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HomeMy WebLinkAboutLCPA 99-06; Inclusionary Housing Ordinance Amendment; Local Coastal Program Amendment (LCPA)I he City of CARLSBAD Planning Departmen, A REPORT TO THE PLANNING COMMISSION Item No. 0 P.C. AGENDA OF: January 19,2000 Application complete date: NIA Housing & Redevelopment Staff: Craig Ruiz Project Planner Scott Donne11 SUBJECT: ZCA 99-08LCPA 99-06 - INCLUSIONARY HOUSING ORDINANCE AMENDMENT - Request for a Zone Code Amendment and a Local Coastal Program Amendment to amend Chapter 21.85 of the Municipal Code regarding inclusionary housing requirements. I. RECOMMENDATION That the Planning Commission ADOPT Planning Commission Resolution No. 4708 RECOMMENDING APPROVAL of the Negative Declaration and Planning Commission Resolutions No. 4709 and 4710 RECOMMENDING APPROVAL of ZCA 99-08 and LCPA 99-06 based upon the findings contained therein. 11. INTRODUCTION Proposed are amendments to the Zoning Ordinance and Local Coastal Program to revise inclusionary housing requirements, or the standards by which new residential development must provide housing affordable to lower income households. Staff recommends approval of the proposed changes as they are consistent with the General Plan and Local Coastal Program. 111. BACKGROUND In 1993, the Inclusionary Housing Ordinance became effective to implement the City of Carlsbad’s Inclusionary Housing Program. The City’s Inclusionary Housing Program requires that 15 percent of all residential units developed within Carlsbad be affordable to lower income households, specifically to those households with gross household incomes equal to or less than 80% of the San Diego County Area Median Income (AMI). In implementing the Inclusionary Housing Ordinance over the past six years, staff has discovered that with regard to some aspects of the Ordinance the proposed revision would facilitate the practical implementation of the Inclusionary Housing Program. Secondly, a Housing Element Self-certification Pilot Program was recently established for San Diego County. The Carlsbad City Council has authorized staff to proceed with efforts to qualify for self-certification during the next Housing Element cycle (2004-2009). Revisions to the Inclusionary Housing Ordinance will assist in the City’s effort to qualify for self-certification since the revisions parallel self- certification policies. Finally, some alternatives for providing affordable housing, such as Second Dwelling Units, have been the subject of much debate and require resolution through revisions to the Inclusionary Housing Ordinance. ZCA 99-08/LCPA 99-06 - INCLUSIONARY HOUSING ORDINAILCE AMENDMENT January 19,2000 IV. ANALYSIS On August 12, 1999, the Housing Commission reviewed the proposed revisions to the Inclusionary Housing Ordinance as recommended by staff. The information below discusses in detail the primary proposed revisions to the Ordinance as recommended by the Housing Commission. The remaining changes are primarily administrative in nature or delete repetitive sections of the existing ordinance. A copy of the Legislative Draft of the proposed Zone Code Amendment, highlighting the proposed revisions, is attached as Attachment A. Definition AdditionsEtevisions: ExtremeZy Low Income - Under the existing Housing Element Regional Share Allocation system, the City is required to provide affordable housing in four income categories. These categories include very low, low, moderate, and above moderate income. Under the new Housing Element Self-certification Program requirements are established for the income categories of extremely low, very low, and low income households. Because the current Inclusionary Housing Ordinance does not contain a definition for extremely low income, a definition has been proposed for addition. Extremely low income is defined by a household whose annual income is 30% of the Area Median Income (AMI) or below. Low Income Rent - A monthly rental rate affordable to low income households is currently defined as 1/12th of 30% of 80% of AMI. When the Inclusionary Housing Ordinance was originally adopted, the City decided to set the low income rental rate at the subject level (30% of 80%) because it was the maximum acceptable to obtain credit for producing a low income affordable housing unit. With over six years of experience in implementing the Inclusionary Housing Ordinance, the City has discovered that the acceptable affordable rents (at 80%) are often equal to, and sometimes higher than, market rents within the community. In order to ensure that the Inclusionary Housing Ordinance is actually providing a unit which is more affordable to low income households, staff is proposing to define Low Income Rent as 1/12th of 30% of 70% of AMI. For a two bedroom unit, this would reduce the current maximum affordable rent from $1,050 to $919. It should be noted that the new affordability level applies to rentals only. The affordability level for a for-sale product shall remain at the original 80%. Oflsets and Incentives - The Inclusionary Housing Ordinance in effect at this time uses the terms “offsets” and “incentives” interchangeably. In the new Ordinance, staff proposes to more differentiate the two terms. Offsets are to be defined as direct financial incentives, density increases, standards modifications, and/or other financial, land use or regulatory concessions. Incentives are to be defined as an actual reduction in the inclusionary housing requirement in return for the provision of certain preferred types of affordable housing or related amenities as determined appropriate, and approved, by the City Council. For example, if a developer agrees to produce housing units which all have 3 bedrooms or more and/or are affordable to households at 50% of the AMI, they may be eligible to reduce their inclusionary housing requirement from 15% to 10%. This would be a negotiated agreement based on the needs and/or desires of the City of Carlsbad as related to affordable housing. The reason for this consideration is related to the new Housing Self-certification Program and the fact that it allows the City to receive additional credit for certain types of housing or lower level of affordability. The City would pass that credit on to the developer as deemed appropriate by the City Council. ZCA 99-0WLCPA 99-06 - IdCLUSIONARY HOUSING ORDINmCE AMENDMENT January 19,2000 Page 3 Armlicabilitv of Provisions: Construction Requirement - Today, all projects which propose seven or more units are required to ensure that 15 percent of the units constructed (rental or for-sale) are affordable to low income households. This means that some projects have a very small requirement (e.g. 1 to 10 units). Small affordable housing projects are difficult to finance. To date, these smaller requirements have been met through the provision of second dwelling units (under the existing ordinance requirements), or through the purchase of housing credits from the Villa Loma Affordable Apartment project (as permitted). Currently, only those projects located in the southeast or southwest quadrant of the City are allowed to purchase housing credits from the Villa Loma Project. Typically, projects with a requirement of 10 affordable units or less have had their requests to purchase housing credits in Villa Loma approved by the City Council with little discussion. There are no qualified combined projects with excess affordable units in the northern half of the City. Therefore, projects in the northeast or northwest quadrants of the City do not have an option to purchase housing credits. They must build units. Typically, these developers or property owners have chosen to construct second dwelling units. Over the past year or more, both the Planning and Housing Commissions have expressed concern about the use of second dwelling units to meet the requirements under the Inclusionary Housing Ordinance. The concern has been that the units are not required to remain available as a rental unit on the open market and that there are no income qualifications for the person’s living within the unit. Because of the concerns expressed by the two Commissions and the reality that there are few other options for projects with small affordable housing requirements, staff proposed, and the Housing Commission concurred, that the requirement to actually produce units be increased to a higher level. The Housing Commission is recommending that the Inclusionary Housing Ordinance be modified to require the construction of affordable housing units only when the size of the total housing project is more than 50 units. If the housing project is 50 units or less, which means that the affordable housing requirement will be 7 units or less, the developer/property owner will have the option of paying the Housing In-Lieu Fee. Staff anticipates that this will result in fewer Second Dwelling Units. However, if second dwelling units continue to be proposed to meet an Inclusionary Housing Requirement, then they will need to meet the new restrictions set forth below. Second DweZZing Units - As mentioned above, under existing policy, a Second Dwelling Unit is not required to be rented and the tenants do not need to meet maximum income requirements. Simply stated, if the unit is rented, existing policy only requires the unit be rented at a rate affordable to lower income households (1/12th of 30% of 80% of AMI). The reason for this policy is primarily related to enforcement. It would be extremely difficult to effectively monitor the operations of individual homeowners as related to the rental of second dwelling units. Therefore, the City took the policy position that second dwelling units are affordable simply by the fact that they are small (less than 640 square feet), and they meet an affordable housing need for elderly parents, domestic help, college students, etc. Due to recent concerns raised by the Housing and Planning Commissions and the fact that the City Council has already made the decision to participate in the program to qualify for Housing Element ZCA 99-08/LCPA 99-06 - NCLUSIONARY HOUSING ORDINANCE AMENDMENT January 19,2000 Self-certification, staff proposed changes to the Inclusionary Housing Ordinance which would revise the policy position on the use of second dwelling units to meet the City’s affordable housing requirements. Under the Housing Element Self-certification requirements, second dwelling units count only if the units are rented at an affordable housing cost to a low income household. This means that the tenants must be income-qualified. Because there may remain situations where the only practical option for meeting the Inclusionary Housing requirement is through the provision of second dwelling units, the Housing Commission is recommending that second dwelling units still be permitted to satisfy the requirements of the Inclusionary Housing Ordinance. With the proposed revision, however, if second dwelling units are used to satisfy the requirements of the Inclusionary Housing Ordinance, they must be rented at an affordable rate to a low income qualified tenant. Affordable Housing Standards: Affordable Tenure - Under Housing Element Self-certification, greater credit is earned when projects have a regulatory requirement which maximizes the term of affordability. The greatest credit is earned for projects which are restricted for 55-years or longer. Projects developed under the current ordinance state that projects will be affordable for a minimum of 30 years, or for the useful life of the project. In practice, all projects have been deemed to have a useful life of 55 years and have been so restricted. The proposed revisions to the Ordinance will change the standard to reflect the current practice of restricting units for a 55-year period. Maximum Affordable Rent within a Mixed Income Project- As stated above, at the current rental standard for low income households (1/12th of 30% of SO%), the rent for a low income affordable unit may be equal to or greater than the market rate rent for a comparable unit. Staff has proposed that the rental standard for a low income affordable unit be reduced to 1/12th of 30% of 70% of the AMI. Staff is also proposing that within a mixed income rental project, the maximum affordable rent be further restricted to require that the rental rate be the lesser of 1/12th of 30% of 70% or 90% of the market rate rent for a comparable unit within the project. Incentive Credit As mentioned above, as an incentive to assist the City in providing more desirable types of housing, developers may receive additional credit (more than one unit) for each unit of more desirable housing, thereby reducing the total inclusionary housing requirement. For example, if a developer proposes to provide units affordable to extremely low income households, they may be eligible to receive additional credit for those units. Alternative to Construction Under the current housing element system, the City only receives credit for new construction of affordable units. Under the new Housing Element Self-certification Program, a variety of housing types now receive credit. Examples include acquisition and rehabilitation of existing units, conversion of existing market rate units to affordable units, construction of special needs housing or programs (shelters, transitional housing, etc.), or contributions to a special needs housing project or program. The Housing Commission is proposing that, at the discretion of the City Council, such alternatives to new construction may be approved to satisfy an Inclusionary ZCA 99-08/LCPA 99-06 - INCLUSIONARY HOUSING ORDINANCE AMENDMENT January 19,2000 Housing requirement where the proposed alternative supports specific Housing Element policies and goals, and assists the City in meeting its housing requirements. Alternatives would only be acceptable if new construction is infeasible or presents an unreasonable hardship. Additional Considerations The City’s density bonus ordinance states that the City has the first right of refusal to purchase housing projects that were developed under the ordinance once their affordability tenure expires. It is the Housing Commission’s recommendation that similar language be included in the Inclusionary Housing Ordinance for affordable rental projects. In general, 90 days prior to the expiration of the affordability tenure, the property owner would offer the Housing and Redevelopment Director the opportunity to purchase the property. The City, or its designee, would then have 90 days to act upon the offer. Consistencv with the General Plan The proposed zone code amendment is consistent with the applicable goals and policies of the General Plan. Proposed changes implement Goal 2 of the Housing Element, which seeks “new housing developed with a diversity of types, prices, tenures, densities and locations and in sufficient quantity to meet the demand of anticipated City and regional growth.” The revisions also are consistent with Housing Element provisions requiring an inclusionary housing program. Moreover, the proposed allowance of alternatives to construction of affordable units as a way to meet inclusionary requirements - such as the rehabilitation and acquisition of existing units and construction of shelters - facilitates several Housing Element objectives, policies, and programs. Finally, the amendment complies with the Land Use Element’s residential goal of providing for “. . . a variety of housing types and density ranges to meet the diverse economic and social requirement of residents. . . ” Currently, Carlsbad is updating its Housing Element, a process subject to state certification. Recently, a pilot program to enable jurisdictions to self-certify their Housing Elements was established for San Diego County. The Carlsbad City Council has authorized staff to proceed with efforts to qualify for self-certification during the next Housing Element cycle (2004-2009). Proposed revisions to the Inclusionary Housing Ordinance will assist the City in its effort to qualify for self-certification since the revisions parallel self-certification policies. These revisions are consistent with both the current and draft Housing Elements. Consistencv with the Local Coastal ProFram The Carlsbad Local Coastal Program (LCP) consists partly of local land use regulations that include the Zoning Ordinance. The area subject to the LCP is commonly referred to as the “coastal zone.” Because the project amends the Zoning Ordinance and affects residential development in the coastal zone, it requires a Local Coastal Program Amendment, or LCPA. LCPAs, following City Council action, also require Coastal Commission approval to become effective. The coastal zone is divided into six geographic segments. Staff has found the proposed revisions to inclusionary requirements are consistent with and will not change the regulations that guide development and protect the coastal environment. These regulations deal largely with public ZCA 99-08/LCPA 99-06 - IHCLUSIONARY HOUSING ORDINANCE AMENDMENT January 19,2000 services and access, agriculture, erosion control, and natural resource protection. V. ENVIRONMENTAL REVIEW The Planning Department has conducted an environmental review of the above described project pursuant to the Guidelines for Implementation of the California Environmental Quality Act and the Environmental Protection Ordinance of the City of Carlsbad. As a result of said review, a Negative Declaration (declaration that the project will not have a significant effect on the environment) was issued for the subject project by the Planning Director on October 28, 1999, and made available for public review. No comments were received on the environmental document. ATTACHMENTS: 1. 2. 3. 4. Planning Commission Resolution No. 4708 (ND) Planning Commission Resolution No. 4709 (ZCA) Planning Commission Resolution No. 47 10 (LCPA) Attachment A - Legislative Draft of the proposed Zone Code Amendment highlighting the proposed revisions SDcs:mh