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HomeMy WebLinkAbout2013-07-24 HAC Special Mtg Agenda PacketCITY OF CHULA VISTA MINUTES HOUSING ADVISORY COMMISSION SPECIAL MEETING Wednesday, July 24, 2013 4:00 P.M. CALL TO ORDER/ROLL CALL — 4:06 P.M. CITY HALL CONFERENCE ROOM C101 276 FOURTH AVENUE PRESENT: Marshall "Dawes" Hamilt, Mark Minas, Sergio Quero, Lillian Uy ABSENT: Mauricio Torre (excused) STAFF: Stacey Kurz, Senior Project Coordinator Jose Dorado, Project Coordinator 418113 - Member Uy motioned to approve the minutes from the meeting of 4/8/93. Member Quero second the motion and all members agreed 4-0-0. Member Quero motioned to elect Member Uy as Chair for the fiscal year. Member Minas second the motion and all members agreed 3-0-1 with Uy abstaining. Member Minas motioned to elect Member Quero as Vice Chair for the fiscal year. Member Uy second the motion and all members agreed 3-0-1 with Member Quero abstaining. Staff Dorado provided a summary of the staff report, Exhibit .1 and presentation, Exhibit 2. Member Quero inquired if HOA and Mello Roos were factored into housing expenses. Staff Dorado replied that is something being added and looked at more closely in the future when determining the affordable housing price since those costs can equate to several hundred dollars a month. Staff Kurz added that is also a potential negotiating point for future inclusionary housing developments. Member Minas asked for clarification on the income qualification process for the existing residents at Mar Brisa and Sedona and Staff Kurz clarified that the existing residents would not be required to income qualify or meet ratios, that was done at initial qualification and they would only be reviewed for eligibility of the second modification if they were in good standing for 12 months. She further clarified that anyone that is not in good standing now would be eligible for the same modification after 12 months of good standing. Chair Uy motioned to recommend that City Council approve the updates to Council Policy 453-02. Vice Chair Quero second the motion and the motion carried 4-0-0. Project Updates: Lofts on Landis — Staff Kurz indicated that the project was approved by Planning Commission at the end of June and now the developer is waiting to find out if they will receive their tax credits. They will find out in late September and would have to pull building permits by late March if they receive them. Chair Uy asked what would happen if they are not awarded and staff Kurz replied that the developer had indicated they would wait until a year from now to apply again. Housing Advisory Commission Minutes Paqe 2 of 2 Congregational Towers — Construction has begun on the rehabilitation project and will be continuing over the next year. The rehabilitation is presenting challenges in construction staging issues within the urban core along Third Avenue, but the City is working with the construction company and residents/businesses surrounding the project. None. ��]:�I�K�] �iJl �t� l��i► I C«7_�� I:�l�r•:h'? None. 7. ADJOURNMENT — HAC Meeting was adjourned at 5:15 p.m. when Vice Chair Quero motioned to adjourn with a second from Chair Uy, to the next regular meeting of October 23, 2313. Recorder, Stacey Kurz Exhibit 1 — For -Sale Housing Policy Update Staff Report Exhibit 2 — For -Sale Housing Policy Update Presentation EXHIBIT 1 The City of Chula Vista Development Services Housing Division A REPORT TO THE HOUSING ADVISORY COMMISSION Item No. 2 Staff: Jose Dorado, Project Coordinator Development Services Department, Housing Division DATE: July 24, 2013 SUBJECT: Council Policy 453-02 - RECOMMENDATION OF APPROVAL TO THE CITY OF CHULA VISTA CITY COUNCIL AN UPDATE TO COUNCIL POLICY 453- 02 RELATED TO THE DEVELOPMENT OF AFFORDABLE FOR -SALE HOUSING FOR LOW AND MODERATE INCOME BUYERS L RECOMMENDATION That the Housing Advisory Commission recommend APPROVAL to the City of Chula Vista City Council an update to the City of Chula Vista's Affordable For -Sale Housing Policy 453-02 that was originally adopted on December 9, 2003 and last updated September 13, 2005. II. BACKGROUND The Affordable For -Sale Housing City Council Policy 453-02 (the "Policy") was adopted in 2003 to provide procedures and guidelines for Developers proposing to construct affordable for -sale housing opportunities within the City. The policy outlines mechanisms to ensure affordability of the sales price, sharing of sale proceeds to continue to promote affordable homeownership programs, loan qualification, and selection of qualified buyers. To date, 32 units within Sedona at Rolling Hills Ranch and 67 units at Mar Brisa at San Miguel Ranch have been developed utilizing this Policy. Since the last amendment to the Policy in 2005, there have been drastic changes in the housing market, including a steep decline in U.S. home values and underwriting changes in the lending industry. In addition, with the elimination of State Redevelopment and the associated governing laws, some of the restrictions in the original Policy are no longer necessary or consistent with industry standards. Given the changes, revisions to the Policy are needed to ensure its continuing effectiveness for existing and future first time homeowners. Staff is proposing revisions that will allow greater flexibility to those beneficiaries of the City's For - Sale Housing Program and to encourage long term homeownership. Such revisions include restructuring of the equity share between the City and homeowner, a reduction in the length of term of the Silent Second loan, underwriting criteria and procedures for a short sales and cases of hardship. In addition, clean up revisions are proposed to provide flexibility which include the applicability of the policy to moderate for -sale products and elimination of examples and language that may change over time and become obsolete. The proposed revisions are consistent with mortgage industry standards and are in line with program policies, at the federal and state level, that July 26, 2013 Update to Council Policy 453-02 Page 2 have been adopted for those experiencing a hardship and facing foreclosure, such as Keep Your Home California and the Home Affordable Refinance Program (HARP). Recommended Substantive Revisions to the Policy Loan Ter°rn and Equity Share The Policy requires the repayment of the Silent Second loan principal upon sale, transfer, refinance, rental or change of title on the property. Staff proposes reducing the shared equity term from the current Policy of 45 years, required under previous State Redevelopment law, to 15 years to coincide with more typical homeownership trends and the City's First Time Homebuyer Program. Proposed Table 1 of the Council Policy is revised to reflect equity share percentages between the City and the Homeowner based on the revised maximum length of the time (15 years) the Homeowner has occupied the property. Should a homeowner sell within one year, the City retains 100% of the equity in the property, minus the homeowner's expenses. The City's share of equity declines each year until year 15. Underwriting Criteria Staff has proposed updates to underwriting criteria to be consistent with the City's First Time Homebuyer Program and current industry underwriting standards to ensure qualified applicants are being selected for the program that will be able to sustain homeownership. Language is included to limit the use of funds gifted to the buyer. Short Sale and Hardship At the time of the adoption and the subsequent amendment to the Policy, home prices reached unprecedented double digit increases and the Policy did not reflect any potential decline in market conditions. With the significant downturn in the housing market in recent years, where home mortgages are significantly higher than market value, many homeowners are choosing to short sell or allow the property to enter into a default status. Given the existing policy term of 45 years and upside down mortgages, homeowners are provided with little incentive to maintain homeownership at the existing terms or to refinance. Staff has proposed new language to recognize short sales and financial hardships. Prior to a short sale, homeowners will be required to seek homeownership counseling. Additionally, the Development Services Director will have the ability to review existing loan documents and approve loan principal reductions in a downturned economy for homeowners in good standing and seeking refinancing to more favorable terms. The proposed language will allow for coordination with Federal, and State foreclosure prevention programs, as previously mentioned. Applicability to Existing Balanced Communities ("Inclusionary Housing') Projects Since 2003, two developments have utilized the Policy, Sedona in Rolling Hills Ranch and Mar Brisa in San Miguel Ranch. Both projects provided affordable units through the City's Balanced Communities Policy. The City is currently working with Fannie Mae, Wells Fargo, and other parties involved in the first mortgages of these properties to address concerns regarding loan modifications and refinances. The update of the Policy will provide the Development Services Director the ability July 26, 2013 Update to Council Policy 453-02 Page 3 to review the City's Silent Second loan documents and appropriately apply the Policy as necessary to allow these homeowners an opportunity to seek more favorable financing terms and maintain homeownership. Moderate Income Buyers The original Policy did not have provisions for moderate -income buyers. The proposed Policy would apply the underwriting criteria and terms as low-income buyers and coincide with the approved pricing guidelines as set forth in the City's Balanced Communities Policy Guidelines, Recommended Clean Up Revisions to the Policy Purpose The Housing Element of the General Plan is updated every seven years. Therefore, goals and policies of the Housing Element are subject to change as housing needs may changeover time. The revisions include the strikeout of the specific goals of the 1999-2020 Housing Element and replacement with language that states a general goal of providing for varied housing opportunities for the diverse needs of the community. Examples The existing Policy provides specific examples (reference struck out Tables 1-3 in Attachment 1) for loan assumptions, calculation of sales prices, and the Silent Second loan calculation. Additionally, County of San Diego Income Limits for 2005 and Housing Pricing based on these income limits serve as Attaclunents to the Policy. The examples and the Attachments are based on point in time information and subject to change over time and based on market conditions. Therefore, the examples and Attachments to the Policy are being deleted. CONCLUSION The Policy revisions promote long term affordability and encourage Chula Vista's working families to take advantage of opportunities for quality housing consistent with City housing goals. Without such changes, staff anticipates it will be difficult to find future buyers of for -sale products under this Policy due to excessive restrictions of the current language and additional defaults may occur with the existing complexes implemented under the Policy. 111. Attachment 1. 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