Housing for Public School Employees , City Employees and Child Care Teachers Program
As a top priority for study in 2001, the Sunnyvale City Council directed staff to explore “options for affordable housing for teachers and City employees”. From January through June an interdepartmental team developed options for Council to consider ways to enhance affordable housing for City and school district employees. This report was presented to the City Council on June 19, 2001 (RTC 01-220). City Council approved several elements outlined in the report for staff implementation during 2001 and 2002.
On October 9, 2001, Council approved Budget Modification Number 2 to begin the implementation process of the Housing for Public School Employees, City Employees and Child Care Teachers Program (RTC 01-351). On January 15, 2002, Council approved guidelines for the implementation of the rental assistance and educational components. On May 21, 2002, Council approved guidelines for the Down Payment Assistance component (RTC 02-195).
The rental assistance component includes the implementation of a Security Deposit Loan Program up to $5,000 to assist employees to obtain rental housing. Staff began the outreach efforts for this program in March, and at the end of the fiscal year, seven security deposit loans have been made.
The education component includes a series of specialized homebuyer education classes and creation of a website that will provide available information on housing assistance programs and training. The educational classes began in February. As of June 30, nine four-hour classes have been held. More than three hundred people have attended.
The Down Payment Assistance component of the HPCC program includes a loan of up to $50,000. The following program guidelines have been developed in cooperation with each school district’s representative.
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1. Maximum loan amount of $50,000.
2. Maximum income 120% of median.
3. Borrowers may not have owned a primary residence in Santa Clara County during the last three years. Applicants would be allowed to have owned a primary residence in locations outside of Santa Clara County.
4. Borrowers may purchase a home within the following Cities: Sunnyvale, Cupertino, Santa Clara, Saratoga, Los Altos, Mountain View, and San Jose (includes Alviso).
5. Home must be owner-occupied. The borrower may not rent out the unit to others; the subject property must be the borrower’s primary residence.
6. No maximum purchase price; price to be determined by what the borrower is able to afford.
7. Interest rate of 5.5%, fully amortized but with deferred payments until the fifth year of the loan. This provision allows the borrower to become accustomed to monthly mortgage payments for a period of five years before payments on the City loan commence. The interest rate is equal to the current return earned on fund accounts.
8. Maximum Loan-to-Value ratio of 95%; borrower must be able to contribute up to 5% down payment. Although the City may request borrowers contribute a full 5% to the down payment, some flexibility should be allowed for certain situations where the down payment is simply too large for the borrower to contribute. At a minimum, borrowers should be expected to contribute 3% to cover closing costs, etc.
9. Total loan term not to exceed 30 years. This is a standard term for the City’s loans.
10. Equity share provisions, up to the first ten years of ownership. Staff suggests that the City include some equity share provisions, should a borrower substantially default on the loan – say, if the borrower rents out the subject property contrary to the terms of the loan or if sold within the first five years. This is meant to act as a deterrent to an early sale to generate “windfall” profits.
The City will include decreasing equity share rights if the borrower sells the subject property between year five and year ten of the loan term. In this way, the equity share provisions would be an inducement to the borrower to remain in the program for as long as possible. The terms may include waiver of the equity share if transfer is made to an income eligible household, if the sale is due to hardship, or due to involuntary termination of employment. The following is an example of the proposed equity share formula: |
Original Purchase Price = $450,000 City Loan = $50,000 = 11% equity share.
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Years held before resale |
% Equity Share |
Gross Proceeds |
Due City |
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One to Five Years |
11%x200= 22% |
$40,000 |
$8,800 |
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Sixth Year |
11%x180= 19.8% |
$40,000 |
$7,920 |
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Seventh Year |
11%x160= 17.6% |
$40,000 |
$7,040 |
|
Eight Year |
11%x140= 15.4% |
$40,000 |
$6,160 |
|
Nine Year |
11%x120= 13.2% |
$40,000 |
$5,280 |
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Ten Year |
11%x100= 11% |
$40,000 |
$4,400 |
11. Borrower must be either:
a. Employee (permanent, full-time) employed by a school district serving Sunnyvale and assigned to a school where the majority of students are residents of Sunnyvale; or
b. Full time (permanent) public employee of City of Sunnyvale.
c. Qualified child care provider who is working at State-licensed childcare center located within the City of Sunnyvale or childcare centers for school-aged children operated by a school district within the City of Sunnyvale who meet the income criteria. The teacher must be qualified to teach under State Title 22 requirements.
12. City Employees, school district employees and qualified child care providers must have successfully completed their probationary period before being eligible for a loan in this program.
13. The City will pre-qualify and maintain a list of lenders to work in this program, and borrowers may obtain their first loans only through this list.
For more information, please contact Katrina L. Ardina at x7451or by email kardina@ci.sunnyvale.ca.us .
The applications and forms are in Adobe Acrobat format (PDF files). If you do not already have Adobe Reader, it can be from downloaded at the Adobe Acrobat Reader® website.