02 Staff Report - Sale of 576 West Parr Avenue Unit 23, 576, and 33o~N 0 MEETING DATE: 9121109
ITEM NO:
!ps ~p~aS COUNCIL AGENDA REPORT
DATE: September 2, 2009
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON TOWN MANAGER /
SUBJECT: AUTHORIZE SALE OF 576 WEST PARR AVENUE UNIT 23 AND 576 WEST
PARR AVENUE UNIT 33, AND DIRECT STAFF TO ENGAGE A REAL
ESTATE PROFESSIONAL TO MANAGE SALE
RECOMMENDATION:
Authorize the sale of 576 West Parr Avenue Unit 23 and 576 West Parr Avenue Unit 33, and
direct staff to engage a local real estate professional to manage the sale.
BACKGROUND:
The Town's Below Market Price Housing Program (BMP Program) allows low and moderate
income households the opportunity to become homeowners. It has a limited number of homes,
typically condominiums or townhomes, which are sold at a price below the current market value.
In return for the ability to purchase a home at a below-market price, participating homebuyers
agree to restrict the price at which they may resell the unit in the future. In order to be eligible to
purchase a unit, a buyer must meet federal income guidelines.
BMP units are built by private developers, in accordance with the Town's Inclusionary Zoning
Ordinance (Town Code sections 29.10.3000 through 29.10.3040). Developers of multifamily
projects with five or more units must designate a specified number of those units as BMP units,
which are then sold through the Town's BMP Program.
The Villa Capri development, located at 576 West Parr Avenue, was originally approved in 1983
under Ordinance No. 1564 (later amended under Ordinances No. 1632 and 1638). The Town's
approval of the development required that four of the 35 total units be BMP units, and that the
entire development, including the BMP units, be restricted to occupancy by senior citizens (age
PREPARED BY: Regina A.
Communit ices Director
N:1CSDITCRPTS\2009 TCRPTS\Villa Capri Sale.dnc
Reviewed by: TAssistant Town Manager own Attorney
Clerk Administrator Finance Community Development Director
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: SALE OF 576 WEST PARR AVENUE UNITS 23 AND 33
September 2, 2009
60 or older). The BMP units were later identified as units 23, 33, 34, and 35. All four units are
one-bedroom, one-bathroom units.
After its construction, Villa Capri was operated for several years as a residential care facility; this
use was later discontinued and the units were prepared for sale as condominiums. At the time,
the Town's BMP Program Guidelines required that the Town and the developer come to
agreement on the initial sales prices for BMP units. The Town participated in lengthy
negotiations with the developer of the Villa Capri units, Capri Associates, but the two parties
failed to reach agreement. During this negotiation period, Capri Associates claimed to be renting
the units within the terms of the BMP Program Guidelines. Finally, the Town received
information that the BMP units were to be placed on the market, presumably at market price. In
order to maintain these units as part of the Town's valued affordable housing stock, the Town
initiated legal action against Capri Associates, resulting in Capri Associates selling the units to
the Town for $250,000 per unit, less than their market value. Escrow closed August 15, 2006. It
was the Town's intention to sell all four units to qualified buyers, according to the terms of the
then-current BMP Program Guidelines. Sales prices for all four units were set by the Town
Council via Resolution 2006-095.
Two of the Villa Capri BMP units, 34 and 35, have been sold to income-eligible households.
Unit 23 is rented to an income-eligible household, and unit 33 is currently vacant.
DISCUSSION:
Units 23 and 33 have remained under Town ownership since August 2006. Since that time,
every effort has been made to sell them to income-eligible households. The Housing Authority
of the County of Santa Clara, through an annual service contract with the Town, is responsible
for the marketing and sale of all BMP units. Authority and Town staff have implemented a
thorough marketing effort for the two remaining units, including the following:
• Multiple open houses were held at the available units.
• Potential homebuyers were allowed to tour the units on an appointment basis, outside the
regular open houses.
• Flyers with information about the available units, the eligibility guidelines, and
application procedures were sent to the Authority's mailing list of potential homebuyers.
• These flyers were also sent to the Senior Center's mailing list, posted in the Los Gatos
Senior Center, and provided to other local Senior Centers.
• Updated information about the units, the eligibility guidelines, and application procedures
is posted on both the Town and Authority websites.
The two units sold, 34 and 35, required one year and 18 months, respectively, to sell. The two
remaining units have been on the market for over three years. It has become clear during this
process that the Villa Capri units appeal to an extremely small pool of potential buyers. Buyers
must be senior citizens who are still able to walk up and down a flight of outdoor stairs to access
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT; SALE OF 576 WEST PARR AVENUE UNITS 23 AND 33
September 2, 2009
their units, interested in living in a seniors-only community, and willing to live in very small
units (units 23 and 33 are 834 and 601 square feet, respectively). Buyers must also be income-
eligible, but still able and willing to afford a modest monthly mortgage payment. In addition,
there is a cost to the Town to retain ownership, including homeowners' association dues of $580
per month for the two units.
With the goal of providing the most benefit to affordable housing efforts in Los Gatos, staff
recommends that both unit 23 and 33 be sold at market value, and the proceeds directed to the
BMP In-Lieu Fund. These two units have proved to be inappropriate for the majority of income-
eligible senior households, which might be better served by using the sale proceeds to help fund
units at another location. BMP In-Lieu monies may be used, generally in combination with other
funding, to fund new projects, acquire existing units, and fund services to income-eligible
residents, such as the rent and utility subsidy program grant to West Valley Community Services.
With the state of the current real estate market, and the specialized nature of these units, it is
difficult to estimate the market value, but based on the list price other units in the same complex,
it may be in the range of $250,000 to $300,000. While unit 33 could be sold immediately, unit 23
would be held as a rental until the tenant chose to vacate.
Staff also recommends that a local real estate professional be engaged to assess current market
value and handle the sale. The Housing Authority has indicated that it would not provide these
services, as its specialty is below market price properties.
CONCLUSION:
In sum, given the experience in the Below Market Price Housing Program as a whole, and with
the Villa Capri units specifically, the greatest benefit to affordable housing in Los Gatos would
result from selling the two remaining Villa. Capri units at market price, and directing the sale
proceeds to other affordable housing efforts through the BMP In-Lieu Fund.
ENVIRONMENTAL ASSESSMENT:
The recommended action is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
The entire proceeds of the sale of the two units would be deposited in the BMP In-Lieu Fund.
BMP In-Lieu monies may be used, generally in combination with other funding, to fund new
projects, acquire existing units, and fund services to income-eligible residents.
Distribution:
Housing Authority of the County of Santa Clara