July 17, 1998

 

 

Honorable Frank J. Ochoa, Presiding Judge

Santa Barbara County Superior Court

1100 Anacapa Street

PO Box 21107

Santa Barbara, California 93121-1107

 

 

Countyí Administratorís Response to the 1997-98 Grand Jury Interim Final Report on the Affordable Housing Process in the County of Santa Barbara

 

 

Dear Judge Ochoa:

 

The County Administratorís Office thanks the Grand Jury for the findings and recommendations included in the subject report.

 

In accordance with Section 2-69 of the County Code, the County Administrator "shall exercise overall responsbibility for sound and effective management of county government, pursuant to board policy and adopted budget. The County Administrator shall have clear and direct management authority and responsibility, and be specifically accountable to the Board of Supervisors." This notwithstanding, it would be appropriate for the Grand Jury to require entities that are directly responsible for those functions to respond to the reportís findings and recommendations. This would help ensure that the appropriate entities properly receive the Grand Jury report, have an opportunity to respond to the Grand Juryís analyses, and fully appreciate the effort that went into putting the report together.

 

For example, the Treasurer-Tax Collector and the Planning & Development departments are responsible for administering the affordable housing program for the County. Yet, out of the 9 findings and recommendations, the Treasurer-Tax Collector department was not identified as an affected agency and the Planning & Development department was identified as an affected agency for only 2 of the 9 findings and recommendations. The County Administratorís Office was identified as the affected agency for 6 findings and recommendations. The County Housing Authority, which is the Countyís consultant, was identified as the affected agency for 5 findings and recommendations. The County contracts with the County Housing Authority for certain affordable housing services (specifically, home buyer income certification and lottery services). Since the Authority is acting as a consultant, the County Administratorís Office addressed the findings and recommendations that the Grand Jury directed to the County Housing Authority. In conclusion, the County Administratorís Office addressed all 9 findings and recommendations.

 

We have been informed that even though the County Housing Authority is a consultant to the County, the County Housing Authority is sending a separate response to those Grand Juryís findings and recommendations that identified them as the affected agency.

 

 

 

 

FINDING 1: There is a very narrow income range for qualified buyers. Buyers must earn enough to qualify for the loan, but not so much that they fail to qualify as low-income buyers. This factor results in a high percentage of last-minute disqualifications which are expensive to the county and to the developer, since the process must be restarted following each disqualification.

 

RESPONSE: The County Administratorís Office disagrees partially with the finding.

 

NOTE: The County Housing Authority was identified as the affected agency for this finding but since the Authority is a consultant to the County, the County Administratorís Office is responding. However, the County Housing Authority is sending a separate response to this finding also.

 

We agree that there is a very narrow income range for qualified buyers and that buyers must earn enough to qualify for the loan, but not so much that they fail to qualify as low-income buyers. The Planning & Development department is continually improving model marketing plans and facilitating marketing and lotteries with private developers. The department is presently implementing an action plan, as acknowledged by the Grand Jury, through revisions to the Housing Element Implementation Guidelines. This action plan recommends making administrative revisions to the county program so that it is aligned more closely with federal lending guidelines (revisions address foreclosures, term limits for affordability and default requirements) and eases financing for low income families.

 

We do not agree that a narrow income range results in a high percentage of last-minute disqualifications which are expensive to the County and to the developer. We acknowledge concerns with the number of applications which must be processed in order to find qualified applicants. However, developers have been able to fill their affordable units because of the huge demand and limited supply.

 

The Planning & Development department will recommend that developers provide pre-qualification screening at no cost to affordable housing applicants in order to reduce disqualifications.

 

The process is not restarted following each disqualification since there is such a large pool of qualified candidates. Hence the need for a lottery. Developers usually request certification of several applicants at a time, anticipating that some will not qualify. If, for some reason, a developer chooses to only process one applicant at a time, it is very likely that additional applicants will have to be certified to obtain the number of qualified applicants.

 

 

 

 

RECOMMENDATION 1: In the South County area, the number of very-low income houses for sale should be minimized as is done by the City of Santa Barbara. This restriction would limit the market to prospective buyers whose incomes better fit the cost of the affordable houses, and so produce fewer disqualifications.

 

RESPONSE: The recommendation has not yet been implemented, but will be implemented pending proposal to, and contingent upon approval by, the Board of Supervisors in fiscal year 1998-99.

 

NOTE: The County Housing Authority was identified as the affected agency for this recommendation but since the Authority is a consultant to the County, the County Administratorís Office is responding. However, the County Housing Authority is sending a separate response to this recommendation also.

 

Finding qualified low income buyers has not presented a major concern. However, the choice by private developers to build houses for the very-low income group (instead of low, lower moderate or upper-moderate income groups) has not resulted in the number and desired "mix" of affordable housing units to serve other income levels. Consequently, the Planning & Development department is reviewing the Housing Element Implementation Guidelines to determine what policy options to present to the Board of Supervisors, including increasing the proportion and number of low and lower-moderate income units in for-sale projects. It is the goal of these modifications to the Housing Element Guidelines to help create a better balance between very low, low and moderate home ownership with a possible focus on rentals for very low income families.

 

These policy options will be presented to the Board of Supervisors in fiscal year 1998-99.

 

 

 

 

RECOMMENDATION 2: The County should require buyers to show evidence of pre-qualification for a loan in the amount necessary to purchase the affordable house at the time they enroll in the lottery. This requirement will discourage casual enrollments and reduce the number of disqualifications.

 

RESPONSE: The recommendation has not yet been implemented, but will be implemented pending proposal to, and contingent upon approval by, the Board of Supervisors in fiscal year 1998-99.

 

NOTE: The County Housing Authority was identified as the affected agency for this recommendation but since the Authority is a consultant to the County, the County Administratorís Office is responding. However, the County Housing Authority is sending a separate response to this recommendation also.

 

The Planning & Development department will recommend that applicants pre-qualify in order to enter the lottery in order to reduce disqualifications. Planning & Development will also recommend that developers provide pre-qualification services at no cost to affordable housing applicants.

 

These policy options will be presented to the Board of Supervisors in fiscal year 1998-99.

 

 

 

 

FINDING 2: The County has no central affordable housing office that is responsible for all aspects of affordable housing. For this reason buyers and developers frequently feel they are getting the run-around when attempting to comply with county procedures.

 

RESPONSE: The County Administratorís Office disagrees partially with the finding.

 

The County Administrator agrees that the County has a fragmented housing structure. There is no central housing office nor a full-time official designated to coordinate and integrate planning and operations between affordable housing, community development and economic development.

 

In 1993, the Board of Supervisors directed the Treasurer-Tax Collector to be responsible for financing affordable housing projects (including housing rehabilitation) through the use of developerís in-lieu fees, state and federal grants, and other funding sources. At the same time, the Board of Supervisors directed the Planning & Development department to be responsible for all planning aspects of affordable housing as required by state land use planning law (e.g., Housing Element) and administer the affordable housing provisions of the zoning ordinances through project review and land use approvals.

 

The Grand Jury stated in its report that "In the discussions with owners of affordable homes, there were no serious complaints". The Planning & Development department designated a single point of contact person for all affordable housing questions, as acknowledged by the Grand Jury. The Planning & Development department maintains and distributes a public information packet [Attachment (1)] including a list of new and upcoming affordable housing projects and a list of existing Affordable Housing projects. The Treasurer-Tax Collector publishes a homeowners guide to the Affordable Housing Program, Housing Rehabilitation Loan Program, Homebuyers Assistance Program and Shared Equity Homebuyerís Program [Attachments (2)-(8)]. Both departments contract with the County Housing Authority to perform income certification and lottery services for both regulatory and financial based programs. In addition, the Treasurer-Tax Collector, Planning & Development, and the County Housing Authority are currently coordinating to provide consistent and accurate information to the public and the development community.

 

NOTE: The County of Santa Barbara has received 3 awards for the Positano Apartment Affordable Housing project (118 units) located southwest of Turnpike and Highway 101. This project received the 1998 John J. Gunther "Best Practices" award from the United States Department of Housing and Urban Development, the National Association of Housing and Redevelopment Officials Award of Merit for program innovation, and the American Planning Association (Central Coast Section) Award of Merit for a planning project.

 

 

 

 

RECOMMENDATION 3: Coordination should be improved between the various affordable housing functions by the establishment of an Affordable Housing Director to control the county affordable housing functions in the Planning, Tax Collector and Housing Authority offices. This office would serve as an interface between all members of the community (buyers, developers, financial institutions, etc.) and the county.

 

RESPONSE: The recommendation will not be implemented.

 

Establishment of such an office would require operational and policy analysis authorized and funded by the Board of Supervisors as a matter of policy. An organizational review and cost/benefit analysis should be conducted to determine if creating an Affordable Housing Director would be beneficial and if it would be a good taxpayer investment based on the limited available resources. To conduct this study, additional resources would be required. Currently, there is a multi-year backlog of studies that need to be conducted countywide. Other options that might be beneficial should be explored, such as consolidation. Consolidations usually can be done without incurring any additional costs and sometimes reduces costs. Another alternative would be to add a 3rd County Deputy Administrator position that would be responsible for, and coordinate, the affordable housing, community development and economic development functions. Of course, any changes would have to be presented to the Board of Supervisors for consideration and approval.

 

As explained in Finding #2, the Treasurer-Tax Collector and Planning & Development departments provide different affordable housing functions. The Treasurer-Tax Collector, through the use of the Consolidated Plan Process, finances affordable housing whereas Planning & Development plans for affordable houses.

 

As a point of interest, in 1998 the Treasurer-Tax Collector conducted a survey of California county organizational structures which revealed few counties with a consolidated housing function under one program director or deputy director.

 

 

 

 

FINDING 3: The county presently does not monitor the status of houses that were originally marketed as affordable. There is no assurance that affordable houses are owner-occupied as prescribed, or that houses are not resold at market prices. No county agency knows the exact number of affordable houses.

 

RESPONSE: The County Administratorís Office disagrees partially with the finding.

 

Affordable housing in the countyís unincorporated areas are generally produced by 4 different methods:

 

    1. County land use regulation (Planning & Development)
    2. Government grant & developer in-lieu funded programs (Treasurer-Tax Collector)
    3. Private Non-Profits
    4. County Housing Authority programs

 

We agree that there is no comprehensive monitoring of affordable housing of all these programs in the county and that no county agency knows the exact number of affordable houses. Part of the reason is due to the fact that private/public non-profits do not necessarily pass projects through the countyís permitting process because they buy and remodel existing housing. If projects are new construction or rehabilitation, they would go through the permit process and would be tracked.

 

The Treasurer-Tax Collector maintains a file of active restrictive covenants for affordable units developed under the Countyís Inclusionary Program, Homebuyer Assistance Program, and Federal/State/Local financed affordable projects developed with loan agreements. Restrictive covenants or mortgage liens are recorded on the title to the affordable unit in order to retain the unit in the affordable housing program or ensure implementing equity share provisions at sale.

 

Excluding the Affordable Housing Overlay program, there are 525 known existing units with active restrictive covenant resale controls that are tracked by the Treasurer-Tax Collector [Attachment (9)]. The Treasurer-Tax Collector contracted with the County Housing Authority to monitor the 173-unit Oak Grove subdivision which has a 40-year restrictive covenant. This one project (which was developed in 1990) equates to approximately 1/3 of all outstanding unincorporated units with known resale controls (excludes Affordable Housing Overlay program units). In addition, the Treasurer-Tax Collector monitors 30 first-time homebuyersí homes.

 

Planning & Development compiled a table of all affordable housing projects in the County, including affordable housing projects which were required under the Comprehensive Planís Housing Element Inclusionary zoning policies (Affordable Housing Overlay and Inclusionary Projects) and is over 95% accurate. It is not 100% accurate because it does not contain data on affordable housing owned by private non-profits, as explained above. There are 1,329 approved affordable housing units and an additional 1,827 affordable housing units pending approval. As pointed out above, of the 1,329 approved affordable housing units, 525 are tracked.

 

Both the Treasurer-Tax Collector and Planning & Development have created databases to track their affordable housing units and other applicable information (i.e., financing assistance, loan servicing, resale control term, affordable housing income group, building date, etc.).

 

Owners of affordable units are bound by law and contract to comply with affordable housing regulations. Similarly, regular market rate home buyers must sign documentation that they are going to occupy the home they are buying. Planning & Development will complete a focused sampling of affordable projects to test compliance with affordability conditions for the Affordable Housing Overlay and Inclusionary Projects in fiscal year 1998-99. An analogous procedure is how the Clerk-Recorder-Assessor verifies a sampling of submitted voter signatures to determine if there are enough valid signatures to qualify a measure for a ballot.

 

Planning & Development will also recommend to the Board of Supervisors amendments to the Housing Element Implementation Guidelines to require regular sampling of affordable housing residents and substantial penalties for non-compliance with the affordable housing restrictions and covenants on the units.

 

 

 

 

RECOMMENDATION 4: The duties of the Affordable Housing Director should include the tracking and monitoring of affordable units to insure that affordable status is maintained after a resale or foreclosure. The county should require that escrow officers notify the Director when a title transfer of an affordable is taking place. Random checks should be made to insure that affordable units are owner-occupied. There should be sufficient staffing to perform these functions.

 

RESPONSE: The recommendation will not be implemented.

 

As explained in recommendation #3:

 

    1. It would be prudent for the County to conduct a study first to determine if an Affordable Housing Director position should be created. Second, what is the source of revenue to pay for this position (and/or what reduction in program services/expenditures)?
    2. Both the Treasurer-Tax Collector and Planning & Development have created databases to track affordable housing units that fall under their responsibility so there is no need to add an additional staff person to do this.
    3. The Treasurer-Tax Collector maintains a file of active restrictive covenants and mortgage liens for affordable units developed under the Countyís Inclusionary Program, Homebuyer Assistance Program, and Federal/State/Local financed affordable projects developed with loan agreements.
    4. The Planning & Development department will sample affordable unit projects for compliance in 1998-99. Staffing for monitoring and compliance review can be developed for the 1999-2000 budget if it is determined that an unacceptable percentage are not in compliance.
    5. Changes to the Housing Element Implementation Guidelines will be recommended by Planning & Development for improved tracking, monitoring and compliance in 1998-99.

 

For those affordable units created as a result of the Affordable Housing Overlay and Inclusionary Programs, deed restrictions are included that prohibit the resale of affordable units at market prices.

 

The County will implement title transfer notification through amendments to the Housing Element Implementation Guidelines in fiscal year 1998-99, pending proposal to, and contingent upon approval by, the Board of Supervisors.

 

 

 

 

FINDING 4: The 60-day income certification term limit results in eligible buyers having to be recertified which creates delay and added expense for buyers and the county.

 

RESPONSE: The County Administratorís Office disagrees partially with the finding.

 

The 60-day income certification term limit does not create delay and added expense for the county. Oftentimes the delay is the result of developers starting the affordable housing process too soon in the project development schedule.

 

The 60-day income certification term limit did result in eligible buyers having to be recertified which creates added expense for the buyers. Consequently, the limit was administratively extended to 90 days by Planning & Development. This 90-day extension will be formalized with amendments to the Income Certification Guidelines. These guidelines, along with the modified Housing Element Implementation Guidelines, will be presented to the Board of Supervisors in fiscal year 1998-99.

 

 

 

 

RECOMMENDATION 5: The income certification term for prospective buyers should be extended from 60 to 90 days. This extension would allow more time in case the housing project was delayed for any reason.

 

RESPONSE: The recommendation has been implemented.

 

As noted in finding #4, the Planning & Development department has administratively extended the income certification from 60 to 90 days. This extension will be formalized in the Income Certification Guidelines pending proposal to, and subsequent approval by, the Board of Supervisors in fiscal year 1998-99.

 

 

 

 

 

Sincerely,

 

 

 

 

Michael F. Brown

County Administrator

 

 

cc: Tim Putz, l997-98 Grand Jury Foreperson

 

 

 

Attach: (1) Affordable Housing Program Information Packet (includes list of new and upcoming affordable housing projects)

(2) Affordable Housing Program brochure

(3) Homebuyer Assistance Program brochure

(4) Affordable Homebuyer Program: Shared Appreciation Covenant

(5) Housing Rehabilitation Loan Program - Isla Vista

(6) Housing Rehabilitation Loan Program - North

(7) Housing Rehabilitation Loan Program - Tanglewood & North Orcutt "Y" Area

(8) Housing Rehabilitation Loan Program - Goleta Old Town

(9) Active Affordable Housing Units with Restrictive Covenants