HomeMy WebLinkAbout2024-06-18; City Council; ; Acquisition and Resale of Two Units as Part of the City’s Affordable Housing Resale ProgramCA Review _AF_
Meeting Date: June 18, 2024
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Erin Peak, Program Manager
erin.peak@carlsbadca.gov, 442-339-2043
Subject: Acquisition and Resale of Two Units as Part of the City’s Affordable
Housing Resale Program
Districts:
1, 2
Recommended Action
Adopt a resolution authorizing the City Manager to execute all required documents to complete
the purchase and resale of two at-risk affordable housing units, 2591 State Street, No. 200 and
6042 Colt Place, No. 301, as part of the City’s Affordable Housing Resale Program and
authorizing the City Manager, or designee, to appropriate $633,000 from the Community
Development Block Grant Fund for related costs.
Executive Summary
As part of the city’s Affordable Housing Resale Program, the city purchases existing affordable
housing units at risk of losing their affordability restrictions and then resells them to another
eligible lower-income buyer. This extends the length of the time the unit is affordable and
maintains and enhances the existing affordable housing stock in Carlsbad.
Staff are recommending that the City Council approve the city’s purchase of two units for a
total of $609,270. The funding for these purchases will come from the Community
Development Block Grant Fund.
The city will own the properties temporarily, with the intent to resell them to eligible lower-
income buyers in accordance with the City Council-adopted Affordable Housing Resale Program
Guidelines.
The revenue generated from the sale of the properties will be deposited into the Community
Development Block Grant Fund as program income.
City Council Policy Statement No. 73 requires the City Council’s approval to carry out the
purchase and resale of the at-risk affordable housing units.
June 18, 2024 Item #6 Page 1 of 26
Explanation & Analysis
Background
The city adopted an inclusionary housing ordinance in 1993 that requires all residential
developments greater than six units to set aside 15% of the total number of units in a project as
affordable to low-income households. Residential developers have the option to offer rental or
ownership units to satisfy the inclusionary requirements. As a condition of the inclusionary
housing program, homebuyers of these ownership affordable properties enter into an
agreement with the city that requires them to notify the city when they intend to sell their
homes and allow the city the option to purchase them at restricted prices.
City Council Policy Statement No. 73 - City Option to Purchase Resale Affordable Housing
(Exhibit 2) and the Affordable Housing Resale Program Guidelines (Exhibit 3) were approved by
the City Council in 2020. The City of Carlsbad’s Affordable Housing Resale Program is designed
to help qualified lower income households purchase city-owned residential units at an
affordable price.
Affordable Housing Resale Program Guidelines
The Affordable Housing Resale Program Guidelines describe the eligibility requirements,
marketing and application process. The city conducted an extensive marketing effort to
promote the availability and sale of the city-owned residential units and received more than
2,000 applications.
The eligibility criteria include a requirement that applicants reside in San Diego County and that
their total household income is limited to no more than 80% of the county’s area median
income. The qualified applicants were selected from priority categories and in the order that
their complete applications were accepted, consistent with the guidelines. The affordable sales
prices are determined based on a formula identified in the Affordable Housing Resale Program
Guidelines.
Previous purchases
To date, the city has acquired 22 units and has authority to acquire one additional unit.
Property owners of three units that were previously approved by City Council to purchase
declined to move forward with the sale of their affordable homes. The purchase of these two
additional units will bring the total to 25 at-risk units that the city has acquired since 2020.
The city has resold 15 of the 23 units to eligible lower-income households, with one unit to
close escrow in the coming month.
Properties to be purchased
Staff are recommending the city purchase the following units, which were set aside for low-
income buyers by the projects’ developers to fulfill their obligations under the city’s
inclusionary housing ordinance:
2591 State Street
• One of six units sold to low-income homebuyers at a restricted affordable price in the
Seagrove community comprised of 47 units
• Located on State Street near the intersection with Laguna Drive
• This would be the city’s first purchase in this project
June 18, 2024 Item #6 Page 2 of 26
6042 Colt Place, No. 301
• One unit in the 25-unit Kensington at the Square - Bressi Ranch complex that were sold
to low-income homebuyers at a restricted affordable price
• Located at the intersection of Colt Place & Gateway Road
• This would be the city’s second purchase in this project
Once eligible buyers are vetted and affordable resale prices are determined, each unit will be
sold with a second deed of trust recorded against the property to ensure it is resold at an
affordable price so the city can continue providing this benefit to future low-income buyers.
Staff is recommending that the City Council authorize the City Manager to execute all required
documents to complete the purchase and resale of the two at-risk affordable housing units
identified as part of the Affordable Housing Resale Program.
Fiscal Analysis
There is no impact to the General Fund from these purchases. There are sufficient funds
available in the Community Development Block Grant Fund to cover the costs for purchase and
resale including refurbishment, related closing costs and future loss on sale of property. The net
proceeds from the resale of the unit will be returned to their respective special revenue funds.
The restricted price for the city to buy the affordable units is based on the change in area
median income levels during the seller’s period of ownership.
The restricted purchase price for each property and the proposed funding source are shown in
the table below:
Address District Description Price Funding source
2591 State Street, No 200 1 2 bed/2 bath $389,580 CDBG
6042 Colt Place, No. 301 2 1 bed/1 bath $219,690 CDBG
Total: $609,270
The costs for purchase and resale, which include brief city ownership, refurbishment, and
related closing costs, are estimated to be $655,436. An appropriation from the Community
Development Block Grant Fund in a total amount of $633,000 is required at this time. The
requested appropriation combined with existing available budget is expected to cover the
estimated cost to purchase. The costs will be partially offset by the future resale of the
properties.
The resale prices are based on a maximum affordable price formula and are generally less than
the city purchase price.
The city also receives a 6% transaction fee, estimated at a total of $36,556, for the purchase of
both units because the city is acting as the real estate agent for these transactions. This helps
cover the cost of the real estate professional the city has contracted with to sell the affordable
units the city will have purchased.
June 18, 2024 Item #6 Page 3 of 26
Next Steps
After review and approval of the City Attorney, the City Manager or designee will execute all
required documents to complete the purchase and resale of the units, consistent with the
Affordable Housing Resale Program Guidelines.
Environmental Evaluation
This action does not constitute a project within the meaning of California Environmental Quality
Act under Public Resources Code section 21065 in that 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.
Exhibits
1. City Council resolution
2. Council Policy No. 73
3. Affordable Housing Resale Program guidelines
June 18, 2024 Item #6 Page 4 of 26
RESOLUTION NO. 2024-136
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE ALL
REQUIRED DOCUMENTS TO COMPLETE THE PURCHASE AND RESALE OF
TWO AT-RISK AFFORDABLE HOUSING UNITS, 2591 STATE STREET, NO. 200
AND 6042 COLT PLACE, NO. 301, AS PART OF THE CITY'S AFFORDABLE
HOUSING RESALE PROGRAM AND AUTHORIZING THE CITY MANAGER, OR
DESIGNEE, TO APPROPRIATE $633,000 FROM THE COMMUNITY
DEVELOPMENT BLOCK GRANT FUND FOR RELATED COSTS
WHEREAS, the City Council of the City of Carlsbad, California has determined that it desires to
purchase and resell at-risk affordable housing units to eligible lower income buyers at an affordable
price to implement the city's affordable housing goals and policies; and
WHEREAS, on Dec. 8, 2020, the City Council approved Council Policy Statement No. 73 -City
Option to Purchase Resale Affordable Housing and the Affordable Housing Resale Program Guidelines
by Resolution No. 2020-234; and
WHEREAS, the property owners of two at-risk affordable housing units, 2591 State Street, No.
200 and 6042 Colt Place, No. 301 provided notice of their intent to sell or transfer ownership of the
restricted affordable housing units; and
WHEREAS, the purchase of the units enables the city to extend the affordability of the existing
units, and to resell them to another eligible lower-income buyer in accordance with the City of
Carlsbad Affordable Housing Resale Program; and
WHEREAS, City Council Policy No. 73 authorizes the City Manager or designee to exercise the
city's option to purchase existing at-risk affordable housing units, subject to City Council
appropriation of funds and acceptance of the grant deed; and
WHEREAS, the purchases are consistent with City Council Policy No. 73, the Affordable
Housing Program Guidelines, and consistent with City Council Policy 90, Administration of the
Housing Trust Fund; and
WHEREAS, Community Development Block Grant funds are available to fund the purchases,
the acquisitions are consistent with FY 2020-2025 Consolidated Plan priorities and are approved
activities in the FY 2023-24 and FY 2022-23 CDBG Annual Action Plans; and
Exhibit 1
June 18, 2024 Item #6 Page 5 of 26
WHEREAS, the revenue generated from the sale of the properties will be deposited into the
Community Development Block Grant fund as program income, with the sale proceeds being
available to create more affordable housing opportunities.
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 Manager, or designee, is authorized to execute all required documents
for the purchases of 2591 State Street, No 200 and 6042 Colt Place, No. 301, and make
all future decisions and actions necessary to implement the resale and disposition of
two at-risk affordable housing units in the City of Carlsbad identified in Attachment A,
in compliance with Council Policy No. 90, City Council Policy No. 73, and the Affordable
Housing Resale Program Guidelines, and to do so in full compliance with the terms and
conditions and to the satisfaction of the City Attorney.
3.That the City Manager, or designee, is authorized to appropriate $633,000 from the
Community Development Block Grant Fund for the property purchase of at-risk
affordable units authorized and for costs related to refurbishing and preparing the
units for resale identified in Attachment A.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 18th day of June, 2024, by the following vote, to wit:
AYES:
NAYS:
ABSENT:
ABSTAIN:
BLACKBURN, BHAT-PATEL, ACOSTA, BURKHOLDER, LUNA.
NONE.
NONE.
NONE.
, Mayor
June 18, 2024 Item #6 Page 6 of 26
Attachment A
Location APN Development Source of Funding
22 2591 State Street, No 200 203-054-34-28 Seagrove CDBG
23 6042 Colt Place, No. 301 213-262-23-09 Kensington CDBG
June 18, 2024 Item #6 Page 7 of 26
Attachment A
Property
no. Location APN Development Source of Funding
22 2591 State Street, No 200 203-054-34-28 Seagrove CDBG
23 6042 Colt Place, No. 301 213-262-23-09 Kensington CDBG
June 18, 2024 Item #6 Page 8 of 26
{city ofCarlsbad
Council Policy Statement
Category: AFFORDABLE HOUSING
Exhibit 2
Policy No. 73
Date Issued: 12-08-2020
Effective Date: 12-08-2020
Resolution No.
Cancellation Date:
Supersedes No.
2020-234
N/A
73, issued 1/22/08
Specific Subject: City Option to Purchase Resale Affordable Housing
PURPOSE:
To provide procedural guidelines for staff when exercising the city's option to purchase restricted
affordable housing ownership units that were created under the lnclusionary Housing Program. The
city's primary interest in exercising its option to purchase affordable units is to preserve, extend and
enhance affordability covenants to subsequent lower-income purchasers and to provide additional
housing opportunity to underserved populations. The policy will establish the authority, selection
criteria, and resale requirements for the identification, acquisition and disposition of these affordable
units.
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.
Ownership units produced under the lnclusionary Housing Program have affordability restrictions for
30 years. 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 non-low-income homebuyer if they repaid the city any outstanding loan amounts
and paid the city a share of the equity from the sale. This initial policy resulted in the loss of many of
the for-sale affordable units in the city. To more effectively implement inclusionary housing
requirements {CMC 21.85.040{E)), the policy was changed to require a restricted unit to be sold to
another low -income household during the first 15 years of the 30-year affordability term. In year 16
and later, the home could be sold to a non-low-income household with the repayment of the city
subsidy loan with a share of equity {also referred to as contingent interest).
The revised policy also required that the city would be given an option, or first right of refusal, to
purchase the affordable unit at a restricted price upon notice of intent to sell from the owner. The city
could also assign its option to a "city-designated purchaser", defined as another public agency, a
nonprofit corporation, or an eligible low-income purchaser. The restricted price option to purchase or
assign is a requirement for participation in the homeownership program and applies throughout the
entire 30-year term of the loan.
For the restricted affordable housing ownership units, if the city declines its option to purchase the
unit or to assign the option to a city-designated purchaser, the owner is required to resell the
Page 1 of 3
June 18, 2024 Item #6 Page 9 of 26
June 18, 2024 Item #6 Page 10 of 26
Policy No. 73
affordable home to another low-income household during the first 15 years of ownership at a
restricted affordable price established by the city. After the initial 15 years, and if the city declines to
exercise its option to purchase or to assign its option to a city-designated purchaser, the resale
agreement permits the owner to sell the unit at market value to a non-low-income buyer and the city
recaptures its subsidy together with shared equity (contingent interest) up through the 30th year of
the resale agreement. The revenue from the loan payoff and shared equity is deposited into the city's
Housing Trust Fund to create additional opportunities for affordable housing within the city.
POLICY:
By adopting this policy, the City Council grants authority to the City Manager, or designee, to accept
or decline the option to purchase a restricted affordable housing ownership unit at a restricted low-
income price during the full term of the resale agreement. 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 lnclusionary Housing Program. The decision to accept or
decline the option to purchase a restricted affordable housing ownership unit will be guided by the
following principles:
1. The unit would be at-risk of conversion to market rate if the city declines its option to
purchase it; or
2. The public interest is served well through purchase of the unit by the city and resale to a
qualified lower-income household; or
3. An underserved population will benefit greater from the city's purchase and resale of the
unit; or
4. An affordable housing opportunity will be enhanced through the city's purchase and resale of
the unit; and
5. Special funding (such as CDBG, HOME, Successor Housing Agency funds) is available and/or is
required to be expended in a timely manner and the city's purchase of the unit is a qualified
expenditure of these funds; or
6. When special funding is unavailable, sufficient Housing Trust Fund dollars are available to
purchase the unit.
The City Manager, or designee, will consider options to purchase as written notices of intent to sell
from restricted affordable housing ownership units are received. If the city receives notices of intent
to sell from multiple owners at a given time, the City Manager, or designee, may rank order them
based on the principles above. For example, an affordable unit that is at-risk of conversion to market
rate (i.e., can be sold to a market rate purchaser after 15 years) will be prioritized for acquisition over
a unit that is not at-risk (i.e., must be sold to a low-income buyer). Other factors, such as purchase
price, amount of available funding, size, location and condition of the unit may be taken into account
when rank ordering multiple options to purchase units.
Upon a decision by the City Manager, or designee, to exercise the option to purchase a restricted
affordable housing ownership unit, the City Manager, or designee, will proceed accordingly to
complete the purchase transaction and present it to the City Council for consideration and final
action, accepting the Grant Deed for the property.
Page 2 of 3
June 18, 2024 Item #6 Page 11 of 26
Policy No. 73
Upon approval of the City Council of the acquisition and completion of the purchase transaction, the
restricted affordable housing ownership unit will be resold by the city according to the Affordable
Housing Resale Program Guidelines recommended for approval by the Housing Commission and
approved by the City Council, and which may be amended from time to time to update policies,
process and/or resale priorities.
As an alternative to accepting the option to purchase the restricted affordable housing ownership
unit, the City Manager, or designee, is authorized to assign the city's option to an eligible low-income
purchaser. This alternative is appropriate when: a) there is insufficient funding available or there are
higher priority uses for the available funding; and b) the unit would be at-risk of conversion to market
rate if the city declines its option to purchase it. In such a case the City Manager, or designee, will
assign the city's purchase option to an eligible purchaser drawn from a waiting list maintained in
accordance with the Affordable Housing Resale Program Guidelines.
Assignment of the city's purchase option to another public agency, nonprofit corporation, or an
eligible purchaser not on the waiting list will require City Council approval.
If the city is unable to accept or assign its option to a city-designated purchaser, then the City
Manager, or designee, is authorized to decline the option and allow the restricted affordable housing
ownership unit to be sold according to the terms of the resale agreement. The City Manager's, or
designee's, decision to decline the option to purchase will be valid for no more than 180 days. If the
unit owner has not completed the sale of their home within this time frame, the unit owner will be
required to file another notice of intent to sell and grant the city another opportunity to exercise or
assign its option to purchase the unit at an affordable price.
All sales of city-owned restricted affordable housing ownership units require City Council approval.
Page 3 of 3
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 1
Approved by City Council, Dec. 8, 2020
Resolution No 2020-234
CITY OF CARLSBAD
AFFORDABLE HOUSING RESALE PROGRAM GUIDELINES
1.PROGRAM BACKGROUND
In 2018, the Carlsbad City Council authorized staff to exercise the city’s option to purchase
restricted affordable housing ownership units when the original lower-income buyer provided
notice of intent to sell the unit during the 30-year regulatory/loan term. These units were
originally constructed by a private residential developer in Carlsbad to satisfy the requirements
of the city’s Inclusionary Housing Ordinance and initially sold to a qualified lower-income buyer
at an affordable restricted price. Because the units are substantially subsidized to a below
market price affordable to lower-income households, the city holds a “silent” second loan on
the property that equals the value of the price subsidy (the difference between the fair market
value of the unit and the restricted price for a lower income household). As part of the loan
agreement between the city and the homeowner, the city has an option to purchase the unit at
the time they are made available for sale by the homeowner; this option may be exercised at
any time of sale during the 30-year term of the loan and the city pays the restricted price for
the unit, calculated at the time of sale.
The City Council has subsequently approved use of federal Community Development Block
Grant (CDBG) funds to purchase these units with the intent of preserving and extending the
long-term affordability of the units. Because federal and potentially local housing funds have
and will be used to purchase these units, the city intends to enhance the public benefit of the
program through these resale guidelines by providing affordable homeownership opportunities
to lower-income households and potentially providing a larger secondary loan if determined to
be needed by the city to allow for the purchase by a qualifying buyer who meets the city’s
priorities.
2.PROGRAM OVERVIEW
The City of Carlsbad Affordable Housing Resale Program is a homeownership program
specifically designed to assist qualified lower-income households to purchase a city-owned
residential property at an affordable price; these affordable units (under city ownership) were
purchased from the original low-income homeowner at the time the owner decided to sell the
unit and provided required notice to the city of the owner’s intent to sell the unit. The price the
qualified buyer will pay for the unit will be set by the city to ensure that total housing costs for
the qualified buyer will not exceed 30 percent of the gross household income of the buyer.
Pricing will be based on incomes ranging from 50 to 80 percent of the San Diego Area Median
Income (AMI). The difference between the fair market value of the property at time of sale to
the qualified buyer and the actual price paid by the qualified buyer will continue to be
Exhibit 3
June 18, 2024 Item #6 Page 12 of 26
{city of
Carlsbad
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 2
structured as a secondary loan documented in a promissory note executed by the new
homeowner and with the city as the beneficiary. The loan will become immediately due and
payable to the City of Carlsbad if the homeowner fails to comply with the terms of the loan and
the requirements set forth within these resale program guidelines. The unit may be sold by the
new owner but may only be sold to an eligible buyer at a price that is affordable to the
designated income level set forth within the 30-year loan agreement. The city will retain an
option to repurchase the unit again at a restricted price throughout the term of the agreement
when the owner decides to sell at a later date.
3. PROGRAM REQUIREMENTS AND BUYER ELIGIBILITY
The city has established basic threshold eligibility criteria for participation in this affordable
housing homebuyer program.
A. The buyer must currently be living in San Diego County.
B. The buyer has not purchased a unit under any other First-Time Homebuyer or
Affordable For-Sale Housing Program administered by the City of Carlsbad in the past
seven years.
C. The buyer’s income may not exceed the maximum income limit for the resale program
which shall be 80 percent of the San Diego County Area Median Income (AMI) as
established by the US Department of Housing & Urban Development and as published
by the State Department of Housing and Community Development and in effect at the
time of the buyer’s application, adjusted for household size.
D. The buyer must have a minimum income which allows for the total of all housing costs
to not exceed 30 percent of the total gross household income for the buyer. The
minimum income shall be determined on a case-by-case basis taking into consideration
the size and market value of the unit, the homeowner association fees (if any) and other
related housing costs (including a utility allowance) at the time of application to
purchase one of the units.
E. At time of application for a particular unit, the buyer’s household size shall meet the
following minimum and maximum household size:
Unit Size Household Size
Minimum Maximum
1 bedroom 1 3
2 bedrooms 2 5
3 bedrooms 3 7
4 bedrooms 4 9
June 18, 2024 Item #6 Page 13 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 3
This requirement is intended to promote efficient use of available affordable housing
and to prevent overcrowding at the time of sale; however, this does not limit future
growth in the household size after the purchase. The buyer must execute legal
documents that prohibit the unit or any portion thereof from being used as a short or
long-term rental, and require the owner to use the unit as their primary residence for
no less than 10 months out of each calendar year.
F. Co-borrowers or co-signers who will not occupy the property as their primary
residence are not permitted. A non-borrowing spouse is considered a co-
borrower if they will occupy the property, even if they will not be on the loan for
the first mortgage. Student dependents who live outside San Diego County at or
near their college will not be counted as a household member.
G. For the purpose of determining household size, any person claimed as a
household member must have lived with the borrower for a minimum of twelve
consecutive months immediately prior to purchase and must provide evidence
they will live in the subject property after purchase. In addition, any non-
borrowing person listed as having no income on the application must be
indicated as a dependent on the applicant’s tax return for the previous year to be
considered a household member.
Appendix A provides a quick review summary of eligibility requirements, documentation
requirements and clarifications of the standards.
4. NOTIFICATION OF AFFORDABLE UNIT FOR SALE BY THE CITY
In an effort to be fair and ensure those that meet the priority criteria set forth by the city have
an opportunity to purchase one of the city-owned affordable units, the city will open an
application period when there are units available for purchase. The application period will
remain open for a period of 60 days, or longer if needed to receive enough qualified
applications.
A. Outreach Strategies
o The city will utilize print media and electronic media to inform the
public of affordable for-sale housing opportunities.
o The city will target outreach to minority and special needs
populations that may not otherwise have the opportunity to access
affordable housing opportunities.
o The city will communicate the status of affordable housing
availability to a variety of agencies including social service agencies,
June 18, 2024 Item #6 Page 14 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 4
nonprofit agencies, and special interest groups in the community,
advising them of eligibility factors and guidelines so that they can
make appropriate referrals.
B. Public Noticing and Application Period
o The city will provide notice in local newspapers and the city website
when affordable housing units will be offered for sale. The notices
will announce when the application period will open and provide
information on how to apply to purchase an affordable unit. Notices
will be sent 15 days prior to the opening date of the application
period.
o Applications for the purchase of an affordable unit must be filed with
the City of Carlsbad, Housing Services Division by the date and time
specified in the public notice. Applications will be date and time
stamped in the order in which they are received.
C. Marketing.
o Informational materials for applicants will include a general
description such as the locations and number of affordable units,
number of bedrooms, number of parking/garage spaces per unit,
amenities, pricing, etc.
o Marketing materials will include photos of the exterior and interiors
of available units.
5. APPLICATION PROCESS
A. Once the application period is opened by the city, an interested buyer will be able to
download the application from the city’s website (www.carlsbadca.gov/housing),
complete it, provide the required back-up documentation and then return the original,
signed application and supporting documents to:
City of Carlsbad
1200 Carlsbad Village Drive, Carlsbad, CA 92008
Attn: Homebuyer Program, Housing Services.
o Application forms will be mailed to interested buyers upon request.
B. The potential buyer shall be required to complete both a program and uniform
residential loan application to purchase the unit and must provide all pertinent
documentation requested by the City of Carlsbad to determine eligibility as well as to
determine sorting priority (see Section 6 below). Applications will only be accepted if all
documentation is provided at the time the application is submitted to the city.
Incomplete applications will be returned to the potential buyer with a list of required
documentation to be submitted to the city; applications may not be resubmitted until all
required documentation is available and included with the completed application.
June 18, 2024 Item #6 Page 15 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 5
Please note that all applications must be signed and dated and may be noted on credit
reports as an application for a loan.
C. Submission of an incomplete application will be returned to the applicant, and the
application will not be considered for the purchase of an existing unit until it is accepted
as complete. A resubmitted application will be date and time stamped when it is
received. If the resubmitted application is accepted as complete, the resubmittal date
and time will be used for sorting as described in Section 6 below. It is important to
review the application closely and ensure that the application is complete, signed and
dated, and that all pertinent documents are included upon initial submission.
D. Persons with disabilities are entitled to request a reasonable accommodation in rules,
policies, practices, or services, or to request a reasonable modification in the application
process and purchasing process, when such accommodations or modifications may be
necessary to afford persons with disabilities an equal opportunity to housing.
6. APPLICATION SORTING
At the conclusion of the application period, based on the following criteria, all verified complete
applications will be placed in one of three eligibility lists, and in the order that applications were
accepted as complete:
List A List B List C
Applicant household has
BOTH
Gross annual household
income that is 50 percent of
Area Median Income or less,
adjusted for household size
AND
Current housing cost burden
of 50 percent of gross
household income or greater
Applicant household has
EITHER
Gross annual household
income that is 50 percent of
Area Median Income or less,
adjusted for household size
OR
Current housing cost burden
of 50 percent of gross
household income or greater
All other eligible applicants
Applicants will be selected first from List A in the order in which applications were accepted as
complete. If units are still available after selection of applicants from List A has been completed,
then applicants from List B will be selected in the order in which applications were accepted as
complete. If units are still available after selection of applicants from List B has been completed,
then applicants from List C will be selected in the order in which applications were accepted as
complete.
June 18, 2024 Item #6 Page 16 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 6
Once all units are purchased by applicants on the eligibility list, remaining eligible applicants will
be kept on a waiting list as provided in Section 7 below. If units still remain after all applicants
from the eligibility lists have been considered and provided an opportunity to purchase a unit,
then any remaining units will be sold to an eligible purchaser on a first-come, first-served basis.
7. WAITING LIST AND ASSIGNMENT OF OPTION TO PURCHASE
If there are more qualifying buyers than units available at the time of application, the applicant
will be placed on a waiting list (with the same rank order) following the completed sale of the
last affordable unit until the next application period is opened by the city. The applicant will
then be considered for the opportunity to purchase a restricted affordable housing unit at that
time.
As described in Section 1, in many cases the city has the option to purchase an existing
affordable unit when the homeowner chooses to sell. The city also has the right to assign its
option to an eligible purchaser rather than purchasing the unit outright and then re-selling it.
Accordingly, whenever an owner of an affordable unit notifies the city of their intent to sell, the
city may assign its purchase option to an eligible buyer on the waiting list created under this
program. Note that in these cases, the qualifying household income limits and affordable unit
sales prices will be determined by the terms of the original resale restriction agreement with
the owner, generally set at 80 percent AMI and adjusted for household size. Therefore, the
waiting list will be screened for applicants meeting the qualifying income requirements, who
will then be selected in their ranked order.
Applicants should notify the city of any changes in email or mailing address to ensure that the
city has the most current contact information for communications regarding unit availability or
any program changes. Applicants on the waiting list will be contacted to update their
application at the time additional units are made available for purchase.
8. INCOME QUALIFYING FOR PROGRAM ELIGIBILITY
The household’s gross annual income must not exceed the income restriction set forth within
these program guidelines and as noted above (maximum 80 percent of AMI for San Diego
County, adjusted for household size). Gross income will be calculated according to these
guidelines. The combined gross annual income of all members of the household age 18 and older
who are currently living together and have lived together for 12 months or more and will be living
in the property must be included in the determination of income. The household’s income must
be projected as an annual income. It will be assumed that today’s circumstances will continue for
the next 12 months, unless there is verifiable evidence to the contrary. All households must be
income-qualified no more than 60 days prior to the purchase closing date. For the purpose of
determining income eligibility, all income is included even if there is less than a two-year work
history.
June 18, 2024 Item #6 Page 17 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 7
9. HOUSING DEBT-TO-INCOME RATIO (HOUSING AFFORDABILITY)
The buyer/borrower’s monthly housing costs/debt—including principal, interest, property taxes,
property insurance, and if applicable, private mortgage insurance and homeowner’s association
dues—shall not exceed 30 percent of the buyer/borrower’s gross monthly income; this is known
as the housing debt-to-income ratio. Please note that the income of a non-borrowing spouse is
included when calculating this ratio if s/he has a work history of two or more years.
All household monthly debt (including home loan, car loans, credit card debt, etc.) shall not
exceed 50 percent of the buyer household’s gross monthly income.
10. INCOME FOR DEBT-TO-INCOME CALCULATIONS
Program guidelines require the combined income of all persons on title, including a non-borrowing
spouse (if applicable), to be included in the calculation of income. The household’s actual /average
income will be calculated for underwriting purposes. It will be assumed that today’s
circumstances will continue for the next 12 months, unless there is verifiable evidence to the
contrary. Applicants, co-applicants and non-borrowing spouses must have a minimum of a two-
year continuous work history.
11. DOWN PAYMENT REQUIREMENTS
The following down payment requirements shall apply to this affordable housing resale program
with the intent of requiring minimal investment by the buyer to extend the opportunity for
homeownership to a larger population of lower income households. But, there is also a cap to
the cash investment to ensure maximum public benefit. An all-cash transaction will not be
permitted, except where exceptional circumstances demonstrate that is necessary to serve a
special population such as very-low or extremely low-income seniors or the disabled.
B. Minimum required down payment is three percent of the purchase price.
o The borrower’s down payment must be from their personal funds or
a gift from an immediate family member. Immediate family
members include the following people: father, mother, brother,
sister, grandparent, uncle, aunt or child.
C. Maximum down payment: 20 percent of the purchase price.
o An exception to the maximum down payment guideline may be made for
buyers whose sole source of income is derived from Social Security, Social
Security Disability or Veterans Disability, in which case a down payment
sufficient to bring their housing debt-to-income ratio to no less than 30
percent may be accepted.
June 18, 2024 Item #6 Page 18 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 8
o As the program is designed for lower-income buyers with limited assets
but sufficient income to support a first mortgage payment, large down
payments from family members with significant assets to assist the
buyers qualify for the mortgage loan will not be considered.
D. All-cash transactions are not permitted. An exception may be made for buyers
whose sole source of income is derived from Social Security, Social Security
Disability or Veterans Disability, and the proposed payment for property taxes,
homeowners association (HOA) dues and homeowners insurance is equal to or
greater than 30 percent of their income. The buyer must meet all eligibility
requirements, have acceptable credit and have sufficient income to support the
HOA, property taxes and monthly debt obligations.
12. ASSET LIMITATION
At the time eligibility is determined, the liquid assets of all household members, including
children, must not exceed an amount equal to the maximum income limit set for the
particular affordable unit, as adjusted for household size.
A. The term “liquid assets” refers to cash and assets, which are readily convertible to
cash within a reasonable period, including but not limited to savings and checking
accounts, certificates of deposit of any term, marketable securities, money market
and similar accounts, mutual fund shares, and insurance policy cash values.
B. The term “liquid assets” shall not include retirement account funds if those
accounts are not accessible to the buyer.
C. An exception may be made for buyers whose sole source of income is derived
from Social Security, Social Security Disability or Veterans Disability and a down
payment of more than 20 percent is required to reduce their housing debt-to-
income ratio to no more than 30 percent. In this case, the borrower’s assets must
not exceed an amount equal to the maximum income limit (50 percent of San
Diego County Area Median Income), as adjusted for household size after the
maximum allowable down payment contribution.
D. The minimum household reserve requirement is $1,000. The reserves must be from
liquid assets.
13. CREDIT GUIDELINES
A. Minimum credit score: 640
B. No foreclosure or bankruptcy (Chapter 7 or 13) within the last seven years
C. A letter of explanation is required for all derogatory reporting dated within two
June 18, 2024 Item #6 Page 19 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 9
years prior to the close of escrow
D. All collections, charge-offs and judgments must be paid or settled with the
creditor through escrow or prior to the close of escrow. Back-up documentation
showing the account has been paid is required if paid outside of escrow
E. A credit report for a non-borrowing spouse is required. All debt of the non-
borrowing spouse will be used in the debt-to-income ratio calculations
14. FIRST TRUST DEED LOAN
The borrower shall secure a 30-year fixed rate loan from a private lender. No adjustable
rate loans or other financing programs shall be permitted. Conventional, Federal Housing
Administration (FHA) and Veterans Administration (VA) financing are acceptable. First
trust deed lenders are required to collect and manage an impound account for payment
of taxes, assessments and property insurance for the term of the first mortgage.
15. HOMEBUYER EDUCATION CLASS
All applicants, co-applicants and non-borrowing spouses, whether on title or not, are
required to attend a homebuyer education class given by a City of Carlsbad-approved
Homebuyer Education Provider.
16. OCCUPANCY REQUIREMENTS
As long as the borrower(s) owns the affordable unit, the borrower(s) must reside in the
unit as their principal place of residence. The borrower(s) shall not rent or lease all or any
part of the restricted unit at any time. The unit shall be occupied full time (at least 10
months out of the year) and may not be used at any time as a vacation home or short-
term vacation rental, or allow any other rental transaction or similar use. Borrower(s)
must comply with annual occupancy certification requirements and submit the
certification to the city upon request.
17. AFFORDABLE RESALE RESTRICTIONS
On the date of the sale of each Affordable Housing Resale Housing Program property,
the city will record resale restrictions on the property. The resale restrictions will include
income restrictions for new buyers, future sales price restrictions, initial occupancy
restrictions, and length of restriction (30 years). Note that future buyer income
restrictions and future sales price limits shall apply throughout the entire 30-year
affordability term. The resale restrictions are included in the following documents:
June 18, 2024 Item #6 Page 20 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 10
A. Declaration of Restrictive Covenants Regarding Restrictions on Transfer of
Property, Occupancy Restrictions, Refinancing Restrictions, and Option to
Purchase
B. Deed of Trust
C. Promissory Note
D. Notice of Affordability Restrictions
E. Buyer’s Disclosure Statement
18. CITY’S CONTINUING ROLE
The City of Carlsbad is the Affordable Housing Homeownership Program administrator
and secondary lender. As the program administrator, the city is responsible for oversight
and compliance of the affordable resale restrictions. The city’s responsibilities include
but are not limited to:
A. Managing the Affordable Housing Homeownership Program interest and waiting list
B. Calculating the sales price for affordable for-sale units at the time of the first
sale and for each subsequent sale
C. Ensuring that upon resale, the property is in a “move-in” ready condition
D. Verifying eligibility of buyers that participate in the program
E. Monitoring owner-occupancy compliance
The city may use third parties to assist in administering the program.
The City of Carlsbad is a lien holder on each unit and has no further ownership interest in the
properties after the initial sale of the unit.
19. REFINANCE
The Deed of Trust and Promissory Note to the city may be subordinated to the
refinancing of the existing first trust deed loan in order to lower the interest rate and
subsequent monthly payment only. Refinancing that increases the current principal
balance (except for reasonable costs of refinance) or increases the monthly mortgage
payment will not be permitted. Mortgage loans or equity lines of credit junior in lien
priority to the city deed of trust are not permitted. No reverse mortgages will be
approved for the affordable units. All refinances are subject to prior written approval by
the city.
June 18, 2024 Item #6 Page 21 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 11
20. PROPERTY CONDITION
Units offered under this program will be sold by the City “as is”, which the City has
determined is in “move in condition”. The city will make no repairs and is not responsible
for any defects in the construction of the units or any repairs or replacements that may
be required for the units. All buyers are encouraged to engage the services of a home
inspector to provide for a full home inspection prior to close of escrow on the purchase
transaction. The potential buyer will be permitted to cancel escrow if there are any
conditions in the unit which are unacceptable to the buyer and with the understanding
that the city will make no repairs or correct any identified defects.
At the time the new owner decides to resell the purchased affordable unit, the unit shall
be restored to “move in condition” prior to providing the Notice of Intent to Sell to the
City of Carlsbad.
June 18, 2024 Item #6 Page 22 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 12
These guidelines are provided as a basis for the determination of program eligibility and
underwriting of Affordable Housing Resale Program loans. The City of Carlsbad at its sole
and reasonable discretion, and with the City Manager’s approval, may make exceptions to
any guideline set forth herein, if not inconsistent with City Council Policy No. 73.
Please be aware that reporting fraudulent, untrue and/or incomplete documentation is
a serious program violation. This could lead to the termination of your participation in
the Affordable Housing Resale Program.
It is also important to acknowledge that Title 18, Section 1001 of the United States Code,
states that a person is guilty of a felony for knowingly and willingly making false or
fraudulent statements to any department or agency of the United States. It is very
important to provide complete and accurate information as requested by the City of
Carlsbad.
The City of Carlsbad is committed to affirmatively furthering fair housing by promoting fair
and equal housing opportunities for individuals living in the City of Carlsbad and San Diego
County. This commitment extends to all housing programs managed or owned by the city
and to all grant-funded programs provided by the city. It is the policy of the city to provide
services without regard to race, color, religion, national origin, ancestry, age, gender, source
of income, familial status or physical/mental disability.
June 18, 2024 Item #6 Page 23 of 26
Qr
EQUAL HOUSING OPPORTUNITY
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 13
Appendix A
Summary of Applicant Eligibility and related standards and acceptable documentation:
Applicant Eligibility Standards
Co-Signers Co-signers who will not occupy the property are prohibited.
Documentation • If married: spouse must sign city forms,
disclosures and promissory note,
regardless of vesting.
• If divorced: copy of final divorce decree
and judgment from the court.
• Death certificate for deceased spouse.
• Non-U.S. Citizen: copy of permanent alien
registration card (green card). All
borrowers must be a U.S. Citizen or
Permanent Resident.
• Copy of driver’s license or other government-issued photo ID.
Income (Required for ALL household members over the age of 18) Standards
Alimony and Child Support Copy of divorce decree and/or child support
agreement, with six months proof of payment.
To be used for eligibility and underwriting.
Support must continue for 12 months or more. Disability Income Copy of award letter from payer. Social Security Income Copy of award letter from payer. Pension Income Copy of award letter or W-2 from payer.
Workers Compensation Benefits Copy of award letter from payer. Unemployment Compensation Copy of award letter from payer.
Financial Aid (student loans, etc.) Copy of award letter from payer.
Interest or Dividend Income Two years 1040s, copies of current statements verifying buyer’s assets. Tax Returns & W-2s Three years of signed tax returns. Two years W-2s for all employers.
Salaried / Wage Earners Most recent pay stubs covering a minimum of
two month’s income. Pay stubs to reflect year-
to date earnings and deductions. If there are
multiple employers, all pay stubs showing year-
to-date earnings.
Part-Time Employment Most recent pay stubs covering a minimum of two months. Pay stubs to reflect year-to-date earnings and deductions.
June 18, 2024 Item #6 Page 24 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 14
Bonus and Overtime Income Must be documented on pay stub. Will be used
if there is a two-year history and likelihood of
continuation.
Self-Employed Two years of tax returns with schedule C
and a year-to-date signed profit and loss
statement. Must have a minimum two-year
history of self-employed income.
Commission Only Two years of tax returns with schedule C
and a year-to-date signed and dated profit
and loss statement or most current pay
stubs covering a minimum of one month.
Must have a minimum two-year history of
commission income.
Assets (Required for ALL households members over age 18) Standards
Checking and Savings Accounts Three months most recent bank statements for ALL accounts.
Stocks and Bonds Must be verified by brokerage firm or similar company and statement of account. Saving Bonds Copy of bond.
401K or Retirement Accounts Copy of account statement and letter from
employer verifying that borrower does not
have access to the funds, if applicable. Liabilities Standards
Alimony/Child Support Included as debt if more than six months remaining. Copy of divorce decree.
Installment Loans Included as debt if more than six months
remaining.
Revolving Accounts Payment stated on credit report or application
is used, whichever is higher. If payment is not
stated, the higher of $10 or 5% of the
outstanding balance owed is used.
Student Loan If loan is deferred for one year or more, it is not
included as a monthly obligation. If less than a
year deferment or borrower making payments,
it is included as a debt. Credit History Standards
Credit Reports Must be a “three repository merged” credit
report. Any items not belonging to borrower
must be removed from the report. Credit
report cannot be dated more than 60 days from
underwriting. Minimum credit score: 640.
June 18, 2024 Item #6 Page 25 of 26
Community Development
Housing Services 1200 Carlsbad Village Drive Carlsbad, CA 92008 760-434-2810 t
December 2020 15
Collections All unpaid collections must be paid. Need letter of explanation from borrower.
Derogatory Credit Letter of explanation is required for all
derogatory credit. No accounts can be past due
at the time of loan application.
Bankruptcy No bankruptcy (Chapter 7 or 13) within the last
seven years. Short Sales / Foreclosures No short sale or foreclosure within the last seven years. Judgments, Garnishments and Involuntary Liens No outstanding judgments, garnishments or involuntary liens are allowed.
Inquiries Any inquiries within the last 90 days must be explained.
No or Limited Credit History Alternative credit history is required. Utility
payment records (at least three months most
recent statements), rental payments (past 12
months) or other personal loans (past 12
months). Need three forms of credit history, at
least one must be a rental history.
June 18, 2024 Item #6 Page 26 of 26