STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of February 10, 2026
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Timothy Rood, AICP, Community Development Director
SUBJECT: Update the City of Hercules Affordable Housing Policy to Increase Maximum Occupancy Levels RECOMMENDED ACTION:
Staff recommends that the City Council adopt a Resolution amending the City of Hercules Affordable Housing Policy to increase the maximum occupancy levels to be consistent with occupancy standards for affordable units as set by the California Civil Rights Department (formerly the Department of Fair Employment and Housing) and the federal Department of Housing and Urban Development (HUD).
BACKGROUND:
Hercules Affordable Housing Policy
The City of Hercules adopted the Affordable Housing Policy (Resolution No. 21-010, “Policy”) on February 23, 2021. At that time, the City had an interest in creating a policy to provide guidance on the administration and monitoring of future affordable units to confirm appropriate management practices and to ensure their continued affordability. On September 24, 2024, the City amended the Affordable Housing Policy to update various references to State Density Bonus Law (SDBL) following the adoption of SDBL by reference in the Municipal Code on April 9, 2024.
Section 6.4 of the Policy provides that prospective homeowners must occupy the affordable unit as primary residence and follow occupancy limits defined in the policy:
2.25 Occupancy Limits. The minimum and maximum number of people allowed to occupy a housing unit of a given size. Minimum occupancy requirements are one person per bedroom. Maximum occupancy are established pursuant to HSC Section 50052.5(h), currently equal to the number of bedrooms in any unit plus one (e.g. 2 persons for a one-bedroom unit).
Health and Safety Code (HSC) Section 50052.5(h) provides a formula to be used for adjusting tenant incomes relative to household size for income qualification purposes. However, this “one-plus-one” formula is not typically used as an occupancy limit for units.
Section 8.1.2 of the Policy, Tenant Compliance Monitoring, provides for the City to have the right annually to monitor the tenant’s income certification, income documentation, maximum affordable rent, and occupancy limits.
Occupancy Limits and Fair Housing Law
A landlord may wish to reduce wear and tear on their rental property by setting an occupancy limit, but they may not set an unreasonably low limit that violates the Federal Fair Housing Act (FHA), part of the Civil Rights Act of 1968. The FHA prohibits discrimination based on familial status, meaning whether a tenant has children. It prevents a landlord from evicting or forcing tenants to move to a larger unit on account of their children since doing so would have the effect of discriminating based on familial status. This protected class includes pregnant tenants and tenants gaining custody of a minor child. Landlords are also prohibited from imposing rules on children’s sleeping arrangements.
Landlords have the right to determine the number of occupants in their rental properties, providing they:
do not discriminate against families;
apply the limitations consistently to all tenants; and
conform to federal and state guidelines.
The U.S. Department of Housing and Urban Development (HUD) adopted a formula to provide guidance in assessing occupancy standards consistent with the FHA. Commonly known as the “two-plus-one” rule, this guidance provides that landlords should generally allow at least two occupants per bedroom plus one additional occupant in a rental unit, regardless of their relationship. For example, two people may occupy a studio unit, three may occupy a one-bedroom unit, five may occupy a two-bedroom unit and so on. California’s Civil Rights Department, formerly the Department of Fair Employment and Housing (DFEH). has also adopted the “two-plus-one” formula.
Note that this formula is only a guideline and not a hard-and-fast rule. The size of a rental unit and its bedrooms may change how many people may live in it. Some properties may have additional rooms like dens or studies that tenants may be able to use for sleeping as well. This accounts for the “plus-one” part of the “two-plus-one” formula. It allows for some flexibility by acknowledging that tenants may be able to use non-bedroom spaces for sleeping.
The California Health and Safety Code requires that residential units have at least one room with an area of at least 120 square feet and that other rooms to be lived in be at least 70 square feet. If more than two people sleep in a bedroom, it must be at least 50 square feet larger for every additional occupant sleeping in that room.
ANALYSIS:
The City’s current Affordable Housing Policy includes minimum and maximum occupancy levels that apply to all affordable housing units in the city. The minimum is one occupant per bedroom, and the maximum is one occupant per bedroom plus one additional person. Thus, a three-bedroom affordable unit must be occupied by a minimum of three and a maximum of four persons.
HouseKeys is the program administrator organization engaged by D.R. Horton to manage the interest list and selection process for the two (2) for-sale affordable homes at Owl Ranch. There have been dozens of applicants for each of the affordable homes. The most recent lottery for the low-income home was held on November 20, 2025. Following the lottery, HouseKeys staff advised City staff that of the 80 entrants, only three households met the current occupancy levels of either 3 or 4 persons for the three-bedroom house. HouseKeys is proceeding to vet the three eligible households but encouraged the City to consider raising the Policy’s occupancy limits, which it advised are more restrictive than is common in the approximately 20 other cities in which it works.
To affirmatively further fair housing and aid landlords in complying with the Fair Housing Act, staff recommends that the City’s Policy be updated to make the maximum occupancy level for affordable units consistent with the federal and state “two-plus-one” formula.
Changes proposed to the Affordable Housing Policy (Attachment 2) are shown as a strikethrough for removal and bold and underlined for additions. The draft amendments include the updated definition of maximum occupancy in Section 2.25 as well as a typographic correction of a section reference in Section 6.4.
ENVIRONMENTAL DETERMINATION
The proposed amendments to the policy are not a project under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378 because they are administrative activities that will not have an impact on the environment. Even if the amendments were to be considered a project, their adoption would be exempt pursuant to CEQA Guidelines section 15061(b)(3) in that they would only establish and clarify administrative processes and would not facilitate new construction or other groundbreaking activities and it can be seen with certainty that there is no possibility that the amended policy update would result in either a direct physical change to the environment or a reasonably foreseeable indirect physical change to the environment. Further, none of the circumstances described in CEQA Guidelines Section 15300.2 applies.
FISCAL IMPACT OF RECOMMENDATION:
There are no direct fiscal impacts associated with this item.
ATTACHMENTS:
Attachment 1 – Draft Resolution
Attachment 2 – Draft Amended Hercules Affordable Housing Policy