The Morning Report
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Last night I told you about the continuing saga at the Nantucket development in Encinitas.

Tonight I heard back from Ron Barefield, housing coordinator for the city of Encinitas.

He said the new owners of the nice, but uninhabitable, house shouldn’t expect the city do them any favors. His point was simple: The new owners inherited the obligation tied to the house they bought, and the city won’t and can’t grant the certificate of occupancy for the house until the promised restricted-price affordable unit is built.

The city had struck an agreement with Barratt American, the subdivision’s developer, that Barratt would build affordable units in exchange for the rights to build market-rate houses. Barratt didn’t build the affordable housing before going bankrupt, thus, the city did not grant the certificate of occupancy to the investors who previously owned the house. This meant the previous owners couldn’t sell the house in a short sale even though they had a buyer willing to pay $1.2 million. The house went to foreclosure.

The new buyers who bought the house for $810,000 in a foreclosure trustee’s sale inherited that quandary. They now can’t live in or rent out the property before the affordable unit is built.

Barefield said he met with two owners recently. They’re trying to navigate the complicated situation, he said.

“When they met with us they seemed very sincere to try to resolve the issue — to see if there were any acceptable alternative approaches,” Barefield said. “Everybody’s aware that the affordable housing needs to be built in order to satisfy the condition of the map.”

The lot for the affordable housing is tied up in the bankruptcy proceedings for Barratt at the moment. Barefield said he spoke with the trustee managing those negotiations a couple of weeks ago. The trustee didn’t have a timeline but was hopeful that there might be a plan for dispersing the lot for the affordable housing sometime in the next few months, he said.

“Somebody has to get control of that lot,” he said. “That’s the sticking point.”

And it seems to me that the only people with the motivation to build the affordable housing — and thus to get control of that lot — are the buyers of this house who can’t live in it until that lot has affordable housing on it.

“They have a $800,000 investment to protect,” Barefield said. “There’s somehow, some way they need to provide that affordable unit.”

I asked Barefield if there’s any way the city would consider lifting the requirement and grant the owners the certificate of occupancy.

He said no. Here’s why: The particular type of affordable housing requirement in play here is one called “density bonus.” The city allowed Barratt American to build extra market-rate housing (the $2 million luxury homes in this cul-de-sac) in exchange for a promise to build affordable housing nearby. Barefield said he didn’t know how many extra units Barratt had been allowed to build.

That kind of trade — extra density in exchange for producing affordable housing — was a state requirement.

At the end of the day, someone has to provide the affordable unit. If the city releases the certificate to these owners, the city would be transferring to itself the responsibility to acquire the land and shoulder the cost of producing the affordable unit.

“Why would we do that?” Barefield said.

— KELLY BENNETT

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