§ 1344.

BELOW MARKET RATE CONDOMINIUM CONVERSION PROGRAM

As described below, this Section is intended to supersede, to the extent described in subsection (a) below, the provisions of Sections 1341, 1341B and 1385 relating to the regulation of units subject to those provisions (“Condominium Conversion BMR Units” or “BMR Units”).

a.

Application.

1.

BMR Units purchased or acquired on or after the effective date of this ordinance. Unless a Section specifically applies only to BMR Units purchased before the effective date of this ordinance, every part of this Section 1344 applies to BMR Units purchased on or after the effective date of this ordinance. For these BMR Units, this Section 1344 replaces and supersedes all provisions of Sections 1341, 1341B, and 1385.

2.

BMR Units purchased or acquired before the effective date of this ordinance.

A.

This ordinance applies to all BMR Units purchased or acquired before the effective date of this ordinance as specified in each subsection and supersedes Sections 1341, 1341B and 1385 only as provided herein.

B.

Alternatives To Compliance With This Section. At the election of any Pre-Legislation Owner who qualifies, he or she may enter into a contract with the City to exercise one of the alternatives to compliance with this Section listed in Section 1344(j) below.

3.

This legislation applies to Original Subdividers as defined herein and as provided for in Section 1344(h).

b.

Definitions. For purposes of this Program the following definitions shall apply. For terms not defined below, the definitions in the Subdivision Code and the definitions in the City and County of San Francisco Residential Inclusionary Affordable Housing Program Monitoring Procedures Manual, published in 2007 under Planning Code Sections 315 et seq. and under this Section shall apply.

1.

“Annual Gross Income” shall mean gross income as defined in CCR Title 25, Section 6914, as amended from time to time, except that the Mayor’s Office of Housing may, in order to promote consistency with the procedures of the San Francisco Redevelopment Agency, develop an asset test that differs from the State definition if it publishes that test in the Procedures Manual.

2.

“Base Price” shall mean the price that the current owner paid for their property or the reset price the current owner received when entering into a contract under Section 1344(i).

3.

“Below Market Rate Condominium Conversion Program” or “Program” shall mean the actions taken by the City to preserve certain low and moderate income housing through the implementation of Sections 1341 and 1385.

4.

“BMR Unit” shall mean a unit restricted as a below market rate unit under the provisions of Section 1341 or 1385.

5.

“Conditional Use” for purposes of this Ordinance means a conditional use authorization that, pursuant to the Planning Code, is required for the residential component of a project.

6.

“Conditions of Approval” shall be a set of written conditions imposed by the Planning Commission or another permit-issuing City agency or appellate body to which a project applicant agrees to adhere and fulfill when it receives a conditional use or planned unit development permit for the conversion of a BMR Unit subject to this Program.

7.

“Fair Market Value” shall mean the greater of the Unit sales price or the Appraised Value of the Unit as of the date of valuation. The owner and the City, acting through the Mayor’s Office of Housing, may determine the Fair Market Value by mutual agreement without obtaining an appraisal. If the owner and the City are unable to agree on a Fair Market Value, then the “Appraised Value” of the Unit is defined as the value that would be agreed to by a seller who is willing to sell but under no particular urgent necessity or obligation to sell, and a buyer who is ready, willing and able to buy but under no particular or urgent necessity to buy, each dealing with the other with full knowledge of all the uses and purposes for which the Property is reasonably adaptable and available. For purposes of determining the Appraised Value, the Borrower shall select and pay for an appraiser who is an “MAI” member of the American Institute of Real Estate Appraisers or an “SRPA” member of the Society of Real Estate Appraisers (or any such equivalent designations). The City has the option, at City’s sole expense, to select an appraiser to conduct an additional appraisal of the Property. If the two appraisals are not in agreement as to the Appraised Value of the Property, the amounts determined by the appraisals will be averaged to determine the Appraised Value of the Property for purposes of this ordinance.

8.

“First Time Homebuyer” shall mean a household who has not held an ownership interest in any residential or commercial real property in the last three years.

9.

“Household of Low Income” shall mean a household whose combined annual gross income for all members does not exceed 80 percent of Area Median Income as published by the United States Department of Housing and Urban Development (HUD) and adjusted for household size.

10.

“Household of Moderate Income” shall mean a household whose combined annual gross income for all members does not exceed 120 percent of Area Median Income as published by the United States Department of Housing and Urban Development (HUD) and adjusted for household size.

11.

“Maximum Annual Rent” shall mean the maximum rent that a Property Owner may charge any tenant occupying a BMR Unit for the calendar year as published by MOH. The maximum annual rent for a BMR Unit of the size indicated below shall be no more than 30 percent of the annual gross income for a household of low or moderate income as defined in this Section, depending on how the BMR Unit is designated, and as adjusted for the household size indicated below as of the first date of the tenancy:



Number of Bedrooms

Number of Persons in Household

0

1

1

2

2

3

3

4

4

5

12.

“Mayor’s Office of Housing or MOH” shall mean the Mayor’s Office of Housing or its successor.

13.

“Notice of Special Restrictions” shall mean a document recorded with the San Francisco Recorder’s Office for any unit subject to this Program detailing the sale and resale or rental restrictions and any restrictions on purchaser or tenant income levels included as a Condition of Approval of the principal project relating to the unit.

14.

“Original Subdivider” for purposes of this Section 1344 only shall mean a Subdivider, or its successor in interest, that was subject to Section 1341 and/or 1385 and that chose to rent the BMR Units under Section 1341(d) and has continued to rent the Units.

15.

“Owner” shall mean the record owner of the fee or a vendee in possession.

15a.

“Pre-Affidavit Owner” shall mean an owner who purchased or acquired a BMR Unit before December 1, 1992.”

15b.

“Post-Affidavit Owner” shall mean an owner who purchased or acquired a BMR Unit on or after December 1, 1992 and before the effective date of this legislation;

15c.

“Pre-Legislation Owner” shall mean all owners who purchased or acquired a BMR Unit before the effective date of this legislation;

15d.

“Post-Legislation Owner” shall mean an owner who purchases or acquires a Unit on or after the effective date of this legislation;

16.

“Procedures Manual” shall mean the City and County of San Francisco Residential Inclusionary Affordable Housing Program Monitoring Procedures Manual published in 2007 under Planning Code Sections 315 et seq., with Condominium Conversion BMR Addendum, on file with the Clerk of the Board in File No. 080520. The Mayor’s Office of Housing shall update the Procedures Manual from time to time as necessary in the same manner as established in Planning Code Section 315 and shall make the Procedures Manual available to the public, including on its website.

c.

Sale Price.

1.

BMR Units purchased or acquired on or after the effective date of this ordinance. The sale price of all BMR units shall be equal to the current owner’s purchase price adjusted by the percentage change in HUD unadjusted area median income from the purchase date to the date of resale pricing, depending on how the BMR Unit is designated and as adjusted for household size as indicated below. In addition, a seller may recoup the cost of approved capital improvements as defined herein and special assessments that were paid by the seller, as well as the cost of using a real estate agent and Multiple Listing Service (“MLS”) of up to five percent (5%) of the sale price if they follow the marketing requirements set forth in the Procedures Manual.



Number of Bedrooms

Number of Persons in Household

0

1

1

2

2

3

3

4

4

5

2.

BMR Units purchased or acquired before the effective date of this ordinance. BMR Units purchased or acquired before the effective date of this ordinance and BMR Units that have not been sold by the original subdivider shall have the sale price as provided in Section 1341(c).

3.

Notwithstanding the provisions of subsection (2), the Board of Supervisors ratifies the decision by the Mayor’s Office of Housing to set the sale price for certain BMR Units purchased or acquired before the effective date of this legislation at 45 Ora Way through 95 Ora Way equal to 2.5 times the annual median income for low or moderate income households, depending on how the BMR Unit is designated, and as adjusted for household size as indicated above in subsection (1).

d.

Capital improvements.

1.

BMR Units purchased or acquired on or after the effective date of this ordinance. The Capital Improvements Policy for this Program is contained in the Procedures Manual, on file with the Clerk of the Board in File No. 080520 and available on MOH’s website. The Policy shall include a per unit cap of 10% of the resale price in order to maintain affordability and shall be consistent with the policy for the Residential Inclusionary Affordable Housing Program, Planning Code Sections 315 et seq.

2.

BMR Units purchased or acquired before the effective date of this ordinance. MOH shall continue to use the 1993 Capital Improvements Policy, on file with the Clerk of the Board in File No. 080520 and available on the Mayor’s Office of Housing website, to implement the requirements of Section 1341(c) and shall publish the Policy on its website.

e.

Sale Procedures.

1.

Purchasers. MOH shall insure that all BMR Units conveyed under this Program are sold or transferred to households that qualify as both (A) low- or moderate-income households, depending on how the BMR Unit is designated, as defined; and (B) a First Time Homebuyer household. MOH shall give preference as provided in Subsection (5) below and shall follow the procedures set forth in the Procedures Manual.

2.

Duration and Monitoring of Affordability. As provided by Sections 1341 and 1385 BMR Units restricted under this Program are to remain affordable for the life of the BMR Unit. MOH shall insure the BMR Units remain affordable through the following mechanisms. Nothing in this legislation shall preclude the Mayor’s Office of Housing from instituting additional mechanisms to insure affordability through the Procedures Manual.

A.

BMR Units purchased or acquired on or after the effective date of this legislation. MOH shall require all BMR Units subject to this Program to record a Notice of Special Restrictions with the Recorder of the City and County of San Francisco. The Notice of Special Restrictions must incorporate the procedures for resale or transfer, affordability restrictions, and other requirements of this Program and provide that the owner or tenant shall adhere to the marketing, monitoring, and enforcement procedures outlined in the Procedures Manual, as amended from time to time, in effect at the time of sale. MOH shall maintain records of the applicable Procedures Manual for each BMR Unit transferred or resold under this Program. The Procedures Manual will be referenced in the Notice of Special Restrictions for each BMR Unit.

B.

BMR Units purchased or acquired before the effective date of this legislation. The Mayor’s Office of Housing has a right of first refusal. MOH shall exercise this right of first refusal at sale consistent with the provisions of Section 1341 and 1341B. In addition, for some BMR Units, a Notice of Special Restrictions (NSR) was recorded against the BMR Unit. For those BMR Units, the provisions in subsection (A) apply. For some BMR Units, the conditions of approval for the project require that an NSR be recorded, but no NSR has yet been recorded. For these BMR Units, the Planning Department and the Mayor’s Office of Housing shall work with the owner to insure that the owner records an NSR and thereafter, the provisions in subsection (A) shall apply.

3.

Marketing the BMR Units. The Mayor’s Office of Housing shall be responsible for overseeing and monitoring the marketing of BMR Units under this Section. In general, the marketing requirements and procedures shall encourage an open public marketing strategy and will be contained in the Procedures Manual, as amended from time to time. The Mayor’s Office of Housing may develop occupancy standards for BMR Units of different bedroom sizes in the Procedures Manual in order to promote an efficient allocation of affordable units. The Mayor’s Office of Housing may require in the Procedures Manual that prospective purchasers complete homebuyer education training or fulfill other requirements to adequately prepare the buyer for homeownership.

4.

Lottery: MOH shall require a general public lottery for all BMR units available for purchase.

A.

BMR Units purchased or acquired on or after the effective date of this legislation. The specific procedures for passing a BMR Unit through inheritance are contained in the Procedures Manual. All transfers through inheritance must be reported to and approved by MOH and in all cases, the heir must acknowledge and agree to the provisions of the BMR Program. The following households may inherit the right to occupy a BMR Unit: (i) a spouse or registered domestic partner, regardless of income; (ii) a child of the owner if it qualifies as a low- or moderate-income household depending on the designation of the Unit. Consistent with the provisions herein related to owners who acquire BMR Units after the effective date of this legislation, any heir must owner occupy the Unit. If the heir chooses not to occupy the Unit, the heir may market and sell the Unit at the BMR Price through a public lottery process. The heir will retain the proceeds of the sale.

B.

BMR Units purchased or acquired before the effective date of this ordinance. An owner may pass on the right to occupy a Unit through inheritance to a specific household as long as that household agrees to owner-occupy the BMR Unit. If the household chooses not to owner-occupy the Unit, it may sell the Unit at its restricted price consistent with the provisions of this legislation and receive the proceeds of the sale. All transfers through inheritance must be reported to and approved by MOH and in all cases, the heir must acknowledge and agree to the provisions of the BMR Program.

5.

Preferences. The Mayor’s Office of Housing shall give first priority to an existing tenant of a BMR Unit at the time of sale if that tenant qualifies as a low or moderate income household, depending on how the BMR Unit is designated. If there is no existing qualifying tenant who wishes to purchase the BMR Unit, the Mayor’s Office of Housing shall use a lottery system that gives preference to households who live or work in San Francisco and meet all other homebuyer requirements. Otherwise, it is the policy of the Board of Supervisors to treat all households equally in allocating affordable BMR Units under this Program.

f.

Rental Procedures.

1.

BMR Units purchased or acquired on or after the effective date of this ordinance. All owners purchasing or acquiring BMR Units on or after the effective date of this legislation must owner-occupy the BMR Unit. No rental of such BMR Units shall be permitted without the express written consent of MOH and under the circumstances outlined in the Procedures Manual.

2.

BMR Units purchased or acquired before the effective date of this ordinance.

Renting is permitted under the following conditions. The owner may continue to rent the BMR Unit to an income qualified tenant at an affordable rent, as defined. The owner may continue to rent to the current tenant at the current rent level until the tenant vacates, at which time the owner must notify MOH of their intent to re-rent the Unit. The owner and MOH shall follow the rental procedures as set forth in the Procedures Manual. Additionally, the owner must submit a monitoring report to the Mayor’s Office of Housing (MOH), at a timeframe determined by MOH, to verify current tenant information and rent levels. For current owners only, the Board hereby supersedes the requirement of Section 1341B effective June 1, 1988 that BMR Units in this Program be owner-occupied.

g.

Other regulations: This Section 1344 sets forth the current requirements and procedures for the Condominium Conversion Below Market Rate Program (“Program”). To implement this Section, the Mayor’s Office of Housing shall periodically publish a Procedures Manual containing procedures for monitoring and enforcement of the policies and procedures for implementation of this Program. The Procedures Manual must be made available upon request and on the Mayor’s Office of Housing website. The Procedures Manual shall not be amended, except for an annual update of the affordability housing guidelines, which reflect updated income limits, prices, and rents, without approval of the Planning Commission or as otherwise specified herein.

The Procedures Manual in effect at the time of the most recent owner’s purchase of a BMR Unit shall govern the regulation of that BMR Unit until it is transferred or sold. Any future amendments to the Procedures Manual will not be retroactive and will only apply to new owners of BMR Units, unless the owner chooses an alternative that provides otherwise under Section 1344(i).

h.

Original Subdividers. The following provisions shall apply only to Original Subdividers as defined herein.

1.

The Mayor’s Office of Housing shall release any BMR rental units if an Original Subdivider can demonstrate a 20-year rental history at the affordable rate for the unit size and income designation of the Unit. A release of the restrictions under the Program will be recorded against the property. The standards used to determine rental history at the affordable rate for the unit size and income designation of the Unit are found on file with the Clerk of the Board in File No. 080520 and on the Mayor’s Office of Housing website.

2.

If an Original Subdivider cannot demonstrate 20 years of rental at the affordable rate for the unit size and income designation of the Unit, the Original Subdivider may;

A.

Continue to rent the Units until a 20-year rental history at the affordable rate for the unit size and income designation of the Unit can be demonstrated. The Units shall be governed by the rules in Section 1344(f)(2). The standards used to determine rental history at the affordable rate for the unit size and income designation of the Unit are found on file with the Clerk of the Board in File No. and on the Mayor’s Office of Housing website.

B.

Enter into an agreement with the City, acting through the Mayor’s Office of Housing, to pay a housing replacement fee adjusted for income level and number of bedrooms as provided in the table below, or 50% of the difference between the BMR Resale Price and the Fair Market Value at the time of payment, as defined herein, whichever is less, The fee may be paid immediately upon execution of the Agreement or as a City lien, recorded through a note and deed of trust in favor of the City against the property, with a simple interest of 3%. Interest will not start accruing until the date which is 24 months from the effective date of this ordinance. Fifty percent (50%) of the difference between the BMR Resale Price and the Fair Market Value will be established at the time of repayment. Upon payment of the fee or recordation of a lien in favor of the City, a release of the restrictions under the Program will be recorded against the property. As part of any Agreement under this subsection, the Original Subdivider must waive all claims against the City for damages or other alleged injury arising from the Subdivider’s participation in the Program. The fee shall be as follows:



Unit Size

Moderate Income Designation(120% AMI)

Low Income Designation(80% AMI)

1-Bedroom or Smaller

$150,000*

$200,000*

2-Bedroom

$250,000*

$300,000*

3-Bedroom

$350,000*

$400,000*

4-Bedroom

$450,000*

$500,000*

(i) [Expired.] a

j.

Funds. Any funds received by the City through payments made in accordance with subsections (h) and (i) shall be deposited in the Mayor’s Home Ownership Assistance Loan Fund, created under Administrative Code Section 10.100-108 and use of the funds shall be governed by that section.

History

(Added by Ord. 320-08, File No. 080520, App. 12/19/2008)

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