City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #: 23-1102 Agenda Date: 1/10/2024
Version: 1 Item #: 15.
Report regarding a resolution approving Budget Amendment Number 24.028 and authorizing the City’s acquisition of the Below Market Rate (BMR) unit at 2230 Gellert Boulevard, Unit 3105 (APN 104540050). ( Elia Moreno, Management Analyst I and Danielle Thoe, Housing Manager)
RECOMMENDATION
Staff recommends that City Council adopt a resolution approving Budget Amendment Number 24.028 and authorizing the City’s acquisition of the Below Market Rate (BMR) housing unit located at 2230 Gellert Boulevard, Unit 3105 (APN 104540050) using the City’s Commercial Linkage Fee Fund (Fund 823).
BACKGROUND
The City’s Inclusionary Housing Ordinance (Municipal Code Chapter 20.380) creates Below Market Rate (BMR) housing units within both ownership and rental developments. This ordinance serves to increase the amount of housing affordable to low and moderate-income households in South San Francisco. When for-sale BMR units are newly constructed and undergo their initial sale, each unit’s initial sale price is calculated based on a complex formula. Specifically, this initial pricing process takes into account the Area Median Income (AMI) level the unit is targeted to, the current interest rate expected on a 30-year, fixed-rate mortgage, a 5% to 10% down payment, private mortgage insurance rates, homeowners’ insurance, and homeowners association dues. When BMR units are resold, the sale price is calculated much more simply and intended to provide the seller with some modest equity earnings. In the case of resales, the new sales price is indexed to the change in AMI since the unit was last sold.
The City controls the resale price and resale procedures of for-sale BMR units through resale restriction agreements and rights of first refusal, documents which are executed between the BMR owner and the City and recorded against the property. These documents give the City opportunities to buy the unit upon the owner’s intention to sell the unit or to assign that right of first refusal to a new income-qualified buyer. This ensures the unit remains affordable for future households, preserving the City’s diverse affordable housing stock. The City has approximately 100 for-sale BMR units located throughout the City and normally between 5 and 10 are refinanced or resold each year. In the instance of nearly all resales, the City assigns its right of first refusal to purchase the unit to an income-qualified buyer identified through a marketing, application, and lottery process facilitated by the seller and their agent and supervised by the City and its consultants.
DISCUSSION
On August 10, 2023, the City received a Notice of Intent to Sell from the owner of the BMR unit located at 2230 Gellert Boulevard, Unit 3105, in South San Francisco. The resale restrictions typically include a period of time that the owner must attempt to sell a BMR to an income-qualified buyer, after which, either the City must City of South San Francisco Page 1 of 2 Printed on 1/5/2024 powered by Legistar™
File #: 23-1102 Agenda Date: 1/10/2024
Version: 1 Item #: 15.
time that the owner must attempt to sell a BMR to an income-qualified buyer, after which, either the City must purchase it or the owner may sell it to any buyer at market rate, removing BMR limitations.
City staff has reviewed various options to assist in the resale of the unit, while reducing the negative financial impacts to the sellers. To take action to intervene to prevent the market rate sale of the unit, staff recommends executing the City’s right to purchase and taking title of the unit. Staff is requesting that the City Council authorize the use of Commercial Linkage Fee Funds (Fund 823) to purchase the unit. Once purchased, the property will be placed back on the market with Council having the authority to market to the affordability level of their choice.
Executing the City’s purchasing right of this unit and preserving its status in the BMR program assists in promoting affordable housing within the City. The loss of BMR units eliminates affordable housing opportunities for low- to moderate-income residents, and we hope to do all we can to continue to make affordable housing available to residents.
FISCAL IMPACT
The Commercial Linkage Fee Fund (Fund 823) has available fund balance of $18.1 million for this transaction.
This Fund will be used to pay all costs related to the preservation and resale of the subject property which includes acquisition of the property and HOA fees. The proceeds from the resale will be replenished back into Fund 823.
RELATIONSHIP TO STRATEGIC PLAN
Executing the City’s purchasing right would preserve this unit at risk of losing its affordability.
Preservation of affordable housing units addresses the City’s Strategic Plan Priority Area #2: Quality of Life, Initiative 2.3 - Promote a balanced mix of housing options in South San Francisco.
CONCLUSION
Staff recommends that City Council approve Budget Amendment Number 24.028 and authorize the City’s acquisition of the Below Market Rate (BMR) housing unit located at 2230 Gellert Boulevard, Unit 3105 (APN 104540050) unit using the City’s Commercial Linkage Fee Fund (Fund 823).
City of South San Francisco Page 2 of 2 Printed on 1/5/2024 powered by Legistar™