Administrative
Report
N.1., File # 23-5731 Meeting Date: 5/9/2023
To: MAYOR AND CITY COUNCIL
From: BRANDY FORBES, COMMUNITY DEVELOPMENT DIRECTOR
TITLE
DISCUSSION AND POSSIBLE DIRECTION ON DRAFT ORDINANCES AMENDING REDONDO BEACH MUNICIPAL CODE (RBMC) TITLE 10 CHAPTER 2 ZONING AND LAND USE AND TITLE 10 CHAPTER 5 COASTAL LAND USE PLAN IMPLEMENTING ORDINANCE PERTAINING TO
INCLUSIONARY HOUSING REGULATIONS
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 and Associates, Inc. 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, was prepared and discussed at the November 8, 2022 City Council meeting. Following the discussion, City Council forwarded the draft Ordinances to the Planning Commission for review and recommendations.
The Planning Commission held public hearings on December 15, 2022, January 19, 2023 and March 16, 2023 to discuss the Inclusionary Housing Ordinances and make recommendations to the City Council.
This item provides the City Council an opportunity to discuss the recommendations of the Planning Commission and provide direction to staff on finalizing the Ordinances.
BACKGROUND
In conjunction with updating the City of Redondo Beach’s Housing Element for the 2021-2029
N.1., File # 23-5731 Meeting Date: 5/9/2023
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 KMA for the preparation of the Housing Element Update and Inclusionary 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 and Associates, Inc. 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 (attached) 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.
Most of the parameters for the draft Inclusionary Housing Ordinance were decided at the September 21, 2021 meeting, and the financial analysis was updated to address those additional parameter decisions (October 24, 2021 version). The remaining items discussed at the November 2, 2021 City Council meeting and final direction was issued for preparing the Inclusionary Housing Ordinances.
As discussed at the November 8, 2022 meeting, City Council 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 o During that term, the for-sale inclusionary units may only be sold and resold to
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o 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
o A resale restriction agreement must be entered into and recorded against the inclusionary unit at each change of ownership to ensure affordability o When term has expired, an exclusionary unit may be resold to an above moderate income purchaser at market rate, provided that sale shall result in a recapture by the City of a financial interest in the differential
o The owner of the inclusionary unit must use and occupy the unit as the owner’s principal place of residence
o 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 o 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
N.1., File # 23-5731 Meeting Date: 5/9/2023
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
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 was to be rounded down to the nearest whole number. City Council did decide at the November 8, 2022 meeting to instead require prorated in-lieu payments for the fractional unit amount, which was subsequently reviewed and recommended by the Planning Commission.
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 least 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
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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
These final parameters have been included in the draft Inclusionary Housing Ordinances (inland and coastal) attached (with the change to in-lieu for fractional units).
At the November 8, 2022 meeting, City Council asked that the Planning Commission consider the draft Ordinances and provide recommendations on these potential parameter changes:
· Consider the requirements for units to be affordable to households at 70% of median, 80% of median or 120% of median (currently is moderate income). The City’s consultant will be updating the financial evaluation to show each of these potential levels of affordability. That updated evaluation was distributed and discussed at the Planning Commission hearings, and is available in this agenda packet.
· For projects 10 units or greater, consider an in-lieu payment for any fractional amount rather than just rounding for any fractional amount (the latter is what was in the draft ordinances considered by the Planning Commission, yet the current version of the draft ordinances includes the fractional amount payment).
· Consider densification as a result of the adoption of the ordinance.
The financial analysis was updated to address these potential parameters (attached-December 6, 2022 version). At the December 15, 2022 public hearing, staff presented an introduction on the topic and the parameters set by City Council. The Planning Commission continued the public hearing to January 19, 2023, and then again to March 16, 2023 where the concluded the discussion and provided recommendations per the City Council’s request.
The Planning Commission recommendations for City Council to consider and finalize the Ordinances include the following:
· The amendments to be revised to include in-lieu fees for fractional units. · Request the City Attorney verify that the code amendments do not require vote of people under Article XXVII of Charter.
· In the procedures, a minimum and maximum household size should be established appropriate per the number of bedrooms.
· Finishes for affordable rental units to have same finishes as market rate units for rental projects.
· City Council consider limiting the inclusionary housing to certain portions of the City (for example, sites inventory of Housing Element) only and not apply to the entire City. · Concern, as an unintended consequence, that with an Inclusionary Housing Ordinance there will be more developments that will take advantage of the State’s Density Bonus Laws than without an Ordinance and that there will be increased density in the community as a result. · City Council consider other options for achieving affordable housing, such as utilizing a South
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· City Council consider other options for achieving affordable housing, such as utilizing a South Bay Housing Trust and other funding to develop affordable housing directly. · City Council reconsider whether in-lieu fees for 2-4 unit developments should be applied.
State threshold for Density Bonus is 5 units.
· Suggest setting affordability level at the Modified Low category. · City Council should also consider the consequences of not adopting the Inclusionary Housing Ordinances as they are identified as a goal in Program 3 of the Housing Element.
As mentioned above, adoption of inclusionary housing regulations has been a prominent goal of the City’s 6th Cycle Housing Element. Specifically, under the “Housing Plan” section of the Housing Element (compliant element adopted July 5, 2022), under the goal to assist in the provision of housing that meets the needs of all economic segments of the community, Program 3 was included referencing the City’s intention to adopt Inclusionary Housing Ordinances. Additionally, a reference to adopting Inclusionary Housing Ordinances was made in the table in the Element regarding fair housing issues and as a strategy to Affirmatively Further Fair Housing to help provide more diverse housing options throughout the City. Attached to the admin report are excerpts from the July 5, 2022 Housing Element that address the Inclusionary Housing Ordinances for reference.
This agenda item is for City Council to consider the Planning Commission recommendations and provide direction to staff on final revisions to the Ordinances. Once that direction is provided, staff will prepare the Ordinances for introduction and consideration of approval at a scheduled public hearing.
COORDINATION
The Community Development Department collaborated with Veronica Tam and Associates, Inc., KMA, and the City Attorney’s Office to prepare the draft Ordinances.
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 amended twice to address the Housing Element portion of the scope, and the third amendment was to address additional analysis for the Inclusionary Housing Ordinance portion of the work. The total not to exceed amount for the contract with amendments that included the Housing Element is $187,015. Of that, $68,375 is attributable to the Inclusionary Housing Ordinance scope of work. The current term for the contract is through December 31, 2023.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Draft Inclusionary Housing Ordinance for Inland
· Draft Inclusionary Housing Ordinance for Coastal
· Planning Commission Resolution, March 16, 2023
· Presentations from Planning Commission Meetings
o March 16, 2023
N.1., File # 23-5731 Meeting Date: 5/9/2023
o January 19, 2023
o December 15, 2022
· Housing Element References to Inclusionary Housing, City of Redondo Beach 2021-2029 Housing Element, July 5, 2022
· Final Inclusionary Housing Financial Evaluation UPDATED, December 6, 2022 · 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 · Third Amendment to Contract with Veronica Tam and Associates, Inc., December 20, 2022
LINKS TO PRIOR MEETINGS ON THIS TOPIC
November 10, 2020 City Council Meeting (N.2.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=802977&GUID=5F0D5AB6-FEDD-456C-B139- 507726E1F791&Options=info|&Search>=
January 12, 2021 City Council Meeting (N.5.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=813734&GUID=A92511FA-593E-4E5F-BB7CAEC529C2AAEC&Options=info|&Search>= September 21, 2021 City Council Meeting (N.1.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=879555&GUID=22284FED-154E-4C72-8705- 5E1684B69CFB&Options=info|&Search>=
November 2, 2021 City Council Meeting (N.2.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=894396&GUID=A7117946-3B22-4239-81B8- DD8E1570A145&Options=info|&Search>=
November 8, 2021 City Council Meeting (N.1.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=989528&GUID=DD46F268-FD3A-4DFA-8560- 4EEAEC2243F5&Options=info|&Search>=
December 15, 2022 Planning Commission Meeting (J.3.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=1007094&GUID=8669EF4B-6FF1-4AE6-B68E581CDF74DF36&Options=info|&Search>= January 19, 2023 Planning Commission Meeting (J.1.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=1058596&GUID=DE54A1EF-10F3-4F54-A3E1- 9AF65E0CF88F&Options=info|&Search>=
March 16, 2023 Planning Commission Meeting (J.1.)
<https://redondo.legistar.com/MeetingDetail.aspx?ID=1083018&GUID=8B2470C4-DA56-404E-9321- C09BE97E4BE2&Options=info|&Search>=