DATE:
September 13, 2022
CATEGORY:
New Business
DEPT.:
Community Development
TITLE: SB 330 Replacement Requirements
RECOMMENDATION
Approve a policy requiring that demolished “protected units” be replaced under Senate Bill 330 with deed-restricted units affordable to households earning 80% of area median income or below when the prior tenants of those protected units earned, or are presumed to have earned, more than 80% of AMI, and direct staff to incorporate this policy in to administrative guidelines and procedures for development applications.
BACKGROUND
Senate Bill 330 (SB 330), also known as t he Housing Crisis Act of 2019 , was approved by the Governor of California on October 6, 2019. SB 330 went into effect Statewide on January 1, 2020 and sunsets in 2030.1 One of the key purposes of SB 330 is to prevent the loss of affordable housing through replacement of “protected units” and to address the displacement of lower - income tenants. The bill includes several requirements that must be met by residential projects.
Since SB 330 went into effect, the City has reviewed several residential projects for compliance with the requirements.
In addition to State law, staff has been working on a n affordable housing strategy , including a local displacement response strategy and an assessment of no net loss of affordable housing as part of the Council work plan. The displacement response strategy is intended to be a comprehensive, multi -pronged approach and will include the development of a local replacement requirement in anticipation of SB 330 sunsetting as well as to potentially address areas not covered by SB 330.
SB 330 Replacement Requirements
SB 330 provides jurisdictions some discretion regarding how to implement the requirement s, specifically regarding project requirements for the replacement of “protected units” that are
1 SB 330 was initially passed to sunset in 2025. A subsequent bill, SB 8, extended its sunset date from 2025 to 2030.
SB 330 Replacement Requirements
September 13, 2022
demolished as part of a residential project. While SB 330 includes several elements, this report focuses on a specific provision that gives the City discretio n relating to the replacement of Community Stabilization and Fair Rent Act (CSFRA) units previously inhabited by households who earn incomes above 80% of area median income (AMI). SB 330 defines a “protected unit” as one of the following:
1. Residential dwelling units that are or were subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income within the past five years.
2. Residential dwelling units that are or were subject to any form of rent or price control through a public entity’s valid exercise of its police power within the past five years.
3. Residential dwelling units that are or were occupied by low- or very low-income households within the past five years.
4. Residential dwelling units that were withdrawn from rent or lease in accordance with Chapter 12.75 (commencing with Section 7060) of Division 7 of Title 1 within the past 10 years.
Under Item 2 above, rent-stabilized units in Mountain View covered by the CSFRA are considered protected units. SB 330 has different replacement requirements depending on the household SB 330 Replacement Requirements
September 13, 2022
incomes of the prior tenants occupying the demolished protected units, as summarized in Table 1 below:
Table 1: SB 330 Replacement Requirements for Protected Units
Protected Units and
Household Income of
Previous Tenants 80% AMI
or Less
Protected Units and
Household Income of
Previous Tenants Unknown
Protected Units and
Household Income of
Previous Tenants Greater
than 80% AMI
Replacement
Requirements
Protected units to be
replaced at the income level
of the previous tenants
residing in the property.
Utilize Comprehensive
Housing Affordability
Strategy (CHAS) data from
the United States
Department of Housing and
Urban Development to
estimate likely income of
previous tenants.
Jurisdiction has discretion to:
a. Require the protected
units be replaced with
deed-restricted units at
80% AMI; or
b. Require the protected
units be replaced as
CSFRA units (the rents
would initially be set at
market rents, and the
allowable annual rent
increase would be
limited going forward
per the CSFRA).
The City only has discretion in the situation where the household income is greater than 80% AMI (Table 1, Column 4, lightly shaded). This provides an area of opportunity for the City to decide the course of action in cases where the previous tenants earned above 80% AMI. Projects where this choice must be made—between replacement as low-income, deed-restricted units or CSFRA units—will not necessarily require Council approval during the entitlement process, as some projects will require only a Zoning Adm inistrator decision ; t herefore, staff requests Council direction on this policy to provide clarity and consistency for both developers and staff as residential projects involving demolition of protected units move through the entitlement process.
SB 330 Replacement Requirements
September 13, 2022
ANALYSIS
Staff recommends that when CSFRA units are being replaced under SB 330 and the former tenants earned above 80% AMI, the replacement units be deed -restricted at the “low -income” (80% AMI) affordability level or lower (Table 1, Column 4, Option a) for the following reasons:
• The original units being replaced would be older units, rent-stabilized units, and, therefore, likely rented at a monthly rate below market rents before demolition, making the units naturally occurring affordable hous ing. If the units are replaced as new rent -stabilized units, the initial rents will be at market rate for new units (also known as vacancy decontrol), which would likely be considerably higher than prior rents ; h owever, if the units are deed-restricted to 80 % AMI, they would remain affordable, resulting in no net loss of affordable units. Table 2 below demonstrates this point:
Table 2: Rent Rate Comparison
Average
CSFRA Rents*
Average
Non-CSFRA Rents**
80% AMI
Rents***
Studio $2,173 $2,738 $2,306
One bedroom $2,402 $4,137 $2,635
Two bedrooms $3,156 $5,223 $2,965
Three bedrooms $4,105 $5,785 $3,293
* Fiscal Year 2021-22 rents
** Fiscal Year 2021-22 Costar rents
*** Based on 2022 State Housing and Community Development income limits
• Creating a separate City program for replacement units in a residential project that include both deed-restricted units (per the City’s below-market-rate (BMR) requirement) and new CSFRA units would create greater ongoing administrative complexity to track, monitor, and enforce the project requirement s. Having all the replaced units as deed -restricted units would reduce the administrative burden.
NEXT STEPS
If Council approves the recommendation, staff will immediately update the City’s SB 330 policies and procedures and provide the information to residential projects subject to SB 330 replacement requirements for protected units.
SB 330 Replacement Requirements
September 13, 2022
ALTERNATIVES
1. Approve a policy requirin g the protected units where the former tenants had household incomes above 80% AMI to be replaced as CSFRA units , which would have initial rents set at market rents (Table 1, Column 4, Option b).
2. Provide other direction.
Prepared by:
Anna Reynoso
Housing Specialist II
Micaela Hellman-Tincher
Housing and Neighborhood
Services Manager
Approved by:
Aarti Shrivastava
Assistant City Manager/
Community Development Director
Kimbra McCarthy
City Manager
AR-MHT/6/CAM
844-09-13-22CR
202195