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HomeMy WebLinkAboutZCA 10-03; Inclusionary Housing; Zone Code Amendment (ZCA)The City of Carlsbad Planning Department A REPORT TO THE PLANNING COMMISSION Item No. P.C. AGENDA OF: July 21, 2010 Application complete date: N/A Project Planner: Scott Donnell Project Engineer: N/A SUBJECT: ZCA 10-03/LCPA 10-02 - INCLUSIONARY HOUSING - Request for a recommendation of approval of minor changes to the City's inclusionary housing requirements found in Zoning Ordinance Chapter 21.85. I.RECOMMENDATION That the Planning Commission ADOPT Planning Commission Resolutions No. 6712 and 6713, recommending APPROVAL of Zone Code Amendment ZCA 10-03 and Local Coastal Program Amendment LCPA 10-02 based on the findings contained therein. II. INTRODUCTION To comply with recent case law, the City of Carlsbad is proposing an amendment to its inclusionary housing requirements that would result in only minor changes. The changes are primarily needed to clarify that the requirements apply to rental projects only under certain circumstances. Presently, inclusionary housing requirements apply equally to rental and ownership projects. Other than the limitations proposed to conform with case law, the changes would not affect key inclusionary housing provisions such as the percentage and affordability of inclusionary units that new development must provide, affordability tenure, and resale restrictions. Because the Zoning Ordinance is an implementing ordinance for the City's Local Coastal Program, a Local Coastal Program Amendment (LCPA 10-02) is also required for this project. On June 17, 2010, the City's Housing Commission reviewed and recommended approval of the proposed minor revisions to Chapter 21.85. A function of the Housing Commission is to advise and recommend on the amendment of affordable housing programs, policies, and regulations. III. PROJECT DESCRIPTION AND BACKGROUND The proposed amendment stems from a July 2009 Court of Appeal decision in Palmer/Sixth Street Properties, L.P. v. City of Los Angeles ("Palmer"). In this case, the court determined that local inclusionary requirements for rental units are pre-empted by State law regarding rent control unless the developer agrees by contract to limit rent in exchange for a "direct financial contribution" or any other forms of assistance specified in density bonus law. The California Supreme Court denied review of the decision allowing it to remain valid law. ZCA 10-03/LCPA 10-02 - INCLUSIONARY HOUSING July 21, 2010 PAGE 2 Therefore, the proposed amendment to Zoning Ordinance Chapter 21.85 would add a clarification that inclusionary housing requirements do not apply to: Any rental project where the developer does not obtain direct financial assistance, offset, or any other incentive or concession of the type specified in density bonus law, although a mandatory density bonus may have been applied pursuant to the provisions of [Zoning Ordinance] Chapter 21.86. The proposed amendment also provides that a developer not receiving direct financial assistance, offsets, or other incentives may voluntarily agree to provide inclusionary rental units. In the proposed clarification above, "offsets" are offered through inclusionary housing requirements and are separate from and can be in addition to the incentives and concessions the City must grant if a developer requests a density bonus as allowed by state law. Complying with Palmer necessitates changes to several sections of Zoning Ordinance Chapter 21.85; these changes can be summarized as follows: 1. Clarify when inclusionary housing requirements do and do not apply to rental developments, consistent with Palmer and as described above. This affects the purpose and intent, inclusionary housing requirement, in-lieu fees, and enforcement sections of Chapter 21.85. 2. Replace "for sale unit" or "purchased unit" with "ownership unit," a change that would occur throughout Chapter 21.85. Also, provide definitions for both "ownership unit" and "rental unit," the latter a currently used term. These changes are proposed to eliminate any ambiguity with "for sale unit" or "purchased unit," to make clear what ownership and rental units are, and to provide assistance in implementing inclusionary housing requirements in light of Palmer. As an example, the proposed definition of "ownership unit" is "a residential unit with a condominium or other subdivision map allowing units to be sold individually." This definition makes it clear that application of inclusionary housing requirements is based not on whether a unit can be purchased or sold, but whether it can be owned. A few "housekeeping" revisions not resulting from the case law are also proposed to clarify terms and correct references. These changes are: 3. Add a definition of "development revision," a term currently used but not defined. As proposed, development revision would mean "revisions to development permits, entitlements, and/or related maps." 4. Revise the definition of "conversion" to match the current meaning of the word in Chapter 21.85. Presently, in the definition section, conversion is defined only as the change of status of a home from a purchased unit to rental unit or vice versa. Elsewhere in Chapter 21.85, however, conversion also means the change in status of a market rate unit to an affordable unit. The amendment would add this additional meaning to the definition. ZCA 10-03/LCPA 10-02 - INCLUSIONARY HOUSING July 21, 2010 PAGE 3 5. Perform other minor changes to improve use of Chapter 21.85. These changes include correcting two wrong references to density bonus and second dwelling unit provisions found in different chapters of the Zoning Ordinance. Attachment 3 shows the revisions proposed to Chapter 21.85 in a strike out and underline format; only those sections proposed for amendment are included. IV. ANALYSIS Staff developed its approval recommendation by analyzing the proposed amendment's consistency with the following relevant documents: Genera] Plan ZCA 10-03 is consistent with the General Plan in that the proposed amendment does not conflict with any goal, objective or policy of the General Plan. For example, Land Use Element Residential Policy C.I directs the City to encourage the provision of low and moderate income housing to meet Housing Element objectives. In Carlsbad, affordable (low income) housing is primarily achieved through inclusionary housing requirements. Accordingly, Housing Element Program 3.1 states the City will continue to implement its inclusionary housing requirements originally adopted in 1993. Subject to the limitations imposed by Palmer, the proposed amendment does not interfere with the ongoing implementation of inclusionary housing requirements to provide affordable housing. Zoning Ordinance ZCA 10-03 reflects sound principles of good planning. It is internally consistent with the other Zoning Ordinance procedures and standards not proposed for amendment. Also, proposed changes are limited to clarifying the applicability of inclusionary requirements to rental projects, improving and clarifying the meaning of some terms, and making reference corrections. No changes to land uses or development standards would be made by this amendment. Furthermore, the amendment to Zoning Ordinance Chapter 21.85, subject to the limitations imposed by Palmer, maintains consistency with the intent and purpose of the inclusionary housing requirements. Part of the intent and purpose as stated in Zoning Ordinance Section 21.85.010 A. is "...to ensure that all residential development... provide a range of housing opportunities for all identifiable economic segments of the population, including households of lower and moderate income." Local Coastal Program The Zoning Ordinance is an implementing ordinance of the City's Local Coastal Program, which provides policy guidance for land use and development in the City's Coastal Zone. To ensure the amendment is consistent with coastal policy, a Local Coastal Program Amendment is necessary. The proposed Local Coastal Program Amendment meets the requirements of, and is in conformity with, the policies of Chapter 3 of the Coastal Act and all applicable policies of the ZCA 10-03/LCPA 10-02 - INCLUSIONARY HOUSING July 21, 2010 PAGE 4 Carlsbad Local Coastal Program not proposed for change by this amendment. The Local Coastal Program does not have any inclusionary requirements and provides very little discussion on affordable housing. Further, ZCA 10-03 does not conflict with any coastal zone regulations, land use designations or policies with which development must comply. McClellan-Palomar Airport Land Use Compatibility Plan The proposed amendment affects land within the Airport Influence Area, which covers a large portion of Carlsbad and includes residential properties; however, the amendment is consistent with the adopted McClellan-Palomar Airport Land Use Compatibility Plan in that it does not propose any land use or development standard changes that affect compatibility with the Plan's safety, noise, airspace protection and overflight criteria. V. ENVIRONMENTAL REVIEW Municipal Code Title 19, Environmental Protection Procedures, identifies minor zone code amendments which refine or clarify existing land use standards as being exempt from the California Environmental Quality Act (CEQA) and thus not requiring environmental review. This exemption is pursuant to CEQA Guideline 15061(b)(3), which states "when it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA." ATTACHMENTS: 1. Planning Commission Resolution No. 6712 (ZCA) 2. Planning Commission Resolution No. 6713 (LCPA) 3. Chapter 21.85 sections proposed for amendment with revisions shown ATTACHMENT 3 ZCA 10-03/LCPA 10-02 - Inclusionary Housing strike out/underline Version of Proposed Text Changes Zoning Ordinance Chapter 21.85 is proposed to be amended as follows: Chapter 21.85 INCLUSIONARY HOUSING Sections: 21.85.010 Purpose and intent. 21.85.020 Definitions. 21.85.030 Inclusionary housing requirement. 21.85.035 New master plans or specific plans. 21.85.040 Affordable housing standards. 21.85.050 Calculating the required number of inclusionary units. 21.85.060 Inclusionary credit adjustment. 21.85.070 Alternatives to construction of inclusionary units. 21.85.080 Combined inclusionary housing projects. 21.85.090 Creation of inclusionary units not required. 21.85.100 Offsets to the cost of affordable housing development. 21.85.110 In-lieu fees. 21.85.120 Collection of fees. 21.85.130 Preliminary project application and review process. 21.85.140 Affordable housing agreement as a condition of development. 21.85.145 Agreement processing fee. 21.85.150 Agreement amendments. 21.85.155 Expiration of affordability tenure. 21.85.160 Pre-existing approvals. 21.85.170 Enforcement. 21.85.180 Savings clause. 21.85.190 Separability ofprovisionsSeverability. 21.85.010 Purpose and intent. The purpose and intent of this chapter is as follows: A. It is an objective of the city, as established by the housing element of the city's general plan, to ensure that all residential development, including all master planned and specific planned communities and all residential subdivisions provide a range of housing opportunities for all identifiable economic segments of the population, including households of lower and moderate income. It is also the policy of the city to: 1. Require that a minimum of fifteen percent of all approved ownership residential development and qualifying rental units as set forth in Section 21.85.030 A be restricted to and affordable to lower-income households; subject to adjustment based on the granting of an inclusionary credit; 2. Require that for those developments which provide ten or more units affordable to lower-income households, at least ten percent of the lower-income units shall have three or more bedrooms; ATTACHMENT 3 3. Under certain conditions, allow alternatives to on-site construction as a means of providing affordable units; and 4. In specific cases, allow inclusionary requirements to be satisfied through the payment of an in-lieu fee as an alternative to requiring inclusionary units to be constructed. B. It is the purpose of this chapter to ensure the implementation of the city objective and policy stated in subsection A. C. Nothing in this chapter is intended to create a mandatory duty on the part of the city or its employees under the Government Tort Claims Act and no cause of action against the city or its employees is created by this chapter that would not arise independently of the provisions of this chapter. 21.85.020 Definitions. Whenever the following terms are used in this chapter, they shall have the meaning established by this section: A. "Affordable housing" means housing for which the allowable housing expenses paid by a qualifying household shall not exceed a specified fraction of the county median income, adjusted for household size, as follows: 1. Extremely low-income, rental or for sale ownership units: .the product of thirty percent times thirty percent of the county median income, adjusted for household size; 2. Very low-income, rental and for sale ownership units: the product of thirty percent times fifty percent of the county median income, adjusted for household size; 3. Low-income, for sale ownership units: the product of thirty percent times eighty percent of the county median income, adjusted for household size; and 4. Low-income, rental units: the product of thirty percent times seventy percent of the county median income, adjusted for household size. B. "Affordable housing agreement" means a legally binding agreement between a developer and the city to ensure that the inclusionary requirements of this chapter are satisfied. The agreement establishes, among other things, the number of required inclusionary units, the unit sizes, location, affordability tenure, terms and conditions of affordability and unit production schedule. C. "Allowable housing expense" means the total monthly or annual recurring expenses required of a household to obtain shelter. For a for sale an ownership unit, allowable housing expenses include loan principal and interest at the time of initial purchase by the homebuyer, allowances for property and mortgage insurance, property taxes, homeowners' association dues and a reasonable allowance for utilities as defined by the Code of Federal Regulations (24CFR982). For a rental unit, allowable housing expenses include rent and a utility allowance as established and adopted by the city of Carlsbad housing authority, as well as all monthly payments made by the tenant to the lessor in connection with use and occupancy of a housing unit and land and facilities associated therewith, including any separately charged fees, utility charges, or service charges assessed by the lessor and payable by the tenant. D. "Affordable housing policy team" shall consist of the community development director, planning director, housing and redevelopment director, administrative services director/finance director and a representative of the city attorney's office. ATTACHMENT 3 E. "Combined inclusionary housing project" means separate residential development sites which are linked by a contractual relationship such that some or all of the inclusionary units which are associated with one development site are produced and operated at a separate development site or sites. F. "Conversion" means the change of status of a dwelling unit from an ownership purchased unit to a rental unit or vice versa and/or a market-rate unit to a unit affordable to lower-income households. G. "Development revision" means revisions to development permits, entitlements, and/or related maps. GrH. "Density bonus" shall have the same meaning as defined in Section 21.86.020(A)(7)ofthistitle. HI. "Extremely low-income household" means those households whose gross income is equal to or less than thirty percent of the median income for San Diego County as determined by the U.S. Department of Housing and Urban Development. IJ. "Financial assistance" means assistance to include, but not be limited to, the subsidization of fees, infrastructure, land costs, or construction costs, the use of redevelopment set-aside funds, community development block grant (CDBG) funds, or the provision of other direct financial aid in the form of cash transfer payments or other monetary compensation, by the city of Carlsbad. JK. "Growth management control point" shall have the same meaning as provided in Chapter 21.90, Section 21.90.045 of this title. KL. "Incentives or concessions" shall have the same meaning as defined in Section 21.86.020(A)( 12-T) of this title. LM. "Inclusionary credit" means a reduction in the inclusionary housing requirement granted in return for the provision of certain desired types of affordable housing or related amenities as determined by the city council. MN. "Inclusionary housing project" means a new residential development or conversion of existing residential buildings which has at least fifteen percent of the total units reserved and made affordable to lower-income households as required by this chapter. NO. "Inclusionary unit" means a dwelling unit that will be offered for rent or sale exclusively to and which shall be affordable to lower-income households, as required by this chapter. ©P. "Income" means any monetary benefits that qualify as income in accordance with the criteria and procedures used by the city of Carlsbad housing and redevelopment department for the acceptance of applications and recertifications for the tenant based rental assistance program, or its successor. PCj. "Low-income household" means those households whose gross income is more than fifty percent but does not exceed eighty percent of the median income for San Diego County as determined annually by the U.S. Department of Housing and Urban Development. ATTACHMENT 3 QR. "Lower-income household" means low-income, very low-income and extremely low-income households, whose gross income does not exceed eighty percent of the median income for San Diego County as determined annually by the U.S. Department of Housing and Urban Development. RS. "Market-rate unit" means a dwelling unit where the rental rate or sales price is not restricted either by this chapter or by requirements imposed through other local, state, or federal affordable housing programs. ST. "Offsets" means concessions or assistance to include, but not be limited to, direct financial assistance, density increases, standards modifications or any other financial, land use, or regulatory concession which would result in an identifiable cost reduction enabling the provision of affordable housing. U. "Ownership Unit" means a residential unit with a condominium or other subdivision map allowing units to be sold individually. V. "Rental Unit" means a residential unit with no condominium or other subdivision map allowing units to be sold individually. T-W. "Residential development" means any new residential construction of rental or for sate ownership or rental units; or development revisions, including those with and without a master plan or specific plan, planned unit developments, site development plans, mobile home developments and conversions of apartments to condominiums, as well as dwelling units for which the cost of shelter is included in a recurring payment for expenses, whether or not an initial lump sum fee is also required. UX- "Target income level" means the income standards for extremely low, very low and low-income levels within San Diego County as determined annually by the U.S. Department of Housing and Urban Development, and adjusted for family size. VY. "Total residential units" means the total units approved by the final decision- making authority. Total residential units are composed of both market-rate units and inclusionary units. WZ. "Very low-income household" means a household earning a gross income equal to fifty percent or less of the median income for San Diego County as determined annually by the U.S. Department of Housing and Urban Development. 21.85.030 Inclusionary housing requirement. The inclusionary housing requirements of this chapter shall apply as follows: A. This chapter shall apply to all residential market-rate dwelling units resulting from new construction of rental and "for sale" projects ownership units, as well as including the conversion of apartments to condominiumsT and to new construction of rental units where the developer receives direct financial assistance, offsets, or any incentive of the type specified in density bonus law pursuant to the provisions of Chapter 21.86 of this code, and the developer agrees by contract to limit rents for below market-rate rental units. Any developer not receiving direct financial assistance, offsets, or other incentives may voluntarily agree to provide inclusionary rental units. ATTACHMENT 3 B. For any residential development or development revision of seven or more units as set forth in Section 21.85.030 A, not less than fifteen percent of the total units approved shall be constructed and restricted both as to occupancy and affordability to lower-income households. C. For those developments which are required to provide ten or more units affordable to lower-income households, at least ten percent of the lower-income units shall have three or more bedrooms. D. This chapter shall not apply to the following: 1. Existing residences which are altered, improved, restored, repaired, expanded or extended, provided that the number of units is not increased, except that this chapter shall pertain to the subdivision of land for the conversion of apartments to condominiums; 2. Conversion of a mobile home park pursuant to Section 21.37.120 of the code; 3. The construction of a new residential structure which replaces a residential structure that was destroyed or demolished within two years prior to the application for a building permit for the new residential structure, provided that the number of residential units is not increased from the number of residential units of the previously destroyed or demolished residential structure; 4. Any residential unit which is accessory as defined in Section 21.04.020 of this code; et 5. Second dwelling units not constructed to fulfill inclusionary housing requirements and developed in accordance with Section 21.10.044 030 of this code; 6. Any project or portion of a project which is a commercial living unit as defined in Section 21.04.093 of this code; a»d 7. Any rental unit where the developer does not obtain direct financial assistance, offset, or any other incentive or concession of the type specified in density bonus law, although a mandatory density bonus may have been applied pursuant to the provisions of Chapter 21.86 of this code; and 78. Those residential units which have obtained affordable housing approvals prior to the effective date of the ordinance codified in this chapter, as set forth in Section 21.85.160 of this chapter. 21.85.040 Affordable housing standards. The affordable housing standards are as follows: A. All qualifying residential developments pursuant to Section 21.85.030 A are subject to and must satisfy the inclusionary housing requirements of this chapter, notwithstanding a developer's request to process a residential development under other program requirements, laws or regulations, including but not limited to Chapter 21.86 (Residential Density Bonus) of this code. If an applicant seeks to construct affordable housing to qualify for a density bonus in accordance with the provisions of Chapter 21.86 (Residential Density Bonus), those affordable dwelling units that qualify a residential development for a density bonus are in addition to, and do not count toward satisfying, the inclusionary housing requirements of this chapter. B. Whenever reasonably possible, inclusionary units should be built on the residential development project site. ATTACHMENT 3 C. The required inclusionary units shall be constructed concurrently with market-rate units unless both the final decision-making authority of the city and developer agree within the affordable housing agreement to an alternative schedule for development. D. Inclusionary rental units shall remain restricted and affordable to the designated income group for fifty-five years. In addition to the income of a targeted group, limitations on assets may also be used as a factor in determining eligibility for rental or for sale ownership units. Notwithstanding anything to the contrary in this chapter, no inclusionary unit shall be rented for an amount which exceeds ninety percent of the actual rent charged for a comparable market unit in the same development, if any. E. After the initial sale of the inclusionary for sale ownership units at a price affordable to the target income level group, inclusionary for sale ownership units shall remain affordable to subsequent income eligible buyers pursuant to a resale restriction with a term of thirty years or for sale ownership units may be sold at a market price to other than targeted households provided that the sale shall result in the recapture by the city or its designee of a financial interest in the units equal to the amount of subsidy necessary to make the unit affordable to the designated income group and a proportionate share of any appreciation. Funds recaptured by the city shall be used in assisting other eligible households with home purchases at affordable prices. To the extent possible, projects using for sale ownership units to satisfy inclusionary requirements shall be designed to be compatible with conventional mortgage financing programs including secondary market requirements. F. Inclusionary units should be located on sites that are in proximity to or will provide access to employment opportunities, urban services, or major roads or other transportation and commuter rail facilities and that are compatible with adjacent land uses. G. The design of the inclusionary units shall be reasonably consistent or compatible with the design of the total project development in terms of appearance, materials and finished quality. H. Inclusionary projects shall provide a mix of number of bedrooms in the affordable dwelling units in response to affordable housing demand priorities of the city. I. No building permit shall be issued, nor any development approval granted for a ' development which does not meet the requirements of this chapter. No inclusionary unit shall be rented or sold except in accordance with this chapter. 21.85.070 Alternatives to construction of inclusionary units. Notwithstanding any contrary provisions of this chapter, at the sole discretion of the city council, the city may determine that an alternative to the construction of new inclusionary units is acceptable. A. The city council may approve alternatives to the construction of new inclusionary units where the proposed alternative supports specific housing element policies and goals and assists the city in meeting its state housing requirements. Such determination shall be based on findings that new construction would be infeasible or present unreasonable hardship in light of such factors as project size, site constraints, market competition, price and product type disparity, developer capability, and financial subsidies available. Alternatives may include, but not be limited to, acquisition and rehabilitation of affordable units, conversion of existing market-rate 6 ATTACHMENT 3 units to affordable units, construction of special needs housing projects or programs (shelters, transitional housing, etc.), and the construction of second dwelling units. B. Second dwelling units constructed to satisfy an inclusionary housing requirement shall be rent restricted to affordable rental rates, and renters shall be income-qualified, as specified in the applicable affordable housing agreement. In no event shall a developer be allowed to construct more than a total of fifteen second dwelling units in any given development, master plan, or specific plan, to satisfy an inclusionary requirement. C. Contribution to a special needs housing project or program may also be an acceptable alternative based upon such findings. The requisite contribution shall be calculated in the same manner as an in-lieu fee per Section 21.85.110. 21.85.110 In-lieu fees. Payment of a fee in lieu of construction of affordable units may be appropriate in the following circumstances: A. For any qualifying residential development or development revision pursuant to Section 21.85.030 A of less than seven units, the inclusionary requirements may be satisfied through the payment to the city of an in-lieu fee. B. The in-lieu fee to be paid for each market-rate dwelling unit shall be fifteen percent of the subsidy needed to make affordable to a lower-income household one newly constructed, typical attached-housing unit. This subsidy shall be based upon the city council's determination of the average subsidy that would be required to make affordable typical, new two-bedroom/one bath and three-bedroom/two-bath for sale ownership units and rental units, each with an assumed affordability tenure of at least fifty-five years. C. The dollar amount and method of payment of the in-lieu fees shall be fixed by a schedule adopted, from time to time, by resolution of the city council. Said fee shall be assessed against the market-rate lots/units of a development. D. All in-lieu fees collected hereunder shall be deposited in a housing trust fund. Said fund shall be administered by the city and shall be used only for the purpose of providing funding assistance for the provision of affordable housing and reasonable costs of administration consistent with the policies and programs contained in the housing element of the general plan. E. At the discretion of the city council, where a developer is authorized to pay a fee in lieu of development, an irrevocable dedication of land or other non-monetary contribution of a value not less than the sum of the otherwise required in-lieu fee may be accepted as an alternative to paying the in-lieu fee if it is determined that the non-monetary contribution will be effectual in furthering the goals and policies of the housing element and this chapter. The valuation of any land offered in-lieu shall be determined by an appraisal made by an agent mutually agreed upon by the city and the developer. Costs associated with the appraisal shall be borne by the developer. F. Where a developer is authorized to pay a fee in lieu of development of affordable housing units, any approvals shall be conditioned upon a requirement to pay the in-lieu fee in an amount established by resolution of the city council in effect at the time of payment. ATTACHMENT 3 G. As an alternative to paying an in-lieu fee(s), inclusionary housing requirements may be satisfied either through a combined inclusionary housing project, pursuant to Section 21.85.080 of this chapter or new construction of inclusionary units subject to approval of the final decision-making authority. 21.85.170 Enforcement. Enforcement provisions are as follows: A. The provisions of this chapter shall apply to all developers and their agents, successors and assigns proposing a qualifying residential development governed by this chapter pursuant to Section 21.85.030 A. No building permit or occupancy permit shall be issued, nor any entitlement granted, for a project which is not exempt and does not meet the requirements of this chapter. All inclusionary units shall be rented or owned in accordance with this chapter. B. The city may institute any appropriate legal actions or proceedings necessary to ensure compliance with this chapter, including but not limited to actions to revoke, deny or suspend any permit or development approval. C. Any individual who sells or rents a restricted unit in violation of the provisions of this chapter shall be required to forfeit all monetary amounts so obtained. Such amounts shall be added to the city's housing trust fund. 21.85.190 Separability of provisionsSeverability. If any provision of this chapter or the application thereof to any person or circumstances is held invalid, the remainder of the chapter and the application of the provision to other persons not similarly situated or to other circumstances shall not be affected thereby.