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TO: BOARD OF SUPERVISORS '
FROM: Dennis M. Barry, AICP, Director of Community Development
DATE: March 7, 2006
SUBJECT: Dougherty Valley Affordable Housing Program Compliance
SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
DETERMINE that Shapell Industries of Northern California and Lennar Homes (on behalf of the
Windemere group of developers)are in compliance with the Dougherty Valley Affordable Housing
Program.
AUTHORIZE the Amendment of Regulatory Agreement and Declaration of Restrictive Covenants for
the Canyon Oaks and Mill Creek Moderate Income Projects in the Dougherty Valley to allow for use
of the City of San Ramon median-income for a maximum of 20% of the units in the respective
projects (130 units) in determining Moderate Income eligibility for tenants on an interim basis, and
for an extension of term as set forth by the Community Development Director herein, and
AUTHORIZE the execution of Amended Regulatory Agreements conforming with this action; and
ENDORSE the recommendation of the Community Development Director to impose ongoing resale
restrictions on Dougherty Valley Moderate Income rental projects subject to County Regulatory
Agreements proposing to convert from rental to for-sale condominium.
FISCAL IMPACT
None. No General Funds are involved.
BACKGROUND/REASONS FOR RECOMMENDATIONS
See attached.
CONTINUED ON ATTACHMENT: X SIGNATURE:
Gam/ P
RECOMMENDATION OF COUNTY ADMINISTRATOR i ECOMME DATION OF Bq/ARD
COMMITTEE L--APPROVE OTHER
SIGNATURE(S • '�
1
ACTION OF ARD ON AP03hVED AS RECOMMENDED
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
UNANIMOUS (ABSENT �- ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Source: Jim Kennedy
335-7225 ATTESTED-
orig: Community Development
JOHN CULLEN, CLERK OF THE
cc: County Administrator's Office BOARD OF SUPERVISORS AND
County Counsel COUNTY AD INISTRATOR
Community Development
via: Redevelopment BY , DEPUTY
• Shapell
• Lennar
• Fairfield Residential
• City of San Ramon
G:\CDBG-REDEV\redev\LNoble\Personal\Board Orders and Greenies\BOARD.02.07.06.DVAHP.doc
I DOUGHERTY VALLEY AFFORDABLE HOUSING PROGRAM COMPLIANCE
Adopted by the Board of Supervisors on March 22, 1994, and amended on October 16, 2001, the
Dougherty Valley Affordable Housing Program (DVAHP) sets for the requirements to be met by the
Dougherty Valley developers (Shapell and Windemere group). The DVAHP requires the submittal of an
annual compliance report by the respective development entities. The following discussion and Table 1
summarizes the compliance status of Shapell Industries of Northern California, and the Windemere
group led by Lennar. A map depicting the location of DVAHP Projects is also attached as Figure 1.
A. Shapell Affordable Housing Compliance
The Shapell portion of the Dougherty Valley includes 5830 residential units.These units are being built in
four phases as follows:
Phase For-Sale Units Rental Total
Gale Ranch 1 960 256 1216
Gale Ranch II 1619 266 1885
Gale Ranch III 1041 380 1421
Gale Ranch IV 648 660 1308
Total 4268 1562 5830
(73%) (27%)
The DVAHP requires that at least 25% of the residential units be affordable to Very Low, Low, and
Moderate Income Households. The Shapell portion of the DVAHP Affordable Housing obligation is as
follows:
Affordability Requirement
Percent Number
Very Low Income 10% 146
Low Income 25% 365
Moderate Income 65% 947
100% 1458
To date the Shapell-Gale Ranch Affordable Housing Program has delivered or has under construction
660 units, or 45% of its obligation (Table 1 Section I-A). The remaining 799 affordable units are to be
delivered in future phases of the Gale Ranch development(Table 1, section 1-B). The Shapell program
complies with the requirements of the DVAHP.
The remainder of Shapell's Affordable Housing obligation will be delivered in Gale Ranch Phase III and
IV (Table I, Section I-B). Two mixed income rental projects would be built, one each in Phase III and
Phase IV.
B. Windemere Affordable Housing Compliance
The DVAHP requires that at least 25% of the 5170 residential units to be affordable to Very Low, Low,
and Moderate Income Households. The Windemere portion of the DVAHP Affordable Housing obligation
is as follows:
Affordability Requirement
Percent Number
Very Low Income 10% 129
Low Income 25% 323
Moderate Income 65% 841
100% 1293
G:\CDBG-REDEV\redev\LNoble\Personal\Board Orders and Greenies\BOARD.02.07.06.DVAHP.doc
To date the Windemere Affordable Housing Program has delivered or has under construction 1,000 of its
affordable housing units in phase 1, or 77% of its obligation (Table 1, Section II-A).
The remaining 293 units of the Windemere Affordable Housing obligation will be delivered in the third
phase mixed income project (Table 1, Section II-B). The Windemere program complies with the
requirements of the DVAHP.
II IMPLEMENTATION ISSUES
The Windemere portion of DVAHP, as one can see from the previous presentation, is front loaded, i.e.,
the bulk of the affordable units are being delivered as part of the initial phase of development. The
developer of the affordable housing units in phase 1 of Windemere is Fairfield Residential LLC, a
national developer of rental housing and affordable rental housing. The three projects which are
complete or nearly complete, are Muirlands (350 very low/low income units), Mill Creek (400 moderate
income units), and Canyon Oaks (250 moderate income units). All developments are currently in their
lease-up phase.
Fairfield representatives have indicated that lease-up of the moderate income units is proceeding at a
slower pace than anticipated, which in turn is creating operating deficits for the projects, and therefore
requiring additional capital infusions by the owner and investor (Fairfield Residential and the California
State Teacher's Retirement System, or "CaISTRS", respectively). This slow lease-up is due to a
combination of two factors —a relatively large number of units going into the market place at this time,
and a relatively small difference between market rents and the permitted moderate income affordable
rents.
The Fairfield Residential representatives have also indicated that a significant portion of the prospective
moderate income (which is defined as an income of 120% of the County Median Income, or less) renters
are over-income but within the 120-150%of median income bracket. They also indicate that over 55%of
the prospective renters are from the Tri-Valley area, therefore tenants for whom a jobs/housing
relationship is strong.
To address this situation a number of options exist. They include:
1. Do nothing–a scenario which could lengthen lease-up period and stress the projects financially;
2. Owners reduce rents – a scenario that could accelerate lease-up, but stress the projects
financially due to lower rents. No County consent is required for this option; and
3. Permit the maximum income of households occupying moderate income units to rise to a higher
income for a defined period of time–a scenario that could permit a timelier lease-up of the units.
This change would require an amendment to the current Regulatory Agreements. Staff views this
as an interim accommodation, which would be reversed in future years so that the terms of the
DVAHP are fully fulfilled.
4. Permit the units to convert to condominiums –this scenario would require planning (Subdivision
Map Act) approval from the City of San Ramon, and would introduce ongoing administrative and
transactional obligations to the City. The County would also have to agree to terminate existing
Regulatory Agreements which are recorded against the property. An in-lieu contribution to
mitigate the loss of affordable units could also be considered, however it would be expensive to
the developer and units would be lost to the County affordable housing stock. Should an owner
propose to convert a Moderate Income Project to condominiums the City could require an ongoing
affordability covenant limiting the maximum income of the initial and subsequent buyers to
Moderate Income as defined in the DVAHP and restricting the resale price for 45 years. The
County could also impose such a restriction as consideration for permitting its Regulatory
Agreement to be terminated.
Staff has discussed these options with the City staff and the developer. The City staff was initially
concerned that the ability of the City to count any Moderate Income units subject to higher income limits
would be impaired relative to the Housing Element Regional Housing Needs Determination (RHND)
process. County staff has confirmed with State Department of Housing and Community Development
staff and legal counsel that the only determinant for production count under the RHND is the rent level.
The recommendation below does not allow the rents to rise; therefore the ability of the City to count the
Moderate Income units in their production count would not be impaired. The City staff concurs with this
evaluation. In view of the policy importance associated with DVAHP implementation, the relevance of
jobs/housing balance as a policy objective, and the short-term financial relief desired by the owner, staff
G:\CDBG-REDEV\redev\[-Noble\Personal\Board Orders and Greenies\BOARD.02.07.06.DVAHP.doc
is recommending option 3 with some specific conditions. Staff recommends the following:
APPROVE the amendment of Regulatory Agreements for up to 20%of the units (130 units) in the
Canyon Oaks and Mill Creek Moderate Income projects such that:
1. Income limits are not to exceed 100%of the Median Income for the City of San Ramon,
adjusted for family size, for an interim period not to exceed 5 years. The 2005 Median
.Income estimate for the City of San Ramon is currently $125,140;
2. The definition of Affordable Rents do not change;
3. For each year in which the income limits set forth in paragraph 1 above are allowed the
developer/owner will be obligated to extend the term of affordability for two years, i.e., a
five year time period for higher income limits would require a 10-year extension to the
term of the Regulatory Agreement.
Should a rental project owner subject to a DVAHP Regulatory Agreement submit an application to
the City of San Ramon to convert a rental property to for-sale condominiums, SUPPORT the
imposition of ongoing resale restrictions conforming to the following:
1. Only Moderate Income rental in the Canyon Oaks would be considered for conversion
to condominiums;
2. All Subdivision Map Act and City Ordinance requirements would be required to be met;
3. The maximum income for initial and subsequent purchases of units so converted would
be Moderate Income Households as defined in the DVAHP; and
4. Units converted to condominiums should be subject to resale restrictions for not less
than 45 years; and
5. A plan acceptable to the City of San Ramon and the Community Development Director
to mitigate the involuntary displacement o f Moderate Income Households renting units
subject to conversion should be provided for.
G:\CDBG-REDEV\redev\LNoble\Personal\Board Orders and Greenies\BOARD.02.07.06.DVAHP.doe
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D.2
03-07-2006
ADDENDUM
On this day, the Board considered determining that Shapell Industries of Northern California and Lennar
Homes (on behalf of the Windemere group of developers) are in compliance with the Dougherty Valley
Affordable Housing Program.
Jim Kennedy, Redevelopment Department, gave the staff report. Staff recommended amendment of the
Regulatory Agreement and Declaration of .Restrictive covenants for the Canyon Oaks and Mill Creek
Moderate Income Projects, and endorsement of the Community Development Director's recommendation
to impose ongoing restrictions on the Dougherty Valley Moderate Income rental projects.
Staff explained to the Board that there is financial stress placed upon the developers by delivering the bulk
of the affordable units first, of which the lease-up of the moderate income units is proceeding more slowly
than expected.
The Chair called for public comment on the matter. The following persons provided testimony:
Deborah Raune, Fairfield Residential;
Dan Coleman, Shapell Homes;
Jim Farr, Muirlands.
The following person did not wish to speak, but left written comments:
Gail Rodens, resident of Martinez.
The Board discussed the matter, acknowledging that market changes have an affect on such projects, and
the possibility of permitting a temporary increase in the allowable maximum income of households
occupying moderate income units in order to increase the number of those units being leased.
Supervisor Uilkema suggested that a specific limitation be placed on the number of units for which a rental
project owner could submit applications to the City of San Ramon to convert a rental property to for-sale
condominiums.
On the motion of Supervisor Piepho, seconded by Supervisor Uilkema, by unanimous vote with Supervisor
Glover absent, the Board adopted the recommendations as submitted.
C.
Dougherty Valley Affordable Units
Tenure and Income
ownership,Moderate
Rental,Moderate
Rental,Low
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