§ 26C-326. Affordable housing; requirements for long-term affordability and design and construction.

(a)

Purpose. This section is intended to implement the provisions of Section 3.1 et seq. of the general plan housing element, Sections 65915 and 65916 of the Government Code, and Section VII of the local coastal plan concerning density bonuses. Any affordable housing project shall comply with the provisions of this section.

(b)

Affordable Housing Agreement Required. The obligations undertaken by a developer in exchange for subsidies for construction of an affordable housing project authorized by state law and the housing element shall be secured by the developer's execution of an affordable housing agreement. The agreement shall include, at a minimum, provisions that the lots or the units thereon shall be reserved for sale or rent as the case may be to moderate, lower, or very low income households in accordance with the approved project and the provisions of Section 3.1 of the housing element. The agreement shall be subject to review and approval by the county counsel and the executive director of the community development commission, and include the following provisions:

1.

Occupancy Standards.

(i)

Income eligibility criteria for defining affordability.

(ii)

The actual affordable sales prices or rents for affordable units, as determined by the community development commission. The community development commission may from time to time revise the sales prices in response to changes in the real estate market.

(iii)

Certification and selection of buyers or renters, as the case may be. One of the criteria for certification and selection of buyers of ownership housing shall be that the purchaser be a first-time home buyer.

2.

Term of Resale AND Rental Restrictions; First Right OF Refusal; Silent Second Mortgage.

(i)

A guarantee of initial sale of all moderate income units to moderate income households, and initial sale or rent and continued affordability of all units affordable to lower and very low income households, for the longest term permitted by law.

(ii)

A provision that the first sale of a targeted dwelling to a lower or very low income household include an assignable first right of refusal to the community development commission to purchase such unit on the occurrence of a subsequent sale.

(iii)

A provision that a silent second mortgage be recorded against the property at the time of transfer of a dwelling targeted for ownership by a low or very low income household at the time of the initial sale.

(iv)

A provision to maintain all qualifying rental units for thirty (30) years or a longer period of time if required by the construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program, provided however, that if the county does not grant at least one (1) additional incentive pursuant to Section 26C-326.1 in conjunction with the grant of a density bonus, the agreement shall provide for the continued affordability for ten (10) years of all qualifying units. For purposes of interpreting and implementing this section, grant of a density increase pursuant to a housing opportunity area policy shall be construed to be an additional incentive within the meaning of Sections 26C-326.1. The thirty (30) or ten (10) year term, as the case may be, shall commence on the date of recording of the notice of completion of the unit or units.

(v)

Provisions for a fair and equitable tenant selection process to insure the selection of eligible tenants. Selection criteria may include, but not limited to, amount of household income and assets, household size, and the size of available units. In addition, priority may be given, first, to current residents of Sonoma County, and second, to persons employed in Sonoma County.

(vi)

A provision that the community development commission receive all applicable fees as may be established by resolution of said commission from time to time.

3.

Domiciliary Criteria; Ownership Units.

(i)

A provision that all required affordable housing shall be the principal place of residence of the purchaser. Principal place of residence shall mean the place where one actually lives for the greater part of the time, or the place where one remains when not called elsewhere for some temporary or special purpose and to which one returns frequently and periodically, as from work or vacation.

(ii)

A provision that preference shall be given to current residents of the county of Sonoma in the sale or rental of such affordable housing to the extent allowed by law.

(c)

Long-term affordability requirements to be junior to construction and permanent financing loans. The board of supervisors finds and determines that a majority of the financial institutions and lenders which make or insure construction and long-term loans on affordable housing projects will not make such loans where a project is subject to locally-imposed long-term affordability restrictions. Therefore, to ensure that the requirements for long-term affordability set out in this chapter will not impede the financing necessary to ensure the construction of new affordable housing projects, the board of supervisors will subordinate said requirements to construction and long-term permanent financing.

(d)

The project review and advisory committee and the design review committee shall not have the authority to waive the requirements of Section 26C-326 where such requirements are applicable to a project approved by either of these committees.

(e)

Standards for Qualifying Units. Qualifying units shall meet the following standards:

1.

Design and Construction.

(i)

Qualifying units shall be constructed concurrently with the other units in a residential development. Where the phasing of construction is necessary, each phase shall provide the required ratio of qualifying units to market-rate units.

(ii)

Qualifying units shall be integrated into the overall design and distributed throughout the development in which they are located. To assist affordability of the qualifying units, amenities of qualifying units may be fewer or of lesser quality than that of the market rate units. Otherwise, these units shall generally be of similar quality and shall have similar amenities as the market-rate units, and their exterior materials and appointments shall be architecturally compatible with the market-rate units in the development. The average size (in square footage) of the qualifying units shall be at least seventy-five percent (75%) of the average size (in square footage) of the market rate units.

(iii)

The mix of unit sizes and bedroom counts in the qualifying units may be similar to the mix of unit sizes and bedroom counts provided in the development as a whole. The sizes and bedroom counts of the qualifying units may, however, be less than that of the market rate units to assist affordability of the qualifying units (subject to the size limit in subsection (ii) above).

(iv)

Developers shall not offer upgrades of materials to buyers where such upgrades would increase the price of the dwelling above the specified affordable sales price.

2.

Occupancy standards for qualifying units. The affordable housing agreement shall provide that qualifying units are to be sold or rented only to households certified by the community development commission as very low or lower income.

3.

Specific standards for ownership qualifying units. The affordable housing agreement shall incorporate the following standards:

(i)

Price Levels. Ownership qualifying units shall be offered at sales prices that are considered affordable to very low, lower or moderate income households, as established annually by the community development commission based upon income limits published by the United States Department of Housing and Urban Development.

(ii)

Buyer Certification and Selection. Qualifying units shall be sold to households certified by the community development commission. Buyers eligible to purchase qualifying units will be selected by the developer in accordance with a marketing program approved, in advance, by the director of the community development commission. The marketing program shall set forth an equitable selection process to be used for the marketing of the affordable units. Selection criteria may include, but not be limited to, household income and assets, household size, and the size of available units. In addition, priority may be given, first, to current residents of Sonoma County, and second, to persons employed in Sonoma County.

(iii)

Guarantee of Continued Affordability. The following provisions shall apply to all dwelling units required to be affordable to lower or very low income households:

(A)

Silent Second Mortgages. A silent second mortgage shall be recorded against each parcel.

(B)

First Right of Refusal; Notice of Intended Sale. An option agreement shall be recorded as part of the grant deed to the first eligible home buyer, which agreement shall provide the community development commission with a first right to either purchase the qualifying unit at the fair market value or assign said commission's first right to a third party, for a specified period of time (typically thirty (30) years) upon notice by the owner that the property will be offered for sale.

(C)

Notice of Intent To Exercise Option. Within forty-five (45) days from the date of receipt of the owner's notice of intent to sell the parcel, the community development commission or assignee, as the case may be, shall notify the owner of the property said commission's or assignee's intent to exercise the option. In the event that the commission or its assignee elects to exercise the option to purchase a property, such option to purchase shall be completed within ninety (90) days from the date of receipt of the owners notice of intent to sell the property.

(D)

Exercise of Option. Should the community development commission elect to exercise its option to purchase the parcel, the seller shall pay said commission a fee equal to two percent (2%) of the resale price. In addition, said commission shall receive the proceeds from the silent second mortgage at the time of resale.

(E)

Failure to Exercise Option. Should the community development commission elect not to exercise its option to purchase the parcel, said commission shall receive the proceeds from the silent second mortgage at the time of the sale of the parcel to a third party.

4.

Specific Standards For Rental Qualifying Units.

(i)

Rent Levels. Rental qualifying units shall be offered at rent levels that are considered affordable to very low or lower income households, as established annually by the community development commission based upon income limits published by the United States Department of Housing and Urban Development.

(ii)

Tenant Certification and Selection. Rental qualifying units are to be rented to households certified by the community development commission. Owners of rental qualifying units must make available to the authorized staff of the community development commission adequate records, as determined by the community development commission in order to prove to the county that all tenants occupying the designated affordable rental units are eligible under the term of Section 26C-326 and the affordable housing agreement.

(f)

Silent Second Mortgages.

The following shall apply to silent second mortgages:

1.

The term of a silent second mortgage shall generally be thirty (30) years.

2.

The silent second mortgage shall secure the repayment upon resale of any direct subsidy funds, such as: community development block grant funds, redevelopment agency housing set-asides or such other federal, state or local program funds used in the acquisition of land for the development or construction of said unit, and any pre-development and construction assistance.

(i)

In no case shall the payoff amount of the silent second mortgage be less than the principal amount of the silent second mortgage (the difference between the appraised value of an affordable unit and the affordable sales price established for sale of the unit to either an eligible lower or very low income buyer) plus the value of the community development commission's share of the increase in equity.

(ii)

The commission's share of said increase in equity shall be the product of the total equity increase multiplied by the ratio of the principal amount of the silent second mortgage to the appraised value on which the silent second mortgage amount is based.

3.

Notwithstanding the requirements of subsection (f)(2) above, where the repayment of a silent second mortgage occurs at a time when the fair market value of the dwelling is equal to or less than the market value at the time of sale, the repayment formula for the silent second mortgage should protect the home buyer's original down payment amount. Under such circumstances, the payoff amount could be less than the original principal amount of the silent second mortgage.

4.

Use of proceeds from silent second mortgages.

(i)

All proceeds from a silent second mortgage received by the community development commission shall be placed in the affordable housing trust fund and be used to fund the conservation, rehabilitation, and construction of permanent rental housing and/or to fund any other housing programs authorized by the community development commission or the board of supervisors which is affordable to lower and very low income households.

(ii)

Notwithstanding the provisions of subsection (4)(i), above, where said commission elects to exercise its option to purchase the dwelling, or the owner locates a buyer who qualifies at the same income level as the seller originally qualified, and meets the qualifying, occupancy, and specific standards for ownership units set forth in Section 26C-326.1, the proceeds of the silent second mortgage may be applied to the sale of said unit in the form of a new silent second mortgage.

(Ord. No. 5318 § 1, 2001.)