City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #: 24-1032 Agenda Date: 10/23/2024
Version: 1 Item #: 10.
Report regarding a resolution approving Budget Amendment Number 25.024 and authorizing the City’s acquisition of the Below Market Rate (BMR) unit at 2230 Gellert Boulevard, Unit 3209 (APN 104540190). (Elia Moreno, Housing Management Analyst I)
RECOMMENDATION
Staff recommend that City Council adopt a resolution approving Budget Amendment Number 25.024 and authorizing the City’s acquisition of the Below Market Rate (BMR) housing unit located at 2230 Gellert Boulevard, Unit 3209 (APN 104540190) 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 at, 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 May 31, 2024, the City received a Notice of Intent to Sell from the owner of the BMR unit located at 2230 Gellert Boulevard, Unit 3209, in South San Francisco for the resale amount of $676,781. 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 purchase it or the owner may sell it to any buyer at market rate, removing BMR limitations. For this specific unit, the owner was required to market the property for a 21-day period. The owner agreed to extend the marketing for an additional 21-day period, but, unfortunately, no eligible applications were received.
To take action to intervene to prevent the market rate sale of the unit, staff recommend executing the City’s right to purchase and taking title of the unit. Staff are 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 City of South San Francisco Page 1 of 2 Printed on 10/18/2024 powered by Legistar™
File #: 24-1032 Agenda Date: 10/23/2024
Version: 1 Item #: 10.
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.
On January 10, 2024, staff requested approval from City Council for a similar scenario. Approval of the acquisition of the property allowed staff to preserve the status of the unit in the City’s BMR program. A total of seven (7) applications were received from pre-qualified applicants, and the City was able to successfully close escrow with an eligible buyer in early October 2024. The new property owners are first-time homeowners and are employed within South San Francisco.
Proceeds from the resale have been received and replenished back into Fund 823.
FISCAL IMPACT
The Commercial Linkage Fee Fund (Fund 823) has an available fund balance of $13 million for this transaction of $676,781. This Fund will be used to pay all costs related to the preservation and resale of the subject property, which include acquisition of the property and HOA fees. The proceeds from the resale will be replenished back into Fund 823.
CONCLUSION
Staff recommend that City Council adopt the accompanying resolution, approving Budget Amendment Number 25.024 and authorizing the City’s acquisition of the Below Market Rate (BMR) housing unit located at 2230 Gellert Boulevard, Unit 3209 (APN 104540190) using the City’s Commercial Linkage Fee Fund (Fund 823).
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