Fiscal Note
This ordinance amendment would modify the sharing of potential equity proceeds in owner occupied affordable housing units between the City and the income eligible owners. Under the current ordinance, any equity generated upon resale of an affordable unit would be shared between the City and the seller based on a complex scheduled calculation incorporating the number of years the owner has lived in the unit, the level of appreciation in each year and other factors including the value of improvements made by the owner. The current formula would result in the owner receiving from 0% to 50% of any equity appreciation which occurred during the period of ownership, with the City receiving the remaining majority. No owner occupied inclusionary zoning units have been sold to date, so there is no actual experience administering the details of this equity sharing formula.
The proposed ordinance amendment would replace this formula with a sharing arrangement where the City would receive a proportionate share of 95% of any appreciation based on the "discounted" price originally paid for the property by the income eligible buyer. For example, if the inclusionary zoning ordinance resulted in an initial purchase price of a unit that was calculated to be 80% of the appraised value, then the buyer would receive 81% of any appreciation and the City would receive the remaining 19%. This change in methodology would simplify some of the reporting and calculation requirements of the current equity calculation formula and would substantially increase the share of future equity accrued by the individual property owners while reducing the City's share by a corresponding amount.
It is difficult to predict, however, what impact this change might have on the total amount of equity appreciation returned to the City. Under the early operation of the existing ordinance, it has been reported that there is very little demand for the first available inclusionary units, pe...
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