That the City Council approve an Affordable Housing Agreement with Citrus Row Townhomes, LLC for the restriction of four affordable housing units to be made available for sale to moderate-income households through the City of La Habra's Inclusionary Housing Ordinance for the property located at 300 South Walnut Street.

On January 13, 2025, the Planning Commission approved a tentative tract map and recommended City Council approval of a Planned Unit Development (PUD) permit application to construct a 22-unit, three-bedroom townhome complex, on 1.36 acres, located at 300 South Walnut Street (see Exhibit 1 below). On March 17, 2025, the City Council approved the PUD. The Planning Commission staff report and minutes and the City Council staff report are provided as Attachments 2-4 of this staff report.

Exhibit 1: Vicinity Map
 
Pursuant to the City's Inclusionary Housing Ordinance, the approvals required 15% (four) of the 22 units to be made available for sale to moderate-income households. As of April 23, 2025, the income limits for a moderate-income household in Orange County are shown below in Table 1. Some examples of job classifications that typically allow a household to meet the above criteria are households that include school teachers, entry-level managers, project managers, social workers, etc. As of October 2025, Zip Recruiter reports the average salary for an entry-level teacher in Orange County, CA as $57,363 per year and the average salary for a project manager as $109,987.

Table 1: Moderate Income Household Income Limits

Number of Persons in Household	1	2	3	4	5	6	7	8
Maximum Annual Income	$114,750	$131,100	$147,500	163,900	$177,000	$190,100	$203,250	$216,350

To ensure that the units available for sale to moderate income households are provided, the ordinance approving the PUD included the following condition of approval (Project-Specific Condition 21):
  By providing affordable housing, the developer is eligible and has elected to utilize the State Density Bonus Law to increase density on the project site beyond what the City's zoning currently allows for this location. Based on the size of the Project site, the City's R-3 Zone permits a maximum of 20 dwelling units to be developed on the property. The State Density Bonus Law, allows the developer to increase the permitted density (20 units) by 10 percent (2 additional units), in exchange for making at least 15 percent (4 units) of the 22 units affordable to moderate-income households. In addition, the developer is entitled to the parking requirements permitted under the State Density Bonus Law, as well as a waiver/reduction in the required width of the patios that are proposed to provide private open space. The table below outlines the required parking per the LHMC, the required parking per the State Density Bonus and the parking proposed by the developer. Additional details about the design of the project, including the patios, is provided in the attached Planning Commission and City Council staff reports.
 

	State Density Bonus Law Parking Requirements (per unit)	State Density Bonus Law Parking Requirements  (per 22 units)	City Code Parking Requirements (per 22 three-bedroom units)	Proposed Parking
Resident Parking	1.5 spaces	33 spaces	66 spaces	44 spaces
Guest Parking	0 spaces	0 spaces	11 spaces	4 spaces

LHMC 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 households.  Pursuant to LHMC Section 18.82.080, options are provided for complying with the Inclusionary Housing requirements including the following:

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 number of affordable housing units required for this 22-unit project to be in compliance with inclusionary housing is four units. Since the developer is also required to make four units available to moderate-income households in order to take advantage of the above housing incentives under the State Density Bonus Law, including a lower parking requirement, the developer must construct the four units and cannot elect to use any other options available through the City's Inclusionary Housing Ordinance.

The subject Affordable Housing Agreement pertains to the affordable units that will be provided on-site. The location of the units is identified in Exhibit B of the Affordable Housing Agreement. The affordable units are restricted to a maximum sales price based on household income criteria. The income criteria used to determine the 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 the Affordable Sales Price. Affordable Housing Cost includes costs associated with owning a home such as:

• Principal and interest payments
• Private Mortgage Insurance (if applicable)
• Property taxes and assessments
• Fire Hazard Insurance covering replacement value of improvements
• Reasonable allowance for utilities
• Reasonable allowance for maintenance; and,
• Homeowners Association Fees (HOA)

The Affordable Sales Price for the proposed project is currently set at $526,650 for the three-bedroom units. The affordable sales price is based on an assumed household size of four persons.  The sales price is based on a target income level, not the income level of an actual home buyer. The Affordable Sales Price is based on the number of bedrooms in the unit, not the actual size of the specific home buyer'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 three-bedroom unit and a presumed four-person moderate-income level household. The 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 "affordable housing" if they are subsequently resold on the open market. Upon resale or title transfer, the law requires the initial purchaser to be bound by equity sharing provisions with the City, as set forth in Government Codes § 65915(c)(2). Exhibit E of the Affordable Housing Agreement 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 proportionate 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:
 

Approval of the Affordable Housing Agreement will have no impact on the City's General Fund. If the affordable housing units are resold in the future, 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, subject to Housing Authority approval. This account currently has approximately $1,250,000 in available funding on hand that can be dedicated towards future affordable housing projects in the City.

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 25/26 Goal and Objectives: