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RTC#02-391

October 8, 2002

SUBJECT:

BMR Audit Actions-Purchase of 969-1 Asilomar Terrace, Sunnyvale

REPORT IN BRIEF

Approval is requested for the purchase of 969-1 Asilomar Terrace at a purchase price of $128,000. Council has previously appropriated funds from Housing Mitigation Reserves that will allow the City to take action, when needed, to make timely purchases of BMR units that may be at risk of being lost from the City’s BMR housing stock. Through the City’s audit of the BMR Purchase Program, several forced sales of properties have been completed. Timely actions for the sale and transfer of ownership are required in the deed restrictions. Circumstances related to title issues require the City act as the interim purchaser of 969-1 Asilomar Terrace to allow for the sale to a new BMR buyer.

BACKGROUND

On March 5, 2002, a Status Report on the ongoing Audit of the BMR Purchase Program was presented to the City Council (RTC 02-076). This report provided Council with information on a City audit certifying the occupancy of 133 out of 180 housing units in the BMR Purchase program. On June 11, 2002 a report which included a Budget Modification was presented to the City Council (RTC 02-234). The budget modification provided sufficient funds to accommodate two purchase transactions and approved the purchase of one property. One of the deed restrictions under the BMR Program requires that each owner continuously occupy the unit as their principal residence. Through this audit, several occurrences of breaches in occupancy restrictions were discovered. The actions taken to resolve these cases have been the forced sale of each unit. To date, ten forced sales have closed escrow and $118,381 in fines has been collected.

The deed restrictions allow the City to purchase the BMR property when the unit might be lost from the City’s BMR housing stock. The time limit during which the City must find a buyer and close escrow on a for-sale BMR unit is limited. If the time limit is reached the seller is released from the resale restrictions and can sell the unit on the open market at full market price.

The estimated market value of the unit is $350,000 to $400,000. The BMR sales price is $128,000, which was calculated by following the valuation formula for the calculation of resale prices that is described in Sunnyvale Municipal Code in Chapter 19.66. This provides the seller with an appreciated resale price, based on 100% of the increase of the Consumer Price Index related to Housing, from the date of purchase through the date of sale or termination of occupancy. Staff determined that the owner violated the restrictions of the BMR Program. In addition, the owner obtained a loan that exceeds the amount allowable per the valuation formula. Since the lender violated the recorded refinancing limits of the City’s program, staff has determined that the City has a strong position to negotiate the amount of the loan payoff with the lender. Staff is proposing the City purchase the unit and then resell it to another BMR purchaser.

EXISTING POLICY

Land Use and Transportation Sub-Element (1997):

GOAL C2: Ensure ownership and rental housing options in terms of style, size, and density that are appropriate and contribute positively to the surrounding area.

Housing and Community Revitalization Sub-Element (2000):

GOAL A: Foster the expansion of the housing supply to provide greater opportunities for current and future residents given environmental, social, fiscal, and land use constraints.

GOAL D: Maintain diversity in tenure, type, size, location and cost-of-housing to permit a range of individual choice for all current residents and those expected to become city residents.

GOAL E: Maintain and increase housing units affordable to households of all income levels and ages

DISCUSSION

Staff recommends the purchase of the unit at 969-1 Asilomar Terrace and then Staff will initiate the process to sell the property to new buyers. Staff will take actions to purchase units by the City only as a last resort to prevent the loss of units.

Staff recommends Council approve the purchase of the unit for subsequent resale in order to keep the unit in the BMR housing stock.

FISCAL IMPACT

There is no fiscal impact to the General Fund. A balance of $202,374.00 remains in 814700 BMR Second Mortgage Program-Real Property Purchase and will fund the purchase of the BMR unit. Proceeds from the sale of the property, at a later date, will be returned to Housing Mitigation Reserves.  

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.

 

ALTERNATIVES

  1. Approve the purchase of 969-1 Asilomar Terrace, Sunnyvale.

  2. Do not approve the purchase of 969-1 Asilomar Terrace, Sunnyvale.

RECOMMENDATION

Staff recommends Alternative 1- Approve the purchase of 969-1 Asilomar Terrace, Sunnyvale.

 

Prepared by:
Annabel Yurutucu
Housing Officer, Community Development

Reviewed by:
Robert Paternoster
Director, Community Development

Approved by:
Robert S. LaSala
City Manager

 

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