Administrative
Report
N.1., File # 22-5017 Meeting Date: 11/8/2022
To: MAYOR AND CITY COUNCIL
From: BRANDY FORBES, COMMUNITY DEVELOPMENT DIRECTOR
TITLE
DISCUSSION AND POSSIBLE ACTION ON THE DRAFT INCLUSIONARY HOUSING
ORDINANCES
AUTHORIZATION TO FORWARD THE DRAFT ORDINANCES TO THE PLANNING COMMISSION
FOR REVIEW
EXECUTIVE SUMMARY
In 2020, the City Council expressed interest in having Inclusionary Housing Ordinances prepared.
The City Council later approved a contract with Veronica Tam and Associates, Inc. for the preparation of the Housing Element Update and Inclusionary Housing Ordinances on October 20, 2020. The contract scope included subconsultant services by Keyser Marston Associates (KMA) to conduct a financial feasibility analysis for inclusionary housing parameters.
The results of the financial feasibility analysis were presented at the September 21, 2021 City Council meeting, where City Council discussed and provided direction on the parameters to be considered in the Ordinances. At the November 2, 2021 City Council meeting, the final parameters were determined and direction was provided for preparing the Ordinances (one inland and one for the coastal zone).
Due to the focus on completing the Housing Element Update, the Inclusionary Housing Ordinance component of the contract with Veronica Tam was postponed until the compliant Housing Element was adopted and certified. The City received notice of Housing Element certification in September, and the draft Inclusionary Housing Ordinance, incorporating the City Council’s direction on parameters, has since been prepared. This item is for discussion of the draft regulations. Following the discussion, it is recommended that the draft Ordinances be sent to the Planning Commission for review and recommendations.
BACKGROUND
In conjunction with updating the City of Redondo Beach’s Housing Element for the 2021-2029 planning period, the City Council expressed interest in having an Inclusionary Housing Ordinance prepared. Although this type of ordinance is expected to be eligible for a CEQA exemption, there is typically a financial feasibility analysis that accompanies an Inclusionary Housing Ordinance to ensure that the requirements established in the Ordinance are justifiable and in accordance with State housing laws. Accordingly, the City Council approved a contract with Veronica Tam and Associates, Inc. and KAM for the preparation of the Housing Element Update and Inclusionary
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Housing Ordinance.
The first step with the consultant was the introductory meeting, which was done at the November 10, 2020 City Council meeting. At that meeting, the housing consultant Veronica Tam described inclusionary housing program basics, including process and parameters for consideration, and the relationship with the Housing Element and Regional Housing Needs Assessment (RHNA).
An additional meeting was held on January 12, 2021 to establish the basic parameters for the subconsultant to evaluate feasibility. Kathe Head from the subconsultant KMA presented the parameters to be set, such as percentage affordable, level of affordability, in lieu fee amounts, etc. and describe the various ranges and implications for those parameters. A survey of other municipalities with inclusionary ordinances was included in the January 12, 2021 agenda packet to illustrate the different parameters and ranges currently being implemented throughout the state, and this information was discussed during the presentation. The goal of that discussion was for City Council to provide the initial preferred parameters for KMA to evaluate in order to test the feasibility of the preferred levels.
The financial analysis was completed regarding the initial parameters and presented at the September 21, 2021 City Council meeting. The report describes the key legislation and legal standards, presents the various parameters to be considered, and explains the methodology to determine feasibility.
The subconsultant KMA then completed analyses on both ownership and rentals, developing prototypes similar to the types of developments in Redondo Beach to determine the recommended parameter levels. A copy of this financial analysis is included in the agenda packet.
Most of the parameters for the draft Inclusionary Housing Ordinance were decided at the September 21, 2021 meeting, with the remaining items discussed at the November 2, 2021 meeting. The City Council’s final direction on parameters are in line with the financial analysis. City Council has determined that affordable housing requirements are to be required for all developments of two (2) units or greater in size as follows:
STANDARDS SPECIFIC TO FOR-SALE RESIDENTIAL DEVELOPMENTS Inclusionary For-Sale Units on Site within Market Rate For-Sale Projects:
· Up to 19 units 9% moderate income required
· 20+ units 5% moderate income required
· Covenant required legally restricting for one cumulative 55-year term for for-sale units § During that term, the for-sale inclusionary units may only be sold and resold to moderate-income households at an affordable sales price for moderate-income households
§ A resale restriction agreement must be entered into and recorded against the inclusionary unit at each change of ownership to ensure affordability § When term has expired, an exclusionary unit may be resold to an above moderateincome purchaser at market rate, provided that sale shall result in a recapture by the City of a financial interest in the differential
§ The owner of the inclusionary unit must use and occupy the unit as the owner’s
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principal place of residence
§ The owner is expressly prohibited from leasing or renting any parts of the inclusionary unit unless the City has given prior written consent on the basis of a demonstrated economic hardship by the owner or for an approved caregiver Inclusionary Requirement Fulfilled with Rental Units
· On Site 15% low income required within the project or on a separate parcel on development site
· Off Site 15% low income required must be within ¼ mile of the Market Rate Project · Developer may, at their discretion, provide very low-income units rather than low-income units · Covenant required legally restricting rental to and occupancy by households in income level for which the inclusionary units were developed for a term of not less than 75 years § At end of 75-year term, the restrictions may only be removed in the event that the property upon which the units are located is rezoned and used for non-residential use · The developer of the market rate residential development may enter into an agreement with a separate affordable housing developer to construct, own, and operate the rental inclusionary units, so long as the affordable housing developer has relevant recent experience developing affordable housing and the affordable housing developer may not request financial assistance from the City for the development of the rental inclusionary units
STANDARDS SPECIFIC TO RENTAL/APARTMENT RESIDENTIAL DEVELOPMENTS On Site Rental Units within Market Rate Rental Projects:
· Up to 19 units 10% Moderate Income
· 20+ units 15% Moderate Income
Off Site Rental Units
· All Project Sizes 15% Low Income must be within ¼ mile of the Market Rate Project · Developer may, at their discretion, provide very low-income units rather than low income units Other Rental Unit Requirements
· Covenant required legally restricting rental to and occupancy by households in income level for which the inclusionary units were developed for a term of not less than 75 years. At end of 75- year term, the restrictions may only be removed in the event that the property upon which the units are located is rezoned and used for non-residential use
GENERAL STANDARDS APPLICABLE TO ALL INCLUSIONARY RESIDENTIAL
DEVELOPMENTS
In-Lieu Fee Payment
· Up to 9 units may pay in-lieu discounted fee
· 10+ units inclusionary required-no in-lieu fee option · Required in-lieu fees shall be paid prior to issuance of first building permit for the residential development
· In-lieu fees collected under these ordinances shall be deposited in the City’s Affordable Housing Project Fund
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Fractional Requirement
For developments with 10+ units, if computation of total number of inclusionary units required results in a fraction, the number of required inclusionary units shall be rounded down to the nearest whole number.
Other Standards
· Inclusionary units must be made available for occupancy prior to market rate units in the development. This is required even with the inclusionary units are rental in a for-sale development. In a phased project, the required inclusionary units shall be provided proportionally within each phase
· Inclusionary units comparable in construction quality and exterior design to market rate units · Inclusionary units comparable in interior finishes to the base level interior finishes of market rate units. Interior improvements for rental inclusionary shall comply with the standards established or approved by the California Tax Credit Allocation Committee · Residents of inclusionary units shall be provided same rights and access to common amenities as residents of market rate units, including but not limited to common open space, parking, storage and other facilities in the development · Inclusionary units reasonably dispersed throughout residential development-not clustered · Bedroom mix of inclusionary units proportional to mix of market rate units · For rental inclusionary, no more than 15% may be studio and at lest 40% shall include two or more bedrooms
· An Inclusionary Housing Plan must be submitted for all residential projects subject to the ordinance, including number of inclusionary units, square footage and number of bedrooms, the general location within the development of the inclusionary units, timing of construction, marketing plan for inclusionary units, etc.
· An Affordable Housing Agreement is required to be recorded against each inclusionary unit or the residential development in its entirety
· Annual reporting required by the owner of inclusionary units · An extreme economic hardship waiver request process was incorporated. Those requests would be heard and decided by the City Council
Exemptions
· A new single-family dwelling or replacement of one single-family dwelling with another singlefamily dwelling · Accessory dwelling units and junior accessory dwelling units · Reconstruction of residential structures destroyed by fire, flood, earthquake, or other act of nature
· Residential building additions, repairs, or remodels not increasing the number of residential units
· Residential projects developed in accordance with terms of a development agreement approved by the City prior to enactment of the Ordinance · Residential developments for which a planning application was formally submitted to the City and deemed complete by the effective date of the Ordinance. However, if planning entitlements for an approved residential project expire or are revoked, the ordinance applies if a new planning permit is resubmitted
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These final parameters have been included in the draft Inclusionary Housing Ordinances (inland and coastal) attached. This agenda item is for review of the parameters in the draft ordinance and it is recommended that the City Council forward the draft ordinances to the Planning Commission for their review and recommendations. The Ordinances will be reviewed by the City Attorney’s Office prior to consideration by the Planning Commission. Once the Planning Commission has reviewed the Ordinances, their recommendations will be provided to City Council for introduction and consideration of approval.
COORDINATION
The Community Development Department collaborated with Veronica Tam and Associates, Inc. and KMA to prepare the report.
FISCAL IMPACT
The costs associated with the preparation of the Inclusionary Housing Ordinance are included in the contract with Veronica Tam and Associates, Inc. that was approved by the City Council on October 20, 2020 and paid for by General Plan Maintenance Funds. The contract was later amended to extend the contract term to March 31, 2023 and to include additional funding for the Housing Element Update. The proportional cost in the contract to prepare the Inclusionary Housing Ordinances is $55,250.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Draft Inclusionary Housing Ordinance for Inland
· Draft Inclusionary Housing Ordinance for Coastal
· Final Inclusionary Housing Financial Evaluation October 24, 2021 · Inclusionary Housing Survey Prepared by Keyser Marston Associates, January 5, 2021 · Original Contract with Veronica Tam and Associates, Inc., October 20, 2020 · First Amendment to Contract with Veronica Tam and Associates, Inc., June 7, 2022 · Second Amendment to Contract with Veronica Tam and Associates, Inc., October 4, 2022