Chapter 14-46
AFFORDABLE HOUSING ORDINANCE*
Sections:
14-46.070 Affordable housing in-lieu fees.
14-46.090 Priority processing.
14-46.100 Project application.
14-46.110 Affordable Housing Agreement processing.
14-46.120 Program requirements.
14-46.130 Program income and asset limits.
14-46.140 Affordable rental unit requirements.
14-46.150 Affordable ownership requirements.
14-46.170 Default, foreclosure and release of units.
14-46.180 Conflict of interest.
* Prior ordinance history: Ords. 866-91, 1026-97 and 1061-98.
14-46.010 Title.
The provisions of this Chapter shall be known collectively as the Affordable Housing Ordinance of the City of Watsonville.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.020 Purpose.
It is the City’s intent to maintain an affordable housing requirement that implements the City’s General Plan policies guiding land use and housing development.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.030 Definitions.
For purposes of this Chapter, unless otherwise apparent from the context, certain words and phrases used in this Chapter are defined as follows:
(a) “Affordable” shall mean a category of housing that may be purchased or rented by a household with very low, low, median, moderate or above moderate income as defined by this Chapter.
(b) “Affordable Housing Agreement” shall mean any written agreement between the owner of a residential development project and the City that specifies how the requirements of this chapter shall be satisfied and which is secured against the property. Such agreement may be secured by a deed of trust encumbering affordable housing developed as part of the project. The Affordable Housing Agreement shall include:
(1) The total number of units in the project;
(2) The total number, where applicable, of rental and/or ownership affordable units;
(3) The total number, and number by income category, of the affordable units;
(4) The area (square footage), number of bedrooms, and type (single-family, multifamily, apartment, etc.) of the market-rate units and affordable units (by income category and as a total);
(5) The term of affordability for the affordable units;
(6) Any density bonus, incentives and/or other assistance to be provided by the City or its Redevelopment Agency;
(7) Provision for periodic monitoring by the City (or its designee) for compliance with the provisions of this Chapter;
(8) A recordable copy of that portion of any tentative map which shall depict (as applicable) all market-rate and designated affordable units or lots by income category; and
(9) Other terms or conditions requested by the City.
(c) “Affordable Housing Fund” shall mean any fund that is established and administered by the City to be used exclusively to increase and/or improve the supply, and/or reduce the cost of housing.
(d) “Affordable Unit” shall mean any dwelling unit or single room occupancy unit affordable by income, rent level, and/or sales price to eligible above moderate, moderate, median, low or very low income households as defined, required, regulated and allowed by this Chapter.
(e) “Applicant” shall mean any person seeking City real property development permits and approvals.
(f) “Commercial Development Project” shall mean any development project involving primarily nonresidential uses including but not limited to retail, office, service-commercial, neighborhood-commercial, tourist-commercial and mixed-use projects.
(g) “Declaration of Covenants and Restrictions” shall mean a recorded document that attaches the conditions and requirements of this Chapter to the title of an affordable ownership unit.
(h) “Density” shall mean the minimum net land area calculated in Sections 14-16.205, 305 and 405 of this Code.
(i) “Density Bonus” shall mean any density increase above the maximum density otherwise allowable under the General Plan and/or zoning regulations because a project exceeds the affordable housing requirements of this Chapter.
(j) “Development Project” shall mean any activity for which a subdivision map and/or zoning permit is required. Changes in ownership, tenancy, management or use, or the exceptions contained in Subsection 14-46.05 are not a Development Project.
(k) “Downtown Core” shall mean the geographic area within the City of Watsonville bounded by the Pajaro River, Rodriguez Street, East and West Lake Avenue, and Union Street.
(l) “Eligible Purchaser” shall mean any household qualified to purchase an affordable unit both: (i) according to household income, and (ii) as a first time homebuyer, as defined in Section 2.3 of the Homebuyer Program Guidelines (published January 30, 2004 and as revised from time to time), and published by the Division of Community Affairs of the Department of Housing and Community Development of the California Business and Transportation Agency. Requirement (i) does not apply if the purchaser is at the same time selling a home within the City of Watsonville at a price that is not more than ninety-five (95%) percent of the Watsonville median sales price for all units (market-rate and affordable) as set forth in the Watsonville Affordable Housing Ordinance Qualifying Maximum Income and Maximum Rents and Sales Prices, determined from time to time by resolution of the City Council.
(m) “Eligible Renter” shall mean any household qualified, according to household income, to rent an affordable unit.
(n) “Housing Price Index (HPI)” shall mean the Santa Cruz—Watsonville Metropolitan Statistical Area Housing Price Index as published from time to time by the Office of Federal Housing Enterprise Oversight.
(o) “Household” shall mean all persons occupying or planning to occupy an affordable unit within ninety (90) days of the close of escrow for an ownership unit and within ninety (90) days of signing a lease for a rental unit.
(p) “Incentive” shall mean any concession that may be granted by the City to an applicant who exceeds the affordable housing requirements of this Chapter.
(q) “Income” shall mean the total household revenue from all sources. Income from the following persons shall be included when calculating the household income:
(1) all persons who will be on title to the property;
(2) the spouse of a title holder if the spouse will reside on the property; and
(3) other persons over the age of twenty-three (23) who will reside on the property.
(r) “Income Category” shall mean any classification of the amount of household income as defined below:
(1) “Very Low Income” shall mean, for the purposes of determining the eligibility of a household to occupy an affordable unit, the lower of the following: the household income equal to or less than eighty (80%) percent of the annual Watsonville median household income, adjusted for household size of fifty (50%) percent of Santa Cruz County’s median income adjusted for household size as set forth in Section 6932 of Title 25 of the California Code of Regulations (25 CCR 6932). For purposes of determining the maximum sales price or rent level for an affordable unit, the household income equal to or less than fifty (50%) percent of the annual Watsonville median household income, adjusted for household size shall be used.
(2) “Low (or Lower) Income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than 100 percent of the annual Watsonville median household income, adjusted for household size. For purposes of determining the maximum rent level for an affordable unit, the household income equal to or less than eighty (80%) percent of the annual Watsonville median household income, adjusted for household size.
(3) “Median Income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the lower of the following: the household income equal to or less than 120 percent of the annual Watsonville median household income, adjusted for household size or eighty (80%) percent of Santa Cruz County’s median income as adjusted for household size pursuant to Section 6932 of Title 25 of the California Code of Regulations. For purposes of determining the maximum sales price or rent level for an affordable unit, the household income equal to or less than 100 percent of the annual Watsonville median household income, adjusted for household size.
(4) “Moderate Income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than 150 percent of the annual Watsonville median household income, adjusted for household size. For purposes of determining the maximum sales price for an affordable unit, the household income equal to or less than 120 percent of the annual Watsonville median household income, adjusted for household size.
(5) “Above Moderate Income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than 170 percent of the annual Watsonville median household income, adjusted for household size. For purposes of determining the maximum sales price for an affordable unit, the household income equal to or less than 150 percent of the annual Watsonville median household income, adjusted for household size.
(s) “Industrial Development Project” shall mean any development project involving primarily nonresidential uses including, but not limited to, warehousing, light industrial and manufacturing uses.
(t) “In-lieu fee” shall mean any fee paid pursuant to this Chapter to the City by owners of residential, commercial or industrial development projects as an alternative to the production of affordable units.
(u) “Market-Rate Unit” shall mean any dwelling unit not subject to the rental, initial sale or resale provisions of this Chapter.
(v) “Market Value” shall mean the highest price a willing buyer would pay and a willing seller would accept, or a willing tenant would pay and a willing landlord would accept, both being fully informed and in an open market for a particular dwelling unit.
(w) “Owner” shall mean any person or persons with legal and equitable title to a property proposed for development.
(x) “Prevailing Interest Rate” shall mean the interest rate as adopted by the Watsonville City Council from time to time.
(y) “Program” shall mean this Affordable Housing Program, consisting of affordable units created or in-lieu fees generated, as a result of the affordable housing requirements of this Chapter.
(z) “Release Fee” shall mean the amount to be paid to the City’s Affordable Housing Fund by the owner of an Affordable Unit that is released from the Declaration of Conditions and Restrictions required by this Chapter. A formula for calculating the release fee may be adopted from time to time by Council resolution. Release fees for a developer at the time of the initial sale and release fees for an owner re-selling an affordable unit may not necessarily be calculated in the same manner and will be determined by the Watsonville City Council.
(aa) “Residential Development Project” shall mean any development project resulting in the subdivision of land and/or the construction of dwellings including but not limited to single-family detached homes, townhouses, apartments, condominiums, live/work studios and single room occupancy units.
(bb) “Section 8" shall mean Section 8 of the United States Housing Act of 1937 as it may be amended or replaced.
(cc) “Watsonville Median Household Income” shall mean seventy (70%) percent of Santa Cruz County’s median household income, as adjusted for family size and rounded upward to the nearest Fifty and no/100ths ($50.00) Dollar increment. This figure is determined annually and is derived from the State Department of Housing and Community Development (HCD) publication of annual income data for counties by income categories pursuant to Section 6932 of Title 25 of the California Code of Regulations.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005)
14-46.040 Applicability.
(a) Projects Required to Produce Affordable Units. Residential development projects of seven (7) or more units or lots shall meet the following requirements:
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15% Affordable Housing Requirement (For-Sale, Ownership Projects) |
20% Affordable Housing Requirement (Rental Projects) |
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Required Components: |
Required Components: |
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5% Above Moderate |
5% Median |
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5% Moderate |
5% Low |
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5% Median |
5% Very Low |
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5% for Section 8 |
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15% Total |
20% Total |
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20% Affordable Housing Requirement (For-Sale, Ownership Projects) |
20% Affordable Housing Requirement (Rental Projects) |
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Required Components: |
Required Components: |
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10% Above Moderate |
5% Median |
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5% Moderate |
5% Low |
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5% Median |
5% Very Low |
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5% for Section 8 |
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20% Total |
20% Total |
(1) The five (5%) percent set aside for Section 8 units must first be made available to the County of Santa Cruz Housing Authority for at least one-month period from the date of marketing for a new unit, or receipt by the owner of a notice of vacancy for an existing unit. The requirement to provide Section 8 units will depend upon the availability of households holding certificates and vouchers who are seeking housing at the time the unit is available for occupancy.
(2) If the total number of affordable units required in the project (derived by multiplying the required fifteen (15%) percent or twenty (20%) percent by total project units) conflicts with the total number of component affordable units (derived by summing the required component units by income category), then the total number and not the total of the component numbers shall prevail. Also, any excess required affordable units shall be restricted to the lowest required income category. For example, in a for-sale, ownership project of thirty (30) units, with a fifteen (15%) percent affordable housing requirement (thus yielding five (5) affordable units), with a component obligation of five (5%) percent above moderate income (two (2) units), five (5%) percent moderate income (two (2) units) and five (5%) percent median income (two (2) units), the total of the component affordable units is six (6). In this case, the project would be required to provide a total of five (5) not six (6) affordable units, consisting of a mix of two (2) moderate income units, two (2) median income units, and one above moderate income unit.
(3) If, pursuant to Subsection (a), two (2) or fewer units are required, one or both of such units may be produced at the moderate income level or below for an ownership development or at the low or very low income level for a rental development.
(4) Fractional Numbers. To determine the number of affordable units required in a project by income level, fractional units less than or equal to .49 shall be rounded down to the first whole number unit, and fractional units equal to or greater than .50 shall be rounded up to the next higher whole number unit. In determining the number of units required for each income level, fractional percentages equal to or greater than .50 shall be applied to the lowest applicable income level.
(b) Projects Required to Pay an In-Lieu Fee. The following categories of projects are subject to this Chapter and required to pay an affordable housing in-lieu fee:
(1) Residential development projects or land divisions that include six (6) or fewer new units or lots, unless the developer elects to provide an affordable unit as provided in Subsection (c) of Section 14-46.07 of this Chapter;
(2) Commercial and industrial development projects exceeding 1,000 square feet of gross floor area; and
(3) Condominium conversions as defined by Article 2 (commencing with Section 13-3.201) of the Watsonville Subdivision Ordinance.
(c) Projects within the Downtown Core. Residential development projects and residential lot subdivisions of seven (7) or more units or lots that are, by virtue of their size, subject to the requirements of Subsection 14-46.04(a) but are located within the City of Watsonville’s Downtown Core, may provide the required affordable units at a location outside of the Downtown Core but within the Watsonville City Limits.
(d) Federal, State and Agency Assisted Housing Projects. Affordable housing projects, funded through Federal and State housing programs, or assisted by the Redevelopment Agency pursuant to an Owner Participation Agreement or Disposition and Development Agreement, whose percentage of rent or price restricted units meet or exceed that required by this Chapter, thereby satisfy the requirements of this Chapter in its entirety.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003)
14-46.050 Exceptions.
The following categories of activities are not subject to the provisions of this Chapter:
(a) Commercial and industrial development projects equal to or less than 1,000 square feet of gross floor area;
(b) The following residential uses:
(1) Residential additions, repairs or remodels that do not result in the creation of additional dwelling units,
(2) Addition living units (also known as second, granny or accessory units),
(3) Farm labor housing,
(4) Shelters, and
(5) Any nonenclosed structure for which a building permit is required;
(c) Other uses:
(1) Congregate care developments that offer nursing and medical services,
(2) Emergency projects or projects exempted by Council for health and safety reasons,
(3) Churches, temples, mosques, and synagogues,
(4) City owned buildings,
(5) Project replacing or restoring a structure damaged or destroyed by fire, flood, earthquake or other disaster occurring within three years prior to the application for the new structure(s),
(6) Lot line adjustments that do not result in the creation of new buildable residential lot(s),
(7) Detached carports, garage structures, or other nonhabitable commercial or residential detached structures of less than 1,000 square feet,
(8) Unenclosed vehicular entry structures for commercial or residential use,
(9) Parking structures (public or private) for commercial or residential use, and
(10) Projects for which an approved tentative map or vesting tentative map exists, or for which a construction permit was issued prior to the effective date of this Chapter and which continue to have unexpired permits.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.060 General standards.
(a) Affordable Unit Requirements.
(1) The minimum square footage and bathrooms required per unit are shown as follows:
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No. of Bedrooms/Afford. Unit |
Min. Sq. Footage/Unit |
Min. # of Bathrooms/Unit |
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Single Room Occupancy (Furnished) |
250 sq. ft. |
.501 |
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Studio |
400 sq. ft. |
1 |
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One |
550 sq. ft. |
1 |
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Two |
850 sq. ft. |
1 |
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Three |
1,050 sq. ft. |
1.50 |
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Four |
1,250 sq. ft. |
1.752 |
1 50 bath consists of a sink and toilet, provided common showers are located elsewhere within the project.
2 1.75 bath consists of a sink, toilet and shower or a bathtub.
(b) Minimum Affordable Unit Standards. The applicant may reduce the interior amenity level of the affordable units as long as each affordable unit meets the following Minimum Affordable Unit Standards and any other provisions of this Chapter:
(1) Have complete interior and exterior painting or other finished wall coverings;
(2) Contain stove, dishwasher and oven, and other built-in kitchen appliances if the woodwork calls for it;
(3) Contain built-in kitchen cabinets;
(4) Contain washer and dryer hookups; or for rental units (at a minimum) a centrally located laundry facility;
(5) Have a paved parking area, with a sidewalk connecting the parking area and unit entrance;
(6) Contain rain gutters and down spouts;
(7) Require that multi-level affordable units provide at least a half bath (toilet and sink) on each level of living space unless a level of living space is comprised solely of an entryway or an entryway and a laundry room and/or utility room.
(c) Size. Affordable units may contain less square footage than market-rate units within the same project, but must meet the minimum square footage requirements of Subsection 14-46.06(a) (Affordable Unit Requirements).
(d) Bedroom Mix. Affordable units must be proportionately distributed by number of bedrooms throughout the project, using the same ratio as the market-rate portion of the project. For example, if fifty (50%) percent of the market-rate units contain two (2) bedrooms and fifty (50%) percent contain three (3) bedrooms within a project, that same ratio of two (2) and three (3) bedroom units shall prevail in the affordable portion of the project.
(e) Appearance. The street frontage facade of affordable units shall be substantially similar to the market-rate units in terms of design, materials and finished quality.
(f) Distribution. Affordable units shall be evenly distributed throughout the project with the following exceptions:
(1) Clustering. If the project contains a variety of product (any combination of one or more of the following types of residential products: single-family detached, condominiums, townhouses, and apartment buildings), the distinct product types may be clustered together; however, there shall be an affordable component of each product type.
(2) Corner Lots. Two (2) adjacent, affordable townhouse units may be sited on corner lots.
(g) Timing.
(1) Construction of Affordable Units. Where an affordable unit or unit(s) is constructed pursuant to this Chapter, each such affordable unit shall be constructed concurrently with or prior to construction of the market-rate units within the same project and phase of such project. Development shall occur in a proportionate ratio to the market-rate units except as may otherwise be established in an Affordable Housing Agreement.
(2) Occupancy of Affordable Units. Where an affordable unit or unit(s) is constructed pursuant to this Chapter, the affordable housing requirement shall be met prior to or concurrently with the issuance of a certificate of occupancy or final inspection for the first market-rate unit in the same project or phase of the project as identified by the conditions of approval and/or an Affordable Housing Agreement. In no case shall the last market-rate unit in the project receive a certificate of occupancy or final inspection prior to the last affordable unit being released for occupancy or occupied.
(h) Price. Affordable units shall be sold at a price affordable to eligible purchasers or rented at a level affordable to eligible renters in compliance with this Chapter.
(i) Term of Affordability. Affordable ownership units created as a result of this Chapter shall remain affordable for a minimum period of forty-five (45) years from the date of the initial sale. Affordable rental units created as a result of this Chapter shall remain affordable for a minimum period of fifty-five (55) years from the date of the initial Certificate of Occupancy. All affordable units shall be deed restricted accordingly.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003)
14-46.070 Affordable housing in-lieu fees.
(a) In-Lieu Fees. Affordable housing in-lieu fees for applicable projects shall be established by resolution of the Council and adjusted annually by fifty (50%) percent of the annual percentage increase in the House Price Index as defined by this Chapter.
(b) Timing of Payment. In-lieu fees shall be paid either before or concurrently with the issuance of each building permit for each applicable project unit or, in the case of a subdivision of land, prior to recording of the final map. In the event a developer is unable to sell an affordable unit within the time period specified, the in-lieu fee shall be paid prior to offering the released unit at the market-rate price.
(c) Providing Affordable Unit(s) Instead of Paying the In-Lieu Fee. An applicant otherwise required to pay an in-lieu fee by this Chapter may instead provide an affordable ownership unit not exceeding the above moderate income level or an affordable unit for rent not exceeding the median income level or rent a unit to a Section 8 tenant. All such units shall be deed and time restricted as required by Subsection (i) of Section 14-46.060.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003)
14-46.090 Priority processing.
A project providing affordable units equal to fifty (50%) percent or more of the total project units shall be entitled to priority processing as follows:
(a) Upon certifying that the application is complete and eligible for priority processing, a project shall be immediately assigned to City development review staff; and
(b) The project shall be processed by City development review staff in advance of all nonpriority items.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.100 Project application.
All applications for residential development permits and/or tentative map approval shall include a reasonably complete description of the following:
(a) The method (provision of units or payment of an in-lieu fee) pursuant to Section >14-46.07 to be used to meet the project’s affordable housing requirements of this Chapter;
(b) The number, type and location of affordable units, or a preliminary calculation of in-lieu fees if applicable;
(c) A request specifying any incentives available under Section 14-46.08 of this Chapter being requested;
(d) Site layout, grading, parking and other site features, and building elevations, layouts and dimensions for both affordable and market-rate units, including copies of relevant plans;
(e) Request for a density bonus, if applicable, pursuant to Section 14-46.08 of this Chapter; and
(f) Any other information that the City determines necessary to adequately evaluate the project’s affordable housing provisions.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.110 Affordable Housing Agreement processing.
(a) A draft Affordable Housing Agreement shall be completed by the applicant for projects with seven (7) or more units or lots in response to an application’s condition of development approval on a form provided by the City.
(b) A draft Agreement shall be reviewed by the City for compliance with project approvals, City policies and standards, and applicable codes.
(c) The Agreement shall be approved by the Council upon approval and signing of the Agreement by the parties; and be recorded and binding on all future owners and successors in interest in the project for the time period specified.
(d) The Agreement shall be recorded prior to the filing of the final map or commencement of construction where no map is required.
(e) Supplemental Documents. Upon the sale or transfers of each affordable unit, the City may use a Declaration of Covenants and Restrictions and/or Promissory Note and Deed of Trust to further secure the City’s rights under this Chapter and provide constructive notice to the public.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.120 Program requirements.
Only households qualifying as very low, low, median, moderate or above moderate income shall be eligible to rent, purchase or occupy affordable units developed or funded in compliance with this Chapter (see Subsection 14-460.03(r) for a definition of income categories and Subsection 14-46.040(a) for the percentage mix of eligible income categories by size and type of project). Purchasers of an affordable ownership unit may not own any real property at the time escrow closes for an affordable ownership unit or at the date of occupancy for an affordable rental unit. Exceptions to these program requirements or appeals may be considered at the discretion of the City Manager.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003)
14-46.130 Program income and asset limits.
(a) Income Limits.
(1) Income eligibility to purchase or rent affordable units created pursuant to this Chapter shall be determined at the time of sale or rental of the affordable unit.
(2) Income eligibility shall be based on household size and income category and shall be established by resolution from time to time by the Council.
(3) For purposes of computing eligibility and pricing of affordable units created pursuant to this Chapter, the Watsonville median household income shall be used unless otherwise noted.
(b) Asset Limits. There are no asset limits for prospective renters or purchasers of affordable units created pursuant to this Chapter except that renters or purchasers shall not be eligible for or receive any tax advantages associated with the ownership of any other real property at the time of purchase or rental of an affordable unit.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003)
14-46.140 Affordable rental unit requirements.
(a) Rent Levels. Maximum allowable rent levels by number of bedrooms shall be determined by resolution from time to time by Council, based on the Rent Formula described in Subsection 14-46.140(b) and may be increased no more frequently than annually after unit occupancy. The maximum allowable income for determining eligibility to rent is higher than that used to determine the maximum rent level (see Subsection 14-46.030(r)).
(b) Rent Formula. Rent for an affordable rental unit shall be calculated as follows:
(1) STEP ONE: Determine maximum annual household income for unit as follows:
(i) Determine income category for unit (Very low, Low or Median).
(ii) Determine household size for unit, assuming a family size one person larger than the number of bedrooms in the affordable unit. For example, the household size for a three (3) bedroom unit shall be four (4) persons and for a studio shall be one person.
(iii) Determine annual household income for unit based on income category and family size using the most recent City of Watsonville Affordable Housing Ordinance Qualifying Maximum Income, and Maximum Rents and Sales Prices adopted by resolution by the Council.
(2) STEP TWO: Determine monthly household allowance available for rent as follows:
(i) Multiply the annual household income limit derived in Step One by .30 to obtain an annual household allowance of thirty (30%) percent of income. Round that figure up to the nearest Fifty and no/100ths ($50.00) Dollars to get the annual household allowance.
(ii) Divide the annual household allowance by twelve (12). Round this figure up to the nearest Fifty and no/100ths ($50.00) Dollars to get the monthly household allowance which amount is the maximum rental payment.
(iii) For Section 8 Households: Use the rent formula and amounts established by the Federal Department of Housing and Urban Development (HUD) for the Section 8 Program.
(c) Eligibility. All affordable rental units shall be rented to either:
(1) A median, low or very low income household; or
(2) Households participating in the Section 8 Program or its successor.
(d) Eligibility Determination Process. Prospective renters of affordable units shall be screened and determined eligible by the owner (or his designee) prior to taking occupancy. The City reserves the right to audit any owner of an affordable unit after providing twenty-four (24) hour written notice. Any deficiencies noted in the City’s audit report must be fully cleared by the owner within thirty (30) days after receipt or constitute a violation of this Chapter, except as to evictions of ineligible tenants; such evictions must be properly corrected and completed within 120 days after receipt.
(e) Lease Requirements.
(1) All households renting affordable units shall be offered standard lease agreements; and
(2) Lease terms shall be for at least a twelve (12) month period.
(f) Notice. The owner of an affordable rental unit shall notify tenants at least sixty (60) days prior to the expiration of the restrictions of this Chapter or the conversion of the affordable rental unit to an affordable ownership status, and advise the tenants that this termination or conversion may mean that rents will increase or the unit shall be sold.
(g) Marketing.
(1) Any marketing communication advertising an affordable rental unit shall substantially disclose the affordable housing rental and eligibility restrictions required by this Chapter.
(2) Marketing and rental of an affordable rental unit shall be performed by the property owner (or his designee).
(3) No person shall market or rent an affordable rental unit for more than the levels prescribed by this Chapter.
(4) Affordable rental units shall be marketed exclusively to existing City of Watsonville residents for two (2) weeks before any marketing to other persons.
(5) Conversion to condominiums.
(i) Conversion of an affordable rental unit to an ownership status shall be subject to Article 2 of Title 13 of the Watsonville Municipal Code.
(ii) Affordable units shall be deed restricted and affordable sales price levels shall be maintained, should such conversion to ownership be approved.
(iii) Conversion of a very low or low income affordable rental unit to ownership status shall not be permitted while an Affordable Housing Agreement is in effect for such unit, unless specifically approved by resolution of the Council. Said resolution would establish the maximum sales price and income category for said unit(s). Conversion of a median priced affordable rental unit to ownership status may be permissible, but only to a median priced ownership unit.
(iv) The owner of an affordable rental unit shall notify tenants at least sixty (60) days prior to any conversion to affordable ownership status and advise that this conversion signifies that the unit shall be sold. Existing tenants shall receive first right of refusal to purchase the affordable rental unit proposed for conversion.
(h) Management and Monitoring. Affordable rental units shall be managed by the owner or the owner’s agent in compliance with the requirements of this Chapter and the terms of the Affordable Housing Agreement Management and monitoring documentation shall be supplied to the City within twenty-four (24) hours after written notice has been received from the City in order to ensure compliance with this Chapter.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005)
14-46.150 Affordable ownership requirements.
(a) Primary Place of Residence Requirement. The purchaser of an affordable ownership unit shall occupy the unit as his/her primary place of residence. If the unit ceases to function as a primary residence, it shall be sold according to the requirements of this Chapter or subject to the requirements of Subsection 14-46.150(c).
(1) STEP ONE: Determine annual household unit income limit.
(i) Determine income category for unit (Median, Moderate or Above Moderate).
(ii) Determine household size, assigning a family size one person more than the number of bedrooms in the affordable unit. For example, the household size for a three (3) bedroom unit would be four (4) persons and for a studio would be one person.
(iii) Determine the maximum annual household income limit for the unit based on income category and family size using the most recent City of Watsonville Affordable Housing Ordinance Qualifying Maximum Income, and Maximum Rents and Sales Prices adopted by resolution by the Council.
(2) STEP TWO: Determine monthly household allowance permitted to be used for a mortgage payment as follows:
(i) Multiply the annual household income limit derived in Step One by .30 to obtain an annual household allowance of thirty (30%) percent of income. Round up to the nearest Fifty and no/100ths ($50.00) Dollars to obtain the annual household allowance.
(ii) Divide the annual household allowance by twelve (12). Round up to the nearest Fifty and no/100ths ($50.00) Dollars to determine the household allowance which is the maximum mortgage payment allowed.
(3) STEP THREE: Determine the maximum mortgage that can be financed for a thirty (30) year fully amortized fixed-rate mortgage:
(i) Determine the prevailing interest rate.
(ii) Determine the amount of the monthly mortgage payment (principal pay-down and interest).
(4) STEP FOUR: Determine maximum allowable unit sales price: Assuming a mortgage of ninety-five (95%) percent of the sales price, divide the principal amount of the mortgage by 0.95 and round to the nearest Fifty and no/100ths ($50.00) Dollars. The result is the maximum allowable price of the affordable unit.
(b) Marketing.
(1) Any marketing communication advertising an affordable ownership unit shall fully disclose the affordable housing price and eligibility restrictions contained in this Chapter.
(2) Marketing and sale of an affordable ownership unit shall be performed by the owner (or his designee), who shall market the affordable ownership unit for no more than the maximum sales price established by the City, excluding closing costs.
(3) The purchaser of an affordable unit shall not pay more in closing costs than that which is reasonable and customary in Santa Cruz County.
(4) The seller of an affordable unit shall pay any real estate sales commission associated with the transaction.
(c) Conversion.
(1) Conversion of an affordable ownership unit to a rental status shall not be permitted unless a hardship can be demonstrated and an administrative hardship received, pursuant to administrative guidelines approved by Council resolution from time to time.
(2) Affordable rent levels shall be maintained, should conversion from an affordable ownership to an affordable rental status be approved.
(d) Financing. First mortgages obtained to purchase an affordable unit created as a result of this Affordable Housing Ordinance shall be fixed interest rate and fully amortized for, at minimum, thirty (30) year term with no negative amortization. An otherwise qualified purchaser may be assisted by the federal Mortgage Credit Certificate (MCC) Program, City First Time Homebuyers Program, or other available homebuyer assistance programs.
(e) Escrow Process.
(1) Sales Price and Purchaser Eligibility Certification. Prior to the close of escrow, the owner (or his designee) shall certify sales price and buyer eligibility compliance with the requirements of this Chapter. This determination shall be subject to audit by the City with twenty-four (24) hour written notice. Any deficiencies noted in the City’s audit report shall be fully cleared by the owner within thirty (30) days after written notice by the City, or constitute a violation of this Chapter and the Affordable Housing Agreement. It shall be a separate and discrete violation of this Chapter to allow escrow to close without City approval of such audit.
(2) Restrictions. Escrow shall prepare and have the buyer sign the Declaration of Covenants and Restrictions and/or Promissory Note and Deed of Trust to further secure the City’s rights under this Chapter and provide constructive notice to the public.
(f) Sales Procedure for New Affordable Units.
(1) Notice of Intent to Sell.
(i) When a new affordable unit is fully completed, ready for final inspection and available for sale, the owner shall send a written “Notice of Intent to Sell” to the City.
(ii) In response to the Notice, the City shall inform the owner of the current maximum allowable sales price.
(2) Sales Price Formula. The maximum allowable sales price for a new affordable unit shall be based on the following formula and the income limits established by resolution from time to time by the Council. The formula to determine maximum allowable sales price for an affordable unit shall be as follows:
(i) STEP ONE: Determine the annual income for a household, based on whether the unit is designated for occupancy by an above moderate, moderate, or median income household using Watsonville above moderate, moderate, or median household incomes:
(aa) Determine household size, assuming one person larger than the number of bedrooms in the affordable unit (for example, the household size for a three (3) bedroom unit shall be four (4) persons and for a studio, shall be one person).
(ab) Given the household size determined above, locate the household’s maximum annual income for purposes of determining the maximum sales price. (Note: The income limit for determining eligibility to purchase is higher than that used to determine the maximum sales price [see Subsection 14-46.030(r)]).
(ii) STEP TWO: Determine the monthly household allowance available for a mortgage payment:
(aa) Multiply the income limit to be used to calculate the maximum sales price derived above by .30 to obtain annual housing allowance of thirty (30%) percent of income.
(ab) Divide the annual housing allowance by twelve (12) to obtain a monthly housing allowance.
(iii) STEP THREE: Determine the maximum mortgage that can be financed for a thirty (30) year fully amortized fixed-rate home mortgage:
(aa) Determine the prevailing interest rate.
(ab) Determine the principal amount of the mortgage payment.
(iv) STEP FOUR: Determine the maximum allowable unit sales price: Assuming a mortgage of ninety-five (95%) percent of the sales price, divide the principal amount of the mortgage by 0.95. The result is the maximum allowable sales price of the affordable unit.
(g) Inability to Sell.
(1) If the owner (or his designee) of an affordable unit, having made a good faith effort that included listing the affordable unit on the Multiple Listing Service (MLS), fails to find an eligible purchaser within 180 days from the date of final inspection or maximum sales price determination, whichever is later, the owner shall notify the City in writing no later than the 150th day of their inability to sell. The owner (or his designee) shall submit a notice identifying the steps taken, with documentation, of the attempted sale.
(2) The City or its Redevelopment Agency shall have a first right of refusal to purchase the affordable unit at the last advertised restricted price. If after thirty (30) days following notice as described above under Subsection 14-46.150(g)(1), the City or its Redevelopment Agency fails to exercise this option, the affordable unit may be sold at a market-rate price, and the owner (or his designee) must pay a release fee to the City’s Affordable Housing Fund.
(h) Resale Procedure for Existing Affordable Units.
(1) Notice of Intent to Sell.
(i) When an existing affordable unit becomes available for resale, the owner shall send a written “Notice of Intent to Sell” form to the City.
(ii) In response to the Notice, the City shall inform the owner of the current maximum allowable sales price.
(2) Resale Price Formula. The maximum allowable resale price for existing affordable units shall be derived using one of the two following methods, whichever yields the highest price for the owner:
(i) The maximum allowable sales price formula as established by this Chapter (see Subsection (f)(2) of Section 14-46.150); or
(ii) The original sales price plus fifty (50%) percent of the increase in the House Price Index since the date of purchase.
(3) Damage Repair Costs. If the City finds that the owner, through neglect, abuse or lack of adequate maintenance, has damaged an affordable unit, the City may require repairs be made at the owner’s expense and be financed prior to sale or through the escrow account.
(4) Marketing. Any marketing of existing affordable units shall fully disclose this Chapter’s affordable housing price and eligibility restrictions:
(i) Marketing and sale of existing affordable units shall be performed by the owner (or his designee) for no more than the maximum sales price established by the City, excluding closing costs.
(ii) The purchaser of an affordable unit shall not pay more in closing costs than that which is reasonable and customary in Santa Cruz County.
(iii) The seller of an affordable unit shall pay any real estate sales commission associated with the transaction.
(5) Inability to Resell Affordable Units.
(i) In the event the owner of an existing affordable unit, having made a good faith effort that included listing the affordable unit on the Multiple Listing Service (MLS), fails to find an eligible purchaser to take title to the unit within 240 days from the date of maximum sales price determination, the owner (or his designee) shall notify the City in writing, no less than thirty (30) days following the end of that 240-day period. The owner (or his designee) shall submit a notice identifying the steps taken, with documentation, of the attempted sale.
(ii) The City or its Redevelopment Agency shall have an option to purchase the affordable unit for an amount that is the highest of the following: the value of the first mortgage; the value of the first and second mortgage combined if the second mortgage is a purchase money second mortgage provided by a governmental body; or the appraised value of the affordable unit with the affordability covenants intact, as determined by an appraiser mutually agreeable to the City and the owner, who employs standard appraisal practices.
(iii) If, after thirty (30) days following the owner’s (or his designee’s) notice, the option is not exercised, the affordable unit may be sold at market-rate, and the owner (or his designee) must pay a release fee to the City’s Affordable Housing Fund.
(i) Refinance of Affordable Ownership Units. Owners desiring to refinance their affordable units shall notify the City (or its designee) prior to refinance and shall not encumber the property through the refinance process for an amount greater than the maximum sales price established by the City using the House Price Index as set forth in Subsection 14-46.030(n) at the time of owner notice.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005)
14-46.160 Fees.
Upon resale or refinance of an affordable unit, the owner shall pay a fee to the City for the maximum sales price determination, monitoring, loan, and other document preparation processes as may be required. The fee shall be established by resolution from time to time by the Council and changed as needed, based on fifty (50%) percent of the annual percentage increase in the House Price Index. In addition, the City may charge each prospective purchaser of an existing affordable unit a fee for the determination of eligibility.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.170 Default, foreclosure and release of units.
(a) Option to Purchase. In the event a notice of default is recorded on an affordable unit, the City or its designee shall have the option to purchase the unit paying the amount that the owner would have received on the date of the foreclosure sale under the resale formula established by Subsection 14-46.150(h)(2) of this Chapter. Out of this sum, the lien holder(s) shall be paid the amount of any funds due, including but not limited to, the loan balance, charges, taxes and assessments; the owner shall be paid any remaining funds.
(1) In the event the City (or its designee) does not exercise its option to purchase the affordable unit prior to the trustee’s sale or judicial foreclosure, the unit shall be free from the restrictions of this Chapter, and the owner shall be deemed in compliance with the provisions of this Chapter, with the exception of the provisions of Subsection 14-46.170(b) below.
(b) Single family units that have never been sold to individual owner-occupants, and multiple family dwelling units, shall not be released from the restrictions of this Chapter through a trustee’s sale or judicial foreclosure. In addition, affordable units shall not be released if any of the following occurs:
(1) the City is not provided a copy of the Notice of Default within ten (10) days of its filing;
(2) the owner does not allow the City to exercise its option to purchase; or
(3) the lender has over encumbered the property and refuses to release its interest in the property for the maximum allowable sales price.
(c) The owner of an affordable unit shall not use this property as collateral for an amount exceeding ninety-five (95%) percent of the maximum sales price allowed by Subsection 14-46.150(f)(2) of this Chapter unless specifically allowed in writing by the City. All second mortgages require the prior, written approval of the City and are subject to guidelines established by the City.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.180 Conflict of interest.
Following are those individuals who, by virtue of their position or relationship, are found to be ineligible to purchase or rent an affordable unit as their residence:
(a) All employees and officials of the City of Watsonville who have, by the authority of their position, policy making authority or influence affecting City housing programs;
(b) The owner or developer of, or applicant for, an affordable housing project or affordable unit; and
(c) The immediate relatives, employees and anyone gaining significant economic benefit from a direct business association with public employees, officials, developers, applicants or owners ineligible to purchase or rent an affordable unit.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.190 Violations.
(a) It shall be unlawful and a violation of this Chapter for the applicant or owner of an affordable unit or any employee or agent of such applicant or owner to:
(1) Sell or rent an affordable dwelling unit to anyone who has not first been qualified as eligible;
(2) Sell or rent an affordable unit to any person who has a conflict of interest as defined by this Chapter;
(3) Sell an affordable unit for an amount exceeding the maximum sales price or rent an affordable unit for an amount exceeding the maximum rent level;
(4) Solicit, require or accept in connection with the sale or rental of an affordable unit any payment or other contribution of cash, property or services from a purchaser or tenant the value of which, when added to the purchase price or rent paid for an affordable unit, would exceed the maximum sales price or maximum rent level prescribed by this Chapter;
(5) Willfully and knowingly make a false statement or representation, or knowingly fail to disclose a material fact for the purpose of qualifying as eligible to purchase or rent an affordable unit under this Chapter; or
(6) Violate any other provision of this Chapter.
Any applicant or other person whose interests are adversely affected by any determination in regard to the requirements of this Chapter may appeal in accordance with the provisions of Chapter 14-10, Part 9 of this Code to the Council. The appeal shall set forth specifically wherein the action fails to conform to the provisions of this Chapter.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)
14-46.200 Effect of Chapter.
This Chapter shall only apply to projects for which final approval is granted or final map is recorded after the effective date of this Ordinance. Ordinance 866-91 (CM) (Chapter 14-46) shall remain in effect for those projects approved and final maps recorded prior to the effective date of this Ordinance.
(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001)