HomeMy WebLinkAboutStaff Report 298-08TO:
FROM:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
DATE:
SUBJECT:
JULY 7, 2008 CMR: 298:08
APPROVAL OF AN AREA MEDIAN INCOME-BASED RESALE PRICE
FORMULA FOR THE BELOW MARKET RATE OWNERSHIP
PROGRAM
RECOMMENDATION
Staff recommends that the City Council approve the resale price formula for appreciation of BMR
ownership units based on 80 percent of the percentage change of the area median income as
recommended by the BMR Study consultants (Attachment A) to be incorporated into revisions to the
BMR Ordinance and/or rules and regulations.
BACKGROUND
At its meeting of March 24, 2008, Council voted (8-0 with Burt absent) to approve recommendations
from the Policy and Services Committee, PTC and staff implementing policy changes to the BMR
program as described in Attachment E. Council, however, voted to direct staffto return with a resale
price formula based on the change in the Santa Clara County Area Median Income (AMI) for the full
Consumer Price Index (CPI) resale price formula recommended by the PTC and staff. Council’s
specific direction to staff on March 24th was:
"to change going forward to an Area Median Income (AMI) appreciation formula
which will be brought back to Council by staff with an analysis and specific
recommendations on consent agenda at a later date."
Council members stated support for an AMI based formula because it would be more likely to
provide greater appreciation for BMR owners and also result in resale prices which would maintain
the BMR units within the moderate income affordability price range of 80 to 120 percent of AMI,
based on the comparative history of the CPI and AMI indices over the last 30 years. A policy of
maintaining the units over the long term within the moderate income price range was supported by
Council as being more consistent with the original goals of the program than the one-third or the full
CPI methods, which have resulted in the units becoming relatively more affordable over time.
CMR: 298:08 Page 1 of 5
DISCUSSION
A modified AMI based resale price formula was recommended by Keyser Marston Associates
(KMA) in the BMR Study report (see Attachments A and B). Staff had asked KMA to develop a
resale formula that would work well in varying economic cycles and would meet the following
criteria, to the extent possible:
Resale prices should not exceed prices for new BMR units;
Keep resale prices sufficiently below market prices of similar units;
Resales price will not be less than the seller’s original purchase price;
Keep resale prices from dropping far below the moderate income level;
Provide higher appreciation than the one-third CPI method;
Encourage better maintenance and capital improvements; and
Be easy to explain, calculate and administer.
Based on Council’s March 24th direction, staff is recommending that the KMA formula be approved
rather than using an unmodified percentage change of the AMI. The KMA proposal is based on 80
percent (or four-fifths) of the percentage increase in the County AMI as published annually by State
Housing and Community Development (State HCD). The KMA proposal caps and minimum pricing
will help maintain resale prices generally within the moderate income range and provide some
cushion for the addition of special assessments and capital improvements onto resale prices without
pushing the prices higher than the moderate income level.
Staff believes that caps on BMR resale prices are especially important with an AMI based method
given the past history of rapid AMI growth during local economic boom periods. Growth in the
median County income does not necessarily equate to a similar growth rate in the household incomes
of our waiting list families. Most households interested in Palo Alt0 BMR ownership, and now on
the waiting list, work in occupations where income growth is modest - this is a key reason why they
have given up on market rate ownership.
Attachment C illustrates how the AMI has fluctuated as much as ten percent from year to year
compared to the lower volatility of the CPI. In the ten years from 1994- 2003, the AMI increased by
68 percent, but in the last five years, due to changes in HUD’s methodology followed by declining
economic factors, the AMI has not increased at all but remained at $105,500. Attachment D
provides a detailed retroactive 20-year comparison of the full CPI, the full AMI and the 80 percent of
AMI with an example of these formulas applied to a typical three bedroom BMR unit first sold in
1987 and then resold in 2007.
The data from Attachment D is used in the table below to compare resale prices produced by each
formula for a sample 20-year old BMR unit being sold in 2008 together with the current pricing for a
three bedroom newly constructed BMR unit and the range of affordable prices at today’s interest
rates for the typical family sizes that would purchase a three-bedroom BMR unit.
CMR: 298:08 Page 2 of 5
Typical 1987 New
Three Bedroom
Townhouse BMR
Original Price
1987
Resale Prices for 20-Year Old BMR Unit
(Based on 1987 - 2008 CPI & AMI History)
KMA: 80% of Full AMIFull CPI AMI (Unmodified)
$215,300 $248,200 $281,500$115,000
2008 - Affordable Price Guidelines for Lower Moderate Households (80 to 100% of AMI) with
Five Percent Down Payment & Current Interest Rates for a 3-Bedroom BMR
3 Persor $206,000to 4Person $236,000to 5 Person $259,000to
Households:$273,000 Households:$310,000 Households: $339,000
Current (2008) Pricing for a newly built 3-bedroom BMR = $272,700
The three formulas produce resale prices that generally fall within the affordability range of 80 to 100
percent of AMI. With the full AMI formula, however, the resale price exceeds the current price for a
comparable newly built BMR unit. Most BMR buyers can only manage a five to ten percent
downpayment, although there are a few buyers able to make twenty percent or more. The full AMI
resale prices would be harder for households at the lower end of the moderate income spectrum to
afford without a substantial downpayment. Attachment B illustrates the recommended 80 percent of
AMI formula resale price calculation using this same sample unit with the addition of fairly typical
adjustments for capital improvements, an assessment and a deduction for some deferred maintenance.
Full CPI Formula Comparison: Based on past history, compared to the two AMI-based formulas, the
full CPI formula is likely to result in units becoming more affordable than newly built units over the
long term. Lower resale prices provide more cushion to help absorb the addition of special
assessments, renovation costs and legal costs to preserve units faced with foreclosure and still result in
a final resale price that’,s within the lower end of the moderate income affordability level. The addition
of large special assessments (such as those that occurred at the Redwoods and Abitare) and / or credits
for capital improvements to higher AMI based resale prices may result in resale prices that exceed
what buyers on the waiting list are willing, or able, to pay, especially as resale units age, ~he
combination of this concern, together with the AMI’s unpredictability and Palo Alto Housing
Corporation’s concerns about the complexity of the formula and higher resale prices was what led
staff to recommend to Council that the resale formula simply be increased to the full CPI. In addition,
at the present time, the full CPI provides current owners under the one-third CPI a financial reward for
signing the new, improved deed restrictions, while few owners may want to switch to an AMI formula
until regular annual increases in the AMI resume.
Transition from Current One-Third CPI Formula: After approval by Council, proposed changes will
be incorporated into the ordinance adopting the recommended BMR program changes. As detailed in
previous staff reports, these changes will require an overhaul of the City’s deed restrictions, together
with the addition of supporting legal documents to assist in both enforcement and clear disclosure of
the program’s rules to prospective buyers and owners.
CMR: 298:08 Page 3 of 5
RESOURCE IMPACT
Funds are budgeted in the recently adopted FY 2008-09 budget in the Residential Housing Fund for
the cost of contract legal services to prepare new BMR ownership deed restrictions and related
enforcement and disclosure documents and to conduct the in-lieu fee study.
POLICY IMPLICATIONS
Council approval of an AMI based resale price formula establishes the policy that the resale pricing
method should maintain resale units within the moderate income affordability level over the long
term. This policy action, in combination with the approval of the $2,000 annual Maintenance and
Replacements Credit for existing BMR units under the one-third of CPI formula on March 24%
clarifies that the City’s goal is that the BMR ownership program is intended to primarily serve
moderate income households.
ENVIRONMENTAL REVIEW
The administration of the BMR housing program is categorically exempt under Section 15326 of the
California Environmental Quality Act (CEQA).
PREPARED BY:
CATHERINE SIEGEL
Advance Planning Manager
CURTIS WILLIAMS, Interim Director
Planning and Community Environment
CITY MANAGER APPROVAL: ~
KELLY MORARIU / S~EVE EM~-’~LIE
Deputy City Managers
ATTACHMENTS
A. Resale Price Formula for BMR Unit Based Upon 80 Percent of the Change in the Area Median
Income (AMI)
B. BMR Resale Price Calculation With 80% of AMI Formula (Sample Calculation)
C. BMR Study: Comparison of CPI & AMI Chart
D. BMR Study: Appreciation Indexes: 20 year Comparison of Full CPI, Full AMI & 80 % of AMI
E. BMR Program Update: Policy Changes Approved by the City Council on March 24, 2008
F. City Council Special Meeting of March 24, 2008: Excerpt from approved minutes for Item #6
Policy and Services Committee recommendations for approval of updated Below Market Rate
(BMR) Program (continued from March 17, 2008)
CMR: 298:08 Page 4 of 5
CC:Palo Alto Housing Corporation, Candice Gonzalez, Executive Director
Bonnie Packer, Palo Alto Housing Corporation Board of Directors
Lani Wheeler, Palo Alto Housing Corporation Board of Directors
Silicon Valley Association of Realtors ! 9400 Stevens Creek Blvd. #100, Cupertino, CA 95014
Home Builders Association of Northern California, Southern Division
Attn: Beverly Bryant 675 North First Street, Suite 620, San Jose, CA 95112-5118
CMR: 298:08 Page 5 of 5
ATTACHMENT A
Resale Price Formula for BMR Unit Based Upon 80 Percent of the Change in the Area
Median Income (AMI)
Below Market Rate (BMR) Home Ownership Program
July 2008
The resale price formula is driven by a "base" appreciation index equal to 80% of the percentage
increase in the AMI, with upper and lower limits on the resale price1, as follows:
1) The "Base" appreciation index is equal to 80% of the percentage increase in the AMI over the
seller’s period of ownership
2) Subiect to the Following Price Ceiling:
Resale Price Ceiling: The resale price cannot exceed the lesser of:
(a) The then-current new sales prices of comparable BMR units (by number of bedrooms
and unit’s original income category)2; and
(b) 80% of the unrestricted market rate appraised value of the unit
3) Subiect to the Followin~ Price Floor:
Resale Price Floor: The resale price will not be less than the greater of:
(a) The original purchase price paid by the seller; and
(b) A price affordable (at time of sale) to households at 75% of AMI (for the low moderate
category units); or at 95% of AMI (for the high moderate category units)
4) To the price derived from the above calculations, the follow adjustments are made in order to
determine the final sales price:
Plus:
a) The depreciated value of capital improvements; and
b) The cost of mandatory special assessments levied by the homeowners association
Less:
a) The cost of curing deferred maintenance and repairs
Notes:1 Recommended by Keyser Marston Associates in the BMR Study, March 2007 (Chapter 3.2, pages 3-16
to 3-25)2 For example, a resale 3-bedroom townhome’s maximum price would equal the current year’s maximum
price for new 3-bedroom BMR units
H:\DOC\BMR Study\Resale Price Formula 80% AMI Att A.doc
ATTACHMENT B
BMR RESALE PRICE CALCULATION WITH 80% OF AMI FORMULA
SAMPLE CALCULATION USING 1987 - 2008 DATA
Calculation Date: June, 2008
~ddress & Description of Unit:3 Bedroom Lower Moderate Unit
80% of the Percentage ChangeYears Unit Owned: 21 in AMI
Factor for Calculation 80%
Purchase Price When New $115,000
Purchase Date June 1987
Month & Year of AMI Used June 2008
AMI Index at Purchase Date $43,100
AMI Index at Sales Date $105,500
Change in Index $62,400
Total Percent Change in Index Over Time Owned 144.78%
Modifier 2.1582
BMR Calculated Value $248,193
Appreciation $133,200
Resale Price with 80% AMI (Rounded)$248,200
Caps (Maximum Price): the Lesser of:
a) Then Current New Unit Sales Price at Lower
Moderate Income (based on 90% AMI); or
b) 80% of Unrestricted Fair Market Value ($800,000)
$272,700
$640,000
Floors (Minimum Price): the Greater of:
a) Original Price Paid by Seller; or
b) Then Current Affordable Price at 75% of AMI (for
Similar Unit)
Resale Price (after Caps & Floor Adjustments)
Add: Depreciation Value of Capital Improvements
Add: Special Assessments by HOA
Deduct: Cost to cure deferred maintenance, repairs,
cleaning, painting, etc;
TOTAL ADJUSTED FINAL SALES PRICE
$115,000
$217,200
$248,200
$12,500
$1,200
($800)
$261,100
H:\Sheet\BMR Study 80% AMI Calc Vers #2 for 7-7-08 CMR.xls
ATTACHMENT C
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ATTACHMENT F
City Council Special Meeting of March 24, 2008
Excerpt from Approved Minutes
Item # 6: Policy and Services Committee Recommendations for Approval of
Updated Below Market Rate (BMR) Program (pages 5 - 14)
UNFINISHED BUSINESS
Policy and Services Committee Recommendations for Approval of
Updated Below Market Rate (BMR) Program. (continued from March :[7, 2008)
Estelle Chalfin, 432 High Street, #302 spoke regarding the BMR units and
the dues and maintenance fees.
Director of Planning and Community Environment, Steve Emslie stated Staff
was recommending new ownership units would be entitled to full Consumer
Price Index (CPI). Staff would institute a maintenance credit program for
owners who were under the reduced CPI formula to maintain the units. Staff
recommended creating a deferred payment loan program to allow very low-
income BMR owners access to loans. Those loans would not be payable until
the sale of the unit enabling access to housing funds to maintain their unit.
The issue identified for the Council’s consideration was the requirement to
lower the threshold for BMR requirements down to three units of multi-
family and three units of single-family. The recommendation for the
maintenance bonus program would be a $1,500 dollar per year credit
applied, per year of ownership.
Mayor Klein asked whether the Council would be voting on all 0f the things
on Attachment A in the City Hanager’s Report (CMR).
Mr. Emslie stated that was Staff’s recommendation.
Mayor Klein stated he was concerned with the recommendations that stated
they were subject to further study.
Mr. Emslie stated that the recommendations in the CMR noted as further
study issues should be to the Housing Element Update being initiated for
completion in 2009.
03/24/08 5
Mayor Klein asked for clarification of what exactly the Council was voting on.
Mr. Emslie stated that it was Staff’s recommendation to include these items
in the policy analysis for the Housing Element,
Council Member Barton asked if the Council asked to proceed with an Area
Median Income (AMI) approach rather than a CPI approach should Council
send it back to Staff to study further.
Mr. Emslie stated Staff would recommend sending it back for further analysis
and then return to the Council with a formula based on the AMI formula.
Council Member Barton asked if the analysis would delay the schedule.
Mr. Emslie stated it would not amount to serious delay to the
implementation of the recommendations.
Mayor Klein stated he wanted to separate the voting of the S.taff
recommendations.
Council Member Kishimoto stated that the recommendations raised issues.
In the last 40 years, we have only produced an average of 7.5 BMR units per
year. More market rate housing has been created. It appears there had been
trouble meeting the .low/very low-income level housing.
Mr, Emslie stated that there were numerous recommendations in the study
that were necessary to facilitate the effective administration of the program.
Staff could return to the Council prior to the initiation of the Housing
Element to set the scope of service.
Council Member Yeh stated that the CMR stated that units must be resold in
a timely manner and he asked what the timeframe was.
Mr. Emslie stated that the program had five months total from the time the
unit became available to the conclusion.
Council Member Yeh stated that assuming there were no improvements
made to a BMR unit and the owner decided not to go along with the low
interest rate loan, what was the estimate for how long that unit may be on
the market.
Mr. Emslie stated that Staff estimated about 20 percent of the units had
issues regarding timeliness because of a variety of issues and deferred
maintenance.
03/24/08 6
Council Member Yeh asked what would happen if the City were to take title
of the units and what the timeframe and costs would be.
Mr. Emslie stated that due to escalating construction costs, it would be
somewhere around 40-50 thousand dollars and would take an additional six
months.
Council Member Morton stated that many of the owners view this more as an
investment partnership. If the unit were valued at market price then it would
be taken out of the BMR program.
~Mr. Emslie stated that if the costs escalated to the point where the unit
became market, then it would be lost to the BMR program unless the City
invested additional housing funds into writing that unit cost down.
Council Member Morton asked whether the new units on the old Palo Alto
medical site were rentals that were able’to subsidize rent for people.
Mr. Fmslie stated that was correct.
Council Member Morton stated if we converted the BMP, units into rental
units, we would be combining one program into another.
Mr. Emslie stated the program had always included both rental and
ownership opportunities.
Council Member Morton stated if the Council decided upon a two thousand
dollar per year credit per unit then the difference of the one-third CPI would
be $171,200 versus $129,200. He asked whether that would basically go to
the current holder of the housing contract.
Mr. Emslie stated that was correct.
Council Member Morton asked whether that was an indirect way of
recognizing that we had a housing contract and rewarded long term owners
for keeping their units in good maintenance.
Mr. Emslie stated that was correct.
Council Member Schmid stated there were many different reasons to buy
rather than rent: 1) a fixed rate mortgage, which would give a flat rate
repayment; 2) tax credits could pay 20 to 25 percent of your rent; 3) once a
purchased unit is sold it makes a nice investment; 4) after the house is paid
off you pay only association dues. He stated that one of the policy
implications was the BMR program should shift more of the resources to
affordable rental housing.
03/24/08 7
Mayor Klein asked Mr. Emslie if under the appreciation formula were there
more alternatives then what was shown in the slides.
Mr. Emslie stated these were a summary of recommendations and the
Council did have the choice to apply the full CPI to the units.
MOTION: Council Member Morton moved, seconded by Vice Mayor
Drekmeier to direct Staff to adopt the formula of one third Consumer Price
Index (CPI), plus resale price, . plus annual maintenance and replacement
credit up to $2,000 per year or full CPI to 2008 or whichever is lower.
Mayor Klein asked for clarification regarding the. Motion whether he was
asking for both the CPI and the maintenance credit going forward.
Mr. Emslie stated that the maintenance credits would just apply to the
current owners for the one-third CPI and there would be no maintenance
program, which had full CPI.
Mayor Klein asked whether that was the Motion.
Council Member Morton stated that going forward it would be with full CPI
and for the previous owners we would give them a maintenance credit of
2,000.dollars per year.
Mayor Klein stated that would produce more than the retroactive CPI.
Council Member Morton stated only for those units where there has been a
concern to keep the unit at a quality maintenance level. There would be no
need to reward the owners who had not maintained their units.
Mayor Klein stated he was concerned with the people who would be coming
out ahead of CPI.
Council Member Morton stated in the last twenty years units have gone from
$150,000 to $750,000 and in those situations, maintaining the unit was
something they should be rewarded for with maintenance dollars. ¯
Vice Mayor Drekmeier asked for the Maker of the Motion to consider a
$2,000 maintenance credit up to the full CPI.
Council Member Morton stated he would support that.
Council Member Schmid stated that AMI was a better measure for our
program than the CPI. CPI was only related to either affordability or the cost
of housing and in the past, it had not worked. He asked to substitute the
03/24/08 8
AMI for the County which was directly related to housing affordability in
Santa Clara County.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to use full Annual Medium Income (AMI) program
in lieu of CPI formula from 2008 on, which will be brought back to Council at
a later date.
Council Member Morton stated that would mean we would start as of today
with the Medium Income levels as published by the County. Those annual
changes would be the measure of the future appreciation in the housing
contract.
Mr. Emslie stated that was correct.
Council Member Morton asked if we could adopt this policy and leave open
the question of whether it would be a change of AMI or CPI and resolve that
issue depending on future Staff input.
Mayor Klein asked for clarification if we could use AMI for past and future.
Council Member Schmid stated no.
Mayor Klein asked whether we would use CPI up until the date we adopt this
and only use AMI going forward.
Council Member Schmid stated that was correct.
Mr. Emslie stated that Staff understood that they will use AMI as a way to
calculate affordability in the future and CPI would apply to the existing units.
Council Member Morton asked whether it would only be to calculate the CPI
cap.
Mr. Emslie stated it was understood that CPI would be used to calculate the
cap for the bonus program.
Council Member Schmid stated it was his understanding that Association of
Bay Area Government (ABAG) uses the AMI to calculate the income levels.
Mr. Emslie stated that many cities had used this calculation and the problem
was it was subject to radical change and could create unintended
consequences because the income levels in the County did fluctuate
regularly. Staff could return with a formula that was based on AMI.
03/24/08 9
Council Member Kishimoto stated that the recommendation to peg future
price increases based on AMI was exactly what the Keyser Marston
Associates, Inc. (KMA) study had recommended. She asked if Staff would be
coming back with data for Council to vote o.n.
Mr. Emslie stated that Staff would provide a specific recommendation that
could come back on the Consent Calendar and confirm the use of the
formula.
Council Member Kishimoto asked whether Mr. Emslie could summarize what
the incentives and requirements were with the upgrading of the units.
Mr. Emslie stated the credits would still be based on CPI for the existing
units and AMI for the future.
Council Member Kishimoto stated she had expected higher incentives and
requirements for maintaining the units.
Mr. Emslie stated that all of the BMR units had standards for maintenance.
Staff would explore and include in the follow up recommendations to ensure
higher levels of maintenance for newer units in the AMI formula.
Council Member Barton stated from a policy point of view, it would be to try
to maintain these units in the 80 to 120 percent of AMI. He stated he was
concerned with the period of time where CPI could be significantly higher
than AMI and asked when this would return to Council.
Council Member Espinosa asked what Staff would research differently to
reach a different conclusion.
Mr. Emstie stated that Staff had not anticipated any of the administrative
issues that the formula KMA had prepared based on AMI. Staff would like to
make sure that the adjustments were fitting and achieve the desired
outcome.
City Attorney Gary Baum stated the City Attorney’s Office would need to
review anything that was prepared.
Mayor Klein expressed his concern regarding people who may want to sell
their units. He stated the first part of the formula was fixed and easy to
calculate and he did not want to see that part delayed and asked to divide
the Motion.
Mr. Emslie stated it was possible.
Mr, Baum stated it was not necessary to divide the Motion.
03/24/08 10
Mayor Klein stated his concern was with the switch over from CPI to AMI for
the people who own right now and want to sell right now.
Mr. Emslie stated that Staff understood the Council’s direction.
Vice Mayor Drekmeier asked if AMI was a countywide figure.
Mr. Emslie stated yes.
Vice Mayor Drekmeier asked if that was just Santa Clara County.
Mr. Emslie stated yes.
Council Member Morton stated that the first part of the policy would state
that we were directing Staff to revise the appreciation formula to AMI going
forward with the final wording to be presented to the Council.
MOTION PASSED: 8-0, Burtabsent
MOTION: Council. Member Morton moved, seconded by Council Member
Barton to improve the condition of the existing older BMR housing stock by
creating a deferred payment renovation loan program for very low-income
BMR owners.
Council Member Morton stated that there were new owners in the BMR
program facing major assessments with no easy way to fund. We would be
enabling them to participate in a housing contract, and the costs would be
deferred and taken into consideration on the sale of the unit.
MOTION PASSED: 8-0, Burt absent
MOTION: Council. Member Morton moved, seconded by Council Member
Barton to lower the threshold for the BMR requirement to 3 new units or 3
single family lots from the current 5.
Mr. Emslie stated that any current application would use the existing
threshold and any new application for development that came in after the
Council’s action would be subject to the lower threshold for three units
rather than the current five.
Mayor Klein asked how that would affect a three-unit Developer.
Mr. Emslie stated they would be subject to an in-lieu fee calculated based on
a percentage of the sales price.
03,/24/08 :11
Mayor Klein asked what the percentage was.
Mr. Emslie stated it was seven and a half percent of the sales price of the
home or unit.
Mayor Klein stated the in-lieu fund would add 35 thousand dollars tothe cost
of the unit.
Mr. Emslie stated yes.
Council Member Schmid stated the in-lieu fee had a financial benefit to the
Developer using the in-lieu payment and would need further justification.
The in-lieu fees need an appropriate adjustment to make it equal to the cost
of building.
Mayor Klein asked to make that a separate Motion.
Council Member Morton stated that we were not shifting from unit
contributions. This would be for smaller developments where the required
percentage would not require us to geta BMR unit and would not affect the
larger developments. He did not intend his Motion to be an in-lieu fee
because that would be problematic.
Council Member Barton stated this would bring more funds into our in-lieu
fee and help create additional units. It would be reasonable to be concerned
with those who are developing smaller projects.
Council Member Yeh asked in regards to developers whether Staff had a
sense of proportionate impact of who would be developing the smaller unit
projects versus the larger projects.
Mr. Emslie stated that they had received requests for smaller units where
there were duplexes, three and four unit complexes, which tend to be
smaller local developments instead of the big publicly traded developers who
handle the bigger projects.
Council Member Yeh asked whether there were concerns with the lower
threshold and a greater burden being placed on those particular developers.
Mr. Emslie stated that the units go for the market rate, which has been more
than enough to handle the in-lieu payment from a small development.
Council Member Yeh stated his concern was having an unintended
consequence for the larger projects if for some reason developers found this
an unfriendly development on the policy front.
03/24/08
Council Member Espinosa asked regarding bench marking for other Cities on
this last point and what we saw in the-Bay Area for other jurisdictions who
i~ave lowered this down to a three-unit threshold.
Mr. Emslie stated it was estimated that about 30 percent of jurisdictions that
had BMR inclusionary housing requirements have applied fees or dedication
of units at five or fewer. We would be par with about 30 percent of the Cities
that did inclusionary housing.
MOTION PASSED= 8-0, Burtabsent
MOTION= Council Member Schmid moved, seconded by Council Member
Kishimoto to direct Staff to study Policy # 1.I.1. which reads "Consultants
found that in-lieu fees are a financial benefit to the developer and that the
methodology needs further adjustment to bring those fees in-line with
development costs.
Mr. Baum asked for clarification whether that was direction to Staff to study
and return to Council.
Mayor Klein stated it should be direction to Staff to study the issue and
return with it.
Mr. Emslie stated it was in the overall recommendation to return with that.
Council Member Morton asked whether the Council was asking Staff to
return and provide us with their opinion on whether or not converting to a
complete in-lieu fee program was advisable.
Mr. Emslie stated the consultants had recommended that the in-lieu fee was
too low.
Council Member Morton stated the in-lieu fee was seven percent and for the
larger developments they would be paying 15 percent or more. We are
asking Staff to return with a proper level of the in-lieu fee.
Council Member Espinosa asked for clarification whether this was already in
the plan.
Mr. Emslie stated it was but Council comments were always welcome on any
Staff recommendation;
MOTION PASSED: 8-0, Burtabsent
03/24/08 13
MOTION: Council Member Barton moved, seconded by Council Member
Morton to approve remaining Staff supported items in Attachment A to CMR
173:08;
1.a.) Recommendations Related to Appreciation and Calculation of the
Resale Price; Continue to Emphasize the Goal of Permanent
Affordability of BMR Units
1.b Recommendations on the Term of the Ownership BMR Deed
Restrictions & Rental BMR Regulatory Agreements
1.c.Recommendations to Improve the Condition of the Existing, Older BMR
Housing Stock with the Provision of Limited City Financial Assistance to
Very Low Income BMR Owners of Such Units
1.d.Increase Efficiency of Program Administration, Clarify Rules & Improve
Owner Understanding
1.e.Eliminate the "Cost-Based" Pricing Exception Clause for New BMR Units
in Program H-36; Continue to Base Newly Built BMR Prices Only on the
Mortgage Affordability Formula
1.f.Require a Customized Analysis of the BMR Obligation for Unusual
Housing Product Types or Unique Proposals
1.g.Clarify the City’s Priorities for Satisfaction by Developers of the BMR
Requirement
1.h.Lower the Threshold for the BMR Requirement for Five Units to Three
Units or Residential Parcels
1.i Conduct Further Technical Study the BMR In-lieu Fee Formula
1.j.Miscellaneous Changes in Program H-36 Provisions for Incorporation
into BMR Ordinance
1.k. BMRRental Program: Specific Policy for Rental BMRs
Council Member Barton stated there were another 25 Staff supported items
and were about things that were going to return in the work plan for the
Comprehensive Plan (Comp. Plan). These were items that had been through
Policy and Services (P&S) and/or the Planning and Transportation
Commission (P&TC) multiple times.
Council Member Schmid stated that one item he would like to discuss was
Attachment A, Page .4, 1.d)2. There was a division between Staff and the
P&TC over local preferences and the waiting lists. He asked if the current
methodology of the waiting list make it impossible for new entrees into the
City to participate in our BNR program. He added that as the Stanford issue
was addressed are we expanding employment or eliminating workers coming
from out of town to participate in our BMR program.
AMENDMENT: Council Member Schmid moved, seconded by XXX to have
Staff explore the Planning and Transportation Commission evaluation of
preference point system BMR qualifications.
AMENDMENT FAILED FOR LACK OF $~CONDo
MOTION PASSED: 8-0, Burt absent
03/24/08