HomeMy WebLinkAbout2002-10-22; City Council; 16946; Annual Housing Production Report FY 2002n
CITY OF CARLSBAD -AGENDA BILL
AB# 16,946 I TITLE: DEPT. HD.
10-22-02 ANNUAL HOUSING PRODUCTION REPORT
FISCAL YEAR 2002
DEPT.
CITY ATTY.
CITY MGRa
RECOMMENDED ACTION:
That the City Council ACCEPT the staff report on housing production for the reporting period July 1,
2001 to June 30,2002.
ITEM EXPLANATION:
Description
This agenda bill brings to the City Council staffs ninth 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 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 2001-2002 (FY 2002), the third year of the
current housing cycle that began July 1, 1999 and ends June 30,2004.
Through tables and text, the attached report provides:
0 Statistical data for both market-rate and publicly assisted homes.
0 Affordability of the housing produced by income group.
0 Comparison of production in this third year of the current housing cycle with overall objectives
0 Observations and conclusions about the housing production data.
for the entire cycle.
Report Hiqhliqhts on Housinq Production
In FY 2002:
0 Builders completed 1,460 homes, over 600 units fewer than FY 2001’s output of 2,097
homes. Despite the decrease, the 608 condominiums built in FY 2002 far exceeded any
annual condominium output since the 1980s.
0 The median sales price for a residence was $459,000, up $62,000 from the prior fiscal year.
0 123 new homes affordable to very low and low-income (lower-income) families were built,
including 59 condominiums, 28 apartments, and 36-second dwelling units.
During the first three years of the current housing cycle (July 1, 1999 - June 30, 2002):
Builders constructed 5,471 new homes in Carlsbad, 85% of which were considered
0 Nearly 700 apartments were completed, 56% of which were restricted to occupancy by lower-
0 601 lower-income units were built. Most of these units resulted from the City’s inclusionary
affordable to the other, or “upper”-income category.
income families.
requirements and required city financial assistance.
Report Conclusions
Carlsbad continues to see 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
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PAGE 2 OF AGENDA BILL NO. 16,946
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
Carlsbad must continue its commitment to fully implement the lnclusionary Housing Ordinance.
Testimony to this is the 601 lower-income units built so far in this housing cycle, most of which were
completed because of inclusionary requirements. This same fact is expected to hold true for the
several hundred additional lower-income homes that likely will be completed or underway by the end
of the current housing cycle in June 2004.
Staff recommends 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.
ENVIRONMENTAL:
This is an information item only that does not have the potential to physically impact the
environment. Therefore, it is not subject to the California Environmental Quality Act (CEQA)
pursuant to CEQA Guideline 15378.
FISCAL IMPACT:
None. This is an information report only.
EXHIBIT:
I. Memorandum from the Planning Department to the City Manager, dated October 1, 2002,
with the subject: Annual Housing Production Report - Fiscal Year 2002.
a
Exhibit 1
OCTOBER 4,2002
TO: CITY MANAGER
VIA: Planning Director
FROM: Associate Planner
ANNUAL HOUSING PRODUCTION REPORT - FISCAL YEAR 2002
This document constitutes the ninth annual report describing the City’s progress in producing housing.
It describes our progress during the previous fiscal year (July 1, 2001 to June 30, 2002) 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.
Purpose - The Annual Housing Production Report is prepared pursuant to California Government
Code Section 65400 (b)(l) which in part requires an agency to report annually to its legislative body
on the progress in meeting its share of regional housing needs.
Format - The City’s progress is reported with data contained in the following nine tables:
Table 1 defines the four income groups.
Tables 2 - 4 set out the qualifying income levels for the four income groups and the
corresponding rents and sales prices during FY 2002 at which housing was considered to be
affordable.
0 Table 5 provides the counts of new housing units, by income group and type of housing stock,
which completed construction this last fiscal year.
0 Table 6 highlights housing affordable to very low and low-income persons in FY 2002.
0 Tables 7 and 8 provide price information on market rate homes.
0 Tables 9 and 10 compare our progress so far to the current five-year housing cycle objectives.
Reporting Period - The report covers housing production in FY 2002, which marks the third year of
the current five-year Housing Element cycle. By state law, this cycle began July I, 1999, and will end
June 30, 2004. In 2000, the City Council adopted the General Plan Housing Element for the current
housing cycle.
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 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.
3
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Page 2
The regional share estimate of need prepared for
Carlsbad for the current housing cycle is shown in
Table 1. 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.
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 Groups - Table 1 also shows
that each of the four income groups is described with
Table 1: Carlsbad‘s Regional Share Need Estimates
For Housing Cycle 1999-2004
hcome Group Definition* (% of New Construction
AMP’) Needs
Very Low 50% or under 1,770
Low 51 - 80 % 1,417
Moderate 81 - 120% 1,436
Other Over 120% 1,591
Totals 6,214
*DefinitionsarrfromHUD,viatheCaliforniaDepartmentofHousingand
CommunityDevelopment.
PAMIistheCountyAreaMedianhcome.The2002SanDiegoCounty
AreaMedianhcomeforafamilyoffouris$60,KlO.
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 2002, for example, is
$60,100; in 2001 , it was $56,900.
Additionally, the AMI is modified to reflect the differences in costs of living throughout California, as the
following 2002 AMI information for different counties shows:
0 San Diego: $60,100 0 Shasta: $39,200
Orange: $75,600 0 Santa Clara: $96,000
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 2002 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 $30,050 and
$48,100 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
$83,650 would be considered other-
income.
Table 2: W2002 Qualifying Limit On Annual income
By Household Sue
hcome Group Wrsons Wr Household
2 4 6 8 10
Very Low $24,050 $30,050 $34,850 $39,650 $44,450
Low $38,450 $48,100 $55,750 $63,450 $71,150
Merate $57,700 $72,100 $83,650 $95,200 $106,750
Other >$57,700 >$72,100 >$83,650 >$95,200 >$106,7%
Source: Carlsbad Housing Authoritybasedon HUD M edian hcome data effective m@oo2
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Page 3
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 rentslprices 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 group
(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 assumes two persons per bedroom.
Thus, a two-bedroom unit is assumed to house four people.
To determine affordable housing expenses for
rentals, the practice is to set thresholds for
each income group, using the 30% rule, with
adjustments for the number of bedrooms. An
additional adjustment is also made for a utility
allowance, as required by HUD. Table 3
shows the resulting maximum market-rate
rental expenses (which include rent and a $40-
$90 utility allowance that increases with
household size) for the very low, low, and
moderate-income groups for FY 2002. To
illustrate, the Table shows that for a very low-
Table 3: FY2002 Qualifying Rent and Utility Expenses
BY Number of Bedrooms
hcome Group Number of bedrooms
I 2 3 4 -
Very Low $601 $751 $871 $991
Low $961 $1,203 $1,394 $1,586
Moderate $1,443 $1,803 $2,091 $2,380
Other >$I ,443 >$I ,803 >$2,091 >$2,380
effective y3y2002.
Source:CarlsbadHousingAuthority,baseduponHUDmedianincomedata,
income couple earning $24,050 annually, a one-bedroom apartment would be considered affordable
to them only if the rent and utility expenses combined did not exceed $751 per month, or 30% of their
income.
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 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
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Page 4
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 below gives the qualifying purchase price for housing for the
different income groups for FY 2002. To illustrate, a two-bedroom house costing no more than
$90,150 would be the maximum affordable to a very low-income family (at 50 percent of median-
income). This price is three times the $30,050 annual income limit for a very low-income family of four
as shown on Table 2. On the other hand, a two-bedroom home costing more than $216,300 would be
affordable only to families in the other-income group since the price is more than 120 percent of
median income.
Table 4: FY2002 Qualifying Purchase Price,
By Number of Bedrooms
hcome Group Number of Bedrooms
1 2 3 4 5
Very Low $72,150 $90,150 $104,550 $118,950 $133,35
Low $115,350 $144,300 $167,250 $190,350 $213,45
Moderate $173,100 $216,300 $250,950 $285,600 $320,25
Other >$173,110 >$216,300 >$250,950 >$285,600 >$320,25
*3XmultiplierwasdevelopedbyanadhoccommitteeatSANDAG withsubsequentappmvalby
theSANDAGBoardin1493.~hereisnoformulainstatelaw.)TherulealsoassumesZpersons
perbedroom to pmvideacorrespondence backto HUD affordabilityrules baseduponneLsm%pe
househoId(asopposedto bedrooms). SinceHUD tablesdonotprovideforl2ormoreperson
households,homes with more than 5-bedrooms aretreatedas iftheywere5-bedroom 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.
On the other hand, 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.
Due to the research and delays involved in documenting prices and rents and assembling data, this report trails the end of the reporting period by a few 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 2002 - Table 5 and the information below summarize and
expand on housing completed in FY 2002. Definitions of terms used in the table and the remainder of
the report are as follows:
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Page 5
Market Rate Units - Units that received no financial assistance from the City and have no
affordability restrictions.
Assisted Units - Units that received financial assistance from the City and/or other subsidy
sources 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.
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 - A condominium or single-family attached or detached home.
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 2002
Market Rate Units
Second Totals For Sale Apart- Single Family Single Family Condo- Apart- Duplex Group
Assisted Units
Detached Attached minium ment Dwelling Unit ment
Very Low 0 0 0 0 0
0 75 0 0 Moderate 0 4 68 3 0
36 106 59 11 Low 0 0 0 0 0
0 17 0 17
Other 763 10 481 1 0 0 0 0 1,255
Unknown' 5 0 0 0 2 0 0 0 7
ITotals 768 14 549 4 2 I 59 28 I 36 1,460
'Because the required information was not available for 7 units, it was not possible to determine accurately to what income group these units were affordable. It
is likely that the single-family detached units should be placed in the "other" category and the duplex either in the 'rrcderate" or 'other" category.
~~~~~~~ ~ ~ ~
Comments on Housing Production in FY 2002
0 In FY 2002, 1,460 new homes were built, over 600 units fewer than FY 2001's total of 2,097
units. The decrease can be explained in part as large communities such as Rancho Carrillo
near completion.
0 Despite the drop in overall production, the 608 condominiums built (market rate and assisted)
in FY 2002 far exceed any annual condominium output since the 1980s.
0 Single-family detached dwellings and condominiums accounted for 52% and 42% of the fiscal
year's production, respectively.
Comments on Housing Affordability in FY 2002
0 Most (85%) of the housing built, including all single-family detached units, was affordable to
upper-income households only.
0 Builders completed 75 moderate-income homes, accounting for 5% of all housing built in FY
2002. Most of the homes were condominiums, and none received city-assistance. Prices
7
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Page 6
ranged from $169,000 for a two-bedroom condominium to $256,000 for a four-bedroom,
single-family attached home.
0 Eight percent (123 units) of all housing was built for very low and low-income families, with the
majority of it made possible by the City’s inclusionary housing requirements and financial
assistance. Table 6 highlights this newest lower-income housing in Carlsbad.
Project
Vista Las
Flores
Serrano
Second
Dwelling
Units
Occupancy Restrictions
Available for renters with incomes at
between 50% and 60% of AMI. At
60% of AMI, $810 would be the maximum housing expense (rent and
utilities) paid by a family of three in a
two-bedroom apartment.
For the low-income units, incomes
cannot exceed 80% of AMI ($48,100
for a family of four): Units are made
affordable to low-income families
through “silent” second and third
mortgages provided by the developer
and the city.
If rented, second dwelling units
must be affordable to low-income persons with incomes not
exceeding 80% of AMI ($33,650 for one person); rent (with utilities)
cannot exceed $841 for one person
renting a one-bedroom unit.
1
Table 6: Very Low and Low-Income Housing Built in FY 2002
Location 1 Description
Aviara
Parkway and
Cobblestone
Road
Twenty-eight two and three
bedroom apartments.
Seventeen units are affordable
to very low-income families and
eleven units are affordable to
low-income families.
Rancho Carrillo
A condominium community with
90 low-income units and 34
market-rate units. Fifty-nine of the low-income condominiums
were completed in FY 2002.
Small independent living units
located on property with a larger,
Throughout primary residence. Many of the
Carlsbad
satisfied the inclusionary housing
36 built in FY 2002 partially
requirements of developers.
City Assistance
$364,000
construction
loan
$1,350,000
construction
loan
None
Medians and Extremes - Table 7 compares the median price for for-sale, market rate housing built in
FY 2002 and FY 2001. Table 8 provides high and low sales prices.
Table 7: Comparisons of Median Sales Prices Table 8: Low and High Sales Prices
FY2001 vs. N2002 (Market Rate Units Only) N2002 (Market Rate Units Only)
Median Sales Prices Annual Percent Sales Price
Structure Type Structure Type
Single-Family Detached $421,945 $525,200 $103,255 24.5%
Single-Family Attached $302,000 $380,500 $78.500 26.0%
Condominium $292,700 $322,745 $30,045 10.3%
Single-Family Detached $296,900 $3,000,000
Single-Family Attached $243,372 $444,500
Condominium $169,000 $818,990
All For-Sale Units $397,000 $459,000 $62,000 15.6%
Progress Toward Housing Cycle Objectives - Table 9 below provides the number of dwellings
completed during the first three years of the current housing cycle. The table also shows the
cumulative progress achieved during those years toward meeting the new housing needs (from Table
1) estimated for the housing cycle over its entire five-year term (1999-2004).
8
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002 Paae 7
Table 9: Cummulative Progress Toward Current Housing Cycle Objectives
By Income Group I Housing Units Built Housing Units Needed I I FY 2000 PI2001 FY 2002 Total Objective I I Income Group Objective Percentage of
I Achieved
Very Low 23 130 17 170
6,214 08% Totals 1,914 2,097 1,460 5,471
ma. n.a. Unknown' 11 7 7 25
1,591 291 % Other 1,679 1,700 1,255 4,634
1,436 15% Moderate 42 94 75 21 1
1,417 30% Low 159 150 106 423
1,770 10%
'Neither sale pnce nor rent information were available for these units.
Comments on Production during the Housing Cycle
e The City has already exceeded by nearly three times its estimated need of other-income units
for the entire 1999-2004 housing cycle.
e Single-family detached dwellings accounted for 63% of all new construction, condominiums
19%, and apartments 12%.
e Almost 700 apartments have been built in the first three years of the housing cycle. About
56% of the apartments are restricted to occupancy by very low and low-income households.
In the first three years of the housing cycle, 601 lower-income units have been completed,
which is 11% of the total housing built during the cycle. About 30% of these lower-income
units were built for very low-income families. With the exception of second dwelling units, all
lower-income housing built resulted from lnclusionary Housing Ordinance requirements and
required city financial assistance. See Table 10 below for additional information.
Table 10: Types of Lower-Income Housing Built
First Three Years of Current Housing Cycle
Second
Dw ellina Units-
Condominiums 95
Single-family Attached 24
Second Dwelling Units 108
Totals 601
Conclusions
As this report demonstrates, Carlsbad has seen significant results from its commitment to the
development of housing affordable to lower-income families. This commitment is evidenced in its
CITY MANAGER
HOUSING AFFORDABILITY REPORT FY 2002
OCTOBER 4,2002
Paae 8
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 lower-income 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 remains high, 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. Additionally, when the City
considered including a moderate-income requirement as part of its inclusionary housing ordinances in
the early 1990~~ 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 of moderate-income housing, averaging about 6% of annual production
since July 1994, does not stand up well to its earlier assurances.
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 123 very low and low-income
units produced during FY 2002, most of which were completed because of Carlsbad’s inclusionary
requirements.
In the remaining two years of the current housing cycle, inclusionary requirements will continue to
produce more new housing affordable to lower-income families. New projects that will be completed
or likely underway by the end of housing cycle are listed below.
Terraces at Sunny Creek - 50 apartments
La Costa Greens - 180 apartments
Calavera Hills - 106 apartments
Kelly Ranch - 120 apartments
0 Bressi Ranch - 100 apartments
As a result of these projects, Carlsbad will add over 550 lower-income homes and continue to make
significant progress toward its estimated regional share need. * SCOTT DONNELL