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6.3A Page 2 fall under private ownership that could potentially contribute to further blight. In addition, there was very little property turnover in the area. Moreover, non-profit corporations that manage affordable housing projects were not interested in acquiring the Property because of its location, which lacks access to transportation and services and because of the area crime rate. If a non-profit had no other properties in that area with which it could share maintenance and management costs, managing the units on the Property would not be cost-effective. Council directed staff to maintain the Property for affordable rental housing while other steps were taken to stabilize the neighborhood. In the meantime, vacant units were filled through the Fair Oaks Community Center information and referral process and the Property became affordable housing for low-income small family households. Rent revenue earned from the Property was used annually by the Property Manager to operate the Property. After Habitat for Humanity agreed to build new ownership housing nearby for low income families, property owners started to invest in the area and the neighborhood began to stabilize. In April 201 0, the City's CDBG program was reviewed by U.S. Department of Housing and Urban Development (HUD) staff who determined that because of the length of time the City has held the Property, the original eligibility for Operation of Repossessed Property is no longer appropriate under CDBG regulations. The City was directed to dispose of the Property in order to avoid a requirement that it repay funds used for the Property's ongoing operation. While Section 3 % of the City Charter normally requires that a proposed sale of real property be advertised and sold to the highest responsible bidder, that provision does not apply if the City Council determines that the Property shall be used for housing for persons or households of low or moderate-income. Government Code section 37364 expressly provides that if the Council finds that the use of the property for such purposes is in the Cityis best interests, the City may dispose of that property for less than fair market value. The statute provides that the provision of affordable housing is a matter of statewide concern, and therefore if the conditions of this section are satisfied, such a sale would supersede the provisions of a City Charter. Recently, City staff has been in discussion with San Mateo County Service League that currently owns transitional housing in the area. The Property would provide an opportunity for permanent housing for the non-profit's clients, as vacant units become available. The organization's board has confirmed its interest in purchasing the Property, with recorded affordable housing covenants. Conditions of Sale Staff proposes that the Council authorize staff to negotiate a Purchase and Sale Agreement for the Property with San Mateo County Service League. The Property would be sold in its lias is" condition, with a minImum bid of $170,000 in order to payoff the first mortgage, and that the buyer pay all closing costs. The buyer would be required to operate and maintain the Property for affordable housing purposes for 55 years. Any and all remaining money in the Property's operating fund, after Deposit Receipts are accounted for, would be transferred to the Buyer for building reserves. Staff estimates this will likely be $25,000. ALTERNATIVES If the City does not wish to have the Property maintained as affordable housing, then it must follow the provisions of Section 3 % of the City Charter. Section 3 % requires that a notice of the proposed sale be published in the newspaper, that the City obtain an appraisal of the fair market 82483.00000\4749666.1