DISCUSSION
City of San Bernardino
Request for Council Action
Date: April 1, 2026
To: Honorable Mayor and City Council Members
From: Eric Levitt, City Manager
Department: Economic Development
Subject: Disposition and Development Agreement (DDA) with Montebello Housing Development Corporation (MHDC) for
the Development of Surplus Land Act Site 6 for Affordable Housing (Ward 2)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve the Disposition and Development Agreement (DDA) between the City of San Bernardino and Montebello Housing Development Corporation (MHDC), a nonprofit affordable housing developer, for the development of approximately
0.15 acres of city-owned surplus land, identified as site 6 for affordable housing; and
2. Authorize the City Manager or designee to execute the DDA, along with any subsequent amendments, extensions, and other necessary documents to complete the transaction.
City Manager's Comments
The City Manager recommends approval.
Executive Summary
Montebello Housing Development Corporation (MHDC) is proposing to develop two manufactured housing units on City-owned surplus land located at 1715 N. Arrowhead Avenue. The primary unit would include a three-bedroom, two-bathroom residence of approximately 1,000 square feet, and the secondary unit would be a one-bedroom, one-bathroom accessory dwelling unit (ADU) of approximately 750 square feet.
Entering into a Disposition and Development (DDA) Agreement with MHDC will establish the framework for site disposition and project development, including terms related to site control, affordability requirements, project design, financing strategy, development milestones, and long-term compliance. Approval of the DDA will enable the City to advance the timely development of affordable housing on the site in a manner consistent with the Surplus Land Act and the City’s housing goals.
MHDC has demonstrated the financial capacity, development experience, and organizational ability to perform, allowing the City to proceed directly to a DDA without first entering into an Exclusive Negotiating Agreement. The DDA establishes the framework for site disposition and project development, including terms related to site control, affordability requirements, project design, financing strategy, development milestones, and long-term compliance. Approval of the DDA will enable the City to advance the timely development of affordable housing on the site in a manner consistent with the Surplus Land Act and the City’s housing goals.
Background
The City owns properties located at 1715 N. Arrowhead Avenue, identified as Surplus Land Act Site 6. This property was designated for disposal under the Surplus Land Act, meaning it is considered excess property that the City does not need for public use and may be made available for development or other purposes. The sites include the following Assessor’s Parcel Number (APN): 0146-072-02.
On November 16, 2022, the City Council of the City of San Bernardino adopted Resolution No. 2022-234, which declared the Property surplus, pursuant to Government Code Section 54220 and issued Notices of Availability (“NOA”) on February 27, 2024.
On October 14, 2024, the California Department of Housing and Community Development (HCD) issued a letter to the City determining that the City had met all the requirements under the Surplus Land Act (SLA) for the purposes of disposing of the Property.
Discussion
MHDC proposes the development of affordable homeownership housing on the City- owned surplus land site located along North Arrowhead Avenue (Site 6). The proposed project consists of two manufactured housing units designed to provide efficient, high- quality, and cost-effective housing. The primary unit would include a three-bedroom, two-bathroom residence of approximately 1,000 square feet. The secondary unit would be a one-bedroom, one-bathroom accessory dwelling unit (ADU) of approximately 750 square feet.
MHDC has determined that the use of manufactured housing represents an economical and time-efficient development approach, allowing for reduced construction timelines while maintaining quality standards. The estimated total project cost, including both direct and indirect development costs but excluding land costs, is approximately $458,000. This cost structure reflects MHDC’s experience with similar housing types and supports the financial feasibility of the project.
Montebello Housing Development Corporation (MHDC) is a seasoned nonprofit affordable housing developer with more than 25 years of demonstrated experience in the development of affordable homeownership housing. MHDC was established following a determination by the Montebello City Council in 1991 that there was a critical need for affordable housing within the community. As part of the City’s Affordable Housing Strategic Plan, MHDC was incorporated in November 1992 as a public service nonprofit organization to address this need.
MHDC has successfully developed multiple single-family, detached infill housing projects intended for low-income buyers, demonstrating consistent performance in project delivery, financial management, and regulatory compliance. The organization has maintained a long-standing financial relationship of approximately 34 years with East West Bank of California. In addition to providing standard commercial banking services, East West Bank has served as a construction lender for several MHDC affordable housing developments. This established banking relationship further supports MHDC’s ability to secure construction financing for future projects, including the proposed development on the Arrowhead Avenue site.
Due to its long-term operational stability, MHDC has accumulated a reasonable level of organizational assets and maintains sufficient financial capacity to advance development activities. The organization has indicated that it intends to obtain a construction loan from East West Bank for the proposed project, if needed.
Additionally, MHDC has stated that the estimated cost of the proposed development is significantly lower than that of prior projects it has completed, and that it would be capable of self-financing portions of the project should circumstances require.
Based on MHDC’s demonstrated development history, financial capacity, and proposed project approach, staff finds that the developer is qualified to proceed directly into a Disposition and Development Agreement for the Arrowhead Avenue site.
The following summarizes the key terms of the proposed Disposition and Development Agreement (DDA) between the City of San Bernardino and Montebello Housing Development Corporation (MHDC). The DDA establishes the conditions under which the City-owned surplus land will be conveyed and developed with affordable housing, subject to applicable approvals and compliance with all governing laws and regulations:
Property: Approximately 0.15 acres of City-owned surplus land located along North Arrowhead Avenue in Ward 2, identified as Surplus Land Act Site 6. Developer: Montebello Housing Development Corporation (MHDC), a nonprofit affordable housing developer.
Project Description: Development of affordable homeownership housing consisting of one primary single-family residence and one accessory dwelling unit (ADU), utilizing manufactured housing.
Affordability: The primary unit and ADU shall be restricted to households meeting applicable low- and/or moderate-income affordability requirements, consistent with the Surplus Land Act and terms negotiated in the DDA. Disposition Terms: The City shall convey the property to MHDC upon satisfaction of all conditions precedent set forth in the DDA, including project approvals, financing commitments, and compliance with applicable laws. Development Schedule: MHDC shall be required to meet defined development milestones, including permitting, commencement of construction, and project completion, as specified in the DDA.
Financing: The project is anticipated to be financed through a combination of private construction financing and developer equity. MHDC has indicated its intent to pursue construction financing through East West Bank of California, if needed.
Estimated Project Cost: Total estimated development costs, exclusive of land value, are approximately $458,000.
Design and Construction: The project shall comply with all applicable zoning, building codes, and City design standards, and utilize manufactured housing as an efficient and cost-effective construction method
Reversionary Interest: The DDA shall include reversionary provisions and remedies to protect the City’s interest in the event of default or failure to perform Assignment and Amendments: Assignment of the DDA shall be subject to City approval. The City Manager, Deputy City Manager, or designee is authorized to approve minor amendments, extensions, and related documents consistent with the intent of the DDA.
Restrictive Covenant: A Declaration of Restrictive Covenants shall be recorded against the property to ensure long-term affordability. The covenant shall require that the dwelling units remain affordable to and occupied by lower- income households for a minimum period of 55 years for rental housing and 45 years for ownership housing. The initial occupants of all ownership units shall be lower-income households, and such units shall be subject to an equity sharing agreement consistent with the provisions of paragraph (2) of subdivision (c) of Section 65915 of the California Government Code. 2021-2025 Strategic Targets and Goals
Approving the DDA aligns with Key Strategic Target and Goal No. 3: Improved Quality of Life. Partnering with MHDC to develop affordable housing will reduce the number of blighted city-owned properties while providing essential affordable housing opportunities to the community.
Fiscal Impact
There is no impact to the General Fund and no additional funding is being requested.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve the Disposition and Development Agreement (DDA) between the City of San Bernardino and Montebello Housing Development Corporation (MHDC), a nonprofit affordable housing developer, for the development of approximately
0.15 acres of city-owned surplus land, identified as site 6 for affordable housing; and
2. Authorize the City Manager or designee to execute the DDA, along with any subsequent amendments, extensions, and other necessary documents to complete the transaction.
Attachments
Attachment 1 Resolution No. 2026-034
Attachment 2 Disposition and Development Agreement Ward: 2
Synopsis of Previous Council Actions:
N/A
CC: Eric Levit, City Manager