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HomeMy WebLinkAboutCT 98-17; Hadley Property; Tentative Map (CT) (34)04/15/1999 15:30 7604380981 HENTHORN PAGE 02 •ff'~: *•• Spectrum Communities April 15, 1999 Ms. Deborah K. Fountain Housing and Redevelopment Director City of Carlsbad 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Subject Hadley Property - Request to Purchase Off-site Affordable Housing Credits Dear Ms. Fountain: This letter serves as a formal request by Spectrum Communities to purchase off-site affordable housing credits in the existing Villa Loma development to satisfy the inclusionary housing obligations of the Hadley Property subdivision (CT 98-17). This request is in compliance with actions previously taken by the City Council: The City's Inclusionary Housing Ordinance (CMC Chapter 21.85) establishes certain requirements under which residential developers must provide housing that is affordable to lower-income households as a condition of project approval and permit issuance. The ordinance provides that "circumstances may arise in which the public interest would be served by allowing some or all of the inclusionary units associated with one project site to be produced at an alternative site or sites". The two inclusionary housing options that are available to a developer are that the developer shall either 1) enter into an agreement with the City to purchase affordable credits from Villa toma; or 2) participate in an off-site combined inclusionary project within the southwest quadrant and as appropriate, in accordance with the requirements set forth in Chapter 21.85 of the Carlsbad Municipal Code and City Council Policies 57 and 58 dated September 12,1985. The Housing Commission has reviewed a report that projected the inclusionary housing requirements of undeveloped property within the Southwest Quadrant of the City. The report examined whether projected development of the Quadrant could result in a demand for off- site credits exceeding the number of available credits in the Villa Loma project. The analysis showed that there are sufficient excess units (Credits) to satisfy the potential demand of the Quadrant 1 15375 Barranca Parkway, Suite B-211, Irvine CA 92618 - Tel: (949) 753-8400 Fax: (949) 753-8401 04/15/1999 15:30 7604380981 HENTHORN PAGE 03 /•-v ,,,.^ Spectrum Communities In the case of the Hadley Property, there are particular circumstances that warrant the provision of the incluslonary units off-site in combination with the existing Villa Loma Apartment project, pursuant to Council Policy 57 criteria. Significant feasibility issues affect the development of this project on-site. Contribution to the existing off-site project versus providing a small (5 unit) low-income apartment complex on-site will result in increased public benefit by returning funding currently tied up in the Villa Loma project, for use in other affordable housing activities. We understand that a staff Project Review Committee will evaluate this request to determine compliance with the criteria defined in Policies 57 and 58. It is also understood that staff will then take the Committee's recommendation to the Housing Commission and City Council. Please call if you need additional information or if we may be of any other assistance. Sincerely, Mr. David Salene Spectrum Communities, LLC Enclosure cc: Mr. Jack Henthorn, Jack Henthorn & Associates Mr. Craig Ruiz, Housing and Redevelopment Department 2 15375 Barranca Parkway, Suite B-211, Irvine CA 92618 • Tel: (949) 753-8400 Fax: (949) 753-8401 04/15/1999 15:30 7S04380981 HENTHORN PAGE 04 HADLEY PROPERTY OFF-SITE AND COMBINED INCLUSIONARY HOUSING PROJECT ASSESSMENT WORKSHEET ~ BACKGROUND The following background information is provided to assist you in your assessment. 1. Owner/Applicant Information: Owner: Applicant: Applicant's Representative: Paul & Peggy Hadley Family Spectrum Communities, LLC Jack Henthom & Associates Trust, December 3,1941 Attn: Mr. David Salene Attn: Mr Jack Henthorn Paul & Peggy Hadley, 15375 Barranca Parkway 5375 Avenida Encinas Trustees Suite B-211 Suite D Irvine, CA 92618 Carlsbad, CA 92008 949-753-8400 760-438-4090 2. Off-site/Combined Project Name: VILLA LOMA APARTMENTS 3. Description of Project with Incluslonary Housing Obligation: The Hadley Property, CT 98-17, is a proposed 39-lot, 38-unit, single-family development located on a 14.7-acre parcel with a 5.7 unit affordable housing obligation. 4. On-site Affordable Housing Description: The Hadley Property Affordable Housing project would be a 5-unit multi-family, apartment project occupying two lots with 1, 2 and 3-bedroom units. The units would be offered in a maximum rent range that is affordable to households earning incomes of 80% of the Area Median Income. To achieve financial feasibility, the project would require a net subsidy of $256,000 (assuming the developer provides a fully constructed pad, and unit revenues are based on a 95% occupancy rate factor). 5. Proposed Off-site Project Description: The Villa Loma project is a 344-unit apartment development in which all units are restricted and affordable to households with incomes not exceeding 60% of the San Diego County Median. Villa Loma was developed by La Terraza Associates, with Bn'dge Housing Corporation as the Managing General Partner. The complex contains 1, 2, 3 & 4 bedroom units. Villa Loma was financed with assistance from the City of Carlsbad and the Carlsbad Redevelopment Agency. The assistance was structured in such a way as to create affordable units which would be marketed exclusively by the City to "other developers" in order to satisfy an affordable housing obligation. The Villa Loma Apartment complex is a Combined Project according to the Inclusionary Housing Ordinance, and developers may participate in this as an "off-site" method of satisfying their affordable housing obligation. (This is also an approved site for the Greystone Cove, Ocean Bluff and Lohf projects.) 04/15/1999 15:30 7604380981 HENTHORN PAGE 05 Participation in Villa Loma Apartments by the applicant would be in the form of a purchase of Affordable Housing Credits (Credits) under terms established by City Council Policies Numbered 57 and 58. If the applicant is afforded the opportunity to purchase Credits, the Hadley Property tentative map would require the purchase of 5.7 Credits to satisfy its inclusionary housing requirement. 6. Description of On-site Project Constraints: Specific constraints exist which would affect an on-site affordable project's feasibility. These nrnrliirt 04/15/1999 15:30 7604380981 HENTHORN PAGE 06 HADLEY PROPERTY OFF-SITE AND COMBINED INCLUSIONARY HOUSING PROJECT ASSESSMENT WORKSHEET -- WORKSHEET 1. Feasibility of the Pa-site Proposal a. Are there significant feasibility issues due to factors such as project size, site constraints, amount and availability of required subsidy, and competition from multiple projects that make an on-site option impractical? • The on-site affordable project is not of sufficient size to be a viable apartment project. Given the small size of the project and its restricted rental structure, on-site management and maintenance will be difficult. • The small scale of the affordable housing project also makes it unlikely that the project will generate Interest from funding sources. • The market units in this project would be required to absorb over $6,700 per unit so that land value could be contributed by the developer. This figure would rise to almost $11,500 per unit if the applicant were required to build the units on site and close the post land development gap of over $256,000. • Based on the estimated restricted rental prices of the affordable units the applicant will be facing an average subsidy requirement of approximately $51,200 per unit, beyond land contributions. This would result in each unit being subsidized with approximately $87,200. b. Will an affordable housing product be difficult to Integrate Into the proposed market development because of significant price and product type disparity? • Price disparities will be substantial between the low-income rental apartment units restricted at $695- $1,062 rent and the approved higher-end single-family detached homes which have an estimated base price range of $400,000 to $700.000. • The integration of 5 affordable apartment units, sized at 725 to 1,100 sq. ft., into the single-family subdivision with homes of 2,500 to 4,500 square feet on approximately 7,500 to 15,800 sq. ft. tots will result in major product type disparity on-site. The surrounding area will also be built-out with low density, single-family detached products consistent with the existing RLM land use designation and market demand. The on-site project would, therefore, also result in substantial product disparity with the surrounding region. c. Does the on-site development entity have the capacity to deliver the proposed affordable housing on-site? • The applicant is not experienced in the development of affordable housing. • Affordable housing developers have advised the applicant that it is unlikely that this size of project will generate interest from funding sources. 2. Relative Advantages/Disadvantages of the Off-site Proposal. a. Does the off-site option offer greater feasibility apd cost effectiveness than the on-site alternative, particularly regarding potentiaf local public assistance? • Villa Loma is built and has proven its feasibility; no additional assistance is required, • The applicant's participation in Villa Loma would permit the intended recovery of City investment provided to the project through utilizing "excess units". These funds could then be used to provide additional affordable housing. Conversely, the developer's on-site project would create the demand for additional new subsidy. 04/15/1999 15:30 7604380981 HENTHORN PAGE 07 • The small size of the on-site project could result in additional future subsidy requests related to operating costs. b. Does the off-site proposal have location advantages over the on-site alternative, such as proximity to jobs, schools, transportation, services; less Impact on other existing developments, etc.? • The Villa Loma development is located within close vicinity of jobs (in the nearby business parks and shopping centers), public transportation, schools, public library, shopping, parks, as well as, other amenities and services due to being located along the major thoroughfare, El Camino Real. • Villa Loma Is a self-contained affordable development in an area designated for higher density residential development such as condominiums and townhomes. • The on-site proposal could be a source of land use conflicts that typically occur when higher density development is permitted adjacent to larger lot single family development. c. Does the off-site option offer a development entity with the capacity to deliver the proposed project? « The Villa Loma project is an existing project, developed and managed by a highly experienced and specialized affordable housing developer. d. Does the off-site option satisfy multiple developer obligations that would be difficult to satisfy with multiple projects? • Villa Loma project was originally established as a Combined Project, specifically to address this purpose. • The proposed on-site project would be one of several projects in the southwest quadrant competing for scarce financial assistance. Villa Loma has already been financed and built and thus, would not be competing for subsidy financing. 3. Advancing Housing Goals and Strategy a. Does the off-site proposal advance and/or support City housing goals and policies expressed In the Housing Element, CHAS and Incluslonary Housing Ordinance? General Plan Housing Element and CHAS Goals: • Villa Loma Apartment affordable project is targeted to the highest priority need identified, larger rental units for low income households. • The recovery of the City's investment in the Villa Loma Project through the applicant's participation will provide for additional resources that are needed to further affordable housing development. • Villa Loma provides a large quantity and diversity of affordable housing stock with its 344 units, including a generous supply of different size units to meet various housing needs of the community. Inclusionary Housing Ordinance Policies: • Consistent with the City and public interests to use existing "excess" affordable units before supporting additional new construction. • In conjunction with the combined Villa Loma project, the Hadley Property will provide for 15% of the total units for affordable (lower income) residential units. The project also complies with the Inclusionary requirements as contained in the General Plan Housing Element. Growth Management Zone, Ord. No. NS-257 Guidelines: • Villa Loma is coordinated with surrounding properties by providing direct access to a major Circulation Element Roadway, El Camino Real, as well as circulation and pedestrian access to public facilities. 04/15/1999 15:30 7604380981 HENTHORN HADLEY PROPERTY ONSITE AFFORDABLE HOUSING COMPARATIVE PRO FORMA PAGE 08 4^15/99 REVENUE ANALYSIS 1 BEDROOM 2 BEDROOM 3 BEDROOM 95% OCCUPANCY OPERATING COSTS @ 30% NET OPERATING INCOME DEBT SERVICE INCOME (1.2) * Note. The remainder unit obligation of .7 will INCOME SUPPORTED DEBT LAND DEVELOPMENT COSTS LAND ONSITE IMPS PUBLIC FEES DESIGN/CONSULTANTS IMPROVED SITE COST LAND CARRY 18MO LAND DEVELOPMENT COST UNIT CONSTRUCTION COSTS UNIT SIZE SQUARE FEET (project) STRUCTURE COST $45.00 ON SITE INDIRECTS 10% STRUCT. OVERHEAD .04 MARKETING .02 CONSTRUCTION COSTS LOAN FEES .02 CONST FINANCING SUBTOTAL FINANCING PROJECT cosy GAP Developer land contribution NET GAP PER UNIT NFT«AP PER UMiTfi^gg SUBSIDY RENT UNITS REVENUE $695 1 $695 $888 3 $2,664 $1,062 1 $1,062 5 $4,421 $4,200 ($1,260) $2,940 $2,450 be met by purchase of offstte credits In the Villa Loma $279,040 # lots 2 $180,000 $120,000 $97,500 $35,000 $432,500 $27,000 $459,500 1 BR 2 BR 3BR 725 2550 1100 $32,625 $114,750 $49,5QQ $238,138 $5,581 $11,907 $17,488 SZ1&125 $431085 $180,000 $256.085 $51,217 $87,217 project. 4,375 $196,875 $15,313 $17,300 $8,650 $238,138 Page 1 JACK HENTHORN ASSOCIATES MKA/Hadley Aff Bsg Profcma2