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HomeMy WebLinkAboutLCPA 95-01; Affordable Housing II; Local Coastal Program Amendment (LCPA)STAFF REPORT DATE: TO: FROM: SUBJECT: I. AUGUST 19,1992 PLANNING COMMtSStON PLANNING DEPARTMENT ZCA 91-6 CITY OF CARLSBAD - An amendment to the Carlsbad Municipal Code (Title 21) by the addition of Chapter 21.85 to establish requirements for the reservation and affordability of housing units for moderate and lower income households in residential projects under a Citywide Inclusionary Housing Program and the payment of an tn-lieu Fee or tnclusionary Housing Impact Fee in specified circumstances. RECOMMENDATION That the Planning Commission ADOPT Planning Commission Resolution No. 3424 recommending APPROVAL of the Negative Declaration issued by the Planning Director and ADOPT Planning Commission Resolution No. 3425 recommending APPROVAL of ZCA 91 -6, based on the findings contained therein. 11. PROJECT DESCRIPTION AND BACKGROUND On October 22, 1991, the City Council adopted a Revised Housing Element for the City of Carlsbad. The Revised Housing Element concludes that there exists a considerable demand for, yet an inadequate supply of housing affordable to, lower-income households and moderate-income, first time homebuyers within the City. Consistent with these findings, the Revised Housing Element includes numerical objectives for the provision of around 1,400 lower-income and 1,300 moderate-income dwelling units by 1996. In order to achieve these housing objectives, the Revised Housing Element includes a number of Housing Programs that target the provision of housing affordable to lower and moderate-income households within the City. Of the City‘s proposed new Housing Programs, the tnclusionary Housing Program is anticipated to produce the majority of the projected affordable housing units. Approximately 75% (1,050 DU’s) of the projected 1,400 lower-income dwelling units and 15% (200 DU‘s) of the projected 1,300 moderate-income dwelling units are anticipated to be developed through the City‘s proposed Inclusionary Housing Program. The balance of the proposed lower-income dwelling units (350 DU’s) and moderate-income dwelling units (1,100 DU’s) are proposed to be created through Section 8 Rental Assistance Vouchers (100 DU’s), City tnitiated Development (200 DU’s), Mortgage Revenue Bonds (200 DU’s) and New Lending Programs. ZCA 91-6 CITY OF m-dnL, AUGUST 19,1992 PAGE 2 The Revised Housing Element specifies that the City develop an Inclusionary Housing Program under which the following standards are established: (1) A minimum of 15% of all approved residential units in any master plan, specific plan, or qualified subdivision be reserved and affordable to lower-income households (Policies 3.6.a., 3.6.b. and Programs 3.6.a. and 3.6.b.); (2) A minimum of 5% of all approved units in any master plan or specific plan be reserved and affordable to moderate-income, first-time homebuyers (Policy 3.10.c. and Program 3.10.c.); and (3) In developments which are required to include ten or more units affordable to lower-income households, at least ten percent of the lower-income units should have three or more bedrooms (Policy 3.2 and Program 3.2). (4) In specific cases, allow inclusionary requirements to be satisfied through payment of an in-lieu fee as an alternative to requiring inclusionary units to be constructed on the ground (Program 3.6.c.). Consistent with the above referenced Housing Element Policies and Programs, this project is a Zone Code Amendment (ZCA 91-6) to the Carlsbad Municipal Code (Title 21, Zoning) add Section 21.85, et sea., establishing a Citywide Inclusionary Housing Program. ANALYSIS Included below is a brief synopsis of each section of the proposed new Inclusionary Housing Program. Included within this synopsis is an analysis of the major planning issues. Reference can be made to Exhibit X", the draft ordinance, to review in detail all definitions and text additions. Planning Issues 1. What constitutes a "Qualified Subdivision"? 2. Which residential projects will be subject to the Inclusionary Housing Program and which projects will be exempted? 3. What are the specific inclusionary requirements (i.e.; construction of affordable units, payment of in-lieu fees, or payment of inclusionary housing impact fees) for the various classes of residential projects or permits? 4. What is the recommended dollar value of an in-lieu fee? 5. What is the recommended dollar value of an inclusionary housing impact fee? ZCA 91-6 CITY OF mdtw AUGUST 19,1992 PAGE 3 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. What is the methodology for calculating the number of lower and moderate-income units required per residential project? What is an Inclusionary Housing Plan? What is a Combined Inclusionary Housing Project? What are the recommended inclusionary housing standards regarding: (1) timing of development, (2) tenure of affordability, (3) location of units, (4) design guidelines and (5) unit mix by number of bedrooms. Are residential projects, which are subject to the Inclusionary Housing Program, eligible to request density bonuses or other financial incentives from the City? What are the application requirements and timing for submittal of inclusionary projects to the City? What is an Affordable Housing Agreement? What is an Administrative Agreement for Inclusionary Rental Units? What is a Sales Agreement for Inclusionary For-Sale Units? What is an Inclusionary Housing Resale Agreement? How are households to be qualified for available inclusionary units? Is the proposed Zone Code Amendment consistent with the various elements of the General Plan? Is there a reasonable relationship between the need for affordable housing and the imposition of a 15% lower-income and 5% moderate-income inclusionary housing requirement on market-rate residential development? Section 21.85.010 - Purpose and intent. - This Section includes specific Objective and Policy statements fiom the Housing Element, relative to the City's commitment to providing affordable housing opportunities for lower and moderate-income households, through the implementation of an Inclusionary Housing Program. Section 21.85.020 - Definitions. - A number of definitions for new tern which are included within the Inclusionary Housing Chapter of Title 21 are proposed. These new terms include the following: Administrative Agreement for Inclusionary Rental Units, Affordable Housing, Affordable Housing Agreement, Allowable Housing Expense, Assisted Unit, Base Residential Units, Combined Inclusionary Housing Project, Conversion, Density Bonus, Existing Master Plan or Specific Plan, Growth Management Control Point, ZCA 91-6 CITY OF AUGUST 19, 1992 PAGE 4 Inclusionary Housing Project, Inclusionary Unit, Income, Low Income Household , Lower- Income Household, Market Rate Unit, Moderate Income Household, Net Developable Acreage, New Master Plan or Specific Plan, Qualified Subdivision, Sales Agreement for Inclusionary For-Sale Units, Target Income Level, Unassisted Unit, Very Low Income Household, Originating Site, and Receiving Site. The majority of the new terms and definitions proposed are taken directly from State Law, or from existing successful Inclusionary Housing Programs of other California jurisdictions. For example, this Inclusionary Housing Program includes definitions of target income groups (Le.; Very Low, Low, and Moderate Income) that are eligible for housing assistance, which are consistent with the definitions included in the State Health and Safety Code. One new term and definition which is unique to Carlsbad is ''Qualified Subdivision". Although the term "Qualified Subdivision" was undefined in the City's Housing Element, Policy 3.6.b. specifies that qualified subdivisions shall be subject to a 15% inclusionary housing requirement. The definition of a "Qualified Subdivision" as proposed in the Inclusionary Housing Program includes any existing residential lot or future residential subdivision of land, which is not income-restricted. This recommendation is based upon the finding that, all future residential development within Carlsbad, which does not create affordable housing, will only further serve to exacerbate the current Citywide affordable housing shortage by reducing the supply of developable land upon which affordable housing could have been achieved. In accordance, staff recommends that all future residential units, which are not income-restricted, should be subject to the 15% Inclusionary Housing Program. Section 21.85.030 - Applicability of inclusionaxy housing requirement. - This Section identifies which residential projects shall be subject to the Inclusionary Housing requirements and those which will be exempted. To summarize, all new market rate residential units (for-sale or rental) resulting from new construction shall be subject to the inclusionary housing requirements. The only residential units to be exempted from inclusionary housing requirements would be those units which received a building permit on or before the effective date of the Inclusionary Ordinance; existing residences which are altered, reconstructed, restored, expanded, extended, or replaced, provided that the number of units is not increased; and those residential units which are deed-restricted as affordable to lower or moderate-income households. While staff is recommending that all future residential development be subject to inclusionary housing requirements, the following discussion of Sections 21.85.040 - 21.85.060 identify what the specific alternative inclusionary requirements (i.e.; construction of affordable units, payment of in-lieu fees, or payment of inclusionary housing impact fees) would be for various classes of residential projects or pennits (See Exhibit "A"). The recommendations reflect a comprehensive strategy for addressing the City's Fair Share Housing Needs, through the provision of housing for low and moderate-income households ZCA 91-6 CITY OF mdr~ AUGUST 19, 1992 PAGE 5 over the short, mid and long- term buildout of the City. The proposed strategy, is in part based upon a City study titled 'The Economics of Developing Affordable Housing' (See Exhibit "B"), which concludes that, the costs of developing new affordable housing units within the City are high (ranging between $134,000 and $156,00O/unit), relative to the amount of income that a low-income household can afford to pay for this housing. This results in a significant "affordability gap" (ranging from over $75,000 to nearly $1 20,000/unit). Staff is recommending the assessment of three types of inclusionary requirements on new, amended or revised residential projects. These include the requirement: (1) to construct new affordable units (see Section 21.85.040), (2) pay in-lieu fees or other in-lieu contributions (see Section 21.85.050) which would be used to subsidize the production of new affordable housing units, over the mid to long term buildout of the City or 3) pay impact fees. The concept of the impact fees drawn from the findings of the above noted economic study that new affordable housing units will not be easily achieved over the short term (especially considering the overall depressed state of the regional building industry). Staff is recommending that the City create a new program of lower-income family rental subsidies over the short term. Funding for this new program would be achieved through the assessment of an inclusionary housing impact fee on existing approved, but unbuilt, residential projects (see Section 21.85.060). Overall, the proposed inclusionary requirements have been structured to minimize the number of future residential units within the City which would be subject to the payment of an in-lieu fee. In fact, less than 10% of future residential development would be subject to this in-lieu fee. The emphasis of the program is on the production of affordable units by private for-profit and non-profit developers, with assistance from the City, where feasible. Section 21.85.040 - Construction of Required Inclusionary Units. - This Section specifies which classes of residential projects or permits shall be required to satisfy inclusionary requirements through construction of new affordable housing units. Those residential projects, subject to this requirement include: (1) (2) Any residential project, of seven (7) or more dwelling units, approved after the effective date of the Inclusionary Ordinance. Any residential tentative map, of seven (7) or more dwelling units, which is approved for revision, after the effective date of the Inclusionary Ordinance. The justification for recommending that residential projects of 7 or more dwelling units being required to construct new affordable housing units, is based upon the finding that 15% (which is the minimum inclusionary requirement adopted within the City's Revised Housing Element) of a 7 unit project equates to 1 required inclusionary unit. As discussed in the next section of this report, since projects of 6 dwelling units or less, would not ZCA 91-6 CITY OF mabdd AUGUST 19, 1992 PAGE 6 achieve a full inclusionary unit (6 DU's X .15 = .9 DU's), the 15% Inclusionary requirement may be satisfied through the payment of an in-lieu fee. The recommendation to impose the same inclusionary requirements on revised tentative maps, of 7 or more dwelling units, is consistent with Section 20.12.120(d) of Title 20, which specifies that " ... a revised tentative map shall be treated in all respects as an original tentative map and shall be reported on, approved, conditionally approved or disapproved in the same manner as a tentative map". Section 21 -85.050 - In Lieu Contributions. - This Section specifies which classes of projects or permits may satisfy inclusionary housing requirements for lower-income households, through the payment to the City of an in-lieu fee or other in-lieu contribution (Le. land). Those residential projects include: (1) (2) (3) (4) (5) While it is preferable for developers to construct the required inclusionary dwelling units on the ground as a first priority, imposing this requirement on those classes of projects listed above could pose an onerous burden. Specifically, small developments of 6 units or less may not be economically viable if the inclusionary housing requirement could only be satisfied by the development of the unit on the ground. In addition, requiring 1 unit of affordable housing to be constructed for every 6 or fewer market rate units developed would result in an inclusionary housing requirement of greater than 15%. Any residential project, of 6 dwelling units or less, approved after the effective date of the Inclusionary Ordinance. Any residential tentative map or parcel map, of 6 or less dwelling units, which is approved for revision after the effective date of the Inclusionary Ordinance. Residential projects, of any size, which were conditioned to pay an in-lieu fee and were approved on or before the effective date of the Inclusionary Ordinance. Residential projects, of any size, in process and for which the application was deemed complete on or before the effective date of the Inclusionary Ordinance. Creation of 6 or fewer new mobilehome spaces in a mobilehome park. i As discussed in Section 21.85.040, Title 20 mandates that revised tentative and parcel maps be treated in the same manner as original tentative and parcel maps. For residential projects, of any size, with existing entitlements (and conditioned to pay an in-lieu fee) or applications in process and already deemed complete, a tremendous economic hardship would also be imposed if a developer had to redesign the project to provide the affordable units on the ground. Therefore, an in-lieu fee or other in-lieu contribution appears as a reasonable alternative to satisfying the inclusionary requirement. With this in-lieu alternative, the City is accepting the burden of producing the affordable dwelling units instead of the private developers. The' in-lieu fee or other in-lieu contribution will be used by the City to subsidize the production of affordable dwelling units. ZCA 91-6 CITY OF CALa13ru) AUGUST 19, 1992 PAGE 7 Staff is recommending that the in-lieu fee be equal to 15% of the subsidy required to make affordable to a lower income household, for a 30 year tenure, one newly constructed, typical attached housing unit. The identified subsidy is based upon the findings of the economic study, "Economics Of Developing Affordable Housing" (see Exhibit "B"). The dollar value of this in-lieu fee would be $14,900 per market rate unit (see Exhibit "C"). Staff acknowledges that this fee amount could likely pose a significant economic burden on developers. However, as discussed earlier, less than 10°/o of future residences developed within the City would be subject to this fee. Assuming that the actual costs to subsidize the development of affordable housing within the City, as discussed in the above noted economic study, are accurate, then the primary means for reducing this fee would be through direct financial assistance from the City. As an alternative to paying this in-lieu fee, a developer may satisfy his/her inclusionary requirement through a combined inclusionary housing project, which is discussed later in this report. This alternative would enable a developer, who is able to, construct, operate and maintain the required number of inclusionary units at a cost less than the value of the in-lieu fee, to pursue this option. In view of the likelihood that a residential developer would be able to produce residential units more cost effectively and efficiently than the City, the City would encourage any developer to build the units rather than pay the required in-lieu fees. The in-lieu fee would be assessed against all market rate units of a development subject to the fee. The fee will be required to be paid to the City at the time of building permit issuance. All in-lieu fees collected by the City would be deposited in a Housing Trust Fund to be administered by the City. The in-lieu fees collected would only be used for the provision of lower-income housing to fulfill the developer's inclusionary housing requirements. Any in-lieu fees collected, could not be used to fulfill the City's own obligation to provide housing affordable to lower-income households. Section 21.85.060 - Lnclusionary Housing Impact Fee. - This Section specifies which classes of projects or permits may satisfy inclusionary housing requirements, for lower-income households through the payment of an inclusionary housing impact fee. Those residential projects include: (1) Residential projecrs, which were not conditioned to pay an in-lieu fee or construct required inclusionary units, and for which all discretionary approvals were granted (excluding site development plans for single family residences) on or before the effective date of the Inclusionary Ordinance. Any residential tentative map or parcel map, which was not conditioned to pay an in-lieu fee or construct required inclusionary units, and is approved for extension after the effective date of the Inclusionary Ordinance. Any residential planned unit development, site development plan, conditional use permit or redevelopment permit, which was not conditioned to pay an in-lieu fee or construct required inclusionary units, and is approved for amendment after the (2) (3) _- ZCA 91-6 CITY OF CX~L.~~AD AUGUST 19, 1992 PAGE a effective date of the tnclusionary Ordinance. The recommendation to assess an inclusionary housing impact fee on previously approved, yet unconstructed residential projects is based upon the principle of requiring all future market rate residential development to bear responsibility for the provision of affordable housing within the City. There currently exist approximately 6,000 approved, yet unconstructed dwelling units within the City. These 6,000 units represent approximately 1/5 of the remaining buildout capacity of the City. Without the participation of these previously approved residential projects, the City would not be able to achieve its affordable housing Fair Share objectives through buildout. However, because these projects were approved prior to the City's commitment to an tnclusionary Housing Program, staff is recommending that a less onerous inclusionary housing requirement be assessed these projects. The proposed housing impact fee would not be used to build or create new affordable units, but instead would be used to create rental subsidies for lower income households. The dollar value of the impact fee would be $3,25O/unit (see Exhibit I'D''). At this dollar value, each fee would provide 15 percent of rental subsidy needed for a low-income household for a period of 30 years. If all 6,000 previously approved, yet unconstructed units within the City were assessed this fee, the City, could provide rental assistance for 900 low-income households for a tenure of 30 years. The dollar value of the fee would be determined by calculating the difference between the average monthly rental costs for housing within the City (U.S. Department of Housing and Urban Development Fair Market Rent Schedule for San Diego), and the maximum amount of money that a low income household can afford to pay for rent (U.S. Department of Housing and Urban Development Income Limits for the San Diego MSA). The fee is weighted relative to demand for housing by bedroom size (taken from City's existing Section 8 Certificate waiting list). The value of this impact fee would be recalculated yearly based upon revised: (1) HUD Fair Market Rent Schedules, (2) HUD tncome Limits for the San Diego Region, and 3) demand for different sized units from the City's Section 8 waiting list. Similar to the proposed In-Lieu Fee, the impact fee would be required to be paid at the issuance of building permits. The impact fees would be deposited into a Housing Trust Fund, and expended for rental subsidies in a reasonable period of time. Sections 21.85.070 - 21.85.100 - Regulations for New Master Plans and Specific Plans, Existing Master Plans and Specific Plans, Qualified Subdivisions and Mobilehome Parks - These Sections establish the inclusionary housing regulations and requirements applicable to specific residential application types (i.e.; New Master Plan or Specific Plan, Existing Master Plan or Specific Plan, Qualified Subdivision or Mobilehome Park). The key provisions of these Sections are described below. A. Number of Lower/Moderate Lncome Units Requkd - The number of lower income and ZCA 91-6 CITY OF CAk-A .J AUGUST 19, 1992 PAGE 9 moderate-income units required per residential project is equal to the "base" number of dwelling units permitted within the project multiplied by 15% and 5% respectively. The "base" number of units for: (1) new Master Plans or Specific Plans (those approved after the effective date of the Inclusionary Ordinance), (2) Qualified Subdivisions not subject to a Master Plan or Specific Plan, and (3) Mobilehome Parks, is determined by multiplying the net developable acreage of the project site times the Growth Management Control Point of the applicable General Plan designation. In simple terms, this methodology would determine a project's inclusionary requirements based upon what is allowed on a site rather than what is proposed or approved. This approach for calculating dwelling unit yields is consistent with the methodology adopted through the City's Growth Management Program. The "base" number of units for an existing Master Plan or Specific Plan is equal to the maximum number of dwelling units permitted under that Master or Specific Plan minus the number of residential building permits issued within the Plan area on or before the effective date of the Inclusionary Ordinance. Notwithstanding this general rule, any residential phase or development area within an Existing Master or Specific Plan, which has a tentative map or final map approved on or before the effective date of the Inclusionary Ordinance, and the number of units approved per said map(s) is less then the maximum number that could have been achieved under the Master or Specific Plan, then the base shall be equal to the number of dwelling units actually approved on that tentative or final map. The justification for the above noted inclusionary housing regulations is based upon an important assumption: the City is committed to achieving the affordable housing numerical objectives contained within the Housing Element. As discussed earlier in this report, the Housing Element includes an objective for the development of 1,050 lower-income and 200 moderate-income dwelling units, through the Inclusionary Housing Program, by 1996. Research conducted by staff indicates that the Inclusionary Housing Program could only, produce enough affordable dwelling units to meet the identified affordable housing objectives if all future residential development is subject to these standards. To the extent that portions of the base are exempted from these standards, production of affordable units may be fewer than are needed to meet the City's Inclusionary objectives. It is also likely that if the City does not meet its lower income housing objectives, or at least adopt ordinances which would enable the achievement of these objectives, then the City's lower income housing needs, as idenrified by the State, would be increased over the next Housing Element cycle. Under this scenario, the City would be asked by the State to produce a greater number of affordable units, but would have fewer acres of land upon which to develop this housing. This could necessitate that the 15% Inclusionary requirement be increased to a greater percentage, and that significantly higher density projects would be required to be approved. B. Large Family Fkquirement - Consistent with the Revised Housing Element Policy 3.2, ZCA 91-6 CITY OF cAEt.ddh~ AUGUST 19, 1992 PAGE 10 a standard has been included to require that residential projects which must provide ten or more units affordable to lower income households, provide at least ten percent of the lower income units with three or more bedrooms. This standard was incorporated to ensure that lower income families with children have access to decent and affordable housing opportunities within Carlsbad. C. Lndusionary Houshg Plan Requirement - All New Master and Specific Plans or Existing Master and Specific Plans, which are proposed for amendment, shall be required to provide an Inclusionary Housing Plan within the body of the Master or Specific Plan. An Inclusionary Housing Plan is a plan which outlines the basic components of the Master or Specific Plan's inclusionary housing requirements, and commits the Master or Specific Plan developer to fulfilling these requirements. This Inclusionary Housing Plan shall be required to include: (1) (2) (3) (4) (5) the total number of base residential units within the Master or Specific Plan; the required number of lower and moderate-income units over the entire plan area; designated sites or areas for the location of the required inclusionary units; a phasing schedule for the development of the inclusionary units; and a provision that all future discretionary applications processed within the plan area shall be conditioned to enter into an Affordable Housing Agreement and either an Administrative Agreement For Inclusionary Rental Units or Sales Agreement for Inclusionary For Sale Units, with the City prior to final map approval and building permit issuance, respectively. The Affordable Housing Agreement shall be recorded as a deed restriction on those lots or units designated for the location of inclusionary units. All other qualified subdivisions and mobilehome park projects shall be required to enter into an Affordable Housing Agreement and a Rental Administrative or Sales Agreement as a condition of their approval(s). It is important to understand that the Inclusionary Housing Plan constitutes but a single part of the agreement process and documentation which shall be necessary for ensuring the development of inclusionary units. As shown on Exhibit "E", other agreements (i.e.; Affordable Housing Agreement, Rental Administrative Agreement, Sales Agreement, Resale Agreement, and Annual Reports), discussed later in this report, shall also be required to successfully implement this program. Section 21.85.110 - Combined hdusionary Housing Projects. - This section establishes that it may be in the public interest for the City to authorize some or all of the inclusionary units associated with one residential project site to be produced and operated at a second site. Where the parties-in-interest to the two sites and the City form an agreement to such an effect, the resulting linked project sites would be considered to be a single combined inclusionary housing project. This section establishes the circumstances and conditions necessary for the formation of combined inclusionary housing projects. It requires the City ZCA 91-6 CITY OF CARLJdAr, AUGUST 19, 1992 PAGE 11 to be a party to an agreement between the principals of the originating site and the receiving site and that this agreement shall be made a part of the larger Housing Agreement required by Section 21.85.180 for both sites. These regulations would pertain to any development proposing to satisfy its inclusionary housing requirement by producing units "off-site". This City-approved option may be of interest to developers of small (less than 7 units total), in-fill projects who are eligible to meet their inclusionary requirements with in-lieu fees, but who may find it less costly to arrange for a second party to produce on their behalf actual units at another site. It may also appeal to larger developers with low density land who wish not to apply for density bonuses for higher density projects. And it will probably appeal to developers working within master plans which call for meeting the inclusionary requirements of the whole master plan in just a few locations. Key provisions include: it is the City's exclusive prerogative to authorize a combined inclusionary housing project. The receiving site must add the transferred inclusionary units to its own inclusionary requirement, together with a strict accounting to assure that no inclusionary units "slip through the cracks" in the transfer. The receiving site must be in the same City quadrant as the originating site. The receiving site must have been already granted discretionary permits or such permits must be processed concurrently with the permits for the originating site. Section 21.85.120 - Affordable Housing Standards. A. Timing of Development - The Inclusionary Housing Program specifies that inclusionary units should be constructed concurrent with market rate units unless both the City and developer agree to an alternative schedule for development. Developing the inclusionary units at the same time as the market rate units would help to ensure that the lower income units are integrated physically within a project or community. Lower-income units that are satisfactorily integrated into a community are less likely to create neighborhood opposition associated with NIMBY (Not-In-My-Backyard) attitudes that otherwise might occur. Although it is desirable for the inclusionary units to be constructed concurrent with the market rate units, there will likely be situations where it may be necessary to allow the inclusionary units to be constructed in a subsequent phase of development. Therefore, this standard includes flexibility to enable a developer and the City to negotiate an alternative schedule for the construction of the inclusionary units. The schedule for construction of the inclusionary units would be identified within an Affordable Housing Agreement, which is required by this Inclusionary Housing Program. B. Tenure of Affordability - All required inclusionary units shall be restricted and affordable to designated income groups for a minimum period of 30 years. This recommendation is based upon a principle of maintaining the units as affordable for the longest reasonable period of time, particularly in geographic areas (such as Carlsbad) where market forces would otherwise rapidly force these units out of reach of the lower ZCA 91-6 CITY OF CARwdm AUGUST 19,1992 PAGE 12 income population. A survey of Inclusionary Housing Programs of other jurisdictions revealed that some jurisdictions have tenure standards which extend for the life of the structure (assumed to be 55 years). This minimum 55 year tenure standard is, in fact, now the minimurn standard for qualifying for tax credits and some Federal and State government affordable housing grants and loan programs. However, conventional lenders typically are not willing to finance affordable housing projects which have tenures which exceed 30 years. In order to enable private developers the opportunity to qualify for loans for affordable housing from conventional lenders, staff is recommending a minimum tenure of 30 years. In that this proposed tenure standard does not include a maximum, if a longer tenure than 30 years is required to secure other non-conventional, government loans, grants or tax credits, then the tenure could be increased on a project basis. In conclusion, this recommended 30 year minimum tenure standard will provide the development community the greatest opportunity to secure financing, conventional or otherwise, for affordable housing. C. Location of hclusionary Units - The Inclusionary Housing Program includes a hierarchy for preferred location of inclusionary units. In order of priority, the required inclusionary units should be located: (1) (2) (3) Within the same project site of the proposed market rate units ; Within the same Local Facilities Management Zone of the proposed market units; Within the same City quadrant of the proposed market rate units. rate Inclusionary units shall not be permitted to be located outside of the City quadrant which the market rate units are located. The location standards of the Inclusionary Housing Program implement Revised Housing Element Goal 3 which states "Sufficient new, affordable housing opportunities in all quadrants of the City to meet the needs of groups, with special requirements, and in particular, the needs of current lower and moderate-income households. .." The proposed location standard will ensure that: (1) inclusionary units are as a first priority, fully integrated into a development and, (2) are evenly distributed throughout the City, thereby avoiding concentration in infill areas of the City such as the Northwest Quadrant. The location standard also establishes criteria for identifying appropriate sites for the location of inclusionary units. Inclusionary units restricted for lower income households should be located on sites which are in proximity to or will provide access to : transportation corridors ( freeways, major roads, bus lines, or commuter rail), services and facilities ( commercial centers, parks and schools), employment opportunities (commercial, industrial) and which would be compatible with adjacent land uses. D. Design Guidelines - Consistent with the City's overall commitment to project design quality, this Section requires that the inclusionary units shall be compatible with the design ZCA 91-6 CITY OF Wdrd AUGUST 19, 1992 PAGE 13 of the larger project and adjacent structures in terms of appearance, and materials. In addition, by requiring, as a first priority, that the inclusionary units be located in proximity to the market rate units of a project, there is assurance that the appearance of the inclusionary units will not negatively affect the marketability of other market rate units within a development. E. Unit Mix (by number of bedrooms) - Program 3.9 of the City's Housing Element specifies that the City will annually set priorities for its future lower-income and special housing needs. In order to ensure that identified lower-income housing needs, by family size are addressed, this Section requires that Inclusionary projects shall include a mix of affordable units (by number of bedrooms) to meet the identified demand. Until this priority list is approved by the City Council, the Census data ("Housing Assistance Needs of Low and Moderate-Income Households", October 1, 1991), can be used to establish demand. As discussed in the City's Comprehensive Housing Affordability Strategy (CHAS), the current demand is: 1 BR (20%), 2 BR (360/0), 3 BR (36?40), and 4 BR (8%). Section 21.85.130 - 21.85.140 - Terms and Conditions of Rental and For-sale Inclusionary Units. - These Sections identify the affordable housing payment standards for rental and for-sale units. These standards include: (1) (2) (3) Marketing procedures, and (4) Occupancy restrictions. Maximum affordable housing payment per target income group; Maximum saleshental prices and move in costs; The maximum affordable housing payment per target income group is consistent with Federal Law (U.S. Department of Housing and Urban Development) and State policy. The City shall annually revise, the rental rates and maximum sales prices for inclusionary units based upon revised Housing and Urban Development Income Limits for the San Diego MSA. Occupancy restrictions are stipulated to ensure that only qualified lower and moderate-income households reside in the affordable units. In addition, the principal householder must reside in the unit. Renting, leasing, subleasing and subletting of units is permitted provided that the total household income qualifies under the eligibility requirements of the ordinance. Section 21.85.150 - Resale guidelines, prices and adjustments to resale prices for inclusionary units. - This Section mandates that all future owners of for-sale inclusionary units shall be required to enter into an Affordable Housing Resale Agreement with the City. The major resale control provisions which are incorporated into this Section include the following: (1) That low-income dwelling units, upon resale, may be sold only to qualifying low income households, and that moderate-income dwelling units, upon resale, may be sold only to qualifying moderate-income households; ZCA 91-6 CITY OF CARtUdN) AUGUST 19, 1992 PAGE 14 (2) That the City, upon notification of unit availability, shall establish the resale price, and shall have the first right of refusal to purchase the unit, or assign its right to an eligible household. Section 21.85.160 - Incentives. - This Section clarifies that a developer, subject to the Inclusionary Housing Program, may request a density bonus or other incentives permitted under State Density Bonus Law. However, consistent with State Density Bonus Law, a density bonus and/or other incentives shall only be granted if a developer of a housing development of at least five units agrees to develop and restrict: (1) a minimum of 10% of the total units for very low-income households, or (2) a minimum of 20% of the total units for low-income households, or (3) a minimum of 50% of the total units for qualified senior residents. Otherwise, under the Inclusionary Housing Program, the City is not obligated to offer any incentives to offset the additional costs incurred as a result of this Inclusionary Housing Program. The City may however, at its discretion, agree to offer other incentives including, but not limited to: (1) subsidized plan check, permit, or facilities fees, (2) modification of development standards or (3) density bonus. Section 21.85.170 - Application and Review Process. - This Section provides the submittal requirements and guidelines for review of inclusionary housing project proposals (both preliminary and formal). All inclusionary housing project proposals shall be required to undergo a preliminary project review prior to submitting a formal application for development. The purpose of this preliminary review is to identify major project issues up front and to provide feedback to a prospective applicant regarding any specific economic incentives (i.e. : standards modifications, density bonus, or fee subsidies) being requested of the City. All residential projects which are required to satisfy their inclusionary requirements through new construction of affordable units (either on or off-site) shall be required to process a site development plan in addition to any other applications required for the inclusionary or market rate units of the project. Any proposal requesting an incentive from the City shall be required to submit a project pro-forma to justify that the request is necessary to make the project economically feasible. All requests for direct financial incentives (Le.; fee subsidies) from the City shall be required to be reviewed and approved by the City Council. Section 21.85.180 - Inclusion of Affordable Housing Agreement as a Condition of Development. - For any residential project subject to the Inclusionary Housing Program (excluding those projects eligible to satisfy their inclusionary requirement through the payment of an in-lieu fee or impact fee) the project applicant shall be required to submit for review and approval by the City an Affordable Housing Agreement prior to ha1 map approval, or final approval of any other applicable discretionary application. An Affordable Housing Agreement is a legally binding agreement between the developer (proposing the discretionary application) and the City which provides the specific details regarding the implementation of the inclusionary requirements of a project. An Affordable Housing Agreement for newly constructed inclusionary units shall: (1) describe the inclusionary requirements of the project (i.e.; the number, size and location ZCA 91-6 CITY OF CARtotJm AUGUST 19, 1992 PAGE 15 of the proposed units), and (2) identify the unit prices, tenant/owner income qualification process, tenure of affordability, schedule for production, and program for selling or marketing the units. In order to guarantee that the inclusionary units shall be constructed, reserved as affordable and operated consistent with the tern of this agreement, the Affordable Housing Agreement shall be recorded as a deed restriction on those individual lots or units designated as affordable. The Affordable Housing Agreement for projects making a non-monetary in-lieu contribution shall include the dollar value of the in-lieu contribution and the method and schedule for payment of the in-lieu contribution. Projects eligible to pay monetary in-lieu fees or inclusionary housing impact fees shall not be required to enter into an Affordable Housing Agreement with the City, but instead shall be conditioned to pay the in-lieu fees to the City on a per dwelling unit basis prior to the issuance of building permits. Section 21.85.190 - Administrative Agreement for Inclusionary Rental Units. - All developers of residential projects proposing to satisfy their inclusionary requirements through the construction of rental units shall be required to enter into an Administrative Agreement for Inclusionary Rental Units, with the City. The Administrative Agreement for Inclusionary Rental Units, shall be required to clearly establish the rules, procedures and plans for: (1) qualifying tenants, (2) setting rental rates, (3) filling vacancies, and (4) operating and maintaining the units. The purpose of this agreement is to ensure the long term maintenance and operation of inclusionary units as affordable. This agreement shall be required to be completed prior to the issuance of building permits for inclusionary units. Section 21.85.200 - Sales Agreement for Inclusionary For-Sale Units. - All developers of inclusionary for-sale units shall be required to enter into an Agreement for Inclusionary For-Sale Units with the City prior to the issuance of building permits for those inclusionary units. The For-Sale Agreement shall serve to establish sales guidelines and regulations which shall govern the initial sale of the inclusionary units to a qualified household. The Sales Agreement shall include: (1) an income qualification process for homebuyers, (2) unit sales and resale regulations and price standards, and (3) a marketing program which includes a loan package with a low downpayment to enable qualified households to purchase the restricted units. Section 21.85210 - Indusionary Housing Resale Agreement. - This Section requires that all buyers of for-sale inclusionary units shall be required to enter into an Inclusionary Housing Resale Agreement with the City prior to purchasing an inclusionary unit. The Resale Agreement shall specify to a prospective buyer of a for-sale inclusionary unit that the unit may not be resold to any other buyer without the approval of the City. Resale controls are necessary for ensuring that inclusionary units, which have been made available to a lower or moderate-income household at a price substantially below the market price, are not lost from the City's pool of affordable housing through the subsequent sale of an income restricted unit at a market price. ZCA 91-6 CITY OF WdAU AUGUST 19, 1992 PAGE 16 While resale controls are essential for preserving for-sale inclusionary units as affordable over the long term, there will likely be costs to the City for administration and enforcement. The administration of resale controls shall require that the City: (1) place a limitation on the amount of appreciation on the unit, in order that the price of the unit continues to be affordable to lower and moderate-income households, and (2) establish a process to ensure that the new buyer of the unit is a qualified income household, similar to the seller. Such programs, to be most effective, require not only ongoing monitoring of prices and sales transactions, but also maintenance of a pool of qualified buyers, who can be referred in a timely fashion as units become available. Section 21.85.220 - Eligibility requirements and tenant selection - This Section establishes household eligibility requirements (based upon income) and a tenant selection priority list. The process of marketing inclusionary units and making their availability known to those households in need is critical to ensuring that Carlsbad's Inclusionary Housing Program is as responsive as possible to the needs of it's lower income population. In order to more effectively match housing units to the target households in need, a tenant selection priorities list is included in this Section. This list assigns the highest priority to qualified income Carlsbad resident/worker households, and a lower priority to other low income households within the region. This priority ranking is based upon the objective of providing housing opportunities to: (1) existing City residents who may be living in substandard or overcrowded housing conditions or paying a large portion of their income to hosing costs or, (2) people working within the City who are unable to live within the City. While acknowledging that the City's "fair share" affordable housing objectives are in large part based upon identified regional needs, the recommendation to assign a preference for local residents or workers is based upon the fact that the City currently has a list of households who qualify for, but have not received Section 8 assistance because an adequate number of Certificates are not available to the City. In accordance, with the implementation of this Program, this existing list could be used to qualify households for inclusionary units which are available. Section 21.85.230 - Management and Monitoring. - This Section establishes that all inclusionary rental units shall be required to be managed and operated by the owner of the units. Consistent with this requirement, an annual monitoring report, which is due on the anniversary of the initial certificate of occupancy release date shall be required to be submitted to the City. This report shall review the status of the inclusionary units and the tenant households over the past year. This report shall identify: (1) the inclusionary units, (2) the monthly rent and monthly income of tenants, and (3) the vacancy information for each unit. The City shall have the responsibility for monitoring and administering all inclusionary for-sale units. Section 21.85.240. - Administrative Fee for hclusionary Housing. - Over the minimum thirty-year tenure of projects containing inclusionary housing units the City will either ZCA 91-6 CITY OF CAR--JXS AUGUST 19,1992 PAGE 17 s directly or, via one or more third parties, provide a number of recurring services associated with the administration and monitoring of inclusionary units. Although the provision of some of these semices will be within the normal purview of existing City activities, others will involve new costs to the City for which there are no existing funding sources. Unless and until alternative funding sources are identified it may be necessary to require the builders/owners of residential projects to share in these administrative costs. Therefore, staff recommends that the ordinance provide for the establishment of an administrative fee for inclusionary housing, the amount to be established by City Council resolution and paid prior to the issuance of building pennit(s). Establishing the amount of the fee will depend upon several factors, the dollar implications of which are not known at this time. For example, will the City directly provide administrative services or will it contract out with a third party? If done in-house, what will the exact staffing and non-personnel expenses be? What time and skills will be required to negotiate and enforce the several types of agreements called for by the ordinance? What will be the role of the Housing and Redevelopment Advisory Committee? Until the new Director of Housing and Redevelopment is brought on-board to assist with answering these questions, it may not be possible to estimate these expenses. Nevertheless, the expenses will be real and they will be non-trivial. Therefore, it is recommended to establish a fee in the ordinance now, and determine the dollar amount at a later time. Consistency with the General Plan. In that this zone code amendment, implements Inclusionary Housing Programs; 3.2 (Large Family Inclusionary), 3.6.a. (15% Low-Income Inclusionary for Master Plans), 3.6.b. (15% Low-Income Inclusionary for Specific Plans and Qualified Subdivisions) 3.6.c. (Inclusionary In-Lieu Fee), and 3.10.c. (5% Moderate-Income Inclusionary for Master and Specific Plans) of the City's Housing Element, it is consistent with the General Plan. Reasonable Relationship. As discussed below, there is a reasonable relationship between the need for affordable housing and the imposition of a 15% low-income and 5% moderate-income inclusionary housing requirement on market-rate residential development. The State Department of Housing and Community Development (HCD) and the San Diego Association of Governments (SANDAG) have identified numerical objectives for the production of housing units for all income groups within each jurisdiction in San Diego County. These numerical objectives are contained within SANDAG's Regional Housing Needs Statement, and are recognized as each jurisdiction's "regional share" of the total region-wide housing needs. Consistent with State Law (Section 65584), SANDAG's Regional Housing Needs Statement identifies that the minimum number of total dwelling units to be constructed in Carlsbad during the period 1991-1996 is estimated at 6,273 (see Table 1). h ZCA 91-6 CITY OF CAR-dd AUGUST 19,1992 PAGE 18 CARLSBAD REGIONAL SHARE ll FUTURE HOUSING NEED BY INCOME CATEGORY 1991-1996 Income Type I Dwelling Units’ I . Percentage Very Low - Less than 50% of County Median Income 1,443 1 23% Low Income - Median Income 50 - 80% of County 17% Moderate Income - 80 - 120% of County 1,317 I 21% I Median Income ~ Upper - 120% + of County Median Income 2,447 I I 39% I TOTAL 6,273 I 100% Source: Regional Housing Needs Statement, SANDAG (page 135) The Regional Housing Needs Statement breaks this figure down by income groups. There is a total need of 2,509 units affordable to lower-income (very-low and low-income) households. The need for housing affordable to moderate-income households is 1,317 units and for upper-income households is 2,447 dwelling units. The need for lower-income and moderate-income households represents 40% and 21% respectively, of Carlsbad’s future residential development through 1996. However, because of historic and anticipated economic and market conditions (Le.; 1986 Federal Tax Reform Act which reduced multi-family housing tax benefits and made project financing difficult to obtain, an existing recessive economy, higher land costs associated with Carlsbad’s coastal location, and significant facility fee requirements) it will not be feasible to achieve 2,509 units affordable to lower-income households within the City by 1996. The need (1,317 units) for housing affordable to moderate-income households in Carkbad is also significant, particularly for first-time homebuyers. The income needed to qualify for a loan for a median priced home is far above the median income in San Diego County (see Table 2). ZCA 91-6 CITY OF ado. 3 AUGUST 19, 1992 PAGE 19 AVERAGE PRICE OF HOME AND QUALIFYING HOUSEHOLD INCOME Few moderate-income households are able to qualify for a typical mortgage on an entry level home. Carlsbad's moderate-income families who can afford to purchase a home within the City are usually "move-up" buyers, with substantial equity from a previous home sale. Accordingly, the City's adopted Housing Element includes more modest, but realistic objectives for the development of housing affordable to lower-income households. The minimum number of lower-income units to be provided is 1,125 (as identified by SANDAG's Fair Share goals). This represents 18% of the 6,273 total Regional Share units needed in Carlsbad over the next five years. The City's revised Housing Element includes objectives for the provision of 1,400 lower- income units (275 units in excess of the City's Fair Share requirements) and 1,300 moderate-income units (17 units less than the Regional Share requirement). Of the 1,400 lower-income and 1,300 moderate-income required units, the City has committed itself to producing 300 lower-income and 1,100 moderate-income units through City initiated development. The private sector has not produced in the past, nor is likely to produce in the future, an adequate amount of housing units affordable to lower and moderate-income households to meet the remaining balance of the City's lower-income Fair Share need (1,050 units) or moderate-income Regional Share need (200 units). If the development of the remaining vacant residentially designated land is driven by private sector market forces, market-rate priced housing will be produced that is unaffordable to lower and moderate-income households. Continued new residential development, which does not include, nor contribute toward the lower cost of housing will only serve to aggravate the current affordable housing shortage, by reducing the supply of available residential land upon which affordable housing could have been developed. Accordingly, the proposed, mandatory Inclusionary Housing Program was identified within the City's Housing Element as the best program available to the City to achieve the remaining balance of the City's Fair Share objective for lower-income units and Regional Share objective for moderate-income units. Based upon an assumed rate for projected residential development between 1991 and 1996, the imposition of a 15% low-income and 5% moderate-income inclusionary requirement on future residential development is necessary to achieve the City's Fair Share ZCA 91-6 CITY OF .d AUGUST 19, 1992 PAGE 20 (lower-income) and Regional Share (moderate-income) objectives, as mandated by the State of California. SUMMARY In summary, since the proposed Inclusionary Ordinance: (1) is necessary in order for the City to achieve its lower income Fair Share and moderate-income Regional Share housing objectives, (2) is consistent with the various elements of the General Plan, and (3) there is a reasonable relationship between the need for affordable housing and the imposition of a 15% lower income and 5% moderate-income inclusionary housing requirement on market rate residential development, staff recommends approval of ZCA 91 -6. nr. ENVIRONMENTAL REVlEW The Planning Director has determined that this Zone Code Amendment, to add an Inclusionary Housing Chapter to Carlsbad's Zoning Ordinance, will not have a significant impact on the environment and therefore has issued a Negative Declaration on June 25, 1992. The environmental analysis concluded that since: (1) this zone code amendment is not associated with any specific development project, (2) will not directly or indirectly result in any significant physical, biological, or human environmental impacts, and that, (3) any future residential development processed pursuant to the Inclusionary Housing Program shall be required to undergo detailed environmental review, no project specific environmental impacts are anticipated. There were no letters of comment received during the public review period for this Negative Declaration. ATTACHMENTS 1. 2. 3. 4. 5. 6. 7. 8. Planning Commission Resolution No. 3424 Planning Commission Resolution No. 3425 Memo from Planning Director, dated August 19, 1992 Exhibit "A", lnclusionary Housing Requirements Exhibit "B", The Economics of Developing Affordable Housing Exhibit "C', In-Lieu Fee Calculation Exhibit "D", Inclusionary Housing Impact Fee Calculation Exhibit "E", Inclusionary Housing Processing Flowchart. CDD:km