Chapter 21.05
PRESERVATION OF ASSISTED AFFORDABLE HOUSING
Sections:
21.05.010 Purpose and application of chapter.
21.05.020 Notices of intent to terminate.
21.05.040 Restrictions on owners.
21.05.060 Notice of intent to sell or transfer.
21.05.070 Sale to a qualified entity.
21.05.080 Public subsidy contract/condition of approval.
21.05.010 PURPOSE AND APPLICATION OF CHAPTER.
1. The purpose of this chapter is to help ensure that housing affordable to very low, low and moderate income households is not permanently removed from the housing stock and to prevent the displacement of very low, low and moderate income households.
2. This chapter addresses any multifamily rental housing building, or group of buildings under common ownership, comprised of four or more rental units which development has received or receives any public subsidy, including, but not limited to, a mortgage loan, a mortgage interest subsidy, mortgage insurance or a rent subsidy from a federal, state or local governmental body or agency, and whose rent levels are restricted so as to be affordable to very low, low and moderate income households. Such rental housing buildings are hereinafter referred to as “assisted housing developments.” Federal Housing and Urban Development Department Section 8 Housing Choice Voucher Program participants, or equivalent programs that may be enacted, and previously assisted housing developments that do not have current agreements in effect and do not have active agreements or covenants regarding income or rent restrictions are exempt from this chapter.
3. It is the intent that the provisions of the chapter are in addition to, but not preemptive of, applicable state and federal laws governing the sale, or the disposition of a development that would result in either (1) a discontinuance of its use as an assisted housing development or (2) the termination of any low-income use restrictions which apply to the development. This includes, but is not limited to, compliance with California State Government Code Sections 65863.10, 65863.11, and 65863.13.
4. The intent of this chapter is not to infringe upon a property owner’s right to sell his or her property to the highest bidder or to raise rents to market upon the expiration of applicable affordability covenants, but simply to establish a noticing period that could provide an opportunity for the city of Santa Cruz or a non-profit organization that is committed to the preservation of affordable housing to work with the owner of the property to explore options that might provide for a continuation of the property being affordable to very low, low and moderate income households.
(Ord. 2002-09 § 1 (part), 2002).
21.05.020 NOTICES OF INTENT TO TERMINATE.
1. At least 12 months prior to the termination of affordable housing restrictions, any owner of an assisted housing development shall deliver to the director of planning and community development a notice of intent to terminate.
2. The notice of intent to terminate shall include the following:
a. The name and address of each owner of the assisted housing development;
(1) For a corporation, the notice shall include the names and addresses of the officers and directors of the corporation.
(2) For a partnership or joint venture, the notice shall include the names and addresses of the joint venturers or general partners and principal or controlling persons of the partnership or joint venture but shall not include limited partners.
b. The development’s name, federal, state, or local program name and ID number, and address;
c. The date of intended termination and a brief description of the owner’s plans for the property, including any timetables or deadlines for actions to be taken;
d. The number of subsidized rental units in the development subject to termination, and the number of subsidized rental units occupied by tenant households with persons age 62 or older, with disabled persons, or with children;
e. The current rent schedule for the subsidized rental units; and
f. The anticipated rent schedule after termination. Owners shall give their best estimate to define anticipated rents but shall not be bound by these estimates.
g. This section shall not require the owner to obtain or acquire additional information that is not contained in the existing tenant and project records, or to update any information in his of her records. The owner shall not be held liable for any inaccuracies contained in these records or from other sources, nor shall the owner be liable to any party for providing this information.
h. Copies of any notices sent to tenants and/or the State of California Department of Housing and Community Development in compliance with California State Government Code Sections 65863.10 and 65863.11.
3. Owners of housing developments are exempt from this noticing requirement when:
a. The owner is refinancing the project and preserving all current affordable requirements and/or restrictions;
b. The property is being sold to a buyer who has entered into a regulatory agreement that will preserve the current affordability requirements and/or restrictions; or
c. The property owner is refinancing a Section 8 housing project in a manner which complies with the following conditions:
(1) No tenant will be involuntarily displaced on a permanent basis.
(2) The owner will accept all renewals of project-based Section 8 rental agreements, if available, and if it is at a level sufficient to maintain the project’s fiscal viability, as defined in California State Code Section 65863.13 and as determined using reasonable estimates of operational costs, reserves, and property incomes.
(3) The owner will accept all enhanced Section 8 vouchers, if tenants receive them, and all other Section 8 vouchers for vacancies.
(4) The owner will not terminate a tenancy at the end of a lease term unless there is a breach of the lease.
(5) The owner will consider all factors relevant to an applicant’s ability to pay rent.
(6) For units with project-based Section 8 assistance, rents will be set at 30% of 60% of area median income if the Section 8 assistance is no longer available.
(7) For units that are unassisted or do not have project-based Section 8 assistance, rents will be set at 30% of 50% of area median income. If the project has a Section 241(f) loan, rents will be set at the regulated rents under that loan.
(Ord. 2002-09 § 1 (part), 2002).
21.05.030 ASSESSMENT PERIOD.
To facilitate the city’s ability to evaluate status of the tenants, assess the fair market value of the property, and review other pertinent information, within 14 days of receiving the notice of intent to terminate, the planning and community development director may send a written Request for Information and Access to an owner who has issued a notice of intent to terminate and the owner shall:
1. Within 21 days of receiving the written request, submit a statement to the planning and community development director certifying the following:
a. Incomes and household composition of tenants currently living in assisted units within the project; and
b. Owner reports on file with HUD and the State of California made within the last 12 months.
2. Consent to reasonable walk-through inspection of the property, with access to a sample of two to three units, showing typical units of each size that are part of the development.
(Ord. 2002-09 § 1 (part), 2002).
21.05.040 RESTRICTIONS ON OWNERS.
Owners who have issued a notice of intent to terminate shall:
1. Refrain from taking any action or steps, including entering into any agreements, that would preclude the city or its designee from succeeding to the contract or negotiating with the owner for purchase of the property during the notice periods identified herein.
2. To the extent allowed by HUD, maintain an existing HUD Section 8 contract in good standing during the notice period.
3. Not disturb any tenancy, other than for cause, for a period of 180 days after expiration of the Section 8 contract, if the city has paid or arranged to pay to the owner on the first day of each month, the monthly subsidy that the owner was receiving under the contract that would include any increases that might be allowed under the contract.
(Ord. 2002-09 § 1 (part), 2002).
21.05.060 NOTICE OF INTENT TO SELL OR TRANSFER.
Any owner subject to this chapter shall not sell or otherwise transfer to an unrelated third party unless the owner proposing such sale or transfer shall first have provided qualified entities, as defined below, the opportunity to purchase the development.
1. A “qualified entity” means a governmental entity.
2. Alternatively, a “qualified entity” means a nonprofit organization exempt from taxation under Section 501(c)3 of the Internal Revenue Code of 1986 (or a successor provision), which:
a. Is either the tenant association of the development; a nonprofit public benefit corporation or a limited partnership with a nonprofit public benefit corporation as general partner, which can demonstrate the capability to manage the development for the development’s remaining useful life; and
b. Obligates itself and any successors in interest to maintain the assisted housing development.
3. At least three months prior to any date of any offering to sell, including listing a property with a real estate agent, or transfer to an unrelated third party owner shall give notice of intent to sell or transfer the development to the planning and community development director. The notice shall contain the following:
a. A statement that the development or portion of the property thereof is available for purchase by or transfer to a qualified entity;
b. The intended date of offering to sell or transfer;
c. Itemized lists of monthly operating expenses, the amount of project reserves, and copies of the two most recent financial and physical inspection reports on the development, if any, filed with federal, state, or local agencies. This information shall be treated as confidential and shall not be published or presented at any public meeting without permission of the owner.
4. If the owner already has received and accepted an offer to purchase from a qualified entity, the owner shall not be required to give the notice of intent to sell or transfer.
5. Any owner subject to this chapter shall also comply with California State Government Code Section 65863.11 and 65863.13 noticing requirements.
(Ord. 2002-09 § 1 (part), 2002).
21.05.070 SALE TO A QUALIFIED ENTITY.
1. If an owner receives an offer to purchase from a qualified entity during the twelve month period covered under Section 21.05.020 of this chapter and has no intention to sell the property, the owner may consider the offer but is not required to enter into negotiations with the qualified entity.
2. If an owner receives an offer to purchase from a qualified entity within the three month period following receipt by the director of planning and community development of the notice of intent to sell or transfer, the owner shall consider and make a reasonable effort to negotiate an offer from the qualified entity to purchase the property. During negotiations, the qualified entity may request a reasonable amount of time to obtain necessary financing and government approvals. The owner agrees to provide for that time in a purchase or other form of written agreement, unless the amount of time requested is unreasonable given the open market conditions at the time the offer is made.
3. Within twelve months following receipt of an offer by a qualified entity, an owner shall not accept an offer that is equal to or less than the offer, in all respects, submitted by the qualified entity as long as the qualified entity’s offer remains outstanding.
4. As a condition precedent to the acquisition of any development by a qualified entity pursuant to this section, any agreement shall include affordability covenants that are satisfactory to the planning and community development director and shall run with the land and be binding on the qualified entity and its successors and assigns in perpetuity.
5. If the owner has complied with the provisions of this chapter and has not received an offer from a qualified entity within the three-month notification period following the notice of intent to sell or transfer as defined in Section 21.05.060, the owner shall not be obligated to provide further notices of intent to sell or transfer during next 24 months following the receipt by the director of planning and community development of the notice of intent to sell or transfer.
6. Nothing in this chapter shall be construed to affect or limit the ability of the city to acquire the property through the use of its eminent domain powers.
(Ord. 2002-09 § 1 (part), 2002).
21.05.080 PUBLIC SUBSIDY CONTRACT/CONDITION OF APPROVAL.
1. Where a housing unit receives a public subsidy after the effective date of this chapter pursuant to a contract with the city, the terms of this chapter shall be incorporated by reference into that contract and become contractually binding upon the public subsidy recipient. A copy of this chapter shall be appended to any such contract.
2. Where a housing unit receives a public subsidy after the effective date of this chapter pursuant to an agreement with an entity other than the city and other than a Section 8 Voucher Subsidy Contract, or equivalent programs that may be enacted, the terms of this chapter shall be incorporated by reference into the conditions of approval for any development permit issued for that housing unit by the city. A copy of this chapter shall be appended to any such development permit.
3. Nothing in this section shall be construed as exempting owners of housing units already subject to this chapter on its effective date from complying with the requirements of this chapter.
(Ord. 2002-09 § 1 (part), 2002).
21.05.090 SEVERABILITY.
If any part or provision this chapter, or application thereof to any person or circumstance, is held invalid, the remainder of this chapter and the application of that provision or part thereof, to other persons not similarly situated or to other circumstances, shall not be affected thereby and shall continue in full force and effect. To this end, the provisions of this chapter are declared severable.
(Ord. 2002-09 § 1 (part), 2002).