ORD Sections Amended: City Code Sections 16-44, and BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF VIRGINIA BEACH, VIRGINIA:

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1 ORD AN ORDINANCE TO AMEND AND REORDAIN SECTIONS 16-44, AND OF THE CITY CODE, PERTAINING TO NET APPRECIATION AND RESALE OF WORKFORCE HOUSING UNITS Sections Amended: City Code Sections 16-44, and BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF VIRGINIA BEACH, VIRGINIA: That Sections 16-44, and of the City Code are hereby amended and reordained to read as follows: DIVISION 1. - GENERAL PROVISIONS Sec Applicability. ARTICLE VIII. WORKFORCE HOUSING The provisions of this article shall apply only to the sale or rental of workforce housing approved by the city council pursuant to the provisions of article 21 of the city zoning ordinance. Sec Definitions; explanatory material. As used in this article, the following terms shall have the meanings set forth in this section. Where explanatory material is provided, such terms shall be construed in a manner consistent with such material: Net appreciation. The amount of the resale price of a workforce housing unit, less the total amount of: (i) the original principal amount of the first mortgage loan on the unit, (ii) the principal amount of the workforce housing deed of trust note and of any VHDA-held second deed of trust note if VHDA also holds the first deed of trust on the unit, (iii) closing costs actually paid by the eligible buyer in connection with the purchase of the unit, (iv) the eligible buyer's down payment, (v) the appraised value of any capital improvements approved by the

2 32 director of housing and neighborhood preservation or, where the first deed of trust is insured 33 by the FHA, the cost of such capital improvements, and (vi) the reasonable and customary 34 sales commission paid by the eligible buyer Shared net appreciation. The amount of the net appreciation owed to the city by the purchaser of a workforce housing unit, which shall be equal to the proportional share represented by the city's investment in the original purchase of the unit as evidenced by the equity sharing agreement. For example, if the amount of the workforce housing deed of trust note equals twenty-five (25) percent of the initial sales price of the unit, the amount of shared net appreciation owed to the city will be twenty-five (25) percent of the net appreciation of the unit. Subject to the provisions set forth in subsections (e) and (f) of Section regarding first deeds of trust insured by the Federal Housing administration (FHA), the The amount of the shared net appreciation and principal amount of the workforce housing deed of trust note is repaid to the city upon resale of the unit. DIVISION 2. - SALE AND OWNERSHIP OF WORKFORCE HOUSING Sec Initial sales of workforce housing units. (a) The city shall have the right to purchase workforce housing units offered for initial sale as follows: (1) The city shall have an exclusive right to purchase any workforce housing unit, not to exceed a total of one-third (1/3) of the workforce housing units for sale within a development, by so notifying the developer of the unit within thirty (30) days from the date on which the city is notified that the workforce housing unit is available for initial sale. If the city does not timely exercise its right to purchase the unit, it may be sold to an eligible buyer. (2) Any workforce housing unit the city has not elected to purchase shall be offered for sale exclusively to eligible buyers for a period of sixty (60) days from the date on which the city's right to purchase the unit expires. Upon the expiration of such time, any such unit not sold to the city or to an eligible buyer may be offered for sale without restriction, provided, that when such a unit is sold, the developer shall pay to the city the difference between the actual sales price and the price as reduced by the amount of the workforce housing discount, less any additional sales commission actually paid by the developer up to a maximum of two (2) percent of the sales price and any closing cost assistance actually paid on behalf of the buyer up to a maximum of three (3) percent of the purchase price. 2

3 (b) The procedure for initial sales of workforce housing units to be purchased by an eligible buyer shall be as follows: (1) A developer who has reached an agreement with an eligible buyer to sell a specific workforce housing unit to such eligible buyer as an initial sale shall notify the city that the developer and eligible buyer have reached an agreement regarding the purchase of the unit. The city shall, either before or after it receives such notification, verify the eligible buyer's continued eligibility under section (2) In the event the eligible buyer continues to meet such requirements, the developer and city shall enter into an agreement pursuant to which the developer agrees to sell the unit to the eligible buyer at a price incorporating the workforce housing discount (the "discounted sales price"). The developer shall not be entitled to receive any portion of the monies representing the workforce housing discount. (3) The city and eligible buyer shall also enter into an agreement pursuant to which the city will finance, by means of a workforce housing deed of trust, the difference in value between the fair market value of the workforce housing unit and the discounted sales price. Such agreement shall further provide, among other things, that that the city shall have the right to repurchase the unit upon resale, or to assign such right to an eligible buyer, in accordance with the provisions of section (4) The workforce housing deed of trust shall: (i) subject to the provisions set forth 90 in subsections (e) and (f) of Section regarding first deeds of trust insured by the Federal Housing administration (FHA), secure repayment to the city of the workforce housing discount, plus the shared net appreciation; (ii) carry a zero percent interest rate; (iii) be subordinate only to the lender's first deed of trust or, in the event the property is financed by means of first and second deeds of trust held by the Virginia Housing Development Authority (VHDA), to such deeds of trust; and iv) provide that the eligible buyer shall make no payments of principal on the indebtedness secured by the workforce housing deed of trust until the eligible buyer sells or otherwise divests his or her interest in the workforce housing unit Sec Resale of workforce housing units. (a) Prior to offering a workforce housing unit for resale, the owner shall notify the city of the owner's intent to sell the unit. The city shall notify the unit owner of its intention to purchase 3

4 the unit within thirty (30) days from the date on which the owner's notice of intent to sell was received by the city. In the event the city determines to purchase the unit upon resale, it shall have the right to assign the contract to an eligible buyer. (b) The city shall tender to the unit owner an offer to purchase such unit at its fair market value. The fair market value shall be determined by appraisal. Such appraisals shall be performed by licensed Virginia real estate appraisers selected by the city as follows: The city and workforce housing unit owner shall attempt to agree upon an appraiser, who shall determine the fair market value of the workforce housing unit as of the date of the actual or anticipated sale. If the parties are unable to agree upon an appraiser within ten (10) days, the parties shall each have an appraisal made by an appraiser of its choice to establish the fair market value. If the two competing appraisals are within ten (10) percent of each other, the midpoint between the two shall be considered the fair market value. If the two appraisals are not within ten (10) percent of each other, the parties shall agree on a third appraiser, and such appraiser's valuation shall be controlling as to fair market value. If the parties cannot agree on a third appraiser, the city shall have the right to appoint a qualified appraiser and such appraisal shall be controlling as to fair market value. The parties shall share equally in the cost of joint appraisals and shall be solely responsible for the cost of any other appraisals. (c) In the event the city decides not to purchase or assign its right to purchase the unit, it shall so notify the owner in writing, who shall thereafter have the right to sell the unit to any other person or entity. In such event, the provisions of this section shall not thereafter apply to any subsequent resale of the unit. (d) In the event the city purchases or assigns its right to purchase a workforce housing unit from the owner of such unit, it shall make such unit available for sale to another eligible buyer for a period of at least ninety (90) days. The city shall notify the eligible buyers on its prescreened list of the availability of the unit (e) In the event an eligible buyer enters into a contract to purchase the unit within the ninety-day period, the city shall determine whether such eligible buyer continues to so qualify. If such eligible buyer continues to meet the eligibility requirements of section 16-46, the owner of the unit shall enter into a contract with the city and, if applicable, the city's assignee, to purchase the unit at the fair market value thereof, as determined pursuant to subsection (b). The contract shall further provide that: (i) the amount of the workforce housing discount, plus the shared net appreciation of the unit, shall be repaid to the city upon resale of the unit, provided that where the first deed of trust on the property is insured by the FHA, the owner 138 shall be permitted to recover, at a minimum, original purchase price, sales commission, cost of 139 capital improvements, and any accrued negative amortization if the property was financed with 140 a graduated payment mortgage, and (ii) that the city shall have the right to repurchase the unit, 4

5 or to assign such right to an eligible buyer, in accordance with the provisions of this section. (f) At settlement, the principal amount of the outstanding workforce housing deed of trust note, plus the shared net appreciation of the unit, as defined in section 16-44, shall be repaid to the city from the proceeds of the resale of the unit, provided that where the first deed of trust on the property is insured by the FHA, the owner shall be permitted to recover, at a minimum, original purchase price, sales commission, cost of capital improvements, and any accrued negative amortization if the property was financed with a graduated payment mortgage. All such monies shall be deposited into the workforce housing revolving fund. (g) Subject to the availability of funding, the The city shall finance a portion of the purchase price equal to the amount of the new workforce housing discount by means of a note secured by a workforce housing deed of trust. Adopted by the City Council of the City of Virginia Beach, Virginia on the 23 rd day of October,