HomeMy WebLinkAbout2005-08-16; City Council; 18252; Village by the Sea Financial Assistance RequestCITY OF CARLSBAD -AGENDA BILL 13
AB# 18,252
MTG. 8/16/05
DEPT. HlRED
TITLE:
V ILLAGE BY THE SEA
REQUEST FOR FINANCIAL ASSISTANCE FOR
LOW INCOME HOMEBUYERS
RECOMMENDED ACTION:
That the City Council ADOPT Resolution No. 2005-265 as recommended by the Housing Commission,
APPROVING a request to provide $220,000 in financial assistance from the Housing Trust Fund to the 11
low income home buyers within the Village by the Sea residential development, which is located within the
Village Redevelopment Area, and approving and authorizing the City Manager or his designee to prepare
and execute the related loan documents with the approval of the City Attorney and/or Special Legal
Counsel.
ITEM EXPLANATION
Anastasi Development recently completed construction of their Village by the Sea residential development
within the Village Redevelopment Area. The project is located on Carlsbad Boulevard and Washington
Street, between Christiansen and Beech Streets. The project provides for 65 town homes and condominiums with approximately 8600 square feet of retail space fronting on Carlsbad Boulevard. A total
of 11 units within the development are being sold to low income households to meet the project’s
inclusionary housing obligation.
The 11 affordable residential units are located within Building 1 of the Village by the Sea development. They
include 9 two bedroom, 1 three bedroom and 1 four bedroom units. The units range in size from
approximately 871 to 1,447 square feet. The 11 units will be affordable to households earning 80% or less
of the San Diego County Area Median Income ($52,050 to $63,550, depending on bedroom size).
The Developer for the Village by the Sea project is Anastasi Development. Anastasi retained Affordable
Housing Applications to assist them with developing their affordable housing sales program. Anastasi is
requesting financial assistance for the 11 low income homebuyers to help them with the required down
payments for the affordable units. Anastasi requested $20,000 to $25,000 per low income homebuyer within
the Village by the Sea development.
On August 11, 2005, the Housing Commission considered the developer’s request and recommended
approval of $220,000 (or $20,000 per unit) in financial assistance for the project. In the past, the City has
provided $1 5,000-$20,000 per unit for for-sale product available to low income households. The most
recent for-sale product financial assistance request approved was for the Mulberry at Bressi Ranch project.
The Mulberry project received $20,000 in assistance from the City for each of the 100 low income buyers.
The request for financial assistance is now being forwarded to the City Council for approval and
authorization to prepare and execute the appropriate loan documents.
FINANCIAL ASSISTANCE FOR THE AFFORDABLE HOUSING PROJECT
For most affordable for-sale projects in the past, the City’s assistance has been structured in a form which
is first used for project construction and then for deferred financing for the actual homebuyer. In this case,
the developer has already completed construction of the units and is requesting assistance for the low
income home buyers to assistance them with required down payments for the subject residential units. If the financial assistance request is approved, the financial assistance will be provided directly to the
homebuyer at the time of purchase (rather than to the Developer). This City subsidy will be in the form of
down payment assistance and structured as a loan which is repaid to the City upon resale of the unit to a
non-low income household.
AB# 18,252
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The following restrictions will be placed on the affordable unit:
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The low income buyer must live in the unit as hidher principal place of residence; the unit may not
be rented.
There is a limit to the price at which the unit may be sold during the first fifteen years; it must be
sold to another low income household at the appropriate restricted price.
After year 15, the home may be sold to a non-low income household but the City’s loan must be
repaid. Any real appreciation is shared between the City and the homebuyer based on the
contribution to the initial purchase. There is no “windfall’’ profit to the subsidized buyer under this
loan structure.
The City has the option to purchase the unit at a restricted price when it is put up for sale.
The City loan is due and payable upon any default under the Promissory Note, Resale Restriction
Agreement, or Deed of Trust, upon transfer of the home and at the end of the 30 year term.
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Proiect Aqreements
Each home buyer will be required to execute loan documents for the assistance. The documents include a
Borrower Promissory Note, Borrower Deed of Trust and Securify Agreement, Borrower Resale Restriction
Agreement and Option to Purchase, and Borrower Disclosure Statement. These documents are explained
below.
0 Borrower Promissory Note- This document is a “promise to pay” the City for the total amount of the
loan advanced to borrower. The note is secured by a Deed of Trust. In this agreement, the borrower is
promising to repay the City Loan of $20,000, all developer subsidy, and any contingent interest upon sale or
transfer of the property.
Borrower Deed of Trust and Security Agreement - this document outlines the security for the loan
between the City of Carlsbad and the individual property owner. The security provided for the loan includes:
1) the owner’s interest in the property, 2) all buildings and improvements of every kind and description on
the property, and 3) interest in all personal property or fixtures on the property.
Borrower Resale Restriction Agreement, and Option to Purchase - this document outlines the
resale controls on the home and provides the City with an option to purchase the home at a restricted price
when the buyer decides to sell the home.
0 Borrower Disclosure Statement - this document explains the major provisions of the Promissory Note,
Deed of Trust, and Borrower Resale Restriction Agreement to help the borrower better understand the
terms and conditions of said documents.
With City Council approval, these documents will be prepared and executed by the City Manager or his
designee, with final approval by the City Attorney and/or Special Legal Counsel.
HOUSING COMMlSSlONlSTAFF RECOMMENDATION
At their meeting on August 11, 2005, the Housing Commission reviewed the request to provide financial
assistance to the low income buyers of the affordable housing units within the Village by the Sea residential
development. The Commission recommended that the City Council approve the financial assistance in the
amount of $220,000 from the Housing Trust Fund and authorize the City Manager or designee to prepare
and execute the related loan and regulatory documents.
AB ## 18,252
Page 3
SUBORDINATION OF CITY AGREEMENTS
It is important to note that by approving the subject agreements, the Council is also agreeing to subordinate
the City’s loans and agreements to the lien of deeds of trust securing the financing provided by a private
lender. The lenders will require that the City subordinate its loan and agreements to those of the Bank. As
with similar previous projects, staff will ensure that the Bank provide commitments reasonably designed to
protect the City’s investment in the event of default. These protections include a notice of default to the City
and a right of the City to cure the default.
ENVIRONMENTAL REVIEW
The City of Carlsbad conducted an environmental review of the subject project pursuant to the Guidelines
for Implementation of the California Environmental Quality Act and the Environmental Protection Ordinance
of the City of Carlsbad. As a result of said review, a Negative Declaration was issued for the project and
adopted by the Housing and Redevelopment Commission in their approval of the residential project. No
further environmental review is required as part of the approval of the financial assistance.
FISCAL IMPACT:
The financial assistance to the low income homebuyers will be provided from the City of Carlsbad’s Housing
Trust Fund. The Trust Fund has a current undesignated fund balance of approximately $10 million. The
$220,000 loan will be in the form of a silent second trust deed loan and will be repaid, along with the
Developers subsidy and shared appreciation, upon sale or transfer of each individual property.
EXHIBITS:
1. City Council Resolution No. 2005-265 approving financial assistance for the low income homebuyers of
affordable units within the Village by the Sea residential development, and authorizing City Manager or
designee to prepare and execute appropriate loan documents with approval of the City Attorney and/or
Special Legal Counsel.
2. Project Location Map.
3. Housing Commission Staff Report dated August 11, 2005, including developer’s financial assistance
request for the low income homebuyers.
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CITY COUNCIL RESOLUTION NO. 2005-265
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF CARLSBAD, CALIFORNIA, APPROVING
$220,000 IN DOWNPAYMENT FINANCIAL
ASSISTANCE FROM THE HOUSING TRUST FUND TO
THE 11 LOW INCOME HOME BUYERS WITHIN THE
VILLAGE BY THE SEA RESIDENTIAL
DEVELOPMENT LOCATED IN THE VILLAGE
REDEVELOPMENT AREA, AND APPROVING AND
AUTHORIZING THE CITY MANAGER TO PREPARE
AND EXECUTE THE RELATED LOAN DOCUMENTS
WITH APPROVAL OF THE CITY ATTORNEY AND/OR
OUTSIDE LEGAL COUNSEL.
APPLICANT: ANASTASI DEVELOPMENT
WHEREAS, the City of Carlsbad has identified a need to provide housing which is
affordable to low income households in a variety of different forms; and
WHEREAS, a project known as “Village by the Sea” has recently completed
construction which provides for eleven (11) for-sale, two, three bedroom and four bedroom,
condominium units on property generally located on Carlsbad Boulevard and Washington Street,
between Beech and Christiansen Streets in the Village Redevelopment Area; and
WHEREAS, the affordability level and the unit mix of the proposed project are
consistent with the City of Carlsbad’s Housing Element objectives, Consolidated Plan, and
Inclusionary Housing Ordinance; and
WHEREAS, on August 11, 2005, the City of Carlsbad Housing Commission held a
public meeting and recommended that the City Council approve financial participation in the
project that is necessary, appropriate and exceeded by the public benefit received by the City; and
WHEREAS, the City Council did hold a public meeting to consider a request to provide
downpayment assistance to the low income buyers of said eleven (11) for-sale, two, three and
four bedroom, condominium housing units affordable to low income households in the Village
by the Sea residential development and;
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Page 2 of CC Resolution No. 2005265
WHEREAS, at said public meeting, upon hearing and considering all testimony, if any,
of all persons desiring to be heard, said Council considered all factors relating to said request:
NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City
of
Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The request for City financial assistance for home buyer down payments for the
Village by the Sea residential has been determined to be consistent with the goals
and objectives of the City of Carlsbad’s Housing Element and Consolidated Plan,
the Inclusionary Housing Ordinance, and the Carlsbad General Plan.
3. The request for City financial assistance will assist low income households to
purchase a total of eleven (11) for-sale, two, three and four bedroom,
condominium housing units in the Village by the Sea residential development
within the Village Redevelopment Area. The project, therefore, has the ability to
effectively serve the City’s housing needs and priorities as expressed in the
Housing Element and the Consolidated Plan.
4. That based on the information provided within the City Council Staff Report, the
Housing Commission Staff Report, dated August 11, 2005, and the testimony
presented during the public meeting of the City Council, the City Council hereby
APPROVES the financial assistance for the individual low income home buyers
within said project and APPROVES a total amount of $220,000 from the City of
Carlsbad’s Housing Trust Fund to provide down payment assistance to low
income buyers of said eleven (11) for-sale, two, three and four bedroom,
condominium housing units in the Village by the Sea residential development.
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Page 3 of CC Resolution No. 2005-265
5. That the City Council authorizes the City Manager or his designee to prepare and
execute all documents related to provision of the City assistance, including but
not limited to a Borrower Promissory Note, Borrower Deed of Trust and
Security Agreement, Borrower Resale Restriction Agreement and Option to
Purchase, and Borrower Disclosure Statement, subject to review and final
approval by the City Attorney and/or Special Legal Counsel.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
Council of the City of Carlsbad, California, held on the 16th day of AUGUST, 2005 by the
following vote, to wit:
AYES: Council Members Lewis, Hall, Kulchin , Sigaf oose
NOES: None
ABSENT: Council Member Pa
ABSTAIN: None
ATTEST:
A
LORRAINE M. WO&, City Clerk ’
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[SEAL)
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EXHIBIT 2
Project Location Map
Village by the Sea
VILLAGE BY THE SEA
RP 01-06/CT 01-lO/CDP 01-16
EXHIBIT 3
Housing Commission Staff Report
Village by the Sea
Financial Assistance
CftyoiCaa-labad Houmizqg 8t Redewelopmarat Department
AREPORTTO'I'HE
HOUSXNG UO-lsSXON
DATE: August 11,2005
SUBJECT: VILLAGE BY THE SEA - RECOMMENDATION OF APPROVAL TO
THE CITY COUNCIL TO PROVIDE $220,000 IN FINANCIAL
ASSISTANCE TO THE BUYERS OF ELEVEN (11) AFFORDABLE
CONDOMINIUM UNITS WITHIN THE VELAGE BY THE SEA
PROJECT IN THE VILLAGE REDEVELOPMENT AREA.
I. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 2005-05, recommending
APPROVAL to the City Council to provide $220,000 in financial assistance from the
Housing Trust Fund in the form of low income home buyer down payment assistance for
eleven (11) affordable for-sale condominium units within the Village By the Sea
development within the Village Redevelopment Area.
11. PROJECT BACKGROUND
The Village by the Sea housing development recently completed construction. The
development provides for a total of 65 town homes and condominiums (stacked flats) and
approximately 8600 square feet of commercial space.
111. PROJECT DESCRIPTION
The affordable housing condominiums located within the Village by the Sea project are
located on Washington Street and Carlsbad Boulevard, between Christiansen Way and
Beech Street.
The affordable condominiums have been constructed as stacked flats within Building 1
of the development. See attached site plan. The condominiums have been priced for sale
to be affordable to households earning 80% of the San Diego County Area Median
Income. The maximum prices for the affordable units is $182,700 for a two bedroom,
$2 1 1,100 for a three bedroom, and $227,400 for a four bedroom. The maximum income
for households purchasing an affordable unit is $52,050 for a two bedroom unit, $59,200
for a three bedroom unit, and $63,550 for a four bedroom unit. The chart below provides
a summary of the number of units available for each bedroom size.
VILLAGE BY THE SEA AFFORDABLE CONDOMINIUMS
AUGUST 11,2005
PAGE 2
Two/Two
Three/Two
Four/Three
871sf 9
1,170 1
1,447 1 I---- I Total 11
IV. DEVELOPMENT TEAM
The Developer for the Village by the Sea is Anastasi Development. The affordable housing
units have been constructed by Anastasi as part of the market-rate development. Anastasi
Development has considerable experience in the development of market-rate housing within
urban environments. Anastasi partnered with Affordable Housing Applications, which has
considerable experience in developing and implementing affordable for-sale programs.
V. FINANCIAL ASSISTANCE
From the beginning, it has been Anastasi Development’s intent to provide the required
affordable housing units with no financial assistance from the City of Carlsbad. They do
not wish to receive any form of government assistance to meet their obligation. Their
intent has been to self-finance construction of the affordable units and then to work
through the California Housing Finance Agency (CalHFA) to obtain loan interest loans
(4%) for their buyers which would allow them to meet the qualification requirements for
the City’s Inclusionary Housing Program. CalHFA gave initial assurances to the
developer that all of its buyers would be eligible to participate in the low interest loan
program offered by their office. Unfortunately, CalHFA reversed its decision after the
developer had qualified all of the buyers and offered them an affordable home in their
development.
CalHFA’s legal counsel ultimately determined that the City’s shared appreciation
requirements do not meet CalHFA’s guidelines. Therefore, they will not authorize
participation of the potential buyers. As a result, the low income households will not be
able to obtain CalHFA’s low interest loans. This will require the potential buyers to
obtain private financing which will have a much higher interest rate (approximately
5.25%). This is a significant increase which results in all of the buyers now being
ineligible to purchase the home in Village by the Sea. In order for the buyers to remain
eligible to purchase a unit, they will need a larger down payment. Many of the buyers,
however, do not have access to additional funds for a larger down payment.
VILLAGE BY THE SEA AFFORDABLE CONDOMINIUMS
AUGUST 11,2005
PAGE 3
On behalf of the low income buyers, Anastasi has requested that the City provide down
payment assistance in the amount of $20,000 to $25,000 per household. See attached
letter from Anastasi Development. This will allow the existing buyers who had expected
to purchase a home in the Village by the Sea development with the assistance of CalHFA
to proceed with their acquisition.
Although it is unusual for a developer to come in after the fact and request financial
assistance for the buyers, there is precedence for providing financial assistance directly to
the homebuyer rather than the developer for construction purposes. The Mulberry
development at Bressi Ranch has a similar financial assistance structure. The City
approved down payment assistance of $20,000 each for 100 low income households with
the Mulberry development. This assistance is provided directly to the homebuyer to allow
them the ability to obtain a smaller private loan (mortgage) for purchase of their new
affordable home thereby making their monthly housing payments meet the City’s criteria
for affordable housing purposes.
Staff is recommending that the City provide $220,000 (or $20,000 per unit) in down
payment assistance for the 11 low income home buyers for the Village by the Sea
development.
The City down payment assistance will be structured as loan that is repaid to the City
upon resale of the unit. Any real appreciation is shared between the City and the
homebuyer based on the contribution to the initial purchase. No “windfall” is provided
to the subsidized buyer, and the City’s position is protected.
The financial assistance will be provided from the City of Carlsbad’s Housing Trust
Fund. The Fund currently has a balance of approximately $10 million
The City takes a security interest in the property for the affordable housing project.
Because the amount of City assistance is only a portion of the total subsidy, the City will
have a significant “cushion” of equity protecting its actual cash loan. In addition, the
individual units will be required to remain affordable for fifteen years after the initial
purchase. If the home owner wishes to sell the unit within the first fifteen years, the
property must be sold to a low income household at a price that is affordable to said
buyer. The requirement to sale the unit at an affordable price is guaranteed through the
execution of a Deed of Trust and a Resale Agreement, which are both recorded against
the property.
From a risk standpoint, the City’s financial assistance will be subordinated to
conventional bank financing. If a problem did arise, the bank’s interest would come
ahead of the City’s. This risk, however, is mitigated by the fact that the City’s program
restricts the amount of gross household income that may be used for housing costs. As a
result, the household is in a better financial position because they are not overextended on
their housing costs. The risk of default on the conventional loan is thereby significantly
reduced.
VILLAGE BY THE SEA AFFORDABLE CONDOMINIUMS
AUGUST 11,2005
PAGE 4
VII. SUMMARY AND STAFF RECOMMENDATION
It is the role of the Housing Commission to make financial assistance recommendations
to the City Council based on several considerations with respect to affordable housing
projects. These are:
0 The proposal's effectiveness in serving the City's needs and priorities as expressed
in the Housing Element of the General Plan and the Consolidated Plan.
The proposal's consistency with the City's affordable housing policies and
ordinances as expressed in the Housing Element and Inclusionary Housing
Ordinance.
The proposal's development and operating feasibility, emphasizing the
development team capacity, financing sources and the role of the City in
providing financial assistance or incentives.
Staff is recommending that the Housing Commission approve a recommendation to the
City Council to commit a total of $220,000 (or $20,000) to the 11 buyers of affordable
housing units within the Village by the Sea Development. The hding will be provided
from the City of Carlsbad's Housing Trust Fund. The Housing Trust Fund has a current
undesignated fund balance of approximately $10 million.
VIII. EXHIBITS
1. Housing Commission Resolution No. 2005-05
2. Correspondence dated August 1,2005 from Anastasi Development
3. Project Locator Map
4. Project Site Plan
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HOUSING COMMISSION RESOLUTION NO. 2005-005
THAT THE HOUSING COMMISSION RECOMMEND APPROVAI TO THE
CITY COUNCIL TO PROVIDE $220,000 IN FINANCIAL ASSISTANCE FROM
THE HOUSING TRUST FUND IN THE FORM OF LOW INCOME HOME BUYER
DOWN PAYMENT ASSISTANCE LOANS TO THE BUYERS OF ELEVEN (11)
AFFORDABLE CONDOMINIMUM UNITS WITHIN THE VILLAGE BY THE SEA
PROJECT IN THE VILLAGE REDEVELOPMENT AREA.
APPLICANT: ANASTASI DEVELOPMENT
PROJECT: VILLAGE BY THE SEA
WHEREAS, Anastasi Development is the developer of the Village by the Sea housing
development within the Village Redevelopment Area; and
WHEREAS, Anastasi Development has constructed a total of 65 residential housing
units within the Village by the Sea development, of which 11 are affordable to low income
households; and
WHEREAS, pursuant to the City of Carlsbad’s Inclusionary Housing Ordinance, Chapter
2 1.85 of the Carlsbad Municipal Code, the developer is selling 1 1 two, three and four bedroom
units to low income households as a means to satisfy the affordable housing obligations for the
Village by the Sea development; and
WHEREAS, Anastasi Development has requested financial assistance from the City of
Carlsbad to assist the low income buyers to provide the required down payment for said
affordable units;
WHEREAS, on August 11, 2005, the Housing Commission held a public meeting to
consider the developer’s request for financial assistance for the low income buyers to purchase
11 affordable housing units within the Village by the Sea development; and
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WHEREAS, at said public meeting, upon hearing and considering all testimony, if any,
of all persons desiring to be heard, said Commission considered all factors relating to the request
for financial assistance;
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing Commission of
the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The project is consistent with the goals and objectives of the City of Carlsbad's
Housing Element, the Consolidated Plan, the Inclusionary Housing Ordinance, and
the Carlsbad General Plan.
3. The project will provide a total of 11, for-sale, two, three and four bedroom attached
condominium units affordable for purchase to households at 80% or below of the
county median income which meets a "medium priority'' affordable housing need as
outlined within the City of Carlsbad's approved 2000-2005 Consolidated Plan. The
project, therefore, has the ability to effectively serve the City's housing needs and
priorities as expressed in the Housing Element and the Consolidated Plan.
4. That based on the information provided within the Housing Commission Staff Report
and testimony presented during the public meeting of the Housing Commission on
August 11, 2005, the Housing Commission hereby ADOPTS Resolution No. 2005-
05, recommending APPROVAL to the City Council to provide $220,000 in financial
assistance for the low income buyers purchasing 11 affordable two, three and four
bedroom attached condominium units to satisfy the requirements of the Inclusionary
Housing Ordinance for the Village by the Sea development. Funding for the down
payment assistance program shall be provided from the City of Carlsbad's Housing
Trust Fund.
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HC RES0 NO. 2005-05
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5. That the Housing Commission recommends that the City Manager or his designee
be authorized to prepare and execute the borrower loan documents subject to
review and approval by the City Attorney and/or Special Legal Counsel.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Housing
Commission of the City of Carlsbad, California, held on the 1 lth day of August, 2005, by the
following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
EDWARD SCARPELLI, CHAIRPERSON
CAFUSBAD HOUSING COMMISSION
DEBORAH K. FOUNTAIN
HOUSING AND REDEVELOPMENT DIRECTOR
HC RESO. NO. 2005-05
PAGE 3
EXHIBIT 2
MEMORANDUM
August 1,2005
TO: Debbie Fountain, City of Carlsbad
FROM: John Simon, Anastasi Development
and Jim Hunt AHS
SUBJECT: City Home Buyer Funds
We are writing to request assistance in selling our 11 affordable units. Unlike the
other developers participating in your for-sale inclusionary housing program,
Anastasi Development did not require a narrow income range for qualification.
We took buyers that were below 80% but did not impose a floor. We felt we
could do this because of the assistance offered by CalHFA. Unfortunately, as
you know, despite their early assurances to approve the program, CalHFA
declined to fund the Carlsbad program.
Without the CalHFA low interest rate and additional assistance which totaled
more than $38,000 per household, Anastasi Development finds it difficult or
impossible to qualify the buyers that we have been working with for several
months. Additional City assistance of $20,000 - $25,000 per unit would help us
qualify our buyers. In addition to the City funds each buyer will apply for a SD
County Mortgage Credit Certificate (MCC) tax credit assistance. Even with the
City assistance and the MCC program, Anastasi Develo ment still finds it
necessary to provide additional funds in the form of a 3' trust deed to effect the
sale of our affordable units.
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Thank you for your consideration of this request.
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EXHIBIT 3
SI
VILLAGE BY THE SEA
RP 01=06/CT 01-IOICDP 01-16
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EXHIBIT 4