HomeMy WebLinkAbout2002-01-08; City Council; 16491; Annual Housing Production Report FY 20018 $
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3 CITY OF CARLSBAD -AGENDA BILL
AB# tb,Yq ! TITLE: DEPT. HD.
MTG. I-%-o 2 ’ ANNUAL HOUSING PRODUCTION REPORT CITY ATTY.
FISCAL YEAR 2001
DEPT. PLN tz.+k CITY MGR
RECOMMENDED ACTION:
That the City Council ACCEPT the staff report on housing production for the reporting period July 1,
2000 to June 30,200l.
ITEM EXPLANATION:
Description: This agenda bill brings to the City Council staff’s eighth annual report on the progress
Carlsbad is making in housing production. The report is an information item only and complies with
the state law requirement for an annual housing report to the local legislative body. No action or
environmental review is required.
Consisting of the attached memorandum to the City Manager, the annual housing production report
focuses on new home production during fiscal year 2000-2001 (FY 2001), the second year of the
current housing cycle that began July 1, 2000, and ends June 30, 2004. The City Council adopted
the Housing Element for the current housing cycle in July 2000.
Through tables and text, the attached report provides:
. Statistical data for both market-rate units and publicly assisted housing. . Affordability of the housing produced by income group. . Comparisons of production in this second year of the current housing cycle with
overall objectives for the entire cycle and with previous fiscal years. . Observations and conclusions about the housing production data.
Report Hiahliqhts on FY 2001 Housinq Production:
. In FY 2001, 2,097 homes were built in Carlsbad, 183 units more than the previous
fiscal year and the third highest fiscal year total ever. . Eighty-one percent of all new housing produced in FY 2001 was affordable only to
upper-income households. . The median sales price for a residence was $397,000. . Ninety-four moderate-income units were built, more than double the production of the
previous fiscal year. . Nearly 300 very low and low-income units were built in FY 2001, most as a result of
lnclusionary Housing Ordinance requirements. . Indicative of the strong economy, almost 400 condominiums were built in FY 2001,
and more than 600 apartments were built over FY 2000 and FY 2001.
Report Conclusions: Carlsbad has seen significant results from its commitment to the development
of housing affordable to lower-income families. This commitment is evidenced in its policy
framework, the allocation of its own resources, and its efforts to pursue creative partnerships with the
private sector in all aspects of housing production. The fact that the market continues to strongly
support the development of housing primarily affordable to upper-income households is a key reason as to why the City must continue its commitment to fully implement the lnclusionary Housing
Ordinance. Testimony to this is the 296 very low and low-income units produced during this past
fiscal year, all but a few of which were completed because of the requirements set forth in the
lnclusionary Housing Ordinance. This same fact is expected to hold true for FY2002 when the City’s
PAGE 2 OF AGENDA BILL NO. -L?!sL 16
affordable housing stock should grow by at least 100 additional very-low and low-income units due to
lnclusionary requirements. As a result, Carlsbad will continue to make significant progress toward its
regional share objectives for the 1999-2004 housing cycle.
At this time, staff is recommending that the City Council accept this housing report. The report will
be forwarded to the Governor’s Office of Planning and Research and the California Department of
Housing and Community Development, as required by law.
FISCAL IMPACT:
None. This is an information report only. .
EXHIBIT:
1. Memorandum from the Planning Department to the City Manager, dated December 3, 2001,
with the subject: Annual Housing Production Report - Fiscal Year 2007.
EXHIBIT 1
DECEMBER 3,200l
TO: CITY MANAGER
VIA: Planning Director w
FROM: Associate Planner
ANNUAL HOUSING PRODUCTION REPORT - FISCAL YEAR 2001
This document constitutes the eighth annual report describing the City’s progress in
producing housing. It describes our progress during the previous fiscal year in meeting,
through the construction of new homes, Carlsbad’s estimated share of the region’s
forecasted growth for the four income groups identified in state law.
Report Purpose The Annual Housing Production Report is prepared pursuant to
California Government Code Section 65400 (b)(l), which in part requires an agency to
prepare an annual report to its legislative body on the progress in meeting its share of
regional housing needs.
Report Period The report covers housing production during Fiscal Year 2001 (July 1,
2000, to June 30, 2001), which marks the second year of the current five-year Housing
Element cycle. By state law, this cycle began July 1, 1999, and will end June 30, 2004.
In July 2000, the City Council adopted the General Plan Housing Element for the current
housing cycle.
Report Format The City’s progress is presented through data contained in nine tables
that provide the following information:
l Table 1 defines the four income groups.
l Tables 2 - 4 set out the qualifying income levels for the four income groups and
the corresponding rents and sales prices during Fiscal Year (FY) 2001 at which
housing was considered to be affordable.
l Table 5 provides the counts of new housing units, by income group and type of
housing stock, which completed construction this last fiscal year.
l Table 6 highlights housing affordable to the very low and low-income groups in FY
2001.
l Tables 7 and 8 provide price information on market rate homes.
l Table 9 compares our progress so far to the current five-year housing cycle
objectives.
General observations and conclusions are provided at the end of this report.
Regional Share Needs The determination of housing need for Carlsbad and all other
jurisdictions in California is derived from the Regional Housing Needs Statements
prepared by the regional councils of government (COG) before the beginning of each
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housing cycle. Based upon these assessments of need the local jurisdictions are
charged to adopt housing objectives in the housing elements of their general plans.
A regional assessment of need is an estimate of the total need for new housing construction throughout the region due to growth forecasted to occur during the five-year
cycle. The overall housing need is then broken out by four income groups: very low, low,
moderate, and other (or above moderate or upper-income) - all as defined by the federal
Department of Housing and Urban Development, or HUD. The regional needs are then
allocated to the local jurisdictions on a “regional share” basis, according to models and
formulas designed by the COG.
The regional share estimate of need prepared for Carlsbad for the current housing cycle
is shown in Table I. It is based, in part, upon the growth that the San Diego Association of Governments (SANDAG), the region’s COG, estimated for the City in its 2020 Regional
Growth Forecast. This forecast was prepared in 1998.
Table 1: Carlsbad’s Regional Share Need Estimates
For Housing Cycle 1999-2004
Income Definition* (% of
Group AM I**) New Construction Needs
Very Low 50% or under 1,770
I Low I 51 - 80 % I 1,417
1 Moderate 1 81-120% 1 1,436
1 Other I Over 120% I 1.591
1 Totals 6.214 I
* Definitions are from HUD, via the California Department of Housing and Community Development.
**AMI is the County Area Median Income. The 2001 San Diego County Area
Median Income for a family of four is $56,900.
The combined very low- and low-income (“lower”-income) estimate of need is 3,187 units.
This equals 51% of the total need for housing through June 2004.
Definitions of Income Classes Table 1 also shows that each of the four income groups
is described with reference to a percentage of the county area median income (AMI).
Defined as the median income for a family of four in a geographic area, the AMI changes
over time and with location. HUD annually revises the AMI to adjust for cost of living.
The AMI for San Diego County in 2001, for example, is $56,900; in 2000, it was $53,700.
Additionally, the AMI is modified to reflect the differences in costs of living throughout
California, as the following 2001 AMI information for different counties shows:
l San Diego: $56,900 l Shasta: $38,300
l Orange: $73,700 l Santa Clara: $87,300
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Adjustments made to the AMI correspondingly affect the dollar limits for each of the four
income groups. Income maximums for each group are also adapted to family size so that larger families have higher income limits.
Table 2 shows the FY 2001 income limits for very low, low, moderate, and other-income
groups for 2, 4, 6, 8, and 10 person households. The income limits in Table 2 correspond
to the percentages stated in Table 1. By way of example, a four-person family earning 51
to 80% of AMI, or between $28,450 and $45,500 as shown in the table below, is
considered low income. Limits are not shown and are not applicable for the other-income
group as any income greater than the moderate-income limits would apply. Thus, as
shown in Table 2, a six-person household earning any amount above $79,200 would be
considered other-income.
Table 2: FY 2001 Qualifying Limit On Annual Income
By Household Size
I I
Income Group
to Which Units Persons Per Household
Are Affordable 2 4 6 8 10
Very Low $22,750 $28,450 $33,000 $37,550 $42,100
Low $36,400 $45,500 $52,800 $60,100 $67,400
Moderate $54,600 $68,300 $79,200 $90,100 $101,000
Other ~$54,600 >$68,300 X$79,200 >$90,100 X$101,000
Prices of Affordable Housing Generally, the federal and state rule is that housing is
affordable to a given family if the family pays less than 30% of its monthly income for
housing expenses that include the rent or mortgage payment, property taxes, insurance,
utilities, and the like. A determination of whether a housing unit is affordable can be
easily made for assisted public rental housing and other public housing programs
because documentation is maintained on both the individual household’s income and the
actual cost of the unit in question (typically a rental).
A determination of whether market-rate housing is affordable according to the 30% rule,
on the other hand, presents some challenges. Builders of market-rate rental and for-sale
housing do not set prices based upon an individual buyer’s ability to pay. Rather, the
rents/prices are set to what the market will bear. Further, rents and prices do not
generally vary with the number of people in the household. For example, market rent for
a two-bedroom apartment will remain constant no matter if it is being rented to a I-, 2-, 3-,
4, or 5-person household. So the challenge is how to determine to what income grout (as opposed to an individual household) a given market-rate house is affordable, and to
do so based upon the number of bedrooms it has (as opposed to persons). A convention
developed in 1993 by member agencies of the San Diego Association of Governments is
to assume that there would be two persons per bedroom. Thus, a two-bedroom unit is
assumed to house four people.
To determine affordable a, the practice is to set rent thresholds for each income group,
using the 30% rule, with adjustments for the number of bedrooms. An additional
CITY MANAGER
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adjustment is also made for a utility allowance, as required by HUD. Table 3 shows the
resulting maximum market-rate rents (which include a $20 - $40 utility allowance that
increases with household size) for the very low, low, and moderate-income groups for FY 2001. The Table shows a two-bedroom unit with a rent of up to $711 would be at the
upper threshold of affordability for a very low-income household (i.e., at 50% of AMI). It
also shows that any rent charged that is above the moderate-income category would be
considered affordable only to the other-income group.
For-sale market-rate housing is even more complicated for purposes of determining
affordability. Neither state nor federal regulations provide a formula to determine
affordability. A multitude of factors are potentially involved. First, buyers don’t pay the full
Table 3: FY 2001 Qualifying Rents, By Bedroom
Income Group
to Which Units Number of bedrooms
Source: Carlsbad Housing Authority, based upon HUD median income data, effective
4W2001. A utility allowance is also a factor in the rents.
price of a house in cash. Instead, they take out one of many types of mortgages, subject
to many variables (fixed or variable interest rate, down payment, pay-back period,
mortgage insurance, loan origination fees, etc.). In addition, other housing costs must be
factored in, including property taxes, insurance, utilities, and homeowners’ association
dues. All of these factors are recognized “housing costs” and indirectly affect how much a
family can pay each month under the 30%-of-income rule. Only the principal and down
payment, however, relate directly to the sales price of the house. All the others are
related to financing and operating a home.
Lacking guidance from state or federal law, SANDAG member agencies developed a
simple formula in 1993 for use in determining the affordability of market-rate for-sale
houses. The formula, provided below, follows a rule-of-thumb used by many mortgage
lending institutions. As with the rental formulas discussed earlier, it was subsequently
reviewed and accepted by the SANDAG Board and the California Department of Housing
and Community Development.
Affordable sales price = 3.0 X maximum-allowed-annual-income for each class,
adjusted for bedroom count.
Based upon this formula, Table 4 gives the qualifying purchase price for housing for the
three income groups for FY 2001. To illustrate, a two-bedroom house costing no more
than $85,350 would be the maximum affordable to a very low-income family (at 50
percent of median-income). This price is three times the $28,450 annual income limit for
a very low-income family of four (from Table 2). On the other hand, a two-bedroom home
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costing more than $204,900 would be affordable only to families in the other-income
group since the price is more than 120 percent of median income.
Table 4: FY 2001 Qualifying Purchase Price, By Bedroom
( = 3X Annual Income*) I I I I Income Group
to Which Units Number of Bedrooms
Are Affordable 1 2 3 4 5
Very Low $68,250 $85,350 $99,000 $112,650 $126,300
Low $109,200 $136,500 $158,400 $180,300 $202,200
Moderate $163,800 $204,900 $237,600 $270,300 $303,000
Other >$163,800 >$204,900 >$237,600 X$270,300 >$303,000
* 3X multiplier was developed by an ad hoc committee at SANDAG with subsequent approval by the SANDAG
Board in 1993. (There is no formula in state law.) The rule also assumes 2 persons per bedroom to provide a
correspondence back to HUD affordability rules based upon oeusons per household (as opposed to bedrooms).
In FY 2001, 40, 6-bedroom houses were built in Carlsbad. HUD tables do not provide for 12 or more person
households. Therefore, these homes were treated as if they were Sbedroom homes,
Determining Affordability Based on the above information, two variables must be
known about a housing unit to determine its affordability: a) the sales price or rent, and b) the number of bedrooms. Staff must collect this information for each individual housing
unit. For housing created under one of the City’s housing assistance programs this is
relatively easy, as we get the data via the program. However, for new market-rate rentals
and for-sale homes, staff must obtain the sales price or rent information directly from the
builders. Staff performs this task once a quarter via a voluntary survey of all newly
constructed units. Most builders are cooperative and provide the information we need. A few are not. If the builder is not responsive, staff attempts additional contacts by mail and
phone. If necessary, we also research Building Department records, County Assessor’s
data, and the Internet for any missing information on bedroom counts and sales prices. Often there is a delay of several weeks before a home’s sales price becomes publicly
available. Sometimes cost information simply remains unavailable.
Due to the research and delays involved in documenting prices and rents and assembling
data, this report usually trails the end of the reporting period by a number of months. For
this reporting period, staff obtained, with the quarterly survey and additional research,
sales prices and rents for all but seven homes.
Housing Activity and Affordability in FY 2001 Table 5 and the information below
summarize and expand on completed housing in FY 2001. Definitions of terms used in
the table and the remainder of the report are as follows:
Market Rate Units - Units that received no financial assistance from the City and have no affordability restrictions.
Assisfed Units - Units that received financial assistance from the City and have
affordability restrictions.
Single-family detached - A single home on a single lot, detached from any
other unit, except for an attached second dwelling unit.
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Single-family attached - A single home on a single lot, attached to another unit
that is on a separate lot.
Condominium - A detached or attached home on commonly owned property.
Apartment - A unit that can only be rented and not owned.
Duplex - Two units on a single lot. Units cannot be individually sold.
Assisted Unit, For Sale - An attached or detached single-family home or a
condominium.
Second Dwelling Unit - A completely independent dwelling unit on the same lot
as a primary residence. A second dwelling unit may be attached to or detached
from the primary residence.
Table 5: Affordability of Housing Constructed in FY 2001 I Type of Units
Zate Units 1 Assisted Units 1 I Market F
Income Group Single Single Condo- Apart- Apart- Second
To Which Units Family Family
are Affordable Detached Attached minium ment Duplex For Sale ment Dwelling Totals
Unit
Very Low 0 0 0 0 0 0 138 0 138
Low 0 0 0 0 0 31 92 35 158
Moderate 3 0 79 12 0 0 0 0 94
Other 1,353 26 279 42 0 0 0 0 1,700
Unknown* 1 0 0 0 6 0 0 0 7
Totals 1.357 26 358 54 6 31 230 35 2.097
*Because the required information was not available for 7 homes, it was not possible to determine accurately to what income
group these units were affordable. It is likely that the home should be placed in the “other” category and the duplexes either in
the “moderate” or “other” category.
Overall Production
l The 2,097 homes produced in FY 2001 was the third highest fiscal year total ever,
eclipsed only by FY 1986 (2,326 units) and FY 1987 (2,308 units). It is also 183
more units than FY 2000.
l Condominium production (market rate and assisted) was more than the
condominium output of the past four fiscal years combined.
Very Low and Low-Income Housing
l Very low and low-income housing production was more than the very low and low-
income output of the past four fiscal years combined.
l Nearly 300 very low and low-income homes, or 14% of the fiscal year total, were
built, most as a result of lnclusionary Housing Ordinance requirements and City
financial assistance. Information about these homes, a mix of for-sale and rental
units, is provided below:
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Table 6: Very low and Low-Income Housing Built in FY 2001
Project Location Description Restrictions City
Assistance
Income cannot exceed 50%
Laurel of AMI ($28,450 for a family Near Palomar 138 apartments for very of fourJ. rent cannot exceed $1,340,000
Tree Airport low-income families only. $711 fo; a 2-bedroom apart-
construction
loan
ment.
Incomes cannot exceed 60% $920,000
Poinsettia Near 92 apartments for low- of AMI ($34,150 for a family construction
Station Poinsettia
Transit Station income residents only. of four); rent cannot exceed loan and tax
$828 for a 2-bedroom apart- exempt
ment. bonds
For the low-income units,
Serrano
Second
Dwelling
Units
A condominium corn- incomes cannot exceed 80%
munity with 90 low- of AMI ($45,500 for a family income units and 34 of four); Units are made $1,350,000 Ranch0
Carrillo market-rate units. Thirty- affordable to low-income construction
one of the low-income families through “silent” loan
units were finaled during second and third mortgages
FY 2001. provided by the developer
and the city.
Small independent living If rented, second dwelling
units located on property units must be affordable to
with a larger, primary low-income persons with
Throughout residence. Many of the incomes not exceeding 80%
Carlsbad 35 built in FY 2001 of AMI ($31,850 for one None
partially satisfied the person); rent cannot exceed
inclusionary housing re- $796 for one person renting a
quirements of develop- one bedroom unit.
ers.
Moderate-Income Housing
l Builders completed 94 moderate-income homes. This accounted for 4% of all
housing built in FY 2001.
l All moderate-income homes were market rate and completed without City
assistance. They include:
o Thirty-eight, two-bedroom condominiums with sales prices between
$167,000 and $204,700.
o Forty-one, three-bedroom condominiums with sales prices between
$169,800 and $236,500.
o Three, four-bedroom single-family detached homes with sales prices
between $257,000 and $266,000.
o Twelve apartments with rents of $1,295 to $1,365. (These units, along
with 42 other apartments affordable to upperrincome families, are all
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CITY MANAGER HOUSING AFFORDABILITY REPORT FY 2001
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located in Mirabella at Aviara, a 288-unit apartment project completed in
FY 2001.)
Other of Upper-income Housing
l Eighty-one percent, or 1,700 of the 2,097 units built in FY 2001, were affordable
only to upper-income households.
l All single family attached units, 99% of single-family detached units, 78% of
condominiums, and 15% of apartments were upper-income affordable only.
Medians and Extremes
Table 7 compares the median price for for-sale, market rate housing built in this and the
previous reporting periods. Table 8 provides high and low sales prices.
Table 7: Comparisons of Median Sales Prices
Table 8: Low and High Sales Prices
FY 2001 (Market Rate Units Only)
Structure Sales Price
Type Low High
Single-Family Detached $256,990 $2,850,000
Single-Family Attached $263,500 $406,000
Condominium $167,000 $672,459
Progress Toward Housing Cycle Objectives Table 9 below lists the number of
dwellings completed during FY 2000 and FY 2001 - the first two years of the current
housing cycle. The table also shows the cumulative progress achieved during those fiscal
years toward meeting the new housing needs (from Table I) estimated for the housing
cycle over its entire five-year term (1999-2004). Cumulative built housing numbers are also expressed as a percentage of the regional share figures.
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Table 9: Cummulative Progress Toward Housing Cycle Objectives
Income Group To
Other 1,679 1,700 3,379
Unknown* 11 7 18
Totals 1,914 2,097 4,011
*Neither sale price nor rent information were available for these units.
1,591 212%
n.a. n.a.
6,214 65%
Very-low and Low Income Housing
l Through the first two years of the current five-year housing cycle, the City has built
9% of the estimated housing cycle need for very low-income housing and 22% of
the estimated housing cycle need for low-income housing.
l With the exception of second dwelling units, all very low and low-income housing
built resulted from lnclusionary Housing Ordinance requirements and required city
financial assistance.
l More than half (55%) of the 634 apartments built in FY 2000 and FY 2001 were
restricted to occupancy by very low and low-income families.
Moderate-Income Housing
l Moderate-income production (94 units) was double that of FY 2000 (42 units).
The significant number of condominiums built contributed to this increase.
l Through the first two years of the current five-year housing cycle, Carlsbad has
achieved 9% of its estimated housing cycle need for moderate-income housing
(136 of 1,436 units).
All moderate-income housing was built without city assistance. When Carlsbad
considered including a moderate-income requirement as part of its inclusionary housing
ordinances in the early 1990s the requirement was set aside when the private sector
assured the City that it would produce moderate-income housing without inclusionary
requirements. Based upon this assurance, the City made a conscious decision to focus
its own resources and efforts on lower-income housing. The industry’s production figures
do not stand up well to its earlier assurances.
Ofher-income housing production
l The City has already exceeded by two times its need of other-income units for the
entire 1999-2004 housing cycle.
l Forty-four percent (276 units) of apartments built in the first two years of the
housing cycle were affordable to other-income households only.
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HOUSING AFFORDABILITY REPORT FY 2001
DECEMBER 3,200l
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Conclusions
As demonstrated in this report, Carlsbad has seen significant results from its commitment
to the development of housing affordable to lower-income families. This commitment is
evidenced in its policy framework, the allocation of its own resources, and its efforts to
pursue creative partnerships with the private sector in all aspects of housing production.
While the City has made positive strides in producing affordable housing, the need for
housing affordable to very low, low, and moderate-income families continues to exceed
the community’s collective ability to produce it. At the same time, total production of new
homes affordable to upper-income groups in FY 2001 hit the highest level in many years,
as the swing of the economic cycle provided the conditions necessary for both production
and purchases of new housing.
Clearly, Carlsbad’s private sector continues to produce primarily up-scale housing. A
number of factors contribute to this trend: demand for higher-end housing remains
relatively strong; tax incentives for producing more affordable housing are few; land costs
are high; and, despite lower, relatively stable or declining interest rates in recent years,
per-square-foot production costs remain substantial, so that profit margins on more
affordable housing are low.
The fact that the market continues to strongly support the development of housing
primarily affordable to upper-income households is a key reason as to why the City must
continue its commitment to fully implement the lnclusionary Housing Ordinance.
Testimony to this is the nearly 300 very low and low-income units produced during FY
2001, the majority of which were completed because of lnclusionary Housing Ordinance
requirements.
In FY 2002, inclusionary requirements will continue to produce housing available to very
low and low-income families by the completion or construction of the following projects:
l Serrano - The buildout of this Ranch0 Carrillo project will yield an additional 51
condominiums.
l Vista Las F/ores - This project, near Aviara Parkway and Palomar Airport Road,
will add 28 apartments.
l Terraces at Sunny Creek - This residential community along the east side of El
Camino Real will contribute 50 apartments and several second dwelling units.
Together, these projects will add over 100 homes affordable to very low and low-income
families. As a result, Cartsbad will continue to make significant progress toward its regional share needs for the 1999-2004 housing cycle.
Lht SCOlT DONNELL