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HomeMy WebLinkAbout2006-04-18; City Council; 18525; Annual Housing Production Report FY 2005CITY OF CARLSBAD - AGENDA BILL AB# 18.525 MTG. 4/18/06 DEPT. PLN TITLE: ANNUAL HOUSING PRODUCTION REPORT FISCAL YEAR 2005 g o RECOMMENDED ACTION: That the City Council ADOPT Resolution No. 2006-096 ACCEPTING the Annual Housing Production Report for fiscal year 2004-2005. ITEM EXPLANATION: Report Description This agenda bill brings to the City Council staffs twelfth 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 2004-2005 (FY 2005). The report covers housing production and affordability in FY 2005, which marks the sixth year of what state law originally intended as a five-year Housing Element cycle. By law, this cycle began July 1, 1999, and was to end June 30, 2004. However, legislation passed in 2003 added a sixth year to the cycle, extending it through June 30, 2005. Through tables and text, the attached report provides: • Statistical data for both new market-rate and publicly assisted homes. • New housing affordability by income group. • Production and affordability information for homes built in FY 2004 and the first five years of the current housing cycle. • Observations and conclusions about the housing production data. Report Highlights on Housing Production In FY 2005: Q • Developers built 1,706 new homes in Carlsbad, compared to 591 units built in FY 2004 UJ and 725 units built in FY 2003. O • The median sales price for all for-sale units was $897,621, up $198,986 (or 28.5%) from ££ the previous fiscal year. • Developers built 58 town homes or condos, 391 apartments, and 12 second dwelling units affordable to low-income households. During the first six years of the current housing cycle (July 1, 1999 - June 30, 2005): • Builders completed 8,423 units in Carlsbad, 81% of which were considered affordable to other- or "upper"-income households. • Housing built affordable to moderate income households accounted for almost five percent (461 units) of total units completed. 72% of the 1,626 apartments completed were built affordable to lower-income families. Carlsbad's lower-income housing stock increased to 1,181 units, compared to 720 in FY 2004. Most of these units resulted from the City's inclusionary requirements and requiredOcity financial assistance. OO PAGE 2 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 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 why the City must maintain its commitment to fully implement the Inclusionary Housing Ordinance. Testimony to this is the 1,181 lower-income units produced so far in this housing cycle and the several lower-income units now under construction, most of which are the result of inclusionary requirements. 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. EXHIBITS: 1. City Council Resolution No. 2006-096 2. Memorandum to the City Manager from the Planning Director dated March 20, 2006 with the subject: Annual Housing Production Report - Fiscal Year 2005. DEPARTMENT CONTACT: Michele Masterson, (760) 602-4615, mmast@ci.carlsbad.ca.us 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2006-096 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACCEPTING THE FY 2004-2005 ANNUAL HOUSING PRODUCTION REPORT WHEREAS, the Housing Element of the General Plan requires that an annual Housing Production Report be prepared and submitted to the local agency, the Governor's Office of Planning and Research and the California Department of Housing and Community Development; and WHEREAS, the current report covers the period July 1, 2004 to June 30, 2005; and WHEREAS, Carlsbad continues to see significant results from its commitment to the development of housing affordable to lower-income families; and NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council of the City of Carlsbad accepts the report and directs the Planning Director to submit the report to the Governor's Office of Planning and Research and the state Department of Housing and Community Development. PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad City Council held on the 18th day of April , 2006, by the following vote, to wit: AYES: Council Members Lewis, Hall, Kulchin, Packard and Sigafoose NOES: None cT<M>i LORRAINE M. WOOD, City (SEAL) EXHIBIT 2 March 20, 2006 TO: CITY MANAGER VIA: COMMUNITY DEVELOPMENTLDIRECTOR PLANNING DIRECTOR FROM: Management Analyst - Planning Dept. ANNUAL HOUSING PRODUCTION REPORT - FISCAL YEAR 2005 This document constitutes the twelfth annual report describing the City's progress in producing housing. It describes our progress during the previous fiscal year (July 1, 2004 to June 30, 2005, FY 2005) 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)(1) which in part requires an agency to report annually to its legislative body on the progress in meeting its share of regional housing needs. Reporting Period - The report covers housing production and affordability in FY 2005, which marks the sixth year of what state law originally intended as a five-year Housing Element cycle. By law, this cycle began July 1, 1999, was to end June 30, 2004. However, legislation passed in 2003 added a sixth year to the cycle, extending it through June 30, 2005. Along with covering FY 2005, this report also discusses production and affordability during the six years of the housing cycle. Report Format - The City's production and progress during FY 2005 and the housing cycle is reported with data contained in the following 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 considered affordable to the income groups during the reporting period (FY 2005). • Table 5 provides the counts of new housing built, by income group and housing type, in FY 2005. • Table 6 highlights the low-income housing built in FY 2005. • Tables 7 and 8 provide price information on the market rate homes built in FY 2005. • Table 9 compares our progress so far to the current housing cycle objectives. • Tables 10-12 focus on production and affordability overall during the current housing cycle. ¥ FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 2 Regional Share Needs - The determination of housing need for Carlsbad and all other jurisdictions in California derived from the Regional Housing Needs Statements prepared by 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 six-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, and the state Department of Housing and Community Development, or HCD. The regional needs are then allocated to the local jurisdictions on a "regional share" basis, according to models and formulas designed by the COG. Table 1 shows the regional share estimate of need prepared for Carlsbad for the current housing cycle. 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 1999-2005 Income Group Definition* (% of New Construction Needs (in AMI")housing units) Very Low Low Moderate Other Totals 50% or under 51 - 80 % 81 -120% Over 120% 1,770 1,417 1,436 1,591 6,214 * Definitions are from HUD, via the California Department of Housing and Community Development. "AMI is the County Area Median Income. The 2004 San Diego County Area Median Income fora family of four is $63,400. The combined very low and low-income ("lower"-lncome) estimate of need is 3,187 units. This equals 51% of the total estimated need for the housing cycle. As mentioned earlier, the state extended the housing cycle one year to June 2005. New construction need estimates in Table 1, although developed for a five-year housing cycle ending in 2004, will continue to apply through the cycle's sixth year. FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page3 Definition of Income Groups - Table 1 also defines each of the four income groups with reference to a percentage of the county area median income (AMI). Defined as the median income for a family of four in a specific geographic area, the AMI changes over time and with location. HCD annually revises the AMI based on HUD data and cost of living issues such as the relationship of housing prices to income. For 2005, HCD established the AMI for San Diego County at $63,400. Additionally, HCD modifies the area median income to reflect the differences in costs of living throughout California, as the 2005 AMI information for different counties shows: > San Diego: > Orange: > Shasta: > Santa Clara: $63,400 $75,700 $49,100 $105,500 Some regions of California, including San Diego County, have high housing costs relative to incomes. In recognition of this factor, HCD adjusted the AMI and increased the income limits in 2005 for the very low and low-income groups in these regions. This potentially enables a larger group of people to qualify for housing assistance. However, these adjustments did not have an effect on housing built in Carlsbad; they did not cause the affordability of any housing produced in FY 2005, for example, to change from one income group to another. Furthermore, the housing in the City built specifically for low-income families in FY 2005 was already restricted to occupancy by that income group. The income maximums for each income group listed in Table 1 are adjusted for family size so that larger households have higher income limits. Table 2 shows the FY 2005 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 standard percentages stated in Table 1, but they also reflect the adjustments discussed in the prior paragraph that are necessary to recognize our region's high housing costs relative to incomes. Table 2: FY 2005 Qualifying Limits On Annual Income By Household Size Income Group Very Low -OW Moderate Other 2 $27,600 $44,150 $60,900 >$60,900 Persons Per Household 468 $34,500 $55,200 $76,100 >$76,100 $40,000 $64,050 $88,300 >$88,300 $45,550 $72,850 $100,450 >$1 00,450 10 $50,700 $81,100 $112,650 >$1 12,650 Source: "2005 Income Limits," state Department of Housing and Community Development. February 25. 2005 (Numbers based on HUD income data effective FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 4 Prices of Affordable Housing - Generally, the federal and state rule is that housing affordable to a given family if the family pays 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 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 that the market will bear. Further, rents and prices do not generally vary with the number of people in the household. For example, a market rent for a two-bedroom apartment will remain constant no matter if it is being rented to a 1- ,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 utility allowance, as required by HUD. Table 3 provides the resulting maximum market rate rental expenses (which include rent and a $32-$63 utility allowance that increases with household size) for the very low, low, and moderated-income groups for FY 2005. Table 3: FY 2005 Qualifying Rent and Utility Expenses By Number of Bedrooms Number of bedrooms Income Group Very Low -OW Moderate Other 1 $690 $1,104 $1,523 >$1,523 2 $863 $1,380 $1 ,903 >$1,903 3 $1,000 $1,601 $2,208 >$2,208 4 $1,139 $1,821 $2,511 >$2,51 1 Source: "2005 Income Limits," state Department of Housing and Community Development, February 25, 2005; and Carlsbad Housing Authority table on "Lower and Moderate Income Rental Rate Calculations" (based on HUD income data effective Januarv 28.20041 FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 PageS 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 do not pay the full price of a house in cash. Instead, they take out one 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 prices 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 on this formula Table 4 gives the qualifying purchase price for housing for the different income groups. The table illustrates that a three-bedroom housing costing no more than $264,900 would be the maximum affordable to a moderate-income family. Table 4: FY 2005 Qualifying Purchase Price, By Number of Bedrooms Income Group 1 Number of Bedrooms 2 3 Very Low $82,800 $103,500 $120,000 $136,650 $152,100 Low $132,450 $165,600 $192,150 $218,550 $243,300 Moderate $182,700 $228,300 $264,900 $301,350 $337,950 Other >$182,700 >$228,300 >$264,900 >$301,350 >$337,950 * 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 persons per household (as opposed to bedrooms). Since HUD tables do not provide for 12 or more person households, homes with more than 5- bedrooms are treated as if they were 5-bedroom homes. a FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 PaaeS 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 and County Assessor's data, the latter on 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 a few homes. Housing Activity and Affordability in FY 2005 - Table 5 and the information below summarize and expand on housing completed in FY 2005. 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. 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. 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. 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. FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 7 Table for FY 2004-2005 Annual Housing Production Report Table 5: Type Income Group Very Low Low Moderate Other Unknown*** Total Units Built and Affordability of Housing Units Constructed in FY 2005 Market Rate Single Family Detached* 0 0 0 707 11 718 Single Family Attached** 0 0 0 2 0 2 Condo- minium 0 58 0 131 0 189 Apart- ment 0 0 197 173 22 392 Duplex 0 0 0 0 2 Assisted Apartment 114 277 0 0 0 2 391 Second Dwelling Unit 0 12 0 0 0 12 *One single family detached home was built with a second dwelling unit. This second dwelling unit is counted second dwelling unit category. ** The "unknown" income group counts units for which sales prices could not be obtained. Totals 114 347 197 1,013 35 1,706 in the Comments on Housing Production in FY 2005 > Developers built 1,706 new homes in Carlsbad, compared to 591 units built in FY 2004 and 725 units built in FY 2003. The increase in production is attributed to the several large, new developments (e.g., Villages of La Costa, Calavera Hills, Bressi Ranch, and Thompson/Tabata). Highlights on Carlsbad's newest lower-income housing. Table 6 highlights Carlsbad's newest lower-income housing. Table 6: Low -income Housing Built in FY 2005 Project Mulberry Rose Bay Village by the Sea Location Bressi Ranch Thompson/Tabata Anastasi Number of Units 22 25 11 Description Town Homes Town Homes Condos Occupancy Restrictions Households earning up to 80% of the Area Median Income Households earning up to 80% of the Area Median Income Households earning up to 80% of the Area Median Income City Assistance Yes - Homebuyer Assistance None Yes - Homebuyer Assistance FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 PaaeS Table 6: Low -income Housing Built in FY 2005 (Continued) Archstone - Pacific View Mariposa Traditions La Costa Paloma Second Dwelling Units Kelly Ranch Calavera Hills El Camino Real & Casia Way Villages of La Costa - Dove Lane Throughout Carlsbad 84 106 21 180 12 Apartments Apartments Apartments Apartments Small, independent living units located on property with a larger primary residence. None for the market rate units. Otherwise, units are available only to persons with low incomes. These units are affordable to households earning at or below 205 - 60% of the Area Median Income Households earning up to 80% of the Area Median Income Households earning at or below 50% & 60% of the Area Median Income If rented, second dwelling units must be affordable to low-income persons. None Yes None Yes None Medians and Extremes - Table 7 compares the median price of for-sale, market rate housing built in FY 2004 and FY 2005. Table 8 provides high and low sales prices during FY 2005. Table 7: Comparisons of Median Sales Prices FY 2004 vs. FY 2005 (Market Rate Units Only) Structure Type Single-Family Detached Condominium All For-Sale Units Median Sales Prices Annual Change FY 2004 FY 2005 $702,000 $859,992 $157,992 $588,900 $619,900 $31,000 $698,635 $897,621 $198,986 Percent Change 22.5% 5.3% 28.5% Table 8: Low and High Sales Prices FY 2005 (Market Rate Units Only) Structure Type Sales Price Low High Single-Family Detached $505,000 $1,950,000 Condominium $381,341 $849,900 8 II FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 9 Progress Toward Housing Cycle Objectives - Table 9 below provides the number of dwellings completed during the first six 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 original six- year term (1999-2005). Table 9: Cumulative Progress Toward Current Housing Cycle Objectives Income Group Very Low Low Moderate Other Unknown* Totals By Income Group Housing Units Built FY2000 FY FY FY FY 2001 2002 2003 2004 23 138 17 0 0 159 158 106 69 50 42 94 75 0 53 1,679 1,700 1,255 654 480 11 7 7 2 8 1,914 2,097 1,460 725 591 FY 2005 114 347 197 1,013 35 1,706 Total 292 889 461 6,781 70 Housing Units Needed Objective Percentage of Objective Achieved 1,770 1,417 1,436 1,591 n.a. 8,493 6,214 16% 63% 32% 426% n.a. 136.7% 'Neither sale price nor rent information were available for these units Affordability of Housing Produced from 1999-2005 - Table 10 shows the affordability of housing produced in the first six years of the current housing cycle. Table 10: Affordability of Housing Built July 1,1999 to June 30,2005 Income Group Units Built* Very Low 292 Low 889 Moderate 461 Other 6,781 Totals 8,423 *70 unknown" units, for which prices could not be determined, are not reflected in this table. Very Low 3%Low Moderate 5% Other 81% 9 FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 10 Type of Housing Produced from 1999-2005 - Based on the type of housing built, the nearly 8,500 units constructed over the past six years break down as follows: Type Totals Table 11: Type of Housing Built July 1,1999 to June 30, 2005 Units Built Single-Family Detached 5,067 Single-Family Attached 161 Condominium 1,462 Apartment 1,626 Duplex 19 Second dwelling Unit 158 8,493 Apt 2% Type of Lower-Income Housing Produced from 199-2005 - Developers have built over 1,100 homes for lower-income households in Carlsbad, must resulting from Inclusionary Housing Ordinance requirements and requiring city financial assistance. Table 12 breaks down the type and number of lower-income housing built during the current Housing cycle. Table 12: Type of Lower-Income Housing Built July 1,1999 to June 30, 2005 Type Units Built Apartment Condominium Single-family Attached Second Dwelling Unit Totals 846 153 24 158 1181 10 FISCAL YEAR 2004 - 2005 ANNUAL HOUSING PRODUCTION REPORT March 20, 2006 Page 11 Conclusions As this report demonstrates, Carlsbad has seen significant results from this 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 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 dominant. Clearly, Carlsbad's private sector continues to produce primarily up-scale housing. A number of factors contribute to the trend: Demand for higher-end housing remains 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 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. Michele Masterson 11