
I. Purpose
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 moderate 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
Element. 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 for the longest feasible time as approved by an authorized body.
Although the Town has a fee-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 authorizing ordinances.
B. Enabling Legislation: The Below Market Price Program BMP is governed by
Division 6 of Article VIII of Chapter 29 of the Town Code. The BMP Program is
administered under these Below Market Price Program BMP Housing Program
Guidelines.
II. Below Market Price Housing Requirements – General
A. Applicability: The BMP Program requirements shall apply to all residential
development projects, mixed-use projects, multiple-family dwelling projects,
residential condominium projects, condominium conversions, and residential
planned 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
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2. Subdivision of property for single family or duplex housing development;,
or
3. Conversion of rental apartments to condominiums or other common interest
ownership; and, or
4. Conversion of non-residential use to residential use.
B. Number of BMP Units: All residential developments projects, mixed-use projects,
multiple-family dwelling projects, residential condominium projects,
condominium conversions, and all residential planned development projects
consisting of that include five (5) or more residential units or parcels are required
to participate in the BMP Program. The requirements for participation increase by
development size as shown below:
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 ten percent (10%) to twenty percent
(20%) over the range of 20 to 100 market rate units.; and
3. One hundred and one (101) units or more: The developer shall provide a
minimum number of BMP units equal to twenty percent (20%) percent of
the number of market rate units.
BMP dwellings within a project of rental units shall should also be rental units.
BMP units within a project of owner-occupied units shall should 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 Housing 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. Decimal fractions below .5 shall be rounded down 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
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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,
in limited circumstances, at its sole discretion, may consider an in-lieu payment
alternative to the required BMP for a project with an underlying zone of HR unit in
the case of Planned Unit development with an underlying zone of HR or a
residential developments project, mixed-use project, multiple-family dwelling
project, residential condominium project, condominium conversions, and all
residential planned development projects with five (5) to nine (9) units with an
underlying zone of HR. Prior to approving the in-lieu fee alternative, the applicant
must demonstrate to the satisfaction of the Town why a BMP unit cannot be: (1)
developed on the same site as the market rate units, and if it cannot be provided on
the same site then,; or (2) developed at an appropriate off-site location within the
Town limits. If the developer provides sufficient justification that both of these
alternatives are not viable, then an fee in-lieu fee 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 residential
unit that triggered the BMP requirement. The 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 Projects: Prior to occupancy
of each phase, a proportional amount of fees shall be paid, as determined
during the Planning approval process.; and
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.
32. Single-Family Planned Developments Projects: At time of final occupancy
for each unit.
E. 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 low/moderate income
households;
3. Purchasing land for the future development of affordable housing;
4. Developing affordable housing;
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5. Supplementing of affordable housing projects; and 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, in limited circumstances, at its sole
discretion, may consider off-site construction of BMP units for continuum care
facilities and for Hillside Residential (HR) Zone District and residential
developments projects, mixed-use projects, multiple-family dwelling projects,
residential condominium projects, condominium conversions, and residential
planned development projects with five (5) to nine (9) units with an underlying
zone of HR 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 Town Council may grant
an exception to these phasing requirements during the Planned Development
project approval process for condominium conversion developments.
H. 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 should to the extent
possible, reasonably be 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 should to the
extent possible, not be a significant identifiable difference between the BMP and
market-rate units visible from the exterior. The size and design of the BMP units
must should to the extent possible, be reasonably consistent with the market-rate
units in the development. The goal of the BMP Program is for a seamless
integration of the BMP units with the market-rate units in a 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 units in one location is not desirable and will generally not
be allowed.
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C. Finish of units: The external appearance of BMP units should be indiscernible to
that of the market rate units in the project. The internal finish of BMP units 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 Facilities: All project facilities and amenities, including parking, must be
available on the same basis to the BMP units as to the market rate units in the
project, to the extent feasible., unless the deciding body approves a reduction in
parking for the BMP units.
IV. The BMP Unit Purchase Process;, Buyer Selection, and BMP Unit Sale and Resale
Procedures.
A. Owner Occupied Units:
1. Applicant Eligibility
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 one hundred and twenty percent (100 120%) 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 income will be determined in
accordance with the guidelines provided in Appendix A of this
document. Eligible income includes, but is not limited to the
following:
1. Payment from employer;
2. Payment from self-employment (e.g.: Lyft. Uber, DoorDash,
etc.);
3. Spousal support;
4. Social Security Income; and
5. Dividends or Annuities from retirement accounts.
Additional information may be requested for confirmation of the
provided documents. Applicants must provide sufficient
documentation of income, as outlined in the Program’s application,
to the Town for use in determining the applicant’s income level.
Final determination of an applicant’s income level and Program
eligibility shall be at the sole discretion of the Town and/or its
designee.
b. Household assets, such as real property, may also be considered in
determining eligibility. Funds in excess of $5,000 (excluding the
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amount to be contributed as the Buyer’s downpayment and
retirement investment accounts such as 401K and 457K accounts)
will be included when determining household income. In such cases,
annual income will include the greater of the actual income from
household assets or a percentage of the value of household assets
based upon the current passbook savings rate as established by
HUD. This income, if any, will be included as part of the
household’s total income.
c. 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 costs shall
include the following factors:
1. 1. u Unit price;
2. 2. c Current lending rates;
3. 3. e Estimated property taxes;
4. 4. e Estimated homeowner’s private mortgage
insurance (PMI) costs;
5. u Utility assumption;
6. h Homeowners’ association fees, if applicable; and
7. 5. o Other expenses as determined necessary by the
lender.
d. c. Mortgage Financing: All persons must qualify for their own
mortgage financing for the purchase of available BMP units 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. All loans used to
purchase or refinance BMP units must be fixed rate and fixed term
without balloon payments to minimize homeowners exposure to
increased risks of mortgage default. Qualifications must include:
1. The ability to pay taxes, insurance, closing costs, and any
homeowner’s association fees in addition to the mortgage.;
2. All loans used to purchase or refinance BMP units must be fixed
rate and fixed term, without balloon payments, to minimize
homeowner’s exposure to increased risks of mortgage default.
The program reserves the right to identify additionally
prohibited loan programs and/or characteristics; and
3. Co-signers are allowed.
e. d. Required Downpayment: A homebuyer shall have a minimum
downpayment that is equivalent to at least 10 three percent (3%) of
the BMP purchase price and is required to document the source of
all downpayment funds. The minimum 10 three percent (3%)
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downpayment is exclusive of any other supplemental downpayment
assistance grant or loan programs available from other agencies.
f. Purchase Contract: At the time a purchase contract is signed, the
applicant must deposit a minimum of one percent (1%) of the
purchase price.
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, Solano, and Sonoma for at least three (3)
years prior to application. Exception is made consistent with the Federal
Housing and Urban Development (HUD) definitions (e.g. for people who
were homeowners prior to a divorce, a displaced homemaker, a single
parent who has only owned with a former spouse, a widow/widower of a
veteran, etc.) and for 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.
All points are calculated per household, not for each individual within the
household. For 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:
1. 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 time 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
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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, but excluding Los Gatos
Monte-Sereno Police Officers, who have been employed by the
Town for a period of no less than 12 months one year 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. The definition of "single," when used in
the context of "single heads of household," means only one parent
is present in the home.;
g. All licensed pre-school and public or private K-12 school employees
of schools and districts geographically located in and serving the
Town, and who have been employed in such capacity for at least one
year at the time of application.; and
h. All certified emergency first responders (e.g. sworn police officers,
fire fighters, and emergency medical technicians, and paramedics)
who have been employed in such capacity for at least one year at the
time of application by an agency serving the Town.
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.
i. Living in Los Gatos means: Occupying and renting, at the time
of application, for at least two years prior to the application date,
a bone fide rental dwelling unit within the incorporated Town
limits, as evidenced by valid third-party documentation (e.g.
current lease, CA driver’s license or vehicle registration card,
and/or utility bills showing applicant’s name and street address
in Los Gatos). For homeless applicants, evidence that the
applicant’s last permanent residence was located in Los Gatos
and/or documentation from a case manager or homeless service
provider may be used to document an applicant’s current status
in Los Gatos, which may include places or structures other than
a bona fide dwelling unit (i.e. tent, vehicle, etc.)
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.
i. Working in Los Gatos means: A member of the household must
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work a minimum of 20 hours per week as a permanent employee
at a business within the incorporated Town limits.
Telecommuting or working from an address located in Los
Gatos for an employer not located in the Town of Los Gatos as
defined above, shall not qualify as employment in the Town,
unless the employer is providing the workspace in the Town as
part of its corporate/company offices.
ii. For persons who are retired at the time of application, the
applicant’s work history immediately prior to the date of
retirement shall be considered in determining the length of
employment. The Town may require applicants to submit pay
stubs, W-2 forms, tax returns, or other satisfactory evidence as
proof of employment at a Town of Los Gatos business. Length
of employment shall be calculated from to the final date for
submitting a Town Eligibility Preapplication.
iii. Employment does not include volunteer work or any work
without reportable income.
3. Two points:
a. Households who have lived in the Town for at least 10 years and
have moved out of the Town within the last ten 10 years prior to the
time of application.
b. Household size is worth two points per person.
4. One point:
a. Households who live in Santa Clara County at time of the application.
i. Living within Santa Clara County means: Occupying and renting,
at the time of application, for at least two years prior to the
application date, a bone fide rental dwelling unit within the
incorporated County of Santa Clara, as evidenced by valid third-
party documentation (e.g. current lease, CA driver’s license or
vehicle registration card, and/or utility bills showing applicant’s
name and street address) in Santa Clara County. For homeless
applicants, evidence that the applicant’s last permanent residence
was within the incorporated County of Santa Clara and/or
documentation from a case manager or homeless service provider
may be used to document an applicant’s current status within the
incorporated County of Santa Clara, which may include places or
structures other than a bona fide dwelling unit (i.e. tent, vehicle,
etc.)
b. Households who work within the incorporated County of Santa
Clara County at time of the application.
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i. Working within Santa Clara County means: A member of the
household must work a minimum of 20 hours per week as a
permanent employee at a business within the incorporated County
of Santa Clara. Telecommuting or working from an address located
in Santa Clara County for an employer not located in the County as
defined above, shall not qualify as employment in Santa Clara
County, unless the employer is providing the workspace in the
County as part of its corporate/company offices.
ii. For persons who are retired at the time of application, the
applicant’s work history immediately prior to the date of retirement
shall be considered in determining the length of employment. The
Town may require applicants to submit pay stubs, W-2 forms, tax
returns, or other satisfactory evidence as proof of employment at a
Santa Clara County business. Length of employment shall be
calculated from to the final date for submitting a Town Eligibility
Preapplication.
iii. Employment does not include volunteer work or any work without
reportable income.
c. b. Households with an annual household income at or below sixty
percent (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. Applicants will initially be sorted by the number of preference points
awarded A lottery will be used to rank each qualified applicant and then will
be randomly sorted through a lottery selection process in the case of a tie.
Each applicant will be given a lottery ranking number in the case of a tie
and. will be notified in writing of the results of the selection process within
one week of the lottery being conducted.
6. Application Review:
a. Applications will be reviewed in ranking order. Additional documents
may be requested from the applicant with a deadline(s) outlined. Failure
to return the additional documents by the deadline(s) will result in
program disqualification due to an incomplete application.
b. After a full application review, applicants who meet the program
eligibility requirements will be issued a conditional approval letter from
the Town. Applicants who do not meet the program eligibility
requirements will be issued a disqualification letter.
i. A disqualified applicant can submit an appeal within seven days
from the date of the decision letter. Applicant must submit an
appeal along with documentation demonstrating the reason for the
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appeal. Seven days from receipt of the appeal, a hearing officer will
be assigned to review the appeal and additional documentation
submitted by the applicant. Seven days from assignment to a
hearing officer, a final decision will be delivered by mail to the
applicant.
ii. Eligible A applicants are provided the opportunity to purchase
available units in the order of point ranking, from most points to
least points. An applicant may refuse to purchase of an available
unit twice 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
retain 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. These time limits may be extended by the
Town for good cause.
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 be provided first right of refusal, regardless
of point ranking, for units in the following order:
a. The unit they reside in if it is designated as a BMP unit.; or
b. Any other available BMP unit.
C. Determination of Initial Selling Price: BMP units shall be priced to be affordable
to households in two income categories: Median Moderate Income Households
(those whose income is above eighty percent (80%), but no greater than one
hundred and twenty percent (100 120%), of the County Median Income MFI); and
Low Income Households (those whose income is above fifty percent (50%), but no
greater than eighty percent (80%), of the County Median Income MFI).
1. Fifty percent (50%) of the units in a project should shall be priced to be
affordable to Median Moderate Income Households; and fifty percent
(50%) should 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
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Median Moderate Income Households 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 Households
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, upon a showing by the developer that the project provides a public
benefit to the residents of the Town. to fulfill a development’s Community
Benefit requirements.
The Affordable Sales Price affordability level of a unit shall be for the
purpose of setting the initial selling price only and does 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 Affordable unit s Sales p Price for
each unit type (number of bedrooms), for each of the two income categories
consistent with Health & Safety Code Section 50052.5, and assuming a
three percent (3%) percent downpayment.
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 Moderate Income
Households: the average of the one hundred and twenty percent (100
120%) MFI annual income and the eighty percent (80%) MFI annual
income (assuming household size appropriate to size of unit) x
Multiplier = Initial Sales Price.
Example: 100 120 percent % MFI (4-person/4 bedroom) =
$105,000
80 percent % MFI (4-person/4 bedroom) = $75,700
Average MFI = ($105,000 + $75,700) divided by 2
= $90,350
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Average MFI X Multiplier = Initial Sales Price
1. Assumptions of household size by size of unit are as follows:
Unit Size
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 eighty percent (80%) MFI annual income and the
fifty percent (50%) annual income (assuming household size
appropriate to size of unit) x Multiplier = Initial Sales Price.
Example: 50 percent % MFI (4-person/4 bedroom) = $52,500
80 percent % MFI (4-person/4 bedroom) = $75,700
Average MFI = ($52,500 + $75,700) divided by 2
= $ 64,100
Average MFI 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 -
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10 three percent (3%) downpayment = mortgage. Annual
debt service on mortgage + annual property taxes + annual
homeowners fees + annual private mortgage insurance
(PMI) = Total Annual Housing Cost.
2. Determination of Minimum Household Income: Assuming
one-third of household income goes for housing expenses,
Total Annual Housing Cost x 3 = Minimum Annual
Household Income.
3. Determination of Multiplier: Sample Sales Price/Minimum
Annual Household Income = Multiplier.
Copies of the initial sales prices, and the calculations made, shall be
available on request from the Town’s Community Development
Department.
D. Required Documents for Completing a Home Purchase:
The following documents must be read and signed by the Owner(s) before the sale
or resale of a BMP unit is completed:
1. Promissory Note;
2. Performance Deed of Trust;
3. Deed Restriction, Refinance Restriction, and First Right of Refusal Agreement.
Council approved Deed Restrictions shall be recorded with each Below Market
Price dwelling unit in order to preserve indefinitely the affordability of the unit
for persons of low and median moderate income; and
4. Request for Notice Under Section 2924 (b) of California Civil Code, for each
lender Deed of Trust record on title.
E. 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 BMP 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.;
4. The homeowner, as noted in the recorded Deed Restriction, is responsible for
paying all closing costs (including commissions or fees) .; and
5. The homeowner is responsible for paying all costs related to a pest inspection
prior to the sale of the property, as well as the cost to cure any deficiencies noted
as “Section 1” in the inspection report prior to the close of escrow.
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F. General Requirements:
1. 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 their his or her primary residence during their his or her ownership of
said unit. Annual compliance monitoring will be performed to confirm proof of
owner occupancy. The owner shall cooperate with the Town and provide
required certifications and any reasonable requests for supporting
documentation to confirm compliance within fifteen (15) days of receipt of a
written request by the Town. The Town or its designee has the right to review
occupancy on a case-by-case basis. If the Town determines that an owner has
intentionally made false statements or misrepresented any facts on the annual
certification, or if an owner fails to submit the Certification of Owner
Occupancy, the Town will treat this as a breach of the Deed Restrictions and
will take all legal remedies available.
2. Capital Improvements: Consistent with the deed restriction, BMP homeowners
will have the opportunity to increase their resale price to reflect pre-approved
documented costs associated with capital improvements. To maintain the
affordability for future BMP owners, the Town will cap all eligible capital
improvements at ten percent (10%) of the resale price.
3. Title Transfer Restrictions: Any transfer without satisfaction of the provisions
of the Deed Restrictions is prohibited.
V. Requirements for BMP Rental Development
A. Administration: The program shall be administered by the Town or its designee.
B. Applicant Eligibility:
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 one hundred and twenty percent (120%)
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 income will
be determined in accordance with the guidelines provided in Appendix A of this
document. Eligible income includes, but is not limited to the following:
a. Payment from an employer;
b. Payment from self-employment (e.g.: Lyft, Uber, DoorDash, etc.);
c. Spousal support;
d. Social Security Income; and
e. Dividends or Annuities from retirement accounts.
Additional information may be requested for confirmation of provided
documents.
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2. Priority will be given to those households whose income is less than fifty percent
(50%) of the MFI.
3. Household assets may also be considered in determining eligibility. Household
Assets: For households applying to be a tenant of a BMP unit, the maximum asset
limit is equal to the maximum household income adjusted for household size that
is allowable in order to be eligible for the program. The maximum allowable
household income limits for the BMP rental program are published annually. Assets
are calculated based on account balances at the time of application.
4. Ability to Pay Rent: A tenant's ability to pay monthly rent will also be considered
in determining tenant eligibility.
C. Tenant Selection: The property owner or manager of the development shall market the
BMP unit(s) and solicit rental applications. Applications from tenants selected by the
property owner or manager will be forwarded to Town or its designee for verification
of income eligibility.
D. Annual Re-Certification of Income: At least once a year, the Town or its designee shall
requalify BMP tenants to verify that they are eligible to remain in BMP rental units.
a. The Town or its designee will provide the “BMP Renter Occupancy Certification
Form” to all BMP tenants who have lived in a BMP unit for at least one year. If the
BMP renter fails to submit a signed Occupancy Certification Form within thirty
(30) days of the written request, then the lease shall automatically terminate, and
the rent will increase to market rate, as determined by the apartment owner/property
manager or the Town, within sixty (60) days of written notice from the apartment
owner/property manager.
b. On an annual basis, re-certification shall be based upon the BMP tenant’s household
income as determined by:
i. Copies of payroll stubs or other verification of employment for the last two
consecutive months;
ii. Prior year tax returns;
iii. Bank statements for the last two consecutive months;
iv. Household size; and
v. Town or its designee will accept signed affidavits in lieu of the following
documentation:
a. No Financial Accounts under the tenant(s) name; and
b. No Income under the tenant(s) name.
E. Management:
1. BMP rental units shall be managed maintained and managed by the property owner
or manager in the same manner as other units in the development.
2. An affordable BMP unit may not be leased until the Town has approved the unit
for occupancy.
3. Tenants of BMP rental units are eligible to receive conciliation and mediation
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services provided through the Town's Rental Dispute Resolution Program, when
there is no concurrent issue concerning increase in or the amount of rent except as
they regard rent increases.
4. All BMP units must be rented to BMP tenants approved by the Town or its
designee.
5. An apartment owner/property manager shall notify the Town or its designee of any
available BMP units and the Town or its designee shall have fourteen (14) days to
provide apartment owner/property manager with an income eligible candidate(s).
In reviewing each candidate, the apartment owner/property manager may apply the
same tenant selection criteria, such as past performance in meeting financial
obligations and credit references, as those applied to applicants for non-BMP units
on the property, except for those standards relating to income eligibility and
minimum income requirements.
6. Executed Lease Agreement and BMP Addendum: The apartment owner/property
manager or tenant will provide the Town or its designee with a copy of the executed
lease agreement and BMP Addendum within five (5) business days of execution.
7. Terms of Lease Agreement:
i. BMP tenants will be subject to the same conditions of tenancy as other tenants
occupying the subject property, except for terms relating to occupancy,
income eligibility, annual recertification, and limits on rents; and
ii. Each BMP unit shall be leased under a form of tenant lease approved by the
Town or its designee. The tenant lease and BMP addendum shall, among other
matters:
a. Provide for termination of the lease for failure: (1) to provide any
information required under the Regulatory Agreement or reasonably
requested by the apartment owner/property manager to establish or
recertify the tenant's qualification, or the qualification of the tenant's
household, for occupancy of the BMP unit; or (2) to income qualify as a
result of any material misrepresentation made by such tenant with respect
to the income computation or certification;
b. Be for an initial term of not less than one (1) year. After the initial year of
tenancy, the lease may be month to month by mutual agreement of the
apartment owner/property manager and the tenant; however, the rent may
not be raised more often than once every twelve (12) months after such
initial year. The apartment owner/property manager will provide each
tenant with at least sixty (60) days' written notice of any increase in rent
applicable to such tenant;
c. Prohibit subleasing of the BMP unit or any portion of the BMP unit,
contain nondiscrimination provisions, and include the tenant's obligation
to inform the property manager of any need for maintenance or repair;
d. Allow termination of the tenancy only for an increase in tenant's
household income above qualifying income or for good cause, including
violation of the terms and conditions of the tenant lease, violations of
house rules, non-payment of rent, violations of applicable federal, state,
or local law, or other good cause;
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e. Include, at the apartment owner's option, the obligation for the tenant to
provide a security deposit not exceeding two (2) months' rent; and
f. Otherwise conform to BMP Guidelines.
8. Occupancy Requirements: The apartment owner/property manager shall notify the
Town or its designee if it suspects that there have been any changes to the
occupancy of the BMP unit. If the tenant fails to receive approval from the Town
for any changes in occupancy, or subleases the property, or fails to provide the
annual occupancy recertification, the tenant shall be in violation of its lease and
will no longer qualify as a BMP tenant.
9. Waiting List Management:
a. Waiting List: Anyone who wishes to be admitted to the property or to be placed
on the property’s Waiting List must complete an application. The application
must include a signature certifying the accuracy and completeness of
information provided. If the applicant is placed on the property’s Waiting List,
the List will note the name of the applicant, the date and time of application,
the size of unit desired, and any other pertinent information;
b. Accommodating Persons with Disabilities: The property shall accommodate
persons with disabilities who cannot utilize the property’s preferred application
process, by providing alternative methods of application in-take (e.g. accepting
mailed or online applications). In addition, the public notification of any
closing or opening of the property’s Waiting List shall comply with HUD fair
housing requirements, such as adopting suitable means to assure that notices
reach eligible individuals with disabilities and those with limited English
proficiency. The property also ensures that notices of and communications will
be provided in a manner that is effective for persons with hearing, vision, and
other communications-related disabilities consistent with Section 504 and
ADA. Accessible and auxiliary aids and services are provided as needed, [e.g.,
materials in Braille, audio, large type, sign language interpreters, computer-
assisted real time transcription (CART) services, assistive listening devices,
etc.] Applications will be made available ahead of time, and in multiple venues,
both physical and online, which will create a more accessible, and more
effective application intake;
c. Use of a Lottery System: Due to the high volume of applications, when opening
a previously closed Waiting List for a set period of time, the property will use
a lottery to select which applicants will be placed on the Waiting List, and the
order in which they will be placed. A public notice will clearly indicate that
this system will be used to place applicants on the Waiting List; Further,
applicants should be notified that, so long as the application is submitted within
the stated timeframe, the timing of the application submission will have no
effect on how soon they may be offered a unit. The date and time the lottery is
held will be the date recorded on the Waiting List. Any preferences the
applicant qualifies for will also be noted on the Waiting List;
d. Selecting Names from the Waiting List: The property will select names from
the Waiting List in chronological order to fill vacancies;
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e. Applicant’s Refusal to Accept a Unit: When appropriately sized units are
offered to applicants, and an applicant turns down a unit offer two consecutive
times, the applicant will be removed from the Waiting List;
f. Maintaining the Waiting List: In order to maintain a balanced application pool,
the property may, at its discretion, restrict application acceptance, suspend
application acceptance, and close a Waiting List in whole or in part. Decisions
about closing the Waiting List will be based on the number of applications
available, and the ability of the property to house an applicant within a
reasonable period of time. Closing the Waiting List, restricting acceptance, or
opening the Waiting List must be approved by the Town or its designee;
g. Advertising: Advertising and outreach activities will be done in accordance
with applicable fair housing marketing requirements;
h. Updating the Waiting List: The Waiting List will be updated at least annually.
The applicant is responsible to update the application with any changes that
may occur to remain active on the current Waiting List;
i. Preferences: Assigning preferences to applicants who meet certain criteria is a
method intended to provide housing opportunities to applicants based upon
household circumstances. Applicants with preferences are selected from the
Waiting List and receive an opportunity for an available unit earlier than those
who do not have a preference. Preferences affect only the order of applicants
on the Waiting List. They do not make anyone eligible who was not otherwise
eligible, and they do not change an owner’s right to adopt and enforce tenant
screening criteria; and
j. Monitoring: The Town or its designee may request to audit the Waiting List
from time to time to ensure compliance.
E. Unit Rents: Rents may not exceed eighty percent (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 eighty
percent (80%) and 100 one hundred and twenty percent (120%) 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 one hundred and twenty percent (120%) 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 BMP rental dwelling unit, in order to preserve indefinitely the
affordability of the unit for persons of low and moderate income.
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VI1. RENTAL UNITS - NEW SECOND ACCESSORY DWELLING UNITS
A. Administration: The program shall be administered by the Town or its designee.
B. Second Accessory Dwelling Unit Incentive Program: 29.10.310 of the Town Code
Accessory Dwelling Units (ADU) owners, may choose to participate in the Second
Unit an ADU Incentive Program (SUIP) as referenced in Section 29.10.320(a) of
the Town Code and as set forth below.
1. The SUIP Incentive Program consists of a no interest construction loan to a
property owner who intends to develop a new second ADU unit. The loan
amount shall be determined based on the square 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 one
hundred percent (100%) of the construction cost if the unit is income and rent
restricted to serve households with incomes below fifty percent (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 eighty percent
(80%) of the construction cost if the unit is income and rent restricted to serve
households with incomes below eighty percent (80%) of MFI.
2. When a property owner participates in the SUIP Incentive Program, 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, and as well as any other criteria as determined
appropriate by the Town.
3. An SUIP Incentive Program loan to construct an second accessory dwelling unit
within the Central Los Gatos Redevelopment Project area shall be funded using
Redevelopment Affordable Housing Funds and shall remain affordable for 55
years. An SUIP Incentive Program loan to construct an second ADU unit
outside the Central Los Gatos Redevelopment Project area shall be funded using
BMP Program Funds and shall remain affordable for a minimum of 30 years.
The SUIP Incentive Program 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 designee for verification of
income eligibility. Rental agreements shall be submitted to the Town or its
agent designee 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.
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5. Units targeted to households with incomes up to 80 one hundred and twenty
percent (120%) of the Median Family Income (MFI) shall have rents restricted
to 80 one hundred and twenty percent (120%) of Fair Market Rents as
determined by the Santa Clara County Housing Authority HUD. Units targeted
to households with incomes up to fifty percent (50%) of CMI MFI shall have
rents restricted to fifty percent (50%) of Fair Market Rents as determined by the
Santa Clara County Housing Authority HUD. Tenant rents and incomes will
be monitored annually.
APPENDIX A: Employment Income Calculation Methodology
Annual employment income must be determined for each job currently held. The following
methods will be used for calculating household income for qualification purposes for the
Town of Los Gatos BMP Program, with the vast majority of households expected to be
evaluated under Method One (below). The Town or its designee will apply Method #1 for
each job currently held by each household member. If, under the following circumstances,
Method #1 is not the most accurate method of projecting of annual income, then at the
discretion of Town or its designee, Methods #2-5 may be applied under certain scenarios,
including but not limited to the following:
1. Household earns income from commissions;
2. Household is an educator;
3. Household’s first pay date for the job was later than January 1st of the current year;
4. Household is receiving temporary disability compensation; or
5. Household is a seasonal worker.
Method #1: Year-to-Date Income from Paystubs
Use the most current paystub, divide the year-to-date (YTD) gross income by the current
pay period number to get the pay period average. Then multiply the pay period average by
the total number of pay periods the household receives in one year.
Example of Calculating Year-to-Date Income with Paystubs:
YTD income as stated on the most recent paystub for the calendar year = $20,000
Current pay period on most recent pay stub = 10
Estimated pay period amount = $2,000 ($20,000 divided by 10)
Total number of pay periods in one year for the household = 24
Annualized pay = $48,000 ($2,000 x 24)
Method #2: Year-to-date Income and Last Year’s Income
Use the most current paystub (or the last paystub received if the household currently
receives no income) to determine the household’s year-to-date gross earnings. Add the
year-to-date earnings to the household’s gross income from the most recent year’s income
tax return. Divide this number by 12 (to account for last year’s earnings) plus the number
of months the household’s year-to-date income encompasses. This is the average monthly
income. Multiply this number by 12 to annualize.
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Example of Calculating Income using YTD plus Last’s Year’s Income:
YTD income as stated on the most recent paystub for the calendar year = $20,000
Gross income from last year’s income tax return: $50,000
Number of months household has worked this year: 6
$50,000 + $20,000 = $70,000
6 months + 12 months = 18 months
$70,000/18 = $3,888.89 (average monthly income)
$3,888.89 x 12 = $46,666.67 (annualized income)
Method #3: Two-Year Average
Add the household’s total gross income from the two most recent years’ income tax returns.
Divide this number by 2 to get the two-year average.
Example of Calculating Income using the Two-Year Average:
Gross income from last year’s income tax return: $50,000
Gross income from the previous year’s income tax return: $55,000
$50,000 + $55,000 = $105,000
$105,000/2 = $52,500 (average annual income)
Method #4: Paystub Average
Add the household’s gross income from the two most recent months’ paystubs. Divide this
number by the number of paystubs included to get the pay period average. Then multiply
the pay period average by the total number of pay periods the household receives in one
year.
Example of Calculating Income using the Pay Check Average:
Total of most recent two months’ paystub = $8,000
Number of pay stubs included = 4
Estimated pay period amount = $2,000 ($8,000 divided by 4)
Total number of pay periods in one year for the household = 24
Annualized pay = $48,000 ($2,000 x 24)
Method #5: Verification of Employment
Reference the total annual income provided by Household’s employer in Verification of
Employment form (VOE).
In the above Method #1, Method #2, and Method #4, in cases where employer paid health
insurance costs are included within the gross income on a household’s paystubs, this
income may be excluded from the gross income calculation.
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APPENDIX B: Self-Employment Income Calculation Methodology
Self-employment income calculations will be based on the adjusted income from the two most recent years and a YTD Profit & Loss statement. The adjusted income shall include net income from tax returns with any depreciation or amortization added back. If the resulting adjusted income is negative, count the income as $0. Negative cash flow from a business may not be used to offset income generated from other sources when determining compliance with income limits.
The Town or its designee will apply the following three income methods to calculate self-
employment income. The method used will be determined by how long the household has
been self-employed, as follows:
1. If the Household member is self-employed for less than two years but over one-year,
annual income will be calculated by either; Method #1; or Method #2. The larger value
of the two calculations will be selected as annual self-employment income. In the
examples below, the calculation from annualizing Method #2 ($60,000) is higher, and
will be selected as the Household member’s self-employment income.
2. If a business started in the same year as the year of qualifying, the income will be
calculated using Method #2. In this case, the Household member must supply copies
of all invoices and payments made to the Household member in support of the YTD
Profit & Loss statement submitted.
3. If the Household member is self-employed for over two years, the Town will apply
Methods #1, #2 and #3 to calculate self-employment income, and use the calculation
that yields the highest annual income to determine eligibility. In the examples below,
the calculation from annualizing Method #2 ($60,000) is the highest, and will be
selected as the Household member’s self-employment income.
Method #1: YTD Profit & Loss Statement and Last Year’s Tax Return
YTD Profit & Loss Statement and Last Year’s Tax Return Calculation:
Use the adjusted YTD Profit & Loss statement to determine the Household member’s year-
to-date earnings. Add the YTD earnings to the Household member’s adjusted income from
the most recent year’s income tax return. Divide this number by 12 (to account for last
year’s earnings) + the number of months the Household member’s YTD income
encompasses. This is the average monthly income. Multiply this number by 12 to
annualize.
Example of Calculating Income using YTD Profit & Loss Statement and Last Year’s Tax
Return:
YTD adjusted income as stated on Profit & Loss statement = $20,000
Adjusted income from last year’s income tax return = $50,000
Number of months from the YTD Profit & Loss Statement = 4
$50,000 + $20,000 = $70,000
4 months + 12 months = 16 months
$70,000/16 = $4,375 (average monthly income)
$4,375 x 12 = $52,500 (annualized income)
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Method #2: YTD Profit & Loss Statement
YTD Profit & Loss Statement Calculation:
Divide the year-to-date (YTD) adjusted income by the number of months on the YTD
Profit & Loss statement to get the average monthly income. Multiply this number by 12 to
annualize.
Example of Calculating Income with YTD Profit & Loss statement:
YTD adjusted income as stated on Profit & Loss statement = $20,000
Number of months = 4
Average monthly income = $5,000 ($20,000 divided by 4)
Annualized pay = $60,000 ($5,000 x 12)
Method #3: Two-Year Tax Returns
Two-Year Tax Returns Calculation:
Add the adjusted income from the two most recent years’ income tax returns. Divide this
number by 2 to get the two-year average.
Example of Calculating Income using the Two-Year Average:
Adjusted income from last year’s income tax return: $50,000
Adjusted income from the previous year’s income tax return: $45,000
$50,000 + $45,000 = $95,000
$95,000/2 = $47,500 (average annual income)
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