RESOURCE MANAGEMENT AGENCY - A. PRADO, ASSISTANT DIRECTOR OF PLANNING AND BUILDING

Approve Deed Restriction and Affordable Housing Implementation Plan for Santana Ranch Apartments Phase 1 - 55 units.

SBC FILE NUMBER: 790

The Santana Ranch project is the subject of a Development Agreement (DA) between the property owners and developers and the County of San Benito that was approved in late 2010, the pertinent provisions of which are summarized below. The DA requires that ten percent (10%) of the residential units be deed restricted as affordable, as defined under the terms of the DA.

The Owner elected to satisfy the Affordable Housing requirement in the DA by constructing 110 multi-family rental units (apartments), a minimum of 6 of which would be for low income occupants as part of the Project. Then-RMA Director Harry Mavrogenes approved the plan to construct apartments as the means to satisfy the Affordable Housing requirement, pursuant to the RMA Director's authority specified in the Santana Ranch Specific Plan also approved in 2010. Building plans were submitted and approved for the first 55 units of apartments.

Construction is now substantially complete, with final inspection and certificate of occupancy delayed by a supply chain disruption of delivery of a critical electrical system component before the electrical service for the apartments and the adjacent park can be energized by PG&E. It is now anticipated that the first 55 units will be available for occupancy in late May or early June.

The DA requires that the Affordable Units be deed restricted as affordable for a minimum period of 30 years (or longer if required by certain types of financing, not applicable in this case) and be subject to an Affordable Housing Implementation Plan approved by the County.

The attached Deed Restriction and Affordable Housing Implementation Plan for the first 55 units (Phase 1) has been submitted by the developer for County approval, all as moderate income units as defined in the DA - with rents not to exceed 1/12 of 35% of income for tenants at 120% of area median income, with no reduction for utility expenses, which currently would be capped at $2,540.42 for a one-bedroom and $2,856.88 for a two-bedroom apartment, based on HCD-published data from December 2021. The developer proposes initial rents of $1,895.00 for a one-bedroom, one bath 668 sq ft unit and $2,475.00 for a two-bedroom, two bath 989 sq ft unit and $2,495 for a two-bedroom two bath 1,016 sq ft unit in Phase 1.

The developer and County staff are still discussing possible modifications of the Deed Restriction and Affordable Housing Implementation Plan that would apply to the second group of 55 units (Phase 2) to expand the range of affordability to better align with meeting County Regional Housing Needs Allocation (RHNA) goals in its adopted Housing Element of the General Plan, as further explained below in the Contract History section.

The Phase 1 Deed Restriction and Affordable Housing Implementation Plan is now before the Board of Supervisors for approval.

On November 2, 2010 the County of San Benito and the Santana Ranch Landowners entered into a Development Agreement (DA) for the development of 1,092 residential units and 106,000 neighborhood commercial and mixed units, an 8-12-acre elementary school site and 18 acres of parks, collectively known as the Santana Ranch Project. The complete DA is attached for reference.

Section 2.7 with the heading Affordable Housing of the DA provides that the Owner shall reserve ten percent (10%) of the Project's total residential
units for Moderate Income Households and Low Income Households (collectively, "Affordable Units"), of which at least five percent (5%) shall be reserved for Low Income Units. Section 2.7 and the Definitions section of the DA are separately attached for ease of reference. The DA defines affordability thresholds for moderate and low income households. The Affordable Units may be either for-sale or rental, single-family or multi-family units, and up to 10% of the units may be age-restricted. Half (50%) of the Affordable Units must be completed before more than 500 market rate housing units can be constructed.

On January 25, 2022, the Board of Supervisors adopted Resolution No. 2022-2 authorizing issuance of building permits for up to 513 single-family homes in the project, in recognition that delay in completion of the first 50% of affordable apartments was due to forces beyond the developer's control. The second half of Affordable Units (Phase 2) must be completed before the 900th housing unit is constructed. The developer has submitted plans for the second phase of apartment development, and begun site grading and preparation with County approval.

In November 2020, County Counsel noted that the moderate income affordability standard in the DA is not consistent with the definition of moderate income rental units affordability standard in the California Housing Element Law. As a result, rental units developed under the DA moderate income definition would not count toward satisfaction of moderate income housing goals established by the Regional Housing Need Allocation (RHNA) under state law and incorporated in the County's adopted Housing Element of the General Plan, but would instead be classified as above-moderate housing units. Goals for production of above-moderate units have already been exceeded. The Owner's representatives and RMA staff with assistance from County Counsel have been engaged in discussions of potential means of resolving that discrepancy with input from a Board of Supervisors ad hoc committee consisting of Supervisors Dirks and Tiffany. Those discussions are ongoing with respect to Phase 2 with the assistance of staff from the Housing Authority of the County of Santa Cruz, which administers the Section 8 voucher program in San Benito County for the Cities of Hollister and San Juan Bautista.

For Phase 2, potential means of increasing the number of low income units through utilization of Section 8 housing vouchers, and other agreements to accommodate RHNA moderate income affordability standards, such as a master lease of some units in Phase 2 to the County, the Housing Authority or non-profit, are under active discussion. RHNA moderate income rental housing standard is rents shall not to exceed 1/12 of 30% of income for tenants at 120% of area median income, with a reduction for utility expenses. Utilizing the RHNA standard and current area median income and utility allowance schedule, rents are estimated to be limited to $1,875.50 for a one-bedroom and $2,100.75 for a two-bedroom unit, based on HCD December 2021 data and HACOSC utility allowance schedule.

Some proposed resolutions under discussion would require an amendment of the DA. One proposal for a DA amendment was presented in concept to the Board of Supervisors by then RMA Director Michael Chambless to extend the term of the DA and increase the number of residential units in Santana Ranch above the current limit of 1,092, including additional affordable units that could meet RHNA goals, but the concept was not favorably received by the Board. If that option, or some variation, were to be further explored the developer would have to file an application with public hearings conducted by the Planning Commission and Board of Supervisors. If the developer wishes to proceed with that option, it is possible to complete that process before the completion of construction for Phase 2 of the Santana Apartments and the need to record the Deed Restriction and Affordable Housing Implementation Plan for Phase 2.