Housing Mitigation Procedural Manual 1995Housing Mitigation
Procedural Manual
Adopted by City Council
October 16, 1995
City of Cupertino
City Council
Wally Dean, Mayor
Don Burnett, Mayor Pro Tempore
John Bautista
Barbara Koppel
Lauralee Sorenson
Marshall Goldman, Emeritus
Nicholas Szabo, Emeritus
Planning Commission
David Doyle, Chairperson
Paul V. Roberts, Vice Chairperson
Donna Austin
Andrea Harris
Orrin Mahoney
John Bautista, Emeritus
Staff
Donald Brown, City Manager
Robert S. Cowan, AICP, Director of Community Development
Ciddy Wordell, AICP, City Planner
Colin Jung, AICP, Associate Planner
Michele Bjurman, AICP, Planner II
Vera Gil, Planner II
Thomas Robillard, Planner II Emeritus
Yvonne Kelley, Administrative Secretary
Pamela Eggen, Administrative Secretary
Carol Atwood, Director of Administrative Services
Steve Dowling, Director of Parks and Recreation
Kimberly Smith, City Clerk
Bert Viskovich P.E., Director of Public Works
INTRODUCTION
Assembly Bill No. 1600 (AB 1600, statutes of 1987, 1988 and 1989, California Government
Code, Section 66000-et seq.) establishes the standards for those cities imposing development fees.
To reiterate the standards, the City must show a relationship (nexus) exists between the fee's use
and the type of project, identify the purpose of the fee and identify the use of the fee. The City
of Cupertino has addressed these standards with the nexus study which was commissioned in
1991.
The study, ("A Study to Examine the Relationship of Land Use and the Creation of Additional
Housing Needs", Planning Resource and Associates, January 1992) evaluated the relationship
between land use and affordable housing. The "nexus" study showed that all new developments
create additional housing needs and placed additional strain on the City's Affordable Housing
programs. Therefore, residential and office/industrial developers are required to mitigate the need
for additional housing units.
This document establishes procedures to implement housing mitigation as required by the General
Plan Housing Element. The programs will be administered by the City or its agent.
This procedural manual consists of two major components, Section One addressing the office and
industrial mitigation and Section Two addressing residential housing mitigation.
Section I: Office and Industrial Mititgation
1.1 Objective
The purpose of Cupertino's Office and Industrial Housing Mitigation Program is to
provide the City with a supply of affordable housing for families and individuals who
work in Cupertino but live elsewhere. This policy will help alleviate regional traffic
congestion by reducing distances between residence and workplace. As such, the
order of priority for selection of buyers and renters will be employees of the
sponsoring company, Cupertino employee who live elsewhere, and Cupertino
residents.
For the purposes of Section I of this manual, the terms "developer", "company", and
"owner" shall be synonymous.
1.2 Program Requirements
1.2. 1 Application of Program
Housing mitigation shall apply to new development of office and industrial space.
Office and industrial development, which has a valid use permit at the adoption of the
General Plan (June 1, 1993), shall be exempt.
1.2.2 Mitigation Requirement
Developers of new office/industrial development shall "cause to be built" 28 housing
units per 100,000 square feet of development. Twelve of the 28 units shall be deemed
affordable, through the application of price caps, with the remaining being market rate
or affordable at the developers option. Of the twelve or more affordable units, at least
two shall be reserved specifically for low or very low income families. It is the
developers option to choose low or very low units to fulfill that requirement. Refer to
Section 1.2.6 for a definition of affordability.
The square footage of building area is the total building floor space allowed by the
General Plan. As provided by the City of Cupertino's Development Intensity Manual
(General Plan Appendix) "Amenity space is subtracted from the building space
calculations.
When the computed housing mitigation requirement results in a fraction of a unit, the
developer's obligation shall be as follows:
.10 - .49 of a unit: round down.
.50 - .99 of a unit: round up.
Example 1
Company A wants to expand its facility by 875,000 sq. ft. Since its housing
mitigation obligation is 28 units per 100,000 square feet, Company A would be
responsible for a total 245.14 housing units. Using the above table for fractional units,
the distribution of the units would be as follows:
Market Rate Units: 140
Price Capped Units: 88
Low Income Units 17
Total 245
1.2.3 In -Lieu Fee Option
Developers shall have the option of paying a fee in -lieu of the creation of the housing
units. The in -lieu fee shall be set at $5.00/sq. ft. office/industrial space and should be
adjusted annually using the Consumer Price Index (all items index for the San Francisco
Bay Area). The fee shall be adjusted at the same time the HUD income guidelines are
released.
The in -lieu fee shall only be used for the provision of affordable housing in Cupertino.
The options for use of the fee include, but are not limited to, the following:
a. Development of new affordable unit , -
b. Conversion of existing market rate units to affordable units
C. Down payment assistance programs
d Second mortgage programs
In the event the funds are not used for the purposes they were exacted, the in -lieu fee
will be returned to the developer as per AB 1600.
1.2.4 Conversion of Market Rate Units
Companies may meet all or a portion of their affordable housing mitigation
requirement by buying and converting existing market rate units within the City or
within a two-mile radius of their project. These units, which would leave the market -
rate arena, would be if replaced" with new market rate units, satisfying overall
mitigation requirements. If these conversion units are proposed to be located outside
Cupertino, the companies, along with the City, shall approach ABAG and or the State
of California Office of Housing and Community Development to propose that the
City receive a transfer credit so that such units count towards meeting the City's fair
share housing goals. If granted, Cupertino shall extend the same consideration to
companies developing in adjacent cities. If unable to obtain concurrence from ABAG
and/or HCD, such conversions outside the City would not be credited toward
satisfying the mitigation requirement.
1.2.5 Housing Development Bank
A. Office and industrial developers shall be allowed to "bank" either housing
development credit or office industrial development credit. This bank would
allow office and industrial development without concurrent housing
development.
B. The development of the required housing units shall be completed within one
year from the issuance of final occupancy for the office or industrial
development.
C. Prior to final occupancy of the office/industrial development the developer will
be required to pay the designated in -lieu fee or a refundable deposit of an equal
amount. The refundable deposit may be in the form of a cash deposit, bond,
letter of credit, certificate of deposit or other form of security approved by the
Director of Community Development. The deposit will be released with the
development of housing units. Should the units not be built within one year the
deposit will convert to an in -lieu fee.
Exhibit "A" discusses in detail how the "bank" works .
Example 2
Company A has begun construction of its new facility. However, it has been unable to
secure land to construct the 245 housing units necessary to meet its mitigation
requirements. Rather than postpone construction on its -new office building, the
developer/company has elected to construct the housing units a few months from now
when land may be available.
A few months later .
The developer is still unable to secure an adequate site to construct the housing units
and the one year deadline is fast approaching. the developer has a second option of
paying the $4,252,500.00 in -lieu fee or submit a deposit equal to the in -lieu fee prior to
occupancy of the office building.
Example 3
Company A wants to expand its faciltty by 875,500 sq. ft. The total housing obligation
for this development is 245 housing units. In the Housing Development Bank, 264
units are available for use by virtue of an agreement with a local housing developer.
Rather than construct the housing units themselves, Company A has opted to utilize 245
of the units in the Bank. These units are distributed in the same manner as ordinary
mitigation units and have the same restrictions.
1.2.6 Definition of Affordability
An affordable unit is one which is affordable to families or individuals earning between
50% and 120% of the median income for the County of Santa Clara as defined by the
Federal Department of Housing and Urban Development (HUD). The State of
California and HUD definition of "affordability" shall be used to generally define the
parameters for the purposes of this program. Currently, both government entities
define affordability as monthly housing costs which do not exceed 30% of a family or
individual's gross monthly income.
To simplify the administration of this program, a price -capped unit will also be
considered affordable. For the purposes of this manual, price -capped units are units
with prices not to exceed a predetermined cap. The cap was originally set by a
subcommittee of Company representatives in consultation with City staff. Annually,
the price -capped selling prices shall increase by the same rate as the HUD median
income for a family of four in Santa Clara County. Units that target smaller household
size are expected to be priced less than the respective cap. Price capped units selling
at the upper end of the range will be two bedrooms or larger.
1.2.7 Pre -Qualification for Price Capped Units
The office/industrial developer shall notify the City three months prior to the sale of
the units to the general public. Within this time frame the City or its agent shall have
first right to qualify potential buyers or renters of the priced capped units using the
Department of Housing and Urban Development income guidelines as determined for
Santa Clara County. Current income guidelines are attached as Exhibit B.
Applications for buyer's interested in affordable units shall be solicited as necessary to
maintain an adequate application pool. The order of preference will be given to
qualifying employees of the sponsoring company, qualifying Cupertino employees
living elsewhere and working closest to the housing project, and qualifying Cupertino
residents.
If the City or its agent is unable to qualify buyers or renters within the three month
time frame the units shall be made available to any buyer selected by the developer
based on the sale prices and rental rates as detailed in Exhibit C.
1.2.8 Sale Prices for Affordable and Price Capped Units
For the affordable and price capped units, the selling price shall not exceed those
shown in Exhibit C.
1.2.9 Rental Rates for Affordable and Price -Capped Units
Rental rates for the affordable and price -capped units shall not exceed those listed in
Exhibit C.
1.2.10 Annual Revision of Sale Prices and Rental Rates
Both the affordable and price -capped unit (see definition above) selling prices and
rents shall be updated on an annual basis in conformance with the median income
levels established for the County of Santa Clara by the United States Department of
Housing and Urban Development (HUD).
1.2.11 Project Conformance
To the extent possible, affordable units shall generally reflect the total project mix in
terms of bedroom count and size of unit. The units shall be scattered throughout the
site and shall conform to the exterior appearance of the other units in the project. In
providing affordable units, the developer shall have final determination as to which
units are affordable and which fit and finishes will be applied. Buyers should be
permitted to upgrade fit and finishes prior too the close of escrow. Price capped or
low/very low income units can be substituted for market rate units at the developers
discretion.
1.3 City Contribution
1.3.1 Density Bonus
To maximize housing opportunity and partially assist the developer by reducing or
eliminating the development cost for the affordable units, a density bonus consistent
with Ordinance No. 1569 ("An Ordinance of the City Council of the City of
Cupertino Adopting and Implementing the State Density Bonus Law") may be
permitted. The bonus units shall be permitted providing they can reasonably be
accommodated on the site and meet City standards. Office/housing linkage mitigation
requirements, or residential/housing mitigation requirements, shall not apply to the
density bonus units.
1.3.2 Elimination of Certain Amenities in Affordable Units
Internally, the affordable units may differ from other units in the project by
eliminating certain amenities in order to reduce costs. The exterior design of the unit
shall be consistent with other units in the project.
1.3.3 Financial Assistance
If the project qualifies, the City may choose to utilize the Affordable Housing Fund
monies to create a greater percentage of affordable units at the 50% (very -low income)
and 80% (low income) price levels.
1.3.4 Fee Waivers
The City shall waive park dedication and construction tax fees for affordable units.
1.3.5 Priority Processing
The City shall, wherever possible, expedite the processing of developments with
affordable units.
1.3.6 Rezoning of Sites
The City shall rezone industrial areas at densities appropriate to meet the goals of the
General Plan.
The City shall also rezone sufficient sites to fulfill the goals of the General Plan.
1.3.7 Management Agreement -
The City may enter into an agreement with a management agency to administer the
buyer application pool, buyer selection and the sale (or resale) of affordable units. To
assist companies in distancing themselves from the housing market, companies may
opt to have their affordable units managed under the City agreement with the
management agency. At the companies' discretion, company employees or contractors,
may receive first priority over other Cupertino workers, as long as they meet the
appropriate criteria.
1.3.8 Subordination Restrictions
The City agrees to subordinate this housing mitigation program to any construction
lender and to individual first deeds of trust to the extent of 90% of the below market
rate value. The City shall have the nonexclusive right to cure a default to preserve the
housing mitigation program.
1 .4 Applicants Qualifications
1.4. 1 Applicant Qualifications for Price Capped Units
Price capped units are designed to assist employees with moderate -or -below incomes
find affordable housing. It is based on the simple principle that the price of a unit will
attract those able to afford such a unit, and that people with higher incomes will be
attracted to higher priced units that better reflect their desires and purchasing power.
1.4.2 Applicant Qualifications for Affordable Units
The program is designed to assist low and very low income families which are defined
as families with an income below 80% of the median for the County of Santa Clara as
established by HUD. Applicants will be eligible according to the family size and
income criteria indicated on Exhibit C.
1.4.3 Solicitation of Applicants
Applications for buyer's interested in affordable units shall be solicited in accordance
with HUD established guidelines for Section 8 Existing Housing as necessary to
maintain an adequate application pool. The order of priority for selection of buyers
and renters will be employees of the sponsoring company, Cupertino employees who
live elsewhere, Cupertino residents and immediate family members of Cupertino
residents.
1.4.4 Applicant Submittals
All applicants shall submit proof of the following -on an annual basis:
a. Residency
b. Place of Employment
C. Income
d. Other Assets
1.5 Buyer Selection for Ownership Units
1.5.1 Prioritization of Applications
Applications shall be prioritized in the following order employees from the sponsoring
company, Cupertino employees who live elsewhere, Cupertino residents, and
immediate family of Cupertino residents.
Applicants who qualify for a project shall be drawn from the eligible applicant pool as
units become available for sale or rent.
1.5.2 Price Determination
The income range of the buyers shall determine the unit type as indicated in Exhibit C.
1.5.3 Applicants Right to Refusal of Unit
An applicant has three opportunities to refuse a development before being removed
from the current applicant pool.
Applicants who do not qualify for a particular development shall retain their
eligibility.
1.5.4 Lending Institutions
The prospective buyer, when seeking fmancing, may choose to contact lending
institutions which have been briefed by the City.
1.5.5 Insurance Requirements
Prior to the sale of any unit, the City shall require that each purchaser execute a
subrogation agreement whereby the City or Company shall be named the additional
insured party to any policy of fire or casualty insurance and will be entitled to any
such policy proceeds in excess of the affordable unit purchase price.
1.6 Deed Restrictions (Ownership Units)
1.6.1 Occupancy Conditions -
Units must be owner -occupied.
1.6.2 Lease, Rent, or Sublet of Units
Owner is not permitted to lease, rent, sublet the unit, or otherwise assign their
interests in the property without the express written permission from the City, or
property management agency. The City or property management agency shall inform
the company of this transaction prior to approval. The lessee must meet the same
requirements imposed on the owner. The lease shall be subject to review by the
property management agency.
1.6.3 Resale Price
Sale of a unit is controlled by the original purchase price, plus changes in an approved
housing cost index for the Bay Area as well as _ the market value of any substantial
improvements made by the owner. Value of improvements, if any, to be established
by a property appraisal.
1.6.4 Right of First Refusal
During the period that a low income or price capped unit is maintained at an affordable
price the City has the right of first refusal on the sale of any of those units under the
following criteria. The developer/company has second right of refusal on first sale of
all new units if the City is unable to find a buyer.
A. Affordable Units:
The City must exercise its right of refusal within sixty (60) days from notice of
availability of a unit.
B. Price Capped Units:
Within one month of notice of availability of a unit or units, the City must notify
the owner whether the City will exercise its right of first refusal. Once the City
notifies the owner of its intent to purchase the unit or units, within 15 days the
City must submit a three percent (3%) non-refundable deposit to the owner, and
must close escrow within the following sixty (60) days.
1.6.5 Condition of Units
Units shall be kept in good repair and resale price shall reflect the condition of the unit.
1.6.6 Terms of Affordability
The deed restrictions imposed on each affordable or price capped unit pursuant to the
program shall remain in effect for a period of 20 and 15 years, respectively, from the
date of original sale of that unit and shall become -null and void upon the expiration of
that period.
In the event the program is terminated, through formal action by the City Council,
prior to the 20 year period for affordable units, and prior to the 15 year period for
priced capped units, the deed restrictions shall be null and void and full ownership
rights of the unit shall revert to the owner of the unit at the time of termination.
1.7 Procedure for Resale of Units
1.7.1 Owner's Responsibility
If the owner elects to sell his unit, the City, Company, and/or the City's agent must be
notified.
1.7.2 Resale Price Calculation
During the respective program period the resale price will be established based on the
following:
a. Original Purchase Price.
b. Cumulative increases or decreases during the period of ownership, as indicated by
an approved housing cost index.
c. The value of any substantial improvements or damage to the unit.
d. Administrative costs incurred by the property management agency or other
selling agent to sell the unit.
e. For the price capped units, if sold within the 10 year period, but after the seventh
year, the new buyer must hold the unit for three years before it can be sold
without the price cap restriction.
1.7.3 Purchaser
The next qualified buyer in the low income application pool is notified.
1.8 Tenant Selection for Affordable Units (Rental) and Rent
Capped Units (During 3 month Pre -Marketing Period)
1.8.1 Prioritization of Applications
Applications shall be prioritized in the following order: employees from the
sponsoring company, Cupertino employees who live elsewhere, Cupertino residents,
and immediate family of Cupertino residents.
Applicants who qualify for a development shall be drawn from the eligible applicant
pool as units become available for sale.
1.8.2 Rental Rate Determination
The income range of the tenant shall determine the unit type (and therefore the
maximum price of the unit) by using Exhibit C.
1.8.3 Applicants Right to Refusal of Unit
An applicant has two opportunities to refuse a unit before being removed from the
current applicant pool.
Applicants who do not qualify for a particular project shall retain their eligibility.
1.9 Leasing an Affordable Unit (Rental)
1.9.1 Availability of Units
An affordable unit shall not be available for lease until the units are formally accepted
by the City.
1.9.2 City Contractors Role in Lease of the Unit
If the Companies' elect, the City shall make available the services of its management
agency to assist in the selection of a tenants. The services of this agency shall be
funded out of the in -lieu fee account and shall be monitored by the City.
1.9.3 Previewing of Unit
It is the tenant's responsibility to contact the management agency to preview the unit.
1.9.4 Occupancy Conditions
It is the intent of this policy that the original lessee shall occupy the unit during the
term of the lease. However, if special conditions require that the unit be sublet, the
applicant/tenant is only permitted to sublet the unit with the express written
permission from the Management Agency and the City of Cupertino.
Should an additional occupant (roommate) move into the unit, they must meet the
same requirements imposed on the original occupant.
1 .10 Deed Restrictions (Rental Units)
1.10.1 Right of First Refusal
Up to termination of the period of affordability, the City has the right of first refusal
on the sale of any affordable rental units. From the notice of availability of the
unit/complex, the City must exercise its right of refusal within 60 days for low income
units, and its intent to exercise its right of first refusal within one month for rent
capped units. Once the City notifies the owner of its intent to purchase, within 15
days the City must submit a five percent (5%) non-refundable deposit to the owner,
and must close escrow within the following 60 days.
1.10.2 Condition of Units/Complex
The units/complex shall be kept in good repair and the resale price shall reflect the
condition of the units/complex.
1.10.3 Terms of Affordability
Deed restrictions placed on each unit/complex pursuant to the program shall remain in
effect for a period of thirty (30) years from the date of first occupancy of the
unit/complex and shall become null and void upon the expiration of that period, unless
it is extended by the company in order to take advantage of incentives resulting from
changes in public policy and programs.
In the event the program is terminated prior to the 30 year period through formal
action by the City Council, deed restrictions shall be null and void.. Full ownership
rights of the units/complex shall revert to the owner at the time of termination.
1 .1 1 Procedure for Resale of Units/Complex
1. 1 1. 1 Resale Price Calculations
During the respective program period the resale price will be established based on the
following
a. Original appraised value.
b. The value of any substantial improvements or damage to the units/complex.
c. Resale of rental properties will also be determined by a capitalized income
approach.
SECTION II: Residential Mitigation
The purpose of the Residential Mitigation portion of the program is to provide the City of
Cupertino with a supply of affordable housing for households who work, attend school or
currently live in Cupertino. The main goal is to provide a safe, clean living environment for those
families and individuals making a contribution to Cupertino and its residents.
2.2 Program Requirements
2.2.1 Application of Program
Housing mitigation shall apply to all new residential developments of five units or
greater. Residential developments which have submitted permit applications to the
Building Division prior to the approval of the General Plan (June 2, 1993) shall be
exempt.
2.2.2 Mitigation Requirement
Residential developers shall designate at least 10% of the units in a development as
"affordable". If the developer is constructing "for -sale" housing, the affordable units
must serve median and moderate income families. If the units being constructed are
rental units, then they must serve very low income and low income families.
Fifty percent (50%) of the Below Market Rate units shall be affordable to each income
level. For example if the development consists of 120 rental units, then 12 units shall
be affordable (6 to low income and 6 to very low income). When 50% of the BMR
units results in an odd number, then the "extra unit" shall benefit the very low income
category. For example, the developer must provide 7 BMR units, 3 shall be for low
income families or individuals and 4 shall be for very low income families.
For condominiums used as rental housing, the BMR units shall be made available to
low and very low income families. Should the complex owner decide to sell the
individual condominiums units, then said owner must allow the BMR residents one-
year to secure new housing. After the BMR units have been vacated (during the
conversion to condo use), the units will be sold to median and moderate income
families or individuals and will be deed restricted by the City for the remainder of the
term of affordability.
In phased developments, the BMR requirement shall be assessed against the overall
development plan and not the individual phases of the proposed master plan.
When the computed housing mitigation requirement results in a fraction of a unit, the
developer's obligation shall be as follows:
0 - .49 of a unit: Round down
.50 - .99 of a unit: Round up.
2.2.3 Mitigation Options
In projects of one to nine units, the developer may pay a fee in -lieu of development of
the affordable units or meet the requirement with alternatives consistent with the
Housing Element of the General Plan. Developments consisting of ten units or more
must develop the BMR units on or off -site on -site using the standards set forth in this
procedural manual.
Off -site units must be constructed within a year from the issuance of building permits.
A bond, equal to the principal value of the cost to develop the units, shall be
submitted to the City prior to issuance of any building permits.
2.2.4 In -Lieu Fee
The in -lieu fee for developments of one to nine units shall be set at $1.00 per square
foot (inclusive of garages) and should be adjusted annually using the Consumer Price
Index (all items index for the San Francisco Bay Area). The fee adjustment shall
coincide with the release of the Department of Housing and Urban Development
income guidelines are released.
The in -lieu fee (collected for projects of less than ten units) shall only be used for the
provision of affordable housing in Cupertino and will be collected at the building
permit stage of development The options for use of the fee include, but are not limited
to, the following:
a. Development of new affordable units
b. Conversion of existing market rate. units to affordable units
c. Down payment assistance programs
d. Second mortgage programs
In the event the funds are not used for the purposes they were exacted or utilized
within five years from the date the fee was collected, the in -lieu fee will be returned to
the developer as per AB 1600.
2.2.5 Definition of Affordability
An affordable unit is one which is affordable to families or individuals earning 120% or
less of the median income for the County of Santa Clara as defined by the Federal
Department of Housing and Urban Development (HUD). The State of California and
HUD definition of "affordability" shall be used to generally define the parameters for
the purposes of this program. Currently, both government entities define affordability
as monthly housing costs which do not exceed 30% of a household's gross monthly
income. Housing costs include not only rent and mortgage payments, but also include
utilities, homeowner's insurance, homeowner's association dues and property taxes.
2.2.6 Qualification for Affordable Units
Applications shall be solicited as necessary to maintain an adequate application pool.
The order of preference will be given to qualifying Cupertino residents, individuals
working in Cupertino, immediate family of Cupertino residents.
2.2.7 Sale Prices for Affordable Units
For ownership units, the selling price shall not exceed those shown in Exhibit C.
2.2.8 Rental Rates for Affordable Units
Rental rates for the affordable units shall not exceed those listed in Exhibit C.
2.2.9 Annual Revision of Sale Prices and Rental Rates
Both the affordable selling prices and rents for the affordable units shall be updated on
an annual basis in conformance with the HUD Income Guidelines as established for the
County of Santa Clara by the United States Department of Housing and Urban
Development (HUD).
2.2.10 Project Conformance
Affordable units shall generally reflect the total project mix in terms of bedroom count
and size of unit. The units shall be scattered throughout the site and shall conform to
the exterior appearance of the other units in the project. In providing affordable units,
the developer shall have final determination as to which units are affordable and which
fit and finishes will be applied. Buyers should be permitted to upgrade fit and finishes
prior to the close of escrow. Low/very low income units can be substituted for market
rate units at the developers discretion.
2.3 City Contributions
2.3.1 Density Bonus
To maximize housing opportunity and partially assist the developer by reducing or
eliminating the development cost for the affordable units, a density bonus consistent
with Ordinance No. 1569 ("An Ordinance of the City Council of the City of
Cupertino Adopting and Implementing the State Density Bonus Law") may be
permitted. The bonus units shall be permitted providing they can reasonably be
accommodated on the site and meet City standards. Office/housing linkage mitigation
requirements, or residential/housing mitigation requirements, shall not apply to the
density bonus units.
2.3.2 Elimination of Certain Amenities in Affordable Units
Internally, the affordable units may differ from other units in the project by
eliminating certain amenities in order to reduce costs. However, the exterior design of
the unit shall be consistent with other units in the project.
2.3.3 Financial Assistance
If the project qualifies, the City may choose, to utilize Affordable Housing Fund
monies to create a greater percentage of affordable units at the 50% (very -low income)
and 80% (low income) price levels.
2.3.4 Fee Waivers
The City shall waive park dedication and construction tax fees for affordable units
constructed.
2.3.5 Priority Processing
The City shall, wherever possible, expedite the processing of developments with
affordable units.
2.3.6 Management Agreement
The City may enter into an agreement with a management agency to administer the
buyer selection process and manage the BMR rental program. To assist developers in
distancing themselves from the management of the BMR units, developers may opt to
have their affordable units managed under the City agreement with the management
agency.
2.3.7 Subordination Restrictions
The City agrees to subordinate this housing mitigation program to any construction
lender and to individual first deeds of trust to the extent of 90% of the below market
rate value. The City shall have the non-exclusive right to cure a default to preserve
the housing mitigation program.
2.4 Applicant Qualifications
2.4.1 Applicant Qualifications for Ownership Units
Units are designed to assist families or individuals with median to between 80% and
120% of the median for the County of Santa Clara as established by HUD.
Applicants will be eligible according to the family size and income criteria indicated on
Exhibit C.
2.4.2 Applicant Qualifications for Rental Units
The program is designed to assist low and very low income families which are defined
as families with an income less than 80% of the median income for the County of
Santa Clara as established by HUD. Applicants will be eligible according to the family
size and income criteria indicated in Exhibit C.
2.4.3 Solicitation of Applicants
Applications for buyer's interested in BMR units shall be solicited as necessary to
maintain an adequate application pool. The order of priority for selection of buyers
and renters will be as follows: qualifying Cupertino residents, individuals working in
Cupertino, immediate family members of Cupertino residents and full and part-time
DeAnza College students enrolled in a degree program.
2.4.4 Applicant Submittals
All applicants shall submit on annual basis proof of:
a. Residency
b. Place of Employment
c. Annual Income
d. Other Assets
2.5 Buyer Selection for Ownership Units
2.5.1 Prioritization of Applications
Applications shall be prioritized in the order of qualifying Cupertino residents,
individuals working in Cupertino, immediate family of Cupertino residents and full and
part-time DeAnza College students enrolled in a degree program. Regardless of
priorities, applicants must still meet income eligibility requirements as described in
sections 2.4.1 of this manual.
Applicants who qualify for units shall be drawn from the eligible applicant pool as
units become available for sale.
2.5.2 Price Determination
The income range of the buyers shall determine the unit type as indicated in Exhibit C.
2.5.3 Applicants Right to Refusal of Unit
An applicant has three opportunities to refuse a development before being removed
from the current applicant pool.
z , Applicants who do not qualify for a particular development shall retain their
eligibility.
2.5.4 Lending Institutions
The prospective buyer, when seeking financing, may choose to contact lending
institutions which have been briefed by the City or its agent.
2.5.5 Insurance Requirements
Prior to the sale of any unit, the City shall require that each purchaser execute a
subrogation agreement whereby the City shall be named the additional insured party to
any policy of fire or casualty insurance and will be entitled to any such policy
proceeds in excess of the affordable unit purchase price.
2.6 Deed Restrictions (Ownership Units)
2.6. 1 Occupancy Conditions
Units must be owner -occupied.
2.6.2 Lease, Rent, or Sublet of Units -
Owner is not permitted to lease, rent, sublet the unit, or otherwise assign their
interests in the property without the express written permission from the City or its
property management agency. The lessee must meet the same requirements imposed
on the owner. The lease shall be subject to review by the City or its agent.
Example 1
The owner of an affordable unit is being transferred to a different state for a nine month period. In
order to lessen the burden of the owner paying a mortgage on the BMR unit as well as rent in the
new state, the owner may lease the BMR unit with prior written approval from the City or its
agent.
2.6.3 Resale Price
Sale of a unit is controlled by the original purchase price, plus changes in the
Consumer Price Index for the Bay Area as well as the market value of any substantial
improvements made by the owner. Value of improvements, if any, to be established
by a property appraisal.
2.6.4 Right of First Refusal
During the period that an affordable unit is maintained at an affordable price the City
has the right of first refusal on the sale of any of those units. Within sixty (60) days
of notice from homeowner, the City must decide whether it will exercise this option.
2.6.5 Condition of Units
Units shall be kept in good repair and resale price shall reflect the condition of the unit.
2.6.6 Terms of Affordability
The deed restrictions imposed on each affordable unit pursuant to the program shall
remain in effect for a period of 30 years from the date of original sale of that unit.
2.7 Procedure for Resale of Units
2. 7. 9 Owners Responsibility
If the owner elects to sell his unit, the City and/or its agent must be notified.
2.7.2 Resale Price Calculation
During the respective program period the resale price will be established based on the
following: _
a. Original Purchase Price.
b. Cumulative increases or decreases during the period of ownership, as indicated by
the Consumer Price Index.
c. The value of any substantial improvements or damage to the unit.
d. Administrative costs incurred by the property management agency or other selling
agent to sell the unit.
2.7.3 Purchaser
The next qualified buyer in the low income application pool is notified.
2.8 Tenant Selection for Rental Units
vrfjza.f
� ii
2.8.2
2.8.3
2.9.2
2.9.3
Prioritization of Applications
Applications shall be prioritized in the order of qualifying Cupertino residents,
individuals working in Cupertino, immediate family of Cupertino residents, full or
part-time DeAnza College students enrolled in a degree program. Regardless of
priorities, applicants must still meet income eligibility requirements as described in
section 2.4.2 this manual.
Applicants who qualify for a development shall be drawn from the eligible applicant
pool as units become available for rent.
Rental Rate Determination
The income range of the tenant shall determine the unit type (and therefore the
maximum price of the unit) by using Exhibit C.
Applicants Right to Refusal of Unit
An applicant has three opportunities to refuse a development before being removed
from the current applicant pool.
Applicants who do not qualify for a particular project shall retain their eligibility.
Leasing an Affordable Unit (Rental)
Availability of Units
An affordable unit shall not be available for lease until the units are formally accepted
by the City.
City Contractors Role in Lease Unit
If the developer elects, the City shall make available the services of a management
agency to assist in the selection of a tenants. The services' of this agency shall be
funded out of the in -lieu fee or CDBG account and shall be monitored by the City.
Previewing of Unit
It is the tenant's responsibility to contact the management agency to preview the unit.
2.9.4 Occupancy Conditions
It is the intent of this policy that the original lessee shall occupy the unit during the
term of the lease. However, if special conditions require that the unit be sublet, the
applicant/tenant is only permitted to sublet the unit with the express written
permission from the City of Cupertino and its agent.
2.10
2.10.1
2.10.2
2.10.3
Should an additional occupant (roommate) move into the unit, they must `rliie 'the
same requirements imposed on the original occupant, including household income
limits.
Deed Restrictions (Rental Units)
Condition of Units/Complex
The units/complex shall be kept in good repair and the resale price shall reflect the
condition of the units/complex.
Terms of Affordability
Deed restrictions placed on each unit/complex pursuant to the program shall remain in
effect for a period of thirty (30) years from the date of first occupancy of the
unit/complex and shall become null and void upon the expiration of that period, unless
it is extended by the company in order to take advantage of incentives resulting from
changes in public policy and programs. These deed restrictions shall run with the
property and not be affected by the sale of the complex, or the individual units within
the complex, prior to the completion of the term of affordability.
In the event the program is terminated prior to the 30 year period through formal
action by the City Council, deed restrictions shall be null and void. Full ownership
rights of the units/complex shall revert to the owner at the time of termination.
Appeal Process
Any portion of this manual maybe appealed. A written request is required from the
appellant. The request should be addressed the Community Development Director.
Any appeal will be referred to the Affordable Housing Committee for recommendation
within thirty (30) days of the date of the written request. The recommendation from
the Affordable Housing Committee will then be forwarded to the City Council for final
ruling. All City Council rulings on the appeal are final.
EXHIBIT A
HUD income category limits based on household'size.
rCategorytitjaFRange
1
2
3
4
5
6 8,
'� iiYL6WI` 0% - 50%
22,450
25,700
28;900
32,100
34,650
37,250,.'. 391800 .
,42-,3$0- ,
$0%
28,150
32,150
36,200
40,200
43,400,_;,.46,65Qi,-,j4q,850
53,050
j&%-100%
44,950
51,350
57,800
64,200
69,350
74,450 „ 79,600
Y!
84,750
Moderate _101%0 - 120%
53,950
61,650
69,350
77,050
83,200
89,400 95,590
101,700
Income limits are revised by the
U.S. Department
of Housing
and Urban Development
on an annual
basis. Revised 1/95
i 1t79i+: T /.
011
eii'IEi ': ,i.-' , t ,
fdEw `{ t 110
.r ,o
r
r
t*!," t) `11 1. ,.Jl fall
?
EXi*BI T B
Housing. Development Bank: How it Works
The development of housing in Cupertino is highly dependent upon the availability
�,cYus'mg
sites: As such, the City of Cupertino anticipates that concurrent development of reggd housing
and "office or' industrial development may be very.; difficult. The housing development7rx r is a
toolwhereb`� hbusiflg, office or industrial development credit can be "banked" fist ;use at suture
date. ' The bank will -also allow housing, office or industrial development witlAut tbirct(rrent
development"of?required housing.
Who can participate?
Any office, industrial or residential developer who has a housing mitigation requirement can
participate.
How the bank works?
A housing, office or industrial developer may place excess units in the bank. These units may be
either new units, converted apartment unit, or price controlled existing units. These units can then
be purchased from the depositor to meet their housing requirements. Alternatively, should units
not be available in the bank a developer needing to meet a mitigation requirement may agree to
either purchase units if they become available, cause housing units to be built, or (in the case of
Office Industrial developers) pay an in -lieu fee.
To place units in the housing bank a depositor must sign an agreement detailing which units are
available to the bank. The agreement and accounting of units in the bank will be placed on file with
the Department of Community Development. _
To utilize units in the housing bank to meet the housing requirement, a developer wishing to make
a withdrawal should contact the depositor directly. When the transaction is complete, the
developer making the withdrawal from the bank must show proof of purchase before housing
mitigation requirement can be met. At that time the units will be removed from the bank.
Should units not be available in the bank, a developer wishing to make a withdrawal may enter into
an agreement specifying that they will either purchase units when available, cause housing units to
be built, or (in the case of Office/Industrial developers) pay an in -lieu fee prior to issuance of
occupancy permits for the developer's project.
EXHIBIT C
(All Tables revised 6/94)
Maximum Sale Price of Affordable Units by Housep id Size and
Number of Bedrooms
Household
Size
Nurhber of
Bedrooms
Median
-income,._
M_odiatafie'
Income
1-2
1
$146 5Q0
__$187 000
2-4
2
$197 000 , ;
1247,500 _
3-5
3
$217 500
52:72 500
4-6
4
$237 0.00r296
000::-
Sale Prices for Price Capped Units
For price capped units,: the selling price shad be as follows:
i 2> units at $187,00.0 (Moderate Income. Family of 2)
• 4 units at $197,000 (Median Income Family: of 4)
4 units at $248,000 (Moderate, Income Family of.4) .
Rental Rates of Affordable -Units by Household Size and
Number of Bedrooms
Household
Size
Number of .
Bedrooms_
'M Very Loiv
Income.
LOW
'.Income
1-2
1
$600.Ofl
_.$750.00
2-4
2
$700.00 ..
i`.. 900.00 ,
3-5
3
U00,001
$1000.00
4-6
4
Rental, Rates for Price C4iRped Tits
For p" capped units, the; recital, rates shall be as follows:
• 2 units at $875 per month
• 4 units at $900 per month
0 4 units at $925 per month