6th Cycle Housing Element
Amendment Strategies
Joint City Council/Planning Commission Meeting
May 20, 2025
CITY OF CARMEL-BY-THE-SEA
CITY OF CARMEL-BY-THE-SEA
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❏ Review draft Housing Element Chapter 2
❏ Review draft Hous ing Element Appendix C
❏ How did we get here?
❏ What happens next?
❏ The Five Strategies
❏ Other Revisions
❏ Q&A / Feedback
Tonight’s Agenda
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• State of CA es timated a need for 2.5 million new homes • A regional share of 33,274 units assigned to Monterey and Santa Cruz counties and cities
• Carmel-by-the-Sea’s share is 349 units (231 affordable) • Potential sites must be identified to accommodate these units • Adopted the 6th cycle Housing Element in April 2024
• Protected the village from builder’s remedy
How did we get here?
• 65 percent of affordable hous ing on two city-owned s ites (149 units ) • Res ident-led Affordable Hous ing Alternatives ‘AHA’ Group • Adoption of City Council Res olution 2024-062 to explore a hous ing element amendment
• Got creative - Revis ed Hous ing Element programs to dis pers e affordable hous ing throughout the village
• Focus on: Hotels , Downtown, ADUs , and Churches
• Each program contributes = Divers ification of units
• Cons ervative approach towards potential of each program CITY OF CARMEL-BY-THE-SEA 4
How did we get here?
• City s taff and the AHA Group have met for the las t 10 months • Subcommittees focus ed on s pecific topics
• Res earching bes t practices , collecting and analyzing data, reviewing s tate law and other hous ing element programs , hos ting community works hops , meeting individually with developers , churches , and property owners
• Retained cons ultant Veronica Tam to as s is t with technical as pects of hous ing element law
• Regular meetings with the State Hous ing and Community Development (HCD) to review s trategies
• Pos itive feedback - “Cons traints to Opportunities ” CITY OF CARMEL-BY-THE-SEA 5 How did we get here?
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• May 20th joint City Council-Planning Commis s ion meeting • Second review of Chapter 2 and Appendix C
• Ans wer ques tions , receive feedback
• Incorporate feedback, polis h drafts before s ubmitting to the State for informal ‘friendly’ review
• Target s ubmittal date: May 30th
• Es timated s tate review time: 3 weeks
• NOTE:Planning vs . Implementation
• We are at the planning s tage
• PC and Council review/ approval of implementation meas ures What happens next?
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What is considered
affordable?
Affordability
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2025 Annual Income Limits
Monterey County
• Income limits are a percentage of “Mean Income” as reported by County of Monterey CITY OF CARMEL-BY-THE-SEA 9
2025 Monthly Rent Limits
Monterey County
• Income limits are a percentage of “Mean Income” as reported by County of Monterey CITY OF CARMEL-BY-THE-SEA 10
The Five Strategies:
Leveraging Constraints into Opportunities
Hotel-to-Residential
Conversion
(Hotel ‘Key’ Transfer)
Downtown
Live/Work Program
Downtown MixedIncome
Incentive Program
Housing on
Religious Facility
Owned Property
Accessory
Dwelling Units
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Hotel Program
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CONVERSION OF UNDERPERFORMING HOTELS TO MIXED -INCOME
HOUSING (i.e. some affordable units, some market rate units) • Program historically referred to as ‘Transfer of Development Rights’ • OLD: 1.3.B- Encourage the conversion of hotels to multi -family with 15% affordable units and transferring the hotel rooms to another site in the commercial district (minimum ½ acre hotel site size requirement)
• Incentive is allowing the transfer in exchange for the housing • NEW: 1.1.F - ‘Hotel Keys’ program is reinvented and expands the sale and transfer of room rights from an underperforming hotel that is converted into mixed-income housing (no minimum hotel site size requirement)
#1 Hotel-to-Residential
#1 Hotel-to-Residential
How it works
Hotel Property Owner Affordable Housing Developer Hotel Developer Buys hotel building and
receives keys
Converts hotel building
into affordable
residential housing
Sells keys
Manages affordable
housing building or
sells property
Buys keys
Builds new hotel or
sells keys to other
hotels to add to their
property
Converts hotel building
into affordable residential
housing and sells keys
Sells hotel building and
transfers keys
OR
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#1 Hotel-to-Residential
How it pencils
Summary Project Per Unit
Purchase price of hotel $ 5,900,000
Conversion costs $ 1,600,000 $ 100,000
Total developer investment $ 7,500,000
Sale of converted hotel (now apartments) $ 5,100,000
Sale of hotel keys $ 5,700,000 $ 300,000
Total developer return $ 10,800,000
Profit $3,300,000
Return on Investment (ROI) 44%
Basic Proforma of Hotel Program 1.1.F - Sample Hotel
19 room hotel - conversion ratio of 85% to 16 room apartment CITY OF CARMEL-BY-THE-SEA 15
INCENTIVES
• Sale and transfer of room rights to another property in the commercial district
• FAR flexibility on hotel sites converted to mixed-income housing • Allocation of water credits
• Expedited permit processing
• Waived or reduced permitting fees
#1 Hotel-to-Residential
Incentives
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PROGRAM BENEFITS
• Innovative Approach: Unlocks value of hotel keys to incentivize conversion of underperforming hotels into affordable residential housing • Optimizes Resources: Repurposes existing underperforming hotels and upgrades hotel stock which will increase the City’s TOT revenue • Aligns With Village Character: Focuses on the conversion of small, scattered site hotel properties, integrating affordable housing into the fabric of our Village • Utilizes Superpower: Carmel caps the hotel rooms permitted to operate in the city, which leverages the value of the keys (948 rooms as of Jan 1, 2025) • Privately funded: No public subsidy or tax credits needed - economically viable #1 Hotel-to-Residential
Benefits
PROJECTED HOUSING UNITS
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#1 Hotel-to-Residential
Hotel Room Conversion Potential
Hotel Rooms within Group 4 and 5 (Underperforming)
Rooms/Units
379 161
Hotel Rooms to Housing Units Conversions (85%) 322
Hotel Conversions During 6th Cycle Planning Period (50%) 161 Income Mix
Very Low Income (25%) 40
Low Income (25%) 40
Moderate Income (25%) 40
Above Moderate Income (25%) 41
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Downtown Program(s)
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DETAILS
• Goal: a program with broader applicability (beyond hotels and live/work sites) to incentivize construction of mixed -income housing downtown • Inspired by the Trevvett Court concept (8,000 sf lot; infill site → 88 du/ac) • Income mix – tentatively 30% affordable, 70% market rate
INCENTIVES
• Higher density (up to 88 du/ acre, inclusive of all state/ local bonuses, incentives)
• Water allocation credits
• Expedited processing
• Waived or reduced permitting fees
#2 Downtown Mixed-Income
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BENEFITS
• Incentivizes the creation of mixed -income housing
• Distributes housing for various income groups throughout the village • Economically viable - no public funding required
• Incentivizes larger bedroom count units encouraging families with children #2 Downtown Mixed-Income
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PROJECTIONS
• 3 sites proposed to be included in the housing element • Su Vecino Court
• Cottage Restaurant
• GBG building
• Projected Housing Units: 27 (9 affordable, 18 market rate) #2 Downtown Mixed-Income
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DETAILS
• Create a new “live/work” use category downtown: commercial storefront with residential space in rear (off-street or upper story space) • Many off-street or upper story commercial spaces are under-utilized or vacant • Rent is low – owner could make more money rent the space as a deed- restricted affordable live/work unit than as a strictly commercial space
INCENTIVES
• Higher rent = enhanced property value
• Water allocation credits
• Expedited permit processing
• Waived or reduced permit fees
#3 Downtown Live/Work
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BENEFITS
• Utilize existing building square footage rather than constructing new buildings • Provide affordable housing opportunities for creatives, shopkeepers, and entrepreneurs who can pay a single rent living and working in the same unit • Encourage more local serving businesses downtown
• Activate areas of downtown with new full -time residents and commercial storefronts
#3 Downtown Live/Work
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PROJECTIONS
• 20 properties with live/work potential
• 259 commercial spaces fit the criteria
• 14 live/work properties listed for RHNA credit
• 116 potential live/work units
• Estimate = 85 units, all affordable to lower incomes
Projected Housing Units: 85 (all affordable to lower incomes) #3 Downtown Live/Work
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ADU Program
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DETAILS
• Supercharged the Accessory Dwelling Units program
• OLD: 1.3.C → NEW: 1.1.H
• Emphasizes implementing state legislation
• Update local ADU Ordinance
• Implement amnesty program
• Explore pre-sales inspection program
• Implement pre-approval of ADU plans, etc.
• Monitor new state legislation related to ADUs
#4 Accessory Dwelling Units
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DETAILS
• Encourage the use of ADUs as rental units
• Explore a renter match program
• Promote ADUs to the local workforce
• Identifies robust education and outreach programs
• Community workshops
• Property Owners Guide to ADUs
• Property Owners mailings
• Dedicated ADU webpage, etc.
#4 Accessory Dwelling Units
Early Momentum
45 ADU’s permits
or certificates of
occupancy issued
in this Cycle 6
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BENEFITS
• Increase the permanent housing stock
• Provide affordable housing options for the local workforce • Provide additional full-time housing options for local seniors • Increase full-time occupancy of ADUs through a renter match program • Legalize unpermitted ADUs to ensure safety and encourage full-time occupancy
INCENTIVES
• Focus incentives on ADU’s with assured low/affordable $ rental rates Projected Housing Units: 77 (23 very low, 23 low, 23 moderate, 8 market rate) #4 Accessory Dwelling Units
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Religious Facility Program
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DETAILS
• Outreach yielded significant interest in program
• From 1 church site to 3 church sites (& all local churches involved) • All Saints
• First Church of Christ Scientist
• Church of the Wayfarer
• From using SB-9 to SB-4: (2023 Affordable Housing on Faith and Higher Education Lands Act)
• from 9 du/acre to 20 du/acre max, by -right, without re-zoning • From default capacity calculation using buildable site area to using full site area • From more minimal support to more robust service and financial support #5 Religious Facilities
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INCENTIVES
STATE
• Exemptions from environmental review
• Reduction in parking requirements
• Increased density
• By-right design approvals
CITY
• Priority water allocation
• Expedited application processing
• Reduced permitting fees
• Technical assistance
• Trust Fund support
• Partnership facilitation
#5 Religious Facilities
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BENEFITS
• Encourages the natural synergy between
supportive faith communities and those most in need of support • Leverages properties that are some of the largest in the village (15.6 acres or 2.5%) • Provides a means to translate stated interest into action • Projected Housing Units: 65 (all affordable)
#5 Religious Facilities
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Does it All Add Up?....Yes.
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• Local Universal Design Standards accidentally deleted, will be put back in Other Revisions
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• Overnight Visitor Accommodation - Employee Housing Program • Program retained but no longer for RHNA credit (OLD: 1.3.D NEW: 1.1.G) Other Revisions
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• Programs Deleted:
• Program 1.1.B City-Owned Sites
• Program 1.3.E Amend the A-2 Zoning District
• Program 1.3.I Implement State Law SB10 Opportunities
Other Revisions
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• Formatting Changes:
• Quantified Objectives/Time frame/Responsible Party/Funding Source Other Revisions
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• Updated quantified objectives
• Updated timeframes
Other Revisions
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• Removal of scattered quotes
Other Revisions
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• May 14th PC Meeting
• General support for revised programs and approach
• Specific feedback received:
• Ensure ADU program has way to capture affordable ADUs that are not deed restricted for RHNA credit
• Water will not be a barrier anymore - even above 14 acre foot allocation • Live/ Work Program brings diversity to the downtown area • Ensure clear communication about financial viability of “Hotel Key” program • Concern about precluding any development on city-owned properties Planning Commission Feedback
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• Accomplishes goal of dispersing 149 units from City property • This is an early draft of revised Chapter 2, Programs and new Appendix C • Implementation to come after adoption
• The substance of the revisions focus on the five strategies and the Sites Inventory
• Other revisions are included in proposal
• The number of units each program is estimated to yield may change based on review by the State Department of Housing and Community Development (HCD)
• Approach sets the City up for future Housing Element cycles • Repeatable opportunities
Key Takeaways
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Thank you!
AHA Group
City Staff
Advising Consultant
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Questions and Feedback