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CITY COUNCIL AGENDA REPORT
City of Anaheim
HOUSING AND COMMUNITY DEVELOPMENT
DEPARTMENT
DATE: OCTOBER 8, 2024
FROM: HOUSING AND COMMUNITY DEVELOPMENT DEPARTMENT
SUBJECT: INTRODUCTION OF AN ORDINANCE ESTABLISHING AN
INCLUSIONARY HOUSING REQUIREMENT FOR NEW
RESIDENTIAL DEVELOPMENT PROJECTS
ATTACHMENT (Y/N): YES ITEM # 21
GOVERNMENT CODE § 84308 APPLIES: NO
REQUESTED ACTION:
That the City Council, introduce an ordinance establishing an affordable housing requirement for new residential development projects.
BACKGROUND:
At the conclusion of the Affordable Housing Production Workshop held on September 10, 2024, Mayor Aitken indicated that she would agendize an ordinance that would establish an affordable housing requirement for new residential development projects.
The City of Anaheim, like many cities in California, is experiencing a significant housing affordability crisis. With escalating housing costs, low-and moderate-income households struggle to find affordable options, often resulting in displacement, overcrowding, and an overall decline in the quality of life for many residents. The City recognizes the critical need to proactively address this issue by creating policies that support affordable housing development, ensuring families are supported, and sustain our local economy.
On April 2, 2024, in response to the City Council’s direction, Housing and Community Development staff presented the results of a report commissioned to explore funding and policy options that could be useful tools to address affordable housing production in Anaheim. Specifically, staff outlined the benefits and possible structure of a Local Housing Trust Fund. Following a robust discussion, the City Council directed staff to advance strategies to increase funding for future programming, resulting in the establishment of the Anaheim Local Housing Trust Fund (A-LHTF). An ordinance establishing the A-LHTF was approved on August 13, 2024.
On August 20, 2024, at the mayor’s direction, staff brought forth a subsequent item to continue the discussion of affordable housing development policies. This item included a review of Resolution 2018-106, which affirms that affordable housing is a city priority Introduction of an Inclusionary Housing Ordinance Establishing an Affordable Housing Requirement October 8, 2024
and encourages collaboration between developers and city staff to explore options for creating affordable housing. The current local affordable housing development program (Housing Ambassador Program) is voluntary and does not set specific development goals or provide alternatives to spur affordable housing production.
In response, staff was directed by the City Council to explore additional policy options, including a more structured inclusionary housing program, and to present detailed information on how such a production program could be structured in Anaheim.
Given the volume and complexity of information to be covered, the information was provided to the City Council in a workshop format. The workshop was held on September 10, 2024. At the workshop, staff used a hypothetical example to discuss key decision-making points when considering an inclusionary housing policy. As reviewed, these points include a decision on applying the policy to housing product type, size of development, affordability levels, and potential In-lieu fee options. Staff also reviewed examples from three other Orange County jurisdictions demonstrating variation and flexibility in crafting a policy that best meets local conditions.
Affordable Housing Production Policy – Inclusionary Housing After the discussion at the workshop, Mayor Aiken requested that staff work with her on drafting an ordinance to bring forward for consideration by the City Council.
Small Project
(Less than 20 units)
Large Project
(20 units or more)
For-Sale Residential
Development
No Inclusionary
Requirement
5% Affordable Units On-Site @
Moderate Income (110% AMI)
Or
In-lieu Fee
$5/SF
For-Rent Residential
Development
No Inclusionary
Requirement
10% Affordable Units On-Site
7% Low Income (80% AMI)
3% Very Low Income (50% AMI)
Or
In-lieu Fee
$10/SF
As presented, the policy is proposed to apply to any proposed for-sale or for-rent residential or mixed-use project with twenty (20) or more dwelling units. Small developments, defined as up to 20 units, are specifically excluded as the production of affordable housing in these developments may be difficult to accomplish and/or may not be financially feasible.
Introduction of an Inclusionary Housing Ordinance Establishing an Affordable Housing Requirement October 8, 2024
State of California Assembly Bill (AB) 1505, authorizes the legislative body of any city or county to adopt an inclusionary housing ordinance that includes residential rental units affordable to lower and moderate-income households. In establishing on-site affordable production requirements, jurisdictions must provide alternative methods to satisfy the inclusionary housing requirements. As presented in the table above, developers may choose to provide the requisite number of units at the indicated income levels or choose to pay an in-lieu fee for providing the units on-site, hereto referred to as an in-lieu fee. AB1505 provides other methods included in the draft ordinance for consideration including off-site construction of required units and land donation to accommodate for the production of the required units. The In-lieu fees reflected in the chart above are proposed. Staff believes these conservative affordable percentages and In-lieu fee structure carefully balance the city’s need for affordable housing without hindering overall housing development. The In-lieu fee is generally intended to bridge the affordability gap- the difference between the achievable market rate rent or sales price for a unit and the affordable rent or sales price for the designated inclusionary units. A resolution adopting the fee will be presented with the second read of this ordinance. In-lieu fees will be deposited into the Anaheim Local Housing Trust Fund (A-LHTF), which the Housing Authority will use to support the affordable housing development pipeline.
The proposed ordinance includes provisions for a 55-year covenant on for-rent developments and a covenant for the initial buyer on for-sale development that requires an equity share should the initial buyer sell at a market price. Both covenant provisions mirror those of State Density Bonus Law. Additionally, the ordinance provides opportunities for flexibility in design standards, proportional allocation of unit types, distribution of units throughout the development, and an Anaheim preference for individuals who live or work in the city.
If approved, the inclusionary housing policy would take effect 30 days after the second read of the ordinance. Development projects in which a formal entitlement application or building plan check was formally submitted to the city on or after October 8, 2024 would be subject to the proposed Inclusionary Housing requirements. Staff recommends not encumbering projects currently undergoing the entitlement process or building plan check process.
An inclusionary housing ordinance represents a key component of Anaheim’s broader equitable development strategy, but it is not the sole solution to addressing the city’s affordable housing challenges. Like in most communities, meeting the housing needs of our lower-income families will continue to require public capital and subsidies and must be integrated with a comprehensive set of strategies that provide housing stability, increase housing supply, and subsidize housing costs.
This ordinance aligns with Anaheim’s Strategic Plan Goal B – Enhance Livability by fostering inclusive communities, expanding housing opportunities for all income levels, supporting economic stability, and promoting long-term sustainable growth.
Introduction of an Inclusionary Housing Ordinance Establishing an Affordable Housing Requirement October 8, 2024
BUDGET IMPACT
The goal of this policy is to facilitate the production of affordable housing. To the extent a developer elects to pay an In-lieu fee instead of providing on-site affordable units, these fees will provide additional funding for the Anaheim Local Housing Trust fund (A- LHTF). In-lieu fees will be a new revenue stream into the A-LHTF.
Respectfully submitted,
Grace Ruiz Stepter
Housing and Community Development Director
Attachment
1. Draft Inclusionary Housing Ordinance