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HomeMy WebLinkAbout2026-02-12; Housing Commission; 01; Affordable Housing Development Activity Meeting Date: Feb. 12, 2026 To: Housing Commission From: Mandy Mills, Housing & Homeless Services Director Staff Contact: Mandy Mills, Housing & Homeless Services Director mandy.mills@carlsbadca.gov, 442-339-2907 Subject: Affordable Housing Development Activity District: All Recommended Action Receive a presentation regarding current affordable housing development activity. Executive Summary Carlsbad Municipal Code Sections 21.85 (Inclusionary Housing) and 21.86 (Density Bonus) require the production of affordable housing. This report provides an overview of the ordinances and report on recent affordable housing development activity in Carlsbad. Explanation & Analysis The private market generally provides housing for above moderate-income households, but not enough housing supply for households of moderate income and below. To help address the housing need for all income levels, the City of Carlsbad has two local ordinances that ensure that housing is created and accessible to low- and moderate-income households. Such ordinances are explained below. Inclusionary Housing The city adopted the Inclusionary Housing Ordinance in 1993 to ensure that all residential development provide a range of housing opportunities for all economic segments of the population, including households of lower and moderate income. The ordinance established the legal basis for requiring affordable housing units in new residential development in the city, known as inclusionary housing. The law applies to all proposed development projects that include seven (7) or more residential units and requires that a minimum of 15% of the units within a project be affordable to lower income households. Applicants proposing six (6) or fewer units pay a fee rather than constructing the inclusionary unit as part of the development project. Revenue from the collected fees are deposited into the Housing Trust Fund to help further the development of affordable housing in the city. An Informational Bulletin describing the inclusionary housing requirements and alternatives for the provision of affordable housing is included as Exhibit 1. HOUSING COMMISSION Feb. 12, 2026 Item #1 Page 1 of 19 Since its implementation, the inclusionary housing ordinance has proven to be an effective tool in providing housing for lower-income households. From 1995 to 2020, approximately 19,000 total housing units were produced in the city, of which roughly 13% (2,400) were made affordable through this program. And it is anticipated that the city will generate approximately 500 additional affordable units over the next eight-year period. While no changes to the city’s ordinance occurred in 2025, an Opinion Letter issued by the State Attorney General (No. 24-501) was published on April 2, 2025, which impacted the implementation of the city’s Inclusionary Housing Ordinance in relationship to projects pursuing State Density Bonus. In summary, the opinion requires that the city use the base density, prior to adding the bonus units, for determining a project’s affordability requirements, not the total number of units, as was the city’s practice. The new calculation results in a reduction in required affordable units. Density Bonus A state law known as State Density Bonus Law (SDBL) found in Government Code §65915, was enacted in 1979, and provides another tool in the development of affordable housing. The city of Carlsbad’s implementing ordinance is found in Carlsbad Municipal Chapter 21.86. This law allows a developer to increase their residential density above what is authorized under the city’s current land use plans in exchange for reserving a certain percentage of the project as affordable. SDBL also allows developers to request waivers to the city’s development standards when such deviations are needed to achieve the density allowed pursuant to SDBL and when such waivers do not result in any health or safety impacts, do not have an adverse impact on property listed on the California historical register, and do not violate state or federal law. An Informational Bulletin describing the density bonus requirements and alternatives for the provision of affordable housing is included as Exhibit 2. While the Density Bonus program requires the provision of on-site affordable housing, it does not significantly increase the amount of affordable housing provided in Carlsbad because the City of Carlsbad already requires affordable housing through the Inclusionary Housing Ordinance. Medium-to-large size projects are already required to provide affordable housing as a part of their development. However, because SDBL requires that the affordable unit(s) be built on site as opposed to an alternative option such as an in-lieu fee or affordable unit credit purchase, more affordable units will be built in small projects that would have traditionally opted out of providing a unit on-site. Current Development Activity with Affordable Units New residential development activity has been steady in the last few years. Exhibit 3 provides a list of all projects with affordable units that were completed, under construction, or approved during calendar year 2025. Four (4) projects were completed in 2025 that produced a total of 72 new affordable units, and 576 market-rate units. Fiscal Analysis There is no direct fiscal impact associated with receiving the presentation. Feb. 12, 2026 Item #1 Page 2 of 19 Environmental Evaluation The proposed action is not a “project” as defined by CEQA Section 21065 and CEQA Guidelines Section 15378(b)(5) and does not require environment review under CEQA Guidelines Section 15060(c)(3) and 15061(b)(3), because the proposed action to report out is an organizational or administrative government activity that does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. Any subsequent action or direction stemming from the proposed action may require preparation of an environmental document in accordance with CEQA or CEQA Guidelines. Exhibits 1. Inclusionary Housing Info Bulletin 2. Density Bonus Info Bulletin 3. Current Development Activity with Affordable Units Feb. 12, 2026 Item #1 Page 3 of 19 Community Development Department | 1635 Faraday Ave. | Carlsbad, CA 92008 | www.carlsbadca.gov Inclusionary Housing Program IB-157 When housing prices spiked in the 1990s, many cities looked for ways to help make housing more affordable. One such tool that many jurisdictions implemented was INCLUSIONARY HOUSING REGULATIONS. Under these laws, developers are required to set aside a certain number of units within their residential development project and make them affordable to lower income households. As part of their inclusionary housing program, many cities also included provisions that allow developers to deviate from the strict adherence of the policy, so long as it is found that the alternative means of compliance meets the intent of the jurisdiction’s inclusionary housing policies, and is consistent with the housing affordability and fair housing choice goals specified in its long-range housing plan. This info-bulletin provides an overview of Carlsbad’s Inclusionary Housing Program and describes how it helps address affordable housing needs while advancing equitable development goals consistent with the city’s adopted Housing Element. NEED FOR LOCAL INCLUSIONARY HOUSING The state faces a serious housing problem that not only threatens its economic security, the lack of access to affordable housing can have a direct impact upon the health, safety, diversity, and welfare of Carlsbad residents. To retain a healthy livable environment and meet state mandated housing goals, more needs to be done to accommodate locally available and affordable housing stock. To help address this need, the city’s inclusionary housing ordinance, originally adopted in 1993, established the legal basis for requiring affordable (inclusionary) housing units in new residential development in the city. The law applies to all proposed development projects that include residential units and requires that a minimum of 15% of the units within a project be affordable to lower- income households. Since its implementation, the inclusionary housing ordinance has proven to be extremely effective. From 1995 to 2020, the city produced 19,026 housing units, of which roughly 13% were made affordable through this program. And it is anticipated that the city will generate over 500 additional affordable units over the next eight- year period. HOUSEHOLD INCOME & AFFORDABILITY We hear this a lot --- How do we make housing more affordable? The term “affordable housing” can be used to describe housing that receives some form of subsidy/restriction that forcibly keeps rents and mortgages low. It can also mean housing that’s naturally affordable simply because of market supply and demand. In order to make a meaningful difference in providing affordable housing, the solution should not be looked at as an “either-or” approach between privately produced housing and subsidized housing…it requires both. To help understand what qualifies as affordable, the U.S. Department of Housing and Urban Development (HUD) establishes income ranges for different household types, which they have grouped into five “income categories:” extremely low, very low, low, moderate and above- moderate household income. The household income for each of these categories is based on a percentage of the region’s Area Median Income or AMI. Exhibit 1 Feb. 12, 2026 Item #1 Page 4 of 19 Page 2 of 6 Inclusionary Housing Program IB-157 (September 2025) Carlsbad falls within the San Diego County region, which has an AMI of $95,100 (2021) per year for a four-person household. In comparison, the city’s actual median income is closer to $108,000, but under state law the city must use the county AMI. To help illustrate, the table below shows the income levels for a family of four. For housing costs to be considered affordable, a family’s monthly rent/mortgage payment should generally not exceed 30% of the gross annual household income of any given income category. Affordable housing price is determined by state law, defined in Health and Safety Code sections 50053 (for-rent) and 50052.5 (for-sale). For a rental unit, total housing costs include the monthly rent payment as well as consideration for a utility allowance. With for-sale units, total housing costs include the mortgage payment, homeowner association dues, property taxes, mortgage insurance and any other related assessments. To learn more about HCD and housing, please see our Info-Bulletin: Carlsbad Housing Plan (IB-137). INCLUSIONARY HOUSING REQUIREMENTS The city’s Inclusionary Housing Ordinance (CMC §21.85) was passed by the City Council in 1993, and established the legal basis for requiring inclusionary housing in new residential development in the city. The following provides a summary of key standards required under the ordinance for new residential development in the city. Number of units required • Pursuant CA Attorney General Opinion No. 24-501, local inclusionary housing requirements can only be applied to base density units, not the density bonus units. As such, irrespective of the requirements set forth under §21.85.030.B, projects proposing seven or more housing units are required to restrict at least 15% of the base density units, not the density bonus units, for low-income households. For projects proposing six or fewer units, refer to Alternative #1 under the “Alternative Means of Compliance” section of this info-bulletin. • Inclusionary unit requirements apply to all residential development projects (rental or for-sale product), including mixed-use projects. • When calculating, fractional units ≥0.5 must be rounded up to the next whole number. Example: An applicant proposes to satisfy its inclusionary requirements for a 112-unit residential development by reserving 15% of the units for low- income households, or 17 units (112 X 0.15 = 16.8, rounded up to 17). The remaining 95 units (112 units minus 17) may be sold at market rate. Duration units protected • Inclusionary rental units shall remain restricted and affordable to the designated income group for not less than 55 years. • Inclusionary for-sale units shall remain restricted and affordable to the designated income group for not less than 30 years. Development standards • Inclusionary units should be located throughout the development rather than clustered in one area. • The inclusionary units must be indistinguishable from the market-rate units in the development, at least outwardly. • The inclusionary units must be constructed prior to or concurrent with development of the market-rate units, and prior to final building permit approval of the market-rate units. • Residents of the inclusionary units must have access to the same amenities – such as pool, fitness center and parking – as residents of the market-rate units. • The inclusionary units must include a similar mix and number of bedrooms as the market-rate units. • When ten or more inclusionary units are required, at least ten percent of those required units must provide at least three bedrooms. Feb. 12, 2026 Item #1 Page 5 of 19 Inclusionary Housing Program IB-157 (September 2025) Page 3 of 6 • Inclusionary units must be provided in the same tenure (for-rent or for-sale) as the market-rate units. • Inclusionary units affordability cost is calculated pursuant to California Health and Safety Code Section 50053 (for-rent) and 50052.5 (for-sale). • To the extent possible, projects using for-sale units to satisfy inclusionary requirements shall be designed to be compatible with conventional mortgage financing programs. ALTERNATIVE MEANS OF COMPLIANCE The city understands that various constraints may frustrate a developer’s ability to meet the strict letter of the city’s inclusionary housing regulations. As such, the ordinance allows for the City Council to authorize “alternative means of compliance” when it is found that the alternative meets the intent of the city’s Inclusionary Housing Ordinance (CMC §21.85) and the goals and policies of the city’s 2021-2029 Housing Element. Council Policy Statement No. 57 (Policy 57) lists those alternatives that have been found to meet the intent of the city inclusionary code and help address its affordable housing needs. These alternative means of compliance are summarized in the sections below, but please refer to Policy 57 for the specific requirements. Alternative #1: Payment of in-lieu fee Rather than constructing the inclusionary unit as part of the development project, applicants proposing ≤six units may instead pay a fee. • $8,529 for a new single-family detached home • $15 per square foot of net building area for each proposed market-rate unit. The rates above are effective 2022. Please check the city’s Fee Schedule for the most current rates. “Net building area” means the aggregate gross floor area of all the unrestricted dwelling units within a development, excluding areas outside the dwelling unit’s habitable space such as garages, carports, parking areas, porches, patios, open space, and excluding common areas such as lobbies, common hallways, stairways, elevators and equipment spaces. Collected in-lieu fees are deposited into the city’s Housing Trust Fund, and applied towards the furthering of the city’s affordable housing needs pursuant to Council Policy Statement No. 90 (Policy 90). Alternative #2: Varying housing affordability In addition to providing more housing available for low income families, the city also recognizes a need to increase housing stock for other targeted and needed housing affordability levels such as moderate, very low- and extremely low-income households. As such, so long as the total average gross income restriction for the required inclusionary units does not exceed 80% of the AMI, the makeup of the inclusionary units can be comprised on any combination of income categories. Alternative #3: Increases in residential density While not specific to the city’s inclusionary housing ordinance, sometimes there is a request from a property owner to increase their residential density above what is authorized under the city’s current land use plans. In exchange for the increased density, the city will require that any future development on the site meet the following additional inclusionary housing requirements. • At least 20% of the total residential units (including Density Bonus units) are restricted for low-income households; or, Feb. 12, 2026 Item #1 Page 6 of 19 Page 4 of 6 Inclusionary Housing Program IB-157 (September 2025) • A least 15% of the total residential units (including Density Bonus units) are restricted for low-income households and an additional 10% are restricted for moderate-income households; or, • At least 15% of the total residential units (including Density Bonus units) are restricted for very low- income households. This has been applied to properties that received an increase in residential density as part of the 2015 General Plan update and the 2021-29 Housing Element. Alternative #4: Reduction credit Residential development (for-sale or rental product) can reduce its inclusionary housing obligations from 15% to 12.5%, under the following conditions. • All affordable units must be made available to very low- or extremely low-income households. • Affordable units are located on the same site as the market-rate units. • No financial assistance from the city is provided. • Example: “A 78-unit residential development is proposed, which requires that 15% of the units be reserved for low-income (12 units). If the developer voluntarily agrees to make inclusionary units available to very low-income households, then the developer may receive an incentive reduction credit. Under this scenario, 10 units in a 78-unit development projects equates to 12.8%, which meets the minimum inclusionary housing requirement. Alternative #5: Use of accessory dwelling units Pursuant to CMC §21.85.070.B, construction of up to 15 accessory dwelling units (ADU) can be used to satisfy inclusionary housing requirements. Refer to our info- bulletin on ADUs (IB-111) for additional information. The standards below provide additional specifications for when this allowance can be used. • The project proposes ≥200 residential detached dwelling units. • The ADU may be an attached or detached product type (Junior ADU prohibited) . • The ADUs shall have an affordability term (≤80% AMI with rents ≤70% AMI) of at least 30 years. Notwithstanding the above, for projects proposing ≤six units, the in-lieu fee may be waived if a detached or attached ADU or Junior ADU is constructed concurrent with construction of the market-rate unit, deed restricted for low-income households for 30-years, and occupied by income-qualified families. Alternative #6: Off-site construction Circumstances may arise in which the public interest would be better served by allowing some or all of the required inclusionary units to be developed at an alternative site. This is referred to as a “Combined Inclusionary Housing Project” or “Combined Project.” To qualify, the following requirements must be met. • The inclusionary calculation requirements shall be based on the total number of market-rate units to be provided, as opposed to the total number of residential units in the project. See example below. Example: An applicant proposes to satisfy its inclusionary requirements for a 112-unit project by building 15% of the units for low-income households off-site. This leaves 85% of the units for market rate, for a total residential unit count of 132 units (112 ÷ 0.85 = 131.8, rounded to 132). Using the total residential unit count, the number of inclusionary units required is 20 (132 X 0.15 = 19.8, rounded to 20). • The decision-making authority of the permit application may approve a Combined Project subject to the following findings. o The site has not or will not receive a density increase or density bonus. o Site conditions make it physically infeasible to accommodate the inclusionary units on-site. o Significant price and product type disparities make it financially infeasible to accommodate the inclusionary units on-site. Feb. 12, 2026 Item #1 Page 7 of 19 Inclusionary Housing Program IB-157 (September 2025) Page 5 of 6 o There is a documented lack of development capacity to deliver affordable housing on-site. o The off-site option provides greater financial feasibility/cost effectiveness than the on-site. o The off-site option provides better access to jobs, schools, transit, and services. o The off-site option supports housing goals and policies in the city’s Housing Element. Notwithstanding, the City Council shall retain final permit approval authority, including approval of the Affordable Housing Agreement, on any Combined Project that requires financial assistance from the city. Alternative #7: Inclusionary housing credit bank For projects that build inclusionary units in excess of code requirements, and where the city is financially participating in the project, the city can sell those excess units in the form of credits to other developers to satisfy their inclusionary requirement. The proceeds from the credit sales are deposited into the city’s Housing Trust Fund and redistributed pursuant to Policy 90. • Bank Creation. The City Council may approve the creation of an inclusionary housing credit bank, subject to the following findings. o The inclusionary units are in excess of the minimum number of units required under the city’s Inclusionary Housing Ordinance; or o The inclusionary units are part of a 100% affordable housing project; and o The inclusionary units are constructed and received final inspection; and o The city financially contributed to the construction of the project. • Credit Purchase Eligibility. Projects proposing more than seven, but no more than 50 residential units are eligible to purchase credits. • Credit Price. The price for each inclusionary unit shall be determined by dividing the city’s financial contribution by the total number excess inclusionary units, subject to annual CPI adjustments. • Credit Bank. Applicants must pay the credit price of available credits from the oldest established inclusionary housing bank that is located within the same city quadrant in which the market-rate units are located, or if none available, sites which are contiguous to the quadrant in which the units are proposed. • Credit Purchase Ratio – The amount of credits to be purchased shall be based on the following. o 7 to 20 units: 1.0 credit/inclusionary unit o 21 to 35 units: 1.5 credits/inclusionary unit o 36 to 50 units: 2.0 credits/inclusionary unit • Credit Purchase Approval. The decision-making authority of the development project is authorized to approve credit purchases, so long as the findings below are met. Should a request to purchase credits occur after discretionary approval, the Community Development Director or the Housing & Homeless Services Director shall have the authority to approve credits, subject to the same findings. o The project site is located within the same Growth Management Plan quadrant that the housing credit is located, or if nonavailable, sites which are contiguous (share a common boarder) with the quadrant in which the units are proposed. o Sufficient housing credits available to purchase. • Credit Price Payment. Payment of credit purchases shall be due prior to recordation of the final map or issuance of a building permit, in situations where the project does not include a subdivision. If the project entitlements expire, credits will be made available to another eligible project(s). Alternatives not listed, but may be considered The City Council may approve other alternatives means of compliance not listed in Policy 57 when evidence is provided that the alternative helps achieve relevant Feb. 12, 2026 Item #1 Page 8 of 19 Page 6 of 6 Inclusionary Housing Program IB-157 (September 2025) Housing Element policies and goals and assists the city in meeting its state housing requirements. As part of the City Council’s consideration, the applicant must also show why compliance with current inclusionary housing regulations would be infeasible or present unreasonable hardship in light of such factors as project size, site constraints, market competition, price and product type disparity, available financial subsidies, and approved alternatives listed in Policy 57. AFFORDABLE HOUSING AGREEMENTS An Affordable Housing Agreement (AHA) is a legally binding agreement between the developer and the city to ensure that the inclusionary requirements of a residential development are satisfied. CMC §21.85.140 provides the specific requirements of the AHA, but the more significant components are listed below. •A project condition shall be added to projects subject to the inclusionary ordinance and Policy 57 requiring that an AHA be reviewed, approved, and recorded prior to Final Map or issuance of building permits, whichever is first. •Among other items, the AHA must include the number of required inclusionary units, the unit sizes, location, affordability tenure, required findings, terms and conditions of affordability and unit production schedule. •The AHA and all relevant terms and conditions shall be recorded against the entire development. •The AHA shall bind all future owners and successors in interest for the term of years specified therein. APPROVAL AUTHORITY The approval authority for the development project subject to these standards is as follows: •The decision-making authority for the underlying permit application(s) shall have the authority to approve projects found consistent with Policy 57. •Development projects that propose an alternative means of compliance that is not specifically provided for in the CMC or Policy 57 shall be considered by the Housing Commission for a recommendation to the City Council. •Approval authority of the AHA is as follows: o AHA that are consistent with CMC §21.85 and Policy 57 and do not request financial assistance from the city shall first be considered by the Affordable Housing Policy Team for a recommendation to the H&HS Director. o Affordable Housing Agreements that propose a deviation(s) to Policy 57 or request financial assistance shall first be considered by the Affordable Housing Policy Team and Housing Commission for a recommendation to the City Council, which has the authority to issue final approval of the alternative. YOUR OPTIONS FOR SERVICE To schedule an appointment or to learn more about this program, please contact the Planning Division at 442-339- 2600 or via email at Planning@carlsbadca.gov or the Housing & Homeless Services Department at 442-339- 4721 or via email at Housing@carlsbadca.gov. Feb. 12, 2026 Item #1 Page 9 of 19 Community Development Department | 1635 Faraday Ave. | Carlsbad, CA 92008 | www.carlsbadca.gov Density Bonus IB-112 This bulletin outlines the development allowances provided under Govt. Code §65915, commonly referred to as state density bonus law. The bulletin is only intended to summarize the key provisions of state law rather than cite them in total. The document has been updated to include recent state legislation, including AB 1287, the “middle-income homes density bonus law,” which became effective January 1, 2024. BACKGROUND State density bonus law allows a developer to increase density (total number of homes) allowed on a property above the maximum set under a city’s local land use plan (Carlsbad General Plan) by as much as 100%. In addition, qualifying applicants can also receive reductions in required development standards such as setbacks and height limits when those standards prevent the applicant from achieving the density allowed under state law. Other tools include reduced or no parking requirements for certain project types. In exchange for these benefits, a certain number of the new dwelling units within the development project must be reserved for lower-income households, seniors, or the other eligible affordable housing projects. Pursuant to Government Code §65915(a)(1), each jurisdiction must adopt an ordinance that specifies how compliance with density bonus law will be implemented. Failure to adopt an ordinance does not relieve the city from complying with state density bonus law. As such, the city’s adopted ordinance, Carlsbad Municipal Code §21.86, references state mandates where appropriate (as opposed to repeating state code requirements) and focuses more on the permit processing requirements for density bonus applications. ELIGIBILITY Any housing development that proposes five or more units and incorporates at least one of the following is eligible for a density bonus. Note: Accessory Dwelling Units (ADUs) may be included as part of a single-family or multi-family development, but ADUs do not count towards/against the total density allowed under state density bonus. Refer to info-bulletin IB-111 for more on ADUs. •At least 5% of the housing units are restricted to very low-income residents. •At least 10% of the housing units are restricted to low-income residents. •At least 10% of the units in a for-sale housing development are restricted for moderate- income. •100% of the housing units (other than manager’s units) are restricted affordable with a maximum of 20% of the units being moderate. •At least 10% of the housing units are rent restricted at the very low-income level for transitional foster youth, disabled veterans, or homeless persons. •At least 20% of the housing units are for low- income college students in housing dedicated for full-time students at accredited colleges. •The project donates at least one acre of land to the city for very low-income units, and the land Exhibit 2 Feb. 12, 2026 Item #1 Page 10 of 19 Page 2 of 8 IB-112_State Density Bonus Law_Updated: September 2025 has the appropriate permits and approvals and access to needed public facilities. • The project is a senior citizen housing development; in which case, no affordable units are required. • The project is a mobile home park that is age- restricted to senior citizens; in which case, no affordable units are required. AFFORDABILITY DURATION & COST State density bonus law establishes how long an affordable unit must stay affordable. • Affordable rental units must be restricted at the targeted income level group for at least 55 years. • Affordable for-sale units must be restricted at the targeted income level group for at least 30 years, which starts after the initial sale of the affordable unit. Affordable units may be sold at a market price to other than targeted households provided that the sale results in an equity sharing agreement with the city. • Affordability cost is calculated pursuant to California Health and Safety Code Section 50053 (for-rent) and 50052.5 (for-sale). DENSITY BONUS CALCULATIONS Despite the city’s rounding requirements under CMC §21.53.230 (Table A), for projects utilizing density bonus, Government Code §65915(q) requires that each component of any density calculation resulting in fractional units shall be separately rounded up to the next whole number. In other words, all density related calculations must be rounded up. Base Density Calculation Step one in calculating density bonus is to calculate the project’s base density, which represents the number of dwelling units allowed under the city’s General Plan, per acre of property. Calculating base density under density bonus is no different from how the city calculates density for standard residential development projects, with the following exceptions: • While the city uses developable (or net) acreage in determining density, density bonus law requires cities to use gross acreage. This allowance was clarified in an HCD technical assistance letter dated July 26, 2023. • While the city utilizes a “mid-range” density calculation for determining the allowable number of units on a property, state law requires that density bonus be calculated based upon the maximum density allowed under the city’s General Plan and zoning ordinance for the subject property. • Pursuant to SB-330 (Housing Crisis Act of 2019), the city is prohibited from enforcing housing caps. As such, the housing caps in the city’s Growth Management Plan (GMP) cannot be applied to new housing development projects. Refer to IB-132 for more information on SB-330 and Reso No. 2021-074 for the city’s suspension of the GMP cap limits and performance standard moratorium provisions. Density Bonus Calculation Step two in calculating density bonus is to calculate the project’s density increase, which represents the number of units allowed in addition to the base density units. These additional dwelling units are set per a sliding scale, based upon two primary factors: • The percentage of units in the project that will be set aside (reserved) as affordable; and, • The household income category of those affordable units (i.e., very low, low, or moderate income). For convenience, a Density Bonus Table is included on page six of the city’s Density Bonus Report (Form P- 1(H)). As you will see from the table, the number of affordable units (far left column) and the level of affordability (top row) greatly influence the number of density bonus units that can be granted. For example, a project that reserves 10% of its units as affordable for very low-income families is eligible for a 32.5% density bonus, as opposed to a density bonus of Feb. 12, 2026 Item #1 Page 11 of 19 IB-112_State Density Bonus Law_Updated: September 2025 Page 3 of 8 only 20% if those same affordable units were reserved for low-income families. Refer to info-bulletin https://www.carlsbadca.gov/home/showpublishedd ocument/9634/637897580094270000 IB-137 (Carlsbad’s Housing Plan) for more information on household income and affordability. INCLUSIONARY HOUSING CALCULATIONS To help provide local affordable housing, the city in 1993 adopted an inclusionary housing ordinance (§21.85), which established the legal basis for requiring affordable (inclusionary) housing units in new residential development in the city. For more information, refer to info-bulletin IB-157 (Inclusionary Housing Program). While the city’s inclusionary regulations are separate from density bonus law, there are a few important provisions in the city’s inclusionary ordinance that directly affect density bonus projects, as reflected below. • The city’s inclusionary requirements apply to all proposed development projects that include residential units. This means that projects subject to the state density bonus law/city’s density bonus ordinance (§21.86), must also comply with the city’s inclusionary housing ordinance (§21.85). • Pursuant CA Attorney General Opinion No. 24- 501, local inclusionary housing requirements can only be applied to base density units, not the density bonus units. As such, irrespective of the requirements set forth under §21.85.030.B, projects proposing seven or more housing units are required to restrict at least 15% of the base density units, not the density bonus units, for low-income households. • When calculating inclusionary requirements, fractional units resulting in less than 0.5 are rounded down to the next whole number. • The required affordable inclusionary units satisfy the required affordable density bonus units. The city’s application of its inclusionary code is consistent with AB 2345 and the Department of Housing & Community Development’s (HCD) technical assistance letter dated September 2, 2022 to the City of West Hollywood. THEORETICAL EXAMPLE Sometimes showing the math helps folks better understand how density bonus works. The following is a theoretical example on how these different density calculations are applied. SECONDARY DENSITY BONUS AB 1287 (Alvarez, 2023) amended state density bonus law by requiring jurisdictions to award an additional (or second) density bonus for projects that have A property 1.003 acres in size has a zoning designation of R-15 (11.5 to 15 dwelling units per acre). Under density bonus, this results in a maximum base density of 15.05 units for this site (1.003 acres multiplied by 15 units per acre), which rounds up to 16 units. The applicant proposes that 3 of the 16 units will be reserved for low-income households. This results in 18.7% of the units that will be reserved as affordable housing (3 affordable units divided by 16 base density units), which rounds up to 19%. Based on the sliding scale found in the Density Bonus Table in the Density Bonus Report (Form P- 1(H)), with 19% of the affordable units reserved for low-income families, the project’s base density can increase by 33.5% or 5.36 units (16 base density units multiplied by 33.5%), which rounds up to 6 density bonus units for a total of 22 units for this project. To satisfy the city’s inclusionary ordinance, a total of 2.4 affordable low-income units are required for this project (15% inclusionary requirement multiplied by 16 base units), which rounds down to 2 units. In this example, the 3 affordable low-income units satisfy the requirements under state density bonus law as well as the two units required under the city’s inclusionary housing ordinance. Feb. 12, 2026 Item #1 Page 12 of 19 Page 4 of 8 IB-112_State Density Bonus Law_Updated: September 2025 allocated a certain amount of affordable housing for very-low income, low-income, or moderate-income units, as summarized in the section below. Minimum Eligibility The proposed density bonus project must comply with one of the following affordability requirements to be eligible for an additional density bonus. • A minimum of 15% of the base units are reserved for very low-income households; or • A minimum of 24% of the base units are reserved for low-income households; or • A minimum of 44% of the base units are reserved for moderate-income households. Density Increase Under state law, the city must grant the developer an additional density bonus if additional units are set aside for either very low or moderate-income households. Like traditional density bonus calculations, the secondary density bonus is also on a sliding scale, based on the project’s base density. For reference, the secondary density bonus allowances have been included in the Density Bonus Table found on page six of the city’s Density Bonus Report (Form P- 1(H)). To help illustrate how this secondary density bonus is applied, let us relook at the previous theoretical example. It is important to highlight that AB 1287 caps the affordable set aside at 50%. For projects that allocate the maximum of moderate-income units (44%), they would only be eligible to set aside another 6% of very- low income or moderate-income units to receive an additional bonus of 23.75% or 22.5%, respectively. REMOVAL OF EXISTING RENTAL UNITS Under density bonus law, projects that include the demolition or removal of affordable rental units are Instead of 3 units, the applicant now proposes that 5 of the 16 units will be reserved for low-income households. This results in 31.2% of the units that will be reserved as affordable housing, which rounds up to 32%. With 32% of the affordable units reserved for low- income households, the project’s base density can increase by 50% or 8.0 units (16 base density units multiplied by 50%), for a total of 24 units. Since more than 24% of the base units are being reserved for low-income households (31.2%, specifically), this project is eligible for a second density bonus. In this example, the applicant proposes to reserve an additional 15% of the base units for moderate-income households, which results in 2.4 units (16 base density units multiplied by 15%) that rounds up to 3 units. With 15% of the affordable units reserved for moderate-income households, the project’s base density can increase by an additional 50% or 8.0 units (16 base density units multiplied by 50%). As a result, the total project size increases to 32 total units, 8 of which will be restricted affordable, five at low-income, and three at moderate-income. Feb. 12, 2026 Item #1 Page 13 of 19 IB-112_State Density Bonus Law_Updated: September 2025 Page 5 of 8 ineligible for density bonus unless the units are replaced concurrent with the development of the project. This provision applies to the following types of rental units: • Units subject to recorded restrictions • Units subject to rent control • Units occupied by very low- or low-income households If household rental income cannot be determined, the city may assume households are occupied by low- income households in the same proportion as low- income renters in the city, consistent with AB 2556. Additionally, under state law the affordable units required under density bonus may also be used to satisfy any replacement unit requirements. This allowance was clarified in an HCD technical assistance letter dated December 14, 2023. DEVELOPMENT STANDARD DEVIATIONS Traditional development projects must be designed to comply with city established development standards and design regulations such as building height limitations, setback requirements, minimum parking ratios, and on-site open space directives. However, under state density bonus law, applicants can deviate from these development standards when found that the standards prevent the applicant from achieving the density allowed under the state law. There are two types of tools available to applicants: • Incentives & Concessions • Waivers Incentives & Concessions Incentives and concessions, as defined under state density bonus law, allow a developer to deviate from those requirements when modifying such regulations would provide “identifiable and actual cost reductions” to provide for affordable housing costs and rents. This requirement was clarified in the court decision of Schreiber v. City of Los Angeles (later codified as part of the passage of AB 1287) and the sections below reflect the holdings in that case. Application A few key considerations regarding the application of incentives or concessions: • Under the government code, the terms “incentives” and “concessions” are used interchangeably. As such, the city considers them one in the same (“incentives/concessions”). • A density bonus project is entitled to incentives/concessions even without a request for a density bonus --- if a developer provides the affordable housing specified under density bonus law, they are eligible for incentives/concessions. • The city applies incentives/concessions to the development standards or design regulations requiring deviation, not to the individual situation. For example, say a project proposes three separate buildings with each building requiring an increase in the city’s maximum building height standard. In this example, the city would require one incentive/concession for this deviation, even though the deviation applies to three separate buildings. If that same project requires a deviation from the building height and rear yard setback standards, the city will require two incentives/concessions since these are considered two different development standards. • Pursuant to the Schreiber case, which was later codified as part of the passage of AB 1287, a developer is not required to provide financial evidence (i.e., pro forma) documenting that a requested incentive/concession will result in actual cost reductions. However, applicants need to reasonably document “why” the requested incentive/concession will reduce affordable housing development costs. As such, the city requires applicants to provide reasonable documentation to show that a requested incentive/concession will result in identifiable cost reductions to provide for affordable housing costs or rents. Feb. 12, 2026 Item #1 Page 14 of 19 Page 6 of 8 IB-112_State Density Bonus Law_Updated: September 2025 Number Authorized The number of incentives/concessions that can be requested by a developer varies by the amount and type of affordable units being proposed, as reflected below. INCOME % OF AFFORDABLE UNITS1 Very Low 5% 10% 15% 16% ≥80% Low 10% 17% 24% --- ≥80% Moderate 10% 20% 30% 45% 20% Student2 20% --- --- --- --- Incentives 1 2 3 4 53 1 The % of a project’s affordable units must be at least equal to the listed %. 2 Lower-income student in a dedicated student housing development. 3 To qualify for 5 incentives, a project must reserve at least 80% of the units for lower income households (very low, low, or combination thereof). The remaining 20% may be reserved for moderate income households. The applicant shall also receive a height increase of up to three additional stories, or 33 feet. As noted in footnote #1, when determining the appropriate number of incentives/concessions, a project’s percentage of affordable units must be “at least” equal to the percentages shown in the table above (§65915(d)(2)). In other words, the percentages in the table are minimums. So, in the case of the theoretical example project that reserved 19% of the units for low-income, the applicant is eligible to receive two incentives/concessions. If affordable units are provided to satisfy the city’s inclusionary housing obligation above required density bonus affordable units, the total number of affordable units count when determining the number of incentives/concessions allowed. Grounds for Denial Under the Schreiber case, the city must grant a requested incentive/concession unless it finds, under a preponderance of evidence, the following: • The incentive/concession does not result in identifiable and actual cost reductions to provide for affordable housing costs or rents. • Granting the incentive/concession would have a specific adverse impact on public health or safety or on property listed on the California historical register, which cannot be mitigated, or would be contrary to state or federal law. Waivers Density bonus law offers another form of assistance to developers, separate from concessions/waivers, in the form of “waivers.” A waiver is a modification or reduction to established development standards or design regulations when those requirements potentially cause the construction of the development project physically infeasible, if not approved. Application A few key considerations regarding waivers. • Waivers do not count as an incentive/concession and can be used in concert (combined) with incentives/concessions. • The developer must provide sufficient documentation justifying why the city’s established development standard(s) or design regulation(s) physically preclude construction of the project and why the waiver(s) is necessary. Sufficient documentation may include a written explanation of the physical constraints accompanied with an exhibit showing the site and developable envelope. Number Authorized Unlike concessions/incentives, applicants are entitled to waive any established development standards or design regulations that would physically preclude the development from achieving the allowances authorized under density bonus law. In other words, there is no limit in the number of waivers an applicant can request. Grounds for Denial The city is not required to grant or otherwise authorize a waiver if it finds that the requested deviation or modification causes a specific adverse impact on public health or safety and cannot be mitigated, would have an adverse impact on property Feb. 12, 2026 Item #1 Page 15 of 19 IB-112_State Density Bonus Law_Updated: September 2025 Page 7 of 8 listed on the California historical register, or would otherwise violate state or federal law. Like incentives/concessions, the city must include a showing of substantial evidence when making a finding of denial on a waiver request. PARKING ALLOWANCES Despite the city’s parking requirements under CMC §21.44, the city may not require more than the following parking ratios for a density bonus project (including parking for persons with disabilities) Unit Type Required Parking Studio 1 space One Bedroom 1 space Two Bedroom 1.5 spaces Three Bedroom 1.5 spaces Four Bedroom 2.5 spaces State law further limits parking requirements for specified projects as reflected below. • 0.5 spaces per unit for projects with at least 11% very low income, 20% lower income, or 40% moderate income, when located within ½ mile of accessible major transit stop, which in the city is the Carlsbad Village Coaster Station or Poinsettia Coaster Station. • No parking spaces are required for projects meeting the following: o 100% affordable to lower income residents, within ½ mile of a major transit stop, which in the city is the Carlsbad Village Coaster Station or Poinsettia Coaster Station. o 100% senior or special needs rental project affordable to lower income, either with paratransit service or within ½ mile of an accessible bus route that operates at least eight times per day. o Rental supportive housing development that is 100% affordable to lower income households. Parking requirements may be satisfied by providing individual parking stalls or in tandem, so long as the stalls are provided onsite. Requesting these parking standards does not count as an incentive/concession or waiver; however, an applicant may request further parking standard reductions using the incentive/concession or waiver allowances. DENSITY BONUS APPLICATIONS The city’s Density Bonus Ordinance can be found in CMC §21.86 and applicants should follow the permit submittal requirements and processes set forth in the Land Use Review Application (Form P-1). Pursuant to changes in state density bonus law that went into effective in 2019, the city developed a supplemental form outlining the information that must be submitted for a complete density bonus application; referred to as the Density Bonus Report Form P-1(H). This includes project location, property description, project description, density calculations, and information on any requested incentives/concessions or waivers. Once a development application is determined to be complete, the city, under state law, will notify the applicant of the level of density bonus and parking ratio the development is eligible to receive. PROJECTS IN THE COASTAL ZONE When a density bonus project is proposed in the coastal zone, legislation that went into effect in 2019 attempted to strike a balance between the state goals of promoting housing and protecting the coast. Density bonuses, incentives/concessions, waivers, and parking reductions are to be permitted so that they are consistent with both density bonus law and the Feb. 12, 2026 Item #1 Page 16 of 19 Page 8 of 8 IB-112_State Density Bonus Law_Updated: September 2025 California Coastal Act. Granting of a density bonus or an incentive does not require a general plan, zoning, or local coastal plan amendment. YOUR OPTIONS FOR SERVICE To schedule an appointment to submit an application or to learn more about density bonus, please contact the Planning Division at 442-339-2600 or via email at Planning@carlsbadca.gov. NOTE: State density bonus law is regularly updated and revised by the state legislature and the city may not be able to timely update this bulletin to reflect the most current provisions. Please refer to current state law (§65915 et seq.). Feb. 12, 2026 Item #1 Page 17 of 19 Exhibit 3 Current Development Activity with Affordable Units The following list of projects only reflects projects with an affordable unit(s) on site. Smaller projects typically pay a fee or purchase an affordable unit credit rather than constructing the inclusionary unit as part of the development project. Revenue from those fees are deposited into the Housing Trust Fund to help further the development of affordable housing in the city. Affordable unit acronyms are: Extremely Low Income (EL), Very Low-Income (VL), Low Income (L), and Moderate Income (M). Projects completed in 2025 Project Name Location Quadrant Rent/ Own Affordable Units Total units Affordable Developer Market Rate Developer EL1 VL L M Aff2 Vista Azul3 1380 Laurel Tree Ln. SW Rent 7 7 55 - 69 704 BRIDGE Housing Wermers Lucia at Aviara 1205 Aviara Pkwy. SW Rent - - - 12 12 2594 N/A Wermers Vintage @ Marja Acres 4901 El Camino Real NW Rent 5 36 5 - 46 2954 USA Properties KB Homes Tower 24 Ponto Beach 7294 Ponto Dr. SW Rent - - 13 - 13 86 N/A HG Fenton Roosevelt 9 2660- 2684 Roosevelt St. NW Own - 1 - - 1 9 N/A Tommy Crudo Totals 12 44 73 12 141 719 1 These affordable units were underwritten by the Housing Trust Fund to achieve deeper affordability 2 Total affordable units may include an unrestricted manager’s unit 3 Residents moved into Vista Azul in the prior year, however because there were infrastructure elements dependent on Lucia at Aviara, its final completion date is registered in 2025. 4 These projects are a component of a larger combined project Projects Under Construction in 2025 Project Name Location Quadrant Rent / Own Affordable Units Total units Affordable Developer Market Rate Developer VL L M Aff Hope Apts. Hope/ Grand Ave. NW Rent 16 - - 16 156 N/A Wermers La Costa Town Square Family Apts. 3592 Via Nido SE Rent - 19 - 19 951 Mirka Investments Woodside Homes Totals 16 19 0 35 251 1 This project is a component of a larger combined project Feb. 12, 2026 Item #1 Page 18 of 19 Projects Approved in 2025 Project Name Location Quadrant Rent/ Own Affordable Units Total units Affordable Developer Market Rate Developer VL L M Aff Carlsbad Village Mixed Use 945-1065 Carlsbad Village Dr. NW Rent 22 - - 22 218 N/A GRT Carlsbad Village, LLC The Roosevelt 2621 Roosevelt St. NW Rent 2 - 2 4 21 N/A FABRIC 2621 Roosevelt LLC Inns of America 5010 Avenida Encinas SW Rent 7 5 3 15 99 N/A MULTI- FAMILY INVESTME NT PARTNERS 4, LP Juniper Coast Homes1 270 Juniper Ave. NW Own 1 - - 1 21 N/A Rincon Jefferson Street Homes 2647 Jefferson NW Own 1 - - 1 12 N/A Rincon 2502- 2518 Jefferson 2502- 2518 Jefferson NW Own 1 - - 1 12 N/A Rincon Totals 34 5 5 44 383 1 In addition to providing one (1) on-site affordable housing unit, the project is conditioned to purchase two (2) inclusionary housing credits. Feb. 12, 2026 Item #1 Page 19 of 19 Affordable Housing Development Mandy Mills, Director Housing & Homeless Services February 12, 2026 1 Affordable Housing Development 2 City of Carlsbad plans for adequate sites that could accommodate higher density housing •2,400 affordable units built since 1995 •Approx. 13% of new housing •Historically due to Inclusionary Housing and Housing Trust Fund Affordable Housing Development 3 More Affordable Housing Every Year Affordable Housing Development 4 Inclusionary Housing and Density Bonus are two tools utilized to create new affordable housing Affordable Housing Development 5 Inclusionary Housing Options Proposed Units Percent Yield Rounded Units Low 58 X 15%= 8.7 9 Very Low 58 X 12.5%=7.25 7 Affordable Housing Development 6 Density Bonus law offers an increase in otherwise allowable density as well as waivers from development standards in exchange for the development of affordable housing. Affordable Housing Development 7 Sample Options Base Density Affordable Increase Total Units Low 58 58 x 13%=8 58 x 24.5%=15 73 Very Low 58 58 x 13%=8 58 x 42.5%=25 83 VL & Mod 58 58 x 15%=9 + 58 x 15%=9 18 58 x 50%=29 + 58 x 50%=29 58 116 Affordable Housing Development 8 Options Proposed Units Inclusionary DB Affordable Density Increase Total Units Low 58 58 x 15%=9 58 x 13%=8 58 x 24.5%=15 73 Very Low 58 58 x 12.5%=7 58 x 13%=8 58 x 42.5%=25 83 VL & Mod 58 58 x 12.5%=7 58 x 15%=9 + 58 x 15%=9 18 58 x 50%=29 + 58 x 50%=29 58 116 Inclusionary Housing compared to Density Bonus Affordable Housing Development 9 Projects completed in 2025 Project Name Location Quadrant Rent/ Own Affordable Units Total units Affordable Developer Market Rate Developer EL1 VL L M Aff2 Vista Azul3 1380 Laurel Tree Ln. SW 7 7 55 70 704 BRIDGE Housing Wermers Lucia at Aviara 1205 Aviara Pkwy SW Rent - - - 12 12 2594 N/A Wermers Vintage @ Marja Acres 4901 El Camino Real NW Rent 5 36 5 - 47 2954 USA Properties KB Homes Tower 24 Ponto Beach 7294 Ponto Dr. SW Rent - - 13 - 13 86 N/A HG Fenton Roosevelt 9 2660- 2684 Roosevelt St. NW Own - 1 - - 1 9 N/A Tommy Crudo Totals 12 44 73 12 143 719 1 These affordable units were underwritten by the Housing Trust Fund to achieve deeper affordability 2 Total affordable units may include an unrestricted manager’s unit 3 Residents moved into Vista Azul in the prior year, however because there were infrastructure elements dependent on Lucia at Aviara, its final completion date is registered in 2025. 4 These projects are a component of a larger combined project Affordable Housing Development 10 Affordable Housing Development 11 Projects Under Construction in 2025 Project Name Location Quadrant Rent/ Own Affordable Units Total units Affordable Developer Market Rate Developer VL L M Aff Hope Apts. Hope/ Grand Ave. NW Rent 16 - - 16 156 N/A Wermers La Costa Town Square Family Apts. 3592 Via Nido SE Rent - 19 - 19 951 Mirka Investments Woodside Homes Totals 16 19 0 35 251 1 This project is a component of a larger combined project Affordable Housing Development 12 Affordable Housing Development 13 Projects Approved in 2025 Project Name Location Quadrant Rent/ Own Affordable Units Total units Affordable Developer Market Rate Developer VL L M Aff Carlsbad Village Mixed Use 945- 1065 Carlsbad Village Dri. NW Rent 22 --22 218 N/A GRT Carlsbad Village, LLC The Roosevelt 2621 Roosevelt St. NW Rent 2 -2 4 21 N/A FABRIC 2621 Roosevelt LLC Inns of America 5010 Avenida Encinas SW Rent 7 5 3 15 99 N/A MULTI- FAMILY INVESTME NT PARTNERS 4, LP Juniper Coast Homes1 270 Juniper Ave. NW Own 1 --1 21 N/A Rincon Jefferson Street Homes 2647 Jefferson NW Own 1 --1 12 N/A Rincon 2502- 2518 Jefferson 2502- 2518 Jefferson NW Own 1 --1 12 N/A Rincon Totals 34 5 5 44 383 1 In addition to providing one (1) on-site affordable housing unit, the project is conditioned to purchase two (2) inclusionary housing credits. Affordable Housing Development 14 Where to find information? https://www.carlsbadca.gov Affordable Housing Development 15 Where to find information? https://www.carlsbadca.gov Questions? Affordable Housing Development 16