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Resolution 1993-10 . . RESOLUTION NO. 93- 10 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY PURSUANT TO SECTION 50.62 OF THE ZONING ORDINANCE ADOPTING AN AFFORDABLE HOUSING EXEMPTION POLICY WHEREAS, Section 50.62 (b) of the ci ty' s Residential Development Ordinance provides for exemptions from the ordinance for certain types of residential projects; and WHEREAS, Section 50.62(b) (4) provides for an exemption for certain private sector funded projects meeting criteria of long-term affordability where the City Council has adopted such criteria by resolution; and, WHEREAS, city staff have drafted a "Policy Statement for Exempting Affordable Private Development Proposals from the RDO", hereafter known as the "Affordable Housing Exemption policy", intended to establish the criteria by which long-term affordability of projects sought to be exempted under Section 50.62(b) (4) may be gauged. NOW, THEREFORE, BE IT RESOLVED THAT: A. The City Council hereby finds that "Affordable Housing Exemption Policy," attached hereto as Exhibit A and incorporated herein by this reference adequately meets the goals of the City'S Residential Development Ordinance and affordable housing policies goals. B. Said Affordable Housing Exemption Policy should be and hereby is adopted pursuant to and in furtherance of Section RESOLUTION NO. 93 - 10 -l- , . . 50.62(b) (4) of the Zoning Ordinance. PASSED AND ADOPTED this 22nd day of February, 1993, by the following vote: AYES: COUNCILMEMBERS: GILROY, HALE, KLOECKER, NELSON, ROWLISON, VALDEZ and GAGE. NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None Don steirunetz, city RESOLUTION NO. 93 - 10 -2- . . Affordable Housing 1 Revised 2/02/93 EXHIBIT "A" POLICY STATEMENT FOR EXEMPTING AFFORDABLE PRIVATE DEVELOPMENT PROPOSALS FROM THE ROO City of Gilroy December, 1992 Section 4.00 statement of Intent It is the intent of this policy to set forth the specific criteria and guidelines for the affordable housing exemption provided in the City of Gilroy Zoning ordinance, section 50.62 (b) (4). This policy shall apply to private sector requestB~ Government funded projects shall continue to be exempted from the RDO under the terms of zoning ordinance section 50.62 (b) (3). The goal of this exemption is to enhance public welfare by meeting the current and future housing needs of all segments of the community. This exemption is intended to encourage private developers to construct housing which is affordable to Very Low, Low and Median income households, as defined in this document. section 4.01 Definitions Affordable Housinq: A dwelling unit, either rented or owned, which is affordable to households with Very LOW, Low, or Median incomes, as defined by this document. Applicant: Any person, partnership, corporation, firm, or any entity or combination of entities, which seeks permits or approvals for residential development in the City of Gilroy. Dwellinq unit: Housing which is designed and intended for occupancy as a residence by one (1) household. This term includes condominiums, townhouses, single family homes, multi-family homes and apartments. HUD: The united states Department of Housing and urban Development or its successor. Resale controls: Legal restrictions imposed upon property owners by the city to ensure that the dwelling units will remain affordable to Very Low, Low and Median income households, as defined in this document, for 55 years from the date the city issues the certificate of occupancy for the development . Affordable Housing 2 Revised 2/02/93 . . Residential Development: All development which includes single family dwellings, multi-family dwellings, condominiums, townhouses, cooperative developments, and land subdivisions intended to be sold to the public for residential use. Residential Development ordinance: section 50.60 of the City of Gilroy Zoning Ordinance which encourages responsible growth in the community, and restricts the amount of housing which may be constructed each year. verY Low. Low and Median Income levels: Income categories established by HUD for santa clara county. Very Low and Low income levels are calculated on the basis of Median household size and income. * VERY LOW INCOME - Households earning under fifty percent (50%) of the Median income level, as published from time to time by HUD. * LOW INCOME - Households earning fifty percent (50%) to eighty percent (80%) of the Median income level, as published from time to time by HUD. * MEDIAN INCOME - The most recent Median gross yearly income adjusted for actual household size, in the County of Santa clara, California, as published from time to time by HUD. Section 4.02 General Requirements (A) All applicants desiring an exemption from the Residential Development ordinance under this program must sell or rent one hundred percent (100%) of the dwelling units which receive an exemption at prices which are affordable to very LOW, Low or Median income households, in accordance with the procedures of sections 4.03 and 4.04. Each application shall be limited to construction of to a maximum of forty- five (45) units. The procedure for this exemption shall be as follows: procedure: (1) The applicant must apply for an "RDO Affordable Housing Exemption". A reasonable fee will be collected for review of the application. (2) At the time of application for the exemption, the applicant must specify the number of units to be constructed. The applicant must also identify the number of units which will be affordable to households with very LOW, Low, and Median incomes, as defined in this document. (3) Rental and/or sale prices of all units shall be established by the City or its designee, and shall be affordable to households with very Low, Low and Median incomes as defined by this document. Affordable Housing 3 Revised 2/02/93 . . (4) Approval of the application will be at the discretion of the Planning Director, based upon this policy and compliance with all other City requirements. The applicant must receive approval of the ROO exemption prior to filing for tentative map approvals or architectural and site review applications. (5) After approval of this application, and prior to filing for tentative map approval or architectural and site review, the applicant must enter into a Contract with the City (hereafter referred to as contract) agreeing to provide affordable housing as delineated in this policy. This Contract will assure on-going affordability of the units. The units shall remain affordable for 55 years from the date the city issues the certificate of Occupancy for the development, as set forth in this document. Failure to comply with the terms of the Contract will void all approvals, and the project will not be allowed to proceed without complying with the annual competition procedures of section 50.60, regardless of the stage of construction of the project. (B) The City or its designee will advertise the existence and terms of this program to the general public and accept applications from prospective purchasers and tenants. The City or its designee shall then compile and maintain a list of qualified purchasers and tenants. (C) All tentative mapB, architectural and site reviews, or other development permits approving residential development shall contain conditions sufficient to ensure compliance with the requirements set forth in this policy. These conditions shall include but not be limited to conditions that specify the number of affordable units (whether for sale or rental), their prices and Resale controls. (D) All dwelling units proposed under this program must be constructed with the same quality of design, construction and materials as would be used for market rate housing. This requirement shall apply to projects which consist solely of affordable housing units, as well as projects which combine affordable housing with market rate housing. (Note: Market rate units are required to receive Residential Development allocations through the ROO process, regardless of whether a portion of the project receives an ROO exemption through this Affordable Housing Policy). (E) Grant deeds for units constructed under this program shall state that these units are required to remain affordable housing as set forth in this policy for the 55 years from the date the City issues the certificate of occupancy for the development, and shall be recorded against the property with the county recorder of Santa clara county. This restriction shall run with the land for 55 years from the date the City issues the certificate of Occupancy for the development, and shall be a condition of the Contract the applicant enters into with the city. Affordable Housing 4 Revised 2/02/93 . . (F) Resale controls shall be incorporated as part of the grant deeds of these residential developments. This restriction shall be recorded against the property with the county recorder of Santa Clara County, and shall run with the land for 55 years from the date the City issues the certificate of occupancy for the development. section 4.03 procedure for Renting Affordable units (A) All prospective tenants shall have their eligibility verified by the City or its designee prior to unit rental, and shall be subject to periodic income verification throughout their tenancY4 In the event a tenant's income increases during the tenancy, the following regulations shall apply: (1) If a tenant, who is renting a unit at a Very Low Income rate, has an income increase from a very Low to a Low Income level, the tenant may be allowed to rent the same unit at a Low Income rate, whenever feasible, under the following conditions: * A comparable vacant rental unit in the same development, which is designated to be rented at a Low Income rate, must be reduced in price so that it is rented at a very Low Income rate. * The development must maintain the number of very Low, Low and Median Income units which are specified in its Contract with the city. (2) If a tenant, who is renting a unit at a Very Low or Low Income rate has an income increase to a Median level or higher, the tenant may be allowed to rent the same unit at a Median Income rate, whenever feasible, under the following conditions: * The development must be eligible to provide Median income rental units, as specified in a contractual agreement with the City. * A comparable vacant rental unit in the same development, which is designated to be rented at a Median Income rate, must be reduced in price so that it is rented at a Very Low or Low Income rate, depending on the tenant's previous rental rate. * The development must maintain the number of Very LoW, Low and Median Income units which are specified in a contractual agreement with the city. If these criteria cannot be met, the tenant shall be required to vacate the unit. Any tenant required to vacate their unit because of an increase in income shall be given a maximum of nine months to do so. Landlords shall be given a maximum of nine months, from the date a tenant's income increases above a Very Low or Low income level, to comply with the requirements of this section. The nine month time period which tenants and landlords will be given in order to comply with the requirements of this section is intended to prevent displacement of renters. HUD regulations prohibit a city receiving HUD monies from implementing any program which would cause tenants to be displaced. Affordable Housing 5 Revised 2/02/93 . . (B) The city or its designee shall maintain a list of qualified tenants. All renters in this program shall be selected off of this list. (C) The developer shall specify, in the contract entered into with the city, the number of units which are to be constructed, the number of bedrooms in each unit, and which units shall be reserved for Very Low, Low and Median income rates. (D) cost of Housing: The rates of rental units shall be determined by the city or its designee. very Low income rents shall be set at thirty-five percent (35%) of the rental rate for a Median income household, and Low income rents shall be set at fifty percent (50%) of the rental rate for a Median income household. The rents shall take into account the number of people in the household, and shall be revised with every published revision of HUD income limits. (see Appendix) Tenants in this program may be required to pay a cleaning and/or security deposit of not more than one half (~) the cost of the monthly rent. (E) Percentage of Housing units in Each Income Level One hundred percent (100%) of the rental units constructed under this program must be affordable to Low Income households, with the exception that for every three (3) units which are affordable to very Low income households, one (l) unit may be rented at the rental rate for a Median income household. A maximum of fifteen percent (15%) of the units may be rented at the rental rate for a Median income household. No units may be rented for more than the rental rate for a Median income household. section 4.04 Procedure for selling Affordable Dwelling units (A) All saleable dwelling units constructed through this program shall be sold to households which qualify for affordable housing, as determined by the city or its designee. Resale of these homes shall be subject to Resale controls which will ensure that these units remain affordable housing. (B) The City or its designee shall establish a list of qualified buyers. All home buyers in this program shall be selected from this list. (C) All prospective home buyers shall have their eligibility verified by the City or its designee prior to unit purchase. Affordable Housing 6 Revised 2/02/93 . . (D) All dwelling units constructed under the terms of this program shall be owner-occupied, and all applicants shall certify, prior to escrow closure, that the unit being purchased shall be maintained as the purchaser's primary place of residence. Failure of the purchaser to maintain eligibility for a homeowner's property tax exemption shall be construed as evidence that the unit is not the primary place of residence of the property owner. If a purchaser is found to not be using the home as his or her primary place of residence, the purchaser will be required to sell the home back to this program for a price equivalent to the purchase price of the home, adjusted for inflation, plus the adjusted amount of any substantial capital improvement expenditures. (E) Resale of these units shall be conducted through this program. The seller of any home purchased through this program may receive a price equivalent to the purchase price of the home, adjusted for inflation, plus the adjusted amount of aoy substantial capital improvement expenditures which were approved by the city under this program, prior to installation. Any costs necessary to repair the unit, in the event it has been allowed to deteriorate, shall be subtracted from the price received by the seller. (F) Houses purchased through this program may not be transferred to heirs. Upon the death of a home owner, the property shall be re-sold through this program. The estate of the deceased may receive a price equivalent to the purchase price of the home, adjusted for inflation, plus the adjusted amount of any substantial capital improvement expenditures. Any costs necessary to repair the unit, in the event it has been allowed to deteriorate, shall be subtracted from the price received for the property. (G) prospective purchasers in this program may not own any other dwelling units. (H) All home buyers shall enter into a Contract, recorded on the property, which provides that the home shall be subject to Resale Controls and shall remain in the city's Affordable Housing program. (I) Cost of Housing: The prices of the owner-occupied units shall be determined by the city or its designee, and shall be revised each year. The formula for determining the mortgage rate is included in the appendix. (J) Percentage of Housing Units in Each Income Level: One hundred percent (lOO%) of the dwellings constructed for sale under this program must be affordable to Low income households, with the exception that for everyone (1) unit affordable to very Low Income households, one (l) unit may be sold at a price affordable to a Median income household. Affordable Housing 7 Revised 2/02/93 . . section 4.05 Eligibility Requirements The City or its designee shall select potential occupants of units constructed under this program from a list of people qualified on the basis of household income and assets, credit ratings, HUD income statistics, household size, the size of available units, and any other criteria established by the city in conformance with this criteria. Priority selection shall be given to applicants in the following categories: * FIRST PRIORITY: Applicants who have maintained their primary place of residence within the city of Gilroy for at least one year. * SECOND PRIORITY: Applicants who have maintained their primary place of employment within the city of Gilroy for at least one year. * THIRD PRIORITY: All other applicants. All eligible applicants must be first time home buyers, which is defined as: 1. Those who haven't owned a home in the last three years. 2. Newly single head of households who may have been homeowners within the last three years, but meet the income eligibility requirements. All potential home buyers must be pre-screened and lender pre-qualified. section 4.06 Occupancy standards For Rental units The criteria for occupancy shall be the same as the standards set forth by the santa clara county Housing Authority, as shown here. These are as follows: (A) criteria for Occupancy standards: It shall be the family'S responsibility to report fully and completely on the household composition to ensure the appropriate bedroom size is assigned to each applicant family. The number of bedrooms are to be assigned in accordance with the minimum and maximum occupancy standards set forth in Chart 1 (see Appendix), however the rental rate for each unit shall be based on the housing requirements for a typical family, as set forth in Figure 1 of the Appendix. The appropriate dwelling unit size for the family will be determined by applying the following criteria: l. One bedroom certification will be assigned to single person households, only when there are no zero bedroom allocations available or when there are no zero bedroom units readily available in the area. Affordable Housing 8 Revised 2/02/93 . . 2. The bedroom size assigned should not require more than two (2) persons to occupy the same bedroom. In addition, the living room need not be used as a sleeping room. This requirement may be deviated from, in order to allow the maximum number of people to be assigned to a dwelling unit, as shown in chart 1 (see Appendix). 3. Family members of the same sex will share a room, regardless of age difference. 4. The bedroom size assigned should not require persons of the opposite sex, except husband and wife, to occupy the same bedroom. Infants or very young children under the age of five (5) may share the same bedroom even if they are of opposite sex. Once a child who shares a bedroom with another child of the opposite sex reaches the age five (5), a new rental unit may be assigned to the family, unless the renter can comply with these requirements by making other sleeping arrangements in the same unit. 5. The head of household, if single, shall be assigned a separate bedroom. 6. Every family member, regardless of age, is to be counted as a person. An unborn child will not be counted as a person needing sleeping accommodations. 7. In cases of verifiable medical or attendant need or hardship t~TeT7 ~efte~a~~efta~-a~EEe~efteee-e~-eft~e~a~ea-aae~~et, the City or its designee has the discretion to deviate from the guideline found in chart 1. Mont.hly Rent. under Program: $521 $744 $893 . . Affordable Housing Appendix 1 Revised 2/02/93 APPENDIX May 1992 Income Limits for santa clara County Figure 1 Area Median Income: $59,500 Number of Persons in Family STANDARD -L --L- ~ ~ ---L.. -L Very Low Income 20850 23800 26750 29750 32150 34500 Lower Income 27000 30900 34750 38600 41700 44800 Median Income 41650 47600 53550 59500 64250 69000 Moderate Income 50000 57100 64250 71400 77100 82800 RENTAL UNITS: An example of how rental rates will be determined, based on the May, 1992 HUD publication of income limits is shown below for a three bedroom dwelling unit, which would house a family of four (4). The rental rate for this size unit is found by adjusting the Median income level for a family of four by thirty-five percent (35%) for very Low income units, fifty percent (50%) for Low income units, and sixty percent (60%) for Median income units. This number is then multiplied by ~weft~y-e~~ft~ ~e~eeft~-t~8%t t.hirt.y percent. (30%), in order to determine the amount of money which will be spent on rent each year. Dividing this number by twelve gives the monthly rental rate. Very Low Income Low Income Median Income Median Income: Income Factor: Adjust.ed Income: Percent. of Income Spent on Rent.*: Annual Housing Expendit.ure: $59,500 x 0.35 $20,825 $59,500 x 0.50 $29,750 $59,500 x 0.60 $35,700 x 0.30 x 0.30 x 0.30 $6,248 . 12 $8,925 . 12 $10,710 . 12 * Monthly rental cost will include the cost of all utilities (gas and electric, water, sewer and garbage), with the exception of telephone 4 The cost of these utilities shall follow the standards set by the Housing Authority of Santa clara county, and shall be updated with every revision of these standards. HUD income limits shall be used to determine eligibility for in this program. However, the price of housing shall be set rate in the categories of Very Low, LOW, and Median incomes. will not vary based on the number of people in the household. participation at a standard The prices . . Affordable Housing Appendix 2 Revised 2/02/93 The number of people housed in each size unit shall generally follow the HUD guidelines listed in chart 1. These guidelines show the minimum and maximum number of people which can be housed in each unit, although the actual number of occupants may vary according to individual situations a The rents shall depend on the number of bedrooms in each unit, and shall be based on a typical family as follows: Figure 2 Number of Bedrooms In owellinq unit Number of people Typically Housed single Residential Occupancy studios 1 2 3 4 5 1 1 2 3 4 6 8 Families which require to be housed in a unit which has more bedrooms than the same size typical family would need (e.g. a two person family which needs to be housed in a two bedroom unit, rather than a one bedroom unit), even though it may not exceed the minimum person per bedroom ratio listed in chart l, shall pay the rent which would normally be charged for the larger unit. This shall be true even though the rental rate may exceed the rental rates which a person in that income bracket would normally be charged. The monthly rental rates for units constructed under this program, for the year beginning May 1, 1992 and ending April 30, 1993, shall be as follows: Figure 3 Number of Bedrooms STANDARD SRO studio ----1- ---L -L -.! Very Low Income $340 $340 $389 $437 $486 $564 Lower Income $486 $486 $555 $625 $694 $805 Median Income $583 $583 $666 $750 $833 $966 FOR-SALE UNITS: Affordable Housing Appendix 3 Revised 2/02/93 . . The formula which will be used to determine the monthly mortgage amount is as follows: Income x PITI Ratio* Annual Mortgage .. 12 Allowable Monthly PITI* - Monthly Taxes** - Monthly Insurance Payment Allowable Monthly Mortgage * PITI = Principal, Interest, Tax and Insurance. The PITI Ratio is the percentage of the applicant's income that can be devoted to a mortgage payment. This shall not exceed twenty-eight percent (28%) of the applicant's income. (Note: This figure shall be set at 28%, as the utilities are not included in this payment.) The annual interest rate shall be based on an average of the interest rates from the previous twelve months. ** Monthly Taxes = 0.01215 x sales Price.. 12 (This is an industry standard) An example of the monthly mortgage payment for a family earning the Median income in Santa clara County, using the above formula, is as follows: $59,500 x .28 16,660 .. 12 1,388 178 50 $1,160 Income PIT I Ratio Annual Mortgage Months in a year Allowable Monthly PITI Monthly Taxes Monthly Insurance Payment Allowable Monthly Mortgage without Taxes and Insurance A monthly mortgage of this amount would allow the applicant to buy a house with a sales price of $;9&,4;7 $176,041 based on the following factors: Family Income: $59,500 per year Interest Rate: 8% Down Payment: 10% of sales price Length of Mortgage: 30 years The amount mortgaged would then be $;SS,7;~ $158,437, based on the following formula: Sales Price of Home: x percentaae of Downoavrnent: x Downpayment amount: Mortgage Amount: $176,041 .10 $H,aH 17,604 $158,437 . . Affordable Housing Appendix 4 Revised 2/02/93 The sales price for units constructed under this program, for the year beginning May 1, 1992 and ending April 30, 1993, shall be as follows: Very Low Income: $85,826 Low Income: $111,861 Median Income: $176,041 Prices for homes sold in this program will be based on the home buyer putting a maximum of a 10% downpayment on the home. The monthly mortgage shall include PITI. A~~-he~8eS-eeft8~rae~ee-!ef-8a~e-e8aer-~ftie-~Ee!fam-9fta~~-ftaYe-a-miftimam-e~ ~ftFee-he8reem8T All units constructed through this program must contain a minimum of one bedroom. Developments may contain a variety of different. sized units in the following ratios: A maximum of twenty percent (20%) of the units may contain one bedroom. A maximum of twenty percent (20%) of the units may contain two bedrooms. A minimum of sixty percent (60%) of the units must be three bedrooms or larger. Applicants are responsible for financing their units. . Official Seal of the City of Gilroy this 23rd day of February ,1993. . . I, SUSANNE E. STEINMETZ, City Clerk of the City of Gilroy, do hereby certify that the attached Resolution No. 93-10 is an original resolution, duly adopted by the Council of the City of Gilroy at an adjourned regular meeting of said Council held on the 22nd day of February, 19~, at which meeting a quorum was present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the A ~0.df;-:::-: ~erk of the City Of~ (Seal)