Title
Recommendation to Approve an Amendment to the City Affordable Housing Agreement Standard Form and Amend and Record Five Previously Executed Agreements. (Housing 236)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Recommendation to Approve an Amendment to the City Affordable Housing Agreement Standard Form and Amend and Record Previously Executed Agreements
BACKGROUND
The City's inclusionary housing requirements are set forth in Municipal Code Section 30-16. The general requirement is that all new residential development of five or more units must provide for the sale or rental of at least 15% of total units at a restricted price. Developments of five to nine units may satisfy this requirement by paying a fee. In all developments with restricted units, the affordability restrictions are enforced by a regulatory agreement that is recorded against the property. The Council has previously approved a standard form of Affordable Housing Agreement ("Agreement") to serve this purpose.
Staff is recommending that the standard form of the Agreement be amended to better align with other funding programs and that the same amendments be approved for existing Agreements (Exhibits 1 and 2).
DISCUSSION
The Agreement requires that affordability of restricted units must remain in force for a minimum of 59 years. The Agreement also establishes specific occupancy standards with respect to the minimum and maximum allowable number of persons in a household according to unit bedroom size. Further, the affordable sale or rental price for each income level is determined by reference to California Health and Safety Code Section 50053 (or any successor statute). This reference to the Health and Safety Code does not always conform to the affordable rent calculation methodology established by the Internal Revenue Code, Section 42 that governs rental projects that are developed with Low Income Housing Tax Credits. This potential discrepancy was recently discovered in the course of legal review of the template documents.
Staff has also identified minor discrepancies with respect to the manager’s unit that is required by State law at all multi-family properties with 20 or more units. The manager’s unit is allowed to be counted within the total affordable unit count by all affordable housing finance programs, but the income restriction (of the manager’s household) does not apply.
Further, staff has made typographic and clarifying corrections that conform to other standard regulatory agreements (e.g., Alameda County and State of California agreements) and to the ground lease that typically grants site control to a tax credit ownership entity. It is noted that an Affordable Housing Agreement is also recorded against housing projects that include inclusionary units sold for Below-Market-Rate homeownership and these Agreements will not be affected by these proposed amendments.
In order to address the discrepancies and minor errors in the Agreement, staff is recommending Council approve two separate documents. Both are meant to clarify the method of rent calculation at affordable rental properties consistent with housing tax credits and also subject to the City's affordability restrictions. With respect to rent calculations, the IRS standard that is recognized by the California Tax Credit Allocation Committee shall prevail. The following list summarizes the points that are clarified in the proposed amendment to the standard form of the Agreement.
1. Clarification that one (1) unit must be a manager's unit, as required under California law. Recital C.
2. The definitions have been reorganized to be in alphabetical order. Article I
3. New Sections 1.01 and 1.03 now include language allowing the Developer to use California Tax Credit Allocation Committee ("TCAC") affordability requirements; Section 2.01:
a. Updates to the management unit language to make clear that a manager's unit is required.
b. Updates to the occupancy standards (number of residents per unit) to allow a higher number of persons residing in each unit.
c. Streamlines the tenant approval process such that City approval is only required to the extent Developer has failed to comply with the terms of the Agreement. Reporting will be on a monthly basis during lease-up, then annually thereafter. See Sections 2.03 and 3.01.
d. Allows use of the TCAC tenant certification form to streamline compliance.
e. Provides a process for addressing qualified tenants who later exceed income requirements.
f. Removes designation of affordable units in the project; this is generally not applicable and can be added back in the case of a mixed use/mixed income project. Also former Section 2.02.
4. Requires monthly reporting only during lease-up period. Section 2.03. Requiring monthly reporting for the full 59-year term would be burdensome for the City and the Developer.
5. Removes citizenship verification requirement. Former Section 3.03.
6. Adds reference to permitted transfer in Ground Lease. Section 5.02(e).
7. Adds reference to the Ground Lease and Memorandum of Ground Lease to clarify that breach of the Agreement does not terminate the Ground Lease and Memorandum of Ground Lease. Article 7.
8. Specifically allows Ground Lease and transfers of partnership interests. Article 9.
9. Removes Exhibits C & D as they were not used within the body of the Agreement.
The first document (Exhibit 1) is the proposed standard form of Agreement that will be used at future affordable rental properties that receive tax credit funding, the first of which will be the Del Monte senior apartments. Typically all tax credit projects include a ground lease between the owner and the tax credit partnership. If a site were sold rather than leased, the relevant clauses will be modified.
The second document (Exhibit 2) is a proposed amendment to the previously recorded Agreements at five affordable rental properties that received tax credit funding (Breakers at Bayport, Shinsei Gardens, Park Alameda, Jack Capon Villa, and Stargell Commons). In that these properties have already closed funding and are either under construction or are completed, the proposed amendment addresses only the discrepancy in bedroom size and rent calculation as it relates to ongoing compliance.
FINANCIAL IMPACT
There is no financial impact to the General Fund from amending the standard form of the City Affordable Housing Agreement.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed amendment is consistent with City of Alameda Inclusionary Housing Requirements (AMC Section 30-16) and other state and federal laws.
ENVIRONMENTAL REVIEW
This recommended action is not subject to environmental review in that it involves an administrative activity of local government that will not result in direct or indirect physical change to the environment and therefore, it is not a project under the California Environmental Quality Act. CEQA Guidelines, section 15378 (b)(5).
RECOMMENDATION
Approve an amendment to the standard form of City Affordable Housing Agreement and record amendments to previously executed agreements.
Respectfully submitted,
Debbie Potter, Community Development Director
By,
Victoria Johnson, Housing Authority Housing and Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. First Amendment to Affordable Housing Agreement
2. Proposed form of Agreement
3. City Form Affordable Housing Agreement - Rental Units