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HomeMy WebLinkAbout75B - PH AMEDNING CH 41 HOOREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: AUGUST 18, 2020 CLERK OF COUNCIL USE ONLY: TITLE: APPROVED ❑ As Recommended PUBLIC HEARING —ZONING ORDINANCE ❑ As Amended AMENDMENT NO. 2020-03 TO AMEND ❑ Ordinance on 1sl Reading El El Ordinance on Reading CHAPTER 41 ZONING RELATING TO El Implementing Resolution THE HOUSING OPPORTUNITY ORDINANCE ❑ Set Public Hearing For AND ADOPT AN AMENDMENT TO THE AFFORDABLE HOUSING FUNDS POLICIES AND PROCEDURES CONTINUED TO /s/Kristine Ridge FILE NUMBER CITY MANAGER RECOMMENDED ACTION 1. Adopt an ordinance approving Zoning Ordinance Amendment (ZOA) No. 2020-03 to amend several sections of Chapter 41 (Zoning) of the Santa Ana Municipal Code (SAMC) pertaining to the Housing Opportunity Ordinance. 2. Adopt an amendment to the City's Affordable Housing Funds Policies and Procedures, subject to non -substantive changes approved by the City Manager and City Attorney. PLANNING COMMISSION ACTION At a special meeting on August 3, 2020, the Planning Commission voted 7:0 to recommend that the City Council approve Zoning Ordinance Amendment (ZOA) No. 2020-03 to amend several sections of Chapter 41 (Zoning) of the Santa Ana Municipal Code (SAMC) relating to the Housing Opportunity Ordinance. PROJECT DESCRIPTION AND ANALYSIS The Housing Element of the General Plan identifies the long range plans for housing throughout the City. The Housing Opportunity Ordinance was established in part to implement the Housing Element goal to promote the provision of affordable housing within the City. In an effort to meet this goal, the City adopted the Housing Opportunity Ordinance (HOO) in 2011 that applied to proposals for five or more housing units. The ordinance required these residential projects to provide 15 percent of the total number of units as affordable, whether the project is for sale or rent and applied to developments requesting a zone change or general plan amendment. Further, it applied to projects increasing the existing allowable residential density and the conversion of apartments to condominiums. It also provided the option to pay an in lieu fee instead of providing units subject to City Council approval. 75B-1 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 2 In 2015, the HOO was updated to make the inclusionary housing requirements more predictable for housing developers and to increase affordable housing production in conjunction with new market rate housing development. Some examples of the ordinance changes included simplifying the complex in -lieu fee calculation, modifying the "moderate income" definition to 80 percent of the area median, and creating additional incentives to allow developers the option of providing inclusionary housing units either on or off -site. A provision of the ordinance was a requirement to revisit the HOO in three years to determine its effectiveness. In December 2018, the City Council received and filed a report on the effectiveness of the Housing Opportunity Ordinance that was adopted in 2015. In July 2019, the City Council formed an Ad Hoc Committee to review the Ordinance as was required by the 2015 ordinance. The Ad Hoc Committee included Mayor Pro Tern Villegas, Councilmember Iglesias, and Councilmember Solorio. In May 2020, the Ad Hoc Committee was reformed to include Mayor Pulido and Councilmembers Bacerra and Mendoza, to continue the review efforts of the previous committee. The Ad Hoc Committee provided direction to draft amendments to Chapter 41 (Zoning) of the SAMC as described and analyzed in Table 1: Summary of Amendments, below. The complete Draft Zoning Ordinance Amendments, including a redlined version of the previously adopted document, are included as Exhibits 1 and 2. Table 1: Summary of Amendments Code Section Subject Issues/Ad Hoc Recommendations 41-1901 Definitions: Deletes Issue: This proposal consists of modifying several definitions, certain definitions and the addition of new amends several existing definitions. Definitions pertaining to "Affordable definitions and adds new housing cost' and "Low income households" definitions to the were modified to identify the type of households ordinance that qualify for these income levels. Further, a definition for "Moderate Income Households" is proposed to identify the parameters of this income level, a definition for "Entitled Residential Project' is proposed to identify when a project is entitled, a "General Plan" definition is proposed as is a definition for "Moderate income units." 41-1902 Applicability: Issue: This section is proposed to be amended Establishes new to only apply to those projects with 20 or more standards for projects that units in size and that are requesting an increase need to comply with the in the density permitted by the General Plan. ordinance The current ordinance applies to projects consisting of five or more units, projects requesting a zone change or a general plan amendment, and are within an overlay zone. It also reduces the percentage of for -sale units that 75B-2 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 3 need to be available for moderate income households from the current 15 percent to 10 percent of the total number of units in an effort to incentivize the construction of for -sale units. 41-1903 Exempt Projects: Issue: Revises language to be consistent with a Clarifies which projects change made in 2015 to the Adaptive Reuse are not subject to the Ordinance by clarifying that an adaptive reuse ordinance project is not subject to the Housing Opportunity Ordinance. 41-1904 In -Lieu Fee Option: Issue: The proposed changes will reduce the in - Revises the in -lieu fee and lieu fee from $15 per habitable square foot to five provides a short-term dollars per habitable square foot. It also clarifies incentive for obtaining that the in -lieu fee is not applicable to projects building permits with less than 20 units. In addition, the change will allow phased projects to pay the in -lieu fee as each phase of construction obtains a building permit. This section also provides an incentive for "Entitled Residential Project" to obtain building permits during the current economic climate. An entitled Residential Project that consists of 20 or more units will be allowed to temporarily pay a reduced fee of $10 per square foot of habitable area as compared to the current rate of $15 per habitable square foot. This incentive will remain until April 2021, with any development not obtaining a building permit by that time obligated to pay the higher rate. Projects subject to a development agreement or an agreement to pay a specific in -lieu fee will be required to comply with the agreement as approved and will not be modified by this proposed ordinance. 41-1904.1 Inclusionary Housing Issue: This section is proposed to eliminate the Development "double" density bonus concession available for Incentives: developers as part of the production of Modifies the incentives affordable units while incentivizing provided to developers for developments of for -sale units. The proposed constructing affordable changes will also allow a developer of for -sale, housing moderate income housing units to request three concessions from the City. The amendment also requires the developer to provide a community 75B-3 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 4 benefit as part of the project, which may include park improvements, a community garden, developer funded down payment assistance, or pay a subsidy toward services, activities or programs. 41-1909 Inclusionary Housing Issue: This section is proposed to be revised to Fund: Clarifies the use of clarify the use of in -lieu fees paid to the City. It the in -lieu fees collected provides the Community Development Agency with a priority for the use of the funds and allows the funds to be used for one-time programs for code enforcement, and quality of life and general health and safety activities. It also codifies the City's local preference for projects that are funded with in -lieu fees and encourages a commitment to use a skilled and trained workforce to complete the project. PLANNING COMMISSON DISCUSSION On August 3, 2020, the Planning Commission held a special meeting to review the proposed modifications to the Housing Opportunity Ordinance (Exhibit 3). At the conclusion of the public hearing, and after an extensive discussion on the matter, the Planning Commission recommended forwarding of the Ad Hoc Committee's amendments for approval and recommended that the City Council consider the following changes: • Section 41-1909(a)(5) - Incorporate enforceable skilled labor requirements by incorporating "Shall" and "will" in place of aspirational words such as "encouraged" or "should." The Commission also recommended that the City Council evaluate the financial impacts of requiring skilled laborers on a private development project. • Section 41-1909(a)(1) - Specify a nexus between code enforcement funding to activities that directly relate, enhance, and promote affordable housing projects and activities. • Section 41-1910(a) - Set a new review period for the Ordinance. • Section 41-1904(c)(3) - Revert back to original language requiring the full payment of fee at first building permit issuance. • Section 41-1904(c)(2)(iii) - Extend end date of April 1, 2021 to October 1, 2021 for Entitled Residential Project. In addition, the Commission had an extensive discussion on Section 41-1904, which pertains to the change to the in -lieu fee. The Commission was unable to come to a consensus on a recommendation regarding the proposed in -lieu fees. Options the Commission discussed included: 75B-4 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 5 1. Apply a fee reduction to $10 per square foot for all projects (entitled and future). 2. Reduce to $5 per square foot for entitled projects and $10 per square foot for future projects. Finally, the Planning Commission requested that modifications be made to the recitals section of the ordinance. Their proposals include: • Add language that establishes an emphasis on economic development and housing construction as catalysts supporting for the proposed amendments. • Add language that identifies an emphasis on the use of skilled & trained workforce with a priority for Santa Ana residents and veterans, and apprenticeships from local school and college districts. AMENDMENT TO AFFORDABLE HOUSING FUNDS POLICIES AND PROCEDURES On March 20, 2018, City Council adopted the City's Affordable Housing Funds Policies and Procedures. The action by City Council to amend the Housing Opportunity Ordinance requires an amendment to the Eligible Uses and Activities for the Inclusionary Housing Fund in the City's Affordable Housing Funds Policies and Procedures (Exhibit 4). Funding for these activities are provided using revenue generated through in -lieu fees from the Housing Opportunity Ordinance. A matrix with the current and amended eligible uses and activities is provided below: Inclusionary Housing Fund Eligible Uses and Activities: Current Amended • Acquisition and rehabilitation of eligible Acquisition and rehabilitation of eligible rental properties; rental properties. Existing rental units • New construction of rental housing may be acquired, substantially units; rehabilitated and then income and • Predevelopment loans up to a period of affordability covenants can be recorded 24 months for site acquisition, on the units for rental or ownership. predevelopment activities, including o Defined as rehabilitation of a professional services which cannot be dwelling unit that has substantial obtained on a contingency basis, and building and other code construction. Such loans may be violations such that the unit is extended for up to 18 months with an additional 12-month extension option at returned to the City's housing the discretion of the Housing Division supply as decent, safe and Manager; sanitary affordable housing. • Acquisition and conversion of non- The housing must comply with residential property to multifamily rental all local building and zoning housing units; codes and standards, including • Homeless services programs; energy efficiency and water • Security deposit assistance programs; conservation standards, and • Immigrant -focused housing programs meet housing quality standards and services; in Section 882 of Title 24. 75B-5 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 6 • Foreclosure prevention; and . Purchase and rehabilitation of homes • Cooperative housing programs. with code -related issues for sale to low - and moderate -income buyers; • New construction of rental housing units; • Deletes section pertaining to predevelopment loans up to a period of 24 months for site acquisition, predevelopment activities, including professional services which cannot be obtained on a contingency basis, and construction. Such loans may be extended for up to 18 months with an additional 12-month extension option at the discretion of the Housing Division Manager; • To pay for one-time programs and activities for code enforcement, quality of life and general health and safety issues that directly relate, enhance, and promote affordable housing projects and activities. • Acquisition and conversion of non- residential (e.g. commercial) property to multifamily rental housing units; • Homeless services programs; • Security deposit assistance programs; • Immigrant -focused housing programs, services and activities for non-U.S. citizens; • Foreclosure and eviction prevention programs, services and activities. • Deletes cooperative housing programs. ENVIRONMENTAL IMPACT As part of the City's permitting process, the proposed project is required to undergo an environmental review in accordance with the California Environmental Quality Act (CEQA). In accordance with the CEQA, the recommended action is exempt from CEQA per Section 15061(b)(3). This exemption applies to projects covered by the "general rule" that CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, 75B-6 Zoning Ordinance Amendment No. 2020-03 August 18, 2020 Page 7 the activity is not subject to CEQA (ER No. 2020-53). FISCAL IMPACT The in -lieu fees are deposited to the Inclusionary Housing Fee Fund 417. Over the past three years, the in -lieu fee revenue includes: $2,712,304 in FY 17-18; $7,236,945 in FY 18-19; and $0 in FY 19-20 (unaudited). If the in -lieu fee were reduced by two-thirds (from $15 to $5 per square foot) for the past three years, the revenue would have been $6.6 million less than actual. The fund has an estimated balance of $13.3 million as of June 30, 2020, and budgeted expenditures for FY 19-20 are $6.1 million. In the worst case scenario, if no in -lieu fees are collected for FY 20-21, the ending fund balance may be approximately $7.2 million on June 30, 2021. These fund balance estimates are not the same as spendable cash. Submitted By: Minh Thai, Executive Director - Planning and Building Agency Exhibits: 1. Draft Zoning Ordinance Amendments — ZOA No. 2020-03 2. Redline Draft Zoning Ordinance Amendments — ZOA No. 2020-03 3. August 3, 2020 Planning Commission Staff Report 4. Affordable Housing Funds Policies and Procedures 75B-7 Exhibit 1 ORDINANCE NO. NS-XXXX AN ORDINANCE OF THE CITY OF SANTA ANA AMENDING CHAPTER 41, ARTICLE XVIII.I (HOUSING OPPORTUNITY ORDINANCE) OF THE SANTA ANA MUNICIPAL CODE TO MODIFY APPLICABILITY AND VARIOUS IMPLEMENTATION PROVISIONS OF THE ORDINANCE THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS FOLLOWS: Section 1. The City Council of Santa Ana hereby finds, determines and declares as follows: A. In Santa Ana, as in other cities in California, there has been a deficit in much needed housing. It is difficult to meet the many housing needs which include, but are not limited to: increasing the housing supply and mix of housing types, rental or ownership opportunities, affordability, promoting infill development and socio- economic equity, the protection of environmental resources, and the encouragement of efficient development patterns. B. In 2015, the City amended its Housing Opportunity Ordinance (HOO) in the Santa Ana Municipal Code (SAMC Sections 41-1900 through 41-1910) to require the construction of affordable units on or off -site or the payment of an in -lieu fee in the amount of $5.00 per square foot of habitable space for projects consisting of 5-20 units, and the payment of an in -lieu fee in the amount of $15.00 per square foot of habitable space for projects with over twenty (20) units. C. In addition to the housing crisis, international, national, state, and local health and governmental authorities are responding to an outbreak of respiratory disease caused by a novel coronavirus named "SARS-Co V-2," and the disease it causes has been named "coronavirus disease 2019", abbreviated COVID-19 ("COVID-19"). D. On March 4, 2020, the Governor of the State of California declared a state of emergency to make additional resources available, formalize emergency actions already underway across multiple state agencies and departments, and help the state prepare for the broader spread of COVID-19. E. On March 13, 2020, the President of the United States of America declared a national emergency and announced that the federal government would make emergency funding available to assist state and local governments in preventing the spread of and addressing the effects of COVID-19. 75B-8 F. The Orange County Board of Supervisors and Department of Public Health declared a local emergency and local public health emergency to aid the regional healthcare and governmental community in responding to COVID-19. G. On March 17, 2020, the Santa Ana City Council proclaimed the existence of a local emergency to ensure the availability of mutual aid and support an expedient response to the COVID-19 pandemic. H. As a result of the public health emergency and the precautions recommended by health authorities, City Hall and the public counters for development processing and permit applications in Santa Ana were closed to the public from March 18 through June 1, 2020, thereby limiting the processing of development applications, delaying development projects that were already approved, and thereby impacting development activities in the city for over 10 weeks. The City Council of the City of Santa Ana is concerned about the unplanned detrimental effects caused by COVID 19 on the local economy and the development and construction of housing in the City. These unforeseen issues are of grave concern as it is imperative for the City to maintain a steady stream of housing units in the pipeline at all times. J. As a result of current world events, construction of single-family homes plummeted to its slowest pace in several years. Single-family housing starts dropped 17.5 percent while multifamily housing starts (5 or more units in a structure) fell 32.1 percent in April and were down 3.9 percent from a year earlier. K. Lack of housing units in the City of Santa Ana is a threat to public health and safety and requires urgent intervening action by the City Council. L. In an effort to combat the anticipated severe negative effects that a reduction in the availability of housing units in the City of Santa Ana will cause to the City and its residents, the City Council has determined that a reduction in the HOO fee will serve as an incentive and a catalyst for builders to initiate construction of housing in the City and for the City to continue providing quality housing opportunities in the City. M. The Santa Ana City Council finds that the construction of new housing units will also stimulate the economy by providing jobs and the City is committed to encouraging that end result. N. The Santa Ana City Council finds that requiring projects with over twenty units to pay the full $15.00 per square foot in -lieu housing fee would pose a serious threat to the public interest, health, safety and welfare for the following reasons: (1) It would adversely impact the development of housing projects in the city; 75B-9 (2) It would adversely affect the number of housing developments in the pipeline; (3) It would cause a decline in the available housing stock; (4) It would put residents at risk for homelessness; (5) It would cause a decline in housing units available at diverse price points; and (6) It would risk the public health, safety and welfare of the City residents needing adequate housing. O. The City Council of the City of Santa Ana desires to use the inclusionary housing fund to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city with the priority on creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units. This includes, but is not limited to, the purchase and rehabilitation of units for sale and the recapturing of affordable housing units at risk of market conversion. Monies may also be used to pay for one-time programs for code enforcement, and quality of life and general health and safety activities. P. The Request for Council Action for this ordinance dated August 18, 2020, and duly signed by the Executive Director of the Planning and Building Agency shall, by this reference, be incorporated herein, and together with this ordinance, any amendments or supplements, and oral testimony constitute the necessary findings for this ordinance. Section 2. The proposed ordinance has been reviewed with respect to applicability of the California Environmental Quality Act ("CEQA") and the State CEQA Guidelines (California Code of Regulations, Title 14, Section 15000 et seq.). The project is exempt from CEQA as it can be seen with certainty that there is no impact on the environment [Section 15061(b) (3)] and a Notice of Exemption will be filed upon adoption of this ordinance. Section 3. The Santa Ana City Council hereby finds, determines and declares that Santa Ana Municipal Code Chapter 41, Article XVIII.I is hereby amended and restated, in its entirety as follows: ARTICLE WILL - HOUSING OPPORTUNITY ORDINANCE Sec. 41-1900. - Purpose. This article establishes standards and procedures to encourage the development of housing that is affordable to a range of households with varying income levels. The 75B-10 purpose of this article is to encourage the development and availability of affordable housing by requiring the inclusion of affordable housing units within new developments or the conversion of rental units to condominium ownership when the number of units exceed the densities permitted under the General Plan. Sec. 41-1901. - Definitions. As used in this article, the following terms shall have the following meanings: Adjusted for household size appropriate for the unit means a household of one person in the case of a studio unit, two (2) persons in the case of a one -bedroom unit, three (3) persons in the case of a two -bedroom unit, four (4) persons in the case of a three -bedroom unit, and five (5) persons in the case of a four -bedroom unit. Administrative procedures means those regulations promulgated by the executive director pursuant to section 41-1910 of this article. Affordable housing cost means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified, as follows: Extremely low-income households. Thirty (30) percent of the income of a household earning thirty (30) percent of the Orange County median income adjusted for family size appropriate for the unit. Very low-income households. Thirty (30) percent of the income of a household earning fifty (50) percent of the Orange County median income adjusted for family size appropriate for the unit. Low-income households. Thirty (30) percent of the income of a household earning eighty (80) percent of the Orange County median income for family size appropriate for the unit. Moderate —income households. Thirty (30) percent of the income of a household earning one hundred twenty (120) percent of the Orange County median income adjusted for family size appropriate for the unit. The qualifying limits for very low-income, low-income and moderate -income households are established and amended annually pursuant to Section 8 of the United States Housing Act of 1937. The limits are published by the Secretary of Housing and Urban Development. Developer means any association, corporation, firm, joint venture, partnership, person, or any entity or combination of entities, which seeks city approval for all or part of a residential project. Development Agreement means an agreement approved by the City Council between a property owner and the City pursuant to Government Code section 65864, et seq. Entitled Residential Project means a development project that includes residential units subject to the provisions and applicability of this Article WILL that received entitlement approvals by City Council action between August 4, 2015 and August 17, 75B-11 2020 to construct the residential project and which has not been issued a building permit prior to August 18, 2020. A list of the currently Entitled Residential Projects is attached hereto as Exhibit A and is incorporated by reference. Executive director means the executive director of community development for the city. General Plan means the adopted general plan for the City of Santa Ana Inclusionary housing agreement means a legally binding agreement between the developer and the city, in a form and substance satisfactory to the executive director and the city attorney, and containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. Inclusionary housing fund means the fund created by the city in which all fees collected in compliance with this article shall be deposited. Inclusionary housing plan means the plan submitted by the developer, in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. Inclusionary unit means a dwelling unit that will be offered for sale or rent to very low, low, or moderate income households, at an affordable housing cost, in compliance with this article. Low-income units and very low-income units means inclusionary units restricted to occupancy by low or very low-income households, respectively, at an affordable housing cost. Market rate units means dwelling units in a residential project that are not inclusionary units. Moderate -income units means inclusionary units restricted to occupancy by Moderate -income households at an affordable housing cost. Prior project means any project for which an application was submitted and the application was deemed complete prior to August 4, 2015. Regulatory agreement means an agreement entered into between the City of Santa Ana or the Santa Ana Community Development Agency and a developer by which the developer covenants to keep certain housing units at an affordable housing cost for a specified period of time. Rehabilitated units/rehabilitation means the improvement of a unit in substandard condition to a decent, safe and sanitary level. Units are in substandard condition when, while they may be structurally sound, they do not provide safe and adequate shelter, and in their present condition endanger the health, safety or well-being of the occupants. Residential project/project means any of the following: A subdivision resulting in the creation of five (5) or more residential lots or residential condominium units; or 75B-12 The new construction of a project consisting of five (5) or more multi -family units; or The new construction of five (5) or more separate houses or dwelling units; or The conversion of five (5) or more existing residential rental units to condominium ownership. Target area means that area designated by the city from time to time, on an as - needed basis, as a priority area for rehabilitation due to health and safety concerns. Total housing costs the total monthly or annual recurring expenses required of a household to obtain shelter. For a rental unit, total housing costs shall include the monthly rent payment and utilities paid by the tenant (excluding telephone and television). For an ownership unit, total housing costs shall include the mortgage payment (principal and interest), insurance, homeowners' association dues (if applicable), private mortgage insurance (if applicable), taxes, utilities, an allowance for maintenance and any other related assessments. Sec. 41-1902. - Applicability and inclusionary unit requirements. (a) Applicability. The requirements of this article shall apply to any new residential project comprised of twenty (20) or more residential lots or residential units located within the city, including new construction, and condominium conversions which exceed the General Plan prescribed densities. (b) Applications. The requirements of this article shall apply to any new residential project proposed in connection with an application to do any of the following: (1) Increase the permitted residential density of the subject property above the density permitted by the General Plan at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the applicable density permitted by the General Plan. (2) Increase the permitted percentage of residential development allowed for a mixed -use development above the percentage at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the density permitted by the General Plan. (3) Convert rental units to condominium ownership. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the density permitted by the General Plan. (c) Units for sale. If the new residential project consists of units for sale, then a minimum of ten (10) percent of the total number of units in the project shall be sold to moderate income households. 75B-13 (d) Rental units. If the new residential project consists of rental units, then a minimum of fifteen (15) percent of the units shall be rented to low-income households, or ten (10) percent rented to very low-income households. (e) Rounding of quantities in calculations. In calculating the required number of inclusionary units, fractional units shall be rounded -up to the next whole unit. The developer may choose to pay an in -lieu fee set forth in section 41-1904(c) for the fractional units, which shall be calculated based on the number of habitable square feet applicable in each case. (f) Displacement of existing inclusionary units. Notwithstanding any other provision of this article, any residential project subject to this article that results in the displacement of very low and/or low income household(s) shall be required to provide on -site inclusionary units as required by this article. (g) Compliance with article. All inclusionary units required by this article shall be sold or rented in compliance with this article. Sec. 41-1903. - Exempt projects. The following are exempt from the requirements of this article (a) Applications deemed complete. Applications that include a residential project for which a development application has been deemed complete prior to November 28, 2011. (b) Development agreements. A residential project that is the subject of a Development Agreement under applicable provisions of the California Government Code that expressly provides for an exclusion to this article or provides for a different amount of inclusionary units from that specified by this article, provided the Development Agreement was adopted on or before November 28, 2011. (c) Project with regulatory agreement. A residential project for which a regulatory agreement has been approved, provided that the regulatory agreement is effective at the time the residential project would otherwise be required to comply with the requirements of this article, and there is no uncured breach of the regulatory agreement before issuance of a certificate of occupancy for the project. This may include a residential project that has obtained a density bonus under article XVI.I of the Santa Ana Municipal Code. Such projects cannot be used to satisfy the inclusionary requirement for another project. (d) Adaptive Reuse. Adaptive reuse development projects pursuant to Chapter 41, Article XVI.I I —Adaptive Reuse. Sec. 41-1904. - Options to satisfy inclusionary requirements. 75B-14 (a) On -site units. The primary means of complying with the inclusionary requirements of this article shall be the provision of on -site inclusionary units in accordance with section 41-1901, above. A developer may only satisfy the requirements of this article by means of an alternative to on -site inclusionary units in accordance with the requirements and procedures of this section. (b) Off -site units. New units. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by constructing the required new inclusionary housing at a different location within the city borders at the ratio of one square foot of habitable inclusionary unit space for each required habitable square foot. While the total habitable square footage area of the required new inclusionary units must be the same as the sum -total of the number of habitable square feet for the project as directed by this ordinance, the number of units and bedrooms associated with the off -site units may be approved by the review authority of the city, consistent with the type of affordable housing needed at the time of project review. 2. Rehabilitated units outside a designated target area. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one and one-half (1Y2) habitable square feet per each required habitable square foot of inclusionary units. 3. Rehabilitated units within a designated target area. Upon application, the developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one habitable square foot per each required habitable square foot of affordable inclusionary units. (c) In -lieu fee. (1) More than 20 units. A Residential Project comprised of more than twenty (20) residential lots or residential units, the developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be five dollars per square foot ($5.00/ft. 2 ) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. (2) Entitled Residential Projects. The applicant(s) of an Entitled Residential Project (see Exhibit A) may either construct the inclusionary units or pay an in lieu fee as follows: (i) Twenty (20) or fewer units. In the case of an Entitled Residential Project containing between five (5) and twenty (20) residential lots or residential units, the Developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing 75B-15 some or all of the required units. The amount of the fee allowed by this section shall be five dollars per square foot ($5.00/ft.) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. (ii) More than 20 units. In the case of an Entitled Residential Project comprised of more than twenty (20) residential lots or residential units, the Developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be ten dollars per square foot ($10.00/ft.) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. The in lieu fee amount allowed herein by this subsection shall revert to fifteen dollars per square foot ($15.00) on April 1, 2021 for any construction which adds net residential units, which has City -approved entitlements, that has not been issued a building permit by April 1, 2021. (iii) A Residential Project that has been entitled and approved with conditions to pay a specific in lieu fee or has a city council approved Development Agreement to pay a specific in -lieu fee shall comply with the conditions or the Development Agreement as approved and shall not be modified by this Ordinance. (3) Timing of payment. The developer shall pay the in -lieu fees allowed by this section prior to issuance of the building permit for any construction which adds net residential units. The developer may provide input regarding what project the in lieu fees should be applied towards, but such input shall not be dispositive. The in lieu fees collected by the city are city funds over which the city has complete and absolute discretion. (4) Inclusionary housing fund. Fees collected in compliance with this section shall be deposited in the inclusionary housing fund. Sec. 41-1904.1. - Inclusionary housing development incentives for production of units. (a) In order to make the production of new inclusionary units on -site or off -site or off - site rehabilitated units, certain incentives, standards and concessions shall be allowed and prescribed as set forth herein below. Such concessions shall not be available to those developers that choose to pay an in lieu fee rather than build the units. The developer may opt to take advantage of up to two (2) concessions among the following possible concessions: 75B-16 (1) Parking concession. One on -site parking space for each zero to one bedroom unit; two (2) on -site parking spaces for each two (2) to three (3) bedroom unit; two and one-half (2Y2) parking spaces for each four (4) or more bedroom unit. (2) Concession on one of the following Zoning Code site development standards: (i) Setback reduction of up to twenty-five (25) percent reduction on subject property; (ii) Height increase of up to twenty (20) additional feet. (b) A developer of a for sale Residential Project proposing to provide on -site Moderate Income Units and a surrounding community benefit may opt to take advantage of up to three (3) of the above concessions. The surrounding community benefit will include but not be limited to park improvements, urban community gardens, developer -funded down payment assistance, or subsidy of services, activities or programs. Sec. 41-1905. - Housing plan and housing agreement. (a) Submittal and execution. The developer shall comply with the following requirements: (1) Inclusionary housing plan. The developer shall submit an inclusionary housing plan in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. The inclusionary housing plan and its supportive documents, plans, and details shall be submitted at the same time as the site plan and application materials for the original project. All inclusionary housing plans shall be subject to the approval of the executive director and subject to appeal processes and procedures set forth in the Santa Ana Municipal Code. (2) Inclusionary housing agreement. The developer shall execute and cause to be recorded an inclusionary housing agreement. The inclusionary housing agreement shall be a legally binding agreement between the developer and the city, executed by the city manager, or his or her designee, and in a form and substance satisfactory to the executive director and the city attorney, and containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. (b) Discretionary approvals. No discretionary approval shall be issued for a residential project subject to this article until the developer has submitted an inclusionary housing plan. (c) Issuance of building permit. No building permit shall be issued for a residential project subject to this article unless the executive director has approved the 75B-17 inclusionary housing plan, and any required inclusionary housing agreement has been recorded. (d) Issuance of certificate of occupancy. A certificate of occupancy shall not be issued for a residential project subject to this article unless the approved inclusionary housing plan has been fully implemented. E`Y� �iQiF'I�Z ��7Trwen (a) Location within project, relationship to non-inclusionary units. All inclusionary units shall be: (1) Reasonably dispersed throughout the residential project; (2) Proportional, in number of bedrooms, gross floor area of habitable space, and location, to the market rate units; (3) Comparable to the market rate units included in the residential project in terms of design, materials, finished quality, and appearance; and (4) Permitted the same access to project amenities and recreational facilities, as are market rate units. (b) Timing of construction. All inclusionary units in a residential project shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (c) Location outside the proposed original project. For projects where the developer proposes to either produce new inclusionary units or rehabilitate existing off -site units to meet the inclusionary affordable housing requirements of this ordinance, the off -site project(s) containing the required inclusionary units shall be subject to the following requirements: (1) The sum -total area (in habitable square feet) of all the newly constructed off - site inclusionary units shall be the same number of habitable square feet of inclusionary area as required by this ordinance. For the purpose of the calculation of the number of square feet of required inclusionary housing, the total gross habitable square feet of the housing units of the original market rate project shall be used, as measured from exterior walls to exterior walls of the market units provided as the base for calculation either ten (10) percent for very low income or fifteen (15) percent for low income inclusionary units. The common areas, exterior hallways, stairways, patios, and balconies shall not be calculated in determining the number of required square feet of inclusionary housing production. All new or rehabilitated units must meet all current zoning and general plan standards. (2) While the total number of square feet of inclusionary housing requirement is calculated based on the requirements of this ordinance, the number of units, bedrooms and other amenities on the proposed off -site inclusionary housing location shall be approved by the review authority commensurate with the size and type of units most in demand at the time of submittal of the application. 75B-18 (3) Any off -site affordable inclusionary housing project shall be substantially comparable to the market rate units included in the residential project in terms of quality of design, materials and finishes. (4) If tenants are displaced due to rehabilitation of housing to meet the inclusionary unit requirement, the developer shall be responsible for relocation costs as required by state law. (5) No city, housing authority, or public funds, subsidies, or participation of any kind shall be expended on the production or building of any inclusionary housing projects associated with meeting the inclusionary unit requirement. (d) Timing of construction. All inclusionary units in a residential project or proposed off -site new inclusionary units or rehabilitated units shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (e) Units for sale. (1) Time limit for inclusionary restrictions. A unit for sale shall be restricted to the target income level group at the applicable affordable housing cost for a minimum of fifty-five (55) years. (2) Certification of purchasers. The developer and all subsequent owners of an inclusionary unit offered for sale shall certify, on a form provided by the city, the income of the purchaser and that such owners will live in such inclusionary unit as their primary residence. (3) Resale price control. In order to maintain the availability of inclusionary units required by this article, the resale price of an owner occupied inclusionary unit shall be limited to the lesser of the fair market value of the unit as established by a licensed real estate agent based upon three (3) comparable properties or the restricted resale price. For these purposes, the restricted resale price shall be the applicable affordable housing cost. (4) Inheritance of inclusionary units. Upon the death of an owner of an owner - occupied inclusionary unit, title in the property may transfer to the surviving joint tenant or heir (in the case of the death of a sole owner or all owners of the household). (5) Forfeiture. If an inclusionary unit for sale is sold for an amount in excess of the resale price controls required by this section, the buyer and the seller shall be jointly and severally liable to the city for the amount in excess of the affordable housing cost at the time of such sale of the inclusionary unit. Recovered funds shall be deposited into the inclusionary housing fund. Notwithstanding the foregoing, city may allow the buyer and seller to cure any violation of the resale price controls within one hundred eighty (180) days. (f) Rental units. 75B-19 (1) Time limit for inclusionary restrictions. A rental inclusionary unit shall remain restricted to the target income level group at the applicable affordable housing cost for fifty-five (55) years. (2) Certification of renters. The owner of any rental inclusionary unit shall certify, on a form provided by the city, the income of all members of the household above the age of eighteen (18) at the time of the initial rental and annually thereafter. (3) Forfeiture. Any lessor who leases an inclusionary unit in violation of this article shall be required to forfeit to the city all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (g) Execution and recording of documents. The executive director may require the execution and recording of whatever documents are required to ensure enforcement of this section; including but not limited to promissory notes, deeds of trust, resale restrictions, rights of first refusal, options to purchase, and/or other documents, which shall be recorded against all inclusionary units. (h) General prohibitions. (1) No person shall sell or rent an inclusionary unit at a price or rent in excess of the maximum amount allowed by any restriction placed on the unit in accordance with this article. (2) No person shall sell or rent an inclusionary unit to a person or persons that do not meet the income restrictions placed on the unit in accordance with this article. (3) No person shall provide false or materially incomplete information to the city or to a seller or lessor of an inclusionary unit to obtain occupancy of housing for which that person is not eligible. (i) Principal residency requirement. (1) The owner or lessee of an inclusionary unit shall reside in the unit for not less than ten (10) out of every twelve (12) months. (2) No owner or lessee of an inclusionary unit shall lease or sublease, as applicable, an inclusionary unit without the prior permission of the executive director. Sec. 41-1907. - Reserved. Sec. 41-1908. - Enforcement. (a) Violation. Any violation of this article constitutes a misdemeanor. (b) Forfeiture of funds. Any individual who sells an inclusionary unit in violation of this article shall be required to forfeit any money in excess of the affordable housing cost at such time. Any individual who rents an inclusionary unit in violation of this 75B-20 article shall be required to forfeit all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (c) Legal actions. The city may institute any appropriate legal actions or proceedings necessary to ensure compliance with this article, including actions: (1) To disapprove, revoke, or suspend any permit, including a building permit, certificate of occupancy, or discretionary approval; and (2) For injunctive relief or damages. (d) Recovery of costs. In any action to enforce this article, or an inclusionary housing agreement recorded hereunder, the city shall be entitled to recover its reasonable attorney's fees and costs. Sec. 41-1909. - Inclusionary housing fund. (a) Inclusionary housing fund. There is hereby established a separate fund of the city, to be known as the inclusionary housing fund. All monies collected pursuant to this article shall be deposited in the inclusionary housing fund. Additional monies from other sources may be deposited in the inclusionary housing fund. The monies deposited in the inclusionary housing fund shall be subject to the following conditions: (1) Monies deposited into the inclusionary housing fund must be used to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city as specified in the city's Affordable Housing Funds Policies and Procedures. A priority will be on the creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units. This includes, but is not limited to, the purchase and rehabilitation of units for sale. Monies may also be used to pay for one-time programs for code enforcement, quality of life and general health and safety activities. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this article. (2) The fund shall be administered by the executive director, or his or her designee, who may develop procedures in the city's Affordable Housing Funds Policies and Procedures to implement the purposes of the inclusionary housing fund consistent with the requirements of this article and any adopted budget of the city. (3) Monies deposited in accordance with this section shall be used in accordance with the Affordable Housing Funds Policies and Procedures, housing element, consolidated plan, or subsequent plan adopted by the city council to construct, rehabilitate, or subsidize affordable housing or to recapture affordable housing at risk of market conversion, or to assist other government entities, private organizations, or individuals to do so. Permissible uses include, but are not limited to, assistance to housing development corporations, equity participation 75B-21 loans, grants, pre -home ownership co -investment, pre -development loan funds, participation leases, or other public -private partnership arrangements. The inclusionary housing fund may be used for the benefit of both rental and owner - occupied housing. (4) A developer receiving funding from the Inclusionary Housing Fund shall implement a local preference in their resident selection criteria and marketing policies meeting guidelines established by the executive director. (5) A developer opting for the in lieu payment option or receiving funding from the Inclusionary Housing Fund, as well as its contractors and subcontractors at every tier performing work for the new housing units is encouraged and should provide an enforceable commitment that a skilled and trained workforce will be used to complete a contract or project in accordance with Public Contract Code §§ 2601-2602. Sec.41-1910. -Administrative. (a) In -lieu fee calculation. The amount per square foot of the inclusionary housing in - lieu fee shall be subject to city council review and consideration before the end of calendar year 2018, but after June 30, 2018. Between July 1, 2018 and December 31, 2018, staff shall report on the effectiveness of this ordinance and provide options for council consideration on the components of this ordinance, including, but not limited to, the monetary amount of inclusionary in -lieu fee per square foot. (b) Prior projects. The applicant(s) of any project for which a site plan review application was submitted and such application was deemed complete prior to August 4, 2015, may either construct the inclusionary units pursuant to the prior housing opportunity ordinance (Ordinance No. NS-2825) or pay an in lieu fee calculated by the formula under the prior housing opportunity ordinance (Ordinance No. NS-2825) or request to revise its inclusionary housing plan and/or inclusionary housing agreement and pay an in -lieu fee of nine dollars and thirty-five cents ($9.35) per square foot of habitable space for the entire project's inclusionary housing obligation. (c) Administration fees. The council may by resolution establish reasonable fees and deposits for the administration of this article including an annual monitoring fee and an inclusionary housing plan submittal fee. (d) Monitoring/audits. At the time of initial occupancy, and annually thereafter, the city will monitor the project to ensure that the income verifications are correct and in compliance with the inclusionary housing administrative procedures. For ownership units, the city shall monitor to verify that owner -occupancy requirements are maintained. Developer/property owners are required to cooperate with the city in promptly providing all information requested by the city in monitoring compliance with program requirements. The city will conduct periodic random quality control audits of inclusionary units to assure compliance with rules and requirements. Such audits may include verification of continued occupancy in inclusionary units by 75B-22 eligible tenants, compliance with the inclusionary housing plan and agreement, and physical inspections of the residential project. (e) Administrative procedures. The city manager is hereby authorized and directed to promulgate administrative procedures for the implementation of this article. Secs. 41-1911-41-1999. - Reserved. Section 4. If any section, subsection, sentence, clause, phrase or portion of this ordinance for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Santa Ana hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 5. This ordinance shall become effective thirty (30) days after its adoption. Section 6. The Clerk of the Council shall certify the adoption of this ordinance and shall cause the same to be published as required by law. ADOPTED this day of 12020. APPROVED AS TO FORM: Sonia R. Carvalho City Attorney Lisa Storck Assistant City Attorney Miguel A. Pulido Mayor 75B-23 AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers Iya iri91N-A 1rx.1y_11ar�-1r_11Ito] 0F_l0axe] : Eel nr_lIIVA I, DAISY GOMEZ, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS-XXXX to be the original ordinance adopted by the City Council of the City of Santa Ana on 2020 and that said ordinance was published in accordance with the Charter of the City of Santa Ana. Date: Clerk of the Council City of Santa Ana 75B-24 - \ \ \ \ \ \ \ \ / E0 \ \ \ \ \ \ .g \ \ \ ! ! _f | } )\ { k , ; ; | ! ! _ � ; § ] ]) ! LB ; , /ib .2 2 /{ /\ § j\\ j j j\ j ; B § bi ! | : t : ! � ) ) ! Z«« Z z w w« � \ � { } \ \ _ m LT � um) f \ ) ) \ / ! ` - rL P4 191 Exhibit 2 ORDINANCE NO. NS-XXXX AN ORDINANCE OF THE CITY OF SANTA ANA AMENDING CHAPTER 41, ARTICLE XVIII.I (HOUSING OPPORTUNITY ORDINANCE) OF THE SANTA ANA MUNICIPAL CODE TO MODIFY APPLICABILITY AND VARIOUS IMPLEMENTATION PROVISIONS OF THE ORDINANCE THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS FOLLOWS: Section 1. The City Council of Santa Ana hereby finds, determines and declares as follows: A. In Santa Ana, as in other cities in California, there has been a deficit in much needed housing. It is difficult to meet the many housing needs which include, but are not limited to: increasing the housing supply and mix of housing types, rental or ownership opportunities, affordability, promoting infill development and socio- economic equity, the protection of environmental resources, and the encouragement of efficient development patterns. B. In 2015, the City amended its Housing Opportunity Ordinance (HOO) in the Santa Ana Municipal Code (SAMC Sections 41-1900 through 41-1910) to require the construction of affordable units on or off -site or the payment of an in -lieu fee in the amount of $5.00 per square foot of habitable space for projects consisting of 5-20 units, and the payment of an in -lieu fee in the amount of $15.00 per square foot of habitable space for projects with over twenty (20) units. C. In addition to the housing crisis, international, national, state, and local health and governmental authorities are responding to an outbreak of respiratory disease caused by a novel coronavirus named "SARS-Co V-2," and the disease it causes has been named "coronavirus disease 2019", abbreviated COVID-19 ("COVID-19"). D. On March 4, 2020, the Governor of the State of California declared a state of emergency to make additional resources available, formalize emergency actions already underway across multiple state agencies and departments, and help the state prepare for the broader spread of COVID-19. E. On March 13, 2020, the President of the United States of America declared a national emergency and announced that the federal government would make emergency funding available to assist state and local governments in preventing the spread of and addressing the effects of COVID-19. 75B-26 F. The Orange County Board of Supervisors and Department of Public Health declared a local emergency and local public health emergency to aid the regional healthcare and governmental community in responding to COVID-19. G. On March 17, 2020, the Santa Ana City Council proclaimed the existence of a local emergency to ensure the availability of mutual aid and support an expedient response to the COVID-19 pandemic. H. As a result of the public health emergency and the precautions recommended by health authorities, City Hall and the public counters for development processing and permit applications in Santa Ana were closed to the public from March 18 through June 1, 2020, thereby limiting the processing of development applications, delaying development projects that were already approved, and thereby impacting development activities in the city for over 10 weeks. The City Council of the City of Santa Ana is concerned about the unplanned detrimental effects caused by COVID 19 on the local economy and the development and construction of housing in the City. These unforeseen issues are of grave concern as it is imperative for the City to maintain a steady stream of housing units in the pipeline at all times. J. As a result of current world events, construction of single-family homes plummeted to its slowest pace in several years. Single-family housing starts dropped 17.5 percent while multifamily housing starts (5 or more units in a structure) fell 32.1 percent in April and were down 3.9 percent from a year earlier. K. Lack of housing units in the City of Santa Ana is a threat to public health and safety and requires urgent intervening action by the City Council. L. In an effort to combat the anticipated severe negative effects that a reduction in the availability of housing units in the City of Santa Ana will cause to the City and its residents, the City Council has determined that a reduction in the HOO fee will serve as an incentive and a catalyst for builders to initiate construction of housing in the City and for the City to continue providing quality housing opportunities in the City. M. The Santa Ana City Council finds that the construction of new housing units will also stimulate the economy by providing jobs and the City is committed to encouraging that end result. N. The Santa Ana City Council finds that requiring projects with over twenty units to pay the full $15.00 per square foot in -lieu housing fee would pose a serious threat to the public interest, health, safety and welfare for the following reasons: (1) It would adversely impact the development of housing projects in the city; 75B-27 (2) It would adversely affect the number of housing developments in the pipeline; (3) It would cause a decline in the available housing stock; (4) It would put residents at risk for homelessness; (5) It would cause a decline in housing units available at diverse price points; and (6) It would risk the public health, safety and welfare of the City residents needing adequate housing. O. The City Council of the City of Santa Ana desires to use the inclusionary housing fund to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city with the priority on creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units. This includes, but is not limited to, the purchase and rehabilitation of units for sale and the recapturing of affordable housing units at risk of market conversion. Monies may also be used to pay for one-time programs for code enforcement, and quality of life and general health and safety activities. P. The Request for Council Action for this ordinance dated August 18, 2020, and duly signed by the Executive Director of the Planning and Building Agency shall, by this reference, be incorporated herein, and together with this ordinance, any amendments or supplements, and oral testimony constitute the necessary findings for this ordinance. Section 2. The proposed ordinance has been reviewed with respect to applicability of the California Environmental Quality Act ("CEQA") and the State CEQA Guidelines (California Code of Regulations, Title 14, Section 15000 et seq.). The project is exempt from CEQA as it can be seen with certainty that there is no impact on the environment [Section 15061(b) (3)] and a Notice of Exemption will be filed upon adoption of this ordinance. Section 3. The Santa Ana City Council hereby finds, determines and declares that Santa Ana Municipal Code Chapter 41, Article XVIII.I is hereby amended and restated, in its entirety as follows: ARTICLE WILL - HOUSING OPPORTUNITY ORDINANCE Sec. 41-1900. - Purpose. This article establishes standards and procedures to encourage the development of housing that is affordable to a range of households with varying income levels. The 75B-28 purpose of this article is to encourage the development and availability of affordable housing by requiring the inclusion of affordable housing units within new developments or the conversion of rental units to condominium ownership when the number of units exceed the densities permitted under the 1g eneral p.Plan. Sec. 41-1901. - Definitions. As used in this article, the following terms shall have the following meanings: Adjusted for household size appropriate for the unit means a household of one person in the case of a studio unit, two (2) persons in the case of a one -bedroom unit, three (3) persons in the case of a two -bedroom unit, four (4) persons in the case of a three -bedroom unit, and five (5) persons in the case of a four -bedroom unit. Administrative procedures means those regulations promulgated by the executive director pursuant to section 41-1910 of this article. Affordable housing cost means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified, as follows Extremely low-income households. Thirty (30) percent of the income of a household earning thirty (30) percent of the Orange County median income adjusted for family size appropriate for the unit. Very low-income households. Thirty (30) percent of the income of a household earning fifty (50) percent of the Orange County median income adjusted for family size appropriate for the unit. Low-income households. Thirty (30) percent of the income of a household earning seventy eighty (7&80) percent of the Orange County median income Bale i irdtc Rd thirty (39) n Rt of the in of R. hei icehe LJ earRiRg ivty (@Q) n Rt adjusted i^ eitn, crtier oaoe for family size appropriate for the unit. Moderate —income households. Thirty (30) percent of the income of a household earning one hundred twenty (120) percent of the Orange County median income adjusted for family size appropriate for the unit. The qualifying limits for very low-income, low-income and moderate -income households are established and amended annually pursuant to Section 8 of the United States Housing Act of 1937. The limits are published by the Secretary of Housing and Urban Development. Developer means any association, corporation, firm, joint venture, partnership, person, or any entity or combination of entities, which seeks city approval for all or part of a residential project. 75B-29 Development Agreement means an agreement approved by the City Council between a property owner and the City pursuant to Government Code section 65864, et sea. Entitled Residential Project means a development protect that includes residential units subject to the provisions and applicability of this Article WILL that received entitlement approvals by City Council action between August 4, 2015 and August 17, 2020 to construct the residential project and which has not been issued a building permit prior to August 18, 2020. A list of the currently Entitled Residential Projects is attached hereto as Exhibit A and is incorporated by reference. Executive director means the executive director of community development for the city. General Plan means the adopted general plan for the City of Santa Ana. Inclusionary housing agreement means a legally binding agreement between the developer and the city, in a form and substance satisfactory to the executive director and the city attorney, and containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. Inclusionary housing fund means the fund created by the city in which all fees collected in compliance with this article shall be deposited. Inclusionary housing plan means the plan submitted by the developer, in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. Inclusionary unit means a dwelling unit that will be offered for sale or rent to very low, of low, or moderate income households, at an affordable housing cost, in compliance with this article. Low-income units and very low-income units means inclusionary units restricted to occupancy by low or very low-income households, respectively, at an affordable housing cost. Market rate units means dwelling units in a residential project that are not inclusionary units. y.'hnsp in a rJgec Ant exceed the qualifying ImMitc fgr 104W in a fen.iliec H9616ORg AGt Gf 1937. The limits.; shall be published the Galifernia Cede of RegulatiGFI& flepa Ftment Of H9 icing and (`gr. M inity Development shell by re i iatign establish I g e hgi isehgWs innL ides veFy to ORGame households, s rlefi nerJ in the Health A. Cafety QGGle Qegtign 59495, RGI evtreMely IGW in a hgiicehg Ws rJeF..e.J in Cestig.. G/1�l1L.` , 75B-30 Moderate -income units means inclusionary units restricted to occupancy by Moderate -income households at an affordable housing cost. P4pe4pe Prior project means any project for which an application was submitted and the application was deemed complete prior to August 4, 2015. Regulatory agreement means an agreement entered into between the City of Santa Ana or the Santa Ana Community Development Agency and a developer by which the developer covenants to keep certain housing units at an affordable housing cost for a specified period of time. Rehabilitated units/rehabilitation means the improvement of a unit in substandard condition to a decent, safe and sanitary level. Units are in substandard condition when, while they may be structurally sound, they do not provide safe and adequate shelter, and in their present condition endanger the health, safety or well-being of the occupants. Residential project/project means any of the following: A subdivision resulting in the creation of five (5) or more residential lots or residential condominium units; or The new construction of a project consisting of five (5) or more multi -family units; or The new construction of five (5) or more separate houses or dwelling units; or The conversion of five (5) or more existing residential rental units to condominium ownership. Target area means that area designated by the city from time to time, on an as - needed basis, as a priority area for rehabilitation due to health and safety concerns. Total housing costs the total monthly or annual recurring expenses required of a household to obtain shelter. For a rental unit, total housing costs shall include the monthly rent payment and utilities paid by the tenant (excluding telephone and television). For an ownership unit, total housing costs shall include the mortgage payment (principal and interest), insurance, homeowners' association dues (if applicable), private mortgage insurance (if applicable), taxes, utilities, an allowance for maintenance and any other related assessments. ■- - 75B-31 Sec. 41-1902. - Applicability and inclusionary unit requirements. (a) Applicability. The requirements of this article shall apply to any new residential project comprised of twenty (20) or more residential lots or residential units located within the city, including new construction, and condominium conversions which exceed the 1gGeneral p2lan prescribed densities. (b) Applications. The requirements of this article shall apply to any new residential project proposed in connection with an application to do any of the following: (1) Increase the permitted residential density of the subject property above the density permitted by applicable Zenin^ the General Plan at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the applicable ZORORg density permitted bV the General Plan. (2) IRGrea6e—iR the peFMittedFesidPRt+a1aeRRity- OF PeKseRtage ofTesideRtal develepmen+ elLAYP-d rJiie W ni+v initiatedZGRe shennes after Navemher 78 :204 1- (42) Increase the permitted percentage of residential development allowed for a mixed -use development above the percentage at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the applicable Z nin,. density permitted bV the General Plan. (4) Approval f,-eWgjeGts�P: y LJIC60+" 'len FeF ++inn F pOIiReRtl' aT land uses puFsuan++e division 29 of this chapter (53) Convert rental units to condominium ownership. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the density permitted by the General Plan. (c) Units for sale. If the new residential project consists of units for sale, then a minimum of fifteen rt�ten (a-5 10) percent of the total number of units in the project shall be sold ar rPRtP : to aew-moderate income households. (d) Rental units. If the new residential project consists of rental units, then a minimum of fifteen (15) percent of the units shall be rented to low-income households, or ten (10) percent rented to very low-income households. (e) Rounding of quantities in calculations. In calculating the required number of inclusionary units, fractional units shall be rounded -up to the next whole unit. The developer may choose to pay an in -lieu fee set forth in section 41-1904(c) for the fractional units, which shall be calculated based on the number of habitable square feet applicable in each case. (f) Displacement of existing inclusionary units. Notwithstanding any other provision of this article, any residential project subject to this article that results in the displacement of very low and/or low income household(s) shall be required to provide on -site inclusionary units as required by this article. 75B-32 (g) Compliance with article. All inclusionary units required by this article shall be sold or rented in compliance with this article. Sec. 41-1903. - Exempt projects. The following are exempt from the requirements of this article (a) aApplications deemed complete. Applications that include a residential project for which a development application has been deemed complete prior to November 28, 2011. (b) Development agreements. A residential project that is the subject of a GDevelopment aAgreement under applicable provisions of the California Government Code that expressly provides for an exclusion to this article or provides for a different amount of inclusionary units from that specified by this article, provided the 4Development aAgreement was adopted on or before November 28, 2011. (c) Project with regulatory agreement. A residential project for which a regulatory agreement has been approved, provided that the regulatory agreement is effective at the time the residential project would otherwise be required to comply with the requirements of this article, and there is no uncured breach of the regulatory agreement before issuance of a certificate of occupancy for the project. This may include a residential project that has obtained a density bonus under article XVI.I of the Santa Ana Municipal Code. Such projects cannot be used to satisfy the inclusionary requirement for another project. (d) Adaptive Reuse. Adaptive reuse development projects pursuant to Chapter 41, Article XVI.I I —Adaptive Reuse. Sec. 41-1904. - Options to satisfy inclusionary requirements. (a) On -site units. The primary means of complying with the inclusionary requirements of this article shall be the provision of on -site inclusionary units in accordance with section 41-1901, above. A developer may only satisfy the requirements of this article by means of an alternative to on -site inclusionary units in accordance with the requirements and procedures of this section. (b) Off -site units. New units. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by constructing the required new inclusionary housing at a different location within the city borders at the ratio of one square foot of habitable inclusionary unit space for each required habitable square foot. While the total habitable square footage area of the required new inclusionary units must be the same as the sum -total of the number of habitable square feet for the project as directed by this ordinance, the number of units and bedrooms associated with the off -site units may be approved by the review authority of the 75B-33 city, consistent with the type of affordable housing needed at the time of project review. 2. Rehabilitated units outside a designated target area. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one and one-half (1Y2) habitable square feet per each required habitable square foot of inclusionary units. 3. Rehabilitated units within a designated target area. Upon application, the developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one habitable square foot per each required habitable square foot of affordable inclusionary units. (c) In -lieu fee. (1 \ / f '* In the f Residential Droi� n Mining CT� 5T� i o e�e%aim$�oc$e�gr-'cr-rtc 'vrTTcJ erg behyeen fide /S\ Rrl twenty (29) sideR+ial Io+s AF FesideRtial Rite the inayIleveloner eleg+ +o satisfy the IRnLmioRaFy I IRi+ FequiFernents for the Dro ion+ uihole OF OR art by n eR+ of a fee in Iivi 1 of n Rs+n ig+ing s GMe OF all of the r rPd i note The a n+ of +he fee allowed by +hoc sec.+ien Shall he five dells Fs n square feet (" 001ff 2—\ of the sum +etal of the number of T--v�--n-r��aiTr-�vRr-ormc�zcr"mvcr habitable s e fee+yAthin the eR+ire Droieg+ a6 mea6ured from the ev+erier vialls of +her sirlen+ial units. This gakzula+ien does not inczlude ev+erier hallway6 GommoR aFeas, laRrlsoape opeR 6paGe 9F ev+erier staipNays (2-1) More than 20 units. In +,. ;e c;ase of a A Residential p.Project comprised of more than twenty (20) residential lots or residential units, the developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be fifteen five dollars per square foot ($4- 5.00/ft. 2 ) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. (2) Entitled Residential Proiects. The applicant(s) of an Entitled Residential Project (see Exhibit A) may either construct the inclusionary units or pay an in lieu fee as follows: (i) Twenty (20) or fewer units. In the case of an Entitled Residential Project containing between five (5) and twenty (20) residential lots or residential units, the Developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be five dollars per square foot ($5.00/ft.) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include 75B-34 exterior hallways, common areas, landscape, open space or exterior stairways. (ii) More than 20 units. In the case of an Entitled Residential Project comprised of more than twenty (20) residential lots or residential units, the Developer may elect to satisfV the InclusionarV Unit requirements for the Protect, in whole or in part, bV payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be ten dollars per square foot ($10.00/ft.) of the sum total of the number of habitable square feet within the entire Protect, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. The in lieu fee amount allowed herein bV this subsection shall revert to fifteen dollars per square foot ($15.00) on April 1, 2021 for any construction which adds net residential units, which has City -approved entitlements, that has not been issued a building permit bV April 1, 2021. (iii) A Residential Protect that has been entitled and approved with conditions to pay a specific in lieu fee or has a city council approved Development Agreement to pay a specific in -lieu fee shall comply with the conditions or the Development Agreement as approved and shall not be modified bV this Ordinance. (3) Timing of payment. The developer shall pay aRy the in -lieu fees allowed by this section is—f-lf befere prior to issuance of the 4&t building permit for any construction which adds net pertieR of residential units Rnn . s„de +„l eFti ns of a mixed , development. The developer may provide input regarding what project the in lieu fees should be applied towards, but such input shall not be dispositive. The in lieu fees collected by the city are city funds over which the city has complete and absolute discretion. (4) Inclusionary housing fund. Fees collected in compliance with this section shall be deposited in the inclusionary housing fund. Sec. 41-1904.1. - Inclusionary housing development incentives for production of units. (a) In order to make the production of new inclusionary units on -site or off -site or off - site rehabilitated units, certain incentives, standards and concessions shall be allowed and prescribed as set forth herein below. Such concessions shall not be available to those developers that choose to pay an in lieu fee rather than build the units. The developer may opt to take advantage of up to two (2) concessions among the following possible concessions: (1) Parking concession. One on -site parking space for each zero to one bedroom unit; two (2) on -site parking spaces for each two (2) to three (3) bedroom unit; two and one-half (2'/2) parking spaces for each four (4) or more bedroom unit. 75B-35 (2) Concession on one of the following Zoning Code site development standards: (i) Setback reduction of up to twenty-five (25) percent reduction on subject property; (ii) Height increase of up to twenty (20) additional feet. ORION 111.10 (b) A developer of a for sale Residential Protect proposing to provide on -site Moderate Income Units and a surrounding community benefit may opt to take advantage of up to three (3) of the above concessions. The surrounding community benefit will include but not be limited to park improvements, urban community aardens. developer -funded down pavment assistance. or subsidv of services. activities or programs Sec. 41-1905. - Housing plan and housing agreement. (a) Submittal and execution. The developer shall comply with the following requirements: (1) Inclusionary housing plan. The developer shall submit an inclusionary housing plan in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. The inclusionary housing plan and its supportive documents, plans, and details shall be submitted at the same time as the site plan and application materials for the original project. All inclusionary housing plans shall be subject to the approval of the executive director and subject to appeal processes and procedures set forth in the Santa Ana Municipal Code. (2) Inclusionary housing agreement. The developer shall execute and cause to be recorded an inclusionary housing agreement. The inclusionary housing agreement shall be a legally binding agreement between the developer and the city, executed by the city manager, or his or her designee, and in a form and substance satisfactory to the executive director and the city attorney, and 75B-36 containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. (b) Discretionary approvals. No discretionary approval shall be issued for a residential project subject to this article until the developer has submitted an inclusionary housing plan. (c) Issuance of building permit. No building permit shall be issued for a residential project subject to this article unless the executive director has approved the inclusionary housing plan, and any required inclusionary housing agreement has been recorded. (d) Issuance of certificate of occupancy. A certificate of occupancy shall not be issued for a residential project subject to this article unless the approved inclusionary housing plan has been fully implemented. E,Y� �QiE'I�Z:1Q.�iTiLMOR (a) Location within project, relationship to non-inclusionary units. All inclusionary units shall be: (1) Reasonably dispersed throughout the residential project; (2) Proportional, in number of bedrooms, gross floor area of habitable space, and location, to the market rate units; (3) Comparable to the market rate units included in the residential project in terms of design, materials, finished quality, and appearance; and (4) Permitted the same access to project amenities and recreational facilities, as are market rate units. (b) Timing of construction. All inclusionary units in a residential project shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (c) Location outside the proposed original project. For projects where the developer proposes to either produce new inclusionary units or rehabilitate existing off -site units to meet the inclusionary affordable housing requirements of this ordinance, the off -site project(s) containing the required inclusionary units shall be subject to the following requirements: (1) The sum -total area (in habitable square feet) of all the newly constructed off - site inclusionary units shall be the same number of habitable square feet of inclusionary area as required by this ordinance. For the purpose of the calculation of the number of square feet of required inclusionary housing, the total gross habitable square feet of the housing units of the original market rate project shall be used, as measured from exterior walls to exterior walls of the market units provided as the base for calculation either ten (10) percent for very 75B-37 low income or fifteen (15) percent for low income inclusionary units. The common areas, exterior hallways, stairways, patios, and balconies shall not be calculated in determining the number of required square feet of inclusionary housing production. All new or rehabilitated units must meet all current zoning and general plan standards. (2) While the total number of square feet of inclusionary housing requirement is calculated based on the requirements of this ordinance, the number of units, bedrooms and other amenities on the proposed off -site inclusionary housing location shall be approved by the review authority commensurate with the size and type of units most in demand at the time of submittal of the application. (3) Any off -site affordable inclusionary housing project shall be substantially comparable to the market rate units included in the residential project in terms of quality of design, materials and finishes. (4) If tenants are displaced due to rehabilitation of housing to meet the inclusionary unit requirement, the developer shall be responsible for relocation costs as required by state law. (5) No city, housing authority, or public funds, subsidies, or participation of any kind shall be expended on the production or building of any inclusionary housing projects associated with meeting the inclusionary unit requirement. (d) Timing of construction. All inclusionary units in a residential project or proposed off -site new inclusionary units or rehabilitated units shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (e) Units for sale. (1) Time limit for inclusionary restrictions. A unit for sale shall be restricted to the target income level group at the applicable affordable housing cost for a minimum of fifty-five (55) years. (2) Certification of purchasers. The developer and all subsequent owners of an inclusionary unit offered for sale shall certify, on a form provided by the city, the income of the purchaser and that such owners will live in such inclusionary unit as their primary residence. (3) Resale price control. In order to maintain the availability of inclusionary units required by this article, the resale price of an owner occupied inclusionary unit shall be limited to the lesser of the fair market value of the unit as established by a licensed real estate agent based upon three (3) comparable properties or the restricted resale price. For these purposes, the restricted resale price shall be the applicable affordable housing cost. (4) Inheritance of inclusionary units. Upon the death of an owner of an owner - occupied inclusionary unit, title in the property may transfer to the surviving joint tenant or heir (in the case of the death of a sole owner or all owners of the household). 75B-38 (5) Forfeiture. If an inclusionary unit for sale is sold for an amount in excess of the resale price controls required by this section, the buyer and the seller shall be jointly and severally liable to the city for the amount in excess of the affordable housing cost at the time of such sale of the inclusionary unit. Recovered funds shall be deposited into the inclusionary housing fund. Notwithstanding the foregoing, city may allow the buyer and seller to cure any violation of the resale price controls within one hundred eighty (180) days. (f) Rental units. (1) Time limit for inclusionary restrictions. A rental inclusionary unit shall remain restricted to the target income level group at the applicable affordable housing cost for fifty-five (55) years. (2) Certification of renters. The owner of any rental inclusionary unit shall certify, on a form provided by the city, the income of all members of the household above the age of eighteen (18) at the time of the initial rental and annually thereafter. (3) Forfeiture. Any lessor who leases an inclusionary unit in violation of this article shall be required to forfeit to the city all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (g) Execution and recording of documents. The executive director may require the execution and recording of whatever documents are required to ensure enforcement of this section; including but not limited to promissory notes, deeds of trust, resale restrictions, rights of first refusal, options to purchase, and/or other documents, which shall be recorded against all inclusionary units. (h) General prohibitions. (1) No person shall sell or rent an inclusionary unit at a price or rent in excess of the maximum amount allowed by any restriction placed on the unit in accordance with this article. (2) No person shall sell or rent an inclusionary unit to a person or persons that do not meet the income restrictions placed on the unit in accordance with this article. (3) No person shall provide false or materially incomplete information to the city or to a seller or lessor of an inclusionary unit to obtain occupancy of housing for which that person is not eligible. (i) Principal residency requirement. (1) The owner or lessee of an inclusionary unit shall reside in the unit for not less than ten (10) out of every twelve (12) months. (2) No owner or lessee of an inclusionary unit shall lease or sublease, as applicable, an inclusionary unit without the prior permission of the executive director. 75B-39 Sec. 41-1907. - Reserved. Sec. 41-1908. - Enforcement. (a) Violation. Any violation of this article constitutes a misdemeanor (b) Forfeiture of funds. Any individual who sells an inclusionary unit in violation of this article shall be required to forfeit any money in excess of the affordable housing cost at such time. Any individual who rents an inclusionary unit in violation of this article shall be required to forfeit all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (c) Legal actions. The city may institute any appropriate legal actions or proceedings necessary to ensure compliance with this article, including actions: (1) To disapprove, revoke, or suspend any permit, including a building permit, certificate of occupancy, or discretionary approval; and (2) For injunctive relief or damages. (d) Recovery of costs. In any action to enforce this article, or an inclusionary housing agreement recorded hereunder, the city shall be entitled to recover its reasonable attorney's fees and costs. Sec. 41-1909. - Inclusionary housing fund. (a) Inclusionary housing fund. There is hereby established a separate fund of the city, to be known as the inclusionary housing fund. All monies collected pursuant to this article shall be deposited in the inclusionary housing fund. Additional monies from other sources may be deposited in the inclusionary housing fund. The monies deposited in the inclusionary housing fund shall be subject to the following conditions: (1) Monies deposited into the inclusionary housing fund must be used to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city as specified in the city's Affordable Housing Funds Policies and Procedures. A priority will be on the creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units. This includes, but is not limited to, the purchase and rehabilitation of units for sale. Monies may also be used to pay for one-time programs for code enforcement, quality of life and general health and safety activities. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this article. (2) The fund shall be administered by the executive director, or his or her designee, who may develop procedures in the city's Affordable Housing Funds Policies and Procedures to implement the purposes of the inclusionary housing 75B-40 fund consistent with the requirements of this article and any adopted budget of the city. (3) Monies deposited in accordance with this section shall be used in accordance with the Affordable Housing Funds Policies and Procedures, housing element, consolidated plan, or subsequent plan adopted by the city council to construct, rehabilitate, or subsidize affordable housing or to recapture affordable housing at risk of market conversion, or to assist other government entities, private organizations, or individuals to do so. Permissible uses include, but are not limited to, assistance to housing development corporations, equity participation loans, grants, pre -home ownership co -investment, pre -development loan funds, participation leases, or other public -private partnership arrangements. The inclusionary housing fund may be used for the benefit of both rental and owner - occupied housing. (4) A developer receiving funding from the Inclusionary Housing Fund shall implement a local preference in their resident selection criteria and marketing policies meeting guidelines established by the executive director. (5) A developer opting for the in lieu payment option or receiving funding from the Inclusionary Housing Fund, as well as its contractors and subcontractors at every tier performing work for the new housing units is encouraged and should provide an enforceable commitment that a skilled and trained workforce will be used to complete a contract or project in accordance with Public Contract Code ✓z 2601-2602. Sec.41-1910. -Administrative. (a) In -lieu fee calculation. The amount per square foot of the inclusionary housing in - lieu fee shall be subject to city council review and consideration before the end of calendar year 2018, but after June 30, 2018. Between July 1, 2018 and December 31, 2018, staff shall report on the effectiveness of this ordinance and provide options for council consideration on the components of this ordinance, including, but not limited to, the monetary amount of inclusionary in -lieu fee per square foot. (b) P4p&Age Prior projects. The applicant(s) of any project for which a site plan review application was submitted and such application was deemed complete prior to August 4, 2015, may either construct the inclusionary units pursuant to the prior housing opportunity ordinance (Ordinance No. NS-2825) or pay an in lieu fee calculated by the formula under the prior housing opportunity ordinance (Ordinance No. NS-2825) or request to revise its inclusionary housing plan and/or inclusionary housing agreement and pay an in -lieu fee of nine dollars and thirty-five cents ($9.35) per square foot of habitable space for the entire project's inclusionary housing obligation. (c) Administration fees. The council may by resolution establish reasonable fees and deposits for the administration of this article including an annual monitoring fee and an inclusionary housing plan submittal fee. 75B-41 (d) Monitoring/audits. At the time of initial occupancy, and annually thereafter, the city will monitor the project to ensure that the income verifications are correct and in compliance with the inclusionary housing administrative procedures. For ownership units, the city shall monitor to verify that owner -occupancy requirements are maintained. Developer/property owners are required to cooperate with the city in promptly providing all information requested by the city in monitoring compliance with program requirements. The city will conduct periodic random quality control audits of inclusionary units to assure compliance with rules and requirements. Such audits may include verification of continued occupancy in inclusionary units by eligible tenants, compliance with the inclusionary housing plan and agreement, and physical inspections of the residential project. (e) Administrative procedures. The city manager is hereby authorized and directed to promulgate administrative procedures for the implementation of this article. Secs. 41-1911-41-1999. - Reserved. Section 4. If any section, subsection, sentence, clause, phrase or portion of this ordinance for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Santa Ana hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 5. This ordinance shall become effective thirty (30) days after its adoption. Section 6. The Clerk of the Council shall certify the adoption of this ordinance and shall cause the same to be published as required by law. ADOPTED this day of 12020. Miguel A. Pulido Mayor 75B-42 APPROVED AS TO FORM: Sonia R. Carvalho City Attorney By: Lisa E. Storck Assistant City Attorney IG\'I X.� .. . PTa'i1.T NOES: Councilmembers IG1:%�/G11�� .. . G1-11TM NOT PRESENT: Councilmembers CERTIFICATE OF ATTESTATION AND ORIGINALITY I, DAISY GOMEZ, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS-XXXX to be the original ordinance adopted by the City Council of the City of Santa Ana on 2020 and that said ordinance was published in accordance with the Charter of the City of Santa Ana. Date: Clerk of the Council City of Santa Ana 75B-43 - \ \ \ \ \ \ \ \ / E0 \ \ \ \ \ \ .g \ \ \ ! ! _f | } )\ { k , ; ; | ! ! _ � ; § ] ]) ! LB ; , /ib .2 2 /{ /\ § j\\ j j j\ j ; B § bi ! | : t : ! � ) ) ! Z«« Z z w w« � \ � { } \ \ _ m LT � um) f \ ) ) \ / ! ` - � EXHIBIT 3 REQUEST FOR Planning Commission Action PLANNING COMMISSION MEETING DATE: AUGUST 3, 2020 TITLE: PUBLIC HEARING — ZONING ORDINANCE AMENDMENT NO. 2020-03 TO UPDATE THE HOUSING OPPORTUNITY ORDINANCE Prepared by Vince Fregoso, AICP Exec ive D ctor RECOMMENDED ACTION PLANNING COMMISSION SECRETARY APPROVED ❑ As Recommended ❑ As Amended ❑ Set Public Hearing For DENIED ❑ Applicant's Request ❑ Staff Recommendation CONTINUED TO U1`_ Pla ning W nager Recommend that the City Council adopt an ordinance approving Zoning Ordinance Amendment No.2020-03. Request of Applicant The Planning Division is requesting approval of several revisions to Chapter 41 (Zoning) of the Santa Ana Municipal Code (SAMC) to amend various provisions of Article XVIII.I pertaining to the Housing Opportunity Ordinance. Project Background The Housing Element of the General Plan identifies the long range plans for housing throughout the City. The Housing Opportunity Ordinance was established in part to implement the Housing Element goal to promote the provision of affordable housing within the City. In an effort to meet this goal, the City adopted the Housing Opportunity Ordinance (HOO) in 2011 that applied to proposals for five or more housing units. The ordinance required these residential projects to provide 15 percent of the total number of units as affordable, whether the project is for sale or rent and applied to developments requesting a zone change or general plan amendment. Further, it applied to projects increasing the existing allowable residential density and the conversion of apartments to condominiums. It also provided the option to pay an in lieu fee instead of providing units subject to City Council approval. In 2015, the HOO was updated to make the inclusionary, housing requirements more predictable for housing developers and to increase affordable housing production in conjunction with new market rate housing development. Some examples of the ordinance changes included simplifying the complex in -lieu fee calculation, modifying the "moderate income" definition to 80 percent of the area median, and creating additional incentives to allow developers the option of 75B-45 Zoning Ordinance Amendment No. 2020-03 August 3, 2020 Page 2 providing inclusionary housing units either on or off -site. A provision of the ordinance was a requirement to revisit the HOO in three years to determine its effectiveness. Project Analysis In December 2018, the City Council received and filed a report on the effectiveness of the Housing Opportunity Ordinance that was adopted in 2015. In July 2019, the Council formed an Ad Hoc Committee to review the Ordinance as was required by the 2015 ordinance. The Ad Hoc Committee included Mayor Pro Tem Villegas, Councilmember Iglesias, and Councilmember Solorio. In May 2020, the Ad Hoc Committee was revised to include new members and continued the review efforts of the previous committee. The sections below provide a summary of the recommendations by the Ad Hoc Committee. Proposed Amendments: Definitions - This proposal consists of modifying certain definitions and the addition of new definitions. Definitions pertaining to "Affordable housing cost' and "Low income households" were modified to identify the type of households that qualify for these income levels. Further, a definition for "Moderate Income Households" is proposed to identify the parameters of this income level, a definition for "Entitled Residential Project' is proposed to identify when a project is entitled, a "General Plan" definition is proposed as is a definition for "Moderate income units." ■ Applicability of Ordinance — This section is proposed to be amended to only apply to those projects with 20 or more units in size and that are requesting an increase in the density permitted by the General Plan. The current ordinance applies to projects consisting of five or more units, projects requesting a zone change or a general plan amendment, and are within an overlay zone. It also reduces the percentage of for -sale units that need to be available for moderate income households from the current 15 percent to 10 percent of the total number of units in an effort to incentivize the construction of for -sale units. ■ Exempt Projects — Revises language to be consistent with a change made in 2015 to the Adaptive Reuse Ordinance by clarifying that an adaptive reuse project is not subject to the Housing Opportunity Ordinance. In -Lieu Fee Option — This section is proposed to be revised to reduce the in -lieu fee from $15 per habitable square foot to five dollars per habitable square foot. It also states that the in -lieu fee option does not apply to projects with less than 20 units. In addition, this section is proposed to be modified to clarify that, for phased projects, the total inclusionary fee will be paid as each phase of construction obtains a building permit. This section also provides an incentive for an "Entitled Residential Project' to obtain building permits during the current economic climate. An Entitled Residential Project that consists of 20 or more units will be allowed to pay a reduced fee of $10 per square foot of habitable area as compared to the current rate of $15 per habitable square foot. This 75B-46 Zoning Ordinance Amendment No. 2020-03 August 3, 2020 Page 3 incentive will be in place until April 2021, with any development not obtaining a building permit by that time obligated to pay the higher rate. Projects subject to a development agreement or an agreement to pay a specific in -lieu fee will be required to comply with the agreement as approved and will not be modified by the proposed ordinance. • Inclusionary Housing Development Incentives — This section is proposed to eliminate the "double" density bonus concession available for developers as part of the production of affordable units while incentivizing developments of for -sale units. The proposed changes will also allow a developer of for -sale, moderate income housing units to request three concessions from the City. The amendment also requires the developer to provide a community benefit as part of the project, which may include park improvements, a community garden, developer funded down payment assistance, or pay a subsidy toward services, activities or programs. Inclusionary Housing Fund — This section is proposed to be revised to clarify the use of in -lieu fees paid to the City. It provides the Community Development Agency with a priority for the use of the funds and allows the funds to be used for one-time programs for code enforcement, and quality of life and general health and safety activities. It also codifies the City's local preference for projects that are funded with in -lieu fees and encourages a commitment to use a skilled and trained workforce to complete the project. CEQA Analysis In accordance with the California Environmental Quality Act, the proposed project is exempt from further review pursuant to Section 15061 (b)(3), as there is no potential for causing a significant impact on the environment due to the adoption of the ordinance. Categorical Exemption Environmental Review No. 2020-53 will be filed for this project. Conclusion Following the direction of the City Council Ad Hoc Committee, staff recommends that the Planning Commission recommend that the City Council adopt an ordinance approving Zoning Ordinance Amendment No. 2020-03. kz- Vince Fregoso, AI P Planning Manager VF:vf M\Reporls2OA 2020-03 HOO Attachment: Exhibit 1 — Proposed Housing Opportunity Ordinance 75B-47 ORDINANCE NO. NS-XXXX AN ORDINANCE OF THE CITY OF SANTA ANA AMENDING CHAPTER 41, ARTICLE XVIII.I (HOUSING OPPORTUNITY ORDINANCE) OF THE SANTA ANA MUNICIPAL CODE TO MODIFY APPLICABILITY AND VARIOUS IMPLEMENTION PROVISIONS OF THE ORDINANCE THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS FOLLOWS: Section 1. The City Council of Santa Ana hereby finds, determines and declares as follows: A. In Santa Ana, as in other cities in California, there has been a deficit in much needed housing. It is difficult to meet the many housing needs which include, but are not limited to: increasing the housing supply and mix of housing types, rental or ownership opportunities, affordability, promoting infill development and socio- economic equity, the protection of environmental resources, and the encouragement of efficient development patterns. B. In 2015, the City amended its Housing Opportunity Ordinance (HOO) in the Santa Ana Municipal Code (SAMC Sections 41-1900 through 41-1910) to require the construction of affordable units on or off -site or the payment of an in -lieu fee in the amount of $5.00 per square foot of habitable space for projects consisting of 5-20 units, and the payment of an in -lieu fee in the amount of $15.00 per square foot of habitable space for projects with over twenty (20) units. C. In addition to the housing crisis, international, national, state, and local health and governmental authorities are responding to an outbreak of respiratory disease caused by a novel coronavirus named "SARS-Co V-2," and the disease it causes has been named "coronavirus disease 2019", abbreviated COVID-19 ("COVID-19"). D. On March 4, 2020, the Governor of the State of California declared a state of emergency to make additional resources available, formalize emergency actions already underway across multiple state agencies and departments, and help the state prepare for the broader spread of COVID-19. E. On March 13, 2020, the President of the United States of America declared a national emergency and announced that the federal government would make emergency funding available to assist state and local governments in preventing the spread of and addressing the effects of COVID-19. 75B-48 F. The Orange County Board of Supervisors and Department of Public Health declared a local emergency and local public health emergency to aid the regional healthcare and governmental community in responding to COVID-19. G. On March 17, 2020, the Santa Ana City Council proclaimed the existence of a local emergency to ensure the availability of mutual aid and support an expedient response to the COVID-19 pandemic. H. As a result of the public health emergency and the precautions recommended by health authorities, City Hall and the public counters for development processing and permit applications in Santa Ana were closed to the public from March 18 through June 1, 2020, thereby limiting the processing of development applications, delaying development projects that were already approved, and thereby impacting development activities in the city for over 10 weeks. I. The City Council of the City of Santa Ana is concerned about the unplanned detrimental effects caused by COVID 19 on the local economy and the development and construction of housing in the City. These unforeseen issues are of grave concern as it is imperative for the City to maintain a steady stream of housing units in the pipeline at all times. J. As a result of current world events, construction of single-family homes plummeted to its slowest pace in several years. Single-family housing starts dropped 17.5 percent while multifamily housing starts (5 or more units in a structure) fell 32.1 percent in April and were down 3.9 percent from a year earlier. K. Lack of housing units in the City of Santa Ana is a threat to public health and safety and requires urgent intervening action by the City Council. L. In an effort to combat the anticipated severe negative effects that a reduction in the availability of housing units in the City of Santa Ana will cause to the City and its residents, the City Council has determined that a reduction in the HOO fee will serve as an incentive and a catalyst for builders to initiate construction of housing in the City and for the City to continue providing quality housing opportunities in the City. M. The Santa Ana City Council finds that the construction of new housing units will also stimulate the economy by providing jobs and to that end the City is committed to encouraging that: N. The Santa Ana City Council finds that requiring projects with over twenty units to pay the full $15.00 per square foot in -lieu housing fee would pose a serious threat to the public interest, health, safety and welfare for the following reasons: (1) It would adversely impact the development of housing projects in the city; 75B-49 (2) It would adversely affect the number of housing developments in the pipeline; (3) It would cause a decline in the available housing stock; (4) It would put residents at risk for homelessness; (5) It would cause a decline in housing units available at diverse price points; and (6) It would risk the public health, safety and welfare of the City residents needing adequate housing. 0. The City Council of the City of Santa Ana desires to use the inclusionary housing fund to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city with the priority on creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units. This includes, but is not limited to, the purchase and rehabilitation of units for sale and the recapturing of affordable housing units at risk of market conversion. Monies may also be used to pay for one-time programs for code enforcement, and quality of life and general health and safety activities. P. The Request for Council Action for this ordinance dated August 18, 2020, and duly signed by the Executive Director of the Planning and Building Agency shall, by this reference, be incorporated herein, and together with this ordinance, any amendments or supplements, and oral testimony constitute the necessary findings for this ordinance. Section 2. The proposed ordinance has been reviewed with respect to applicability of the California Environmental Quality Act ("CEQA") and the State CEQA Guidelines (California Code of Regulations, Title 14, Section 15000 et seq.). The project is exempt from CEQA as it can be seen with certainty that there is no impact on the environment [Section 15061(b) (3)] and a Notice of Exemption will be filed upon adoption of this ordinance. Section 3: The Santa Ana City Council hereby finds, determines and declares that Santa Ana Municipal Code Chapter 41, Article XVIII.I is hereby amended and restated, in its entirety as follows: ARTICLE WILL - HOUSING OPPORTUNITY ORDINANCE Sec. 41-1900. - Purpose. This article establishes standards and procedures to encourage the development of housing that is affordable to a range of households with varying income levels. The 75B-50 purpose of this article is to encourage the development and availability of affordable housing by requiring the inclusion of affordable housing units within new developments or the conversion of rental units to condominium ownership when the number of units exceed the densities permitted under the @General pplan. Sec. 41-1901. - Definitions. As used in this article, the following terms shall have the following meanings: Adjusted for household size appropriate for the unit means a household of one person in the case of a studio unit, two (2) persons in the case of a one -bedroom unit, three (3) persons in the case of a two -bedroom unit, four (4) persons in the case of a three -bedroom unit, and five (5) persons in the case of a four -bedroom unit. Administrative procedures means those regulations promulgated by the executive director pursuant to section 41-1910 of this article. Affordable housing cost means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified, as follows-,4r} Extremely low-income households. Thirty (30) percent of the income of a household earning thirty (30) percent of the Orange County median income adjusted forfamily size appropriate for the unit. Very low-income households. Thirty (30) percent of the income of a household earning fifty (50) percent of the Orange County median income adjusted for family size appropriate for the unit. Low-income households. Thirty (30) percent of the income of a household earning seventy eighty (70-80) percent of the Orange County median income fir feYs,;e adjusted i^ ^+, for family size appropriate for the unit. Moderate —income households. Thirty (30) percent of the income of a household earning one hundred twenty (120) percent of the Orange County median income adjusted for family size appropriate for the unit The qualifying limits for very low-income low-income and moderate -income households are established and amended annually pursuant to Section 8 of the United States Housing Act of 1937. The limits are published by the Secretary of Housing and Urban Development. Developer means any association, corporation, firm, joint venture, partnership, person, or any entity or combination of entities, which seeks city approval for all or part of a residential project. 75B-51 Development Agreement means an agreement approved by the City Council between a property owner and the City pursuant to Government Code section 65864 et seg. Entitled Residential Proiect means a development project that includes residential units subject to the provisions and applicability of this Article WILL that received entitlement approvals by City Council action between August 4 2015 and August 17 2020 to construct the residential protect and which has not been issued a building Permit prior to August 18, 2020. Executive director means the executive director of community development for the city. General Plan means the adopted general plan for the City of Santa Ana lnclusionary housing agreement means a legally binding agreement between the developer and the city, in a form and substance satisfactory to the executive director and the city attorney, and containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. lnclusionary housing fund means the fund created by the city in which all fees collected in compliance with this article shall be deposited. inclusionary housing plan means the plan submitted by the developer, in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. lnclusionary unit means a dwelling unit that will be offered for sale or rent to very low, of low, or moderate income households, at an affordable housing cost, in compliance with this article. Low-income units and very low-income units means inclusionary units restricted to occupancy by low or very low-income households, respectively, at an affordable housing cost. Market rate units means dwelling units in a residential project that are not inclusionary units. dees net exceed the qualify'Rg limits, -for Imnler inGA-Fne families as PRtabl'shed and- amended fFem tome to tome pursuant to Reptlon. A- of the I-Wited. States Housing AGt of 1937. The limits shall be published 4n the California Code ef RegulatiGns as soon as possible after adeption by the Secretary ef Heusing and Urban Development. in the eveRt the federal standards are dIsGoRtinued, the Gal'fC)FR'a Department ef Housing and Community Deveic)pmeRt shall, by regulation, establish 75B-52 Moderate -income units means inclusionary units restricted to occupancy by Moderate -income households at an affordable housing cost P4peline Prior project means any project for which an application was submitted and the application was deemed complete prior to August 4, 2015. Regulatory agreement means an agreement entered into between the City of Santa Ana or the Santa Ana Community Development Agency and a developer by which the developer covenants to keep certain housing units at an affordable housing cost for a specified period of time. Rehabilitated units/rehabilitation means the improvement of a unit in substandard condition to a decent, safe and sanitary level. Units are in substandard condition when, while they may be structurally sound, they do not provide safe and adequate shelter, and in their present condition endanger the health, safety or well-being of the occupants. Residential project/project means any of the following: A subdivision resulting in the creation of five (5) or more residential lots or residential condominium units; or The new construction of a project consisting of five (5) or more multi -family units; or The new construction of five (5) or more separate houses or dwelling units; or The conversion of five (5) or more existing residential rental units to condominium ownership. Target area means that area designated by the city from time to time, on an as - needed basis, as a priority area for rehabilitation due to health and safety concerns. Total housing costs the total monthly or annual recurring expenses required of a household to obtain shelter. For a rental unit, total housing costs shall include the monthly rent payment and utilities paid by the tenant (excluding telephone and television). For an ownership unit, total housing costs shall include the mortgage payment (principal and interest), insurance, homeowners' association dues (if applicable), private mortgage insurance (if applicable), taxes, utilities, an allowance for maintenance and any other related assessments. ►. MINAINIMMININ­ Mill ■_ _ " ■_ .. _ WON INNIN . ._ 75B-53 Sec. 41-1902. - Applicability and inclusionary unit requirements. (a) Applicability. The requirements of this article shall apply to any new residential project comprised of twenty (20) or more residential lots or residential units located within the city, including new construction, and condominium conversions which exceed the @General pPlan prescribed densities. (b) Applications. The requirements of this article shall apply to any new residential project proposed in connection with an application to do any of the following: (1) Increase the permitted residential density of the subject property above the density permitted by apptisable-ZGRiRg the General Plan at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the applicable zoning density permitted by the General Plan. (2) InGrease On the peFrnitted residential density or per%Rtage Of residential development allowed due tO Gity initiated zone Ghanges after Nevernbep 28, 2011. (32) Increase the permitted percentage of residential development allowed for a mixed -use development above the percentage at the time of the application. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the app°Gable zon;R density permitted by the General Plan. (4) Appr49val of new projects on aR overlay zone site plan permitting resid!8Rtial land uses pursuant to division 78 f this h (53) Convert rental units to condominium ownership. The inclusionary requirements shall only apply to the incremental increase in the number of units beyond that which is allowed by the appliowb�g. density permitted by the General Plan. (c) Units for sale. If the new residential project consists of units for sale, then a minimum of fifteen ten (4Z 10) percent of the total number of units in the project shall be sold e ; rated to Jew -moderate income households. (d) Rental units. If the new residential project consists of rental units, then a minimum of fifteen (15) percent of the units shall be rented to low-income households, or ten (10) percent rented to very low-income households. (e) Rounding of quantities in calculations. In calculating the required number of inclusionary units, fractional units shall be rounded -up to the next whole unit. The developer may choose to pay an in -lieu fee set forth in section 41-1904(c) for the fractional units, which shall be calculated based on the number of habitable square feet applicable in each case. (f) Displacement of existing inclusionary units. Notwithstanding any other provision of this article, any residential project subject to this article that results in the displacement of very low and/or low income household(s) shall be required to provide on -site inclusionary units as required by this article. 75B-54 (g) Compliance with article. All inclusionary units required by this article shall be sold or rented in compliance with this article. Sec. 41-1903. - Exempt projects. The following are exempt from the requirements of this article (a) aApplications deemed complete. Applications that include a residential project for which a development application has been deemed complete prior to November 28, 2011. (b) Development agreements. A residential project that is the subject of a dDevelopment aAgreement under applicable provisions of the California Government Code that expressly provides for an exclusion to this article or provides for a different amount of inclusionary units from that specified by this article, provided the dDevelopment aAgreement was adopted on or before November 28, 2011. (c) Project with regulatory agreement. A residential project for which a regulatory agreement has been approved, provided that the regulatory agreement is effective at the time the residential project would otherwise be required to comply with the requirements of this article, and there is no uncured breach of the regulatory agreement before issuance of a certificate of occupancy for the project. This may include a residential project that has obtained a density bonus under article XVI.I of the Santa Ana Municipal Code. Such projects cannot be used to satisfy the inclusionary requirement for another project. (d) Adaptive Reuse Adaptive reuse development projects pursuant to Chapter 41, Article XVI.II — Adaptive Reuse. Sec. 41-1904. - Options to satisfy inclusionary requirements. (a) On -site units. The primary means of complying with the inclusionary requirements of this article shall be the provision of on -site inclusionary units in accordance with section 41-1901, above. A developer may only satisfy the requirements of this article by means of an alternative to on -site inclusionary units in accordance with the requirements and procedures of this section. (b) Off -site units. 1. New units. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by constructing the required new inclusionary housing at a different location within the city borders at the ratio of one square foot of habitable inclusionary unit space for each required habitable square foot. While the total habitable square footage area of the required new inclusionary units must be the same as the sum -total of the number of habitable square feet for the project as directed by this ordinance, the number of units and bedrooms associated with the off -site units may be approved by the review authority of the 75B-55 city, consistent with the type of affordable housing needed at the time of project review. 2. Rehabilitated units outside a designated target area. The developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one and one-half (1'/Z) habitable square feet per each required habitable square foot of inclusionary units. 3. Rehabilitated units within a designated target area. Upon application, the developer may satisfy the inclusionary unit requirements for the project, in whole or in part by substantially rehabilitating existing housing units elsewhere within the borders of the city at a rate of one habitable square foot per each required habitable square foot of affordable inclusionary units. (c) In -lieu fee. between five (5) and twenty (20) residential US •[J -+' i - •F the all of the required UrlitS. The arneunt of the fee allewed by this -&-e-G-to a_n, shaill DevelepeF may 9!eGt to satisfy the !nG!us'enaFy Unit requirements for the five dell-ars per square feet habitable square feet '+h' +h +' D + measured From L stairways.e exterie (2-1) More than 20 units. In the eass of a A r Residential pProject comprised of more than twenty (20) residential lots or residential units, the developer may elect to satisfy the Inclusionary Unit requirements for the Project, in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be fifteen five dollars per square foot ($4- 5.00Ift. 2 ) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways. (2) Entitled Residential Projects. The applicant(s) of an Entitled Residential Project may either construct the inclusionary units or pay an in lieu fee as follows: (i) Twenty (20) or fewer units. In the case of a Residential Project containing between five (5) and twenty (20) residential lots or residential units the or all of the required units. The amount of the fee allowed by this section shall be five dollars per square foot ($5.00/ft) of the sum total of the number of habitable square feet within the entire Project as measured from the exterior walls of the residential units. This calculation does not include 75B-56 exterior hallways, common areas landscape open space or exterior stairways. Li) More than 20 units. In the case of a Residential Project comprised of more than twenty (20) residential lots or residential units the Developer may elect to satisfy the Inclusionary Unit requirements for the Project in whole or in part, by payment of a fee in lieu of constructing some or all of the required units. The amount of the fee allowed by this section shall be ten dollars per square foot ($10.00/ft.) of the sum total of the number of habitable square feet within the entire Project, as measured from the exterior walls of the residential units. This calculation does not include exterior hallways, common areas, landscape, open space or exterior stairways The in lieu fee amount allowed herein by this subsection shall revert to fifteen dollars Per square foot ($15.00) on April 1 2021 for any construction which adds net residential units, which has City -approved entitlements that has not been issued a building permit by April 1 2021. (iii) A Residential Project that has been entitled and approved with conditions to pay a specific in lieu fee or has a city council approved Development Agreement to pay a specific in -lieu fee shall comply with the conditions or the Development Agreement as approved and shall not be modified by this Ordinance. (3) Timing of payment. The developer shall pay any the in -lieu fees allowed by this section is #aN befere prior to issuance of the first building permit for anv construction which adds net pertieR of the residential units . The developer may provide input regarding what project the in lieu fees should be applied towards, but such input shall not be dispositive. The in lieu fees collected by the city are city funds over which the city has complete and absolute discretion. (4) Inclusionary housing fund. Fees collected in compliance with this section shall be deposited in the inclusionary housing fund. ( Ord. No. NS-2881, 6 2, 9-1-15 ) Sec. 41-1904.1. - Inclusionary housing development incentives for production of units. (a) In order to make the production of new inclusionary units on -site or off -site or off - site rehabilitated units, certain incentives, standards and concessions shall be allowed and prescribed as set forth herein below. Such concessions shall not be available to those developers that choose to pay an in lieu fee rather than build the units. The developer may opt to take advantage of up to two (2) concessions among the following possible concessions: (1) Parking concession. One on -site parking space for each zero to one bedroom unit; two (2) on -site parking spaces for each two (2) to three (3) bedroom unit; two and one-half (21/2) parking spaces for each four (4) or more bedroom unit. 75B-57 (2) Concession on one of the following Zoning Code site development standards: (i) Setback reduction of up to twenty-five (25) percent reduction on subject property; (ii) Height increase of up to twenty (20) additional feet. (b) A developer of a for sale Residential Project proposing to provide on -site Moderate Income Units and a surrounding community benefit may opt to take advantage of up to three (3) of the above concessions The surrounding community benefit will include but not be limited to park improvements urban communitv gardens, developer -funded down payment assistance or subsidy of services activities or programs. Sec. 41-1905. - Housing plan and housing agreement. (a) Submittal and execution. The developer shall comply with the following requirements: (1) Inclusionary housing plan. The developer shall submit an inclusionary housing plan in a form specified by the executive director, detailing how the provisions of this article will be implemented for the proposed residential project. The inclusionary housing plan and its supportive documents, plans, and details shall be submitted at the same time as the site plan and application materials for the original project. All inclusionary housing plans shall be subject to the approval of the executive director and subject to appeal processes and procedures set forth in the Santa Ana Municipal Code. (2) Inclusionary housing agreement. The developer shall execute and cause to be recorded an inclusionary housing agreement. The inclusionary housing agreement shall be a legally binding agreement between the developer and the city, executed by the city manager, or his or her designee, and in a form and substance satisfactory to the executive director and the city attorney, and containing those provisions necessary to ensure that the requirements of this article are satisfied, whether through the provision of inclusionary units or through an approved alternative method. (b) Discretionary approvals. No discretionary approval shall be issued for a residential project subject to this article until the developer has submitted an inclusionary housing plan. (c) Issuance of building permit. No building permit shall be issued for a residential project subject to this article unless the executive director has approved the inclusionary housing plan, and any required inclusionary housing agreement has been recorded. (d) Issuance of certificate of occupancy. A certificate of occupancy shall not be issued for a residential project subject to this article unless the approved inclusionary housing plan has been fully implemented. Sec. 41-1906. - Standards. (a) Location within project, relationship to non-inclusionary units. All inclusionary units shall be: (1) Reasonably dispersed throughout the residential project; (2) Proportional, in number of bedrooms, gross floor area of habitable space, and location, to the market rate units; (3) Comparable to the market rate units included in the residential project in terms of design, materials, finished quality, and appearance; and (4) Permitted the same access to project amenities and recreational facilities, as are market rate units. (b) Timing of construction. All inclusionary units in a residential project shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (c) Location outside the proposed original project. For projects where the developer proposes to either produce new inclusionary units or rehabilitate existing off -site units to meet the inclusionary affordable housing requirements of this ordinance, the off -site project(s) containing the required inclusionary units shall be subject to the following requirements: (1) The sum -total area (in habitable square feet) of all the newly constructed off - site inclusionary units shall be the same number of habitable square feet of inclusionary area as required by this ordinance. For the purpose of the calculation of the number of square feet of required inclusionary housing, the total gross habitable square feet of the housing units of the original market rate project shall be used, as measured from exterior walls to exterior walls of the market units provided as the base for calculation either ten (10) percent for very 75B-59 low income or fifteen (15) percent for low income inclusionary units. The common areas, exterior hallways, stairways, patios, and balconies shall not be calculated in determining the number of required square feet of inclusionary housing production. All new or rehabilitated units must meet all current zoning and general plan standards. (2) While the total number of square feet of inclusionary housing requirement is calculated based on the requirements of this ordinance, the number of units, bedrooms and other amenities on the proposed off -site inclusionary housing location shall be approved by the review authority commensurate with the size and type of units most in demand at the time of submittal of the application. (3) Any off -site affordable inclusionary housing project shall be substantially comparable to the market rate units included in the residential project in terms of quality of design, materials and finishes. (4) If tenants are displaced due to rehabilitation of housing to meet the inclusionary unit requirement, the developer shall be responsible for relocation costs as required by state law. (5) No city, housing authority, or public funds, subsidies, or participation of any kind shall be expended on the production or building of any inclusionary housing projects associated with meeting the inclusionary unit requirement. (d) Timing of construction. All inclusionary units in a residential project or proposed off -site new inclusionary units or rehabilitated units shall be constructed concurrent with, or before the construction of the market rate units. If the city approves a phased project, a proportional share of the required inclusionary units shall be provided within each phase of the residential project. (a) Units for sale. (1) Time limit for inclusionary restrictions. A unit for sale shall be restricted to the target income level group at the applicable affordable housing cost for a minimum of fifty-five (55) years. (2) Certification of purchasers. The developer and all subsequent owners of an inclusionary unit offered for sale shall certify, on a form provided by the city, the income of the purchaser and that such owners will live in such inclusionary unit as their primary residence. (3) Resale price control. In order to maintain the availability of inclusionary units required by this article, the resale price of an owner occupied inclusionary unit shall be limited to the lesser of the fair market value of the unit as established by a licensed real estate agent based upon three (3) comparable properties or the restricted resale price. For these purposes, the restricted resale price shall be the applicable affordable housing cost. (4) Inheritance of inclusionary units. Upon the death of an owner of an owner - occupied inclusionary unit, title in the property may transfer to the surviving joint tenant or heir (in the case of the death of a sole owner or all owners of the household). 75B-60 (5) Forfeiture. If an inclusionary unit for sale is sold for an amount in excess of the resale price controls required by this section, the buyer and the seller shall be jointly and severally liable to the city for the amount in excess of the affordable housing cost at the time of such sale of the inclusionary unit. Recovered funds shall be deposited into the inclusionary housing fund. Notwithstanding the foregoing, city may allow the buyer and seller to cure any violation of the resale price controls within one hundred eighty (180) days. (f) Rental units. (1) Time limit for inclusionary restrictions. A rental inclusionary unit shall remain restricted to the target income level group at the applicable affordable housing cost for fifty-five (55) years. (2) Certification of renters. The owner of any rental inclusionary unit shall certify, on a form provided by the city, the income of all members of the household above the age of eighteen (18) at the time of the initial rental and annually thereafter. (3) Forfeiture. Any lessor who leases an inclusionary unit in violation of this article shall be required to forfeit to the city all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (g) Execution and recording of documents. The executive director may require the execution and recording of whatever documents are required to ensure enforcement of this section; including but not limited to promissory notes, deeds of trust, resale restrictions, rights of first refusal, options to purchase, and/or other documents, which shall be recorded against all inclusionary units. (h) General prohibitions. (1) No person shall sell or rent an inclusionary unit at a price or rent in excess of the maximum amount allowed by any restriction placed on the unit in accordance with this article. (2) No person shall sell or rent an inclusionary unit to a person or persons that do not meet the income restrictions placed on the unit in accordance with this article. (3) No person shall provide false or materially incomplete information to the city or to a seller or lessor of an inclusionary unit to obtain occupancy of housing for which that person is not eligible. (i) Principal residency requirement. (1) The owner or lessee of an inclusionary unit shall reside in the unit for not less than ten (10) out of every twelve (12) months. (2) No owner or lessee of an inclusionary unit shall lease or sublease, as applicable, an inclusionary unit without the prior permission of the executive director. 75B-61 Sec. 41-1907. - Reserved. Sec. 41-1908. - Enforcement. (a) Violation. Any violation of this article constitutes a misdemeanor. (b) Forfeiture of funds. Any individual who sells an inclusionary unit in violation of this article shall be required to forfeit any money in excess of the affordable housing cost at such time. Any individual who rents an inclusionary unit in violation of this article shall be required to forfeit all money so obtained. Recovered funds shall be deposited into the inclusionary housing fund. (c) Legal actions. The city may institute any appropriate legal actions or proceedings necessary to ensure compliance with this article, including actions: (1) To disapprove, revoke, or suspend any permit, including a building permit, certificate of occupancy, or discretionary approval; and (2) For injunctive relief or damages. (d) Recovery of costs. In any action to enforce this article, or an inclusionary housing agreement recorded hereunder, the city shall be entitled to recover its reasonable attorney's fees and costs. Sec. 41-1909. - Inclusionary housing fund. (a) Inclusionary housing fund. There is hereby established a separate fund of the city, to be known as the inclusionary housing fund. All monies collected pursuant to this article shall be deposited in the inclusionary housing fund. Additional monies from other sources may be deposited in the inclusionary housing fund. The monies deposited in the inclusionary housing fund shall be subject to the following conditions: (1) Monies deposited into the inclusionary housing fund must be used to increase and improve the supply of housing affordable to moderate, low, very low, and extremely low income households in the city as specified in the city's Affordable Housing Funds Policies and Procedures. A priority will be on the creation of affordable housing opportunities or units from the existing market rate housing stock rather than construction of new affordable housing units This includes but is not limited to, the purchase and rehabilitation of units for sale Monies may also be used to pay for one-time programs for code enforcement quality of life and general health and safety activities Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this article. (2) The fund shall be administered by the executive director, or his or her designee, who may develop procedures in the city's Affordable Housing Funds Policies and Procedures to implement the purposes of the inclusionary housing 75B-62 fund consistent with the requirements of this article and any adopted budget of the city. (3) Monies deposited in accordance with this section shall be used in accordance with the Affordable Housing Funds Policies and Procedures housing element, consolidated plan, or subsequent plan adopted by the city council to construct, rehabilitate, or subsidize affordable housing or to recapture affordable housing at risk of market conversion or to assist other government entities, private organizations, or individuals to do so. Permissible uses include, but are not limited to, assistance to housing development corporations, equity participation loans, grants, pre -home ownership co -investment, pre -development loan funds, participation leases, or other public -private partnership arrangements. The inclusionary housing fund may be used for the benefit of both rental and owner - occupied housing. (4) A developer receiving funding from the Inclusionary Housing Fund shall implement a local preference in their resident selection criteria and marketing policies meeting guidelines established by the executive director. (5) A developer opting for the in lieu payment option or receiving funding from the Inclusionary Housing Fund, as well as its contractors and subcontractors at every tier performing work for the new housing units is encouraged and should Provide an enforceable commitment that a skilled and trained workforce will be used to complete a contract or project in accordance with Public Contract Code §-§ 2601-2602. Sec. 41-1910. - Administrative. (a) In -lieu fee calculation. The amount per square foot of the inclusionary housing in - lieu fee shall be subject to city council review and consideration before the end of calendar year 2018, but after June 30, 2018. Between July 1, 2018 and December 31, 2018, staff shall report on the effectiveness of this ordinance and provide options for council consideration on the components of this ordinance, including, but not limited to, the monetary amount of inclusionary in -lieu fee per square foot. (b) Pipaliae Prior projects. The applicant(s) of any project for which a site plan review application was submitted and such application was deemed complete prior to August 4, 2015, may either construct the inclusionary units pursuant to the prior housing opportunity ordinance (Ordinance No. NS-2825) or pay an in lieu fee calculated by the formula under the prior housing opportunity ordinance (Ordinance No. NS-2825) or request to revise its inclusionary housing plan and/or inclusionary housing agreement and pay an in -lieu fee of nine dollars and thirty-five cents ($9.35) per square foot of habitable space for the entire project's inclusionary housing obligation. (c) Administration fees. The council may by resolution establish reasonable fees and deposits for the administration of this article including an annual monitoring fee and an inclusionary housing plan submittal fee. 75B-63 (d) Monitoring/audits. At the time of initial occupancy, and annually thereafter, the city will monitor the project to ensure that the income verifications are correct and in compliance with the inclusionary housing administrative procedures. For ownership units, the city shall monitor to verify that owner -occupancy requirements are maintained. Developer/property owners are required to cooperate with the city in promptly providing all information requested by the city in monitoring compliance with program requirements. The city will conduct periodic random quality control audits of inclusionary units to assure compliance with rules and requirements. Such audits may include verification of continued occupancy in inclusionary units by eligible tenants, compliance with the inclusionary housing plan and agreement, and physical inspections of the residential project. (e) Administrative procedures. The city manager is hereby authorized and directed to promulgate administrative procedures for the implementation of this article. Secs. 41-1911-41-1999. - Reserved. Section 4. SEVERABILITY. If any section, subsection, sentence, clause, phrase or portion of this ordinance for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Santa Ana hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 5. EXECUTION OF ORDINANCE. The Mayor shall sign this Ordinance and the Clerk of the Council shall attest and certify to the adoption thereof. ADOPTED this day of 2019. APPROVED AS TO FORM: Sonia R. Carvalho City Attorney Miguel A. Pulido Mayor 75B-64 By: Lisa Storck Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers CERTIFICATE OF ATTESTATION AND ORIGINALITY I, DAISY GOMEZ, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS-XXXX to be the original ordinance adopted by the City Council of the City of Santa Ana on 2020 and that said ordinance was published in accordance with the Charter of the City of Santa Ana. Date: Clerk of the Council City of Santa Ana 75B-65 EXHIBIT 4 Affordable Housing Funds Policies and Procedures City of Santa Ana Housing Division and Housing Authority of the City of Santa Ana Adopted March 20, 2018 75B-66 Amended Aueust 18, 2020 TABLE OF CONTENTS L INTRODUCTION 7 It. TYPES OF LOANS AND GRANTS 8 III. PROPOSAL SUBMITTAL AND REVIEW PROCEDURES 9 IV. PRE -LOAN COMMITMENT 19 V. LOAN TERMS AND CLOSING PROCEDURES 20 VI. PROJECT MONITORING AND REPORTING 22 VH. FUNDING SOURCES 23 Low and Moderate Income Housing Asset Fund 23 Inclusionary Housing Fund 26 HOME Investment Partnerships Program 28 Community Development Block Grant Program 32 Project -Based Voucher Program 34 Affordable Housing Funds Policies and Procedures Pace 2 75B-67 PURPOSE On June 20, 2017, the City Council for the City of Santa Ana directed staff to develop a policy to allocate affordable housing development funds and criteriafor selection ofprojects. These policies andprocedures have been developed to guide how affordable housing funds and land assets available to the City of Santa Ana are allocated, committed, loaned and monitored for multi family affordable housing development in the City. INTENT The intent of these policies and procedures is to provide a transparent, open andfair process for developers, businesses, non-profit organizations, individuals and other entities interested in the allocation ofscarce affordable housing funds and land assets available to the Cityfor affordable housing development. Affordable Housing Funds Policies and Procedures Page 3 75B-68 Definitions Available Funds: The total amount of Inclusionary Housing Funds, HOME Investment Partnerships Program, Community Development Block Grant Program, Project -Based Voucher Program, Low and Moderate Income Housing Asset Funds (Housing Successor Agency Funds) and/or any other funds received by the City of Santa Ana for housing purposes as published on a quarterly basis in the Housing Division Quarterly Report. Inclusionary Housing Fund In -Lieu Fee pending payments and any other funds that have not yet been received by the City shall not be considered Available Funds. Affordability Restrictions: Covenants that shall run with the land and bind a property owner, its successors, its assignees and every successor in interest to a property that the property owner will make all subsidized rental units on the property available to extremely -low, very -low, low and/or moderate -income households at rents affordable to such households for at least fifty-five (55) years unless superseded by the regulations for an applicable program fund. Oi The City of Santa Ana when using the Inclusionary Housing Fund, HOME Investment Partnerships Program, and/or Community Development Block Grant Program funds; or the Housing Authority of the City of Santa Ana when using the Project -Based Voucher Program and/or Low and Moderate Income Housing Asset Fund (Housing Successor Agency Fund). Community Housing Development Organization (CHDO): A private nonprofit housing development corporation which meets a series of HUD qualifications prescribed in the HOME Program regulations, including the requirement that it is duly organized to provide decent housing that is affordable to low- and moderate -income persons; maintains at least one-third of its governing board's membership for residents of low-income neighborhoods, other low-income residents, or elected representatives of low-income neighborhood organizations; and, provides a formal process for low-income program beneficiaries to advise the organization in its decisions regarding the design, siting, development, and management of affordable housing. Community Based Development Organization (CBDOI: A Housing Development Corporation which meets the requirements of the CDBG Program regulations as defined in 24 CFR 570204(a)(2)(c)(1), as amended from time to time. Congregate Housing: A multi -family residential facility with shared kitchen facilities, deed - restricted or restricted by an agreement approved by the City for occupancy by low or moderate income households, designed for occupancy for periods of six months or longer, providing services which may include meals, housekeeping and personal care assistance as well as common areas for residents of the facility. Deed of Trust: Legal title in the property that is transferred to the City, which holds it as security for a loan provided by the City. Development of Affordable Housing: The process of creating affordable housing through acquisition and/or rehabilitation of eligible properties for rental or transitional housing; Affordable Housing Funds Policies and Procedures Page 4 75B-69 acquisition and conversion of non-residential property to multifamily rental housing units; and/or new construction of housing units for rental housing. Extremely Low -Income Household: Households with incomes that do not exceed 30% of the Orange County area median income, adjusted for household size, as published by the U.S. Department of Housing and Urban Development (HUD) from time to time. Fair Market Rents: Maximum rents as published by HUD for the Housing Choice Voucher Program for Orange County, adjusted for unit size. Grant: Transfer of funds for purposes of financing the development of affordable housing, on the condition that grantee remains in full compliance with the Regulatory Agreement. Unlike a loan, the grant only becomes due and payable in the event that grantee is in default of the Regulatory Agreement. Nonprofit Housing Development Corporation (HDC): A private, nonprofit corporation with proven capacity to develop, own and operate housing, and which has a valid 501(c)(3) or (4) designation from the IRS. Limited Equity Cooperative: A form of ownership whereby the residents form a cooperative corporation which owns and manages the property, and where the return on residents' original equity is limited to no more than 10%, as defined in the California Health and Safety Code Section 33007.5. Loan Agreement: A loan of program funds for purposes of developing affordable housing with a Promissory Note secured by a Deed of Trust and Affordability Restrictions on the property. Qualified Developer: A non-profit or for -profit affordable housing developer with proven capacity to develop, own and operate affordable housing. Low -Income Household: Households with incomes that do not exceed 80% of Orange County area median income, adjusted for household size, as published by the U.S. Department of Housing and Urban Development (HUD) from time to time. Maximum Affordable Rent: A rent which does not exceed thirty percent (30%) of the maximum income level of the income group being served (see "Low and Moderate Income Households"), adjusted for unit size and utility costs. For Low and Moderate Income Housing Asset Fund: the Maximum Affordable Rent for households with incomes that do not exceed 120% of the area median income for Orange County shall be 30% of 110"/. of such median income. Moderate -Income Household: Households with incomes that do not exceed 120% of the Orange County area median income, adjusted for household size, as published by the U.S. Department of Housing and Urban Development (HUD) from time to time. Affordable Housing Funds Policies and Procedures Page 5 75B-70 New Construction: The construction of new housing, including, but not limited to, assembly of factory -built modular housing, or conventional on -site construction. Notice of Completion: Written notice issued by the owner of a project (or his or her agent) to notify concerned parties that all work on the project has been completed. Operating Reserve Account: An account established for the purpose of funding a deficit in the project's operation. Permanent Loan: A long-term (maturity period of 55 years) mortgage loan. Permanent loan financing is obtained after completion of construction, usually to repay the short-term (non- permanent) construction loan. Promissory Note: A "promise to pay" and evidence of an obligation of a borrower to the City for repayment of a Permanent Loan. Rehabilitation: Correction of local code violations and removal of health and safety hazards; upgrading of housing units to decent, safe and sanitary conditions to comply with the Housing Quality Standards promulgated by HUD and with local standards; repair or replacement of major building systems or components in danger of failure; and alterations, additions and improvements to expand the number of affordable units, or needed to improve the basic livability, energy efficiency, accessibility for the disabled, or security of the property, and to reduce overcrowding. Replacement Reserve Account: An account established for the purpose of funding major repairs or replacement of capital components of a budding which reach the end of their economic life and require replacement. Residual Receipts: The gross receipts from the property, less actual costs of operation, administration, maintenance, taxes, insurance, utilities, management, approved replacement and operating reserves, payments of principal and interest on loans senior to the City loan(s), and required debt service coverage. The amount of Residual Receipts shall be calculated based on the actual income and expenses set forth in the Annual Operating Budget required under the Regulatory Agreement or recorded Affordability Covenants, as approved by the City. Transitional Housing: A type of supportive housing used to facilitate the movement of homeless individuals and families to permanent housing. Typically, transitional housing is housing in which homeless people five for up to 24 months and receive supportive services that enable them to five more independently. The supportive services may be provided by the organization managing the housing or coordinated by them and provided by other public or private social service agencies. Very Low -Income Household: Households with incomes that do not exceed 50% of the Orange County area median income, adjusted for household size, as published by the U.S. Department of Housing and Urban Development (HUD) from time to time. Affordable Housing Funds Policies and Procedures Page 6 75B-71 L INTRODUCTION The City of Santa Anaprovides financial assistance to support the acquisition, rehabilitation, and new construction of properties to preserve and increase affordable housing opportunities for lower income households through the following Programs: • Low and Moderate Income Housing Asset Fund (Housing Successor Agency Fund) including land assets owned by the Housing Successor Agency • hiclusionary Housing Fund • HOME Investment Partnerships Program(HOME) • Community Development Block Grunt Program (CDBG) • Project -Based Voucher Program(PBV) Under these Funds and Programs ("Programs"), the City provides deferred payment loans and/or grants to bridge the financial gap between available resources, including the borrower's/grantee's equity and private financing, and the costs of developing affordable multi -family housing. The Affordable Housing Funds Policies and Procedures ("Policies and Procedures") provides an overview of the types and terms of loans which are available, proposal requirements, review procedures, selection criteria, loan commitment and closing procedures, and project monitoring and reporting requirements of these varied Programs within one comprehensive source of reference. [Throughout this document, loans and grants may be referred to collectively as "loans" except when the terms are unique to a loan or to a grant] These requirements are minimum requirements for Participation in City Programs and are subject to approval by City Council. Meeting these requirements does not guarantee participation in any Program. The Citv reserves the right to require additional qualifications for individual Proiects. The Citv reserves the right to reiect anv and all Proposals. At a minimum these Policies and Procedures will be compared and reviewed to the Citv's progress to achieve the goals in the Housing Element each year. If it is determined that the City is not making adequate progress to achieve the goals of the Housing Element, staff will review these Policies and Procedures to determine whether they should be amended to more effectively achieve the goals of the Housing Element. These Programs are administered by the Housing Division of the City of Santa Ana (under the direct supervision of the Housing Division Manager, the direction of the Executive Director of Community Development, and the general supervision of the City Manager). These Policies and Procedures should be interpreted in conjunction with Federal, State, and City statutes and regulations governing the use of these funds. In the event of a conflict between these Policies and Procedures and such statutes and regulations, the requirements of those statutes and regulations shall prevail. All projects must comply with all applicable statutes and regulations, which may include federal requirements contained in 24 CFR 92, 570, 982, and 983, including, but not limited to, environmental reviews, labor and wage requirements, debarred contractors, lead -based paint and equal opportunity. Leveraging of City dollars (to the extent possible) with outside funding sources will continue to be a priority to preserve and increase affordable housing opportunities for low income households. Affordable Housing Funds Policies and Procedures Page 7 75B-72 IL TYPES OF LOANS AND GRANTS Program funds may be used for development loans for the following eligible purposes: (1) The purchase of existing multi -family or other buildings for rent or sale to low- and very low-income households and for the development of congregate housing for rent to low- and very low-income persons with special needs (e.g. homeless individuals and families, elderly, persons with a disability). Except for congregate housing, existing buildings shall consist of four or more units, unless the Housing Division Manager finds that a substantial public benefit will be provided by a project consisting of less than 4 units. (2) The purchase or lease of land and buildings for new construction or rehabilitation of housing that may utilize available State and Federal housing assistance programs such as Low -Income Housing Tax Credits, the Section 202 Supportive Housing for the Elderly Program, tax-exempt bond financing, Section 811 Supportive Housing Program, and/or other available State and Federal programs. (3) The development of limited -equity housing cooperatives through either conversion or new construction. (4) The provision of interim loan funds for any of the above purposes prior to the funding of a public or private loan. Eligible development costs for the above uses include, but are not necessarily limited to: a. site acquisition and preparation; b. rehabilitation of dwelling units, common areas and related structures; c. new construction; d. carrying charges and financing fees; e. architectural, legal, and organizational fees; I. temporary or permanent tenant relocation costs; and g. developer fees consistent with the policies described in Section IV below. Affordable Housing Funds Policies and Procedures Page 8 75B-73 III. PROPOSAL SUBNDTTAL AND REVIEW PROCEDURES Proposal Subnullal All Proposals for Program funds shall be submitted to the Housing Division and shall be reviewed and recommended for approval to the Community Redevelopment and Housing Commission for its review and recommendation for City Council or Housing Authority approval through a transparent, open and competitive selection and review process as established in this section. The competitive selection process will begin with a determination by Housing Division staff that the City has sufficient Available Funds to develop one or more affordable housing projects. If the City has sufficient Available Funds to develop one or more projects, the Housing Division, upon City Council approval, will issue a Request for Proposals (RFP), Request for Qualifications (RFQ) or Notice of Funding Availability (NOFA), collectively referred to as the "RFP Process" for a certain amount of Available Funds. The RFP Process will be open ("Open RFP Process") and provide sufficient time for applicants to identify an eligible site and complete and submit a proposal in response to the RFP announcement. It will also align with annual funding cycles through the Low -Income Housing Tax Credit Program. The RFP Process will be open for at least one year with four (4) quarterly deadlines to submit a proposal scheduled throughout the year. The RFP Process will be announced through notices to the following parties: • Interested Developers and Nonprofit Organizations on the Housing Division's RFP Process Database o Developers and Nonprofit Organizations interested in being added to the RFP Process Database can do so by contacting the City's Housing Division • Other affordable housing membership association resources (e.g. Southern California Association of Nonprofit Housing, Kennedy Commission, 2-1-1 OC) • Public Notice in the local newspaper • Published on www.Planetbids.com Proposals must meet the minimum requirements outlined in the RFP Process to ensure compliance with available funding sources' regulations and requirements. Proposals will be received from qualified firms for projects consistent with the requirements of the Available Fund(s) issued through the RFP Process. Proposals shall not exceed the amount of the City's total Available Funds as published on a quarterly basis in the Housing Division Quarterly Report. A Qualified Developer (an "Applicant') shall complete and submit to the Housing Division the Proposal for Program funds and prepare all required attachments and exhibits, including, but not limited to, the project proforma, budget, sources and uses, project management plan, tenant selection and marketing plan, relocation plan (if applicable), signed purchase agreement and escrow instructions, preliminary title report, and limited partnership documents (if applicable). Affordable Housing Funds Policies and Procedures Page 9 75B-74 Proposal Review After each deadline for the Open RFP Process, the Housing Division staff shall review the Proposal to determine that the minimum Program and RFP Process requirements are met (minimum threshold review). Proposals that do not meet the minimum threshold review will be considered non -responsive. If the Proposal meets the minimum threshold review, the Housing Division will form a Review Panel. The Review Panel for the RFP Process will consist of at least one employee from the City's Public Works Agency, Planning and Building Agency, and Community Development Agency and one outside agency or government -entity. If an employee is not available in one department, a second employee may be requested from one of the other two departments so long as there are at least two of the three City Agencies represented on the Review Panel. Using the scoring and selection criteria provided in the RFP Process and provided below, the Review Panel shall determine whether the proposal is recommended for a pre -loan commitment, with or without conditions. Including the scoring and selection criteria, the Review Panel shall review the design of the proposed project for appropriateness for the proposed target group, compatibility with surrounding uses, cost effectiveness of construction, and appropriateness of the design and construction for low maintenance and long term durability. Proposed projects must receive a minimum threshold score of 75 points to move forward with the proposal review process. If the Review Panel determines, in its discretion, that the Proposal may be recommended for approval, the Housing Division shall request an underwriting and subsidy layering review by a real estate advisor selected by the City. The real estate advisor shall confirm the underwriting for the Project, the financial gap, and other programmatic requirements related to the funding sources. If the Review Panel determines that the Proposal will not be recommended for approval (i.e. the Proposal does not meet the minimum threshold score of 75 points), the Developer will be notified in writing of the decision and the result will be published in the Housing Division Quarterly Report. City Council Initiated Proposal Review A Developer may submit a request for a sole source award of funding directly to the City Council (the request cannot exceed the amount of the City's total Available Funds as published on a quarterly basis in the Housing Division Quarterly Report). At least one Councilmember must then submit a written request to staff to review the Developer's proposal. After a written request has been received, staff will request a complete proposal from the Developer. After the proposal has met a minimum threshold review by staff, the project will undergo an underwriting and subsidy layering review analysis by a real estate advisor selected by the City, to be paid for by the Developer. After the analysis has been completed, staff will present the real estate advisor's analysis and the proposal to City Council for direction without any recommendation(s) from staff on funding or not funding the project. If City Council requests a second real estate analysis to be conducted, the City will pay for the second analysis, not the developer. Affordable Housing Funds Policies and Procedures Page 10 75B-75 By Right Funding for Achieving City Goals and Objectives If at any time a developer proposes a project that is located in a zoning district permitting development of residential uses "by -right" and such approvals do not require any discretionary actions by the City, the developer may submit an application for by -right funding of extremely low-income affordable housing units. Staff may then form a Review Panel to consider the developer's application for by -right funding as quickly as possible using the scoring and selection criteria from the Open REP Process. This policy will expedite consideration of the developer's application for by -right funding. Only units serving households at 30% Area Median Income and below may qualify for by -right funding under this application process. The maximum per unit subsidy shall not exceed the maximum limits established by HUD for the HOME Program at the time of submission of the application for by -right funding by the developer. Applications for by -right funding may only request Inclusionary Housing Funds from the City under the above -described process and the requested amount shall not exceed the amount of the City's total Available Funds as published quarterly in the Housing Division Quarterly Report. However, funding is subject to the availability of actual Inclusionary Housing Funds. Additionally, the City reserves the right to amend these policies at any time, which could affect the availability of such funding, or to deny funding for any project that the City determines in its sole discretion does not align with the City's goals and objectives for this program. Three -Year Goals for By -Right Funding Proposals: The City of Santa Ana has established the following Goals for the next three years, to be evaluated on an annual basis, for proposals submitted under this section. The Goals are linked to the Regional Housing Needs Assessment (RHNA) per the City's Housing Element and based upon what affordable housing development projects that the City has in the pipeline for development and estimates/goals for Year 3: # of Extremely Low- # of Very LowIncome# of LowIncomeUnits Year Income Units at 30 /• Units at 50% AMI at 80% AMI AMI 1 54 111 9 2 54 33 38 3 115 82 34 TOTAL 223 226 81 ConWetitive Selection Criteria In selecting among competing project proposals, consideration shall be given to projects that meet the following General Principles: • Significantly increase affordable housing opportunities for large families (three- and four - bedroom units). • Benefit a higher percentage of units for extremely low-income households with deeper affordability. • Are cost effective with low operating costs (green building techniques). • Increase affordable housing opportunities for special needs populations, including homeless individuals and families, persons with a disability, and seniors. • Are located in areas currently underserved by affordable housing developments. Affordable Housing Funds Policies and Procedures Page 11 75B-76 The following constitute the City's general selection criteria, and may be modified from time to time to address practical requirements arising from a particular solicitation at the City's discretion: COMPETITIVE SELECTION CRITERIA 1. LEVEL OF AFFORDABILITY AND TARGET POPULATION Max. 25 Points ELIGIBLE POINTS Project significantly increases affordable housing opportunities for large families (three- and four -bedroom units) 10 Project provides a higher percentage of units for extremely low-income households with deeper affordability 10 Project increases affordable housing opportunities for special needs populations including, but not limited to, homeless individuals and families, and persons with a disability 5 Sub -total 25 2. TIMELINESS TO BUILD NEW HOUSING (Max. 20 Points) Project has demonstrated site control 7 Project is zoned appropriately 5 Project does not have any other site -related issues 5 Project aligns with the City's Housing Element, Strategic Plan, and/or 5-Year Consolidated Plan 3 Sub -total 20 3. PROPERTY MANAGEMENT EXPERIENCE AND SHILLS (Max. 15 Points Project is energy efficient and incorporates green -building techniques 6 Applicant's ability to manage affordable rental units to ensure ongoing compliance with affordability requirements and long term financial solvent 3 Applicant's past experience in property management 3 Applicant's capacity and ability to quickly lease completed units 3 Sub -total 15 4. DEVELOPER EXPERIENCE AND SKILLS (Max. 15 Points) Applicant's capacity and ability to obtain additional funding 4 Applicant's capacity and ability to obtain entitlements 4 Applicant's overall past and projected effectiveness to provide affordable housing 4 Applicant's past and projected effectiveness to manage the construction process and stay on schedule 3 Sub -total 15 5. LEVERAGING OF CITY FUNDS (Max. 5 Points Applicant's potential or capacity to obtain additional financing 5 Sub -total 5 Affordable Housing Funds Policies and Procedures Page 12 75B-77 6. ANTICIPATED CASH FLOWS (Max. 15 Points) Project's proposed development costs are reasonable and comparable 3 Projects proposed rents are realistic 3 Projects operating costs are realistic and reasonable 3 Project has sufficient operating and replacement reserves 3 Project is projecting a positive cash flow through affordability period 3 Sub -total 15 7. PROJECT LOCATION (Max. 5 Points) Project is located in an area currently underserved by affordable housing 5 Sub -total 5 TOTAL ELIGIBLE POINTS 100 Developer Input on In -Lieu Fee Payments to the Inclusionary Housing Fund Under Section 41-1904(c)(3) of the Housing Opportunity Ordinance, a "Developer may provide input regarding what proj ect the in lieu fees should be applied towards, but such input shall not be dispositive. The in -lieu fees collected by the City are City funds over which the City has complete and absolute discretion". If a Developer chooses to provide input on the allocation of their in -lieu fees, input must be submitted in writing within no more than 90 calendar days from the date payment of the in -lieu fees are deposited with the City. The Developer's request will be worth up to five (5) bonus points awarded to the applicant within the RFP Process through the Competitive Selection Criteria provided above. The bonus points do not guarantee that the project will be funded with the in -lieu fees paid by the Developer that provided the input. Determination of Reasonable Costs and Financial Feasibility A real estate advisor shall review the Applicants estimates and projections of rents, expenses, reserves and development costs in accordance with industry -standard underwriting guidelines. The Applicant shall provide a proforma and background documentation on all costs for the analysis, as requested by the City. The City may recommend adjustments to cost and expense amounts as appropriate to conform to current market and industry standards. The total amount of the Program loan and all private loans shall not exceed the total development costs approved by the City. The maximum allowable purchase price s1taB not exceed the appraised value as evidenced by an appraisal prepared by a California State Certified General Appraiser and approved by the Housing Division, which is dated not more than six (6) months prior to the date of the proposal. The appraisal may not determine property value based solely on sales of properties financed by public agencies. The maximum affordable mortgage amount s1taB be calculated using the rent schedule proposed by the Applicant as approved by the City, the proposed interest rate and terms of the primary loan(s), and reasonable operating allowances and reserves, including a reserve to amortize a mortgage, as needed. Affordable Housing Funds Policies and Procedures Page 13 75B-78 The requested City loan for a project shall not exceed the total amount of the gap between the maximum affordable mortgage amount available from non -City sources plus funds available from other sources of public subsidy, and the total development costs plus any on -going annuity necessary to maintain affordable rent levels as defined in the Proposal. All assisted units must maintain rents that do not exceed the Maximum Affordable Rent, as defined in the Loan Documents, for the life of the loan in accordance with the terns of the loan or other recorded Covenants. Syndicated projects must be structured such that ownership can feasibly be acquired by the nonprofit General Partner at the end of the term of the limited partnership agreement, when appropriate. When determining the maximum City loan, the real estate advisor will review the rent schedule and annual cash flows to determine whether long- term affordability is maintained. In cases where a rent subsidy program is used and the mortgage is calculated on the basis of the subsidized rents, an "affordability reserve" may be required, where the amount of the reserve shall be sufficient to cover the difference between affordable rents and the subsidized rents. Developer Fee For new construction, acquisition and rehabilitation projects utilizing Low -Income Housing Tax Credits, the developer fee shall not exceed the maximum fee allowed by the California Tax Credit Allocation Committee. The Housing Division Manager may require the developer to defer a portion of their developer fee, based upon an analysis by the real estate advisor, to make the project feasible, reduce the amount of Program funds being requested for the project, or both. Developer Capacity Applicants must demonstrate the capacity to successfully develop the proposed project. The City shall evaluate capacity on the basis of the Applicant's track record in developing and managing affordable housing, or inclusion of development team members with a successful record in developing such housing. In addition, Applicants must demonstrate the financial and legal capacity to undertake the proposed project. Clear Title The Applicant shall have the responsibility to obtain clear title to the property. As soon as feasible, the Applicant will submit a preliminary title report for City review and written approval. Staff shall review the state of title, including the conditions, covenants, restrictions, and legal description of the property. In the case of title issues, the Applicant shall correct the state of title and remove all exceptions to the title not consented to by the City before the City closes the loan. Senior Financing The Applicant shall secure other resources such as equity from syndication proceeds, tax exempt financing, federal and state housing rental and development subsidies and available private financing to minimize the amount of the City loan. The Applicant will submit to the City the terms and conditions of all non -City financing as well as equity contributions for review. The Affordable Housing Funds Policies and Procedures Page 14 75B-79 Applicant must submit projected cash flows for the term of the loan, showing the maximum possible increases (i.e. worst case scenario) in debt service per year, the projected rent and expense increases, the means of making up any deficits, and projected payments of Residual Receipts. The real estate advisor shall analyze the feasibility of the project to carry the loan(s), and if feasible will review the terms of the non -City financing. The City may, at its sole discretion, calculate the mortgage amount at the terms and rates of available financing programs other than that proposed by the Borrower, if alternative terms and rates are available that would reduce the amount of City subsidy required, and would otherwise conform to the City/Agency requirements. Management andAffzrmative Marketing Plan The Applicant shall prepare a Project Management Plan for City review and approval. The Plan shall describe the Applicant's policies and procedures concerning: (1) Affirmative marketing and tenant selection procedures, including proposal procedures, prioritization of Santa Ana residents and workers (see Local Preference section below) where possible; waiting lists, and lease agreements; and marketing efforts and tenant selection procedures that will be used to attract eligible persons from all racial, ethnic and gender groups, as well as persons living with disabilities, in the housing market area to the available housing opportunities. The Plan should describe the protocols for keeping records of affirmative marketing activities and for keeping records of requests (from applicants and existing tenants) for all units assisted with affordable housing funds; (2) Procedures for determining tenant eligibility and certifying incomes. The Plan should demonstrate sufficient outreach to disability -related service providers to ensure that accessible units are occupied to the extent possible by those households who need the accessibility features due to disability. The Plan should demonstrate that the Developer conducted sufficient outreach to persons that meet the qualifications identified in the Local Preference section below. An outreach plan and results from outreach efforts should be maintained by the developer and available to submit to the City upon request; (3) Management/tenant relations and assistance to tenant organizations, including the training and use of tenants to perform maintenance and management functions as appropriate; (4) Maintenance and repair services; (5) On -site management facilities; (6) Rent collection; (7) Records and reporting requirements; (8) Personnel and staffing; (9) Compliance with all tenant protection laws, including Building and Health and Safety Codes; (10) Fee schedule; and (11) Any other relevant issues requested by the City to be addressed. Affordable Housing Funds Policies and Procedures Page 15 75B-80 No person shall on the grounds of race, marital status, sex, color, age, religion, national origin, ancestry, immigration status, physical disability, AIDS, sexual orientation, or any other protected class, be excluded from participating in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with these funds. Local Preference Local preference for Santa Ana residents and workers in tenant selection shall be a requirement of the City's Affordable Housing Funds and Programs. Local preference shall be a requirement of the HOME, CDBG, and PBV Programs only ifpermitted by the federal government. In evaluating a loan request, staff shall evaluate a loan applicant's effectiveness in achieving the City's local preference goals and give priority to those loan applicants who administer their wait lists using sorting protocols which result in outcomes where households who live or work in Santa Ana are beneficiaries of City -funded affordable housing. Subject to applicable tenant income limits and any preferences required by the laws of the United States or the State of California (including, but not limited to, laws and regulations governing nondiscrimination and preferences in housing occupancy), the Borrower shall give preference in leasing units in the following order of priority: First priority shall be given to persons who have been permanently displaced or who face permanent displacement from housing in Santa Ana as a result of any of the following: a. A redevelopment project undertaken pursuant to California's Community Redevelopment Law (Health & Safety Code Sections 33000, et seq.) -- applicable only to projects funded by the Low -Moderate Income Housing Asset Fund. b. Ellis Act, owner -occupancy, or removal permit eviction; c. Earthquake, fire, flood, or other natural disaster; d. Cancellation of a Housing Choice Voucher HAP Contract by property owner; or e. Governmental Action, such as Code Enforcement. 2. Second priority shall be given to persons who are either: a. Residents of Santa Ana and/or b. Working in Santa Ana at least 32 hours per week for at least the last 6 months. c. Persons who seek to reside in Santa Ana as an accommodation to a mental or physical disability. Regarding any "accessible units" that are required as part of a multifamily development, such accessible units should be fast offered to existing occupants of the building (if applicable) who are not occupying an accessible unit and who have indicated a need for the features of an accessible unit. If no existing occupants of the budding have indicated the need for the features of an accessible unit, or if the building is being leased for the initial occupancy, then such accessible units should first be offered to applicants who have indicated the need for the features of an accessible unit, inclusive of the preferences above. The application of preferences may not conflict with Section 504 of the Rehabilitation Act of 1973, 24 C.F.R. §100.202, and any other preemptive laws that may be enacted regarding fair housing for persons living with disabilities. Affordable Housing Funds Policies and Procedures Page 16 75B-81 "Accessible units" refers to those units whch were originally approved by the City specifically as accessible units and which provide specific features to address the needs of persons living with mobility impairments or persons living with sensory impairments. Environmental Review Project sites must be free from adverse environmental impacts or the proposed project must successfully mitigate these impacts. The City shall assess the environmental effects of each activity proposed to be carried out with City funding in accordance with the provisions of the National Environmental Policy Act of 1969 (NEPA) and the California Environmental Quality Act (CEQA), as applicable. For projects subject to NEPA review, no loan funds (except for activities normally exempted from the environmental clearance requirements in 24 CFR Part 58.34) shall be released until the environmental review is completed, the notice of finding and environmental assessment results are published, and the 15-day public comment period expires. Prevailing Wages Any contract for construction (rehabilitation or new construction) of affordable housing with 12 or more units assisted with HOME Program funds, 8 or more units if the project is assisted with CDBG Program funds, or 9 or more units if the project is assisted with PBV Program funds, must contain a provision requiring that not less than the prevailing wages paid in the locality, as determined by the Secretary of Labor pursuant to the Davis -Bacon Act, will be paid to all laborers and mechanics employed in the development of the project. Contractors and subcontractors must comply with regulations issued under this Act and pertaining to labor standards and HUD Handbook 1344.1. Relocation If necessary, the Applicant shall develop a plan for temporary relocation or permanent voluntary relocation, where necessary, for review by the City. The Relocation Plan shall be in accord with the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, and the implementing regulations at 24 CFR Part 42, and the California Relocation Assistance Act, where applicable. There shall be no permanent involuntary tenant displacement. In cases where tenants will be voluntarily displaced, the Applicant must submit a copy of a letter to each tenant which details the tenant's rights to relocation assistance. In the case of a tenant's waiver of relocation payments, the Applicant must submit a letter signed by the tenant indicating the tenant's knowing and voluntary waiver of any relocation assistance. In the absence of these items, the Applicant/"other displacing entity," as that term is defined under applicable state or federal law will be responsible for paying the tenant the appropriate level of relocation assistance. Contracting Requirements All Applicants will be required to submit an affirmative action/equal employment opportunity plan indicating the methods that they will use to encourage the participation of certified Minority Affordable Housing Funds Policies and Procedures Page 17 75B-82 Business Enterprise/V✓omen Owned Business Enterprise (MBE./VrBEs) in their development project. City staff will review the plan and competitive bid and selection process to ensure that required procedures have been followed. City staff will also monitor construction to ensure that MBE/V✓BEs are participating in the project as indicated in the construction contract. All work shall be completed by State -licensed contractors which shall have Santa Ana business licenses. All contracts must comply with competitive bidding requirements. All efforts shall be made by the private owner or the Borrower to provide equal opportunity for employment without discrimination as to race, marital status, sex, color, age, religion, national origin, ancestry, physical disability, AIDS, sexual orientation, or any other protected class, in seeking contractors and subcontractors. Affordable Housing Funds Policies and Procedures Page 18 75B-83 IV. PRE -LOAN COAUMTMENT Pre -Loan Commitment Following the REP Process, Proposal Review, Determination of Reasonable Costs and Financial Feasibility, and conditional on meeting the other requirements and conditions outlined above, a pre -loan commitment letter may be drafted by the Housing Division, reviewed and approved by the Housing Division Manager, the City Attorney's Office, and the Executive Director of Community Development, before being recommended for approval. The letter shall state the maximum amount of program funds reserved for the project and list all of the additional conditions, documents and steps that must be taken by the Borrower prior to loan closing. After the pre -loan commitment letter has been drafted, staff will prepare a written staff report recommending a commitment of funds for a proposal and explaining the reasons for the commitment. The recommendation will be made first by the Housing Division to the Community Redevelopment and Housing Commission (CRHC) to issue the commitment of program funds to the project in the form of an award of program funds. If recommended by the CRHC to City Council, a recommendation will then be made by the Housing Division to the City Council and/or Housing Authority for final approval of the commitment of program funds by motion adopted by the affirmative votes of at least two-thirds (2/3) of the members. If approved by City Council and/or the Housing Authority, a notice of the issuance of the pre - loan commitment shall be posted publicly, and a copy of such notice shall be published in a newspaper of general circulation, no later than 21 days after the commitment is issued. Upon issuance of a pre -loan commitment letter, the Housing Division shall work with the Developer to secure all of their remaining financing. If the conditions and projections for the project rent schedule or non -City loans changes or is modified after the pre -loan commitment letter is issued, a second underwriting and subsidy layering analysis will be conducted by a real estate advisor. Conflict of Interest No person who is an employee, agent, consultant, officer, or elected official or appointed official of the City who exercises or has exercised any function or responsibility regarding activities assisted with Program funds or who is in a position to participate in a decision making process or gain inside information concerning these activities, may obtain a financial interest or benefit from an activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter. Affordable Housing Funds Policies and Procedures Page 19 75B-84 V. LOAN TERMS AND CLOSING Loan Terms Permanent loans that are not grants shall be due and payable in no more than fifty-five (55) years subject to the terms of the applicable Loan Agreement and recorded Affordability Restrictions. If a developer requests a shorter term loan, the City would be willing to negotiate. However, except for certain HOME funded projects, the Affordability Restrictions shall remain in effect for at least 55 years. Purchase Option At the end of the permanent loan tenn, the City may have the option to take title to the property in accordance with the terms of an option agreement if the owner of the property decides to sell Interest Rates for Loans The interest rate shall be set at either (1) The rate established by the Federal Home Loan Mortgage Corporation for the average conventional commitment of a fixed rate, thirty-year (30) mortgage, and shall be compounded annually; or (2) When necessary to secure investor equity, interest rates of affordable housing projects that include tax credits or conventional lenders, at 3% simple interest; or (3) When the City loan is in a subordinate position to a first trust deed capital advance/loan made under the U.S. Department of Housing and Urban Development (HUD) Section 202 or Section 811 Programs, the interest rate shall not exceed the highest permissible rate on the applicable HUD Section 202 or Section 811 Program mortgages, under authority of Chapter 24 of the Code of Federal Regulations (CFR), Subpart 885.410(g); or (4) When required to meet federal subsidy layering guidelines, at the Applicable Federal Rate (that rate established by the Internal Revenue Service pursuant to Section 1274(d)(1) of the Internal Revenue Code). Loan Payments Payments on permanent loans shall be made as follows (1) Payments of principal and interest shall be made annually to the City in an amount equal to 50% of project Residual Receipts, if any. Payments shall be applied first to accrued interest, and then to principal. (2) The Borrower may elect to prepay the loan prior to the end of the term. However, the Regulatory Agreement or recorded Affordability Covenants shall remain in full force and effect for its term regardless of any prepayment. Affordable Housing Funds Policies and Procedures Page 20 75B-85 (3) If the Borrower violates the terms of the Regulatory Agreement or recorded Affordability Covenants such that the City declares the loan in default, the entire amount of unpaid principal plus accrued interest at the rate established at the time of closing shall be due based on the terms of the agreement. (4) Unless paid in full earlier, the remaining principal balance of the loan and accrued interest shall be due and payable at the end of the term of the Promissory Note. Where necessary to meet requirements of third party investors and with approval of the Housing Division Manager, the City may allow the remaining principal and accrued but unpaid interest to be payable only to the extent that the fair market value of the Project exceeds the principal balance of the existing indebtedness seemed by the property. Security The loan shall be secured as follows: (1) The loan shall be secured by a Deed of Trust and Promissory Note which may be subordinated to Deeds of Trust securing other Federal, State, City loans, or loans from conventional financing institutions used in conjunction with the loan on the same property. The City must approve all requests for subordination. (2) The loan shall be further secured by a Regulatory Agreement or recorded Affordability Covenants to assure that Program funds are used to provide long-term affordable rental housing opportunities for low-, very low-, and extremely low-income households, as applicable. The Borrower and the City shall execute the Regulatory Agreement or recorded Affordability Covenants regulating project rents, tenant selection procedures, use of project income, management and maintenance, transfer of property, and permitted forms of ownership and use. The Regulatory Agreement or recorded Affordability Covenants shall be recorded with the Deed of Trust. Loan Closing Procedures After the developer has secured all of their remaining non -City financing (e.g. Low -Income Housing Tax Credits), the Housing Division will prepare draft loan documents following the Loan Terms above, including a draft Loan Agreement, Promissory Note, Deed of Trust (or other appropriate security as determined by the Housing Division Manager), and Regulatory Agreement or recorded Covenants, and submit them to the City Attorney's Office for review and approval as to form. Requirements for a Regulatory Agreement or recorded Covenants may be waived in the case of a project which is funded under the HUD Section 202 or Section 811 Program. After the loan documents have been finalized, a recommendation will be made by the Housing Division to the CRHC to approve the loan documents. If recommended by the CRHC to City Council, a recommendation will then be made by the Housing Division to the City Council and/or Housing Authority for final approval of the loan documents by motion adopted by the affirmative votes of at least two-thirds (2/3) of the members. Funds may be disbursed following execution and recording of the Loan Documents by the Borrower and the City Manager, and compliance with all commitment conditions. Staff shall submit a request for release of funds required for loan closing to the Executive Director of Finance. The Executive Director of Finance may then authorize release of loan funds into an escrow account established for the loan closing with instructions for disbursement. Affordable Housing Funds Policies and Procedures Page 21 75B-86 VL PROJECT MONITORING AND REPORTING The Housing Division shall monitor the project during rehabilitation or construction as needed for compliance with any loan documents and applicable City, State and/or Federal regulations. The Housing Division shall request notification of the final inspection and final construction release from the primary lender, and shall review management practices and reporting procedures with the borrower and project management agent at that time for full compliance with Program requirements. A copy of the Notice of Completion for the project shall be submitted to the Housing Division at the time the Notice is recorded. Borrowers shall be required to certify annually that they have complied with affirmative marketing and tenant selection procedures, and shall submit an annual report to the Housing Division in the form specified by the Division. The Housing Division shall monitor compliance with any Regulatory Agreement or recorded Affordability Covenants, the loan documents, and applicable City, State and/or Federal regulations on an annual basis. Additional details regarding the monitoring process will be included as part of the final Loan Documents. Fair Housing and Equal Opportunity Borrower shall post notices stating that a housing project is subject to Fair Housing and Equal Employment Opportunity requirements of 24 CFR 92.350 and 351 at each project site. Establishment and Use of Reserve Funds Upon completion of project construction, the borrower will be required to capitalize a reserve fund in an amount determined by the City and make annual contributions to the fund. The reserve fund can be used for expenditures related to necessary structural and equipment replacements and improvements of a capital nature, and is not intended to be used for ordinary maintenance items. Annual Reporting by the Housing Division On a quarterly basis, the Housing Division shall prepare a report to the CRHC for its review and recommendation for City Council approval. The quarterly report shall include details on at least the following items: (1) Loan Activity; (2) Loan Portfolio Management and Monitoring; (3) Proposals that were submitted during the previous quarter under the RFP Process but were not recommended for approval by a Review Panel; (4) Affordable Housing Projects under Development; and (5) Available Funds for Affordable Housing Development Projects. Affordable Housing Funds Policies and Procedures Page 22 75B-87 VII. FUNDING SOURCES Low and Moderate Income Housing Asset Fund (Housing Successor Agencv Fund) Source of Funds Funding sources for this program are generated from proceeds from the sale of former Redevelopment Agency housing assets, residual receipts from former Redevelopment Agency assets (i.e. loans), as well as a portion of the loan repayments from the former Redevelopment Agency to the City. Sources are set aside for the purpose of increasing, improving and preserving the community's supply of low and moderate income housing as stipulated by California Health and Safety Code Section 34176. (Further information on grant terms provided in Section III). This fund includes land assets owned by the Housing Authority acting as the Housing Successor Agency that must be developed for affordable housing or sold at or above fair market value to increase the Low and Moderate Income Housing Asset Fund. Eligible Borrowers/Grantees Eligible borrowers are nonprofit Housing Development Corporations (HDC's) duly organized to promote and undertake community development activities on a not -for -profit basis, or for -profit housing developers or development corporations, with proven capacities to develop, own, and operate affordable housing. Limited partnerships whose general partners are otherwise eligible under the above are also eligible to borrow Program funds. Eligible Projects All new construction projects shall be affordable to households whose income, as adjusted for household size, does not exceed 80% of area median income. Eligible acquisition and/or rehabilitation projects will (1) have four or more apartments or be congregate housing or mobile home units, except where the Housing Division Manager finds that the project will provide a substantial public benefit; (2) be in need of rehabilitation as defined herein; (3) be located in the City of Santa Ana; (4) be free from significant adverse environmental conditions, except those that can be mitigated at a reasonable cost through rehabilitation; and, (5) minimize tenant displacement. Eligible Uses and Activities Program funds can be used to make loans or grants to eligible borrowers who will provide affordable housing, principally for low- and moderate -income households. Eligible uses of deferred payment loan funds or grants include, but are not limited to, the following: (1) acquisition and/or rehabilitation of eligible properties for rental or transitional housing; Affordable Housing Funds Policies and Procedures Page 23 (2) acquisition and conversion of non-residential property to multifamily rental housing units; and (3) new construction of housing units for rental or transitional housing. Affordability Requirements As required by State law, all projects shall be targeted to households earning 80% or less of the area median income, based on the State of California Housing and Community Development income and rent limits. State law also requires that at least thirty percent (30%) shall be expended for rental housing affordable to and occupied by "low-income" households does not exceed thirty percent (30%) of the area median income and no more than twenty percent (20%) affordable to and occupied by households between 60% of the area median income and 80% of the area median income. Units are considered affordable when the rent, less a deduction for a utility allowance, for a '-very low-income" household does not exceed thirty percent (30%) of 50% of the area median income, for a "low-income" household does not exceed thirty percent (30°/n) of 60% of the area median income. Very low-income households are households whose incomes do not exceed 50% of the area median income. Low-income households are households whose income does not exceed 80% of the area median income. The area median income as referenced above is the Orange County area median income figure, adjusted for household size, as published by the California Department of Housing and Community Development (HCD) from time to time. Security The loan or grant shall be secured by a Deed of Trust and Promissory Note which may be subordinated to deeds of trust securing other Federal, State, or City loans, or loans from conventional financing institutions used in conjunction with the Low and Moderate Income Housing Asset Fund loan on the same property. The City must obtain written commitments to protect the City's investment in the event of a default. The City must approve all requests for subordination. The loan or grant shall be further secured by recorded Affordability Covenants and Restrictions, running with the land, to assure that Program funds are used to provide long-term affordable rental housing opportunities for low- and moderate -income households. The Borrower and the City shall execute and record Affordability Covenants and Restrictions regulating project rents, tenant selection procedures, use of project income, management and maintenance, transfer of property, and permitted forms of ownership and use, including a prohibition on conversion of the project to condominium or stock cooperative ownership for the term of the recorded Affordability Covenants and Restrictions. The recorded Affordability Covenants and Restrictions shall provide for the longest feasible time. Notwithstanding the above, the Affordability Covenants and Restrictions would in no event, be shorter than any other term of a Regulatory Agreement or Covenant recorded concurrently with the City's Covenants and Restrictions. The Affordability Covenants and Restrictions shall be recorded with the Deed of Trust. Affordable Housing Funds Policies and Procedures Page 24 75B-89 In some circumstances, these Affordability Covenants and Restrictions may be subordinated by the City, pursuant to Section 33334.14 of California Health and Safety Code, to liens, encumbrances, or regulatory agreements of other federal or state agencies or lenders providing financing for the project, subject to assurances by senior lenders that the City's lien rights will be protected. Affordable Housing Funds Policies and Procedures Page 25 75B-90 Inclusionary Housing Fund Source of Funds Funding for this program is provided using revenues generated through in -lieu fees from the City of Santa Ana Housing Opportunity Ordinance (revised and adopted by City Council in October 2015). Eligible Borrowers/Grantees Eligible borrowers are nonprofit Housing Development Corporations (HDC's) duly organized to promote and undertake community development activities on a not -for -profit basis, and which have a valid 501(c)(3) or (4) designation from the IRS, or for -profit housing developers or development corporations, with proven capacities to develop, own, and operate affordable housing. Limited partnerships whose general partners are otherwise eligible under the above are also eligible to borrow Program funds. Eligible Proiects Funds can be used to increase and improve the supply of housing affordable to moderate 120% AMI, low (80% AMP, very -low (50% AMD and extremely -low —income (30% AMq households in the City. Eligible rehabilitation projects will: (1) be in need of rehabilitation as defined herein; (2) be located in the City of Santa Ana; (3) be free from significant adverse environmental impacts, except those that can be mitigated through rehabilitation; and (4) avoid permanent involuntary tenant displacement to the greatest degree feasible in order to carry out the program. Eligible projects which involve new constmction or conversion of an existing non-residential use will conform to items (2), (3), and (4) above. Eligible Uses and Activities Funds can be used to make loans to eligible borrowers to provide affordable housing, for moderate (120% AM➢, low (80% AMU), very -low (50% AMII and extremelv-low income (30% AMD households'--- __a - ---• '---- �'a,., including, but not limited to, the following: 1_ae"isition Acquisition and rehabilitation of eligible rental properties. Existing rental units may be acquired, substantially rehabilitated and then income and affordability covenants can be recorded on the units for rental or ownership. a. Defined as rehabilitation of a dwelling unit that has substantial building and Formatted other code violations such that the unit is returned to the Citv's housing supply as decent, safe and sanitary affordable housing. The housing roust comply with all local building and zoning codes and standards, including energv efficiencv and water conservation standards, and meet housing qualitv Affordable Housing Funds Policies and Procedures Page 26 75B-91 standards in Section 882 of Title 24. 4-.2.Purchase and rehabilitation of homes with code -related issues for sale to low- and moderate -income buvers: housing projects and activities. 2-5_Aacquisition and conversion of non-residential (e.g. commercial) property to multifamily rental housing units; -5,6_Hhomeless services programs; 6-.7_Ssecmity deposit assistance programs; -7-.8.thnmigrant-focused housing programs,-aad services and activities for non-U.S. citizens; 4­17€oreclosure and eviction prevention programs, services and activities.d 9. . Affordable Housing Funds Policies and Procedures Page 27 75B-92 HOME Investment Partnerships Program Source of Funds Funding for this Program is provided through the U.S. Department of Housing and Urban Development (HUD) HOME Program (including program income and residual receipts), and therefore is subject to the federal mles and regulations found in 24 CFR Part 92, as amended from time to time. Eligible Borrowers/Grantees Eligible borrowers are nonprofit Housing Development Corporations (HDC's) duty organized to promote and undertake community development activities on a not -for -profit basis, and which have a valid 501(c)(3) or (4) designation from the IRS, or for -profit housing developers or development corporations, with proven capacities to develop, own, and operate affordable housing. Limited partnerships whose general partners are otherwise eligible under the above me also eligible to borrow Program funds. Eligible Projects Projects eligible for HOME funding shall: (1) be rental projects located in the City of Santa Ana; (2) contribute to the achievement of the City's Strategic Plan and fair housing goals; (3) involve 4 or more apartments which will be rented to eligible lower income households at rents that do not exceed rents as defined by 24 CFR 92.252, as amended from time to time. Projects serving persons with special needs, or where the City Manager finds that the project will provide a substantial public benefit, may have fewer than four units. Transitional or permanent supportive housing may be provided (but not temporary shelters). Affordable Housing Funds Policies and Procedures Page 28 75B-93 (4) have at least 20% of the HOME -assisted units rented to very low-income families (50% of median income) under the terms and conditions set forth in 24 CFR 92.252 (2)(b); (5) demonstrate financial feasibility -- including the ability to maintain rents for the subsidized units at affordable levels for the periods specified in 24 CFR 92252; (6) be free of significant adverse environmental impacts, except those that can be mitigated through the project itself, (7) minimize tenant displacement; (8) comply with all local building and zoning codes and standards, including energy efficiency and water conservation standards, and meet housing quality standards in Section 882.109 of Title 24. Newly constructed housing must meet the current edition Model Energy Code of the Council of American Building Officials; (9) make efficient use of public funds and avoid "layering" of subsidies beyond those necessary to achieve a financially feasible project; and, (10) have at least 51% of the project space be residential, if in a mixed use project. Eligible Uses and Activities HOME funds may only be used to finance new construction or acquisition and/or rehabilitation of rental housing which is affordable to very low and low-income households as defined by 24 CFR 922. Fifteen percent (15%) of the annual HOME fund allocation shall be set aside for certified Community Housing Development Organizations (CHDO's). New construction costs eligible for HOME funding shall be as specified in 24 CFR Part 92, including: 1. site acquisition; 2. site preparation costs (grading, filling, etc.); 3. financing costs as described in 24 CFR 92206; 4. architectural, engineering, and other related soft costs; 5. the cost of extending or upgrading utilities to the site to support the proposed project; 6. construction costs; 7. relocation costs; and, 8. affirmative marketing and audit costs related to HOME program requirements. Rehabilitation costs eligible for HOME funding include: 9. project acquisition with or without rehabilitation; 10. financing costs, as described in 24 CFR 92.206; 11. architectural, engineering, or other design costs; 12. utility upgrade or extension costs; 13. costs associated with demolition (where necessary) only if rehabilitation is commenced within 12 months of demolition; 14. construction costs; 15. project audit costs; and, 16. affirmative marketing costs. Ineligible Uses and Activities The following costs are not eligible for HOME funding: Affordable Housing Funds Policies and Procedures Page 29 75B-94 1. project reserve accounts for replacement or operating reserves, and operating subsidies; 2. payment of impact fees; 3. land banking; 4. emergency repair or weatherization programs; 5. commercial properties; 6. temporary shelters; or 7. project -based rental assistance. Affordability Rea uirements HUD provides the following maximum HOME rent limits. The maximum HOME rents are the lesser of. 1. The fair market rent for existing housing for comparable units in the area as established by HUD; or 2. A rent that does not exceed 30 percent of the adjusted income of a family whose annual income equals 65 percent of the median income for the area, as determined by HUD, with adjustments for number of bedrooms in the unit. The HOME rent limits provided by HUD will include average occupancy permit and adjusted income assumptions. In rental projects with five or more HOME -assisted rental units, twenty (20) percent of the HOME -assisted units must be occupied by very low-income families and meet one of following rent requirements: 1. The rent does not exceed 30 percent of the annual income of a family whose income equals 50 percent of the median income for the area, as determined by HUD, with adjustments for smaller and larger families. HUD provides the HOME rent limits which include average occupancy permit and adjusted income assumptions. However, if the rent determined under this paragraph is higher than the applicable rent under 24 CFR 92252(a), then the maximum rent for units under this paragraph is that calculated under 24 CFR 92.252(a). 2. The rent does not exceed 30 percent of the family's adjusted income. If the unit receives Federal or State project -based rental subsidy and the very low-income family pays as a contribution toward rent not more than 30 percent of the famdy's adjusted income, then the maximum rent (i.e., tenant contribution plus project -based rental subsidy) is the rent allowable under the Federal or State project -based rental subsidy program. To ensure that HOME investments yield affordable housing over the long term, HOME imposes rent and occupancy requirements over the length of an affordability period. For homebuyer and rental projects, the length of the affordability period depends on the amount of HOME assistance to the project or buyer, and the nature of the activity funded. Table 1-1: Determining the HOME Period of Affordability: HOME Assistance er Unit or Buyer Length of the Affordabili Period Less than $15'000 5 years $15,000 - $40,000 10 years Affordable Housing Funds Policies and Procedures Page 30 75B-95 More than $40,000 15 Years New construction of rental housing 20 years Refinancing of rental housing 15 years Throughout the affordability period, income -eligible households must occupy the HOME - assisted housing. When units become vacant during the affordability period, subsequent tenants must be income eligible and must be charged the applicable HOME rent. Other Requirements Minimum Loan: All HOME investments must total not less than $1,000 multiplied by the number of HOME -assisted units in the project. Maximum Loan: The maximum amount of subsidy per unit shall not exceed the maximum allowed by HUD under the HOME program (24 CFR 92.250), or that provided for under Section IV, Loan Terms, of these Policies and Procedures, whichever is less. The City will avoid unnecessary layering of subsidies from different federal, state and local programs and seek to maximize the benefit to target households from the investment of HOME funds in a project. The Housing Division will use HUD's Cost Allocation Tool to identify the maximum subsidy per unit for each project. Property Standards: Housing that is assisted with HOME funds must meet, at a minimum, the City's Property Standards, including all applicable local, State and Federal codes and regulations. Newly constructed housing must also meet the current edition of the Model Energy Code published by the Council of American Building Officials. Substantially rehabilitated housing must meet the cost-effective energy conservation and effectiveness standards in 24 CFR 39. Labor Standards/Construction Contracts: Any contract for construction (whether it is for rehabilitation or for new construction) of affordable housing with 12 or more units assisted with HOME funds must contain a provision requiring that not less than the prevailing wages paid in the locality, as determined by the Secretary of Labor pursuant to the Davis -Bacon Act, will be paid to all laborers and mechanics employed in the development of the project. Contractors and subcontractors must comply with regulations issued under this Act and pertaining to labor standards and HUD Handbook 1344.1. These provisions apply whether HOME funds are used for construction or non -construction costs. Lead -based Paint: Housing assisted with HOME funds constitutes HUD -associated housing for the purpose of the Lead -Based Paint Poisoning Prevention Act and the Lead Safe Housing Rule, and is therefore subject to 24 CFR Part 35. Unless otherwise provided, borrowers are responsible for testing and abatement. Affordable Housing Funds Policies and Procedures Page 31 75B-96 Community Development Block Grant Program Source of Funds Funding for this program is provided through the U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant (CDBG) program (including program income and residual receipts), and therefore is subject to the federal rules and regulations found in 24 CFR Part 570, as amended from time to time. EBgible Borrowers/Grantees Eligible borrowers are community -based nonprofit housing development corporations (CBDO's) duly organized or with capacity to promote and undertake community development activities m a not -for -profit basis, with proven capacity to develop, own and operate affordable housing, within a neighborhood identified in the Community Development plan (Annual Action Plan). Such organizations are defined in CDBG regulations (24 CFR 570204(a)(2)(c)(1)). Nonprofit Housing Development Corporations (HDC's) and social service agencies with proven capacity to develop, own, and operate affordable housing, and limited partnerships whose general partner(s) is otherwise eligible under the above provisions, are also eligible to borrow Program funds if the nonprofit partner is the managing general partner throughout the term of the loan and will receive at least 51% of the developer fee. Nonprofit corporations must have a valid 501(c)(3) or (4) designation from the Internal Revenue Service. Eligible Projects Eligible projects will: (1) have four or more apartment units or fewer than four units in the case of congregate housing, mobile home units or where the Housing Division Manager finds that the project will provide a substantial public benefit; (2) if new construction, have 51% of the units occupied by low income tenants; (3) be free from significant adverse environmental impacts, except those that can be mitigated; and, (4) avoid permanent involuntary tenant displacement to the greatest degree feasible in order to carry out the program. Transitional or permanent supportive housing may be provided. Rents of assisted units shall be affordable to households whose incomes do not exceed 80% of the area median income. Eligible Uses and Activities Funds can be used to make loans to eligible borrowers to provide affordable housing, principally for low and moderate income households, including, but not limited to: (1) acquisition and/or rehabilitation of eligible rental properties; (2) new construction of rental or limited equity cooperative housing by a CBDO is eligible, provided the construction activity is carried out as part of a neighborhood revitalization, community economic development or energy conservation project. New housing constmction carried out by an eligible CBDO must be part of a larger effort to revitalize the neighborhood (i.e., a plan for the community's revitalization efforts based on a comprehensive plan, not just for the sake of the CDBG project); Affordable Housing Funds Policies and Procedures Page 32 75B-97 Ineligible Uses and Activities Funds may not be used for the following activities: 1. the construction of new rental housing or for any program to subsidize or assist such housing, except when carried out by a CBDO, provided the construction activity is carried out as part of a neighborhood revitalization, community economic development or energy conservation project, 2. to provide income payments for rent or utilities, except in emergency situations for a period not longer than three months; or, 3. to assist rental housing properties if less than 51 % of the units will be occupied by low and moderate income households. Compliance with Federal and Local Regulations All projects must comply with all applicable federal requirements contained in 24 CFR Part 570 Subpart K, including, but not limited to, standards of financial management, environmental review, labor and wage requirements, debarred contractors, lead -based paint and equal opportunity. Borrowers should note: Contract Requirements: All work shall be completed by licensed contractors. All contracts must comply with competitive bidding requirements. Labor Standards: A project with eight or more residential units must comply with the Federal Labor Standards, including the Davis -Bacon Act requirements, as promulgated by HUD, and set forth in 24 CFR Part 570, Subpart K in the performance of the rehabilitation or construction work tmanced by the loan. Contracts over $10,000 must comply with Equal Opportunity Affirmative Action requirements of Section 3 of the Housing Urban Development Act of 1968. All efforts shall be made to provide equal opportunity for employment without discrimination as to race, marital status, sex, color, age, religion, national origin or ancestry, and to seek out qualified local tradespeople for contracting and subcontracting bids. Lead -based Paint: Housing assisted with CDBG funds constitutes HUD -associated housing for the purpose of the Lead -Based Paint Poisoning Prevention Act and the Lead Safe Housing Rule, and is therefore subject to 24 CFR Part 35. Unless otherwise provided, borrowers are responsible for testing and abatement. Accessibility: All projects must comply with the federal Section 504 Disabled Accessibility regulations contained in Sections 822 and 8.23 of Subpart C, 24 CFR Part 8. Affordable Housing Funds Policies and Procedures Page 33 75B-98 Project -Based Voucher Program Source of Funds Project -based vouchers are a component of a public housing authority's (PHA) Housing Choice Voucher Program. Funding for project -based vouchers comes from funds already obligated by the U.S. Department of Housing and Urban Development to a PHA under its Annual Contributions Contract. A PHA can attach up to 20 percent of its Annual Contributions Contract to specific housing units if the owner agrees to either rehabilitate or construct the units, or the owner agrees to set -aside a portion of the units in an existing development. The PHA can use up to 20 percent of its housing choice vouchers for project -based vouchers. Eligible Borrowers Eligible borrowers are nonprofit Housing Development Corporations (HDC's) duly organized to promote and undertake community development activities on a not -for -profit basis, or for -profit housing developers or development corporations, with proven capacities to develop, own, and operate affordable housing. Limited partnerships whose general partners are otherwise eligible under the above are also eligible to borrow Program funds. Eligible Proiects Eligible projects include acquisition, rehabilitation, or new construction of rental housing projects which: 1. The PHA may attach PB V assistance for units in existing housing or for newly constructed or rehabilitated housing developed under and in accordance with an Agreement. a. Existing housingA housing unit is considered an existing unit for purposes of the PBV program, if at the time of notice of PHA selection the units substantially comply with HQS. i. Units for which rehabilitation or new construction began after owner's proposal submission but prior to execution of the Agreement to Enter into a Housing Assistance Payments Contract do not subsequently qualify as existing housing. ii. Units that were newly constructed or rehabilitated in violation of program requirements also do not qualify as existing housing. Eligible Uses and Activities Program funds can be used to enter into an Agreement with eligible borrowers who will provide affordable housing, principally for low and moderate income households. Eligible uses of Project -Based Voucher funds include, but are not limited to, the following: (1) acquisition and/or rehabilitation of eligible rental properties; (2) acquisition and conversion of nonresidential property to multifamily rental housing units; and (3) new construction of rental housing units. Affordability Requirements All units assisted under this program shall be affordable to households with incomes that do not exceed 30% of median income. Affordable Housing Funds Policies and Procedures Page 34 75B-99 Compliance with Federal and Local Regulations All projects must comply with all applicable federal requirements contained in 24 CFR 982, including, but not limited to, environmental review, labor and wage requirements, debarred contractors, lead -based paint and equal opportunity. Borrowers should note: Contract Requirements: All work shall be completed by licensed contractors. All contracts must comply with competitive bidding requirements. Labor Standards: A project with nine or more residential units must comply with the Federal Labor Standards, including the Davis -Bacon Act requirements, as promulgated by HUD, and set forth in 24 CFR Part 570, Subpart K in the performance of the rehabilitation or construction work financed by the loan. Contracts over $10,000 must comply with Equal Opportunity Affirmative Action requirements of Section 3 of the Housing Urban Development Act of 1968. All efforts shall be made to provide equal opportunity for employment without discrimination as to race, marital status, sex, color, age, religion, national origin or ancestry, and to seek out qualified local tradespeople for contracting and subcontracting bids. Lead -based Paint: Housing assisted with PBV funds constitutes HUD -associated housing for the propose of the Lead -Based Paint Poisoning Prevention Act and the Lead Safe Housing Rule, and is therefore subject to 24 CFR Part 35. Unless otherwise provided, borrowers are responsible for testing and abatement. Accessibility: All projects must comply with the federal Section 504 Disabled Accessibility regulations contained in Sections 8.22 and 8.23 of Subpart C, 24 CFR Part 8. Affordable Housing Funds Policies and Procedures Page 35 75B-100