The provisions of this chapter shall be known collectively as the inclusionary housing ordinance of the city of Soledad.

(Ord. 620 § 2 (part), 2005)

The purpose and intent of this chapter is to promote the public welfare by increasing the production and availability of affordable housing units, and to establish inclusionary housing requirements which implements general plan policies guiding land use and housing development. It is the intent of the city of Soledad to provide for a minimum of twenty percent of new housing units be affordable to moderate, low and very low income households (eight percent moderate income, six percent low income and six percent very low income).

(Ord. 620 § 2 (part), 2005)

For the purposes of this chapter, the following words and phrases shall have the meanings set forth in this section:

"Affordable" means housing which can be purchased or rented by a household with very low, low, or moderate income. Units designated for purchase by lower income households shall be affordable according to income limits established by the state department of housing and community development for the county of Monterey. Units designated for rent by lower income households shall be affordable at rents that do not exceed thirty percent of sixty percent of area median income. Units designated for rent by very low income households shall be affordable at rents that do not exceed thirty percent of fifty percent of the area median income.

"Affordable housing agreement" means a written agreement between the developer, city and possibly additional parties which specify the terms and conditions under which affordable housing requirements are to be met.

"Affordable housing fund" means a fund established and administered by the city, containing in-lieu fees and other funds held and used exclusively to increase and improve the supply of affordable housing.

"Affordable housing project" means a development project in which one hundred percent of the dwellings to be built will be sold or rented in conformance with the city's affordable housing standards.

"Building valuation" means the total value of the construction work for which a construction permit is required, as determined by the building official using the Uniform Building Code.

"Commercial mixed use project" means a development project involving primarily non-residential uses, including retail, office, commercial, industrial, and manufacturing uses as further described in the zoning regulations.

"Density" means residential density as defined in the appropriate sections of this code.

"Density bonus" means a density increase of at least twenty-five percent over the maximum density otherwise allowable under the zoning regulations.

"Development project" means an activity for which a subdivision map or construction permit is required, including new buildings and building additions or remodels, but not including changes in ownership, occupancy, management or use.

"Director" means the community development director or his/her authorized representative.

"Equity build-up" means a property's sales price at first resale, less the initial purchase price and less the city's equity share as described in Section 17.41.210 of this chapter.

"Expansion area" means a land area proposed for annexation to the city or annexed after the adoption date of the ordinance codified in this chapter.

"Inclusionary housing unit" means a dwelling which is built under the provision of this chapter, and which meets the city's affordable housing standards.

"In-lieu fee" means a fee paid to the city as an alternative to the production of inclusionary housing, to be used in the acquisition, construction, or rehabilitation of affordable housing.

"Low" or "lower income households" shall have the meaning set forth in California Health and Safety Code, Section 50079.5; provided the income of such persons and families shall not exceed eighty percent of the median income within the county.

"Market value" means the highest price a willing buyer would pay and willing seller would accept, both being fully informed and in an open market, as determined by an appraiser or other qualified professional. See also Section 17.41.210 of this chapter.

"Moderate income households" mean and include those persons and families whose incomes exceed eighty percent but are less than or equal to one hundred twenty percent of the median income within the county.

"Real property" means land and improvements, if any, including anything permanently affixed to the land, such as buildings, walls, fences and paved areas.

"Residential project" means development projects which result in the subdivision of land and/or the construction or conversion of dwellings, including, but not limited to: Single-family detached homes, apartments, condominiums, live/work studios, manufactured homes, and group housing.

"Very-low income" shall have the meaning set forth in California Health and Safety Code, Section 50105; provided that such income level shall not exceed fifty percent of the median income within the county.

(Ord. 620 § 2 (part), 2005)

A.

This chapter shall apply to development projects consisting of five or more lots or new dwelling units, and to commercial development projects consisting of two thousand five hundred square feet of gross floor or larger.

B.

The following types of development projects are excluded:

1.

Residential developments of four units or less;

2.

New commercial developments of less than two thousand five hundred square feet gross floor area;

3.

Residential and commercial building additions, repairs or remodels, provided that such work does not increase the number of existing dwellings by four or more units; or result in an increase in gross floor area of two thousand five hundred square feet;

4.

The conversion of less than five dwelling units to condominiums within any five-year period;

5.

Commercial condominium conversions which do not result in the creation of new dwellings;

6.

Affordable housing projects;

7.

Emergency projects, or projects which the city council determines are necessary to protect public health and safety;

8.

Development projects which the city council determines are essentially noncommercial or nonresidential in nature, which provide educational, social, or related services to the community and which are proposed by public agencies, nonprofit agencies, foundations and other similar organizations;

9.

Projects which replace or restore a structure damaged or destroyed by fire, flood, earthquake or other disaster within three years prior to the application for the new structure(s);

10.

Projects for which an approved tentative map or vesting tentative map exists, or for which a construction permit was issued prior to the effective date of the ordinance codified in this chapter and which continue to have unexpired permits.

(Ord. 620 § 2 (part), 2005)

A.

Methods of Meeting Requirements. New development projects shall satisfy the inclusionary housing requirements of the city's housing element. To meet the requirements, the developer may suggest one or more of the following methods, subject to approval of the City of Soledad:

1.

Construct the required number of affordable dwelling units;

2.

Dedicate real property for affordable housing;

3.

In-lieu fees;

4.

Use a combination of the above methods, to the approval of the city council;

5.

Inclusionary units should be similar in size and design to market rate units within the development.

B.

Affordable Housing Standards. Affordable dwelling units constructed must meet city affordable housing standards, and must be consistent with affordability policies in the general plan housing element.

C.

Concurrent Development. The required inclusionary shall be constructed concurrently with market rate units. City council may approve alternate timing for a multi-family unit rental housing project when an affordable housing developer is involved through an affordable housing agreement.

(Ord. 620 § 2 (part), 2005)

(Ord. No. 757, § 2, 11-15-2023)

A.

Fractional Numbers. In determining the number of dwellings that are required to be built, fractional units less than 0.50 shall be rounded down to the first whole number unit, and fractional units of 0.50 or greater shall be rounded up to the next higher whole number unit, as calculated by the director.

B.

Timing. The inclusionary housing requirement shall be met prior to issuance of a certificate of occupancy for the first unit in a building, or the first building in a complex to be constructed or remodeled; or for subdivisions, prior to final map approval; or prior to building permit issuance, for projects for which a certificate of occupancy is not issued; or as otherwise agreed to by the city council as part of the tentative map, rezoning, conditional use permit or other development approval.

C.

Affordable Housing Agreement. To meet the requirements, the developer may enter into an agreement with the city, the city's housing authority, nonprofit housing provider, or other qualified housing provider approved by the city council to construct, refurbish, convert, operate and maintain the required affordable housing. Such affordable housing agreements shall be to the approval of the city council and shall be in a form approved by the city attorney.

(Ord. 620 § 2 (part), 2005)

A.

Payment of In-Lieu Fee. Developer and city council may agree to allow payment of a fee to the city in lieu of constructing affordable dwellings to meet this requirement. The developer shall submit a report identifying all overriding conditions impacting the project that prevent the developer from meeting the requirements of this section.

B.

Amount and Method of Payment. The dollar amount and method of payment of the in-lieu fee shall be as approved by the city council.

C.

Timing. In-lieu fees shall be paid prior to issuance of the certificate of occupancy of the first dwelling within a residential development; or for residential subdivisions to be built out by others, prior to final subdivision map approval; or prior to occupancy for new commercial buildings or remodels; or prior to building permit issuance, for projects for which a certificate of occupancy is not issued; or as otherwise provided by written agreement between the developer and city, to the approval of the community development director.

(Ord. 620 § 2 (part), 2005)

A.

Affordable Housing Fund Established. The city hereby establishes an affordable housing fund. Such fund shall be administered by the finance director and shall be used exclusively to provide funding for the provision of affordable housing and for reasonable costs associated with the development of affordable housing, at the discretion of the city council.

B.

In-Lieu Fees. In-lieu fees collected shall be deposited into the affordable housing fund, to the satisfaction of the finance director.

(Ord. 620 § 2 (part), 2005)

A.

Irrevocable Offer to Dedicate Real Property. At the discretion of the city council, an irrevocable offer to dedicate real property equal or greater in value to the in-lieu fee which would otherwise be required may be offered to the city, or to a housing provider designated by the city, instead of providing the required number of affordable dwellings or paying in-lieu fees. In considering an offer to dedicate real property, the city council must find that the dedication of real property will provide an equal or greater public benefit than constructing affordable units or paying in-lieu fees, based on the following criteria:

1.

Valuation of the land and/or improvements to be dedicated relative to other methods of meeting the requirement;

2.

Suitability of the land and/or improvements for housing, including general plan conformity, size, shape topography and location; and

3.

Feasibility of developing affordable housing, including general plan consistency, and availability of infrastructure.

B.

Real Property Valuation. The valuation of real property offered in-lieu shall be determined by the community development director, based upon an appraisal made by a qualified appraiser mutually agreed to by the developer and the city. Costs associated with the appraisal, title insurance and transfer, recordation and related costs shall be borne by the developer.

C.

Agreement and Timing. The real property dedication shall be by deed or other instrument acceptable to the city, and shall be completed by recordation with the recorder of the county of Monterey or to occupancy release of the first residential unit or commercial building in the development; or prior to building permit issuance, for projects for which a certificate of occupancy is not issued; or as otherwise provided by written agreement between the developer and the city.

(Ord. 620 § 2 (part), 2005)

A.

Eligibility for Incentives. The developer may be eligible to receive, or to request development incentives in return for constructing affordable housing in connection with a development project, as part of a city planning application. Such incentives may include density bonus, waiver/modification of development or zoning standards, priority of application processing prior to applications which do not include affordable units, deferral of city required fees for payment until issuance of the certificate of occupancy or other incentives or concessions agreed to between the developer and city council. Incentives or other forms of financial assistance may be offered by the city to the extent that resources are available for this purpose and to the degree that such incentives or assistance will help achieve the city's housing goals.

B.

Affordable Housing Agreement. Any incentives provided by the city, beyond those incentives to which a developer may be automatically entitled to shall require city council approval and shall be set out in an affordable housing agreement. The form and content of such agreement shall be to the approval of the city attorney and the community development director. Developers are further encouraged to utilize other local, state or federal assistance, when available, to meet the affordable housing standards.

(Ord. 620 § 2 (part), 2005)

A.

Method of Application. An applicant/developer proposing a project for which affordable housing is required shall submit a statement with the standard planning application, describing the inclusionary housing proposal. The developer's statement shall include:

1.

A brief description of the proposal, including the method chosen to meet the inclusionary housing requirement, number, type and location of affordable units, term of affordability, preliminary calculation of in-lieu fees, or offer of land dedication;

2.

How the proposal meets general plan policies and inclusionary housing requirements;

3.

Plans and other exhibits showing preliminary site layout, grading, building elevations, parking and other site features, location of affordable dwelling units and (where applicable), market-rate dwelling unit;

4.

Description of incentives requested, including exceptions from development standards, density bonuses, fee waivers or other incentives; and

5.

Other information which the community development director determines necessary to adequately evaluate the proposal.

B.

Director Response. After receiving a complete planning application, including an affordable housing proposal, the director shall respond to the applicant or developer's affordable housing proposal. The city response shall identify: 1) affordable housing issues and concerns; 2) incentives which the director can support when making a recommendation to the decision-making body; and 3) procedures which will need to be followed to comply with the inclusionary housing requirements.

(Ord. 620 § 2 (part), 2005)

A.

Submittal of an Affordable Housing Agreement. Applicants and developers for development projects subject to this chapter shall, as a condition of development approval, prepare and submit an affordable housing agreement for city approval. The draft agreement shall be reviewed by the community development director and city attorney for compliance with project approvals, city policies and standards, and applicable codes. Following approval and signing of the agreement by the parties, the final agreement shall be recorded and relevant terms and conditions shall be recorded as a deed restriction on those lots or affordable units subject to affordability requirements. The affordable housing agreement shall be binding to all future owners and successors in interest.

B.

Agreements for Construction of Affordable Units. For development projects meeting their inclusionary requirement through construction of affordable dwelling units, the affordable housing agreement shall specify:

1.

The number and location of affordable units;

2.

The size (square footage), number of bedrooms, and design of the affordable units;

3.

Terms of affordability;

4.

Schedule for construction of the affordable units;

5.

Incentives or other assistance to be provided by the city;

6.

Where applicable, the procedures to be used for qualifying tenants or buyers, setting rental/sales costs, renting or selling units filling vacancies, and managing the units; and

7.

Other terms or conditions requested by city.

C.

Agreements for Real Property Dedication. For development projects meeting their inclusionary housing requirement through real property dedication, the agreement shall specify:

1.

The method of conveyance, schedule, and appraised value of the proposed dedication;

2.

Calculation of housing in-lieu fees otherwise applicable to the project at the time of recordation;

3.

Title report and insurance;

4.

Description of location, condition, improvements, and other relevant factors applying to the property; and

5.

Other information required by the city.

D.

Payment of In-Lieu Fees. An affordable housing agreement shall not be required for projects which meet their inclusionary housing requirement through the payment of in-lieu fees.

(Ord. 620 § 2 (part), 2005)

Only households qualifying as very low, low or moderate income, pursuant to the affordable housing standards, shall be eligible to rent, purchase or occupy inclusionary units developed or funded in compliance with this requirement. For sale inclusionary housing units shall be owner occupied for the term of the affordable housing agreement.

(Ord. 620 § 2 (part), 2005)

The following principles shall apply to the development of inclusionary housing: (1) The development proposal shall provide for the dispersal of inclusionary units to the maximum extent feasible. (2) Multifamily buildings may contain any proportion of inclusionary units, but no inclusionary housing development should be located to or in the immediate vicinity of another inclusionary housing development.

(Ord. 620 § 2 (part), 2005)

The city or other housing provider designated by the city shall screen prospective renters or buyers of affordable units. Renters or buyers of affordable units shall enter into an agreement with city or other housing provider to comply with the affordable housing standards.

(Ord. 620 § 2 (part), 2005)

Developers of affordable units for sale shall specify the type of affordability restriction to be applied. These restrictions may include, inclusionary housing agreements, promissory notes, deeds of trust, resale restrictions, rights of first refusal, options to purchase and/or other documents, which shall be recorded against the inclusionary units. The developer may participate in a shared equity purchase program. Affordable rental units shall be available in perpetuity.

(Ord. 620 § 2 (part), 2005)

The term of the covenant shall be at least forty-five years from the date of the covenant. If an owner occupies the unit for the full term, the controls expire and the owner may sell the unit to any buyer for any price. However, if the owner sells the unit during the term of the covenant, the new owner will be required to sign and record a new covenant which begins a new forty-five-year period of price and occupancy restrictions. This requirement will continue for each new owner of the unit, but in no event will the total period of controls exceed ninety years.

(Ord. 620 § 2 (part), 2005)

Under this program, the qualified buyer of designated affordable dwelling unit shall enter into a shared equity agreement with the city. Such agreement shall be recorded as a second trust deed against the purchase property, at no interest, securing and stating the city's equity share in the property. The city's equity share shall be calculated by the community development director, and shall be the decimal percentage of the property's value resulting from:

A.

The difference between the property's market value and the actual price paid by the homeowner, divided by the market value, and/or when applicable;

B.

The amount of subsidy provided by the city to the homeowner to purchase the property, divided by the property's market value.

Upon sale, the city's equity share shall be repaid to the city from the proceeds of the sale, less the city's percentage share of title insurance, escrow fees and documentary transfer taxes, at the close of escrow.

(Ord. 620 § 2 (part), 2005)

In the event of "early resale," owners of properties subject to the shared equity purchase program shall either 1) pay an equity recapture fee to the city as described in the schedule below, in addition to the city's equity share, or 2) sell the property to another eligible household. "Early resale" means the sale, lease or transfer of property within five years of the initial close of escrow. If owner chooses to pay the equity recapture fee, the recapture fee shall be paid to the city upon resale at close of escrow, based on the following schedule:

The recapture amount shall be determined prior to the calculation of escrow closing costs.

(Ord. 620 § 2 (part), 2005)

A.

When the city provides low interest financing to assist affordable housing projects and the buyers of individual units, the city's financing is almost always secured by a deed of trust recorded subordinate to financing from other institutions. Often the owners wish to refinance the senior institutional financing to obtain a lower interest rate while keeping the city's loan in place. In such cases, the new lender requires the city to subordinate its deed of trust to the new financing, so the new financing retains priority in the event of default.

B.

Generally the city will approve subordination requests when:

1.

The borrower is refinancing solely for the purpose of obtaining a lower interest rate;

2.

The borrower is taking no cash out of the transaction;

3.

The new institutional loan is fully amortized with no balloon payment; and

4.

The subordination does not place the city loan at greater risk.

C.

Generally the city will not approve subordination requests when:

1.

The senior institutional financing is deferred or only partially amortized, and the borrower proposes to take cash out of the transaction;

2.

The new institutional financing may result in negative amortization (unless the city is satisfied that there is adequate owner equity (at least twenty to twenty-five percent) and excellent credit history);

3.

The subordination places the city loan at significantly greater risk;

4.

The borrower is not in full compliance with the city's affordability requirements; or

5.

The refinancing exceeds the value of affordability as determined by the calculation of value and resale price.

(Ord. 620 § 2 (part), 2005)

The affordable units must remain affordable to very low, low or moderate income households in the community. Affordability is assured upon the sale of any affordable unit through the covenant, which sets forth the formula for calculating the maximum allowable price at any given time and/or upon resale.

A.

Standard Value/Resale Formula. To set the price of the unit at any given time or upon resale, staff starts with the price paid by the current owner and increases that price by the percentage increase in area median income (AMI) during the period in which the owner owned the property. Below is a formula to calculate the value of the unit:

(FMV of market home - affordable unit value) × (2.222% × (year affordable unit built - year affordable unit sold) = home value/equity)

For purposes of this section, fair market value of market home shall mean the appraised value of a home equivalent in size and number of bedrooms and bathrooms of that of the affordable unit. The value of the affordable unit may be determined for purposes of resale, refinancing, and/or accessing a line of credit on the home. At no time shall refinancing of the unit or access to a line of credit exceed the value of the affordable unit. The owner of the affordable unit is responsible for the full cost of the appraisal. The city must certify the appraisal but reserves the right to challenge the market rate value.

B.

Mid-Year Adjustment. The value of the unit is typically established annually. To allow for some projected increase in valuation/sales price within a calendar year, the following calculation shall be allowed:

Standard allowed percentage × # of months = mid-year percentage rate

If the seller had bought the affordable unit for two hundred fifty thousand dollars, the mid-year adjustment would amount to an increased value of four thousand one hundred sixty-five dollars.

C.

Sale Prior to Expiration of Forty-Five Year. If the owner sells the unit during the term of the covenant, the new owner will be required to sign and record a new covenant which begins a new forty-five-year period of price and occupancy restrictions.

To sales price of the unit cannot exceed either 1) the value of the unit as determined through calculation of value and resale price in subsection A of this section, or 2) a price established by agency which will make such home available for purchase at affordable housing costs to household of very low, low or moderate income, or 3) HCD's income guidelines for very low, low or moderate, income, whichever is applicable, at the time of sale. The maximum allowable sale price in each category must be affordable to a hypothetical buyer in that income category. The price is set such that the buyers' monthly payments for mortgage, taxes and insurance do not exceed forty-three percent of the buyer's target income.

The formula to calculate the unit value includes assumptions for interest rate, property taxes and insurance, which can be updated annually based on market changes. It also varies with changes in the AMI, which is updated annually.

To determine the value of the homes based on the monthly mortgage, a calculation will have to be determined working backwards assuming a forty-three percent debt to equity ratio. A mortgage lender will calculate the value of the home based on the mortgage as outlined in the schedule with a debt-to-equity ratio.

(Ord. 620 § 2 (part), 2005)

(Ord. No. 757, § 2, 11-15-2023)

Inclusionary rental units shall be managed and operated by the property owner, or the owner's agent, for the term of the affordable housing agreement. Sufficient documentation shall be submitted to ensure compliance with this chapter, to the satisfaction of the community development director.

(Ord. 620 § 2 (part), 2005)

A.

Enforcement. No final subdivision map shall be approved, nor building permit issued, nor shall any other development entitlement be granted for a development project which does not meet these requirements. No inclusionary unit shall be rented or sold except in accordance with these requirements and the affordable housing standards.

B.

Appeals. The community development director shall administer and interpret these requirements, subject to applicable codes and city procedures. Decisions of the director are appealable, subject to the zoning ordinance appeal provisions.

(Ord. 620 § 2 (part), 2005)

If any provision of this chapter or the application thereof to any person or circumstances is held invalid, the remainder of the chapter and the application of the provision to other persons or situations shall not be affected thereby.

(Ord. 620 § 2 (part), 2005)