13 Desk Item - Annual Update on Affordable Housing ActivitiesMEETING DATE: 1/20/03
°wN ITEM NO.
DESK ITEM
~0S"s°g COUNCIL AGENDA REPORT
DATE: JANUARY 20, 2004
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: ANNUAL UPDATE ON AFFORDABLE HOUSING ACTIVITIES
DISCUSSION:
Council Member McNutt raised an issue concerning the report entitled Annual Update on
Affordable Housing Activities noting that on the second page of the report it indicates that
should the property at 20 Dittos Lane be acquired, that staff would issue an RFP to non-profit
housing developers for an affordable housing development on this property. Council Member
McNutt has indicated that such an RFP should not be restricted solely to non-profit developers,
but also should include for-profit developers. Staff stands corrected, and concurs that such an
RFP should also be send to for-profit developers.
PREPARED BY: Marry Woodworth
Redevelopment Manager
N:\DEV\Marty\Forms\affordablehousingdeskitemjan2004.wpd
Reviewed by: Assistant Town Manager ! Town Attorney Clerk Finance
community Development Revised: 1/20/04 12:40 pm
Reformatted: 5/30/02
0.
MEETING DATE: 1/20/04
ITEM NO.
~o s COUNCIL AGENDA REPORT
S GA~°
DATE: JANUARY 13, 2004
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: ANNUAL UPDATE ON AFFORDABLE HOUSING ACTIVITIES
RECOMMENDATION:
Accept report on affordable housing activities.
BACKGROUND:
On September 16, 2002, the Town Council held a Study Session to discuss the Town's affordable
housing activities. Staff prepared a detailed report* (Attachment 1) for the Study Session that
discussed the Town's affordable housing activities. In addition, staff prepared a detailed Draft
Redevelopment Agency Affordable Housing Strategy that outlined a number of potential affordable
housing activities to pursue.
Annually, staff would like to update the Council on the current affordable housing activities being
undertaken by the Redevelopment Agency ("Agency") and by the Town. In this manner Council can
be informed of activities and provide comments to staff.
DISCUSSION:
New affordable housing units in Los Gatos are generally provided in two ways: 1) using
Redevelopment Agency Low and Moderate Income Housing Funds, and; 2) through the Town's
Below Market Price. program and with CDBG funds. Listed below are the affordable housing
activities currently being pursued in each of these two categories.
PREPARED BY: Marty WoodwortH
Redevelopment and Economic Vitality Director
Reviewed by: Assistant Town Manager Attorney Clerk Finance
IEL~,_Community Development Revised: 1/13/04 8:57 am
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ANNUAL UPDATE ON AFFORDABLE HOUSING ACTIVITIES
January 13, 2004
Redevelopment Agency Low and Moderate Income Housing Fund
Under Redevelopment Law, 20 percent of all tax increment revenue collected by a redevelopment
agency must be spent on affordable housing. The Agency currently has approximately $2.6 million
in its Low and Moderate Income Housing Funds ("LMIHF") with annual revenues of approximately
$800,000. This annual income stream is generally unencumbered (there are no bonds or other debt
service payments required of it)..
The Agency has undertaken two projects over the past year. The first is the Habitat for Humanity
house on Charles St. that was completed in September, 2003. The Agency contributed $310,000 to
make this project a reality. The second project, which was completed in early December, 2003, is
the Project Match five unit very low income senior group residence on Blossom Hill Rd. The
Agency contributed $262,000 in LMIHF and the Town contributed $126,801 in CDBG funds to this
project.
The Agency is currently working with the owners of 20 Dittos Lane regarding a potential purchase
of this 1.5 acre property. Should the Agency he able to acquire this property it would then issue a
Request for Proposals (RFP) to non-profit housing developers for an affordable housing
development on this property. Staff, :at a later date, will need to get direction-from the Council
regarding the type of affordable housing project desired and an idea of the density that might be
suitable for the site.
2. Below Market Price Affordable Housing Program
Under the Town Code, new housing developments of five or more units must either provide a
certain number of Below Market Price units (BMP) or pay an in-lieu fee to the Town. The Town
has approximately $1 million in its BMP in-lieu fund available for affordable housing projects.
These funds can be combined with Agency funds in order to finance a project such as Dittos Lane
or could be used on a separate Town initiated project.
During the first half of 2004, staff will be focused on revising the BMP Guidelines. The goals
of this revision are to maximize the program's benefit to the community, and to facilitate more
effective administration. Issues to be addressed include:
Demographics: What is the typical household size, income, and composition of the local
households who could most benefit from the BMP Program? How should these household
characteristics affect unit size or price?
Community Benefit Units: How should the program address proposed community benefit
units? (i.e., - units which the developer wishes to reserve for certain populations, such as teachers
or public safety employees. To date approximately three of these types of units have been
proposed).
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ANNUAL UPDATE ON AFFORDABLE HOUSING ACTIVITIES
January 13, 2004
Sales Price: What is the best means for setting the sales price of a new unit: one which takes
into account developer costs, affordability to the moderate income household, or real-world
financing options?
Staff anticipates that draft revisions to the BMP Guidelines will be brought to the General Plan
Committee for its review and to Council for its approval by June 2004.
Second Units: Staff is working on developing a loan program in conjunction with the recently
approved Second Dwelling Unit Ordinance. As approved by Council, the Town or the
Redevelopment Agency would provide construction financing for a new secondary living unit if
the owner voluntarily agrees to record affordability restrictions against the unit. In this manner
the Town can provide additional affordable housing at a reasonable cost. Should the unit be
inside the Central Los Gatos Redevelopment Project Area then Agency LMIHF will be used.
Should the unit be outside the Project Area, then Town BMP funds would be used. Staff is in the
process of developing the loan program and is working with the Housing Trust of Santa Clara
County to administer the program. Staff expects to bring back to Council in early 2004,
guidelines for review and approval.
CONCLUSION:
Staff continues to pursue affordable housing projects for the Town. The Agency is currently
pursuing a project on Dittos Lane. The Town continues to produce BMP units in new housing
developments as well as collecting in-lieu fees. In addition, staff is working to develop a loan
program for new secondary living units in which the owners will voluntarily record affordability
restrictions against a unit in return for a low-cost construction loan from the Agency or the Town.
Staff believes that the Town should be able to produce a number of new affordable units at a
reasonable cost using this approach.
Staff is seeking direction from Council regarding the current and proposed strategies for
producing affordable housing in Los Gatos.
ENVIRONMENTAL ASSESSMENT:
Is not a project defined under CEQA, and no further action is required.
I
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: ANNUAL UPDATE ON AFFORDABLE HOUSING ACTIVITIES
January 13, 2004
FISCAL IMPACT:
The fiscal impact of each project will be analyzed as it is brought forward to the Council for
consideration.
Attachments:
1. Council Study Session Report from the September 16, 2002 meeting
S AaffordablehousingupdatedecOlwpd
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414
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DATE:
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FROM:
SL-BJECT
MEETING DATE: 9/15/02
COUNCIL STL]DY SESSION REPORT
Seaterlber 10, 2002
NL?Y0R AND TOWN C0UINCIL
. Ia~qrv-~
DLBRA J. FIG0NE, TOWNN tiLNNAGER
DISCUSSION OF AFFORDABLE HOUSLNG
RECON& E.N-DATION:
Staff seeks Council direc ion er, the followi:g key affordable housing issues:
1. What directior. should staff take in spendi:ig the Redevelopment Agency's Affordable'
Housing Set-Aside Funds
2. Should changes be made to the Town's Below Market Rate (BMP) program to target I,ow
Income persons? What should be the mix of ownership vs. rental units?
3: L-1 order to help get State ceaication of the Town's Housing Element, should proper:es on
Oka Read be considered for higher density zoning?
BACKGROUND:
Lack of affordable housing is one of the key regional issues impacting Silicon VaL'ey sand the Bay
Area. The lack of available land, high construction costs, and difficulty'in getting projects approved
have resulted iri a severe shortage of affordable housing. The high cost of housing forces many to
live many miles from.,xl ere they work, resulting in time consuming commutes. Companies often
find it difficult to recrl:it employees ,'Who cannot afford to live in the area, despite good salaries. Ln
turm, some cornpan es relocate outside of the Bay Area because or this housing problem. - Hcusino
and transportation will continue to be the two most significant issues that Silicon Valley will have
to address Ln order to continue to maintain its economic vitality and high quality of life.
(Continued to Page 2)
PREPARED BY: BLZ7 N. LORTZ D`-~
'IF
CO'Yf~iL-viTY DEVELOPtifENT DIRECTOR
Reviewed by:
S ?ssista:~tTown til~zager
Aaomey Clerc
-Finance
Co__ munity Developrnert
Revised: 9/11'02
5:06 pm
Eo.^ared =/3 o/c?
Attachment 1
ti
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: DISCUSSION OF AFFORDABLE HOUSING
September 12, 2002
DISCUSSION:
All cities arld towns in :he Santa Clara Valley save a State mandated obligation to produce housing
and affordable housing. The Town has its "Fair Share" housing obligations adopted in its General
Plan Housing Element. Los Gatos, with its redevelopment agency, must spend 20 percent of all tax
increment collected on affordable housing. Furthermore, the Town has its Below Market Price
(BMP) program that requires new housing developments to set-aside a certain number of units as
affordable, or pay an in-lieu fee.
Developing affordable housing -s challenging in Los Gatos for several reasons. First, the cost of:and
and construction is very expensive here. Second, there is very little land available for affordable
housing or any other type of development. Finally, the approval process is often 'engthy and highly
scrutinized by residents,
Despite the afore..-nentioned obstacles, Los Gatos has been successful in developing a significant
number of affordable housing units in` the past. Because of the substantial redevelopment agency
affordable housing funds the Town is accumulating, as well as B)'YT in lieu funds, it is important for
the Town to develop a strategy to produce additional affordable housing. Affordable housing
projects often take several years from inception to completion, consequently, planning needs to beg-a
imr.nediately.
The purpose of :he Affordable Housing Study Session is to review affordable housing issues with
she Council in order that it can provide guidance to staff in terms of the direction to proceed wit,
affordable housing issues as outlined in the "Recommendation" section of this report.. The Study
Session will locus on the following three areas:
1. Redevelopment Agency Affordable Housing Strategy
2. The Town's Below Market Rate (m?) program
3. The General Plan's Housing Element
1. Redevelopment :agency Affordable Housing Strategy
Attachment I provides the detailed draft Redevelopment Agency Affordable Housing Strategy ac
was recently prepared by staff. The Strategy provides information to the Council on: 1) Housing
require :merits and obligations; 2) Funding sources; 3) Types of affordable housing; 4) Potential sites
for affordable housing proiects, and: 5) Next steps. The Strategy is intended to provide the Council
with necessa_r y back round irfornation in order that it can provide dLection to stafff in teer7s of the
types of affordable housing projects to investigate. The following is a summary of key points f:onn
the report:
Redevelopment Law requires that all redevelopment agencies spend 20% of their tam
increment revenues or. affordable housing.
Tl e Los Gatos Redevelopment Agency (the "Agency") has aprroximately S2 rrill:on in its
M4YOR AID TOWN COL-NCIL
SUBIEC'T: DISCUSSION OF AFFORDABLE HOUSING'
September 12, 2002
20 % housing set-aside fund (the "Housing Fund"). The Town has approximately $I million
in its BMP fund. The Agency needs to begin to spend down its Housing Fund in the next
three years to be in compliance with state law. Typically, the Town's funds would be
leveraged with other funding obtained by a non-profit housing developer. In addition, the
Agency could bond its housing set-aside revenues, however, there are a number of
restrictions on use of the funds should the Agency decide to do so.
• Redevelopment Housing Fund money can be spent on affordable housing within he
Redevelopment Project Area (444 aces in and around the downtown) or elsewhere in the
Town upon making certain findings.
• The Agency has expended Housing Funds in the past on the 12 unit Los Gatos Creek (tiLiies
Ave.) development and for the Habitat for Humanity house which shouid be ur-der
construction soon.
• The Town has a number of choices in te- of now it wishes to spend its Housing Fund.
Obtaining the Council direction in the following areas would be helpful:
• Rental housing (most common form of affordable housing).
Ownership housing (requires very high subsidies in an expensive area such as Los
Gatos).
• Senior housing, family housing, special needs housing, public employee housing?
• Large family vs smallfamily development.
Rehabilitation vs. new construction (note: rehabilitation does not result in anv "zet
new" housing units).
• Size of projects: Large vs. small (greater economies of scale with larger projects):'
• Wcr_; ing with non-profit developers(most corm-non method for agencies in
constructing or rehabilitating affordable housing).
• Pooling of Town's RDA Housing Fund and Bi'vM in-lieu fund.
Staff has developed a list Qf several properties that may have some potential for affordable housir.3.
All will have a variety of issues of deal with, however, they represent what appears to be sor ne of
the best possibilities for affordable housing developments:
• 20 Dittos Lane - 1.6 acres near downtown with a vacant historic building. Owner
wishes to develop property and would consider affordable housing. Access to t'-1e
site is difficult.
• Riviera Terrace Apartment ComplexownedbvSobratoDevelopnent.Ownerwould
like to seek density bonus to build additional units - many to be affordable.
• Los Gatos Mobile Home Park - A i application for this 12.6 acre site was sub:_,_dtted
by Barry Swenson to construct 60 town homes, with 19 of which being ENT.
Exist fig use has 72 mobile home spaces. Site has a number of issues.
• Vacant County Parcel adjacent to courthouse on Capri Ave. - County'gas ir_dicat~d
an interest in wcrking to develop affordable housing. T:lis would be a good location.
County needs to determine that property is surplus.
• Oka Rd./Yll'_t properties - several car-c--'s ranging :n size frCnZ 1 3Cre .0 6 acres.
Good location and adjacent co omler .-izl:er density Zous fig. Yuri has slnowd'it.'e
interest in selling any or :fie properties.
PAGE-,k
MAYOR AIND TOWN COUNCIL
SUBJECT: DISCUSSION OF AFFORDABLE HOUSING
SepTember 12, 2002
• 14561 Winchester Blvd. - north of Courtside Tennis Club. - this 2.3 acre site has two
older homes on it. A number of issues concern this property.
• Town owned property at Lark and Winchester - the property,.s vacant and about ;/z
acre in size and could accommodate a smaller affordable housing project.
• 15940 Blossom Hill Rd Blossom Hill Rd. at Old Blossom Hill Rd. - two parcels
totaling approximately 1 1/i acres. Site could accommodate a moderately sized
affordable project. A number of issues to deal with.
• Villa Vasona'Apartments on W. Parr Ave. - Affordability restrictions expire in
November, 2004. Town intervention maybe required to assure future affordability;
of units.
• Next steps - Council to provide staff direction in terms of affordable Housir.~
opportunities to pursue.
2. Below Xarket Price Program (BLNIP)
In addition to the redevelopment housing set aside requirements, a primaryelement of he Town's
affordable housing prograrn is he Below tilarket Price (BMP) Housing Program. Resolution 2000-
131 and Sections 29.10.3020 - 29.10,3040 of the Town Code (Attachments 3 and 4 respecti vely) set
forth the elements of the Town's BMP Program. The objective of the BMP program is to require the
construction of dwelling units such that persons and families of moderate income can afford to buy
or rent , and that the resale prices and rents are restricted through recordation of deed restrictions
such that the BILYT unit(s) will remain in the.Town's supply of affordable units.
Through the BN program, new residential units are made available to income eligible householcs
for purchase or rent at below market rate prices. The proggr•am currently includes housing inventory
of 29 owner occupied units; 4 additional snits are due to be constructed widri the next year. Also
included in the program ape 31 rental units (29' are part of The Terraces, a senior continuing ca.-e
retirement facility); 47 additional rental units have been approved, 27 of which are included in the
recently approved Los Gatos Gateway project.' Attachment 5 provides a list of pending BLIP units.
Staf; is in tale process of drafting policy recommendations regarding the B.NT progral-r, in three
prur_a.-y a.r;°as and would 1.>.Ke to obtain (L.e,,,:on ..om Cot,rc• .These areas ar., r,'ef_y ,;,,scribed as
follows:
1. Rental versus Owner-Occupied Units
Currently, the Town allows the applicant to determine if the B1T units will be for sale or rental. Tne
current and approved distribution of B.1P units totals 33 units that are owner occupied (for sale
units) and 78 that are rental occupied. The current percent distribution of approved BMP units
include 30 % owner occupied and 70% rental. The adopted General Plan policy H.P. 2.2 stases _`:at
"The ToVin shall attempt to maintain a range of 30-35 percent of the total tcw: dwell:: g as
rental.
PAG~~ _
MAYOR AND TOWN COUNCIL
SUBJECT: DISCUSSION OF AFFORDABLE HOUSING
September 12, 2002
The staff would like direction from Council regarding he management of the distribution of BMP
units. In -.ssence, should staff direct and condition the "for sale" and "rental" distribution of
development projects with BNIP units and should the BMP program maintain General Plan pclicy
H.P. 2.2.?
2. Household Incomes
Under the current BMP program there are *_wo income categories that include moderate income
housing (80% -100% of the County Median Income {($74,250 - 596,000 for a family of four)) and
Low Income (<80% of County Median Income). Page H-3 of the General Plan states the BMP
program should be revised so that new BMP units are only affordable to very low or low income
households. Staff, is looking for direction from Council regarding the elimination of the moderate
income category as an eligible income category for BMP units. Attachment 6 provides the most
recent Housing and Urban Development (HID) income distribution categories that define Low
Income based on the County median income. Staff believes that making Bl,2 units available for
Low Income persons, versus Moderate Income, will better meet the affordable housing seeds of the
community.
3. Targeted Households
To demonstrate "corlmurity benefit", developers have recently been proposing additional B tiIP units
aimed at specific populations such as teachers and public safety employees. Currently, applications
are ranked on a point system. A minimal number of points are awarded to Town employees. if
Council wishes to broaden the targeted population, staff recommends that the guidelines be revised
to allocate the same number of points to a general "worker housing" population group. T:is coup
would include teachers, municipal employees, and or.private sector service industry workers as an
example. Priority could be given for the woriter housing category to those employed within rhe
Town. Feedback is requested on what additional populations Council would Ike targeted and if more
or fewer points to these populations are desired. Attachment 3, Resolution 2000 -131 provides the
point system criteria.
3. The General Plan's Housing Element
The Housing Element update began in Fall 2001. The Town. red a housing consultant, 'tiIe'.zn:e
Shaffer-F-eitas of Freitas +Freitas to prepare the new HousmgElement. An administrative draft was
completed in March 2002 and was sent to the State Department of Housing and Corr-muniry
Development (HCD) for review. Staff also presented the March 2002 Draft to the General Plan.
Cc=ritt-- (GPC) and hen worked with a four member sub-committee of the GPC in reVie,ing the
draft goals, policies and i-molementin- strategies that will ultirrrately'oe irconoratedinto he General
Plan. The consultant recently completed revisions in response to HCD comments receiv-d in ;ate
July 2002. The Housing Eler_ent public review period was advertised and began or. Sebte ben
2002, and will end on October 2' , 2002. The public hearing draft was forwarded to HCD for -'a'/! eW
and co Z-r_ents should be received prior to public hearings.
MAYOR AiND TOWN COUNCIL
SUBJECT: DISCUSSION OF AFFORDABLE HOUSING
September 12, 2002
The next steps to be taken are as follows:
• September 25, 2002 - General Plan Con=ittee will discuss he public hearing draft and
formulate a recommendation to the Commission and Council.
• October 2, 2002 - Community meeting. Staff and the consultant will be available at that
meeting to discuss the Draft Housing Element and to answer any questions from members
of the public.
• -October 9,2002 - Planning Commission hearing.
• October 21, 2002 - Tentative Town Council hearing date.
Among the July 2002 comments from HCD was a request that the Town rezone property to a .`dg`:er
density in order to meet housing production requirements. Following discussions with HCD t,e
housing consultant recommended that the Town include a housing program to rezone-at least 11ve
acres to high density. Staff suggested that the wording state that the Town will consider .rezonin31
properties on Oka Road to a higher density. There is approximately 13 acres of R-1:8 zoned lard
in this area that could be rezoned to I;LM:5-12, thereby allowing for a higher density and -Wore
affordable housing >.:nits. Staff seeks Council direction on :his issue.
The architectural Standards/HMside Committee (AS C) has had some discussions about secondary
dwelling units and accessory living quarters in the past year. The ASC suggested that accessory
livin quarters criteria be dropped and that secondary dwelling unit provisions be looked at to see
if they can be modified to allow potential for more second units in the Town. The Committee has
not forwarded a recommendation on this to the Commission or Council, but. staff would like the
Council's input on this topic in order to make a determination on whether it should be pursued.
CONCLUSION:
Affordable housing is an important issue in Los Gatos and Silicon Valley. The Study Session :s
intended to provide the Council with information regarding the Town of Los Gatos' a -crdao:e
housing efforts and to seek direction from the Council on key issues. More specifically, the S rudy
Session focuses on :he following:
1. How to spend the Los Gatos' Redevelopment Agency's 201-7o Housing Funds
2. Whether some changes should be made to the Town's Below Market Price (EMP) progra=-
to better meet the needs of the community
3. The Los Gatos General Plan Housing Element, and the possibility of rezoning 'a .d on Oka
Rd. to Maher density
EN-VLRO'y--vf-PN--I'AL ASSESSNENT:
Is not a pro iect deaned under CEQA, and no further action is required.
PAGt
- MAYOR AND TOWN COUNCIL
SUBJECT: DISCUSSION OF AFFORDABLE HOUSING
September 12, 2002
FISCAL IMPACT:
The Study Session itself will have no direct fiscal impact. Affordable housing developments wit
be required to come before the Council/Agency Board for review and approval of any funding.
Attachments:
1. Draft RDA Affordable Housing Strategy
2. Draft Housing Element
3. Resolution 2000-131
4. Town Code Sections 29.10.3020 - 29.10.3040
5. Pending BMP Units
6. HUD Income Limits
7. Town of Los Gatos Derographics
Distribution:
Departrent Heads
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