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Home My WebLink About4.06 Rental of BMR Units C~lY Cl[E~~ fnle # O[3l:][3]lDJclRJ[Q] AGIE~DA STATEME~T crrv COU~C~l MEIET~~G DATE JanlnJauy 15,2008 SUBJECT Proposed Resolution Estabhshmg a Pohcy PermIttmg Rental of Below Market Rate For-Sale Dmts on the BasIs of HardshIp Report Prepared by John Lucero, Housmg Specwllst ArrACHMEN'f 1) ResolutlOn EstablIshmg a Pohcy PermlttlOg the Rental of Below Market Rate For-Sale Umts on the BaSIS of HardshIp CIty CounCIl Staff Report dated December 4,2007 Draft Mmutes of the DubllO CIty Councll Meetmg December 4,2007 2) 3) R1ECOMMIENDAn~ ~ Adopt the ResolutIon estabhshmg a Pohey Permlttmg the Rental of Below Market Rate For-Sale Umts on the BaSIS of HardshIp IFlNANC1AL STATEMENT There would be no financial Impact for Staff to admInIster the polley penmttmg rental of below market rate for-sale umts on the basIs of hardshIp Staff would mcorporate the admmIstratlon of the poltcy mto the Housmg DlvlSlon's work plan Staff antICIpates that a small number of rental requests wIll be submItted PROJEC'f DESCRllP'fUlN Background The CIty's InclusIOnary Housmg Program reqUIres purchasers of below market rate (BMR) for-sale umts to execute a Resale Restnctlon Agreement and OptIOn to Purchase (Resale RestnctIon Agreement) whIch IS recorded agamst the BMR umt The Resale RestnctlOo Agreement reqUires the BMR umt to remam affordable to low-and moderate-mcome households for a penod of 55 years, reqUires the owner to hve In the umt as hIS or her pnmary reSidence, and, prohIbItS the owner from rentIng the BMR umt WIthout the consent of the CIty The CIty recently receIved a letter from a BMR owner requestIng permISSIon to rent a BMR umt As a result, Staff presented a report to the CIty CouncIl at the December 4, 2007 meetlOg, requestmg dIrectlOo as to whether the CIty should adopt a polIcy permIttmg owners of BMR for-sale umts to rent theIr umts COPliES TO Page 1 of3 K \Agcnd1 Slalemenls\2007\CC\Renlal of I3MR I or Sale Unit, Hard,hlp\1 15CCSR Updated 12 26 07 DOC liTEM NO fro c.- The City recently receIved a letter from a BMR owner requestmg permIssIOn to rent a BMR umt As a result, Staff presented a report to the City Council at the December 4, 2007 meetmg, requestmg dIrectIon as to whether the CIty should adopt a polIcy permlttmg owners of BMR for-sale UnIts to rent their umts upon a demonstratIon of hardship (Attachment I) Generally, hardship IS a term used to descnbe somethIng that IS out of the control of the BMR owner For example, hardshIp would Include a sItuatIon III whIch a BMR owner IS temporanly transferred to another area by hIS or her company or needs to leave the area to care for a sick relatIve Staff also asked for dIrectIon as to how long owners should be permItted to rent theIr BMR umts The CIty CouncIl deltberated and gave Staff the folloWIng directIOn o Develop a polIcy permIttmg owners to rent theIr BMR for-sale umts upon demonstratIon of hardshIp due to employment and/or health Issues, o PermIt owners to rent thelf unItS at BMR rents for a maxImum of one year, and o Develop a program to mom tor the rental umts for complIance With the CIty'S InclusIOnary Zomng Ordmance and the Layperson's GUIde to the InclusIOnary ZOnIng OrdInance ANALYSIS Staff recommends that the CIty CouncIl establIsh the followmg proposed polIcy (Rental PolIcy) permlttmg hmIted~term rentals ofBMR for-sale umts and wntten approval from the City Proposed Rental Poltcv I Polley The owner of a below market rate (BMR) for-sale unIt may rent hIS or her umt for a penod not to exceed twelve (12) months upon demonstratIon of hardshIp, as determIned by the CIty Manager, and demonstrated by wntten approval from the CIty of Dub 1m 2 DefinitlOn 'Hardship" means CIrcumstances In whIch a BMR owner IS reqmred to be absent from the umt for an extended penod of tIme due to eIther a change In the location of hIS or her employment or health problems of the BMR owner or an nnmedIate famIly member of the BMR owner 3 Tenant SelectIOn Once the BMR owner obtallls wntten approval from the CIty to rent hIS or her BMR umt, the BMR UTIlt owner shall select a tenant to rent the BMR umt that satisfies the mcome, household Size, and other qualIfymg household reqmrements set forth 10 the CIty's InclusIOnary Ordmance (868 020A 1) and the CIty'S Layperson's Gmde to the IncluslOnary Zonmg OrdInance Regulations 4 Rent The monthly rental payment for the BMR umt shall not exceed the maxImum monthly rent calculated In accordance wIth the CIty'S IncluslOnary OrdInance (868 020A 1) and the CIty'S Layperson's GUIde to the IncluslOnary Zomng OrdInance RegulatIons 5 Rental Agreement The BMR owner shall not execute a rental agreement for the BMR llntt wIthout first obtaInIng the CIty'S approval of such agreement The rental agreement shall clearly state (1) the term of the rental (not to exceed the twelve month penod rental IS permItted pursuant to thiS policy), (2) the monthly rental payment, and (3) that the rental IS for a lImIted penod of tIme 6 Effect of VlOlatIOn Any rental agreement In VIOlatIOn of thiS polIcy IS prohIbIted, and any owner who VIOlates thIS polICY shall be deemed to be m default under hIS or her Resale RestnctIOll Agreement Staff recommends that the Policy take effect 1111ll1edIate1y Page 2 of3 If the CIty CouncIl establIshes the proposed Rental Pohcy, Staff would reVIew the rental applIcatIOns of qualtfied households for completeness, complIance wIth the IncIuslOnary ZOnIng Ordmance and Layperson's GUIde, and would reVIew and approve the rental agreements Staff would also conduct annual affordable rental surveys to determIne the current affordable rental rates m the Dublm and Tn- Valley regIOn Staff IS currently m the process of prepanng revISIOns to the City's InclusIOnary ZOnIng OrdInance and the Layperson's Gut de to the IncluslOnary Zomng OrdInance Those reVISIons WIll be brought before the City CouncIl for approval m 2008 It IS antIcIpated that the proposed Rental PolIcy WIll be Incorporated mto the reVISIOns to the Layperson's GUIde RECOMMJENDA TKON Staff recommends that the CIty CouncIl 1) Adopt the ResolutIOn estabhshmg a PolIcy PermIttIng the Rental of Below Market Rate For-Sale UnIts on the BasIS of HardshIp Page 3 of3 ) ()~ 1 RESOLUTION NO -08 RESOLUTION OJF THE CITY COUNCIL OF THE CITY OF DUlBLJlN IESTABLlSHlNG A POLICY FOR THE RENTAL OF BELOW MARKET RA l'E FOR-SALE UNITS R]ECIT ALS WHEREAS, the CIty of DublIn's ("elt}") IncluslOnary Housmg Program reqUIres purchasers of Below Market Rate for-sale umts ("BMR For-Sale VUlt") to execute and record a Resale RestnctIon Agreement with OptlOn to Purchase ("Resale RestnctIOn Agreement"), and WHEREAS, the Resale RestnctIon agreement prohIbIts the rental of the BMR For-Sale Umt wIthout the consent of the City, and WHEREAS, the CIty does not currently have a polley regardmg the rental of BMR For-Sale Umts, and WHEREAS, thIs ResolutIOn IS Intended to establIsh a polIcy for the rental of BMR For-Sale Umts NOW, THEREFORE, the CIty Counctl of the CIty of Dub 1m does hereby resolve as follows 1 Pohcy The owner of a BMR For-Sale Umt may rent hIS or her umt for a penod not to exceed twelve (12) months upon demonstratIOn of hardshIp, as determmed by the CIty Manager, and demonstrated by wntten approval from the CIty of DublIn 2 DefimtIOn HardshIp" means Clfcumstances m whIch a BMR owner IS reqmred to be absent from the umt for an extended penod of tIme due to eIther a change m the locatIOn of hIS or her employment or health problems of the BMR owner or an ImmedIate farm1y member of the BMR owner 3 Tenant SelectIOn Once the BMR owner obtams wntten approval from the CIty to rent hIS or her BMR umt, the BMR umt owner shall select a tenant to rent the BMR umt that satisfies the mcome, household SIze, and other quahfymg household reqUIrements set forth III the CIty'S IncluslOnary OrdInance (868 OlGA 1) and the CIty'S Layperson's GUIde to the Inc1uslOnary ZOnIng OrdInance Regulations 4 Rent The monthly rental payment for the BMR UTIlt shall not exceed the maxImum monthly rent calculated In accorddllce With the CIty'S Inc1usIondfY Ordmance (868 020A 1) and the CIty's Layperson's Gut de to the Inc1usIOnary Zonmg Ordmance RegulatIOns 5 Rental Agreement The BMR owner shall not exec.ute a rentaJ agreement for the BMR umt wlthout first obtammg thc CIty'S approval of such agreement The rental agreement shall clearly state (1) the term of the rental (not to exceed the twelve month penod rental IS permItted pursuant to thIS policy), (2) the monthly rental payment, and (3) that the rentalls for d lImIted penod of time 6 Effect of VlOlatzon Any rental agreement m VIOlatIOn of thIs polIcy IS prohIbIted, and any owner who vlOlates thIS polIcy shall be deemed to be In defdult under hIS or her Resale Restnctron Agreement 7 Severablll(v Clause The provlslons of thIs ResolutIon are scverable and If any provlsron, clause, sentence, word or part thereof lS held Illegal, mvahd, unconstltutronal, or mappltcab1e to any person or cIrcumstances, such J1legahty, lOvahdIty, unconstItutIOnalIty, or mapphcabIhty shall not affect or l!.npaIr 1040768 1 :!..fP-Wllf' :4" ! 1 ! 5 f Of' 4.11 ACHMENT 1 ;z ox1 any of the remaInIng provIsIOns, clauses, sentences, sections, words or parts thereof of thIs ResolutIOn or their appllcabl1Ity to other persons or Circumstances 8 EffectIve Date This ResolutIOn shall take effect ImmedIately PASSED, APPROVED, AND ADOPTED thIS 15th day of January, 2008, by the followmg vote AYES NOES ABSENT ABSTAIN Mayor ATTEST City Clerk 1040768 1 CC~TY CLERK FI!e # D[!]~~}[i]~ 3~1 AGENDA STATEMENT CITY COUNC~l MIEET~NG DA.TE December 4,2007 SUBJECT Request to PermIt Rental of Below Market Rate For-Sale UnIts on the BaSIS of HardshIp Report Prepared by John Lucero Housmg Specwhst and Sabrma Wolfson Deputy CIty Attorney ~~ 1) 2) 3) ReceIve Staff presentatIOn, Deliberate, ProvIde duectlOo to Staff on a Whether a polley should be brought back to the CIty CouncIl allowmg for rentals of BMR umts based on hardshIp, and the length of ttme for the rentd1s (If applIcable), or b ProvIde Staff with a1temattve dlrectIOll RECOMMENDATION FINANCIAL STATEMENT There would be a finanCial Impact for Staffto design, Implement, and manage the rental of Below Market Rate For-Sale Umts The fundlOg for the management ofthe program would be provIded from the IncluslOnary Zomng In-Lleu Fee Fund The amount from the IncluslOuary Zomng In-Lieu Fee Fund would vary based on the number ofHMR owners requestmg that the CIty allow the rental of theIr umts PROJECT DESCRIPTION Background The Clty's InclusIOnary Housmg Program mcludes both Below Market Rate (BMR) Rental and For-Sale umts The CIty'S program has been operatIng SInce 1997 In 2002, the CIty entered mto an Affordable Housmg Agreement WIth Toll Brothers for the Terraces at DublIn Ranch for 105 BJvIR umts Pursuant to _ the Affordable HOUSIng Agreement, the affordable sales pnce of the BMR umts are based on a household sIze of either one or two persons COPIES TO Page 1 of4 K \Agenda S1.alements\2007\CC\CCSR12-4Kelso doc ATTA( 'HMENT 2 As of October 2007, there were 220 BMR for-sale umts that recelved entltlements from the ~y ~ 7 Dubhn Over tlme, these BMR umts wIll be sold and then possIbly resold At the tlme ofprepan~ tilt" report, 108 BMR umts had been sold and occupIed As a mechanIsm to ensure the affordabllIty ofBMR for-sale umts, the CIty requues purchasers of for-sale umts to execute a Resale RestnctIon Agreement and OptIOn to Purchase (Resale RestnctIOn Agreement), WhICh IS recorded agamst the BMR umt The Resale RestnctIOn Agreement reqUIres the BMR unIt to remam affordable to low-and moderate-mcome households for a penod of 30 years at the Terraces at Dublm Ranch and 55 years for all other developments that contam BMR for-sale umts Thus, If a BMR owner desues to sell theIr BMR unIt, It must sell the urnt to another 10w- or moderate-mcome household at a restncted pnce The maXImum restncted resale pnce IS generally the ongma1 pnce paId by the BMR owner for the BMR umt, mcreased by the percentage mcrease m the medIan household mcome for Alameda County between the date of the Resale RestnctIon Agreement and the date the CIty receIVes notIficatIon ofthe owner's mtent to sell In addItIOn, the Resale RestnctIOn Agreement grants the CIty an optIOn to purchase the BMR umt at the restncted pnce upon the occurrence of the followmg events (1) recelpt of notlficatIOll of the owner's mtent to sell the BMR Umt, (2) any actual, attempted, or pendmg sale, lease or other transfer of the umt, (3) any actual, attempted, or pendmg encumbrance of the umt, (4) recordatIOn of a Notlce of Default and/or a notIce of sale, (5) commencement of a Judlcml foreclosure proceedmg or executIon by the owner of a deed m lIeu of foreclosure, (6) commencement of a bankruptcy proceedmg or actIOn, or (7) a vlolatlOn by the owner of any proVIsIOn of the Resale Restnctlon Agreement The CIty may aSSIgn Its optIon to another government entIty, a non-profit affordable housmg provIder or to a low- or moderate- Income household In the past several years, there have been several re-sales of the BMR for-sale umts All but one of the resales has been from the Terraces at Dub1m Ranch The restncted resale pnce IS based on the ongmal amount paId by the owner, Increased by percentage mcrease III the area medIan mcome The property owner may sell the urut through a real estate agent, sale by owner and/or use the Tn Valley Housmg Opportumty Center to help locate qualIfied buyers At present, there are SIX BMR umts m the Terraces that are on the re-sale market Until recently, the resale process has been smooth, Wlth CIty Staffworkmg WIth the seller of the umt and revlewmg potential applIcants for purchase However, recently as a result of the slow down of the housmg market, some sellers have mdicated that It IS becornmg mcreasmgly dIfficult to find qualified buyers wIllmg to purchase BMR uruts at the restncted resale pnce because the restncted resale pnce IS close to the market pnce, and thus, buyers would father purchase a market-rate home free of restrIctIOns In addItlon, Toll Brothers contmues to sell new BMR umts m the Terraces, therefore, the resale umts are competmg WIth the sale of new umts It should be noted, however, that Toll Brothers and the current BMR owners may sell the BMR umts for less than the maXImum restrIcted pnce set forth m the CIty's Affordable Housmg Agreement and Resale RestnctlOn Agreement, If they so deSIre On October 8,2007, the CIty receIved a letter from an mdIvldua1 who owns a BMR umt m the Terraces The letter mdIcates that the owner IS expenencmg dIfficultIes sellmg the BI\.1R umt to a quabfied purchaser at the restncted resale pnce The owner has requested that the CIty allow the rental of the umt WltII a qualIfied buyer can be found The Resale RestnctIOn Agreement executed by the owner proVIdes that rental of the umt IS not permItted WIthout the consent of the CIty Page 2 of4 ANAL'YSIS ~~l The documents that the CIty uses to make a determmatlOn on whether the lncluslOnary Housmg Program allows for the rental of umts are the Resale and RestnctIOn Agreement, the IncluslOnary Zomng Ordmance (120) and the Layperson's GUIde The Resale and RestrIctIOn Agrcement states that the owner shall occupy the property as his or her prmclpal residence for the duratwn of his or her ownership and shall not rent or lease the property or pm tl on thereof durzng the term of thiS agreement without pnar wntten approval o{Czty The InclusIOuary Zomng Ordmance and Layperson's GUide are SIlent on how the CIty should evaluate such a rental request Staff has reVIewed the InclusIOnary Program, contacted other ]UnSdIctlOns and worked WIth the CIty Attorney on the analYSIS of the Issue of whether or not to allow the rental of a for sale BMR umt as follows HardshIp The Resale RestrIctIon Agreement IS clear m statmg that the purchaser of the BMR Umt IS reqUIred to occupy the umt as hIS or her pnncIpal resIdence However, some mc1usIOnary programs 10 other CItIes mclude a provlSlon m theIr resale restnctIOn agreements allowmg the owner to rent the umt 10 the event of a hardshIp WhIle the CIty'S Resale RestnctlOn Agreement does not refer to hardshIp, It does allow the property owner to request Clty approval to rent the BMR umt Staff suggests that the CIty make a determmatIOn on whether to penmt BMR UTIlt owners to rent theIr umts upon demonstratIon of hardshIp as descn bed below ~ Generally, hardshIp IS a term that IS used to descnbe somethIng that IS out of the control of the property owner For example, hardshIp would mclude a sltuatlOn m WhICh a BMR owner IS transferred to another area by theIr company, or needs to leave the area to care for a SIck relatIve The City of LIvermore has allowed a ltmIted-term rental of a BMR umt for thIS type of hardshIp SImIlarly, the CIty of San FranCISCo pernuts a BMR owner to rent a BMR umt when the household IS forced to temporanly relocate due to employment reqUIrements, or for other reasons deemed acceptable to the Mayor's Office of Housmg prOVIded that the uOlt IS not rented for more than 6 months, the tenant satIsfies the mcome and other ehgIblllty reqUIrements, and the rent IS affordable In contrast, the CIty of Pleasanton does not permIt the rental ofBMR for-sale umts ~ A financml hardshIp SItuatIon that IS pnncIpally one of the BMR owner's own makmg could be excluded as a hardshrp case For example, the owner of d BMR uOlt purchases a new pnncIpal reSidence before the sale of theIr BMR umt and IS oblIgated to pay on two mortgages If the City CouncIl deCIdes to permIt hnllted term rentals of BMR for-sale umts upon the owner's demonstratIOn of a hardshIp, Staff would lIke dIrectIOn as to what constttutes hardshIp Is hardshIp o UnaVOIdable relocatIOn? o Personal Illness or lllness m the famIly? o InabIlIty to sell umt? o Double mortgages? o Some other Item as dlfected by CIty CounCIl? In addltton, If the CIty CouncIl makes a determmatlon that rentals based on hardshIp (as noted above), then Staff would lIke dIrectIOn as to how long owners should be permItted to rent thelf BMR umts Page 3 of 4 AdmInIstration o ~7. The IncluslOnary Housmg Program was developed as a Program m WhICh BMR multI-famIly rental UnIts are managed by a pnvate entIty At the tIme the Program was developed, It was determmed that a successful and cost-effectIve rental program would be one that has pnvate professIOnals screenmg tenants, has on-sIte management, If possIble, and would reqUIre ltmIted CIty Staff tIme for momtonng complIance wIth mcome and rent restnctIOns If the CIty CouncIl decIdes to permIt the rental of BMR for-sale uruts upon a showmg of hardshIp by the BMR owner, CIty Staff would have to mom tor the rental umt for complIance wIth mcome gurdelmes for affordable umts As noted above, the BMR Rental Program was developed on the premIse that rental UnIts would be momtored and managed by a pnvate entIty Currently Staffmomtors the umts by workmg wIth the pnvate organIzatIOn that manages the umts lf several BMR owners are permItted to rent then umts, there would be an Impact on CIty Staff because Staff would be reqUIred to perform addlttona1 momtonng In addltlOn, there IS a screemng process that pnvate organizatIOns use to ensure that the tenant IS not only mcome qualified, but would be a responsIble renter CIty Staff would reVIew applIcatlOns of qualified households for completeness, complIance WIth 120, final mcome and the households' venficatlOn and qualIficatIOn Staff would occasIOnally take on the responsIbIlIty of conductmg annual affordable rental surveys to determme the current affordable rental rates m the Dub1m and Tn-Valley regIOn If the City CouncIl were to perrolt lImIted term rentals of BMR for-sale unIts, Staff would return to CouncIl at a future meetmg WIth a Rental of Below Market Rate for Sale Dmts on the BaSIS of HardshIp Pohcy to be adopted by ResolutIOn of the CIty CouncIl and a Budget Change Form, If applicable RECOMMENlDA TION StaffrecoIDmends that the CIty CounCIl 1) ReceIve Staff presentatIon, 2) DelIberate, 3) ProV1de dIrectIOn to Staff on (a) whether a polIcy should be brought back to the CIty CounCIl allowmg for rentals of BMR UnIts based on HardshIp, and the length of tIme for the rentals (If apphcab1e), or (b) ProvIde Staff wIth alternatIve dIrectIOn Page 4 of 4 1fJ:(7 DRi\FT On mohoo of Cm Sbranh, seconded by Vm HIldenbrand, and by maJonty vote (Cm Oravetz yohng no), the CIty CouncIl receIved the report and proVlded Staff wIth dlrechon to prepare a superstore ban ordInance for a future CouncIl meenng, WIth further dIscusslOn regardmg square footage at that hme -- .. RECESS 9 01 pill Mayor Lockhart called for a bnef recess CouncIlmembers present at 9 07 pm The meetmg reconvened WIth all ...~ - -- NEW BUSINESS ReQuest to PermIt Rental of Below Market Rate For-Sale UnIts on the BasIs of HardshIP 9 07 pm 8 1 (430-80) Housmg SpecIalIst John Lucero presented the Staff Report and adVIsed that the CIty CounCIl would consIder the allowance to rent Below-Market Rate (BMR) For-Sale Umts on the baSIS of a hardslup The CouncIl dIscussed how tlus was an mtereshng dIscussIOn that had not been consIdered If someone's Job took them elsewhere, or there was an Illness, It would be a hardslup The CIty could gIve a reSIdent one year to rent the urnt, staYIng wlthm the same below market rate guIdelmes as when they bought the home They had not foreseen the real estate market turn On motIon of Mayor Lockhart, seconded by em Scholz and by unanImous vote, the CIty CounCIl provIded dIreCTIOn to Staff to bnng back a rental polIcy for the below market rate uruts that mcluded a rental range m the below market rate and a maXImum of one year for specIfic reasons such as health or Job transfer DUBLIN CHTY COUNCIL MINUTES VOLUME 26 REGULAR MrEETING DECJEMBER 4, 2007 PAGE 146