Loading...
HomeMy WebLinkAbout2020-10-13; City Council; ; Acquisition of 7008 Forsters Tern Drive, an Affordable Housing Resale Unit, and Expenditure of Housing Trust Funds in the Amount of Up to $270,000 Meeting Date: Oct. 13, 2020 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: David de Cordova, Housing Services Manager david.decordova@carlsbadca.gov, 760-434-2935 Subject: Acquisition of 7008 Forsters Tern Drive, an Affordable Housing Resale Unit, and Expenditure of Housing Trust Funds in the Amount of Up to $270,000 Recommended Action Adopt a resolution authorizing the city manager to exercise the City of Carlsbad’s option to purchase an affordable housing unit at 7008 Forsters Tern Drive and execute all required documents to complete the purchase, and the deputy city manager for administrative services to appropriate and disburse $270,000 from the Housing Trust Fund to purchase this affordable housing unit. Executive Summary The City of Carlsbad has received notice that an affordable housing unit in the 24-unit Rose Bay condominium project is available for the city to purchase to provide affordable housing in Carlsbad as part of its inclusionary housing efforts. City Council Policy Statement No. 73 (Exhibit 2) requires that all notices of intent to sell an affordable housing unit after 15 years of ownership must be presented to the City Council for consideration and a decision as to whether or not to exercise the city’s option to purchase. Furthermore, the City of Carlsbad Municipal Code does not provide authority to the city manager to proceed with such an acquisition of property, or accept the grant deed for transfer of property ownership, without the prior approval by the City Council. Staff is recommending the city purchase the affordable housing unit using $270,000 from the city’s Housing Trust Fund. City Council approval would allow the city to complete the acquisition process for this at-risk affordable housing unit with the intent to resell it to an eligible lower- income buyer. Discussion Program overview The city adopted an inclusionary housing ordinance in 1993 that requires all residential developments greater than six units to restrict 15% of the total number of homes in a project as affordable to low-income households. Residential developers have the option to produce rental or ownership properties to satisfy the inclusionary requirements. As a condition of the inclusionary housing program, homebuyers of restricted affordable housing units enter into an Oct. 13, 2020 Item #1 Page 1 of 8 agreement with the city that requires them to notify the city when they intend to sell their unit and allow the city the option to purchase the unit at restricted prices. The city has 30 days to respond to such notices. During the first 15 years of ownership, an affordable unit may only be sold at a restricted, affordable price, either to the city or a low-income homebuyer. After 15 years, the affordable housing unit is considered at-risk as the owner may sell their unit at a market price if the city does not exercise its purchase option. Upon a market sale of an affordable unit, the city recaptures its original subsidy plus contingent interest. The unit’s affordability restrictions are removed, and the city’s share of sale proceeds are deposited into the Housing Trust Fund, with the funds used to create additional affordable housing opportunities. On the other hand, by exercising the purchase option, the city is able to preserve the housing unit’s affordability and resell it to an eligible lower-income buyer. As the owner, the city could place additional restrictions on the property and could resell it at a lower price to create more affordable housing opportunities. The property and the purchase The 24-unit Rose Bay condominium project was approved by the City Council on Feb. 12, 2002, as a 100% affordable housing development within the Thompson/Tabata subdivision (Exhibit 3). The condominium at 7008 Forsters Tern Drive is one of those affordable units, and would be the city’s second purchase in this neighborhood. On Sept. 16, 2020, the owner of the affordable housing unit notified the city of their intent to sell. Since the owner’s resale restriction agreement with the city has been in effect for more than 15 years, the City Council must provide direction to staff whether or not to exercise the city’s option to purchase. The city must respond to the notice of intent to sell by Oct. 16, 2020. Staff is recommending that the City Council authorize the city manager or designee to respond to owner that the city will exercise its purchase option, and to execute all required documents to complete the purchase of the subject property, which includes acceptance of the grant deed, and to expend up to $270,000 from the Housing Trust Fund to cover the purchase price, related escrow and other processing fees necessary to complete the acquisition. Additionally, the city would likely incur some costs to refurbish the unit and prepare it for resale. If the City Council approves this purchase, this would become the ninth affordable housing resale unit the city has acquired. Should the City Council decline the city’s purchase option, then the city would receive repayment of the initial homebuyer loan (developer/city subsidy) of $266,500 plus contingent interest (44% of the appreciated market value of the unit). The city’s share of proceeds would be deposited into the Housing Trust Fund, the unit’s affordability restrictions would be lifted, and the affordable housing unit would be permanently lost from the city’s affordable housing unit inventory. Fiscal Analysis The homeowner purchased the home at Rosebay in 2005 at the restricted, subsidized price of $173,500. The current restricted price for the city to buy the affordable residential property from the homeowner at 7008 Forsters Tern Drive is based on the change in area median income levels during the seller’s period of ownership. Over the past 15 years, area median Oct. 13, 2020 Item #1 Page 2 of 8 income increased by 46.2%, resulting in a current restricted purchase price of $253,657. Staff anticipates that there will be additional acquisition costs including escrow fees. Staff is requesting that the City Council approve the expenditure of Housing Trust Fund money in the amount of up to $270,000 to cover all acquisition costs for the subject property. As a condition of the city’s option to purchase, a 6% transaction fee, amounting to $15,219, is to be paid to the City of Carlsbad at the close of escrow because the city is acting as the real estate agent for this sales transaction. Funds paid at the close of escrow will be returned to the Housing Trust Fund. Currently, the Housing Trust Fund has an available cash balance of approximately $13.1 million. Therefore, staff is asking for an appropriation from the Housing Trust Fund in the amount of $270,000. Next Steps The city will formally notify the owner of the city’s intent to exercise its option to purchase the affordable unit and execute all acquisition documents to complete the purchase of the home and subsequently record the grant deed to transfer ownership of the home to the City of Carlsbad. The home will then be resold to a lower-income household at a later date. The purpose in acquiring existing affordable housing units is to preserve, extend and enhance affordability covenants to subsequent lower-income purchasers and to provide additional housing opportunities to underserved populations. To facilitate this, staff has drafted resale program guidelines, which have been reviewed by the Housing Commission, and will be presented to the City Council Policy and Municipal Code Update Subcommittee and then the full City Council for consideration in the near future. Environmental Evaluation (CEQA) This action does not constitute a “project” within the meaning of California Environmental Quality Act under Public Resources Code section 21065 in that it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment and therefore does not require environmental review. Public Notification Public notice of this item was posted in accordance with the Ralph M. Brown Act and it was available for public viewing and review at least 72 hours prior to the scheduled meeting date. Exhibits 1. Resolution 2. City Council policy statement No. 73 3. Location map Oct. 13, 2020 Item #1 Page 3 of 8 RESOLUTION NO. 2020-200 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXERCISE THE CITY'S OPTION TO PURCHASE AN AFFORDABLE HOUSING UNIT AT 7008 FORSTERS TERN DR AND EXECUTE ALL REQUIRED DOCUMENTS TO COMPLETE THE PURCHASE, AND THE DEPUTY CITY MANAGER FOR ADMINISTRATIVE SERVICES TO APPROPRIATE AND DISBURSE $270,000 FROM THE HOUSING TRUST FUND TO PURCHASE THIS AFFORDABLE HOUSING UNIT. WHEREAS, the property owner of 7008 Forsters Tern Dr provided notice to the city on Sept. 16, 2020, indicating the owner's intent to sell or transfer ownership of the restricted affordable housing unit at the noted location; and WHEREAS, City Council Policy Statement No. 73 requires that all notices of intent to sell an affordable housing unit after 15 years of ownership must be presented to the City Council for consideration and a decision as to whether or not to exercise the city's option to purchase; and WHEREAS, since the owner's resale restriction agreement with the city has been in effect for more than 15 years, City Council authorization to exercise or decline the option to purchase this unit is required; and WHEREAS, the purchase approval by the City Council allows for the city to recapture an at-risk affordable housing unit, preserve and extend its affordability, and to resell it to an eligible buyer at a lower price, if necessary, to implement the city's affordable housing goals and policies; and WHEREAS, Housing Element Program 3.7 states that the "city will continue to maintain the Housing Trust Fund for the fiduciary administration of monies dedicated to the development, preservation and rehabilitation of affordable housing in Carlsbad", and as such, purchase of this affordable housing unit is an appropriate use of the Housing Trust Fund; and WHEREAS, there is sufficient funding available in the city's Housing Trust Fund to purchase this unit. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council of the City of Carlsbad, California has determined that it desires to exercise its option to purchase an affordable housing unit located at 7008 Forsters Tern Oct. 13, 2020 Item #1 Page 4 of 8 Dr, Carlsbad, California, and hereby authorizes the city manager to execute all required documents, including the Acceptance of the Grant Deed, for the purchase of said property, and to expend up to $270,000 from the Housing Trust Fund to cover the purchase price, related escrow and other processing fees to complete the acquisition. Additionally, said funds are authorized for costs related to refurbishing and preparing the unit for resale. 3. That the Deputy City Manager for Administrative Services is authorized to appropriate and disburse $270,000 from the Housing Trust Fund for the property purchase at 7008 Forsters Tern Dr. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 13th day of October, 2020, by the following vote, to wit: AYES: Hall, Blackburn, Bhat-Patel, Schumacher. NAYS: None. ABSENT: None. MATT HALL, Mayor Jy0((tic BARBARA ENGLESON, City CI rk (SEAL) '*CA " II 04 "ku 1011 4110 z Oct. 13, 2020 Item #1 Page 5 of 8 CITY OF CARLSBAD COUNCIL POLICY STATEMENT DATED: January 15, 2008 Policy No. Date of Issue: Effective Date Cancellation Date Supersedes No. Subject: CITY OPTION TO PURCHASE RESALE AFFORDABLE HOUSING Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File PURPOSE: Exhibit 2 Page 1 of 2 73 January 22, 2008 January 22, 2008 To provide guidelines to City employees as to when the City's option to purchase a restricted affordable housing ownership unit may be accepted or declined by the City Manager, or designee, and/or the City Council. This policy will allow the City Manager, or designee, to decline the City's Option, and to make recommendations to the City Council on when it would be appropriate to exercise the City's option to purchase an affordable housing ownership unit. BACKGROUND: The City's lnclusionary Housing Ordinance requires developers of residential projects with more than six units to provide fifteen percent of the homes to lower income households at an affordable price. Developers may satisfy the ordinance requirements by providing rental or for sale (ownership) units. Some developers are able to use alternatives such as second dwelling units or the purchase of affordable housing credits to meet the lnclusionary Housing Ordinance requirements if approved by the City Council. Under the initial requirements of the lnclusionary Housing Program, low income homebuyers were required to execute Resale Agreements that allowed them to sell their homes at market rate to a non­low income homebuyer if they repaid the City outstanding loan amounts and paid a share of the equity from the sale, to the City. This initial policy did result in the loss of many of the for-sale affordable units in the City. Therefore, the policy was changed to require the restricted unit to be sold to another low income household during the first 15 years of a 30 year affordability term. A new Resale Restriction Agreement and Option to Purchase (Agreement), which gives the City an option to purchase the unit at a low income restricted price in the event the owner needs to sell the property prior to the end of the term of the Agreement, replaced the initial Resale Agreement. Agreements for affordable units in the Village Redevelopment Area, and units assisted with Redevelopment Low/Mod Housing Set Aside Funds, have an affordability term of 45 years while all others have a term of 30 years. .5 Oct. 13, 2020 Item #1 Page 6 of 8 Subject: CITY OPTION TO PURCHASE RESALE AFFORDABLE HOUSING CITY OF CARLSBAD COUNCIL POLICY STATEMENT DATED: January 15, 2008 Policy No. Date of Issue: Effective Date Cancellation Date Supersedes No. Page 2 of 2 73 January 22, 2008 January 22, 2008 Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File During the first fifteen years of the Agreement, if the City does not use its option to purchase the property at a low income restricted price, the owner must resell the unit to a lower income household at an affordable price. After the initial fifteen years, the owner may sell the unit at market value to a non-low income buyer if the City does not use its option to purchase. When the unit is sold at market value, the seller must repay the City loans and share the equity from the sale with the City. This revenue is deposited into the City's Housing Trust Fund for future affordable housing purposes. POLICY: Through this policy, the City Council grants authority to the City Manager, or designee, to decline the option to purchase an affordable ownership unit at a restricted low income price during the first fifteen years of a Resale Restriction Agreement and Option to Purchase. Because the restricted unit must be sold to another low income homebuyer at a restricted price during the first fifteen years of ownership, there is no benefit to the City to exercise the option to purchase and there is no risk that the unit affordability will be lost to market conditions. If the City Manager, or designee, believes that it may be in the City's best interest to purchase the. property during the first fifteen years, the matter will be presented to the City Council with a recommendation for consideration and action to accept/decline the purchase option. After the initial fifteen years, all notices of a low income homebuyer's intent to sell will be presented to the City Council for consideration and a decision as to whether or not to accept/decline the purchase option. This policy shall apply to all units restricted under a Resale Restriction Agreement and Option to Purchase in order for a housing development to comply with the requirements of the City's Inclusionary Housing Program. (eOct. 13, 2020 Item #1 Page 7 of 8 Street Map Plus Report For Property Located At 7008 FORSTERS TERN DR, CARLSBAD, CA 92011-3969 * Map data ©2020Report a map error100 m  Exhibit 3 Oct. 13, 2020 Item #1 Page 8 of 8