Chapter 18.16
AFFORDABLE HOUSING PROGRAMS*

Sections:

18.16.010    Purpose.

18.16.020    Definitions.

18.16.030    Below market rate housing requirements.

18.16.040    Exemptions to below market rate housing requirements.

18.16.050    Below market rate unit standards.

18.16.060    Compliance procedures.

18.16.070    Alternatives.

18.16.080    Eligibility for below market rate units (owner-occupied and rental units).

18.16.090    Owner-occupied units.

18.16.100    Rental units.

18.16.110    Below market rate fund.

18.16.120    Periodic review and enforcement.

18.16.130    Waivers of affordable housing requirements.

*  Prior legislation: Ords. 1081, 1126 and 1263.

18.16.010 Purpose.

The purpose of this chapter is to:

A.    Encourage the development and availability of housing affordable to a broad range of households with varying income levels within the City as mandated by State law, California Government Code Section 65580 and following.

B.    Offset the demand for affordable housing that is created by new development and mitigate environmental and other impacts that accompany new residential and commercial development by protecting the economic diversity of the City’s housing stock; reducing traffic, transit and related air quality impacts; promoting jobs/housing balance; and reducing the demands placed on transportation infrastructure in the region.

C.    Promote the City’s goal to add affordable housing units to the City’s housing stock in proportion to the overall increase in new jobs and housing units.

D.    Support the Housing Element policy to consider use of funds for developments with a higher percentage of BMR units or deeper affordability than otherwise is required.

E.    Support the Housing Element policy to encourage second units as a form of affordable housing.

F.    Support the Housing Element goal of assisting in the development of new housing that is affordable at all income levels and the policies and actions that support this goal.

G.    Support the Housing Element goal of removing and/or mitigating potential governmental constraints to the provision of adequate, affordable housing and the policies and actions that support this goal.

H.    Support the guiding principle of the Housing Element that housing in San Carlos supports an economically and socially diverse population.

I.    Support the guiding principle of the Housing Element that housing in San Carlos creates and supports vibrant neighborhoods and a cohesive sense of community.

J.    Meet the housing needs identified by the Housing Element of the General Plan.

K.    Encourage the production of the very low-, low-, and moderate-income units planned for in the Housing Element of the General Plan.

L.    Comply with the provisions of Government Code Section 65915 mandating the adoption of a City ordinance that specifies procedures for providing density bonuses and other incentives and concessions. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.010)

18.16.020 Definitions.

As used in this chapter and in Chapter 18.17, the following terms shall have the following meanings:

A.    “Administrator” means the Housing Manager of the City or other person designated by the City Manager.

B.    “Affordable rent” means monthly rent, including utilities, for a below market rate unit that does not exceed:

1.    For very low-income households, one-twelfth of fifty percent of area median income, adjusted for assumed household size based on unit size, multiplied by thirty percent.

2.    For low-income households, one-twelfth of sixty percent of area median income, adjusted for assumed household size based on unit size, multiplied by thirty percent.

C.    “Affordable housing impact fee” is a fee applicable only to residential rental developments and residential ownership developments consisting of either one dwelling unit or an addition of one thousand square feet or more that shall be based upon the cost of mitigating the impact of market rate units in a residential development on the need for affordable housing in the City.

D.    “Affordable ownership cost” means a sales price for a below market rate unit, based on a reasonable down payment, that results in a monthly housing cost (including mortgage principal and interest, property taxes, insurance, utilities, and homeowners’ association costs, if any) that does not exceed:

1.    For very low-income households, one-twelfth of fifty percent of area median income, adjusted for assumed household size based on unit size, multiplied by thirty percent.

2.    For low-income households, one-twelfth of seventy percent of area median income, adjusted for assumed household size based on unit size, multiplied by thirty percent.

3.    For moderate-income households, one-twelfth of one hundred ten percent of area median income, adjusted for assumed household size based on unit size, multiplied by thirty-five percent.

E.    “Area median income” means the median household income for San Mateo County as published by the State of California pursuant to California Code of Regulations, Title 25, Section 6932, or successor provision.

F.    “Assumed household size based on unit size” means a household of one person in a studio unit, two persons in a one-bedroom unit, three persons in a two-bedroom unit, and one additional person for each additional bedroom, unless the requirements of another funding source require an alternate method of calculating assumed household size.

G.    “Below market rate housing agreement” means a written agreement between a builder and the City as provided by Section 18.16.060(C).

H.    “Below market rate housing plan” means a plan for a residential development submitted by a builder as provided by Section 18.16.060(B).

I.    “Below market rate incentives” means incentives provided by the City for below market rate units and density bonus BMR units pursuant to Chapter 18.17.

J.    “Below market rate (BMR) unit” means a dwelling unit that shall be offered at an affordable rent or affordable ownership cost to moderate-, low- and very low-income households and is required by the City pursuant to Section 18.16.030.

K.    “Builder” means any person, firm, partnership, association, joint venture, corporation, or any entity or combination of entities which seeks City approvals for all or part of a residential development.

L.    “City” means the City of San Carlos.

M.    “Density bonus” is as defined in Chapter 18.17.

N.    “Density bonus below market rate (BMR) unit” is as defined in Chapter 18.17.

O.    “First approval” means the first discretionary approval to occur with respect to a residential development, or, for residential developments not requiring a discretionary approval, the issuance of a building permit.

P.    “Household” means one person living alone or two or more persons sharing residency whose income is considered for housing payments.

Q.    “In lieu fee” is as defined in Section 18.16.030(A)(3).

R.    “Low-income household” means a household whose annual income does not exceed the qualifying limits set for lower income households in Section 50079.5 of the California Health and Safety Code.

S.    “Market rate unit” means a dwelling unit in a residential development that is not a below market rate unit or a density bonus BMR unit or is not otherwise required by this chapter to be affordable to very low-, low-, or moderate-income households.

T.    “Moderate-income household” means a household whose income does not exceed the qualifying limits set for persons and families of low or moderate income in Section 50093 of the California Health and Safety Code.

U.    “Off-site below market rate unit” means a below market rate unit that will be built separately or at a different location than the residential development.

V.    “On-site below market rate unit” means a below market rate unit that will be built at the same location as the residential development.

W.    “Residential development” means any development project requiring any discretionary permit from the City, or a building permit, and which would create one or more additional dwelling units and/or lots by construction or alteration of structures, or by subdivision of existing lots, or which would add one thousand square feet or more to an existing dwelling unit. A residential development includes dwelling units that are part of a mixed-use development and the conversion of existing dwelling units to community housing subdivision ownership as defined in Chapter 17.48.

X.    “Residential ownership development” means any residential development project that includes the creation of one or more residential dwelling units and/or lots that may be sold individually, or that would add one thousand square feet or more to an existing dwelling unit that may be sold individually. A residential ownership development also includes the conversion of existing dwelling units to community housing subdivision ownership as defined in Chapter 17.48.

Y.    “Residential rental development” means any residential development project that creates one or more residential dwelling units that cannot be sold individually, or that would add one thousand square feet or more to an existing dwelling unit that cannot be sold individually.

Z.    “Standard unit” means the base market rate unit that a purchaser could buy or renter could lease without paying for additional features or upgrades such as flooring, cabinetry, or fixtures.

AA.    “Total development cost” means the total value of a project’s:

1.    Estimated construction costs as defined in the California Building Code;

2.    The cost of land;

3.    Financing costs; and

4.    Any indirect costs.

BB.    “Very low-income household” means a household whose income does not exceed the qualifying limits set for very low-income households in Section 50105 of the California Health and Safety Code. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.030)

18.16.030 Below market rate housing requirements.

A.    Residential Ownership Development. For all residential ownership developments of seven or more dwelling units, at least fifteen percent of the total units shall be below market rate units restricted for sale to and occupancy by moderate- and low-income households. The number and type of below market rate units required for a particular residential ownership development will be determined at first approval of the residential ownership development in accordance with the provisions of Section 18.16.060. If a change in the residential ownership development design results in a change in the total number of units, the number of below market rate units required will be recalculated to coincide with the final approved project.

1.    Calculation. In determining the number of whole below market rate units required, any decimal fraction less than one-half shall be rounded down to the nearest whole number, and any decimal fraction of one-half or more shall be rounded up to the nearest whole number.

2.    Type of Below Market Rate Units. At least fifteen percent of the total units shall be below market rate units, of which ten percent shall be affordable to moderate-income households and five percent affordable to low-income households unless an alternative is approved as described in Section 18.16.070, or the builder chooses the rental alternative specified in subsection C of this section.

3.    In Lieu Fee. For a residential ownership development of one dwelling unit, or for an addition of one thousand square feet or more to an existing dwelling unit that may be sold individually, if an affordable housing impact fee has been adopted, the builder shall pay the affordable housing impact fee or construct a second dwelling unit consistent with Section 18.23.210, Second dwelling units. For a residential ownership development that creates one additional lot or two to six dwelling units and/or lots, or for a residential ownership development that triggers a decimal fraction of less than one-half, the builder shall pay an in lieu fee for the partial unit or build a below market rate unit. This obligation to build or pay an in lieu fee shall apply to each type of below market rate unit (i.e., affordable to a low-income household or a moderate-income household), as determined by calculating the decimal fraction pursuant to subsections (A)(1) and (A)(2) of this section or by determining the number and type of below market rate units for which an in lieu fee has been approved pursuant to Section 18.16.070(A)(6). The in lieu fee shall be established by resolution of the City Council and shall not exceed the difference between the approximate average affordable ownership cost of a below market rate unit affordable to a low-income household or a moderate-income household and the total development cost of the below market rate unit.

4.    Purpose of In Lieu Fees. Nothing in this chapter or Chapter 18.17 shall deem or be used to deem the in lieu fee authorized pursuant to subsection (A)(3) of this section as an ad hoc exaction, as a mandated fee required as a condition to developing property, or as a fee subject to the analysis in Building Industry Association of Central California v. City of Patterson, 171 Cal.App.4th 886 (2009). Any in lieu fee adopted by the City Council is a menu option that may serve as an alternative to the on-site below market rate housing requirements set forth in this chapter.

B.    Residential Rental Development. For any residential rental development, if an affordable housing impact fee has been adopted, it shall be paid upon issuance of a building permit for each dwelling unit or addition of one thousand square feet or more in the residential rental development, unless an alternative is approved as described in Section 18.16.070, or the builder chooses the rental alternative specified in subsection C of this section. The affordable housing impact fee shall be established by resolution of the City Council.

C.    Rental Alternative. If the builder of a residential ownership development chooses to rent the below market units rather than to sell the below market rate units, or if the builder of residential rental development chooses to provide below market units rather than pay an affordable housing impact fee, then at least fifteen percent of the total units shall be below market rate units, of which five percent shall be affordable to low-income households and ten percent affordable to very low-income households. To ensure compliance with the Costa-Hawkins Act, the City may only approve a proposal to rent the below market rate units if the builder agrees in a below market rate housing agreement to limit rents in consideration for an incentive provided by the City, such as the incentives provided in Section 18.17.030, which is a form of assistance specified in Section 65915 of the Government Code.

D.    Below Market Rate Units Not Eligible for State Density Bonus. As further described in Section 18.17.050, if a residential development receives a density bonus pursuant to Government Code Section 65915, any density bonus BMR unit and any dedication of property that made the residential development eligible for the density bonus must be provided in addition to the required below market rate units and may not also be counted as below market rate units pursuant to this chapter. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.040)

18.16.040 Exemptions to below market rate housing requirements.

The requirements of Section 18.16.030 do not apply to:

A.    Residential development of a legal second dwelling unit consistent with Section 18.23.210, Second dwelling units.

B.    The reconstruction of any dwelling units that have been destroyed by fire, flood, earthquake or other act of nature; provided, that the reconstruction of the site does not increase the number of legally constructed dwelling units or increase the area of the legally constructed dwelling units by one thousand square feet or more.

C.    Additions to existing dwelling units of less than one thousand square feet.

D.    Residential developments that already have more deed-restricted units that are affordable to moderate-, low- and very low-income households than Section 18.16.030 requires. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.050)

18.16.050 Below market rate unit standards.

Below market rate units built under Section 18.16.030 shall conform to the following standards:

A.    Design. Except as otherwise provided in this chapter, and subject to the approval of the Administrator, below market rate units shall be dispersed throughout a residential development and may have different interior finishes and features than market rate units in the same residential development, so long as the finishes and features are durable, of good quality, compatible with the market rate units, and consistent with contemporary standards for new housing. Below market rate units may be smaller in aggregate size than market rate units in the same residential development, so long as the number of bedrooms in below market rate units shall be in the same proportion as in the total number of units in the residential development.

B.    Timing. All below market rate units shall be constructed and occupied concurrently with or prior to the construction and occupancy of market rate units, and in phased residential developments, below market rate units may be constructed and occupied in proportion to the number of units in each phase of the residential development, unless an alternative phasing plan is approved as part of the below market rate housing plan for the residential development.

C.    Duration of Affordability Requirement. Below market rate units produced under this chapter and Chapter 18.17 shall be legally restricted to occupancy by households of the income levels for which the units were designated, for a period of forty-five years for below market rate units offered for sale, and for a period of fifty-five years for below market rate units offered for rent. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.060)

18.16.060 Compliance procedures.

A.    General. Approval of a below market rate housing plan and recordation of an approved below market rate housing agreement prior to the recordation of any final or parcel map, or, if no final or parcel map is required, prior to issuance of any building permit, is a condition of the first approval of any residential development to which Section 18.16.030 applies. This section does not apply to exempt projects or to residential developments where the requirements of Section 18.16.030 are satisfied by payment of a fee under Section 18.16.030(A)(3).

B.    Below Market Rate Housing Plan. The decision-making body for the first approval (either the Planning Commission or the City Council) shall approve, conditionally approve or reject the below market rate housing plan. No application for a first approval for a residential development to which Section 18.16.030 applies shall be deemed complete until a below market rate housing plan, in a form satisfactory to the Administrator, is deemed complete by the Administrator. The below market rate housing plan shall include:

1.    The location, structure (attached, semi-attached, or detached), proposed tenure (for sale or rental), number of bedrooms, and size of the proposed market rate and below market rate units and the basis for calculating the number of below market rate units;

2.    A floor or site plan depicting the location of the market rate and below market rate units;

3.    The income levels to which each below market rate unit will be made affordable;

4.    For a phased residential development, a phasing plan that provides for the timely development of the number of below market rate units proportionate to each proposed phase of development, or with an alternative phasing plan;

5.    A description of any below market rate incentive requested pursuant to Chapter 18.17;

6.    Any alternative means designated in Section 18.16.070(A) proposed for the residential development, along with information necessary to support the findings required by Section 18.16.070(B) for approval of such alternatives;

7.    Builder’s agreement to conform to the provisions of this chapter, including but not limited to the provisions of Sections 18.16.080 through 18.16.100; and

8.    Any other information reasonably requested by the Administrator to assist with evaluation of the below market rate housing plan under the standards of this chapter.

C.    Below Market Rate Housing Agreement. The forms of the below market rate housing agreement and any resale and rental restrictions, deeds of trust, options to purchase, and other documents authorized by this subsection, and any change in the form of any such document which materially alters any policy in the document, shall be approved by the Administrator and the City Attorney or his or her designee prior to being executed with respect to any residential development prior to the recordation of any final or parcel map, or, if no final or parcel map is required, prior to issuance of any building permit. The form of the below market rate housing agreement will vary, depending on the manner in which the provisions of this chapter are satisfied for a particular development. All below market rate housing agreements shall include, at minimum, the following:

1.    Description of the residential development, including whether the below market rate units will be rented or owner-occupied;

2.    The number, size and location of all below market rate units;

3.    Below market rate incentives granted by the City, if any, pursuant to Chapter 18.17;

4.    Provisions and/or documents for resale restrictions, deeds of trust, options to purchase, rental restrictions, or other documents as appropriate;

5.    Provisions for monitoring the ongoing affordability of the units, and the process for qualifying prospective resident households for income eligibility;

6.    Formula for calculating affordable rent and/or affordable ownership cost and the initial sales price for the below market rate units and any density bonus BMR units, as applicable;

7.    Builder’s agreement to conform to the provisions of this chapter, including but not limited to the provisions of Sections 18.16.080 through 18.16.100; and

8.    Any additional obligations relevant to the compliance with this chapter.

If a builder chooses to satisfy all or a portion of the below market rate requirement with rental units, as permitted by Government Code Section 65589.8, then the below market rate housing agreement shall include the builder’s agreement to the limitations on rents and applicable terms and conditions required by Section 18.16.030(C).

D.    Recording of Agreement. Prior to the recordation of any final or parcel map for a residential development, or, if no final or parcel map is required, prior to issuance of any building permit for a residential development, below market rate housing agreements that are approved and fully executed shall be recorded against residential developments containing below market rate units. Additional rental or resale restrictions, deeds of trust, options to purchase, and/or other documents acceptable to the Administrator shall also be recorded at the time of sale against owner-occupied below market rate units. In cases where the requirements of this chapter are satisfied through the development of off-site units, the below market rate housing agreement shall simultaneously be recorded against the property where the off-site units are to be developed.

E.    Amendments. Modifications to the below market rate housing plan shall be considered a change in the approved conditions of approval and processed in the same manner as the original below market rate housing plan. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.070)

18.16.070 Alternatives.

A.    Builder Proposal. A builder may propose an alternative means of compliance in a below market rate housing plan required by Section 18.16.060(B) according to the following provisions. The builder may also partner with a nonprofit affordable housing provider to meet its below market rate housing obligations through one of the alternatives set forth in this section.

1.    Increase in Total Number of Below Market Rate Unit Bedrooms. The builder may propose a plan that provides larger units and increases the total number of bedrooms that would have otherwise been provided under this chapter, even if fewer total units are produced.

2.    Provision of a Greater Level of Affordability. The builder may propose a greater level of affordability than required under this chapter and reduce the total number of units otherwise required.

3.    Off-Site Construction. Below market rate units may be proposed off-site within the City limits if it can be demonstrated that the off-site construction proposal would result in a minimum of ten percent more total below market rate units than required by this chapter and if the below market rate units will be located in an area where, based on the availability of affordable housing, the Administrator finds that the need for such units is greater than the need in the area of the proposed development. If the builder proposes to provide rental off-site below market rate units in place of ownership on-site below market rate units, the rental off-site below market rate units shall meet the affordability and other requirements specified in Section 18.16.030(C). Off-site below market rate units shall meet or exceed minimum quality standards specified in conditions of approval and may include any combination of new dwelling units, new dwelling units created in existing structures, or conversion of existing market rate units to below market rate units. The following information, to the satisfaction of the Administrator, is required for submittal of a proposal for off-site below market rate units:

a.    If the off-site below market rate units will not be constructed concurrently with the market rate units, the builder shall specify the security to be provided to the City to ensure that the below market rate units will be constructed in a timely manner, including evidence of ownership or control of any sites proposed for the below market rate units, to the satisfaction of the Administrator, and clear and convincing evidence that financing has been secured for the off-site below market rate units.

b.    For conversion of existing market rate units to below market rate units:

i.    Existing rent or appraised value of each unit on the property to be converted, proposed rents or sales prices after conversion, and any existing rent limits, resale price restrictions, or other affordability restrictions imposed by any public agency, nonprofit agency, land trust, or other body.

ii.    Size of households occupying each unit on the property to be converted, vacancy rates for each month during the past two years, and existing tenant incomes.

iii.    A property inspection report prepared by a certified housing inspector and a termite report, both prepared no more than sixty days before the filing of the application. The property inspection report shall include a full examination of all common and private areas within the existing dwelling units for compliance with applicable building codes.

iv.    Plans and a written description of rehabilitation to be completed, including correction of all code violations and completion of all termite repairs described in the property inspection report and termite report; cost of rehabilitation; and the appraised value of the property, including land, buildings, and all other improvements, after rehabilitation.

v.    Description of benefits to be offered existing tenants, including but not limited to right of first refusal to remain in the unit, and required relocation assistance for existing tenants.

4.    Preservation of Historically Significant Structures. Adjustments may be made to the required number and affordability level of the below market units based on the economics associated with preservation of historically significant structures as identified under guidelines as set forth by the California Environmental Quality Act (CEQA).

5.    Rental Units in Place of Ownership Units. The builder may propose rental on-site below market rate units in a residential ownership development, subject to the provisions of Section 18.16.030(C).

6.    In Lieu Fees. The builder may request a waiver of the requirement to build a below market rate unit in exchange for the payment of an in lieu fee, established as described in Section 18.16.030(A)(3). An application for payment of in lieu fees shall include a detailed analysis, to the satisfaction of the Administrator, demonstrating economic infeasibility to construct the below market rate units. Any approved in lieu fee shall be paid prior to issuance of a certificate of occupancy for any unit in the residential development.

7.    Combination. The decision-making body may accept any combination of the above options.

8.    San Carlos Redevelopment Project Area. If the residential development is located within the San Carlos Redevelopment Project Area, any alternative proposed pursuant to this section shall provide equivalent redevelopment affordable housing production credit under Health and Safety Code Section 33413 as would be obtained if the builder provided on-site below market rate units as required by Section 18.16.030.

B.    Findings. The decision-making body for the first approval may approve, conditionally approve or reject any alternative proposed by a builder as part of a below market rate housing plan. Any approval or conditional approval shall be based on the following findings:

1.    That the purposes of this chapter would be better served by implementation of the proposed alternative(s) and that the proposal meets the greatest community needs at the time the alternative is reviewed. As one of the factors determining whether the purposes of this chapter would be better served under the proposed alternative, the decision-making body should consider whether implementation of an alternative would overly concentrate below market rate units within any specific area and, if so, shall reject the alternative unless the concentration of below market rate units is offset by other identified benefits that flow from implementation of the alternative at issue.

2.    For payment of in lieu fees, that the applicant has sufficiently demonstrated that construction of the below market rate units is economically infeasible and cannot be mitigated through the other alternatives outlined in subsection A of this section. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.080)

18.16.080 Eligibility for below market rate units (owner-occupied and rental units).

A.    General Eligibility. If the City or its designee maintains a list of eligible households, initial and subsequent occupants will be selected first from the list of eligible households, to the maximum extent possible, in accordance with any rules approved by the Administrator.

B.    Preferences. Preferences will be given to those households where at least one member in the household lives or works in San Carlos or works for a school district or fire district serving residents living in the City of San Carlos, except for those households deemed ineligible due to conflict of interest listed in subsection C of this section.

C.    Conflict of Interest. The following individuals are ineligible to purchase or rent a below market rate unit as specified below:

1.    Elected City Council officials and all Planning Commissioners (including their spouses and dependents);

2.    All City staff members (including their spouses and dependents) who participated in the approval process for the residential development;

3.    The builder and its officers and employees (and their spouses and dependents); and

4.    The project or land owner of the residential development and its officers and employees (and their spouses and dependents).

D.    Occupancy. Any household which occupies a rental below market rate unit or purchases a below market rate unit shall occupy that unit as its principal residence and shall not lease or sublease to a different party. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.100)

18.16.090 Owner-occupied units.

A.    Initial Sales Price for Below Market Rate Units. The initial sales price of a below market rate unit shall be set by the City at the time a building permit is issued for the below market rate unit so that the eligible household will pay an affordable ownership cost. The initial sales price shall be based on the builder’s estimate of homeowners’ association dues, if any, the City’s assumptions for interest rates and other factors, and the formula for calculating sales prices contained in the below market rate housing agreement. The City shall provide the builder with an estimate of the initial sales price for the below market rate units at an earlier date upon written request by the builder. After the building permit is issued, the initial sales price may be adjusted by the City due to changes in market factors upon written request by the builder no less than ninety days prior to marketing of the below market rate units. In no case will the initial sales price be adjusted below the initial sales price calculated when the building permit was issued.

B.    Certification of Eligibility. The income of each household proposed to purchase a below market rate unit shall be certified to the City or the City’s designee prior to the sale of a below market rate unit. Each household shall provide written verification of income, including but not limited to such documents as income tax returns for the previous calendar year, W-2 statements, and pay stubs. Income verification shall be submitted on a form approved by the City.

C.    Initial Sales Deed Restrictions. Deed restrictions provided by the City and recorded against title to the below market rate unit shall be required as a condition of sale for all owner-occupied below market rate units and shall include, but are not limited to, the City’s purchase option, resale restrictions, and procedures and policies regarding changes in title to ensure that owner-occupied below market rate units remain affordable for not less than forty-five years. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.110)

18.16.100 Rental units.

A.    Initial Rents for Below Market Rate Units. The initial rent of below market rate units shall be set by the City at least thirty days prior to marketing of the below market rate units so that the eligible households will pay an affordable rent. The initial rent shall be based on the City’s assumptions for utility costs and the formula for calculating rents contained in the below market rate housing agreement. The City shall provide the builder with an estimate of the initial rent for the below market rate units at an earlier date upon written request by the builder.

B.    Selection of Tenants. Rental units will be offered to eligible households at an affordable rent. If no eligible households are identified by the City pursuant to Section 18.16.080, the owners of rental below market rate units shall fill vacant units by selecting income-eligible households from the San Mateo County Office of Housing Section 8 Housing Choice Voucher program or similar program. If no eligible households are identified from the County program or similar program, owners may fill vacant units through their own selection process; provided, that they publish notice of the availability of below market rate units according to guidelines established by the Administrator.

C.    Certification of Eligibility. The owner of rental below market rate units shall certify each tenant household’s income to the City or City’s designee at the time of initial rental and annually thereafter. The owner shall obtain and review documents from each tenant household that provide written verification of income, including but not limited to such documents as income tax returns for the previous calendar year, W-2 statements, and pay stubs. Income verification shall be submitted on a form approved by the City.

D.    Nondiscrimination. When selecting tenants, the owners of below market rate units shall follow all fair-housing laws, rules, regulations, and guidelines. The owner shall apply the same rental terms and conditions to tenants of below market rate units as are applied to all other tenants, except as required to comply with this chapter (for example, rent levels and income requirements) or with other applicable government subsidy programs.

E.    Move-In Costs. Total deposits, including security deposits, required of households occupying a below market rate unit shall be limited to first and last month’s rent plus a cleaning deposit not to exceed one month’s rent.

F.    Annual Report. The owner shall submit an annual report summarizing the occupancy of each below market rate unit for the year, demonstrating the continuing income eligibility of each tenant, and the rent charged for each below market rate unit. The Administrator may require additional information to confirm household income and rents charged for the unit if he or she deems it necessary.

G.    Periodic Audit. The City maintains the right to periodically audit the information supplied to the City for the annual report if deemed necessary to ensure compliance with this chapter. In addition, owners of below market rate units shall cooperate with any audits conducted by the City, State agencies, Federal agencies, or their designees.

H.    Rent Regulatory Agreements. A rent regulatory agreement provided by the City shall be recorded against the residential development prior to final inspection or issuance of any certificate of occupancy for any dwelling unit in the residential development. The rent regulatory agreement shall include the developer’s agreement to rent the below market rate units at affordable rents for not less than fifty-five years. The rent regulatory agreement shall include, but not be limited to, the limitations on rents required by this section, provisions for selection of tenants and tenant eligibility, provisions for nondiscrimination and monitoring, and other provisions required to ensure compliance with this chapter.

I.    Changes in Tenant Income. If, after moving into a below market rate unit, a tenant’s household income exceeds the limit for that unit, the following shall apply:

1.    If the tenant’s income does not exceed the income limits of other below market rate units in the residential development, the owner may, at the owner’s option, allow the tenant to remain in the original unit and re-designate the unit as affordable to households of a higher income level, as long as the next vacant unit is redesignated for the income category previously applicable to the tenant’s household. Alternatively, if a below market rate unit meeting the tenant’s revised income threshold becomes available within six months and the tenant meets the income eligibility for that unit, the owner shall allow the tenant to apply for that unit.

2.    If there are no units designated for a higher income category within the residential development that may be substituted for the original unit, the owner may raise the tenant’s monthly rent to an amount, net of utilities, that is the lesser of rent for a comparable market rate unit in the residential development or one-twelfth of thirty percent of the tenant’s household income. Upon vacancy by the tenant, the unit must be rented to a household in the income category previously applicable to the unit.

3.    If the tenant’s income exceeds the income designated for all below market rate units in the residential development, the tenant shall be given six months’ notice to vacate the unit. If within those six months another unit in the residential development is vacated, the owner may, at the owner’s option, allow the tenant to remain in the original unit, increase the rent to that for a comparable market rate unit in the residential development, and designate the newly vacated unit as a below market rate unit affordable at the income level previously applicable to the unit converted to market rate. The newly vacated unit shall be comparable in size (for example, number of bedrooms, bathrooms, square footage, etc.) to the original unit. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.120)

18.16.110 Below market rate fund.

A.    Trust Fund. A fund for the deposit of fees established under this and similar prior municipal codes exists as Fund 29 (the “fund”). This fund shall receive all fees contributed under this chapter and may also receive monies from other sources.

B.    Purpose and Limitations. Monies deposited in the fund shall be used to increase and improve the supply of housing affordable to moderate-, low-, very low-, and extremely low-income households. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this chapter.

C.    Administration. The fund shall be administered by the Administrator, who may develop procedures to implement the purposes of the fund consistent with the requirements of this chapter and subject to any adopted budget of the City.

D.    Expenditures. Fund monies shall be used in accordance with the City’s Housing Element, or subsequent plans adopted by the City Council to maintain or increase the quantity, quality, and variety of affordable housing units or assist other governmental entities, private organizations or individuals to do so. Permissible uses include, but are not limited to, land acquisition, debt service, parcel assemblage, gap financing, housing rehabilitation, grants, unit acquisition, new construction, and other pursuits associated with providing affordable housing. The fund may be used for the benefit of both rental and owner-occupied housing. (Ord. 1480 (Exh. C (part)), 2015: Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.130)

18.16.120 Periodic review and enforcement.

A.    Periodic Review. It is the intent of the City Council to review the provisions of this chapter concurrently with the review of the City’s Housing Element, including provisions for income targeting, funding priorities, fees, and other provisions, to ensure that such provisions are economically feasible and are designed to serve the community’s highest priorities for the provision of affordable housing.

B.    Penalty for Violation. It shall be a misdemeanor to violate any provision of this chapter. Without limiting the generality of the foregoing, it shall also be a misdemeanor for any person to sell or rent to another person a below market rate unit or density bonus BMR unit at a price or rent exceeding the maximum allowed under this chapter or Chapter 18.17 or to sell or rent a below market rate unit or density bonus BMR unit to a household not qualified under this chapter. It shall further be a misdemeanor for any person to provide false or materially incomplete information to the City or to a seller or lessor of a below market rate unit or density bonus BMR unit to obtain occupancy of housing for which he or she is not eligible.

C.    Legal Action. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance with this chapter, including:

1.    Actions to revoke, deny or suspend any permit, including a building permit, certificate of occupancy, or discretionary approval;

2.    Actions to recover from any violator of this chapter civil fines, restitution to prevent unjust enrichment from a violation of this chapter, and/or enforcement costs, including attorneys’ fees;

3.    Eviction or foreclosure; and

4.    Any other appropriate action for injunctive relief or damages. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any person, owner, household or other party from the requirements of this chapter. (Ord. 1480 (Exh. C (part)), 2015: Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.140)

18.16.130 Waivers of affordable housing requirements.

A.    Requests for waivers shall be made concurrent with application submittal. As part of an application for the first approval of a residential development, a builder may request that the requirements of this chapter be reduced, adjusted, or waived based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. Any such request shall be submitted concurrently with the below market rate housing plan required by this chapter. The builder shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation, and shall bear the burden of presenting the requisite evidence to demonstrate the alleged unconstitutional result. The City may assume each of the following when applicable:

1.    The builder will benefit from the incentives set forth in the municipal code; and

2.    If required to provide below market rate units, the builder will provide the most economical affordable housing units feasible in terms of financing, construction, design, location and tenure.

B.    The City Council, based upon legal advice provided by or at the behest of the City Attorney, may approve a reduction, adjustment, or waiver if the Council determines that applying the requirements of this chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. The reduction, adjustment, or waiver may be approved only to the extent necessary to avoid an unconstitutional result after adoption of written findings, based on legal analysis and the evidence. If a reduction, adjustment, or waiver is granted, any change in the residential development shall invalidate the reduction, adjustment, or waiver, and a new application shall be required for a reduction, adjustment, or waiver. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010. Formerly 18.200.150)