Loading...
HomeMy WebLinkAbout2006-04-25; City Council; 18542; Bluffs Low Income Homebuyers Financial AssistanceCITY OF CARLSBAD - AGENDA BILL AB# MTG. DEPT. 18,542 4/25/06 HIRED TITLE: THE BLUFFS REQUEST FOR FINANCIAL ASSISTANCE FOR VERY LOW INCOME HOMEBUYERS DEPT. HD^kp^ J$ CITYATTY. <&£-' OITV Mfl/"*D •-» \/V"*"^CITY MoK. ^3^af_ RECOMMENDED ACTION: That the City Council ADOPT Resolution No. 2006-108 as recommended by the Housing Commission, APPROVING a request to provide $200,000 in financial assistance from the Housing Trust Fund to the 10 very low income home buyers within the Bluffs residential development (CT 02-18/SDP 03-03), 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. ITEM EXPLANATION Anastasi Development Company has received approval and started grading on its project known as The Bluffs (CT02-18/SDP 03-03). The project is located in the Northwest Quadrant of the City on Harrison and Locust Streets. The site overlooks the Agua Hedionda Lagoon. The project will provide for a total of 78 condominiums. A total of 10 units within the development will be sold to very low income households to meet the project's inclusionary housing obligation. The 10 affordable condominiums will include 9 one bedroom/1 bath and 1 three bedroom/2 bath units. The one bedroom units will be primarily 777 square feet in size. The three bedroom unit will be 952 square feet in size. The 10 units will be sold at an affordable price to households earning 50% or less of the San Diego County Area Median Income ($27,600 to $38,625, depending on bedroom size). The price of the homes will range from approximately $83,600 (1 bedroom) to $122,700 (3 bedroom) based on 2005/2006 incomes. The Developer for the Bluffs project is Anastasi Development. Anastasi retained Affordable Housing Applications (AHA) to assist them with developing their affordable housing sales program. Anastasi is requesting financial assistance for the 10 very low income homebuyers to help them with the required down payments for the affordable units. No financial assistance will be provided to the developer for construction of the units. On March 9, 2006, the Housing Commission considered the developer's request and recommended approval of $200,000 (or $20,000 per unit) in financial assistance for the very low income buyers within the subject project. In the past, the City has provided $15,000-$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 Village-By-The-Sea project. The City granted the request from Anastassi to provide $20,000 in down payment assistance to each of the 11 low income homebuyers within the Village-By-The-Sea project. It should be noted again that the Bluffs project will provide more affordable units than the previously approved for-sale affordable projects. The Bluffs' units will be affordable to very low (50% of AMI) rather low (80% of AMI) income households. 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 foi deferred financing for the actual homebuyer. In this case, the developer is requesting assistance for the very low income home buyers to assist them with required down payments for the subject residential units. The developer is not requesting funding for construction of the units. If the financial assistance request is approved, the financial assistance will be Page 2 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-very low income household and/or at the end of the thirty (30) year restriction period. The following restrictions will be placed on the affordable unit: • The very low income buyer must live in the unit as his/her 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 very low income household at the appropriate restricted price. • After year 15, the home may be sold to a non-very 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. Project Agreements 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 Security Agreement, Borrower Resale Restriction Agreement and Option to Purchase, and Borrower Disclosure Statement. These documents are explained below. • 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. • 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. HOUSING COMMISSION/STAFF RECOMMENDATION At their meeting on March 9, 2006, the Housing Commission reviewed the request to provide financial assistance to the very low income buyers of the affordable housing units within the Bluffs residential development. The Commission recommended that the City Council approve the financial assistance in the amount of $200,000 from the Housing Trust Fund and authorize the City Manager or designee to prepare and execute the related loan and regulatory documents. 2 Page3 SUBORDINATION OF CITY AGREEMENTS It is important to note that if the attached resolution is approved, the City will agree 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, and will be incorporated into the loan agreement and related regulatory documents. ENVIRONMENTAL REVIEW Based on an environmental impact assessment conducted by Planning Staff, potentially significant impacts related to noise impacts from traffic on Interstate 5 and potential paleotological resources were found to impact the project. Mitigation measures were imposed to reduce those impacts to below a level of significance. The Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program were approved by the City Council on June 15, 2004. FISCAL IMPACT: The financial assistance to the very low income homebuyers for the Bluffs project will be provided from the City of Carlsbad's Housing Trust Fund. The Trust Fund has a current unreserved fund balance (as of 3/23/06) of approximately $8.5 million. The $200,000 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. 2006-108 approving financial assistance for the very low income homebuyers of affordable units within the Bluffs residential development, and authorizing City Manager or designee to prepare and execute appropriate loan documents with approval of the City Attorney. 2. Project Location Map. 3. Housing Commission Staff Report dated March 9, 2006. 4. Housing Commission Draft Minutes, dated March 9, 2006. DEPARTMENT CONTACT: Debbie Fountain, (760) 434-2815, dfoun@ci.carlsbad.ca.us 1 CITY COUNCIL RESOLUTION NO. 2006-108 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING 3 $200,000 IN DOWNPAYMENT FINANCIAL ASSISTANCE FROM THE HOUSING TRUST FUND TO 4 THE 10 VERY LOW INCOME HOME BUYERS WITHIN THE BLUFFS RESIDENTIAL DEVELOPMENT 5 LOCATED IN THE NORTHWEST QUADRANT OF THE CITY ON HARRISON AND LOCUST STREETS, AND 6 APPROVING AND AUTHORIZING THE CITY MANAGER TO PREPARE AND EXECUTE THE 7 RELATED LOAN DOCUMENTS WITH APPROVAL OF THE CITY ATTORNEY. 8 APPLICANT: ANASTASI DEVELOPMENT 9 WHEREAS, the City of Carlsbad has identified a need to provide housing which is 10 affordable to lower income households in a variety of different forms; and 11 WHEREAS, a project known as "The Bluffs" has recently completed construction which 12 provides for ten (10) for-sale, one and three bedroom condominium units on property generally 13 located on Harrison and Locust Streets, in the Northwest Quadrant of the City; and 14 WHEREAS, the affordability level and the unit mix of the proposed project are 15 consistent with the City of Carlsbad's Housing Element objectives, Consolidated Plan, and 16 Inclusionary Housing Ordinance; and 17 WHEREAS, on March 9, 2006, the City of Carlsbad Housing Commission held a public 18 meeting and recommended that the City Council approve financial assistance for the homebuyers 19 in the project and said assistance is necessary, appropriate and exceeded by the public benefit 20 received by the City; and 21 WHEREAS, the City Council did hold a public meeting to consider a request to provide 22 down payment assistance to the very low income buyers of said ten (10) for-sale, one and three 23 bedroom, condominium housing units affordable to very low income households in the Bluffs 24 residential development and; 25 //// 26 27 1 Page 2 2 3 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: 8 The above recitations are true and correct. 9 2. The request for City financial assistance for home buyer down payments for the 10 Bluffs residential development has been determined to be consistent with the goals and objectives of the City of Carlsbad's Housing Element and Consolidated 11 Plan, the Inclusionary Housing Ordinance, and the Carlsbad General Plan. 12 3. The request for City financial assistance will assist very low income households to purchase a total of ten (10) for-sale, one and three bedroom, condominium 13 housing units in the Bluffs residential development within the Northwest Quadrant of the City of Carlsbad. The project, therefore, has the ability to 14 effectively serve the City's housing needs and priorities as expressed in the Housing Element and the Consolidated Plan. 15 4. That based on the information provided within the City Council Staff Report, the 16 Housing Commission Staff Report, dated March 9, 2006, and the testimony presented during the public meeting of the City Council, the City Council hereby 17 APPROVES the financial assistance for the individual very low income home buyers within said project and APPROVES a total amount of $200,000 from the 18 City of Carlsbad's Housing Trust Fund to provide down payment assistance to very low income buyers of said ten (10) for-sale, one and three bedroom, 19 condominium housing units in the Bluffs residential development. 20 //// 21 //// 22 //// 23 //// 24 //// 25 //// 26 //// 27 28 1 PageS 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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. 6. That the City Council agrees to subordinate the City's loans and agreements to the lien of deeds of trust securing the financing provided by a private lender on said very low income affordable condominium units with assurances that the private lender will provide commitments reasonably designed to protect the City's investment in the event of a default including but not limited to a notice of default to the City and a right for the City to cure the default, subject to review and final approval by the City Attorney. PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, California, held on the 25th day of April , 2006 by the following vote, to wit: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES:None ABSENT: None ABSTAIN: None ATTEST: .\\\»IU;; **&»& - OV\y R £*>...-?, C-&YCi LORRAINE M. WOOD, City Clerk (SEAL) % (f * EXHIBIT 2 SITE BLUFFS CT 02-18/CP 02-10/SDP 03-037 CDP 03-35/HDP 02-09 EXHIBIT 3 City of Carlsbad JHToujsjlngr & fted.Gvdoftm.cnt X>efH*x*tment Staff: Debbie Fountain Housing and Redevelopment Director Item No. 3 DATE: March 9,2006 SUBJECT: THE BLUFFS - RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE $200,000 IN FINANCIAL ASSISTANCE TO THE BUYERS OF TEN (10) AFFORDABLE CONDOMINIUM UNITS WITHIN THE PROJECT KNOWN AS THE BLUFFS. I. RECOMMENDATION That the Housing Commission ADOPT Resolution No. 2006-03, recommending APPROVAL to the City Council to provide $200,000 in financial assistance from the Housing Trust Fund in the form of low income home buyer down payment assistance for ten (10) affordable for-sale condominium units within the project known as The Bluffs, and located in the Northwest Quadrant of the City of Carlsbad. II. PROJECT BACKGROUND The Bluffs project has been approved and grading has started on the site in preparation for construction. The development will provide a total of 78 town homes and condominiums, 10 of which will be sold to very low income households. This is the first project within the City of Carlsbad where the developer has agreed to an inclusionary requirement that will result in homeownership opportunities for very low income households. Very low income households are those at 50% or less of the San Diego County Area Median Income (AMI). The current income levels for households at 50% or less of AMI are as noted in the attached chart: Household Size Income (Max) 1 $24,150 2 $27,600 3 $31,050 4 $34,500 III. PROJECT DESCRIPTION The affordable condominiums, located within The Bluffs project, will provide for primarily one (1) bedroom/one (1) bath units. There will be a total of nine (9) one bedroom units and one (1) three bedroom unit. The units are small in size with one of the one bedroom units at 555 square feet and the remainder (eight units total) at 777 square feet. The three bedroom/2 bath unit will be 952 square feet in size. As noted above, the THE BLUFFS AFFORDABLE CONDOMINIUMS MARCH 9, 2006 PAGE 2 condominiums have been priced for sale to be affordable to households earning 50% of the San Diego County Area Median Income. AFFORDABLE UNITS • " ' ' •' -• Number of Bedrooms/Bathrooms One/One One/One Three/Two Size of Unit 555sf 777sf 952sf Total Number of Units 1 8 1 10 IV. DEVELOPMENT TEAM The Developer for The Bluffs is Anastasi Development. The affordable housing units will be 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. In their Village-by-the-Sea project in the downtown area, they developed experience with successfully selling eleven (11) units affordable to households at 80% of the Area Median Income. Anastasi has 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. 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 very 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. This is a significant increase which results in very low income buyers finding it more difficult to qualify for an adequate loan. In order to assist 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 <T THE BLUFFS AFFORDABLE CONDOMINIUMS MARCH 9, 2006 PAGES additional funds for a larger down payment. As a result, on behalf of the very low income buyers, Anastasi has requested that the City provide down payment assistance in the amount of $20,000 per household. The down payment assistance will be 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 $200,000 (or $20,000 per unit) in down payment assistance for the 10 very low income home buyers for The Bluffs 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 $9 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 very 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. 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: • 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 BLUFFS AFFORDABLE CONDOMINIUMS MARCH 9, 2006 PAGE 4 • 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 $200,000 (or $20,000) to the 10 buyers of affordable housing units within The Bluffs Development. The funding will be provided from the City of Carlsbad's Housing Trust Fund. The Housing Trust Fund has a current undesignated fund balance of approximately $9 million. VIII. EXHIBITS 1. Housing Commission Resolution No. 2006-03 11 1 HOUSING COMMISSION RESOLUTION NO, 2006-003 2 THAT THE HOUSING COMMISSION RECOMMEND APPROVAL TO THE 3 CITY COUNCIL TO PROVIDE $200,000 IN FINANCIAL ASSISTANCE FROM THE HOUSING TRUST FUND IN THE FORM OF LOW INCOME HOME BUYER 4 DOWN PAYMENT ASSISTANCE LOANS TO THE BUYERS OF TEN (10) AFFORDABLE CONDOMINIMUM UNITS WITHIN THE BLUFFS 5 DEVELOPMENT IN THE NORTHWEST QUADRANT OF THE CITY. 6 APPLICANT: ANASTASI DEVELOPMENT 7 PROJECT; THE BLUFFS WHEREAS, Anastasi Development is the developer of The Bluffs housing development 1 0 within the Northwest Quadrant of the City of Carlsbad; and WHEREAS, Anastasi Development is constructed a total of 78 residential housing units 12 within The Bluffs development, of which 1 0 are affordable to very low income households; and 13 WHEREAS, pursuant to the City of Carlsbad's Inclusionary Housing Ordinance, Chapter 14 21 .85 of the Carlsbad Municipal Code, the developer is selling 10 one and three bedroom units to I f very low income households as a means to satisfy the affordable housing obligations for the The 1 7 Bluffs development; and WHEREAS, Anastasi Development has requested financial assistance from the City of 19 Carlsbad to assist the very low income buyers to provide the required down payment for said 20 affordable units; 21 WHEREAS, on March 9, 2006, the Housing Commission held a public meeting to 23 consider the developer's request for financial assistance for the very low income buyers to 24 purchase 1 0 affordable housing units within The Bluffs development; and 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 27 for financial assistance; 28 1 NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing Commission of 2 the City of Carlsbad, California, as follows: 3 1. The above recitations are true and correct. 4 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. 7 3. The project will provide a total of 10, for-sale one and, three bedroom attached condominium units affordable for purchase to households at 50% or below of the county median income which meets a "medium priority" affordable housing need as p 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 10 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 March 9, 2006, the Housing Commission hereby ADOPTS Resolution No. 2006-03, 13 recommending APPROVAL to the City Council to provide $200,000 in financial assistance for the very low income buyers purchasing 10 affordable one and three 14 bedroom condominium units to satisfy the requirements of the Inclusionary Housing Ordinance for The Bluffs development. Funding for the down payment assistance program shall be provided from the City of Carlsbad's Housing Trust Fund. 16 17 18 19 20 //// 21 //// 22/2 23 24 25 26 27 mi 28 1 HC RESO NO. 2006-03 2 PAGE 2 3 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 4 review and approval by the City Attorney and/or Special Legal Counsel. 5 PASSED, APPROVED, AND ADOPTED at a regular meeting of the Housing 6 Commission of the City of Carlsbad, California, held on the 9th day of March, 2006, by the 7 following vote, to wit: O 9 AYES: 10 NOES: 11 12 ABSENT: 13 ABSTAIN: 14 15 EDWARD SCARPELLI, CHAIRPERSON CARLSBAD HOUSING COMMISSION 17 18 19 DEBORAH K. FOUNTAIN 20 HOUSING AND REDEVELOPMENT DIRECTOR 21 22 23 24 25 26 27 28 HOUSING COMMISSION MINUTES EXCERPT FROM HOUSING MARCH 9, 2006 COMMISSION MINUTES PAGE 12 of 16 EXHIBIT 4 eleven anbf4able condominium residential units to be located—3l~ 25 78 Roosevelt Street in the Village Redevelopment^sea of the City of Carlsbad. Board Member Ritchie secori 3-0 Boddy, Ritchie, Scarpelrf^ScJhraml, and Smith None None DRAFT Ms. Debbie Fountain said the next project is also for assisting very low income persons, which went with the first item on the rental assistance and having very low income people being assisted through that program. We actually have a project that is currently under construction called the Bluffs. It is overlooking the Agua Hadionda Lagoon where the water sports place is off of 1-5. That project has a requirement to build ten units affordable to very low income persons. The reason they ended up agreeing to do very low income on this project, even though the requirement is for low, is that we gave them a two unit credit for going to very low. The original requirement was to do twelve units. They couldn't quite work all the units on the site that they needed so they asked us if we would give them incentive credit if they did them at very low. We agreed to do that. Again, the income levels are the same as what we were talking about before. These are small units. They do have primarily one-bedroom units. These are actually smaller than the ones we were talking about on the Roosevelt Street project. They are 555 square feet and they do have one three-bedroom, two-bathroom unit at 952 square feet. The reason we felt these smaller units are okay for this very low income group is we do tend to see more seniors, more disabled in this very low income group where the smaller household size seems to be appropriate. Especially if it is a for-sale product. Trying to make it affordable, the smaller unit is necessary. We were a little concerned at first when we looked at the site plans for these on the sizes for one bedrooms, but when we looked at the layouts of them and gave it some analysis, we felt they were okay. They originally started out with much smaller and we actually got them up to that number. The project is primarily one bedroom so there are nine one-bedroom units and one three-bedroom unit, which is an inclusionary requirement that they have to do one three-bedroom unit. Only one model of the one-bedroom unit is at 555 square feet. The rest of them are at 777 square feet. What this developer is asking for is not financial assistance to the developer, which a lot of times we are giving the money to the developer for constructing units. In this particular case, the developer is asking for the assistance for the home buyers so it is basically down payment assistance of $20,000 per unit. We had a similar request from this same developer on the Village By The Sea that you might remember in the downtown area. They had an eleven unit requirement. Originally they were working with the California Housing Finance Agency to get low-interest loans that were down at about 4% and both of these projects were moving along to get those low interest loans for the low and very low income households. At the last minute CalHFA changed their position that these home buyers would be eligible for these low interest loans because of the restrictions that we have on the project for shared appreciation. We weren't willing to change our requirements because the Council has felt very strongly that if a unit is sold, there should not be a windfall to the homeowner so we share in the equity. CalHFA had a problem with our share of that and ultimately wouldn't approve it. Although, initially they said they didn't have a problem with our restrictions. That is unfortunate for those home buyers that were getting ready to move forward to buy units because now they are not able to unless they can come up with an additional down payment. We proposed to the Housing Commission and you recommended to the City Council that we provide down payment assistance to those home buyers so there is no money going to the developers. It is just straight to the home buyers to help them be able to afford the down payment and closing costs on the unit so the loan amount they can get will be a little higher to be able to afford the higher interest rates they will have to pay on the units. It is harder, especially for the very low income group, to have enough money in savings to be able to make those down payments. So the developer is actually requesting, on behalf of the home buyers, that the City Council provide $20,000 in down payment assistance to each of these ten home buyers. That would be a $200,000 investment from the City of Carlsbad. Staff is recommending that we do HOUSING COMMISSION MINUTES MARCH 9, 2006 PAGE 13 of 16 this like we recommended with the Village By The Sea so we are successfully able to get these home buyers into these homes. Commissioner Boddy asked if we were sure $20,000 is enough? Ms. Fountain answered at this point, we believe that is enough. If we find out that it is not, we will probably be back, but at this point in time, both the developer and our staff are feeling comfortable with that $20,000. Commissioner Boddy commented that interest rates may be going up so I was just curious if that could be reopened. Ms. Fountain said it can be. That is a very good question because until the unit is actually ready to sell, you don't have that interest rate as a known factor. We believe this will probably be enough. Commissioner Boddy asked when do they expect to have these units available for sale. Ms. Fountain said the project is moving pretty slow. They are just now grading the site. There will probably be another year or so before we actually see units on the ground. It may be less depending if it starts moving quicker than it is right now. Chairperson Scarpelli commented that at one time developers were aware of the fact that they were able to purchase interest rates in advance by going into contract with a lender on an interest rate and pay an appropriate fee to hedge that rate. We haven't had to use that probably in twenty years because of interest rates being relatively low. However, maybe on projects like this we could talk to them about talking to their lenders as to the cost of locking in a rate. Ms. Fountain said we could suggest that to them. Chairperson Scarpelli continued they can do that for a year or more. Obviously the longer the rate is at risk for the lender, the higher the cost is going to be up front. Sometimes that cost up front, locking it in, makes everything possible. Ms. Fountain said we can definitely share that with them. Commissioner Ritchie asked Ms. Fountain to tell the Commision exactly what the Housing Trust Fund is. Ms. Fountain said when we adopted the inclusionary housing ordinance, at the same time we set up a housing trust fund, which is basically where we collect the fees related to housing. If somebody has the ability to pay the in-lieu fee for housing rather than to produce the units, that money goes into that account. Any repayment of loans that we get go back into that account. If somebody sells a unit and we get shared appreciation, it goes back into that account. A lot of times if we get any grants or that type of thing that are just general to affordable housing, they would be recorded as coming into the housing trust fund. It is accumulated funding over the years, because it now has over $9,000,000, but most of the money that we give as loans comes out of the housing trust fund. The last item we actually specifically mentioned a different funding source, which is the village redevelopment low and moderate income housing fund. A lot of times we use the housing trust fund because it has less strings attached to it. If it is not federal or state money, it has less strings. It is where we return all of our money that comes back in. In Villa Loma we sell credits and that money goes into the housing trust fund so we can recycle it and send it back out to affordable housing projects. It can only be used for affordable housing programs or projects. It can't be used for any other purpose in the city. Chairperson Scarpelli asked if Ms. Fountain has any idea what kind of return the housing trust fund is receiving on the $9,000,000 and if it has been invested. \<o HOUSING COMMISSION MINUTES MARCH 9, 2006 PAGE 14 of 16 Ms. Fountain said in terms of the interest rate on that, I don't know the exact amount of what that is. I could find that out for you, but off the top of my head I'm not remembering what it is. I know finance has told me several times, but it is at the same investment rate they use for all of the other city funds. Our City Treasurer has been successful in getting us good return on our money. Chairperson Scarpelli commented that with $9,000,000 itfthe pot that's a lot. Ms. Fountain said it does get quite a bit of interest each year, which adds to it definitely. Commissioner Schraml moved that the Housing Commission recommend approval to the City Council to provide $200,000 in financial assistance from the Housing Trust Fund in the form of low income home buyer down payment assistance loans to the buyers of ten affordable condominium units within the Bluffs Development in the northwest quadrant of the city. Commissioner Smith seconded. VOTE: 5-0-0 AYES: Boddy, Ritchie, Scarpelli, Schraml, and Smith NOES: None ABSTAIN: None DIRECTOR'S REPORT )ebbie Fountain said we are starting construction of the Cassia Heights affordable housing prpj€ct that is across the street from Villa Loma on El Camino Real. It is a 56 unit project. They have started grading and they will be starting construction soon. If you will remember, that project actually wasn't done as aajnclusionary requirement. That was justbse of the developers that came into the city, found a piece of property^ and they happened to be experienced in building affordable housing so they agreed to provide that project. The good thing about that construction is we are starting to get to the point where we have sold out all ofour credits at Villa Loma. We are down to about twenty something credits. This project will give us another^my-six credits. So the small projects in the southeast and the southwest wiH have another opportunity to be able^ro buy credits if they can't do their units on site. Typically if they are going tooqthem in second dwelling ujrifs, we usually say we'd rather have them buy credits so we can then spend that money tb-get some other units., Also Hunter's Point that is in the Villages of La Cbsta project, which is the second phase of their affordable project, which will be 168 units, has been successful so far i^getting all of their financing. They have gotten approval of their housing program loan from the state, whichXactuallyS^ard to get. The City agreed to their bond financing on their project. Now they are getting ready tp^move forward wirii their tax credit application. That project will probably be moving forward fairly soon Things are going strong and we'll keep you posted on anything new. Commissioner Ritchie askeiifthe city ever foresees building senior-only projects. Ms. Fountain said wp'fio get that question and there are a few developers that are looking inwNhat as an option. We don't have an anpfication yet on file, but there are a few that are looking at it trying to make it work Comrnisafoner Schraml asked if that is something the city does not pursue? It is just up to the developers're come to theory with the idea?