The provisions of this chapter shall be known collectively as the affordable housing ordinance of the City of Watsonville.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

It is the City’s intent to maintain an affordable housing requirement that implements the City’s General Plan policies guiding land use and housing development.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

For purposes of this chapter, unless otherwise apparent from the context, certain words and phrases used in this chapter are defined as follows:

(a)    “Affordable” shall mean a category of housing that may be purchased or rented by a household with very low, low, median, moderate or above moderate income as defined by this chapter and/or any State or Federal affordable housing program, and/or a household that receives any type of affordable housing choice voucher or rental subsidy.

(b)    “Affordable housing agreement” shall mean a written agreement between the owner or developer of a residential development project and the City, in a form approved by the City, that specifies how the requirements of this chapter shall be satisfied and which is secured against the property. Such agreement may be secured by a deed of trust encumbering affordable housing developed as part of the project. The affordable housing agreement shall include:

(1)    The total number of units in the project;

(2)    The total number, where applicable, of rental and/or ownership affordable units;

(3)    The total number, and number by income category, of the affordable units, including the number of units set aside for households that receive any housing choice vouchers or other affordable rental subsidies, if any;

(4)    The area (square footage), number of bedrooms, and type (single-family, multifamily, apartment, etc.) of the market-rate units and affordable units (by income category and as a total), including the number of units set aside for households that receive any housing choice vouchers or other affordable rental subsidies, if any;

(5)    The term of affordability for the affordable units;

(6)    Any density bonus, incentives and/or other assistance to be provided by the City or other public agency;

(7)    Provision for periodic monitoring by the City (or its designee) for compliance with the provisions of this chapter;

(8)    Provision requiring the owner or developer to establish and maintain a local sales office;

(9)    Provision requiring the local sales office to offer all written materials in both English and Spanish, and to employ individuals fluent in both English and Spanish;

(10)    A recordable copy of that portion of any tentative map which shall depict (as applicable) all market-rate and designated affordable units or lots by income category; and

(11)    Other terms or conditions requested by the City.

(c)    “Affordable housing fund” shall mean any fund that is established and administered by the City to be used exclusively to increase and/or improve the supply, and/or reduce the cost of housing.

(d)    “Affordable unit” shall mean any dwelling units which are affordable to extremely low, very low, low, median, moderate or above-moderate income households as defined by this section or by any Federal or State housing program and/or to recipients of housing choice vouchers or other public rental assistance and are subject to rental, sale, or resale provisions to maintain affordability.

(e)    “Applicant” shall mean any person or entity seeking City real property development permits and approvals.

(f)    “Commercial development project” shall mean any development project involving primarily nonresidential uses including but not limited to retail, office, service-commercial, neighborhood-commercial, tourist-commercial and mixed-use projects.

(g)    “Declaration of covenants and restrictions” shall mean a recorded document that attaches the conditions and requirements of this chapter to the title of an affordable unit.

(h)    “Density” shall mean the minimum net land area calculated in Sections 14-16.205, 14-16.305 and 14-16.405.

(i)    “Development project” shall mean any activity for which a subdivision map and/or zoning permit is required. Changes in ownership, tenancy, management and/or the exceptions contained in Section 14-46.050 are not a development project.

(j)    “Eligible purchaser” shall mean any household qualified to purchase an affordable unit both: (1) according to household income, and (2) as a first-time homebuyer, as defined in the City’s Homebuyer Program Guidelines (published July 30, 2018 and as revised from time to time), and any other State or Federal program.

(k)    “Eligible renter” shall mean any household qualified, according to household income or eligibility for a housing choice voucher or other affordable rent subsidy, to rent an affordable unit.

(l)    “House Price Index (HPI)” shall mean the Santa Cruz-Watsonville Metropolitan Statistical Area House Price Index as published from time to time by the Federal Housing Finance Agency.

(m)    “Household” shall mean all persons occupying or planning to occupy an affordable unit within ninety (90) days of the close of escrow for an ownership unit and within ninety (90) days of signing a lease for a rental unit.

(n)    “Income” shall mean the total household revenue from all sources. Income from the following persons shall be included when calculating the household income:

(1)    All persons who will be on the title to the property;

(2)    The spouse of a title holder if the spouse will reside on the property; and

(3)    Other persons over the age of eighteen (18) who will reside on the property, subject to the exceptions provided in the City’s Homebuyer Program Guidelines.

(o)    “Income category” shall mean any classification of the amount of household income as defined below:

(1)    “Very low income” shall mean, for the purposes of determining the eligibility of a household to occupy an affordable unit, the lower of the following: the household income equal to or less than eighty (80%) percent of the annual Watsonville median household income, adjusted for household size, or up to fifty (50%) percent of Santa Cruz County’s area median income, adjusted for household size as published by the State Department of Housing and Community Development for Santa Cruz County. For purposes of determining the maximum sales price or rent level for an affordable unit, the household income equal to or less than fifty (50%) percent of the annual Watsonville median household income, adjusted for household size, shall be used.

(2)    “Low (or lower) income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than one hundred (100%) percent of the annual Watsonville median household income, adjusted for household size, or between fifty (50%) percent and eighty (80%) percent of Santa Cruz County’s median household income, adjusted for household size, as published by the State Department of Housing and Community Development for Santa Cruz County. For purposes of determining the maximum rent level for an affordable unit, the household income equal to or less than eighty (80%) percent of the annual Watsonville median household income, adjusted for household size, shall be used.

(3)    “Median income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the lower of the following: the household income equal to or less than one hundred twenty (120%) percent of the annual Watsonville median household income, adjusted for household size, or eighty (80%) percent of Santa Cruz County’s median income, as adjusted for household size, pursuant to Section 6932 of Title 25 of the California Code of Regulations. For purposes of determining the maximum sales price or rent level for an affordable unit, the household income equal to or less than one hundred (100%) percent of the annual Watsonville median household income, adjusted for household size, shall be used.

(4)    “Moderate income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than one hundred fifty (150%) percent of the annual Watsonville median household income, adjusted for household size, or between eighty (80%) percent and one hundred twenty (120%) percent of Santa Cruz County’s median household income, adjusted for household size as published by the State Department of Housing and Community Development for Santa Cruz County. For purposes of determining the maximum sales price for an affordable unit, the household income equal to or less than one hundred twenty (120%) percent of the annual Watsonville median household income, adjusted for household size, shall be used.

(5)    “Above moderate income” shall mean, for purposes of determining the eligibility of a household to occupy an affordable unit, the household income equal to or less than one hundred seventy (170%) percent of the annual Watsonville median household income, adjusted for household size. For purposes of determining the maximum sales price for an affordable unit, the household income equal to or less than one hundred fifty (150%) percent of the annual Watsonville median household income, adjusted for household size, shall be used.

(p)    “Industrial development project” shall mean any development project involving primarily nonresidential uses including, but not limited to, warehousing, light industrial and manufacturing uses.

(q)    “In-lieu fee” shall mean any fee paid pursuant to this chapter to the City by owners of residential, commercial or industrial development projects as an alternative to the production of affordable units.

(r)    “Market-rate unit” shall mean any dwelling unit not subject to the rental, initial sale or resale provisions of this chapter.

(s)    “Market value” shall mean the highest price a willing buyer would pay and a willing seller would accept, or a willing tenant would pay and a willing landlord would accept, both being fully informed and in an open market for a particular dwelling unit.

(t)    “Owner” shall mean any person or persons with legal and equitable title to a property proposed for development.

(u)    “Prevailing interest rate” shall initially mean, and going forward be based on, the average thirty (30) year fixed interest rate mortgage available on a particular date from lenders located in Santa Cruz County then offering such loan product to Watsonville residents. The prevailing interest rate shall initially be set by the Community Development Director based on the above calculation and may be amended by the Watsonville City Council from time to time, but no more often than once every six (6) months or within a reasonable time after income limits are published by the State Department of Housing and Community Development, whichever occurs later.

(v)    “Program” shall mean this Affordable Housing Program, consisting of affordable units created or in-lieu fees generated, as a result of the affordable housing requirements of this chapter.

(w)    “Release fee” shall mean the amount to be paid to the City’s affordable housing fund by the owner of an affordable unit that is released from the declaration of conditions and restrictions required by this chapter. A formula for calculating the release fee may be adopted from time to time by Council resolution. Release fees for a developer at the time of the initial sale and release fees for an owner reselling an affordable unit may not necessarily be calculated in the same manner and will be determined by the Watsonville City Council.

(x)    “Residential development project” shall mean any development project resulting in the subdivision of land and/or the construction of dwellings including but not limited to single-family detached homes, townhouses, apartments, condominiums, live/work studios and single room occupancy units.

(y)    “Watsonville median household income” shall mean seventy (70%) percent of Santa Cruz County’s median household income, as adjusted for family size and rounded upward to the nearest Fifty and no/100ths ($50.00) Dollar increment. This figure is determined annually and is derived from the State Department of Housing and Community Development publication of annual income data for counties by income categories.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

(a)    Projects Required to Produce Affordable Units. Residential development projects of seven (7) or more units or lots shall meet the following requirements:

(1)    If the total number of affordable units required in the project (derived by multiplying the required fifteen (15%) percent or twenty (20%) percent by total project units) conflicts with the total number of component affordable units (derived by summing the required component units by income category), then the total number and not the total of the component numbers shall prevail. Also, any excess required affordable units shall be restricted to the lowest required income category. For example, in a for-sale, ownership project of thirty (30) units, with a fifteen (15%) percent affordable housing requirement (thus yielding five (5) affordable units), with a component obligation of five (5%) percent above moderate income (two (2) units), five (5%) percent moderate income (two (2) units) and five (5%) percent median income (two (2) units), the total of the component affordable units is six (6). In this case, the project would be required to provide a total of five (5) not six (6) affordable units, consisting of a mix of two (2) moderate income units, two (2) median income units, and one (1) above moderate income unit.

(2)    If, pursuant to this subsection (a), two (2) or fewer units are required, one (1) or both of such units may be produced at the moderate income level or below for an ownership development or at the low or very low income level for a rental development.

(3)    Fractional Numbers. To determine the number of affordable units required in a project by income level, fractional units less than or equal to .49 shall be rounded down to the first whole number unit, and fractional units equal to or greater than .50 shall be rounded up to the next higher whole number unit. In determining the number of units required for each income level, fractional percentages equal to or greater than .50 shall be applied to the lowest applicable income level.

(b)    Projects Required to Pay an In-Lieu Fee. The following categories of projects are subject to this chapter and required to pay an affordable housing in-lieu fee:

(1)    Residential development projects or land divisions that include six (6) or fewer new units or lots, unless the developer elects to provide an affordable unit as provided in Section 14-46.070(c);

(2)    New commercial and industrial development projects exceeding one thousand (1,000) square feet of gross floor area; and

(3)    Condominium conversions as defined by Chapter 13-9.

(c)    Federal, State and Agency Assisted Housing Projects. Affordable housing projects, funded through Federal and State housing programs, or assisted by the City pursuant to an owner participation agreement or disposition and development agreement, whose percentage of rent or price restricted units meet or exceed that required by this chapter, thereby satisfy the requirements of this chapter in its entirety.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

The following categories of activities are not subject to the provisions of this chapter:

(a)    Commercial and industrial development projects equal to or less than one thousand (1,000) square feet of gross floor area;

(b)    The following residential uses:

(1)    Residential additions, repairs or remodels that do not result in the creation of additional dwelling units;

(2)    Two (2) unit developments, dwelling units created through urban lot splits, accessory dwelling units and/or junior accessory dwelling units);

(3)    Farm labor housing;

(4)    Shelters, including emergency shelters and low barrier navigation centers as defined by State law; and

(5)    Any nonenclosed structure for which a building permit is required;

(c)    Other uses:

(1)    Congregate care developments that offer nursing and medical services;

(2)    Emergency projects or projects exempted by Council for health and safety reasons;

(3)    Churches, temples, mosques, and synagogues;

(4)    City-owned buildings;

(5)    Project replacing or restoring a structure damaged or destroyed by fire, flood, earthquake or other disaster occurring within three (3) years prior to the application for the new structure(s);

(6)    Lot line adjustments that do not result in the creation of new buildable residential lot(s);

(7)    Detached carports, garage structures, or other nonhabitable commercial or residential detached structures of less than one thousand (1,000) square feet;

(8)    Unenclosed vehicular entry structures for commercial or residential use;

(9)    Parking structures (public or private) for commercial or residential use;

(10)    Projects for which an approved tentative map or vesting tentative map exists, or for which a construction permit was issued prior to July 26, 2001, and which continue to have unexpired permits; and

(11)    Child care facilities.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

(a)    Affordable Unit Requirements.

(1)    The minimum square footage and bathrooms required per unit are shown as follows:

1.    0.50 bath consists of a sink and toilet, provided common showers are located elsewhere within the project.

2.    1.75 bath consists of a sink, toilet and shower or a bathtub.

(b)    Minimum Affordable Unit Standards. The applicant may reduce the interior amenity level of the affordable units as long as each affordable unit meets the following minimum affordable unit standards and any other provisions of this chapter:

(1)    Have complete interior and exterior painting or other finished wall coverings;

(2)    Contain stove, dishwasher and oven, and other built-in kitchen appliances if the woodwork calls for it;

(3)    Contain built-in kitchen cabinets;

(4)    Contain washer and dryer hookups; or for rental units (at a minimum) a centrally located laundry facility;

(5)    Have a paved parking area, with a sidewalk connecting the parking area and unit entrance;

(6)    Contain rain gutters and downspouts;

(7)    Require that multilevel affordable units provide at least a half bath (toilet and sink) on each level of living space unless a level of living space is comprised solely of an entryway or an entryway and a laundry room and/or utility room.

(c)    Size. Affordable units may contain less square footage than market-rate units within the same project, but must meet the minimum square footage requirements of subsection (a) of this section (Affordable Unit Requirements).

(d)    Bedroom Mix. Affordable units must be proportionately distributed by number of bedrooms throughout the project, using the same ratio as the market-rate portion of the project. For example, if fifty (50%) percent of the market-rate units contain two (2) bedrooms and fifty (50%) percent contain three (3) bedrooms within a project, that same ratio of two (2) and three (3) bedroom units shall prevail in the affordable portion of the project.

(e)    Appearance. The street frontage facade of affordable units shall be substantially similar to the market-rate units in terms of design, materials and finished quality.

(f)    Distribution. Affordable units shall be evenly distributed throughout the project with the following exceptions:

(1)    Clustering. If the project contains a variety of product (any combination of one (1) or more of the following types of residential products: single-family detached, condominiums, townhouses, and apartment buildings), the distinct product types may be clustered together; however, there shall be an affordable component of each product type.

(2)    Corner Lots. Two (2) adjacent, affordable townhouse units may be sited on corner lots.

(g)    Timing.

(1)    Construction of Affordable Units. Where an affordable unit(s) is constructed pursuant to this chapter, each such affordable unit shall be constructed concurrently with or prior to construction of the market-rate units within the same project and phase of such project. Development shall occur in a proportionate ratio to the market-rate units except as may otherwise be established in an affordable housing agreement.

(2)    Occupancy of Affordable Units. Where an affordable unit(s) is constructed pursuant to this chapter, the affordable housing requirement shall be met prior to or concurrently with the issuance of a certificate of occupancy or final inspection for the first market-rate unit in the same project or phase of the project as identified by the conditions of approval and/or an affordable housing agreement. In no case shall the last market-rate unit in the project receive a certificate of occupancy or final inspection prior to the last affordable unit being released for occupancy or occupied.

(h)    Price. Affordable units shall be sold at a price affordable to eligible purchasers or rented at a level affordable to eligible renters in compliance with this chapter.

(i)    Term of Affordability. Affordable ownership units created as a result of this chapter shall remain affordable for a minimum period of forty-five (45) years from the date of the initial sale. Affordable rental units created as a result of this chapter shall remain affordable for a minimum period of fifty-five (55) years from the date of the initial certificate of occupancy. All affordable units shall be deed restricted accordingly.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

(a)    In-Lieu Fees. Affordable housing in-lieu fees for applicable projects shall be established by resolution of the Council and adjusted annually by fifty (50%) percent of the annual percentage increase in the House Price Index as defined by this chapter.

(b)    Timing of Payment. In-lieu fees shall be paid either before or concurrently with the issuance of each building permit for each applicable project unit or, in the case of a subdivision of land, prior to recording of the final map. In the event a developer is unable to sell an affordable unit within the time period specified, the in-lieu fee shall be paid prior to offering the released unit at the market-rate price.

(c)    Providing Affordable Unit(s) Instead of Paying the In-Lieu Fee. An applicant otherwise required to pay an in-lieu fee by this chapter may instead provide an affordable ownership unit not exceeding the above moderate income level or an affordable unit for rent not exceeding the median income level or for rent to a tenant eligible for any housing choice voucher or other affordable rent subsidy. All such units shall be deed and time restricted as required by Section 14-46.060(i).

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)

A project providing affordable units equal to fifty (50%) percent or more of the total project units shall be entitled to priority processing as follows:

(a)    Upon certifying that the application is complete and eligible for priority processing, a project shall be immediately assigned to City development review staff; and

(b)    The project shall be processed by City development review staff in advance of all nonpriority items.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.090)

All applications for residential development permits and/or tentative map approval shall include a reasonably complete description of the following. These requirements shall not supersede the requirements for density bonus or other state law incentive projects described elsewhere in this title:

(a)    The method (provision of units or payment of an in-lieu fee) pursuant to Section 14-46.070 to be used to meet the project’s affordable housing requirements of this chapter;

(b)    The number, type and location of affordable units, or a preliminary calculation of in-lieu fees if applicable;

(c)    Site layout, grading, parking and other site features, and building elevations, layouts and dimensions for both affordable and market-rate units, including copies of relevant plans; and

(d)    Any other information that the City determines necessary to adequately evaluate the project’s affordable housing provisions.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.100)

(a)    A draft affordable housing agreement shall be prepared in a form approved by the City and executed by the applicant for projects with seven (7) or more units or lots in response to an application’s condition of development approval.

(b)    A draft agreement shall be reviewed by the City for compliance with project approvals, City policies and standards, and applicable codes.

(c)    The agreement shall be approved by the Council upon approval and signing of the agreement by the parties; and be recorded and binding on all future owners and successors in interest in the project for the time period specified.

(d)    The agreement shall be recorded prior to the filing of the final map or commencement of construction where no map is required.

(e)    Supplemental Documents. Upon the sale or transfer of each affordable unit, the City may use a declaration of covenants and restrictions and/or promissory note and deed of trust to further secure the City’s rights under this chapter and provide constructive notice to the public.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.110)

Only eligible renters and purchasers as defined herein shall be eligible to rent, purchase or occupy affordable units developed or funded in compliance with this chapter (see Section 14-46.030(o) for a definition of income categories and Section 14-46.040(a) for the percentage mix of eligible income categories by size and type of project). Preference shall be given to current residents of the City of Watsonville who have lived in, worked in or received municipal services from the City for at least one (1) year. Exceptions to these program requirements or appeals may be considered at the discretion of the City Manager.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.120)

(a)    Income Limits.

(1)    Income eligibility to purchase or rent affordable units created pursuant to this chapter shall be determined at the time of sale or rental of the affordable unit.

(2)    Income eligibility shall be based on household size and income category and shall be established by resolution from time to time by the Council.

(3)    For purposes of computing eligibility and pricing of affordable units created pursuant to this chapter, the Watsonville median household income shall be used unless otherwise noted.

(b)    Asset Limits. There are no asset limits for prospective renters or purchasers of affordable units created pursuant to this chapter except that renters or purchasers shall not be eligible for or receive any tax advantages associated with the ownership of any other real property at the time of purchase or rental of an affordable unit.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.130)

(a)    Rent Levels. Maximum allowable rent levels by number of bedrooms shall be determined by resolution from time to time by Council, based on the rent formula described in subsection (b) of this section and may be increased no more frequently than annually after unit occupancy. The maximum allowable income for determining eligibility to rent is higher than that used to determine the maximum rent level.

(b)    Rent Formula. Rent for an affordable rental unit shall be calculated as follows:

(1)    STEP ONE: Determine maximum annual household income for unit as follows:

(i)    Determine income category for unit (very low, low or median).

(ii)    Determine household size for unit, assuming a family size one (1) person larger than the number of bedrooms in the affordable unit. For example, the household size for a three (3) bedroom unit shall be four (4) persons and for a studio shall be one (1) person.

(iii)    Determine annual household income for unit based on income category and family size using the most recent City of Watsonville Affordable Housing Ordinance qualifying maximum income, and maximum rents and sales prices adopted by resolution by the Council.

(2)    STEP TWO: Determine monthly household allowance available for rent as follows:

(i)    Multiply the annual household income limit derived in Step One by .30 to obtain an annual household allowance of thirty (30%) percent of income. Round that figure up to the nearest Fifty and no/100ths ($50.00) Dollars to get the annual household allowance.

(ii)    Divide the annual household allowance by twelve (12). Round this figure up to the nearest Fifty and no/100ths ($50.00) Dollars to get the monthly household allowance which amount is the maximum rental payment.

(iii)    For housing choice voucher or affordable rental subsidy recipients: Use the rent formula and amounts established by each applicable program.

(c)    Eligibility. All affordable rental units shall be rented to either:

(1)    A median, low or very low income household; or

(2)    Households participating in any affordable housing choice voucher or rental subsidy program.

(d)    Eligibility Determination Process. Prospective renters of affordable units shall be screened and determined eligible by the owner (or his designee) prior to taking occupancy. The City reserves the right to audit any owner of an affordable unit after providing twenty-four (24) hour written notice. Any deficiencies noted in the City’s audit report must be fully cleared by the owner within thirty (30) days after receipt or constitute a violation of this chapter, except as to evictions of ineligible tenants; such evictions must be properly corrected and completed within one hundred twenty (120) days after receipt.

(e)    Lease Requirements.

(1)    All households renting affordable units shall be offered standard lease agreements; and

(2)    Lease terms shall be for at least a twelve (12) month period.

(f)    Notice. The owner of an affordable rental unit shall notify tenants at least sixty (60) days prior to the expiration of the restrictions of this chapter or the conversion of the affordable rental unit to an affordable ownership status, and advise the tenants that this termination or conversion may mean that rents will increase or the unit shall be sold.

(g)    Marketing.

(1)    Any marketing communication advertising an affordable rental unit shall substantially disclose the affordable housing rental and eligibility restrictions required by this chapter.

(2)    All marketing materials shall be provided in both English and Spanish.

(3)    Marketing and rental of an affordable rental unit shall be performed by the property owner (or his designee).

(4)    No person shall market or rent an affordable rental unit for more than the levels prescribed by this chapter.

(5)    Affordable rental units shall be marketed exclusively to existing City of Watsonville residents who have lived in, worked in or received municipal services from the City for at least one (1) year for at least thirty (30) business days before any marketing to other persons.

(6)    Conversion to Condominiums.

(i)    Conversion of an affordable rental unit to an ownership status shall be subject to Chapter 13-9.

(ii)    Affordable units shall be deed restricted and affordable sales price levels shall be maintained, should such conversion to ownership be approved.

(iii)    Conversion of a very low or low income affordable rental unit to ownership status shall not be permitted while an affordable housing agreement is in effect for such unit, unless specifically approved by resolution of the Council. Said resolution would establish the maximum sales price and income category for said unit(s). Conversion of a median priced affordable rental unit to ownership status may be permissible, but only to a median priced ownership unit.

(iv)    The owner of an affordable rental unit shall notify tenants at least sixty (60) days prior to any conversion to affordable ownership status and advise that this conversion signifies that the unit shall be sold. Existing tenants shall receive first right of refusal to purchase the affordable rental unit proposed for conversion.

(h)    Management and Monitoring. Affordable rental units shall be managed by the owner or the owner’s agent in compliance with the requirements of this chapter and the terms of the affordable housing agreement management and monitoring documentation shall be supplied to the City within twenty-four (24) hours after written notice has been received from the City in order to ensure compliance with this chapter.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.140)

(a)    Primary Place of Residence Requirement. The purchaser of an affordable ownership unit shall occupy the unit as his/her primary place of residence. If the unit ceases to function as a primary residence, it shall be sold according to the requirements of this chapter or subject to the requirements of subsection (c) of this section.

(1)    STEP ONE: Determine annual household unit income limit.

(i)    Determine income category for unit (median, moderate or above moderate).

(ii)    Determine household size, assigning a family size one (1) person more than the number of bedrooms in the affordable unit. For example, the household size for a three (3) bedroom unit would be four (4) persons and for a studio would be one (1) person.

(iii)    Determine the maximum annual household income limit for the unit based on income category and family size using the most recent City of Watsonville Affordable Housing Ordinance qualifying maximum income, and maximum rents and sales prices adopted by resolution by the Council.

(2)    STEP TWO: Determine monthly household allowance permitted to be used for a mortgage payment as follows:

(i)    Multiply the annual household income limit derived in Step One by .30 to obtain an annual household allowance of thirty (30%) percent of income. Round up to the nearest Fifty and no/100ths ($50.00) Dollars to obtain the annual household allowance.

(ii)    Divide the annual household allowance by twelve (12). Round up to the nearest Fifty and no/100ths ($50.00) Dollars to determine the household allowance which is the maximum mortgage payment allowed.

(3)    STEP THREE: Determine the maximum mortgage that can be financed for a thirty (30) year fully amortized fixed-rate mortgage:

(i)    Apply the City Council-adopted prevailing interest rate.

(ii)    Determine the amount of the monthly mortgage payment (principal pay-down and interest).

(4)    STEP FOUR: Determine maximum allowable unit sales price. Assuming a mortgage of ninety-five (95%) percent of the sales price, divide the principal amount of the mortgage by 0.95 and round to the nearest Fifty and no/100ths ($50.00) Dollars. The result is the maximum allowable price of the affordable unit.

(b)    Marketing.

(1)    Any marketing communication advertising an affordable ownership unit shall fully disclose the affordable housing price and eligibility restrictions contained in this chapter.

(2)    Marketing and sale of an affordable ownership unit shall be performed by the owner (or his designee), who shall market the affordable ownership unit for no more than the maximum sales price established by the City, excluding closing costs.

(3)    The purchaser of an affordable unit shall not pay more in closing costs than that which is reasonable and customary in Santa Cruz County.

(4)    The seller of an affordable unit shall pay any real estate sales commission associated with the transaction.

(5)    All marketing materials shall be provided in both English and Spanish.

(c)    Conversion.

(1)    Conversion of an affordable ownership unit to a rental status shall not be permitted unless a hardship can be demonstrated and an administrative hardship received, pursuant to administrative guidelines approved by Council resolution from time to time.

(2)    Affordable rent levels shall be maintained, should conversion from an affordable ownership to an affordable rental status be approved.

(d)    Financing. First mortgages obtained to purchase an affordable unit created as a result of this chapter shall be fixed interest rate and fully amortized for, at minimum, thirty (30) year term with no negative amortization. An otherwise qualified purchaser may be assisted by any available homebuyer assistance programs.

(e)    Escrow Process.

(1)    Sales Price and Purchaser Eligibility Certification. Prior to the close of escrow, the owner (or his designee) shall certify sales price and buyer eligibility compliance with the requirements of this chapter. This determination shall be subject to audit by the City with twenty-four (24) hour written notice. Any deficiencies noted in the City’s audit report shall be fully cleared by the owner within thirty (30) days after written notice by the City, or constitute a violation of this chapter and the affordable housing agreement. It shall be a separate and discrete violation of this chapter to allow escrow to close without City approval of such audit.

(2)    Restrictions. Escrow shall prepare and have the buyer sign the declaration of covenants and restrictions and/or promissory note and deed of trust to further secure the City’s rights under this chapter and provide constructive notice to the public.

(f)    Sales Procedure for New Affordable Units.

(1)    Notice of Intent to Sell.

(i)    When a new affordable unit is fully completed, ready for final inspection and available for sale, the owner shall send a written “notice of intent to sell” to the City.

(ii)    In response to the notice, the City shall inform the owner of the current maximum allowable sales price.

(2)    Sales Price Formula. The maximum allowable sales price for a new affordable unit shall be based on the following formula and the income limits established by resolution from time to time by the Council. The formula to determine maximum allowable sales price for an affordable unit shall be as follows:

(i)    STEP ONE: Determine the annual income for a household, based on whether the unit is designated for occupancy by an above moderate, moderate, or median income household using Watsonville above moderate, moderate, or median household incomes:

(aa)    Determine household size, assuming one (1) person larger than the number of bedrooms in the affordable unit (for example, the household size for a three (3) bedroom unit shall be four (4) persons and for a studio shall be one (1) person).

(ab)    Given the household size determined above, locate the household’s maximum annual income for purposes of determining the maximum sales price. (Note: The income limit for determining eligibility to purchase is higher than that used to determine the maximum sales price (see Section 14-46.030(o)).

(ii)    STEP TWO: Determine the monthly household allowance available for a mortgage payment:

(aa)    Multiply the income limit to be used to calculate the maximum sales price derived above by .30 to obtain annual housing allowance of thirty (30%) percent of income.

(ab)    Divide the annual housing allowance by twelve (12) to obtain a monthly housing allowance.

(iii)    STEP THREE: Determine the maximum mortgage that can be financed for a thirty (30) year fully amortized fixed-rate home mortgage:

(aa)    Apply the City Council-adopted prevailing interest rate.

(ab)    Determine the principal amount of the mortgage payment.

(iv)    STEP FOUR: Determine the maximum allowable unit sales price. Assuming a mortgage of ninety-five (95%) percent of the sales price, divide the principal amount of the mortgage by 0.95. The result is the maximum allowable sales price of the affordable unit.

(g)    Inability to Sell.

(1)    If the owner (or his designee) of an affordable unit, having made a good faith effort that included listing the affordable unit on the Multiple Listing Service (MLS), fails to find an eligible purchaser within one hundred eighty (180) days from the date of final inspection or maximum sales price determination, whichever is later, the owner shall notify the City in writing no later than the one hundred fiftieth day of their inability to sell. The owner (or his designee) shall submit a notice identifying the steps taken, with documentation, of the attempted sale.

(2)    The City shall have a first right of refusal to purchase the affordable unit at the last advertised restricted price. If, after thirty (30) days following notice as described above under subsection (g)(1) of this section, the City fails to exercise this option, the affordable unit may be sold at a market-rate price, and the owner (or his designee) must pay a release fee to the City’s affordable housing fund.

(h)    Resale Procedure for Existing Affordable Units.

(1)    Notice of Intent to Sell.

(i)    When an existing affordable unit becomes available for resale, the owner shall send a written “notice of intent to sell” form to the City.

(ii)    In response to the notice, the City shall inform the owner of the current maximum allowable sales price.

(2)    Resale Price Formula. The maximum allowable resale price for existing affordable units shall be derived using one (1) of the two (2) following methods, whichever yields the highest price for the owner:

(i)    The maximum allowable sales price formula as established by this chapter (see subsection (f)(2) of this section); or

(ii)    The original sales price plus fifty (50%) percent of the increase in the House Price Index since the date of purchase.

(3)    Damage Repair Costs. If the City finds that the owner, through neglect, abuse or lack of adequate maintenance, has damaged an affordable unit, the City may require repairs be made at the owner’s expense and be financed prior to sale or through the escrow account.

(4)    Marketing. Any marketing of existing affordable units shall fully disclose this chapter’s affordable housing price and eligibility restrictions:

(i)    Marketing and sale of existing affordable units shall be performed by the owner (or his designee) for no more than the maximum sales price established by the City, excluding closing costs.

(ii)    The purchaser of an affordable unit shall not pay more in closing costs than that which is reasonable and customary in Santa Cruz County.

(iii)    The seller of an affordable unit shall pay any real estate sales commission associated with the transaction.

(5)    Inability to Resell Affordable Units.

(i)    In the event the owner of an existing affordable unit, having made a good faith effort that included listing the affordable unit on the Multiple Listing Service (MLS), fails to find an eligible purchaser to take title to the unit within two hundred forty (240) days from the date of maximum sales price determination, the owner (or his designee) shall notify the City in writing, no less than thirty (30) days following the end of that two hundred forty (240) day period. The owner (or his designee) shall submit a notice identifying the steps taken, with documentation, of the attempted sale.

(ii)    The City shall have an option to purchase the affordable unit for an amount that is the highest of the following: the value of the first mortgage; the value of the first and second mortgage combined if the second mortgage is a purchase money second mortgage provided by a governmental body; or the appraised value of the affordable unit with the affordability covenants intact, as determined by an appraiser mutually agreeable to the City and the owner, who employs standard appraisal practices.

(iii)    If, after thirty (30) days following the owner’s (or his designee’s) notice, the option is not exercised, the affordable unit may be sold at market rate, and the owner (or his designee) must pay a release fee to the City’s affordable housing fund.

(i)    Refinance of Affordable Ownership Units. Owners desiring to refinance their affordable units shall notify the City (or its designee) prior to refinance and shall not encumber the property through the refinance process for an amount greater than the maximum sales price established by the City using the House Price Index as set forth in Section 14-46.030(l) at the time of owner notice.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 1, Ord. 1161-03 C-M, eff. October 23, 2003, and § 1, Ord. 1186-05 C-M, eff. April 7, 2005, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.150)

Upon resale or refinance of an affordable unit, the owner shall pay a fee to the City for the maximum sales price determination, monitoring, loan, and other document preparation processes as may be required. The fee shall be established by resolution from time to time by the Council and changed as needed, based on fifty (50%) percent of the annual percentage increase in the House Price Index. In addition, the City may charge each prospective purchaser of an existing affordable unit a fee for the determination of eligibility.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.160)

(a)    Option to Purchase. In the event a notice of default is recorded on an affordable unit, the City or its designee shall have the option to purchase the unit paying the amount that the owner would have received on the date of the foreclosure sale under the resale formula established by Section 14-46.140(h)(2). Out of this sum, the lien holder(s) shall be paid the amount of any funds due, including, but not limited to, the loan balance, charges, taxes and assessments; the owner shall be paid any remaining funds.

(1)    In the event the City (or its designee) does not exercise its option to purchase the affordable unit prior to the trustee’s sale or judicial foreclosure, the unit shall be free from the restrictions of this chapter, and the owner shall be deemed in compliance with the provisions of this chapter, with the exception of the provisions of subsection (b) of this section.

(b)    Single-family units that have never been sold to individual owner-occupants, and multiple family dwelling units, shall not be released from the restrictions of this chapter through a trustee’s sale or judicial foreclosure. In addition, affordable units shall not be released if any of the following occurs:

(1)    The City is not provided a copy of the notice of default within ten (10) days of its filing;

(2)    The owner does not allow the City to exercise its option to purchase; or

(3)    The lender has overencumbered the property and refuses to release its interest in the property for the maximum allowable sales price.

(c)    The owner of an affordable unit shall not use this property as collateral for an amount exceeding ninety-five (95%) percent of the maximum sales price allowed by Section 14-46.140(f)(2) unless specifically allowed in writing by the City. All second mortgages require the prior written approval of the City and are subject to guidelines established by the City.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.170)

Following are those individuals who, by virtue of their position or relationship, are found to be ineligible to purchase or rent an affordable unit as their residence:

(a)    All employees and officials of the City of Watsonville who have, by the authority of their position, policy-making authority or influence affecting City housing programs;

(b)    The owner or developer of, or applicant for, an affordable housing project or affordable unit; and

(c)    The immediate relatives, employees and anyone gaining significant economic benefit from a direct business association with public employees, officials, developers, applicants or owners ineligible to purchase or rent an affordable unit.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.180)

(a)    It shall be unlawful and a violation of this chapter for the applicant or owner of an affordable unit or any employee or agent of such applicant or owner to:

(1)    Sell or rent an affordable dwelling unit to anyone who has not first been qualified as eligible;

(2)    Sell or rent an affordable unit to any person who has a conflict of interest as defined by this chapter;

(3)    Sell an affordable unit for an amount exceeding the maximum sales price or rent an affordable unit for an amount exceeding the maximum rent level;

(4)    Solicit, require or accept in connection with the sale or rental of an affordable unit any payment or other contribution of cash, property or services from a purchaser or tenant the value of which, when added to the purchase price or rent paid for an affordable unit, would exceed the maximum sales price or maximum rent level prescribed by this chapter;

(5)    Willfully and knowingly make a false statement or representation, or knowingly fail to disclose a material fact for the purpose of qualifying as eligible to purchase or rent an affordable unit under this chapter; or

(6)    Violate any other provision of this chapter.

Any applicant or other person whose interests are adversely affected by any determination in regard to the requirements of this chapter may appeal in accordance with the provisions of Chapter 14-10, Part 11 of this Code to the Council. The appeal shall set forth specifically wherein the action fails to conform to the provisions of this chapter.

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, as amended by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025. Formerly 14-16.190)

(§ 1, Ord. 1107-01 C-M, eff. July 26, 2001, repealed by § 2(3) (Exh. A), Ord. 1480-25 (CM), eff. October 9, 2025)