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HomeMy WebLinkAbout2021-09-09; Housing Commission; ; Approval of Affordable Housing credits to satisfy the affordable housing requirement for the Ocean View Pointe (CT 15-07)Meeting Date: To: From: Subject: Sept. 9, 2021 Housing Commissioners Mandy Mills, Director of Housing & Homeless Services mandy.mills@carlsbadca.gov, 760-434-2907 Approval of Affordable Housing credits to satisfy the affordable housing requirement for the Ocean View Pointe (CT 15-07} Recom mended Action Adopt a resolution recommending that the City Council approve a request to purchase Affordable Housing credits to satisfy the inclusionary housing requirement for Ocean View Pointe. Executive Summary Rincon Homes is under contract to purchase a thirteen unit project. The development, known as Ocean View Pointe, was approved by the City Council on August 20, 2019, and is conditioned to provide two units affordable units affordable to low income households. The home builder is seeking to satisfy the inclusionary housing requirement through the purchase of two affordable housing credits as opposed to building on site. The City Council approves the Affordable Housing Agreement in accordance with requirements and process set forth in 21.85 of the Carlsbad Municipal Code. Discussion Background On July 26, 2016, the City Council agreed to designate the Tavarua Apartments as a Combined Affordable Housing Project under the city's lnclusionary Housing Program. It provided 56 units of housing affordable to lower income households in "excess" of an inclusionary housing obligation for a market-rate housing developer, and therefore, represent "housing credits" that may be purchased by future housing developers in the southeast and southwest quadrants of the city to satisfy an lnclusionary Housing obligation. At the discretion of the City Council, the credits may be sold at a price set by the City Council. The current credit price for the subject units is $98,123. On August 20, 2019, the City Council approved of a Tentative Tract Map (CT 15-07) and Planned Development Permit to develop a thirteen large lot subdivision on a 21.9-acre property at the southern terminus of Twain Avenue, abutting the Spyglass Hills neighborhood (Location Map provided as Exhibit 2). The project is eligible to purchase credits in the Tavarua Apartments Item #1 combined affordable housing development. Because of the small size of the project, significant environmental constraints, large homeowner's association dues anticipated the applicant has elected to pursue the purchase of affordable housing credits rather than constructing units on the site of the market rate development. The City Council has adopted Policies 57 and 58 (Exhibits 3 & 4) that govern the sale of affordable housing credits. The policies require the examination of the feasibility of an on-site proposal, the advantages and disadvantages of an off-site proposal, and whether the off-site project advances the city's housing goals and strategies. The Affordable Housing Policy Team (staff) has reviewed the above request and utilized the criteria contained in the policies in making its recommendation to approve the purchase of the credits for the project. Below is a summary of the analysis considered. Policy 57 Criteria Analysis Feasibility issues on site The following issues impact the on-site feasibility: Size-the project allows for 13 large lot single family homes, making it difficult to absorb the loss of two market rate homes, Environmental constraints-the environmental constraints call for ongoing mitigation and the loss of buildable land, making the cost of the project more expensive, including high homeowner association fees. Design and product type-The lots are large which translate to large single-family homes. Absorbing a low-income unit on site is not financially feasible. Difficult to integrate Design and product type-The lots are large which translate to large single-family homes. Absorbing a low-income unit on site is not financially feasible based on disparity of product type. Feasibility/cost The unique site characteristics make an on-site affordable unit effectiveness infeasible. The funds received by the city for the purchase of an affordable housing credit will allow the city to invest in more meaningful affordable housing opportunities. Location advantages The location is not in close proximity to services that support low income households. The funds received by the city for the purchase of an affordable housing credit will allow the city to invest in more appropriately located affordable housing opportunities. Capacity to deliver On site units would not have services provided. The funds received by the city for the purchase of an affordable housing credit will allow the city to invest in affordable housing opportunities that provide on-site services for residents. Advance housing goals The funds received by the city for the purchase of an affordable housing credit will allow the city to repay the city for existing units and re-invest in affordable housing opportunities that provide on-site services for residents. ltem#l City Council Policy 57 directs the cost to a purchaser, and the use of an Affordable Housing Agreement to commit a developer's purchase of credits. If eventually approved by the City Council, the funds received for the purchase of the two credits will be deposited to the city's Housing Trust Fund to assist in the development of future affordable housing projects as well as programs to provide housing ass istance to low income households. Fiscal Analysis The Affordable Housing Credit price for the Tavarua Apartments is currently $98,123 per credit. The developer of Ocean View Pointe is required to purchase a total of two credits. This action would result in a payment of a minimum of $196,246 to the city's Housing Trust Fund. These funds will be used to assist in the development of future affordable housing projects as well as programs to provide housing assistance to low income households, as appropriate. It should be noted that the developer/builder will pay the credit price in effect at the time that building permits are approved for the subject development. The housing credit price for Tavarua Apartments has an annual esca lator based on the Consumer Price Index (CPI}. Therefore, it is anticipated that the developer may pay more than the above noted credit price depending upon any increases in CPI prior to building permit approval. Next Steps The Housing Commission recommendation and staff analysis of the credit purchase request will be forwarded to the City Council for their consideration. Environmental Evaluation The City Council adopted a Mitigated Negative Declaration, Mitigation Monitoring and Reporting Program and Addendum on Aug. 20, 2019. No further environmental review is required. Public Notification and Outreach This item was noticed in keeping with the state's Ralph M. Brown Act and it was available for public viewing and review at least 72 hours before the scheduled meeting date. Exhibits 1. Housing Commission resolution 2. Location map 3. City Council Policy 57 4. City Council Policy 58 Item #1 ,I RESOLUTION NO. 2021-006 A RESOLUTION OF THE HOUSING COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA RECOMMENDING THAT THE CITY COUNCIL APPROVE A REQUEST BY RINCON HOMES TO PURCHASE TWO AFFORDABLE HOUSING CREDITS IN THE TAVARUA APARTMENTS COMBINED HOUSING PROJECT IN ORDER TO SATISFY THE AFFORDABLE HOUSING OBLIGATION OF ITS HOUSING DEVELOPMENT UNDER THE CITY'S INCLUSIONARY HOUSING ORDINANCE EXHIBIT 1 WHEREAS, Rincon Homes is under contract to build a thirteen-home subdivision, known as Ocean View Pointe, and is conditioned to provide two units affordable units affordable to low income households; and WHEREAS, the City Council approved said development on Aug. 20, 2019; and WHEREAS, the home builder is seeking to satisfy the inclusionary housing requirement through the purchase of two affordable housing credits as opposed to building on site: and WHEREAS, credits in the northwest quadrant are available to purchase for this project; and WHEREAS, the city's Affordable Housing Policy Team reviewed the request on July 28, 2021 to discuss the request and consider options, prior to presenting it to the Housing Commission for their consideration and recommendation to the City Council; and WHEREAS, the Housing Commission makes recommendations to the City Council for projects that alternatively meet affordable requirements set forth in 21.85 of the Carlsbad Municipal Code; and WHEREAS, the Housing Commission considered the request, staff evaluation and recommendation, and the testimony of all persons desiring to be heard on the matter at a special meeting on Sept. 9, 2021. NOW, THEREFORE, BE IT RESOLVED by the Housing Commission of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the request from Rincon Homes to alternatively satisfy the inclusionary housing requirement is consistent with the goals, objectives and programs of the City of Carlsbad's Housing Element, and City Council Policies 57 and 58 as currently adopted. 3. That, based on information provided in the Housing Commission staff report and considering testimony of all persons desiring to be heard at the Sept. 9, 2021 public meeting, the Housing Commission hereby recommends that the City Council approve EXHIBIT 1 the assistance from the Rincon Homes to purchase two affordable housing credits to satisfy their inclusionary housing requirement. 4. That the Housing Commission recommend that the City Council consider amendments to policies implementing Chapter 21.85 of the Carlsbad Municipal Code to address market rate projects' varying ability to contribute to the provision of affordable housing, with the objective of addressing the disparity between the low value of affordable housing credits versus higher-value developments. PASSED, APPROVED AND ADOPTED at a Meeting of the Housing Commission of the City of Carlsbad on the 9th day of September 2021, by the following vote, to wit: AYES: NAYS: ABSENT: COLE, EVANS AND NGUYEN-CLEARY MANZANO CORTES-TORRES ¥~~ J ~ NMEN-CLEARY, CHAIRPERSON CARLSBAD HOUSING COMMISSION ATTEST: MANDY MILLS Director of Housing & Homeless Services Location Map Ocean View Pointe Exhibit 2 _.- - CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Off-site and Combined Inclusionary Housing Projects EXHIBIT 3 Policy No. -----'5=--'7'-------- Date Issued August 8, 1995, Effective Date August 8, 1995-- Cancellation Dllte _____ -:_:- Supersedes No. ______ _ Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. BACKGROUND The City's Inclusionary Housing Ordinance (CMC Chapter 21.85) establishes certain requirements under which residential developers must provide housing that is affordable to lower-income households as a condition of project approval and permit issuance. ,,,-The Ordinance provides that inclusionary units "should be built on-site and, wherever reasonably possible, be distributed throughout the project site." The Ordinance also provides that "circumstances may arise ... in which the public interest would be served by allowing some or all of the inclusionary units associated with one project site to be produced and operated at an alternative site or sites." This alternative is described as a "Combined lnclusionary Housing Project" or "Combined Project". The Ordinance, in addressing Combined Projects, states that 11it is the exclusive prerogative of the final decision making authority of the City to determine whether or not it is in the public interest to authorize the residential sites to form a Combined lnclusionary Housing Project. " r PURPOSE It is the purpose of this policy to establish the criteria which will be utilized in order to make the necessary finding that off-site satisfaction of an inclusionary housing requirement, when proposed through a Combined Project, is in the public interest. POLICY The following criteria will be applied in order to make the necessary public interest finding. Each criteria is defined in tenns of specific questions which, when affirmatively answered, would support an off-site option: Pagel of 4 r - CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Off-site and Combined lnclusionary Housing Projects Policy No. ------'5"'"'7,___ ____ _ Date Issued August a, 1995 Effective Date August 8, 1995 Cancellation Date ------Supersedes No. ______ _ Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. Feasibility of the On-site Proposal. ► Are there significant feasibility issues due to factors such as project size, site constraints, and competition from multiple projects that make an on-site option impractical? ► Will an affordable housing product be difficult to integrate into the proposed market development because of significant price and product type disparity? ► Does the on-site development entity lack the capacity to deliver the proposed affordable housing on-site? 2. Relative Advantages/Disadvantages of the Off-site Proposal ► Does the off-site option offer greater feasibility and cost effectiveness than the on-site alternative, particularly regarding potential local public assistance and when applying the City's Affordable Housing Financial Assistance Policy. ► Does the off-site proposal have location advantages over the on-site alternative, such as proximity to jobs, schools, transportation, services; less impact on other existing developments, etc.? ► Does the off-site option offer a development entity with the capacity to deliver the proposed project? ► Does the off-site option satisfy multiple developer obligations that would be difficult to satisfy with multiple projects? Page 2 of 4 -- CITY OF CARLSBAD COUNCIL POLICY STATEMENT - Policy No. _ _,5::..,7....__ ____ _ Date Issued August 8, 1995 Effective Date August 8, 1995 Cancellation Date ------Supersedes No. ______ _ General Subject: AFFORDABLE HOUSING Specific Subject: Off-site and Combined Inclusionary Housing Projects Copies to: City Council, City Manager, City Attorney, Depanmlnt and Division Heads, Employee Bulletin Boards, Press, File. 3. Advancing Housing Goals ► Does the off-site proposal advance and/or support City housing goals and policies as expressed in the Housing Element, CHAS and Inclusionary Housing Ordinance? It is likely that off-site proposals will involve "mixed" results with the application of the above criteria. The "public interest" finding shall be made when a Combined Project Review Committee made up of the City Manager, City Attorney, Community Development Director, Financial Management Director, Planning Director, Housing & Redevelopment Director, and the Mayor (ex-officio), reaches consensus that a proposal substantially and affirmatively satisfies the above criteria and that this conclusion can be appropriately documented through the use of a Combined/Off-site Project Evaluation Assessment Worksheet. (Attachment 1). PROCEDURE 1. Projects with an inclusionary housing obligation will be processed according to the requirements of the Inclusionary Housing Ordinance. 2. Project approvals must be conditioned with the option to propose an off-site method (i.e., Combined Project) of satisfying the inclusionary obligation. A project proposing an off-site option may or may not also propose an on-site option. 3. Prior to final map or issuance of building permits, applicants must submit an Affordable Housing Agreement as described in the lnclusionary Housing Ordinance which specifically describes any off- site proposal. 4. Off-site proposals in the form of a draft Affordable Housing Agreement will be reviewed by the Combined Project Review Committee and it will be determined if the necessary findings can be made by staff. Page 3 of 4 r - CITY OF CARLSBAD COUNCIL POUCY STATEMENT - Policy No. _ __,,5..._7 ____ _ Date Issued August 8. 1995 Effective Date August a, 1995 Cancellation Date _____ _ Supersedes No. _____ _ General Subject: AFFORDABLE HOUSING Specific Subject: Off-site and Combined Inclusionary Housing Projects Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. S. Staff's findings and recommendation, including the Combined/Off-site Project Assessment Worksheet, will accompany the Affordable Housing Agreement to the Housing Commission for action. 6. Prior to final map or issuance of building permits, the proposed Affordable Housing Agreement will be considered by City Council along with the recommendation of staff and Housing Commission. 7. City Council will be the final decision making authority in determining whether an off-site proposal is in the public interest and permitting this option. Page 4 of 4 - - OFF-SITE A/VD COMBINED INCLUS/ONARY HOUSING PROJECT ASSESSMENT WORKSHEET ..... , ..... · 8A1:_-•-:~~•_c_1UND: · · . . ····-· •' ....... , ......... . . . .. . . ' .. . .. ... . .. . . ' .. ' .. . ' ' . ... ... ....... ... . , .. ' . . . . ' , ................. .. ••· .... 1. Applicant Name and Address: 2. Off-site or Combined Project Name: 3. Description of Project with lnclusiona,y Housing Obligation: 4. Proposed On-site Project Description flf any): 5. Proposed Off-site Project Description: 6. Desaiption of On-site Project Constraints: Attachment "1" to Council Policy Slatement No. 57 -- .. .. . ... :WtjRi(SHl!ET .. . . .. . . . . .. . . . . . . .. .. •· . . . . . . . .. .. . ... . . ASSESSMlatY:-CONCLUSION .. .. .(Cfiiick a~ljata '·b~~) ' ,. . .. .. · · D.OES:flar=suP,POR.f .. SUPiidRra· OFrS11E . A!ISESSMENr,CRtJ'MA : . ·: ·o#-shE ·PROPOSAL -~IISNE_ PROPOSAL .. ... .. 0 0 ... 0 •HO • . . . . 1. Feasiblllty of the On:5ite Proposal. a. Are there significant feasibility issues due to factors such as project size, site constraints, amount and availability of required subsidy, and competition from multiple projects that make an on-site option impractical? Brief NarratiVe: b. Will an affordable housing product be difficult to integrate into the proposed market development because of significant price and product type disparity? ~ Brief Narratl!:!!J.; c. Does the on-site development entity have the capacity to deliver the proposed affordable housing on-site? Brief Narrat!YI!: 2. Beli!tjve agv5!ntages/Disadvantages of the Off- site Proposal. a. Does the off-site option offer greater feasibility and cost effectiveness than the on-site alternative, particularly regarding potential local public assistance? 2 --- .. .. .. . . . . : tilioki(SHSET~ . .. . . .. . .. .. . . . . .. . . . .. . :.: ........ ,••· .· , .......... .. . . ·····• .. . . ... ASSESSIIENTCONCL.USION · : . . (.¢fiedc apprbprl_att,:_boxj · . : . . ... . OOESN(fr SUPPORT INCONCWSIVE . SUPPORIS·OFAlnE ASSE$$IIENT:CRRERIA ~~ mePOS4L Brief /Y,grt§.tlve; b. Does the off-site proposal have location advantages over the on-site alternative, such as proximity to jobs, schools, transportation, services; less impact on other existing developments, etc.? Bci§.l N-1,m1tlve: C. Does the off-site option offer a development entity with the capacity to deliver the proposed project? Brief ~arratrL,e; d. Does the off-site option satisfy multiple deyel9per obligations that would be difficult to satisfy with multiple projects? Brief NafI§.tive: 3. Advancing Housing Goals and Strategy a. Does the off-site proposal advance and/or support City housing goals and policies expressed in the Housing Element, CHAS and lncluslonary Housing Ordinance? Brief Narrative: .. D8"NOT.SUPPO/tr:-.. . . . . . SUPPOR1S.fJFF.SRE SU111MARY .. ---QFF.Sl1S-~ -_~SNE-~ . ··.· . . . .. -.. . . .. . ........ . ..... . • 3 -- Date Considered by Review Committee: r Review Committee Action: Action: ar 4 CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Sale of Affordable Housing Credits Page 1 of 4 EXHIBIT 4 Policy No. ------=5.,.,8 _____ _ Date Issued September 12 1 1995 Effective Date Sept, 12, 1995 Cancellation Date ------Supersedes No. ______ _ Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. PURPOSE To establish a policy to be followed by City Council and City staff in selling Affordable Housing Credits, controlled by the City, to developers who will use the Credits to satisfy obligations to provide affordable housing pursuant to the City's Inclusionary Housing Ordinance (CMC Chapter 21.85). BACKGROUND In the development of the 344-unit affordable housing project known as Villa Loma in the Southwest Quadrant of the City, the developers and the City created a project which may be treated as a Combined Project as defined in the City's lnclusionary Housing Ordinance. With City Council approval, Combined Projects allow "some or all of the inclusionary units associated with one residential project site to be produced and operated at an alternative site". The "alternative site" becomes a Combined Project. Villa Loma was conceived and developed with City participation based on the creation of 184 excess affordable housing units which would be available to satisfy other developers' inclusionary housing obligations thus making it a potential Combined Project. City financial participation in the project was also based on the concept of recovering costs through the sale of the excess units. Furthermore, Villa Loma was structured to give the City control of these units (Affordable Housing Credits or "Credits") and their sale to potential Combined Project participants. Therefore, it is necessary to establish a policy to guide the City in the effective implementation of these Affordable Housing Credit sales transactions. POLICY Two basic factors will be considered in a Credit sale transaction -the financial aspect, which is the Credit pricing --this determines cost to a purchaser and revenue to the City; and the affordable housing aspect, which is the use of this mechanism to satisfy a developer's obligation under the Inclusionary Housing Ordinance. Based on these considerations, the following will guide Credit sales: - CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Sale of Affordable Housing Credits Page 2 of 4 Policy No. _----->!.:58~----- Date Issued Sept. 12. 1995 Effective Date Sept. 12, 1995 Cancellation Date ------Supersedes No. ______ _ Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. ► Price. The Credit price will be determined according to the following formula which divides the local financial contribution provided to the Villa Loma project by the total number of Credits available. The local financial contribution consists of all City financial assistance provided to the project (either as loans or expenditures for land including accrued interest on such amounts for the period of time they are outstanding); and the local developer contribution to the project provided in order to satisfy an affordable housing obligation): Affordable Housin1 Credit Pricin1 Formula + Number of Affordable Local Financial Contribution Housing Credits Available City Contribution $4.2 Million* Developer Contribution (Aviara Land Associates) .9 TOT AL $5.1 Million * To be adjusted with the addition of interest. 184 = Unit Price of Affordable Housing Credits (Rounded to nearest $1,000)* $28,000* ► Tenns of Purchase and Sale. The commitment to purchase and sell Credits will be accomplished through an Affordable Housing Agreement as required by the Inclusionary Housing Ordinance. This Agreement will contain the terms of the Credit sale and will acknowledge the satisfaction of an affordable housing obligation through participation in a Combined Project (Villa Loma). CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Sale of Affordable Housing Credits Page 3 of 4 Policy No. __ 5=8 _____ _ Date Issued Sept. 12, 1995 Effective Date Sept. 12, 1995 Cancellation Date ------Supersedes No. ______ _ Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. ► Selection of Purchasers. The following procedure will apply to the selection of purchasers and allocation of Credits: 1. Project Review. Staff, through the Combined Project Review Committee (see Council Policy No. 57) will review all applications and approved projects with inclusionary requirements and determine which projects will be recommended to satisfy their obligations through the purchase of Credits. If the number of acceptable projects have affordable housing requirements which exceed the available number of Credits, projects will be ranked and allocated Credits accordingly. Projects will be reviewed and ranked using the following criteria: a) The immediacy of the need to satisfy an affordable housing obligation with respect to the market rate project that is generating the obligation. b) The readiness and capacity of the developer to enter into an Affordable Housing Agreement and perform under its terms. c) The acceptability of the Combined Project as an off-site option in lieu of the satisfaction of the affordable housing obligation on-site with respect to the project that is generating the obligation (see Council Policy No. 57). 2. Electing to Purchase Credits. Developers will be notified of staffs recommendation to pennit the purchase of Credits and given the opportunity to accept or reject this option. 3. Reservation of Credits. Developers wishing to use the option of purchasing Credits must have their projects approved with conditions allowing this option. In addition to Planning Commission approval, the recommendation of the Housing Commission will be required for the Credit purchase option of satisfying the Inclusionary Housing Obligation. When a project is approved (e.g., tentative map) with the Credit purchase condition, a reservation of the Credits is made for the project. CITY OF CARLSBAD COUNCIL POLICY STATEMENT General Subject: Specific Subject: AFFORDABLE HOUSING Sale of Affordable Housing Credits Page 4 of 4 Policy No. _-.;58=------- Date Issued Sept. 12, 1995 Effective Date sept. 12, 1995 Cancellation Date ------Supersedes No. _____ _ Copies to: City Council, City Manager, Qty Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File. 4. Affordable Housing Agreement. Within sixty (60) days of the approval of the Credit purchase condition, the developer must deliver to the Housing and Redevelopment Director a signed Affordable Housing Agreement in the form prescribed by the City with a non-refundable deposit in an amount equal to 10% of the total Credit sale price. The Affordable Housing Agreement will be scheduled for City Council consideration and, if and when approved, will be executed by the City. Toe Affordable Housing Agreement will require payment of the balance of the purchase price upon execution and prior to final map or issuance of a building permit. 5. Failure of Developer to Perform or Denial of Purchase Option. If the developer is unable to perfonn as required, or is denied the option of purchasing Credits, the Credits will be made available to another project(s), subject to this process. 6. This policy is subject to all other requirements of the Inclusionary Housing Ordinance.