HomeMy WebLinkAboutMINUTES - 08171999 - C218 Contra
Costa
TO: BOARD OF SUPERVISORS � 4.. }vw Courty
FROM: Dennis M. Barry,AICP .
Community Development Director
DATE: August 17, 1999
SUBJECT: Dougherty Valley Affordable Housing Program--Shapell Industries Annual Compliance Report
SPECIFIC I2E€UEST(S)OR RECOMMENTIATIONS(S)& BACKGROUND ANIS JUSTIFICATION
RECOMMENQATIOI S
ACCEPT the determination of the Deputy Director,Redevelopment finding Shapell Industries in compliance with the
requirements of the Dougherty Valley Affordable Housing Program(DVAHP)and APPROVE the October 1998 Annual
Compliance Report submitted by Sly{.pell Industries pursuant to Section V.F.1 of the DVAHP.
LISCAL I'YIPA "i'
None, No General Funds involved.
IsACI CxROLJN: /REASONS FOR RECOA✓MENDLUONIS
The Dougherty Vallee Affordable Housing Program was approved by the Board of Supervisors on March 22, 1994. The
purpose of the DVAHP is to provide a structure for implementation of the affordable housing requi ernents and policies
CONTINUED ON ATTACHMENT:T: X YES SIGNATURE: ,€� ` � r� ���' !
V RECOMMENDATION OF COUNTY ADMINISTRATOR� r MENDAT OF BOARD CO MITTEE
APPROVE —OTHER
f r
1
SIGN'ATURE(S)'
ACTION OF BOARD ON Augus t 17,_ 1999 APPROVED AS RECOMMENDED X®OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
X UNANIMOUS (ABSENT none. �) TRUE ANIS CORRECT COPS'OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD CIE
SUPERVISORS ON THE DATE SHOWN.
Contact: jim Kciedy 335-1255 ATTESTED August 17, 1999
cc: County Administrator PHIL BATCHELOR,CLERK OF
County Counsel THE BOARD OF SUPERVISORS
Community Development ANUCUNT7TYMIN7ISTRATOR
Shaped Industries
Ef 1 9 DEPUTY
of the County General,Plan and the Dougherty Valley Specific Plan.Under the terms of the DVAHP,a minimum of
25 percent of the total units produced iti the Dougherty Valley are required to be affordable to and occupied by very-
low, low and moderate-income households. Assuming fall build-out, Shapell's obligation under the terms of the
DVAHP consists of 1,458 affordable housing units.
Section V.F.I of the DVAHP requires Shapell to submit an Annual Compliance Report on affordable housing
development for review by the Board of Supervisors. The Report must be submitted to the Community Development
Department for initial review and must include a summary of progress made with respect to the provision of
affordable units wid a one and three year strategic plan for the provision of the affordable units. The 1998 An"aal
Compliance Report for Shapell Industries is included as Attachment A. The Community Development Department
has reviewed the Report and recommends that Shapell be found ire compliance with the requirements of the DVAHP
as of October 1998.A draft letter from the Department to Shape'll,Industries confzirning compliance and summarizing
issues to be addressed prior to submission of the 1999 Annual Compliance Report is included as Attachment B.
-14` 99(MONI 16903 SPAPEEL-LAND DEPT, TELA08 946 4657 P. 001/002
SHAPELL [NDUSTRIES of NORTHERN CALIFORNIA CON
A VvWon of ShapGt3 Industries,Inc. "
June 14, 1999
Nfi% Jim Kennedy
Contra Costa.County
Redevelopment Department
651 pine Street
Martinez, CA 9455'
Deur Jim:
The following submittal is intended to provide Shapell's Annual Compliance Report for
the Dougherty Valley Affordable Housing Prograrxr VAI-IP)for 1998. This report was
due on October 1, 1998. Please accept our apologies for its lateztess.
1998 saw the first provision of actual housing in Dougherty Valley. While no€actual
occupancy occurred by 1081198,more than 100 single family units were either under
construction or sold pending construction as of that time. As you may have heard,the
demand for housing that we have experienced has been explosive,exceeding ever,our
most optimistic projections.None of these units had been assumed to meet affordability
requirements. However, we tare pleased to report that two of the sales met affordability
thresholds based on the income of the buyers,as opposed to the price of the home they
purchased. Please inform me of how to demonstrate this to you and the County while
protecting the privacy of the indi viduals involved.
On May 10, 1999 I sent to you a letter intended to serve as our compliance report for
1998. Upon reflection,I believe that the tetter left the County with the wrong impression
r:s to Shapell's position relative to the affordable housing program. Accordingly,this
?etter is sent to both withdraw the May 10, 1999 letter and to,hopefully,better describe
Shapell's position relative to the.DVARP.
Shapell understands that the terms of DVAITP require that rental units may only meet
100% of the median income in order to Meet affordability cr„iteda. Therefore, absent an
amendment to the program by the Board of Supervisors we are bound to abide by the
terms.
As we commut:ictated to you and staff at a recent meeting we were in fact surprised to
find that the written terms of the agreernant read as they do. As mentioned in the May
Wh letter both Shapell antl't indemere assumed that the 120%threshold applicable to for
sale units also applied to rentals. Unfortunately we have designed our first 256-unit
apartment complex udder this incon-oct impression. We have done so in order to promote
the concept of the affordable and nonaffordable units as indistinguishable as possible
from each other. This concept was an important component of the specific plan. When l:
first discovered that the language of the DVAI-IP reads as it does,I brought the matter to
Homes of Quality Since 1955
P.O. 13ox 3611469,100 Nord,Milpitas kitslevnrd,Milpitas,Callforni."135 Phnne;408/946-1550 Fix,408/946-9687
99 (NIDN1 16:G4 SHAPELL-LAND DEEPT, TDL.408 946 4667 P OG21DD2
Mr,Jim Kenpedy
Jane 14, 1999
Page 2
your attention and yo,,) indicated that the regulation stems from implementation of-
redevelopment agency law, As you know,the Dougherty valley is not in a redevelopment
area and rune of the governmental assistance concomitant with such a designation is
available to us to help create deeper affordability. Therefore we would hire to enlist your
effort and that of your staff to explore further ways in which our two objectives can be
achieved, The 256 unit apartment cornplex will not be occupied until the Spring of next
year and that may provide us with a timely opportunity to undertake a fuller discussion of
the issues. Finally,I want to reiterate that we are fully uwa-a that any change to the
DVA.HP will rewire ROS action should,they see fit to do so,
Given the fact that nothing si rti-Ificant had changed as of October 1, 1998 from the ties
we had reported to you in August 199'7,1 again submit the details of that report for your
consideration. The one distinction between that report and the present is that we are now
aware of the 100% maximum and will endeavor to meet its terms.
Hook forward to discussing these matters with you further. Please be aware that a
complete chart fallowing the made] you provided me will be following shortly under
separate cover. Thank you for your time assisting Shapell in meeting the DVAHP and
Specific flan goals for housing affordability.
Sincerely,
Thomas J. Koch
Vice President
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} Dennis M. eery, AICP'
Community t,,,� r Community Deveiopment Director
Del3veomnt Costa
Depart'r, ,entCe nt.
County Administration Building r
651 Pine Street
4th Floor, North trying .-
Martinez,California 94553-0095 DRAFT
Phone: (925 335-1255
°SQA CUv °� Augusta 7 1999
Mr. Thomas J. Koch
Vice President, Shapell Industries
P.O. Box 361169
Milpitas, California 95035
Dear Torn:
RE: Dougherty Malley Affordable Housing Program
The purpose of this letter is to respond to information submitted by Shapell .Industries
with respect to the Dougherty Valley Affordable Housing Program (DVAHP), including
your June 14, 1999 letter and DVAHP Opportunities Analysis, and a June 2, 1999 letter
with attachments from Chris Truebridge to Jennifer Peterson. used on the information
provided, I understand that Shapell is committed to meeting DVAHP requirements for
the development of housing affordable to very-low, low and moderate-income
households. Although several issues require additional information and discussion, it
appears that the overall affordable housing program proposed by Shapell complies with
the requirements of the DVAHP as of October 1998. It is anticipated that the outstanding
issues will be resolved and additional information provided no later than October o1999
when the next DVAHP Annual Compliance Deport and Opport=unities Analysis is due.
The following summarizes outstanding issues and additional information needed to
implement the Dougherty Valley Affordable Housing Program as proposed by Shapell.
AFFORDABILITY—Moderate-income For-sale Units
The DVAHP rec:uires that moderate-income homeownership units angst be sold to
households with incomes at or below 120 percent of the Contra Costa County Area
Median Income (ASMI) as adjusted for household size. In addition, a minimum of half of
the units angst be sold to the target population at an affordable price.
® Moderate-income Homebuyer Income Certification
Per your request, I am forwarding to you alarm of income certification to be
executed by moderate-income homebuyers and submitted to the County as
documentation of income eligibility in accordance with DVAHP requirements. Note
that the homebuyer must certify the household's income under penalty of perjury.
Furthermore, by signing the income certification form, the household also agrees to
Office Hours Monday- Frday:6:00 a.m.-5:00 p.m.
permit the County to verify the income information through access to the mortgagor's
Goan file. It is the intent of the County to monitor these files on a periodic basis to
ensure compliance.
You have also indicated some concern with respect to confidentiality of homebuyer
records and income. While County records are public documents, we have never to
my knowledge received a request from a member of the public to view individual
homebuyer records maintained for purposes of the County's affordable housing
programs. The County maintains mortgage assistance records for several thousand
homebuyers.
Based on information previously provided by your office, two moderate-income
households have already acquired homes in the Dougherty Valley. As stated in the
preceding, documentation is required in order to confirm that the households are
eligible in accordance with the definition of a moderate-income household. Since
these :oars have closed, the County will accept the following as documentation: name
and address of qualified household; household size; and the lender's certification as to
income eligibility. Please note that this will be acceptable for these two households
only. In the future, in order to qualify as a moderate-income household under the
DVAIIP households acquiring Domes will be required to provide income
certifications as discussed in the above.
0 Additional Information Needed to Confirm Compliance
The maximum allowable sales price for a moderate-income unit according to the
DVAI IP is the lesser of the current market price and a price taking into account unit
and family size, prevailing interest rates, and other conventional loan underwriting
criteria. In order to determine the allowable sales price for the price-restricted
moderate-income units, additional information is needed concerning proposed unit
size/number of bedrooms, target market characteristics (e.g., household size), and
assumed underwriting criteria, particularly homeowner association dues,
RENTAL UNITS —Moderate and Low-income
Affordability term—Moderate Income Rental units
The DVA.HP and Dougherty Valley Specific Plan goals and policies emphasize the
Need to maintain housing affordability over the long run.. Policy H-9 in the Specific
Plan states that "Affordable units shall be maintained for the maximum period
feasible. Target periods shall be a minimum of twenty years for for-sale units and
thirty years for rental units." At the time the DVAI-IP was approved, it was assumed
that the moderate-income affordable housing obligation would be met through the
provision of affordable homeownership opportunities at market prices without the
need for public subsidy. Due to a lack of specific financial benefit to the buyer(e.g.,
below-market price, low-interest loan), it was not considered feasible to require
moderate-income households to purchase an essentially market-rate unit with an
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affordability restriction. Consequently, the DVAHP does not currently specify a
rewired terra of affordability for moderate-income units.
In part as a result of substantial changes in housing market conditions, Shapell is now
proposing to satisfy over 80 percent of the total moderate income housing obligation
through the production. of 876 rental units. In order to accommodate the revised
program and remain consistent with Specific Flan and DVAHP housing affordability
goals and policies, DVAHP requirements for maintained a:fordability should be
modified to state that rental units intended to satisfy the moderate income housing
requirement must remain affordable to and occupied by the target population for a
minimum of thirty years. In addition, the developer/owner of the rental units should
be required to enter into a regulatory agreement with the County to ensure that the
units remain in the affordable housing stock for the required period of time. This
approach is ally consistent with affordability requirements for very-low and low-
income rental units and with Policy H-9 of the Dougherty '`Dalley Specific Plan and
DVABP, A final form of regulatory agreement mast be prepared, using Appendix
I to the DVAHP as a starting point.
Request for Additional Information and Clarification—Moderate and Low-income
Rental Units
Maximum allowable rents for the moderate-income units are defined as the lesser of
the monthly market rent or a monthly rent including an allowance for utilities which
does not exceed 30 percent of the monthly area median income for Contra Costa
County. Similarly, maximum allowable rents for the low-income units are defined as
the lesser of the monthly market rent or 104 percent of the Section 8 Fair Market Rent
(FMR) less an appropriate allowance for utilities. In both cases, rents are adjusted
based on the number of bedrooms and assumed household size in a unit. Additional
information concerning proposed unit size/number of bedrooms, probable utility
configuration and appropriate allowances, and size of target market household is
needed in order to determine compliance of the proposed moderate and low-income
rents with the requirements of the DVAHP.
In a second issue, it appears that the rents for the low-income apartments and rental
units have been incorrectly calculated based on 30 percent of the gross monthly
income of a household at 80 percent of the area median rather than the FMRs as
required by the DVAHP. Depending on the number of bedrooms in a unit, the rents
proposed for these units may not comply with the maximum affordable rents for the
DVAHP. The rents for these units should be clarified as soon as possible.
® Carriage Units—Moderate and Low-income
Shapell proposes to meet a portion of the moderate and low-income affordability
requirement through the provision of carriage units. In general, carriage units are a
separate housing unit located on the same lot and purchased in combination with a
single family home. The carriage unit option was not specifically addressed in the
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DVAIIP. Therefore, some clarification in the requirements to be attached to this type
of rental housing is appropriate. In order to qualify as an eligible rental unit, the
carriage unit must be a separate unit (i.e., separate entrance, kitchen, and bath
facilities, separate off street parking). In addition, owners of the carriage units trust
rent the units to moderate or low-income households at rents including a utility
allowance which do not exceed the maximums allowable under the DVABP for a
minimum of3O years. The specific income group to be targeted for occupancy of the
carriage unit (low or moderate income) must be identified at the time the homebuyer
enters into a sales agreement, In order to ensure compliance, owners of carriage units
will be required to enter into regulatory agreements with the County to be recorded
against the property and specifying the affordability requirement. It is not
immediately apparent how the DVAHP affordability requirements will affect the
demand for and ultimate feasibility of carriage units as affordable rental housing. In
addition to the information requested for rental units in general, please provide
information concerning the potential market for this type of unit by homeowners and
moderate/low income renter households.
A second issue with respect to carriage units concerns compliance through the period
of required affordability. In general, owners of multifamily rental projects with 20 to
100 or more units each are required to submit periodic reports confirming compliance
with County affordability and use restrictions. The County reviews compliance on an
ongoing basis. In the evert of non.-compliance, the County will work with the owner
to bring the project back into conformance with the affordability requirements.
Absent corrective action, the County will declare the project in default under the
terms of the regulatory agreement. While there are obvious administrative costs
associated with monitoring compliance of these projects, these costs are provided for
in the regulatory agreement. In contrast, the proposal to use over 300 carriage units,
each with a separate owner/landlord, to satisfy a portion of the County affordability
requirements involves potentially significant compliance and related administrative
costs due in part to a lack of apparent economies of scale. Discussions should be
initiated between Shapell and the County to determine an equitable approach to
covering these costs.
Low-income Rental Units—Phasing
As currently proposed, the majority of low-income units will be produced in Phases II
and III of the project; none are produced in Phase I. This is allowable under the
current DVAIIP subject to the findings of the compliance monitoring program. In the
next compliance repoI L, please provide the proposed construction timeline for each
phase of the project in order to clarify the anticipated time frame for construction of
the low-income units.
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RENTAL,UNITS —Very-low Income
Request for Additional Information-- Very-low Income Units
The information submitted on Shapell's strategy for producing very-low income units
is '_united. .Additional information needs to be provided prior to the next annual
report to facilitate assessing the feasibility of this component of the af'f'ordable
Dousing program. This information should include: the proposed location with a
description of the specific site or sites to be used for very-low income housing
(acreage, configuration, significant development and environmental constraints); the
type of housing proposed (mixed-use or all affordable, multifamily, senior, unit
size/number of bedrooms); range of incomes and household size of target population;
and the relationship of these units to other units in the development.
* Developnient Mechanism and Procedures
As one alternative to producing the units themselves, Shapell has proposed meeting
the requirement for very-low income housing by dedicating a parcel of land to a non-
profit affordable housing developer. This approach is allowable under the DVAFIP.
Discussions should be initiated to identify proposed procedures and criteria to be
employed in selecting a non-profit for this purpose. Given the complexities of
affordable housing finance which typically involves multiple funding sources, it is
important that this process be initiated early in the development in order to permit
adequate time for the nonprofit to design and obtain the necessary financing and
planning approvals for the project.
* Phasing
As currently proposed, all 146 of the very-low income housing units will be produced
at the end of the development in Phase IV. While the DVAUP does not require a
specific distribution of very-low, low and moderate-income units by phase,
incorporation of the very-low income units in the last phase increases the risk that
these units will never be built. For example, pending completion of a new or
amended EIR, the Dougherty Valley Settlement Agreement with the City of San
Damon and Town of Danville limits the number of units to be built to 8,500 out of the
11,000 units approved by the Board. On a pro rata basis, this would allow Shapell to
build a total of 4,505 units. Phases I through III will result in the development of
4,439 units, leaving only 66 to be produced in Phase IV prior to completion of a new
EIR. Discussions should be initiated to develop alternative approaches to be followed
by the developer to meet the very-low income housing requirement earlier than Phase
IV. These alternatives should include the feasibility of building the very-low income
units in an earlier development phase.
I anticipate that the majority of the issues identified in this letter will be successfully
resolved and the additional requested information provided prior to or coincident with
submission of the next annual affordable housing program compliance report and
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opportunities analysis due in October 1999. My staff and I would be happy to meet with
you to at your earliest convenience to discuss these issues :lrther.
Sincerely,
Jinn Kennedy
Deputy Director=-Redevelopment
�. Board of Supervisors
Dennis Barry
Debbie Chamberlafti
KaUeen Harron:
File C.4.3(bX1.6Xa)
l;Wi:datalworkldvahp i.d'oc
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