Council Meeting: August 13, 1996                 Santa Monica, CA

TO:       City Council

FROM:     City Staff

SUBJECT:  City Council Resolution to Establish 1996 Maximum Rents
          and Purchase Prices for Inclusionary Housing Units

INTRODUCTION
This report recommends City Council adoption of a resolution
establishing the maximum allowable rents and purchase prices for
inclusionary housing units subject to Ordinance 1615.

BACKGROUND
On November 6, 1990, the voters of the City of Santa Monica
approved Proposition R, adding Section 630 to the City Charter. 
Proposition R provides that the City shall require that not less
than 30% of all multifamily residential housing newly constructed
in the City on an annual basis be permanently affordable to and
occupied by low and moderate income households.  Half of the
inclusionary units must be affordable to low-income households,
defined as households whose incomes do not exceed 60% of L.A.
County median income; and the remaining half must be affordable
to moderate income households whose incomes do not exceed 100% of
the L.A. County median income. To implement Proposition R, the
City Council adopted Ordinance 1615 on March 3, 1992.  
On December 14, 1993 City Council took further action in
implementing Ordinance 1615 by  approving Program Guidelines and 
adopting a resolution to establish maximum allowable rents and
purchase prices for inclusionary units.

DISCUSSION
Maximum Allowable Income:
To be eligible for the Inclusionary Housing Program, households
shall not earn more than the maximum allowable income as
determined by the City for a low and moderate income households
as adjusted by household size.  The 1996 maximum allowable
incomes for low and moderate income households is shown in
Attachment 1.

Rents:
The Inclusionary Housing Program Guidelines set forth the method
for calculating the maximum rent for all rental inclusionary
units. Attachment 2 shows all the factors that are used to
calculate maximum rents for low and moderate income households.
The maximum rent for moderate income households is equal to 30%
of the monthly income for households earning 100% of the median
income for a four person household, as published by the U.S.
Department of Housing and Urban Development and adjusted for unit
size (i.e. number of bedrooms).  The maximum rent for very low
income households is equal to 30% of the monthly income for
households earning 60% of the median income for a four person
household, as published by the U. S. Department of Housing and
Urban Development, and adjusted for unit size.  The bedroom
adjustment factors per the Program Guidelines are shown in
Attachment 2.  These are used to calculate the maximum rents for
varying type units for both low and moderate income households.
Based on the above methodology, the maximum allowable rents for
low and moderate income units for 1996 are shown on Attachment 2. 
For 1996, the maximum rent for a low income household renting a
1-bedroom unit would be $616 and the maximum rent for a 2-bedroom
unit would be $731.  The maximum rent for a moderate income
household renting a 1-bedroom unit would $1,026, while the
maximum rent on a 2-bedroom unit would be $1,218.  

Purchase Prices:
Under the Program Guidelines, the purchase price of an
inclusionary unit is based on the amount of a mortgage that can
be amortized over thirty years by a buyer who makes no more than
the maximum income for that income category at a 30% affordable
standard, plus a 10% down payment.  The mortgage amount is
calculated on the basis of maximum income, interest rates,
typical homeowner association fees, property taxes and private
mortgage insurance.  The Program Guidelines provide that staff
utilize an interest rate for fixed rate loans utilizing the
midpoint between the high and low required yield for Fannie Mae
during the prior twelve months and to calculate homeowner
association fees on the basis of an annual survey of fees for
newly constructed condominiums in the City.  
In preparing the maximum purchase prices, a calculation for a
four-person household at both 60% and 100% of median income is
prepared.  These purchase prices are then adjusted by the unit
size (i.e. number of bedrooms) using the appropriate adjustment
factors.  
Based on the above methodology, the maximum purchase prices for
low and moderate income units for 1996 is shown on Attachment 3. 
For 1996, the maximum purchase prices for a low income household
buying a 1-bedroom unit would be $57,278 and the maximum purchase
price for a 2-bedroom unit would be $68,018.  The maximum
purchase price for a moderate income buying a 1-bedroom unit
would $136,092, while the maximum purchase price on a 2-bedroom
units would be $129,288.  As reflected in Attachment 3, the
calculations assume the following: (1) Interest Rate at 7.87%;
(2) Homeowner Association Fees at $200 per month; (3) Property
Taxes at the assessment year rate of 1.25%; (4) Private Mortgage
Insurance calculated at .52 basis point of the loan amount. 

ADMINISTRATION
Housing Division provides this information to the Planning and
Zoning staff, so the updated information is made available to the
public.

BUDGETARY FINANCIAL IMPACT
The are no financial or budgetary impacts from the City
perspective.

RECOMMENDATIONS
It is recommended that the City Council:
     Adopt a resolution establishing the maximum allowable income
     levels, maximum rents and maximum purchases prices for
     inclusionary units under the Inclusionary Housing 
     Program as shown in Attachment 1, Attachment 2 and
     Attachment 3 of this staff report.


Attachments (available in the City of Santa Monica City Clerk's
Office):
               #1   Maximum Allowable Income Levels for
                    Inclusionary Housing
               #2   Maximum Rents for Inclusionary Housing
               #3   Maximum Purchase Prices for Inclusionary
                    Housing