09 Staff Report - Below Market Price Housing Programtow N nF MEETING DATE: 11/7/05
ITEM NO. 9
COUNCIL AGENDA REPORT
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lpS: ~A:~~S
DATE: October 21, 2005
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: ADOPT A RESOLUTION ADOPTING REVISED BELOW MARKET PRICE
HOUSING PROGRAM GUIDELINES AND RESCINDING RESOLUTION
2003-117
RECOMMENDATION:
Adopt a resolution (Attachment 1) adopting revised Below Market Price Housing Program
Guidelines and rescinding Resolution 2003-117.
BACKGROUND:
The Town's Inclusionary Zoning Ordinance was adopted in 1979. The ordinance requires
developers to provide a specified number of affordable owner-occupied or rental units, as
appropriate, in their new housing projects. In some instances, developers may pay fees in lieu of
providing affordable units. All units developed under the ordinance are managed under the Town's
Below Market Price (BMP) Housing Program. .
The BMP Program is managed by the Community Services Department, in accordance with the
Council-adopted "Below Market Price Housing Program Guidelines" (BMP Guidelines). The
current Guidelines were adopted under Resolution 2003-117.
The Community Services Commission, with input from the General Plan Committee and staff, has
conducted an extensive review of the BMP Guidelines, with the goal of improving the way in which
the BMP Program provides affordable housing to the Los Gatos community. At its November 18,
2004 meeting, the Commission adopted a recommendation that the Town Council adopt revised
BMP Guidelines. The Council considered this recommendation at its April 4, 2005 meeting, but did
not adopt the revised Guidelines. Instead, it sent the Guidelines back to the Commission, with the
PREPARED BY: Regina A. Falkner unity Services Director
N:\CSD\TCRPTS\2005 TCRPTS\BMP Guidelines Nov 005.wpd -
Reviewed by: S1 Assistant Town Manager _ own Attorney Clerk Administrator
Finance Community Development Revised: 10/21/05 10:26 am
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT A RESOLUTION ADOPTING REVISED BELOW MARKET PRICE
HOUSING PROGRAM GUIDELINES AND RESCINDING RESOLUTION 2003-
117
October 21, 2005.
direction that the Commission consider including occupation in the point system.
DISCUSSION:
In response to Council's direction, the Community Services Commission's Housing Committee met
to consider the issue of occupation, and also held a discussion with the General Plan Committee at
its September 28 meeting. Following these discussions, the Community Services Commission
considered the issue at its October 20 meeting, at which members voted unanimously to recommend
to Council that it adopt revised Below Market Price Housing Guidelines (Exhibit A to Attachment
1) with no changes to the point system from that brought to Council in April.
In summary, the reasons cited for not considering occupation as a feature of the point system are as
follows:
In order to maintain a diverse and thriving community, Los Gatos should contain and value
individuals working in the full spectrum of professions.
It is both impossible and unnecessary to prioritize the value of services individuals provide
to the community.
The recommended BMP Guidelines provide a fair, reasonable, and comprehensive point
system based on income, household size, and history of living and/or working in Los Gatos.
The members of the General Plan Committee present at its September 28 meeting unanimously
concurred with the Housing Committee's recommendation, though they did discuss the possibility
of providing points for emeency responders, as reported below.
Points for Emergency Responders
The General Plan Committee discussed the possibility of providing points to all "emergency
response" personnel. Currently, the Guidelines provide points to Town employees, as they are all
considered EOC personnel and are required to report to work in an emergency. It was concluded to
not provide points to any other emergency response personnel, for the following reasons:
Town employees are required to report to the Town EOC, located in the Neighborhood
Center. Emergency responders from other agencies may report to one of several EOCs,
including Los Gatos, the County EOC, or the EOC of other municipalities.
Non-Town emergency responders come from a pool of employees; no specific employee is
designated to respond to Los Gatos emergencies.
A non-Town emergency responder who lived in a Los Gatos BMP unit, but who during a
disaster was directed to report to another location, might have a conflict between personal
and job responsibilities.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT A RESOLUTION ADOPTING REVISED BELOW MARKET PRICE
HOUSING PROGRAM GUIDELINES AND RESCINDING RESOLUTION 2003-
117
October 21, 2005
Points for Native Los Gatans
The General Plan Committee also discussed the possibility of providing points to a class of people
loosely defined as those who are young (approximately age 20 to 25), grew up in Town, are new to
the workforce, and need some help to buy their first home. The General Plan Committee members
did not agree that the BMP Program was the best vehicle for providing help to such persons. They
also had substantial difficulty in defining this class of people in a way that could be applied to the
points system.
CONCLUSION:
The Community Services Commission recommends that Council adopt the proposed revisions to
the BMP Guidelines.
The recommended revisions to the BMP Guidelines contain a number of administrative
improvements to the BMP Program which it would be beneficial to adopt in a timely manner. If
Council has continuing concerns about the point system of the Guidelines, the Commission
recommends that Council adopt the revised Guidelines, and direct the Commission to come back at
a future date with additional revisions to the point system section only.
ENVIRONMENTAL ASSESSMENT:
The recommended action is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
No fiscal impact would result from the proposed action.
Attachment:
1. Draft Resolution of the Town Council of the Town of Los Gatos adopting revised Below
Market Price Housing Program Guidelines and rescinding Resolution 2003-117 (Exhibit A) .
Distribution:
Community Services Commission members
General Plan Committee members
Randy Tsuda, Assistant Director of Community Development
David Wei, Robson Homes, 2185 The Alameda, Suite 150, San Jose, CA, 95126
( Attachment 1
RESOLUTION NO. 2005-
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
ADOPTING REVISED BELOW MARKET PRICE HOUSING GUIDELINES
AND RESCINDING RESOLUTION 2003-117
WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 29.10.3000 through
29.10.3040 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 buy or rent, and assures to the extent possible that the
resale prices of those dwellings and rents, if they are rented, will be within the means of persons and
families of low and moderate income; and,
WHEREAS, 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 RESOLVED that the Town Council ofthe Town of Los
Gatos (1) repeals Resolution 2003-117; and, (2) adopts the revised Town of Los Gatos Below Market
Price Housing Program Guidelines attached as Exhibit A.
PASSED AND ADOPTED at a _ meeting of the Town Council of the Town
of Los Gatos, California, held on the _ day of November, 2005 by the following vote:
COUNCIL MEMBERS :
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
1
EXHIBIT A
TOWN OF LOS GATOS
BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES
I. GENERAL PROVISIONS
A. Number of units
Every multifamily rental dwelling project at the time of building permit, every
residential condominium or planned development residential subdivision at the
time of subdivision, and every community apartment project and every residential
stock cooperative apartment or unit project at the time of subdivision if the
transaction involves subdivision, or at the time of sale, if it does not, shall contain
one or more BMP dwellings according to the rules listed below with the following
exception: Any planned development with an underlying zone of HR, shall only
be required to pay an in-lieu fee as established by this resolution. The Town and
developer may negotiate to provide more BMP units than required by the rules
listed below, to fulfill a development's Community Benefit requirements.
1. Projects containing five or more but fewer than twenty market rate units
must provide a number of BMP units equal to 10 percent of the number of
market rate units.
2. Projects which include 20 to 100 market rates units must provide BMP
units as determined by the following formula:
Number of BMP units = (.225 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. All projects in excess of 100 market rate units must provide a number of
BMP units equal to 20 percent of the market rate units.
4. Whenever the calculations of below market price units result in a fraction
of one-half or more, the number of units to be reserved is increased to the
next whole number.
5. 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 proj ect 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.
B. Unit Standards
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
BMP Guidelines Page 1
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.
2. Location of units
BMP units shall be located 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.
3. 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 finishings, appliances, or fixtures, if such substitutions do not
violate any Town code requirement.
4. 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.
C. In-Lieu Fees
1. Establishment of Fee:
Projects with five or more but less than ten units may pay a fee in-lieu of
building a BMP unit in order to comply with BMP Program requirements.
Approval of Hillside Planned Developments with five or more residential
building sites shall require the payment of an in-lieu fee. The fee shall be
equal to the amount of six percent of the building permit valuation for the
project. The total building permit valuation is determined by the Building
Official.
2. Fees shall be paid prior to or at time of final occupancy as follows:
a. 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.
b. 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.
C. Single-Family Planned Developments. At time of final occupancy
BMP Guidelines Page 2
for each unit.
3. In-lieu fees will be deposited into the Town's Affordable Housing Fund.
Applications/recommendations for use of remaining funds will be
reviewed as received. Possible use of the funds include, but is not limited
to, the following:
a. subsidizing the cost of owner occupied units to make them
affordable to low/moderate income households
b. purchasing rental units to make them affordable to low/moderate
income households
c. purchasing land for the future development of affordable housing
d. developing affordable housing
e. supplementing of affordable housing projects developed through
the Los Gatos Redevelopment Agency
f. funding administration of the program, as approved by the Town
Council in its annual budget process
D. Confidentiality
Any information provided by an applicant in order to demonstrate eligibility for
the program is confidential and not considered public information to the extent
permitted by law except for statistical information on the BMP units and general
demographic information on the buyers and renters of BMP housing units.
Through BMP program implementation, the Town is attempting to provide a
supply of low-moderate income housing. The Town does not wish. to set the
occupants of such housing apart from the general community, attaching a stigma
to the occupants. Furthermore, no public interest is served by disclosure of this
information. The address of the projects containing BMP units may be provided
as well as a range of sales prices.
II. OWNER OCCUPIED UNITS
A. Applicant Eligibility
1. 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 100% 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.
BMP Guidelines Page 3
2. Housing Costs:
a. 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
(5) homeowners's association fees, if applicable
(6) other expenses as determined necessary by the lender
b. All persons must qualify for their own mortgage without assistance
from the Town. Qualifications must include the ability to pay
taxes, insurance, closing costs and any homeowner association fees
in addition to the mortgage.
B. Buyer Selection
1. 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:
a. Six points:
(1) 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.
(2) Senior Citizens who have lived in the Town for at least two
BMP Guidelines Page 4
years and have moved out of the Town within the last five
years prior to the time of application.
(3) 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.
(4) Households required to relocate their residence as a result
of Council action or mobile home park closure.
(5) 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.
b. Five points:
(1) 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.
C. Four points:
(1) 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.
(2) 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.
d. Two points:
(1) 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.
(2) Household size is worth two points per person.
e. One point:
(1) Households who live or work within Santa Clara County at
the time of application.
(2) Households with an annual household income at or below
60% of the Median Family Income (MFI), adjusted for
BMP Guidelines Page 5
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).
2. A lottery will be used to rank each qualified applicant in the case of a tie.
3. 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.
4. 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.
5. 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.
C. Determination of Initial Selling Price
1. 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).
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 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
BMP Guidelines Page 6
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 unit 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) 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 80% MFI annual income and the 50% annual
income (assuming household size appropriate to size of unit) x
Multiplier = Initial Sales Price.
BMP Guidelines Page 7
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. 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 Services Department.
D. Deed Restrictions
Council approved Deed Restrictions shall be recorded with each Below Market
Price dwelling unit.
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 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.
III. RENTAL UNITS
A. Administration
The program shall be administered by the Town or its designee.
BMP Guidelines Page 8
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% 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. Ability to Pay Rent
A tenant's ability to pay monthly rent will also be considered in
determining tenant eligibility.
C. Tenant Selection
The properly 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.
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.
BMP Guidelines Page 9
G. Deed Restrictions
Council approved Deed Restrictions shall be recorded for each Below Market
Price rental dwelling unit.
IV. RENTAL UNITS - NEW SECOND DWELLING UNITS
A. Administration
The program shall be administered by the Town or its designee.
B. Second Unit Incentive Program
The property owner of a New Second Dwelling Unit, as defined in Section
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.
1. 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 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 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 NMI.
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 funded 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
BMP Guidelines Page 10
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
County Housing Authority. Tenant rents and incomes will be monitored
annually.
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