The city of San Mateo (population 99,670) adopted its mandatory Below Market Rate Program in 1998. The ordinance requires that 10 to 15 percent of rental and for-sale homes be priced affordably for households earning 50 to 120 percent of median income, depending on tenure and incomes targeted. As of 2014, the city has 325 total inclusionary homes—196 rental units and 129 for sale.
Affordable rental units must remain affordable for the life of the building. The for-sale affordability term is 45 years, with the term restarting for the next homebuyer if the home is resold within the 45-year control period. City staff believes this will have the practical effect of perpetual affordability because most homes tend to be sold within 30 years.
San Mateo uses many innovative practices to hold onto its inclusionary homes over time. The city adds a promissory note and deed of trust to inclusionary for-sale homes at the point of initial sale to establish a “security interest” in the property that helps the city stay better notified of attempts to improperly refinance or sell homes. The city also exercises a preemptive right of purchase (right of first refusal) at the point of resale to gain control and oversight over the resale process. Rather than actually taking ownership of the home, however, the city assigns its preemptive option to purchase to an income-qualified homebuyer, who then purchases the home from the previous homeowner at the designated affordable price.
San Mateo’s Below Market Rate Program also sets underwriting standards for loans assumed by homeowners and has found it helpful to require its homeowners to complete annual certification forms affirming that they are in compliance with permissible types of home loans and the underwriting standards required for refinancing.
To ensure inclusionary rental units are leased in keeping with the program’s selection and income qualification rules, the city manages a master waitlist for all inclusionary rental units in the city.
For More Info:
Sandy Council, Department of Community Development, City of San Mateo
Email: [email protected]