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DISCUSSION As part of the May 1, 2013 joint Housing Commission and City Council workshop, the Council endorsed staff pursuing a flexible model for attempting to achieve affordable rent restricted units in new residential rental developments. As such, it encouraged all parties to attempt and strive to meet the IZO in a flexible, negotiated way recognizing the fact that the City has multiple interests it is trying to address, including parking, school impact needs, and affordable housing, all of which fuel the outcome of negotiations. However, this position was directed primarily to affordable rental housing based on legislative action, such as the Costa-Hawkins Act adopted in 1995 which acts as the states rent control law and recent court litigation, such as the Palmer/Sixth Street Properties L.P. v. City of Los Angeles ("Palmer") that significantly impacted the provisions of the City's Inclusionary Zoning Ordinance (IZO) as it relates to rental housing. Because these laws and litigation do not directly impact affordable ownership housing, the IZO's requirement that 15% of multi-family ownership homes in developments of more than 15 units be affordable to households with very low and low incomes remains fully intact. (However, you may also recall that as part of the recently adopted Housing Element, the City will be reviewing the IZO to assure it complies with the current legal environment and the City's expectations for affordable housing.) Nevertheless, notwithstanding this situation, staff continues to strive to meet the City Council's direction. As a result of the above, staff and the developer discussed project affordability with the goal of obtaining affordable homes with restricted initial sales prices and long term price controls. The end result of those discussions has resulted in a recommended affordable housing agreement with the following primary features: • A total of ten units, 10% of the project's total number of units, will be affordable to households with incomes at 80% Area Median Income (AMI) or low-income with an initial selling price estimated at $265,000. • The designated affordable units will be three story two bedroom and two bath approximately 1,200 square feet in size with the same interior standards of quality as the market rate units. • Consistent with the City's current ownership policies, the sales price of the affordable units, including the initial sales price, will be adjusted based on adjustment in the AMI. • The owners will be required to enter into and Restrictive Covenants, Resale Restrictions, and Option to Designate Eligible Purchaser agreement that amongst other things, regulates the resale of the property to assure it is transferred to a qualified affordable household and establishes ownership responsibilities. A copy of the City's standard Restrictive Covenants document is included as Attachment 5. • The affordable units will be sold consistent with the City's preference system (Attachment 6) Page - 3 -