REPORT TO COUNCIL
SUBJECT
Title
Consideration of an Affordable Housing Agreement with Legend SantaClara, LLC
Report
BACKGROUND
On September 27, 2016, the City Council approved land use entitlements for a 56-unit condominium housing project submitted by Legend GC, Inc., for the property located at 1890 El Camino Real. The property and entitlements have been transferred to Legend SantaClara, LLC who will act as developer. As a condition of the land use entitlements, and per the City’s inclusionary housing policy, the developer was required to enter into an Affordable Housing Agreement (AHA) to designate 10-percent of the total units (i.e. 5.6 dwelling units) as Below Market Purchase (BMP) units to be sold to qualified first-time homebuyers at an affordable price based upon the Area Median Income (AMI).
DISCUSSION
The BMP Policies and Procedures Guidelines adopted by the City Council indicate that in the case of a fractional obligation of 5.6 units, the developer can either elect to provide six BMP units, or five BMP units and pay a BMP in-lieu fee for the fractional unit. In this case the developer is proposing to provide five BMP units and pay the required in-lieu fee for the fractional units. The BMP housing units will be sold at prices deemed affordable to households with an income that does not exceed 110% of AMI. The resulting Affordable Sales Prices will be $295,000 for two 1-bedroom, 1-bath BMP units and $333,000 for three 2-bedroom, 2-bath BMP units. The anticipated BMP in-lieu fee will be established by an appraisal of the BMP units after completion. The BMP in-lieu fee will be equal to the difference between the appraised unrestricted Initial Market Value (IMV) and the Affordable Sales Price, multiplied by the 0.6 fraction. To maintain long-term affordability, a twenty (20) year restrictive resale covenant (Covenant) is enforced and recorded against the property. The resale restrictions within the Covenant include:
1. If home is sold within 5 years of acquisition, the homeowner must sell the BMP unit to another income-eligible homebuyer.
2. After 5 years of ownership, the homeowner can resell the home at market price; however the City and the homeowner will share in the appreciation of the home. The homeowner's share of any appreciation beyond the Initial Market Value (IMV) will increase by five percent per year for twenty years.
3. After the Covenant expires in twenty years, the equity sharing requirements is exhausted and the homeowner will realize full gain beyond the IMV.]
Approval of the proposed AHA will implement the City’s General Plan inclusionary housing policy consistent with the previous land use entitlements granted for the subject property.
ENVIRONMENTAL REVIEW
The potential environmental impacts of the project were addressed in an Environmental Impact Report/Mitigated Negative Declaration/ Negative Declaration prepared for the project (and which was certified/approved on September 27, 2016.
FISCAL IMPACT
In accordance with the policies of the BMP Program, the City will realize a recapture of the inclusionary subsidy value of the BMP units when resold in the future if the sale takes place within 20 years of the date of the AHA. In addition, the BMP in-lieu fee for the fractional unit will be deposited into the City Housing Fund at the time it is received from the Developer.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Approve and authorize the City Manager to execute the Affordable Housing Agreement (AHA) with Legend SantaClara, LLC, to execute amendments thereto, and to take any other action necessary to implement the requirement for the provision of five (5) Below Market Purchase (BMP) units and payment of the BMP in-lieu fee for a fractional unit within a 56-unit housing project at 1890 El Camino Real.
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Affordable Housing Agreement With Legends SantaClara, LLC