Council Meeting: October 25, 2005

 

 Santa Monica, California

 

 

 

To:

 

Mayor and City Council

Chairperson and Redevelopment Agency

 

 

 

 

 

From:

 

City and Agency Staff

 

 

 

 

 

Subject:

 

Affordable Homeownership, Relocation Plan, and Replacement Housing Plan for the Development Proposed at 1943-59 High Place

 

 

INTRODUCTION

 

This report recommends that the City Council and Redevelopment Agency approve in concept an affordable homeownership development to be located at 1943-59 High Place and authorize the City Manager and Executive Director to negotiate and execute the necessary documents specific to a homeownership development for moderate income households.  This report also recommends that the City Council approve the Relocation Plan and that the Redevelopment Agency approve the Replacement Housing Plan for the proposed development.

 

BACKGROUND

The City’s two main housing policy documents, the Housing Element and the Consolidated Plan, identify that homeownership programs for low and moderate income households should be supported.  The Housing Element establishes that the City should cooperate with housing providers to promote the development of ownership housing for low and moderate income households (Goal 2.0, Policy 2.3).  The Consolidated Plan establishes that the City should expand homeownership opportunities for low and moderate income first-time homebuyers (Priority 1C).  In addition, as part of its mission statement and objectives, the City’s Housing Commission has made a commitment to explore opportunities for affordable homeownership programs. 

 

In 2003, Community Corporation of Santa Monica (CCSM), a local nonprofit agency committed to the development and management of affordable housing in Santa Monica, held two community forums to bring the residents of Santa Monica’s Pico neighborhood together to discuss affordable housing issues.  At these forums, community members expressed interest in affordable homeownership for first time homebuyers.  In response to this feedback, CCSM convened a study group comprised of Pico community leaders to explore and consider all aspects of affordable homeownership.  The study group prepared a report, provided in Attachment A, which endorses affordable homeownership for moderate income households.

 

DISCUSSION

CCSM is proposing to develop approximately forty (40) units of affordable homeownership housing at 1943-1959 High Place (High Place East).  The units would be affordable to moderate income households (100% of median income, up to $65,500 for a 4-person household for 2005).  This site is located on the east side of High Place between Virginia Avenue and the Santa Monica Freeway in the Pico neighborhood and is zoned R2 (Low Density Multiple Residential District).  The site measures approximately 36,300 square feet and currently includes seven buildings containing fourteen rent controlled units.   However, building permit records indicate that these structures represent only six original units.

 

The use of the City’s various affordable housing funds are governed by the Housing Trust Fund Guidelines (“Guidelines”) adopted by City Council and the Redevelopment Agency.  The current Guidelines limit the use of these funds to affordable rental developments and target low income households earning no more than 80% of the area median income (currently $52,400 for a 4-person household).  There is no current City program to subsidize the construction of affordable homeownership housing.  Therefore, housing trust fund financing of a homeownership development targeted to moderate income households requires Council and Agency approval.  

 

The proposed development also requires Council approval of the Relocation Plan and Agency approval of the Replacement Housing.  Other than homeownership housing (versus rental housing) and targeting moderate income households (versus low income households), the proposed High Place East development would be consistent with the Guidelines, including the $180,000 per unit maximum subsidy.

 

 

 

The approximate development budget sources and uses are identified in Table 1:

 

Table 1

USES

AMOUNT

Per Unit

 

SOURCES

AMOUNT

Per Unit

Land

$1,920,000

$48,000

 

Homeowner

$8,000,000

$200,000

Construction

$10,000,000

$250,000

 

State

$1,200,000

$30,000

Soft Costs

$4,000,000

$100,000

 

City subsidy

$6,720,000

$168,000

TOTAL

$15,920,000

$398,000

 

TOTAL

$15,920,000

$398,000

 

Based on current lending practices a moderate income household should be able to obtain a bank loan of approximately $200,000.  Table 1 also indicates that a State subsidy of $30,000 per unit is available and that a City subsidy of $168,000 per unit would be required.  The estimated City subsidy of $168,000 per unit is within the current Guidelines per unit subsidy limit of $180,000 for a two or more bedroom unit.

 

The affordability covenants would remain in effect for a minimum of fifty-five years, which is also consistent with the Guidelines.  The price of the units will be calculated from the median income, thus maintaining affordability through the covenant period.  Homeowners build equity by paying down the mortgage and earning appreciation as the affordability index (i.e., the area median income) increases.  

 

A Relocation Plan must be approved by the City Council whenever a Redevelopment Agency-funded activity would displace any existing property occupants.  The Relocation Plan must be prepared in conformance with statutes and regulations established by the California Relocation Assistance Law (CRAL; California Government Code section 7260 et seq.), the California Relocation Assistance and Real Property Acquisition Guidelines, Title 25, California Code of Regulations, Chapter 6, Section 6000 et. Seq., and California’s Community Redevelopment Law (Health & Safety Code Section 33000 et seq.).

 

The Relocation Plan, provided in Attachment B, explains that only three of the fourteen existing rental housing units on the High Place East site are occupied.  Under State relocation guidelines, comparable and available replacement housing must be identified prior to the relocation of the displaced household.   A rental housing survey conducted in July 2005 indicates there is an adequate supply of comparable replacement units in proximity to the High Place East site to meet the needs of the households that will be displaced.  The Relocation Plan for this proposed development was made available for public review and provided to the three households remaining on the site, as required by CRAL.  Any written comments from the public or the displaced household will be attached to the Relocation Plan as an addendum prior to its consideration by the Council. 

 

The Replacement Housing Plan, provided in Attachment C, establishes that Agency will meet its replacement housing obligations by replacing the removed units with units containing an equal or greater number of bedrooms within four years of demolition.  The existing units contain fourteen bedrooms as shown in Exhibit 2 of the Replacement Housing Plan.  The Agency will provide replacement housing by utilizing surplus housing units and bedrooms from a previously funded affordable housing development to be located at 2411-23 Centinela Avenue.   The Replacement Housing Plan also establishes that the Agency will ensure the affordability of the replacement housing units and the occupancy by households whose incomes are commensurate with those households previously occupying the demolished units.  Demolition of the units at High Place East is not anticipated for a few years because the development is in the conceptual stage and the design has not yet begun. 

 

 FINANCIAL/BUDGETARY IMPACT

City/Agency financial assistance to this proposed development will be provided by one or more of the available housing trusts funds for affordable housing.

 

RECOMMENDATION

It is recommended that the following actions be taken to allow housing trust fund financing of an affordable homeownership development at 1943-59 High Place:   

 

 City Council and Redevelopment Agency:

            1)      Approve the homeownership concept for moderate income households at the High Place East development site as outlined in this staff report; and       

            2)      Authorize the City Manager and Executive Director to negotiate and execute agreements necessary to effect the proposed homeownership development at High Place East as outlined in this staff report.

 

City Council:

            1)      Approve the attached Relocation Plan for the proposed development on High Place East as outlined in this staff report.

 

Redevelopment Agency:

            1)      Approve the proposed Resolution (Attachment D) adopting the Replacement Housing Plan for the proposed development on High Place East as outlined in this staff report.

 

 

 

Prepared by:

 

Jeff Mathieu, Director Resource Management Department

 

 

 

Ron Barefield, Acting Housing and Redevelopment Manager

 

 

 

Jim Kemper, Acting Housing Administrator

Tina Rodriguez, Redevelopment Administrator

Mike Strader, Senior Administrative Analyst

Nia Tang, Senior Administrative Analyst

 

 

 

 

 

ATTACHMENTS:

 

Attachment A:            Pico Neighborhood Affordable Homeownership Report

Attachment B:            Relocation Plan for 1943-59 High Place

Attachment C:            Replacement Housing Plan for 1943-59 High Place

Attachment D:            Agency Resolution approving the Replacement Housing Plan for 1949-1959 High Place