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1 DATE: November 20, 2023
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Sofia Mangalam, Community Development Director
Nori Jabba, Housing Coordinator
Thai-Chau Le, Planning Manager
DEPARTMENT: Community Development
SUBJECT: RZ2023-0008, AMEND TITLE 17, “ZONING” CHAPTER 17.90
BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM
AND FINDING THE AMENDMENTS EXEMPT FROM THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
PURSUANT TO CEQA GUIDELINE SECTION 15061(B)(3)
RECOMMENDATION
It is recommended that the City Council (1) introduce and pass to second reading the Ordinance (Attachment 1) amending Title 17, “Zoning” Chapter 17.90 Below Market Rate Inclusionary Housing Program and finding the amendments exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guideline Section 15061(b)(3); and (2) review, discuss, and provide direction to staff for the proposed revisions to BMR Administrative Procedures and Guidelines “BMR Guidelines”.
EXECUTIVE SUMMARY
Chapter 17.90 Below Market Rate Inclusionary Housing Program of the Foster City Municipal Code implements the city’s adopted inclusionary policy contained in the Housing Element of the General Plan by creating standards and a mechanism to provide Below Market Rate (BMR) dwelling units as part of new residential development projects.
The City’s inclusionary policy requires that 20% of all units, excluding bonus units, in residential projects be affordable in order to meet the City’s regional share of very low-,
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1 low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers.
The Below Market Rate Inclusionary Housing Program includes provisions regarding the development of the new BMR units, including the required number of BMR units; level of affordability for rental and ownership projects; payment of BMR in-lieu fee; standards for new BMR units; BMR housing plan and agreement; alternatives to BMR requirements; waiver of BMR requirements; affordable housing fund; and enforcement.
In recent months, the Community Development Department (CDD) staff reviewed Chapter 17.90 and related documents, including the City’s BMR Guidelines. Chapter
17.90 mainly focuses on the development of the new BMR units. Staff has determined that the implementation and enforcement of existing BMR programs could be improved with revisions to Chapter 17.90 to clarify certain terms, and a comprehensive update to the BMR Guidelines would provide clarity to landlords, property managers and tenants regarding BMR unit administration practices to better support the City’s anti-displacement policies and further fair housing strategies.
On October 19, 2023, the Planning Commission held a public hearing to review the draft amendments to Chapter 17.90. At the meeting, the Commission voted 4-0-1 to approve Resolution P-19-23 recommending that the City Council adopt an Ordinance amending Title 17, “Zoning” Chapter 17.90 Below Market Rate Inclusionary Housing Program and finding the amendments exempt from the California Environmental Quality Act (CEQA) section 15061(b)(3) (see Attachment 7).
BACKGROUND
CDD staff oversees the City’s Affordable Housing programs, including deed restricted ownership units, BMR program, Workforce Housing, Existing Unit Purchase Program, HIP Home Sharing Program, and Housing Rehabilitation Loan Program.
BMR Program
The BMR program covers all rental and ownership properties subject to an affordable housing deed restriction or agreement that restricts units to extremely low, very low, moderate, or workforce units. The responsibilities pertaining to the oversight and administration of overseeing and monitoring existing BMR programs are specified in the requisite deed restriction applicable to the property, and the City’s BMR Guidelines. The City ensures compliance with terms of the affordability agreement, Chapter 17.90 of the Municipal Code, as well as any regulations such as the BMR Guidelines and Council policies. In addition to reviewing annual reports submitted by property managers, staff assists property managers in applying the BMR Guidelines and assists tenants in navigating BMR requirements as appropriate.
To assist with these responsibilities, the “BMR Guidelines” were created in 2010, and minor revisions were made in 2011, 2016, and 2020. Furthermore, on March 21, 2022 5 0
1 (first reading on March 7, 2022), the City Council adopted a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17, “Zoning”, of the Foster City Municipal Code (Ordinance No. 644). Staff monitors and ensures compliance of BMR rental, senior rental, workforce, and ownership properties, as described below.
BMR Property Summary
The BMR Guidelines cover all rental and ownership properties subject to a property covenant or agreement that restricts units to extremely low, very low, moderate, or workforce income or rent limits, including the following properties:
Senior Rental
1. 1. Alma Point (65 senior rental units)
2. 2. Metro Center Senior Apartments (60 senior rental units) BMR Rental
3. Foster’s Landing (BMR covenants expire December 31, 2023) (4 remaining rental units)
4. Marlin Cove (84 rental units)
5. Miramar Apartments (48 rental units)
6. One Hundred Grand (33 rental units)
7. The Pilgrim Workforce Housing (22 rental property units, owned by the City)
8. The Plaza (60 rental units)
9. The Triton (48 rental units)
10. The Existing Unit Purchase Program homes (rental properties owned by the City): six (6) individual homes and duplexes categorized as one (1) property; in various locations.
Ownership
11. Emerald Bay BMR homes (ownership): seven (7) low and very low ownership properties in the Emerald Bay neighborhood that were sold to income-qualified buyers in the early 1990s.
The properties named above provide 437 BMR units for the City of Foster City. The City’s Regional Housing Needs Allocation (RHNA) from the State calls for the City to plan for 1,896 new housing units from 2023-2031 in its 6 th Cycle of the Housing Element. This comprises of 1,119 BMR units and 777 above-moderate rate units. With these RHNA targets and State’s efforts to encourage affordable housing production through new legislation, the City’s overall number of BMR units is expected to increase.
BMR Property Restrictions
Each BMR property is subject to individual covenants and/or deed restrictions, which generally set forth the number of BMR units, affordability levels of those units, and associated terms and conditions, as explained in further detail below. 5 0
1 Senior Rental and BMR Rental:
The covenants for BMR rental properties set forth how many units in the development must be income and or rent-restricted, affordability designations, occupancy standards, how affordable rents are determined, annual reporting requirements, preferences, income restrictions, annual income recertification requirements, and other requirements.
The covenants also reference sections in the California Health and Safety Code and California Code of Regulations, Title 25, for determining affordability, occupancy standards, income, and affordable rent. In addition, some of the properties are also covered by Low-Income Housing Tax Credits (LIHTC) or Bond Agreements.
BMR Ownership:
The BMR owner-occupied properties each include a deed restriction that requires the initial owners to meet restrictions for the specified income levels and maintain the property as the owner’s sole and primary residence. During the deed-restricted period, if the property is sold, it must be sold at a below-market price and to an income-qualified household. After the expiration of the deed restriction, owners may choose to sell the property at market rates.1 The Existing Unit Purchase properties, owned by the City, are deed-restricted for rental to very low- and low-income households, consistent with the BMR rental properties.
For future BMR ownership properties, Chapter 17.90 provides that the deed restriction will have a term of at least 45 years and that the 45-year term shall start over with each resale. If a below-market rate dwelling unit has not been sold or resold prior to the expiration of the 45-year term, then upon the expiration of the 45-year term, the restrictions set forth in the below-market rate housing agreement shall terminate, expire, and be of no further force or effect and the dwelling unit may then be sold at market rate.
With the 6th cycle of the Housing Element, staff anticipates substantial growth in the overall number of BMR units in the City. Staff has determined that the implementation and enforcement of existing BMR programs could be improved with revisions to Chapter
17.90 and the BMR Guidelines.
Public Meetings (see Attachment 8 and Attachment 9 for meeting minutes)
•Planning Commission Study Session
On October 5, 2023, a Study Session was held to discuss the City’s affordable housing programs and proposed amendments to Chapter 17.90 and BMR Guidelines. Staff provided an overview of the BMR housing programs, explained the need for revisions and outlined the proposed amendments to Chapter 17.90 and BMR Guidelines ( see link to the meeting for details). At the meeting, one of 1 The Emerald Bay deed restrictions provide that the City of Foster City receives a portion of the proceeds of the first sale after the expiration of the restrictions. The Emerald Bay deed restrictions expire in November 2026.
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1 the Commissioners suggested adding language for expiring covenants to include that the City will engage with the property owner(s) to determine the feasibility of extending the expiring covenants.
•Planning Commission Public Hearing
Subsequently, on October 19, 2023, a Planning Commission public hearing was scheduled and staff made further revisions to the Chapter 17.90 to include a new section 17.90.120 Expiring Covenants requiring that five (5) years prior to expiration of an affordability restriction, the Director or designee shall present a report to the City Council informing them about the expiration and will commence discussions with the property owner(s) to determine the feasibility of extending or prolonging affordability restrictions on the property. The Commission reviewed the revisions to Chapter 17.90 and BMR Guidelines and approved Resolution P-19- 23 recommending that the City Council adopt the Ordinance amending Title 17, “Zoning” proposed amendments to the Municipal Code Chapter 17.90 Below Market Rate Inclusionary Housing Program and BMR Guidelines as included below.
ANALYSIS
Summary of Proposed Amendments to the Chapter 17.90 of the Municipal Code The proposed revisions to Chapter 17.90 (Exhibit A, Attachment 1) include additional definitions of terms, updates to code references, clarity on the use of compliance and monitoring fees, formatting updates to improve clarity, the addition of a new section for standards for occupancy, management, and compliance of BMR dwelling units, and the inclusion of enforcement of the BMR Guidelines, enforcement methodology, and other clarifying revisions, as follows:
•Section 17.90.010 Purpose: Addition of “extremely low-income households” to City’s regional share in Section 17.90.010.B, to mirror the language used in the 6th cycle Housing Element. Included language in the section 17.90.010.F to apply the provisions of the chapter to ‘existing and proposed providing program management, maintenance, and compliance standards and Guidelines for eligibility and occupancy of below market rate units.’
•Section 17.90.020 Definitions: Addition of six (6) new definitions, including: (i) administration and compliance monitoring cost, (ii) “director”, (iii) development applicant, (iv) “household, (iv) housing applicant, and (vi) workforce housing.
These additional definitions provide clarity for the terms used in the chapter. In addition, staff made minor revisions to the language of a few definitions. •Section 17.90.030 Applicability: Formatting changes and other minor revisions. •Section 17.90.040 Requirements for inclusion of below market rate dwelling units: Formatting changes and other minor revisions, including moving items relating to standards for management of units to a new section, 17.90.110. •Section 17.90.050 Payment of below market rate housing in-lieu fee:
Formatting, updated references, and other minor changes and other revisions. 5 0
1 •Section 17.90.060 Standards for development of below market rate dwelling units: Formatting changes, minor change in title for clarity; moved sections relating to management and compliance of BMR units from this section to a new Section 17.90.110 to differentiate between development of units and management of units; and other minor revisions.
•Section 17.90.070 Below market rate housing plan and below market rate housing agreement: Formatting and other minor revisions. Also added provision relating to requirement of replacement units per Municipal Code Chapter 17.55. •Section 17.90.080 Alternatives: Formatting and other minor revisions. •Section 17.90.090 Waiver of requirements: The Section has been removed since there is a provision for exemptions under section 17.90.303.C, and to ensure the City’s inclusionary requirements are enforceable as objective standards. •Section 17.90.100 Affordable Housing Fund is now renumbered to Section
17.90.090 and there are no changes.
•Section 17.90.110 Standards for occupancy, management, and compliance of below market rate housing units: Staff proposes this new section which is comprised of existing standards for occupancy, management, and compliance of BMR housing from Section 17.90.060 to this new section to differentiate between standards for development of BMR units and standards for managing below market rate units. Staff additionally proposes updated language regarding BMR housing administrative standards and Guidelines. This section is now renumbered to Section 17.90.100.
•Section 17.90.120 Enforcement: Clarification of the Enforcement section of the Chapter to include BMR Guidelines and to enable staff to enforce rules and requirements for management and compliance of BMR units, especially as best practices continue to evolve in this area. This change is necessary to ensure consistency in income certification methodologies and the city’s anti-displacement strategies. This section was also renumbered to accommodate the new Section
17.90.110.
•Section 17.90.120 Expiring Covenants: Language added to require that five (5) years prior to expiration of an affordability restriction, the Director or designee shall present a report to the City Council informing them about the expiration and will commence discussions with the property owner(s) to determine the feasibility of extending or prolonging affordability restrictions on the property.
It shall be noted that that extension of covenants would be voluntary and mutually agreed upon by the property owner(s).
See Attachment 2 for the redline version showing the proposed amendments to Chapter
17.90. The revisions to Chapter 17.90, Below Market Rate Inclusionary Housing Program will facilitate more effective BMR program management and administration in the following ways:
•Clarify the purpose, scope, and definitions of the BMR Program. 5 0
1 •Position staff to better monitor BMR units and ensure compliance with the City’s BMR program.
•Ensure consistency and enforcement of Chapter 17.90.
•Clarify enforcement of the City’s BMR Guidelines.
Next Steps for Code Amendments
Should the Council approve these amendments, staff will come back for the second reading of the ordinance at a future meeting.
Summary of Proposed Revisions to BMR Guidelines
In order to assist with responsibilities of overseeing, monitoring and administering existing BMR programs, the BMR Guidelines were created in 2010, and minor revisions were made in 2011, 2016, and 2020 (See Attachment 6).
For effective implementation of the BMR Guidelines, staff divided the existing guidelines into (i) ownership and (ii) rental property documents due to the differences between the two (2) programs. Additionally, a table of contents, detailed instructions and guidance, more references, and enforcement provisions were added. These enhancements aim to ensure consistent BMR management practices, offer clear guidance, support the Housing Element goals and anti-displacement strategies, and reduce the risk of BMR non- compliance.
Following is a brief summary of two (2) BMR Guidelines documents, including:
•BMR Rental Guidelines (Attachment 3): This document includes requirements, standards, procedures, best practices, and recommendations for BMR unit compliance, waitlist management, marketing plans for initial lease-ups, tenant eligibility, occupancy standards, determination of income and rent, annual income recertifications, annual reports, training for property managers, and other critical elements of compliance for BMR units. The BMR Guidelines are the primary resource for property managers to implement the terms of the regulatory agreements.
•BMR Ownership Guidelines (Attachment 5): This document includes requirements, procedures and best practices for City Staff to determine purchaser eligibility for initial sale and rules for sale of the property during and after the deed restriction period. The BMR Ownership Guidelines are an important resource for City staff to ensure compliance of owner-occupied BMR units with regulatory agreements.
Policy Direction from the City Council on BMR Rental guidelines Staff is seeking policy direction from the City Council on the following items:
1. Occupancy Standards (Section 17.14.2).
Staff recommends changing general occupancy standards for future BMR properties to align with state issued standards for minimum occupancies and industry standards 5 0
1 for maximum occupancies. The minimum and maximum occupancies allowed in BMR units varies by property according to deed restrictions. In general, the City uses the following standards:
Table 1. Foster City General Occupancy Standards*
Size of Unit Minimum
Occupancy
Maximum
Occupancy
Studio 1 2
One-Bedroom 1 2
One-Bedroom + Den 1 3
Two-Bedroom 3 4
Three-Bedroom 5 6
Four-Bedroom 7 8
*a few properties use different standards as stated in their deed restrictions or bond agreements.
These standards, which have been used since the 1990s, are problematic for the following reasons.
a.Inconsistency in Occupancy Standards. The City’s occupancy standards differ from state issued and accepted industry standards. The City’s standards differ from the San Mateo County HUD standards, the California Title 25, Section 8305 standards, and accepted industry standards. Differences in the standards compared to the City’s general standards are highlighted in yellow.
Table 2. HUD Standards, as adopted by the County of San Mateo Housing Authority*
Size of Unit Minimum
Occupancy*
Maximum
Occupancy
Studio 1 2
One-Bedroom 1 4
One-Bedroom + Den n/a n/a
Two-Bedroom 2 6
Three-Bedroom 4 8
Four-Bedroom 6 10
Five-Bedroom 8 12
*Each housing authority establishes its own standards for HUD programs. The San Mateo Housing Authority uses their own standards and based on Federal Code of Regulations, Title 24, Section 982.401. Minimums for San Mateo County vary based on unit size and household status. Guidelines include head of household and spouse, co-head, or partner will be issued one bedroom. All remaining family members will be issued one bedroom per two family members regardless of gender, age, or relationship of these family members. Live-in aides will be assigned one bedroom. Minimums and maximums are based on the Keating Memo of 1991,which is one person per bedroom as a minimum and two people per bedroom/sleeping room as a maximum. Living rooms are considered sleeping rooms. 5 0
1 Table 3. California Title 25, Section 8305 Standards* Size of Unit Minimum
Occupancy
Maximum
Occupancy
Studio 1 n/a
One-Bedroom 1 n/a
One-Bedroom + Den n/a n/a
Two-Bedroom 2 n/a
Three-Bedroom 4 n/a
Four-Bedroom 6 n/a
Five-Bedroom 8 n/a
* California Code of Regulations, Title 25, Division 1, Chapter 7, Subchapter 19, Uniform Multifamily Regulations, Section 8305, Tenant Selection This section applies to those projects with funding from the California Department of Housing and Community Development (HCD), and includes HOME, CalHFA, California Tax Credit Allocation Committee (TCAC), and California Debt Limit Allocation Committee (CDLAC) funding. These standards do not include maximum occupancies.
Table 4. Accepted Industry Standards*
Size of Unit Minimum
Occupancy
Maximum
Occupancy
Studio 1 2
One-Bedroom 1 3
One-Bedroom + Den n/a n/a
Two-Bedroom 2 5
Three-Bedroom 3 7
Four-Bedroom 4 9
Five-Bedroom 5 11
*Industry standards are one person per bedroom for minimums and 2 people per bedroom plus one for each unit and are an accepted standard by the California Civil Rights Department, which oversees fair housing, although they are not codified by law at the state level. FEH Council Minutes January 10 2017 (ca.gov).
b.Challenges in Practical Application. The City’s general standards can cause hardship for tenants, especially in cases where household experience changes such as a member passing away, divorce, and an adult child who lives at home, or an adult child who leaves the home. These situations often lead to occupants falling below the required minimum occupancy for their unit size, causing distress and the risk of displacement. Additionally, the City’s general occupancy standards do not allow families of five to live in a two-bedroom unit, even if the family chooses to do so or can’t afford or find an affordable three-bedroom unit. c.Longer Vacancies. The City’s general occupancy standards can also lead to longer vacancies as these standards exceed industry and state standards. For example, two roommates, an adult child and parent, or two unrelated seniors are not able to rent a two-bedroom unit. The required minimums and maximums lead to longer periods of vacancy.
d. Compliance Challenges. The City’s general standards create compliance challenges. When a property is covered by more than one regulatory 5 0
1 agreement and each uses a different standard, the standard of applying the strictest rule can require an additional agreement with owners and lenders on interpretation since the strictest rule in occupancy can, in some cases, result in higher rents.
In addition, the adjustment of household size to calculate rent also varies from property to property. The state standards differ from the HUD standards and tax credit standards. The City of Foster City generally uses the State of California standards. However, Marlin Cove uses different maximum occupancy limits, which leads to higher rents than other BMR units in the City with the same affordability level. In addition, it is worth noting that the County of San Mateo uses the HCD income limits and the HUD household size adjustment multiplier, not the California State Code multipliers. Therefore, the annual county-issued rent limits do not apply to Foster City BMRs.
Table 5. Standard Multipliers for Adjustment of Household Size for Rent Calculations
Size of Unit State of CA
(HSC § 50052.5)
TCAC/HUD Marlin Cove
Studio 1 1 2
One-Bedroom 2 1.5 2
One-Bedroom + Den n/a n/a n/a
Two-Bedroom 3 2 4
Three-Bedroom 4 4.5 n/a
Four-Bedroom 5 6 n/a
Staff Recommendation: Staff recommends that City Council direct staff to formalize the following occupancy standards for future BMR properties:
a. Establish use of the State of California Health and Safety Code, Section 50052.5 Standards for adjustment of household size with the exception of any property with bond, TCAC, or other financing, in which case, the standards established by the financing agency or referenced in financing agreement shall prevail.
b. Adopt occupancy standards using the California Code of Regulations, Title 25, Section 8305 for occupancy minimums and the accepted industry standards for maximum occupancy, except for developments receiving HUD financial assistance, in which case the HUD occupancy standards as adopted by the County of San Mateo would apply.
The reason for staff’s recommendation is that all Foster City deed-restricted affordable housing references the California State codes for affordable rents and income eligibility and using the State standards of Title 25, Section 8305 reduces the number of exceptions the City would have to make due to additional financing.
If the City adopts the accepted industry standard for minimums as well as 5 0
1 maximums, then two exceptions would be needed for Section 8 and HUD funded units/properties, as well as HCD-funded properties. In addition, while the industry standards are accepted, they are not legislatively adopted, while the Title 25, Section 8305 standards for minimum occupancy are issued by the State of California, thereby providing additional protections for the City in the event of a fair housing claim regarding minimum occupancy.
2. Anti-Displacement Strategy (Section 8.4.1).
Staff is seeking policy direction regarding establishment of an annual rent increase cap for BMR units for future BMR Agreements.
As background, BMR units are exempt from Assembly Bill (AB) 1482, the Tenant Protection Act of 2019, which provides protections for tenants for just cause evictions and limits rent increases to 5% plus the percentage change in the cost of living (CPI), or 10 percent, whichever is lower. For 2023, the maximum permitted increase for San Mateo County is 4.2%.
Foster City BMR rents are restricted to the maximum chargeable rent as calculated annually for each size of unit based on California Department of Housing and Community Development (HCD) income limits that are published annually. BMR property owners and managers may increase rental rates by any amount, provided the rent is below the maximum chargeable rent. This results in increases that exceed CPI in many cases and sometimes exceed 10%, which can lead to financial hardship for BMR tenants.
For reference, owners and managers calculate BMR maximum rents using income limits issued by HCD, adjusted for household size. The income limits are based on Area Median Income (AMI) for San Mateo County. Annual increases of Area Median Income for San Mateo County over the last five years are as follows:
Table 6: AMI increases, San Mateo County
Year AMI for a Family
of Four
% increase over
prior year
CPI
April-April
2023 $175,000 5.4% 4.2%
2022 $166,000 11.4% 5.0%
2021 $149,600 4.5% 3.8%
2020 $143,100 4.6% 1.1%
2019 $136,800 15.6% 4.0%
As Table 6 shows, the percentage increase from year to year is not related to CPI and is greater than the CPI increase. In addition, when a tenant moves in, they may be charged less than the current maximum rent for that year due to current market conditions. Staff has received inquiries from BMR tenants experiencing high rent increases and currently, staff must explain that the increase is permitted under existing regulations if the increased rent does not exceed the maximum chargeable rent for the unit.
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1 Rent increases for 2023 for Foster City’s BMR properties have ranged from 0% to 27%. In 2023, 45% of the City’s BMR tenants experienced rent increases exceeding 10% the CPI and state mandated maximum increase of 4.2% for San Mateo County rental properties covered by AB1482.
The following are examples of BMR rent caps in other cities. •San Mateo: 4% maximum increase for BMR units.
•Pacifica: 5% plus CPI with a maximum of 10% to match AB 1482 for one of their BMR properties with over 100 units.
•Burlingame: no limits other than BMR maximum rents
•Belmont: no limits other than BMR maximum rents.
•San Bruno: no limits other than BMR maximum rents
•Daly City: no limits other than BMR maximum rents, but the most recent three BMR agreements have limits of 5%.
•Mountain View: CPI or 5%, whichever is lower; applies to all rental units, including BMRs.
•San Francisco: limits BMR increases to the percentage increase in Area Median Income from the prior year (over 17% this year).
Staff Recommendation: Staff recommends a required maximum rent increase for future BMR units of the lowest of a) maximum chargeable rent, or b) CPI defined as the 12-month CPI for San Francisco-Oakland-Hayward, all items, not seasonally adjusted, for April of each year and effective June 1 of each year to May 31 of the following year, or c) 5%, whichever is lower. Staff additionally recommends studying the feasibility of recommending a rent cap for the existing BMR units. The timing of the CPI dates closely coincides with the issuance of state income limits each year and mirrors the period used for calculating CPI for AB1482.
3. Rents for City-Owned Rental Properties Housing Rents (new Section 8.5).
Staff is requesting authorization to adjust rental rates up to 10% (both increase or decrease) for vacant units for city-owned rental properties, including the 14 BMR and the eight (8) workforce housing units at 501 Pilgrim Drive, on an as-needed basis. This adjustment will be made as needed, allowing staff to respond promptly to market changes. The aim is to fill vacancies swiftly with rent decreases or enhance city revenues through rent increases, based on market conditions. For example, currently, all rent changes for the workforce housing property need City Council approval, but staff believes that this request if approved would help in filling future vacancies.
Staff Recommendation: Staff recommends the City Council authorize staff, to adjust rents for vacant units of city-owned rental housing properties (including workforce units) by up to 10% (increase or decrease) on as-needed basis due to current market conditions and limit annual rent increases directed by City Council policy.
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1 4. Policy Direction and Addition of New Sections Regarding Fees, Section
10.14, Monitoring Fees and Section 13.3.1, Compliance Fees.
Staff recommends exploring the establishment of a BMR compliance and monitoring fee to the City’s Master Fee Schedule in the future. a) Monitoring fees, to cover staff time to review annual reports, conduct audits and inspections of BMR properties and files, and review and calculate rent and utility allowance calculations annually. Staff recommends that monitoring fees only apply to future development projects, not existing BMR properties. In researching monitoring fees, staff found that fees range from $35 per unit to $150 per unit in other jurisdictions. The California Tax Credit Allocation Committee charges $415 per unit for their compliance monitoring fee. While no jurisdiction in San Mateo County was found to use monitoring fees at the present time, several jurisdictions are considering establishing monitoring fees for BMR developments. In Foster City, the Workforce Housing Affordable Housing Regulatory Agreement and Declaration of Covenants includes an annual monitoring fee of $70 per unit. However, the City does not charge this amount because it has retained ownership of the units.
b) Penalties on a per property and/or per unit basis that would be assessed for continued or repeated non-compliance. It is critical to maintain the integrity of the City’s BMR Housing Program through compliance with regulatory agreements, the BMR Rental Housing and Ownership Housing Procedures and Guidelines, Municipal Code Chapter 17.90, and the Housing Element. To facilitate compliance, staff recommend studying the imposition of penalties on non-compliant owners/managers of both existing and future BMR properties as part of the enforcement process. Penalties would be assessed only if non-compliance remains uncured following enforcement remedy procedures. Possible circumstances where potential penalty fines could be appropriate include, but are not limited to the following examples:
•Unwarranted removal of a tenant from a BMR program. Penalties would be in addition to any credits owed to the tenant.
•Non-compliance with BMR Rental Procedures and Guidelines, such as failure to use required methods to determine eligibility or annual recertification of income, or failure to maintain files as required. •Non-compliance with term or terms of deed restrictions or affordability agreements, such preferences, annual report deadlines, annual recertifications, adhering to occupancy standards, or overcharging of rent, or not handling over-income tenants as required, or not maintaining property or units as required. Fines would be in addition to any credits owed to individual tenants.
•Late payment or non-payment of annual monitoring and compliance fines.
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1 Staff has reached out to all existing BMR property managers regarding the revised guidelines and will provide training to all BMR property managers on the revised BMR Rental Housing Guidelines in both group and on-one-one settings.
Staff recommendation: Staff recommends studying the establishment of BMR compliance and monitoring fees, including studying a reasonable per unit per year BMR monitoring fee for the term of affordability with reasonable periodic increases for all future affordable housing development agreements. In addition, staff recommends studying the establishment of penalties in the event of non-compliant BMR property owners and managers. In the event Council provides direction to proceed, staff will return with an item for the Council’s consideration at a future meeting date..
Next Steps for BMR Guidelines
If the City Council approves the recommendations (Attachment 4) as noted above, staff will incorporate these changes in the Guidelines (Attachment 3) and will bring back a resolution to Council to adopt the final Guidelines at the same time that Council conducts the second reading of the Ordinance Amending Title 17, “Zoning,” Chapter 17.90 “Below Market Rate Inclusionary Housing Program”. Future minor revisions to the BMR Guidelines will be issued by Staff as provided by Chapter 17.90.
Specifically with regard to the establishment of BMR compliance and monitoring fees, if directed by the City Council to proceed with analyzing potential recovery of staff costs through fees, staff will conduct analysis of fees and provide a recommended schedule to the City Council for review as part of the master fee and budget approval process for the 2024-2025 fiscal year.
CEQA
The proposed actions would update City’s existing Municipal Code. The actions would not result in physical changes to the environment and would be exempt pursuant to CEQA Guidelines Section 15061(b)(3).
FISCAL IMPACT
No fiscal impact.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
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1 ATTACHMENTS:
Attachment 1 - Ordinance and Exhibit A Chapter 17.90
Attachment 2 - Chapter 17.90 Redline Version
Attachment 3 – Draft 2023 Revised BMR Rental Housing Program Administrative Procedures and Guidelines
Attachment 4 - List of Recommended Updates to BMR Rental Housing Program Administrative Procedures and Guidelines
Attachment 5 - Draft Revised BMR Ownership Housing Programs Administrative Procedures and Guidelines
Attachment 6 – Original 2020 BMR Administrative Procedures and Guidelines Attachment 7 – Planning Commission Resolution P-19-23
Attachment 8 – Meeting minutes for October 19 Planning Commission meeting Attachment 9 – Meeting Minutes for October 5 Planning Commission Meeting