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2003-117 - Adopting Revised Below Market Price Housing Program GuidelinesRESOLUTION 2003 -117 RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS ADOPTING REVISED BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES 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 residents; 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 extend 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 Guidelines by adding a section that pertains to New Second Dwelling Units. NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Los Gatos (1) repeals Resolution 2000 -131; and (2) adopts the Revised Below Market Price Housing Program Guidelines as indicated in Exhibit A. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 6th day of October, 2003 by the following vote: COUNCIL MEMBERS: AYES: Steve Glickman, Diane McNutt, Joe Pirzynski, Mike Wasserman, Mayor Sandy Decker. NAYS: None ABSENT: None ABSTAIN: None /"Woz zz/' SIGNED: YOR OF THE TOWN OF LOS GATOS ✓LOS GATOS, CALIFORNIA ATTEST: CLER OF THE TOWN OF L GATOS LOS GATOS, CALIFORNIA TOWN OF LOS GATOS BELOW MARKET PRICE HOUSING PROGRAM GUIDELINES I. GENERAL PROVISIONS A. 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. 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 (total # of market rate units) -2.5 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. B. Confidentiality Client information is confidential and not considered public information 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: Income limits are set according to household size using the Federal Department of Housing and Urban Development statistics regarding median income. 2. Buyer Qualification: a. A buyer's qualification is determined by the family's ability to make the monthly payments for the unit. The monthly housing cost shall include the following factors: S: \bmp guildelines 2000.wpd Exhibit A Unit Price - Current Lending Rates Estimated Taxes - Estimated Insurance Costs Homeowner's Fees - 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 applicant rating and ranking. Applicants will be ranked according to total points and must have at least one point to be eligible for consideration. Points are awarded as follows: Six points: (a) Senior citizens who reside in the Town at the time of application and have lived in the Town for at least the prior two years. A senior citizen is defined as any person 62 years of age or older at 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) Handicapped 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. (d) Households required to relocate their residence as a result of Council action or mobile home park closure. (e) Salaried 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. Five points: 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. Four points: 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. Three points: 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. Two points: a. Households who have lived in the Town for at least 10 years and have moved out within the last ten years prior to the time of application. S: \bmp guildelines 2000.wpd b. Household size is worth two points per person. One point: Households who live or work within Santa Clara County at the time of application. 2. A lottery will be used to rank each qualified applicant in the case of a tie. 3. An applicant has two opportunities to refuse a unit before being removed from the current applicant pool. 4. Applicants who do not qualify for a particular project shall retain their eligibility. 5. The highest ranked applicant must obtain pre - approval for a loan within one week after notification of its eligibility to purchase the unit. The applicant must submit documentation of loan approval within four weeks of notification of its eligibility to purchase the unit. C. Determination of Initial Selling Price 1, The initial sales price of the unit will be determined by consultation between the Town Manager, or delegate, and the developer within the price ranges calculated as defined herein. The Manager is authorized to approve changes in specifications to lower the price of the BMP units which do not violate any Town code or ordinance requirements, such as changes in carpeting, lighting fixtures, etc. The initial price will be set by a BMP price agreement, which must be signed by the Town Manager and the developer prior to the Planning Commission review of the project. 2. The initial price of a unit may include direct construction costs and may include a proportionate share of the costs of providing utility services, required on -site improvement, financing and premium points, loan standby fees, landscaping and parking, provided that the price shall not exceed an amount which will allow a range of qualified buyers (as defined above) to purchase a unit. 3. The initial price shall not include cost of land, builder's profit, marketing costs, planning, promotional or advocacy expenses, options preliminary drawings, preparing working drawings and specifications, off -site improvements, public agency fees, bonds, insurance, recreational facilities and engineering and architectural fees related to construction. 4. The range in which the initial selling price shall be set will be determined through completion of the following calculation od regular basis: a. Calculation of the Housing Multiplier i. Determination of Total Housing Cost Sales Price - 10 percent down payment = mortgage + Annual Debt Service • Taxes • Homeowners Fees + Private Mortgage Insurance (PMI) = Total Housing Cost ii. Determination of Minimum Household Income S: \bmp guildelines 2000.wpd Assume 30 percent of household income to go towards housing: Total Housing Cost /.30 = Minimum'household income iii. Determination of Multiplier Sales Price/Minimum Household Income= Multiplier b. Initial Sales Price Ranges Minimum and maximum sales prices are established by completing the following formula for a range of family sizes: Income (80, 100, and 120 percent of median income as defined by the Federal Department of Housing and Urban Development) (H.U.D.) x multiplier = sales price. D. Deed Restrictions Council approved Deed Restrictions are recorded with each Below Market Price dwelling units. E. Resale of Units 1. If the owner elects to sell his/her unit, the Town must be notified. 2. When a Below Market Price dwelling unit becomes available for resale, the owner must allow the Town to set the resale price and make the unit available to other program applicants. 3. The Town determines the resale price in accordance with the deed restriction recorded on the property. 4. Town markets the unit and ranks applications, to identify the top qualified applicants. F. 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 chief building official. 2. Fees shall be paid prior to or at time of final occupancy as follows: a. Multi - Family Owner Occupied Developments. At approximately 40% occupancy of entire development as determined during the Planning approval process. b. Multi - Family Renter Occupied Developments. At approximately 75% occupancy of entire development as determined during the Planning approval process. C. Hillside Planned Developments. At time of final occupancy for each unit. 3. In -lieu fees will be deposited into the Town's Affordable Housing Fund. Funds will be used, in part, for administration of the program. Applications /recommendations for use of remaining funds will be S: \bmp guildelines 2000.wpd reviewed as received. Possible use of the funds include, but is not limited to, the following: landbanking writing down the cost of owner occupied units to make them affordable to low /moderate income households purchasing rental units for renting to eligible tenants. III. RENTAL UNITS A. Administration The program shall be administered by the Town or its designee. B. Applicant Eligibility 1. Household Income: In order to be eligible, applicants must have a household income under 80 percent of the County's median income as defined by the Federal Department of Housing and Urban Development. 2. Ability to Pay Rent A tenant's ability to pay monthly rent will also be considered in determining tenant eligibility. C. Tenant Selection Applications from tenants selected by property owner or manager will be forwarded to Town for verification of income eligibility. D. Management 1. BMP rental units shall be managed in the same manner as other units in the development. 2. Tenants are eligible to receive conciliation and mediation services provided through the Town's Rental Mediation Program except as they regard rent increases. E. Unit Rents Tenants will be limited to persons whose annual income is less than 80 percent of the County's Median Income as defined by the Federal Department of Housing and Urban Development. Priority will be given to those households whose income is less than 50 percent of the median income as defined by H.U.D 1 Rents will be restricted to 80% of 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 the County's Median income, 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 the median, 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 must be rented to an eligible household so that the number of subsidized units remains the same. S: \bmp guildelines 2000.wpd 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 chose to participate in the Second Unit Incentive Program (SUIP) as referenced in Section 29.10.320(a) of the Town Code and as set forth below. The SUIP consists of a no interest construction loan to a property owner who intends to develop a new second unit. The loan amount shall be determined based on the 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 County's Median Income or 80% of the unit is income and rent restricted to serve households with incomes below 80% of the County's Median Income. 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. Loans shall be repaid in 30 years. 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. 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 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 Mediation Program except as they regard rent increases. Units targeted to households with incomes up to 80% of the County's Median Income levels shall have rents restricted to 80% of Fair Market Rents as S: \bmp guildelines 2000.wpd determined by the Santa Clara County Housing Authority. Units targeted to households with incomes up to 50% of the County's Median Income levels 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. S: \bmp guildelines 2000.wpd Current Income Guidelines Determined by Federal Department of Housing and Urban Development for Santa Clara County Effective February 1, 2003 % of Median 30 50 .80 100 Persons in Extremely Low Very Low Low Income Median Income Household Income Income 1 22,150 36,950 57,450 73,900' 2 25,300 42,200 65,650 84,400 3 28,500 47,500 73,850 95,000 4 31,650 52,750 82,100 105,500 5 34,200 56,950 88,650 113,900 6 3.6,700 61,200 95,200 122,400 7 39,250 65,400 .101,800 130,800 8 41,800 69,650 108,350 139,300 N; \CSMBMP \2003 Income Limits.wpd Attachment 2