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0 DATE: December 18, 2023
TO: Mayor and Member of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Nori Jabba, Housing Coordinator
Thai-Chau Le, Planning Manager
Sofia Mangalam, Community Development Director
DEPARTMENT: Community Development
SUBJECT: BELOW MARKET RATE ADMINISTRATIVE PROCEDURES AND
GUIDELINES
RECOMMENDATION
It is recommended that the City Council adopt the resolution approving revisions to the Below Market Rate (BMR) Administrative Procedures and Guidelines “BMR Guidelines” and finding the amendments exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guideline Section 15061(b)(3).
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-, 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
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0 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. Staff determined that Chapter 17.90 mainly focuses on the development of the new BMR units and 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 November 20, 2023, the City Council held a public hearing to review the draft amendments to Chapter 17.90 and BMR guidelines (link to the meeting). At the meeting, staff also sought direction from the Council on four (4) policy issues to be included in the BMR guidelines, including: (1) Occupancy Standards; (2) BMR Rent Increases; (3) Rental Rate Adjustments for Vacant City-Owned Rental Units; and (4) Monitoring and Compliance Fees. The City Council approved the proposed amendments to Chapter
17.90 and passed to the second reading of the Ordinance. The City Council provided directions on the four (4) policy issues and further suggested that some policy issues discussed must be imposed on the existing BMR units (see below for detailed discussion).
Based on the City Council’s direction, staff incorporated the revisions and are requesting approval of the BMR guidelines via Resolution (Attachment 1).
BACKGROUND/ANALYSIS
In order to assist with responsibilities of overseeing and monitoring existing BMR programs, the BMR Guidelines were created in 2010, and minor revisions were made in 2011, 2016, and 2020. As discussed earlier, staff determined that 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.
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 management practices, offer clear guidance, support the Housing Element and anti-displacement strategies, and reduce the risk of non-compliance.
Following is a brief summary of two (2) BMR Guidelines documents, including:
•BMR Rental Guidelines (Attachment 1, Exhibit A): This document includes requirements, standards, procedures, best practices, and recommendations for 5 1
0 below market rate 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 below market rate units.
The BMR Guidelines are the primary resource for property managers to implement the terms of the regulatory agreements.
•BMR Ownership Guidelines (Attachment 1, Exhibit B): 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.
BMR Guidelines were presented to the City Council at the November 20, 2023 regular meeting, and based on the direction received, staff included the following provisions in the BMR Rental Guidelines (Attachment 1, Exhibit A) are as follows:
1. Occupancy Standards (Section 17.14.2).
Staff revised Section 17.14.2 of the BMR Guidelines with updated general occupancy standards for future BMR properties as shown below in Table 1. For existing BMR units, minimum and maximum occupancies vary by property according to deed restrictions. BMR Owners can elect but are not required to amend the occupancy standards in their regulatory agreements to comply with these new standards.
Table 1. Foster City General Occupancy Standards for BMR Units Size of Unit Minimum
Occupancy
(Title 25,
Section
8305)
Maximum
Occupancy
Studio 1 2
One-Bedroom 1 3
One-Bedroom + Den 1 4
Two-Bedroom 2 5
Three-Bedroom 4 7
Four-Bedroom 6 9
Five-Bedroom 8 11
In Section 8.1.1 of the BMR Guidelines, staff added California Health and Safety Code Section 50052.5 as the source for adjustment of household size for calculating rents, except that in the event that the property is subject to a tax credit, bond, or other financing program, then the household size adjustment shall be as stated in the tax credit, bond, or financing agreement. For existing BMRs, the standards in the existing affordability agreements, if stated, shall apply. In the event that the regulatory 5 1
0 agreement does not include occupancy standards, then the City’s General Occupancy Standards shall apply. The one-bedroom-plus den units shall be treated as one-bedroom units for the purpose of household size adjustment for calculating rent. Table 2 shows the state standards for household size adjustments.
Table 2. Standard Multipliers for Adjustment of Household Size for Rent Calculations
Size of Unit State of CA
(HSC § 50052.5)
Studio 1
One-Bedroom 2
Two-Bedroom 3
Three-Bedroom 4
Four-Bedroom 5
2. Anti-Displacement Strategy (Section 8.4.1).
Staff revised Section 8.4.1 of the BMR Guidelines to require maximum rent increase for future BMR units of the lower of maximum chargeable rent or 5%.
3. Rents for City-Owned Rental Properties Housing Rents (new Section 8.5).
Staff included a new Section 8.5 in the BMR Guidelines stating that staff is authorized to adjust rental rates by up to +/- 10% for vacant units (only) 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 to fill vacancies swiftly with rent decreases or enhance city revenues through rent increases.
4. Policy Direction and Addition of New Sections Regarding Fees, Section 10.14, Monitoring Fees and Section 13.3.1, Compliance Fees.
Staff added the sections regarding monitoring and compliance fees to the BMR Guidelines. Staff will study BMR compliance and monitoring fees to be added to the City’s Master Fee for the 2023-2024 fiscal year. Monitoring fees will be a reasonable per unit per year BMR cost to property owners for the term of affordability with reasonable periodic increases for all future affordable housing development agreements and will be due April 1 of each year. Penalties will be levied in the event of non-compliant BMR property owners and managers and will follow the established procedures for code enforcement.
In addition, Council directed staff to add to the guidelines that if an existing property manager/owner wishes to adopt new occupancy standards, they must also comply with BMR unit rent control and BMR monitoring fee as stated in the guidelines. Staff added a new Section to the BMR Rental guidelines to this effect.
It shall be noted that the CDD Director may revise rules, regulations and guidelines as per the provisions outlined in section 17.90.060.F.
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0 Next Steps
With regard to the establishment of BMR compliance and monitoring fees, Staff will conduct analysis of fees and provide a recommended fee schedule to the City Council for review as part of the master fee and budget approval process for FY 2024-25.
CEQA
The proposed actions would not result in physical changes to the environment and would be exempt pursuant to CEQA Guidelines Section 15061(b)(3).
FISCAL IMPACT
There is no fiscal impact.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS
Attachment 1 - Resolution
Exhibit A – BMR Rental Guidelines
Exhibit B – BMR Ownership Guidelines