That the City Council:
A. Approve a Regulatory Agreement with La Habra 4 Inv, LLC, a Delaware limited liability corporation, for the restriction of two affordable housing units to be made available to moderate-income households through the State of California Density Bonus Law (State Density Bonus Law) for the property located at 120 East Whittier Boulevard; and,

B.  Approve a Regulatory Agreement with La Habra 4 Inv, LLC, a Delaware limited liability corporation, for the restriction of three affordable housing units to be made available to moderate-income households through the State of California Density Bonus Law (State Density Bonus Law) for the property located at 310-330 East Whittier Boulevard.

TABLE 1

Number of Persons in Household	1	2	3	4	5	6	7	8
Moderate Income	$103,350	$123,850	$139,300	$154,800	$167,200	$179,550	$191,950	$204,250

The Applicant has decided to utilize the State Density Bonus law and must also comply with the City's inclusionary housing requirements. Therefore, both resolutions include the following conditions of approval to ensure that the affordable units, as further described below, would be provided in accordance to the requirements of the La Habra Municipal Code (LHMC): 

"The applicant/developer shall enter into an affordable housing agreement with the City in accordance with LHMC Chapters 18.80 and 18.82 in form and substance acceptable to the City, as approved by the City Attorney.  City Council approval of the affordable housing agreement is required prior to the issuance of building permits. A copy of the recorded affordable housing agreement is required prior to the issuance of a Certificate of Occupancy or permit final."

The State of California has adopted certain incentives and concessions for affordable housing that are implemented by Government Code Sections 65915-65918 (State Density Bonus Law). The number of incentives that a developer may decide to use is based on the number of affordable units that are proposed. These incentives include density bonuses that allow developers to construct more units than permitted by the City's General Plan and Zoning, regulatory relief from certain development standards, and minimum parking requirements that are lower than the City's requirements.

The following table identifies the regulatory relief available to both projects under State Law for designating 10% of the units for sale to moderate-income households and how the project Applicant has implemented these measures.

TABLE 2

State Law	Project 1	State Law	Project 2
5% Density Bonus	25 units permitted by State 23 units permitted by LHMC 18 units approved	5% Density Bonus	24 units permitted by State 22 units permitted by LHMC 22 units approved
Parking1	33 spaces required by State 68 spaces required by LHMC 40 spaces approved	Parking1	44 spaces required by State 77 spaces required by LHMC 53 spaces approved
Concession2	Waiver made for LHMC utility under-grounding requirements for power lines on Whittier Boulevard	Concession2	Waiver made for LHMC utility under-grounding requirements for power lines on Whittier Boulevard
Waiver of Development Standards3	Reduced rear yard setback 20 feet required by LHMC 13 feet approved	Waiver of Development Standards3	Reduced front yard setback 20 feet required by LHMC 7'10" approved Reduced rear yard setback 20 feet required by LHMC 5 feet approved

1. Local jurisdictions are prohibited from requiring more parking spaces than required by State Law. 
2. The Applicant is entitled to one concession under State Density Bonus Law. A concession must result in an identifiable and actual cost reduction. A concession may only be denied if it would have a specific, adverse impact on public health or safety or on any real property that is listed on the California Register of Historical Resources and for which there is no feasible method to satisfactorily mitigate or avoid the impact without the development being unaffordable to low-income and moderate-income households.
3. The Applicant is entitled to unlimited waivers/reductions in development standards if the development standard would have the effect of physically precluding the construction of a development at the permitted density and with the granted concessions/waivers. A waiver may only be denied if it would have a specific, adverse impact on the public health or safety. 

La Habra Municipal Code Chapter 18.82 (Inclusionary Housing Units) requires a minimum of 15 percent of the total number of for-sale dwelling units to be sold to moderate-income level households. Pursuant to LHMC Section 18.82.080, applicants have options for complying with the Inclusionary Housing requirements, including (1) constructing the required Inclusionary Housing Units on-site within the residential project; (2) constructing the required Inclusionary Housing Units off-site, provided that the applicant acquires and manages the off-site property; (3) paying in-lieu fees, charged at $6.50 per square foot of building space for the project’s total floor area; (4) acquiring and reconstructing existing units; or (5) any combination of the foregoing options.

The following table indicates how each project meets this requirement.

TABLE 3

Project	# of Units	15%	Implementation
1	18	3	Two units on-site and one unit by in-lieu fee
2	22	4	Three units on-site and one unit by in-lieu fee

The subject Regulatory Agreement pertains to the affordable units that will be provided on-site. The location of the affordable units within each Project is identified in Exhibit B of the attached Affordable Housing Agreements. The LHMC separately addresses the payment of the in-lieu fees, which pursuant to LHMC Section 18.82.080 (Applicant options for providing inclusionary housing units), are required to be collected by the City prior to the issuance of the last certificate of occupancy for each project, based on the actual total floor area constructed for each project. 

The affordable units are restricted to a maximum sales price based on household income criteria. The income criteria used to determine the Affordable Sales Price and Affordable Housing Cost are based on standards imposed by California Health and Safety Code Sections 50093 and 50052.5.  Assumptions are used in calculating both the Affordable Housing Cost and Affordable Sales Price.  Affordable Housing Cost includes costs associated with owning a home such as:

The affordable Sales Price for the units in the proposed projects is set at $482,062 for the two-bedroom units and $563,253 for the three-bedroom units. The Affordable Sales Price is based on a presumed household size of three for the two-bedroom units and a presumed household size of four for the three-bedroom units. The sales price is based on a target income level, not the income level of the actual homebuyer. Job classifications that typically meet these criteria are households that could include public school teachers, entry-level managers, project managers, social workers, etc.  According to Zip Recruiter, the average salary for an entry-level teacher in Orange County, CA is $57,500 per year and the average salary for a project manager is $85,500 per year. The Affordable Sales Price is based on the number of bedrooms in the unit, not the actual size of the specific homebuyer's household. This criterion allows the sales price to be set in advance of identifying a specific buyer for each unit. The sales price was determined by using a two-bedroom and three-bedroom unit and presumed household size of three within a moderate-income level.

State Density Bonus Law requires the units to initially be sold to a moderate-income household at an affordable sales price; however, the law does not require those units to remain as "affordable housing" if they are subsequently resold on the open market. Upon resale or title transfer, the law requires that the initial purchaser be bound by equity sharing provisions with the City, as set forth in Government Code §65915(c)(2).  Exhibit D of the Regulatory Agreement has an Exhibit "E" that outlines a sample calculation of equity sharing for this project. Upon resale of the unit, the initial purchaser pays the City the sum of (a) the Initial Subsidy and (b) the City's Proportionate Share of Appreciation ("Equity Share Payment"). The initial purchaser will get a credit for any down payment made at the time of initial purchase of the unit, the value of any improvements made to the unit, and their proportional share of appreciation in the value of the unit. 
 

The following example is a sample calculation of the equity share the City would receive upon the resale or title transfer of an affordable unit by an initial buyer:
 

Sample Equity Share Payment Calculation

A	B	C	D	E	F
Sample Calculation	Down Payment	Affordable Purchase Price	Fair Market Value at Time of Initial Sale	Homeowner Capital Improvements After Closing (Remodeling, Flooring, etc.)	Sample Market Rate Resale Price (Net of Sales Cost)
Buyer 1	$41,350	$413,500	$600,000	$10,000	$750,000
Buyer 2	$50,000	$413,500	$600,000	$20,000	$700,000

Approval of the subject Regulatory Agreements will have no impact on the City's General Fund. Once the five subject affordable housing units are resold, and consistent with applicable equity share provisions that govern the reselling of units, the City will receive a portion of the equity and the initial investment for each unit sold. Any funds received by the City via an equity share will not be available to the General Fund, but will instead be deposited into the City's Housing Authority account and earmarked for reinvestment in future affordable housing projects within the City of La Habra.

This account currently has approximately $1,250,000 in available funding on hand that can be dedicated towards future affordable housing projects.

The recommended action implements the following General Plan policies
H 1.1 - Support State Housing Policy
H 1.3 - Support Private Sector Housing Production
H 1.4 - Variety of Housing
H 1.5 - Market and Non-market Housing Production Needs
H 3.10 - Homeownership Assistance



The recommended action implements the following City of La Habra's FY 24/25 Goal and Objective: