INCLUSIONARY HOUSING ORDINANCESTUDY SESSION
Megan Hunter, Community Development Director & Rod Powell, Planning Manager City Council
September 13, 2022
Background
Nearly 800 housing units (rental and ownership)
1992 – 1st Inclusionary Housing Ordinance
2005 amendment increased inclusionary percentages
No inclusionary units built under 2005 ordinance
Update to ordinance initiated in 2014
Technical Advisory Committee (TAC) formed of stakeholders Current ordinance adopted on June 6, 2017
Discussion
2017 ordinance amendment took 2½ years to complete
Goal: Support developer-friendly options to facilitate housing production and result in more affordable housing through:
Flexibility
Market informed alternatives
Regulations that encourage on-site development
Regulations informed by:
Community Engagement and Input
Downtown Vibrancy Plan
2017 Housing Target Market Analysis
On-site Inclusionary Options
On-site For Sale
On-Site Rental
Mixed For-Sale/Rental
Option 1
Option 2
Option 3
Option 4
20%
15%
12%
20%
Very Low
4%
not required
8%
4% Rental / Option to pay impact fees
Low
8%
not required
4%
8% Rental / Option to pay impact fees
Median
not required
6%
not required
not required
Moderate
4%
6%
not required
4% Ownership
Workforce
4%
3%
not required
4% Ownership
Inclusionary Ordinance Provisions
In-lieu Fees and Rental Housing Impact Fees
$14.05 per square foot for ownership housing
$2.40 per square foot for rental housing, plus 12% of units available to Section 8 Housing Choice Voucher Program Ordinance applicable to:
Developments of 10 or more new, for-sale residential units Subdivision of property into 10 or more lots
Additions/alterations to existing structure to create 10 or more new units Requires approval of Affordable Housing Plan
West Area and Central Area Specific Plans have Development Agreements that lock in the 2017 ordinance
Ordinance Exemptions
Creating fewer than 10 additional units or lots
Development Agreements executed prior to June 6, 2017
Monte Bella (Mountain View) followed 1992 ordinance
Developments with a submitted, complete Planning or Building permit and full payment of application fees prior to June 6, 2017 and compliant with predecessor ordinance Developments in the Downtown Area (Central City Overlay District)
Downtown Area (Central City Overlay) Exemption
Adopted Downtown Vibrancy Plan called out exemption for Downtown to promote housing development 395 housing units built in Downtown have restricted rents Market-rate housing is desirable for retail businesses
Other favorable policies may not be enough to encourage housing development Absence of a Downtown Area exemption greatly reduces the profitability of developments There are few opportunity sites left in the Downtown
Downtown housing opportunities promoting market rate housing should be a goal in evaluating and modifying all City policies Only 24 market rate units built over the last few years
Affordable Housing Units in/near Downtown
Map of Downtown Area Affordable Housing Projects
2017 Housing Target Market Analysis
Demand for ownership and rental residential projects
Consumer preference for market rate infill housing
Traction for adaptive reuse projects
Significant development risks:
Public safety
Homelessness
Lack of open space
Low school performance
Traffic
Untested market
Housing incentives to reduce costs needed
2022 Housing Target Market Analysis Update
Inclusionary housing would constrain momentum
Salinas market has become more expensive since Covid-19 Ownership less affordable, rental more affordable
Construction costs are extremely high
Higher density market rate rental and ownership have negative residual value Micro-rental units show best project feasibility
Downtown Area exemption should remain in place
Timing for Inclusionary Housing Update
Inclusionary Housing Ordinance re-evaluated every 5 years Review of ordinance due in 2022
Staff capacity severely limited:
COVID 19 Funding
Project Roomkey
Project Homekey
Emergency Rental Assistance Program
6th Cycle of Housing Element
Scheduled to begin update of ordinance in summer 2023
During update of ordinance, ability to conduct “deeper dive” into Downtown Exemption
Questions?