VISTA — The city of Vista is considering issuing tax-exempt bonds as a strategy to increase its restricted middle-income housing stock in the coming years.
During a March 28 City Council meeting, Vista officials said the city has been approached in recent years by investors about entering into middle-income housing partnerships, using tax-exempt bonds to purchase properties with market-rate rents and make them more affordable to residents at median income levels.
According to Assistant City Manager Amanda Lee, the city would enter into a Joint Powers Authority that would issue bonds at no cost to the city. City staff and the council would then review each middle-income housing proposal from investors.
Mayor John Franklin, who brought forward the proposal jointly with Councilmember Joe Green, said this could be a good option for Vista, although current financial conditions would need to improve first.
“We have inclusionary housing, we have rent subsidized housing, and this is a whole other type of product. This is adding another tool to our tool box to be able to provide some options,” Franklin said. “Right now, with current bond rates, we’re not looking at anyone making proposals to do this in the next year or two.”
“Middle income” specifically refers to those making between 80% and 120% of the area median income, or AMI, city staff said. In the past, the term has been used as a kind of buzzword by developers to suggest affordability in projects that are actually market-rate.
“We have a lot of developers coming in and saying ‘this is median income housing’ or ‘this is workforce housing,’” said Green. “By having this program in there, it basically says hey, if you want to call it workforce housing, if you want to call it middle income housing, these are the restrictions in order to call it that.”
Under such an agreement, rents would typically be set at 35% of a household’s income. Green and other council members said they would like to see rents in these situations lowered to 30%, including projected utilities, to meet the federal standard of “affordable.”
“We need to guarantee our middle income residents that 30% maximum rent based off of median income … I don’t like the idea of 35% because it gives too much flexibility to developers income-wise. That extra 5% is an extra 300 bucks a month,” Green said.
In apartment buildings that are part of the program, units would be split into an affordability structure with one-third restricted for those making 80% AMI, one-third for 100% AMI, and one-third for 120% AMI.
Rent increases would be capped at 4% per year, and the units would be deed restricted for a period of 30 years or until the bond is repaid. The property would then fall under the ownership of the city, which could sell the property or continue to operate it with restricted rents.
City officials warned that the program would come with caveats; Vista would not receive property tax revenue from these properties, and the units could not be counted toward the city’s Regional Housing Need Allocation obligations.
The only way these units could count toward the RHNA is if the developer agrees to a 55-year deed restriction and to set rents 10% below market rate, Lee said. The city is required to create 2,561 new units by 2029, including 369 units for those making between 80% and 120% AMI.
The apartment buildings purchased would need to be essentially move-in ready without any required maintenance, according to Lee.
“For this bonding financing to work, you would have to purchase a Class A apartment complex. Typically it’s newer or one that doesn’t have any deferred maintenance,” she said.
Several cities throughout California have begun implementing Middle Income Housing programs, including San Diego County neighbors Escondido and Chula Vista.
