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d. The affordable housing to be built on the dedicated land shall meet or exceed minimum quality standards specified in this chapter.
The builder shall specify the security to be provided to the City to ensure that the below mar ket rate units will be constructed on the dedicated land in a timely manner, including evidence of ownership or control of the sites to be dedicated, to the satisfaction of the Administrator, and clear and convincing evidence that financing has been secured for the construction of the below market rate units on the dedicated land. Prior to issuance of any building permit for the residential development, the property shall either be dedicated to the City or to the developer of the below market rate units on the dedicated land, as determined by the City.
4. Preservation of Historically Significant Structures and Resources. Adjustments may be made to the required number and affordability level of the below market units based on the economics associated with preservation of historically significant structures and resources as identified under guidelines as set forth by the California Environmental Quality Act (CEQA).
5. Rental Units in Place of Ownership Units. The builder may propose rental on -site below market rate units in a residential ownership development rather than sell below market rate units.
If the builder proposes this alternative, then at least fifteen percent of the total units (excluding any units approved beyond the otherwise maximum allowable density pursuant to the State Density Bonus Law) shall be below market rate units which meet the standards set forth in Section
18.16.030 for residential rental developments. of which five percent shall be affordable to low- income households and ten percent affordable to very low-income households.
6. Combination. The decision-making body may accept any combination of the above options.
B. Findings. The decision-making body for the first approval may approve, conditionally approve or reject any alternative proposed by a builder as part of a below market rate housing plan. Any approval or conditional approval shall be based on the following finding:
1. That the purposes of this chapter would be better served by implementation of the proposed alternative(s) and that the proposal meets the greatest community needs at the time the alternative is reviewed. As one of the factors determining whether the purposes of this chapter would be better served under the proposed alternative, the decision-making body should shall consider whether implementation of an alternative would overly concentrate below market rate units within any specific area cause or exacerbate racial segregation and, if so, shall reject the alternative unless the concentration of below market rate units is offset by other identified benefits
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that flow from implementation of the alternative at issue. (Ord. 1550 § 2 (part), 2019; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly
18.200.080)
18.16.080 Eligibility for below market rate units (owner-occupied and rental units).
A. General Eligibility. If the City or its designee maintains a list of eligible households, initial and subsequent occupants will be selected first from the list of eligible households, to the maximum extent possible, in accordance with any rules approved by the Administrator.
B. Preferences. Preferences will be given to those households where at least one member in the household lives or works in San Carlos, including part-time and household workers, or works for a public agency, such as a school district or fire district, serving residents living in the City of San Carlos, except for those households deemed ineligible due to conflict of interest listed in subsection C of this section.
C. Conflict of Interest. The following individuals are ineligible to purchase or rent a below market rate unit as specified below:
1. Elected City Council officials and all Planning Commissioners (including their spou ses and dependents);
2. All City staff members (including their spouses and dependents) who participated in the approval process for the residential development or who establish policy for City housing programs;
3. The builder and its officers and employees (and their spouses and dependents); and
4. The project or land owner of the residential development and its officers and employees (and their spouses and dependents).
D. Occupancy. Any household which occupies a rental below market rate unit or purchases a below market rate unit shall occupy that unit as its principal residence and shall not lease or sublease to a different party. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.100)
18.16.090 Owner-occupied units.
A. Initial Sales Price for Below Market Rate Units. The initial sales price of a below market rate unit shall be set by the City at the time a building permit is issued for the below market rate unit so that the eligible household will pay an affordable ownership cost. The initial sales price shall be based on the
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builder’s estimate of homeowners’ association dues, if any, the City’s assumptions for interest rates and other factors, and the formula for calculating sales prices contained in the below mark et rate housing agreement. The City shall provide the builder with an estimate of the initial sales price for the below market rate units at an earlier date upon written request by the builder. After the building permit is issued, the initial sales price may be adjusted by the City due to changes in market factors upon written request by the builder no less than ninety days prior to marketing of the below market rate units. In no case will the initial sales price be adjusted below the initial sales price calculated when the building permit was issued.
B. Certification of Eligibility. The income of each household proposed to purchase a below market rate unit shall be certified to the City or the City’s designee prior to the sale of a below market rate unit . Each household shall provide written verification of income, including but not limited to such documents as income tax returns for the previous calendar year, W-2 statements, and pay stubs. Income verification shall be submitted on a form approved by the City.
C. Initial Sales Deed Restrictions. Deed restrictions provided by the City and recorded against title to the below market rate unit shall be required as a condition of sale for all owner-occupied below market rate units and shall include, but are not limited to, the City’s purchase option, resale restrictions, and procedures and policies regarding changes in title to ensure that owner-occupied below market rate units remain affordable for not less than forty-five years in perpetuity. (Ord. 1438 § 4 (Exh. A (part)), 2011:
Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.110)
18.16.100 Rental units.
A. Initial Rents for Below Market Rate Units. The initial rent of below market rate units shall be set by the City at least thirty days prior to marketing of the below market rate units so that the eligible households will pay an affordable rent. The initial rent shall be based on a schedule provided by the San Mateo County Housing Authority the City’s assumptions for utility costs and the formula for calculating rents contained in the below market rate housing agreement. The City shall provide the builder with an estimate of the initial rent for the below market rate units at an earlier date upon written request by the builder.
B. Selection of Tenants. Rental units will be offered to eligible households at an affordable rent. If no eligible households are identified by the City pursuant to Section 18.16.080, the owners of rental below market rate units shall fill vacant units by selecting income-eligible households from the San Mateo County Office of Housing Section 8 Housing Choice Voucher program or similar program. If no eligible households are identified from the County program or similar program, owners may fill vacant units
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through their own selection process; provided, that they publish notice of the availability of below market rate units according to guidelines established by the Administrator.
C. Certification of Eligibility. The owner of rental below market rate units shall certify each tenant household’s income to the City or City’s designee at the time of initial rental and annually thereafter. The owner shall obtain and review documents from each tenant household that provide written verification of income, including but not limited to such documents as income tax returns for the previous calendar year, W-2 statements, and pay stubs. Income verification shall be submitted on a form approved by the City.
D. Nondiscrimination. When selecting tenants, the owners of below market rate units shall follow all fair-housing laws, rules, regulations, and guidelines. The owner shall apply the same rental terms and conditions to tenants of below market rate units as are applied to all other tenants, except as required to comply with this chapter (for example, rent levels and income requirements) or with other applicable government subsidy programs.
E. Move-In Costs. Total deposits, including security deposits, required of households occupying a below market rate unit shall be limited to first and last month’s rent plus a cleaning deposit not to exceed one month’s rent.
F. Annual Report. The owner shall submit an annual report summarizing the occupanc y of each below market rate unit for the year, demonstrating the continuing income eligibility of each tenant, and the rent charged for each below market rate unit. The Administrator may require additional information to confirm household income and rents charged for the unit if he or she deems it necessary.
G. Periodic Audit. The City maintains the right to periodically audit the information supplied to the City for the annual report if deemed necessary to ensure compliance with this chapter. In additio n, owners of below market rate units shall cooperate with any audits conducted by the City, State agencies, Federal agencies, or their designees.
H. Rent Regulatory Agreements. A rent regulatory agreement provided by the City shall be recorded against the any residential rental development prior to final inspection or issuance of any certificate of occupancy for any dwelling unit in the residential development. The rent regulatory agreement shall include the developer’s agreement to rent the below market rate units at affordable rents for not less than fifty-five years in perpetuity. The rent regulatory agreement shall include, but not be limited to, the limitations on rents required by this section, provisions for selection of tenants and tenant eligibil ity,
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provisions for nondiscrimination and monitoring, and other provisions required to ensure compliance with this chapter.
I. Changes in Tenant Income. If, after moving into a below market rate unit, a tenant’s household income exceeds the limit for that unit, the following shall apply:
1. If the tenant’s income does not exceed the income limits of other below market rate units in the residential development, the owner may, at the owner’s option, allow the tenant to remain in the original unit and re-designate the unit as affordable to households of a higher income level, as long as the next vacant unit is redesignated for the income category previously applicable to the tenant’s household. Alternatively, if a below market rate unit meeting the tenant ’s revised income threshold becomes available within six months and the tenant meets the income eligibility for that unit, the owner shall allow the tenant to apply for that unit.
2. If there are no units designated for a higher income category within the residential development that may be substituted for the original unit, the owner may raise the tenant’s monthly rent to an amount, net of utilities, that is the lesser of rent for a comparable market rate unit in the residential development or one-twelfth of thirty percent of the tenant’s household income. Upon vacancy by the tenant, the unit must be rented to a household in the income category previously applicable to the unit.
3. If the tenant’s income exceeds the income designated for all below market rate units in the residential development, the tenant shall be given six months’ notice to vacate the unit. If within those six months another unit in the residential development is vacated, the owner may, at the owner’s option, allow the tenant to remain in the original unit, increase the rent to that for a comparable market rate unit in the residential development, and designate the newly vacated unit as a below market rate unit affordable at the income level previously applicable to the unit converted to market rate. The newly vacated unit shall be comparable in size (for example, number of bedrooms, bathrooms, square footage, etc.) to the original unit. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.120)
18.16.110 Below market rate fund.
A. Trust Fund. A fund for the deposit of fees established under this and similar prior municipal codes exists as Fund 29 (the “fund”). This fund shall receive all fees contributed under this chapter and may also receive monies from other sources.
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B. Purpose and Limitations. Monies deposited in the fund shall be used to increase and improve the supply of housing affordable to moderate-, low-, very low-, and extremely low-income households.
Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this chapter.
C. Administration. The fund shall be administered by the Administrator, who may develop p rocedures to implement the purposes of the fund consistent with the requirements of this chapter and subject to any adopted budget of the City.
D. Expenditures. Fund monies shall be used in accordance with the City’s Housing Element, or subsequent plans adopted by the City Council to maintain or increase the quantity, quality, and variety of affordable housing units or assist other governmental entities, private organizations or individuals to do so. Permissible uses include, but are not limited to, land acquisition, debt service, parcel assemblage, gap financing, housing rehabilitation, grants, unit acquisition, new construction, and other pursuits associated with providing affordable housing. The fund may be used for the benefit of both rental and owner-occupied housing. (Ord. 1480 (Exh. C (part)), 2015: Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly 18.200.130)
18.16.120 Periodic review and enforcement.
A. Periodic Review. It is the intent of the City Council to review the provisions of this chapter concurrently with the review of the City’s Housing Element, including provisions for income targeting, funding priorities, fees, and other provisions, to ensure that such provisions are econom ically feasible and are designed to serve the community’s highest priorities for the provision of affordable housing.
B. Penalty for Violation. It shall be a misdemeanor to violate any provision of this chapter. Without limiting the generality of the foregoing, it shall also be a misdemeanor for any person to sell or rent to another person a below market rate unit or density bonus BMR unit at a price or rent exceeding the maximum allowed under this chapter or Chapter 18.17 or to sell or rent a below market rate unit or density bonus BMR unit to a household not qualified under this chapter. It shall further be a misdemeanor for any person to provide false or materially incomplete information to the City or to a seller or lessor of a below market rate unit or density bonus BMR unit to obtain occupancy of housing for which he or she is not eligible.
C. Legal Action. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance with this chapter, including:
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1. Actions to revoke, deny or suspend any permit, including a building permit, certificate of occupancy, or discretionary approval;
2. Actions to recover from any violator of this chapter civil fines, restitution to prevent unjust enrichment from a violation of this chapter, and/or enforcement costs, including attorneys’ fees;
3. Eviction or foreclosure; and
4. Any other appropriate action for injunctive relief or damages. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any person, owner, household or other party from the requirements of this chapter. (Ord. 1480 (Exh. C (part)), 2015: Ord. 1438 § 4 (Exh.
A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010: Ord. 1340 § 1 (part), 2004. Formerly
18.200.140)
18.16.130 Waivers of affordable housing requirements.
A. Requests for waivers shall be made concurrent with application submittal. As part of an applicatio n for the first approval of a residential development, a builder may request that the requirements of this chapter be reduced, adjusted, or waived based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. Any such request shall be submitted concurrently with the below market rate housing plan required by this chapter. The builder shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation, and shall bear the burden of presenting the requisite evidence to demonstrate the alleged unconstitutional result. The City may assume each of the following when applicable:
1. The builder will benefit from the incentives set forth in the municipal code; and
2. If required to provide below market rate units, the builder will provide the most economical affordable housing units feasible in terms of financing, construction, design, location and t enure.
B. The City Council, based upon legal advice provided by or at the behest of the City Attorney, may approve a reduction, adjustment, or waiver if the Council determines that applying the requirements of this chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. The reduction, adjustment, or waiver may be approved only to the extent necessary to avoid an unconstitutional result after adoption of written findings, based on legal a nalysis and the evidence. If a reduction, adjustment, or waiver is granted, any change in the residential development shall invalidate the reduction, adjustment, or waiver, and a new application shall be
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required for a reduction, adjustment, or waiver. (Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 3 (Exh. A (part)), 2010. Formerly 18.200.150)
Chapter 18.17
AFFORDABLE HOUSING INCENTIVES
18.17.010 Purpose.
The purpose of this chapter is to provide procedures for granting incentives for the construction of affordable housing to encourage the production of affordable housing and to achieve the following additional goals:
A. Housing Element Goals and Policies. To implement goals and policies contained in the Housing Element providing for incentives for the construction of affordable housing.
B. Compliance with State Law. To comply with the provisions of Government Code Section 65915 et seq. (“State Density Bonus Law”), which mandates the adoption of a City ordinance specifying procedures for providing the density bonuses and other incentives and concessions required by th ose at sections. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.010)
18.17.020 Definitions.
Terms defined in Section 18.16.020 shall have the same meaning in this chapter. In addition, the following terms shall have the following meanings when used in this chapter:
A. “Bonus units” means dwelling units allowed pursuant to Section 18.17.030(A) or Section 18.17.040 that exceed the otherwise allowable maximum gross residential density for a residential housing development.
B. “Concessions and incentives” means regulatory concessions and incentives as defined by Government Code Section 65915(k) and as listed in Section 18.17.050.
C. “Density bonus” means a density increase over the otherwise allowable maximum gross residential density for a residential housing development, pursuant to Section 18.17.030(A) or Section 18.17.040.
D. “Density bonus below market rate (BMR) unit” means a dwelling unit that is not a below market rate unit that is required by Section 18.17.040; is offered at an affordable rent or affordable ownership cost to moderate-, low- or very low-income households; and qualifies a residential housing development for a density bonus pursuant to Section 18.17.040.
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E. “Development standard” means a site or construction condition that applies to a residential housing development pursuant to any ordinance, General Plan element, specific plan, or other local condition, law, policy, resolution, or regulation. A “site and construction condition” is a development regulation or law that specifies the physical development of a site and buildings on the site in a residential housing development.
F. “Maximum allowable gross residential density” means the maximum number of dwelling units permitted in a residential housing development by the City’s Zoning Ordinance and by the Land Use Element of the General Plan on the date that the application for the residential housing development is deemed complete submitted, excluding any density bonus. If the maximum density allowed by the Zoning Ordinance is inconsistent with the density allowed by the Land Use Element of the General Plan, the Land Use Element density shall prevail.
G. “Senior citizen housing development” means a residential housing development with at least thirty- five dwelling units, meeting the definition of a senior citizen housing development set forth in California Civil Code Section 51.3 or a mobile home park that limits residency based on age requirements pursuant to Section 798.76 or 799.5 of the Civil Code. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.020)
18.17.030 City incentives for below market rate units.
The incentives provided by this section are available to residential housing developments that provide on-site below market rate units in compliance with Chapter 18.16. Residential Housing developments which have been granted a density bonus pursuant to Section 18.17.040 are not eligible for the City density bonus described in subsection A of this section but may be granted another incentive included in this section as a concession or incentive granted pursuant to Section 18.17.050.
A. City Density Bonus.
1. Bonus for Owner-Occupied Units: Upon the discretionary issuance of a conditional use permit by the Planning Commission, residential owner-occupied developments with one or more on-site below market rate units that are affordable to low-income households, or to a lower income category, may be granted one additional unit for each unit affordable to low -income households or to a lower income category. This density bonus shall not apply to single-family residential developments and is an alternative to density bonuses allowed under California Government Code Section 65915 and Section 18.17.040.
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2. Bonus for Rental Units: Upon the discretionary issuance of a conditional use permit by the Planning Commission, residential rental developments with one or more on-site below market rate units that are affordable to low-income households may be granted two additional units for each unit affordable to low- income households. Residential rental developments with one or more on-site below market rate units that are affordable to very low-income households, or to a lower income category, may be granted four additional units for each unit affordable to very low-income households or to a lower income category.
This density bonus shall not apply to single-family residential developments and is an alternative to density bonuses allowed under California Government Code Section 65915 and Section 18.17.040.B. Modified Development Standard Calculations. Bonus unit(s) approved under the density bonus incentive described in subsection A of this section shall be exempted from floor area ratio and density requirements. In addition, the bonus unit(s) will not be counted in determining the required number of below market rate units.
C. Flexible Parking Standards. Residential developments with one or more on-site below market rate units shall be allowed limited reductions in the parking requirements related to any dwelling units or allowed limited use of tandem and/or shared parking arrangements or allowed a combination of these modified parking standards.
D. Flexible Setback Allowance. Residential developments with one or more on -site below market rate units may be allowed limited reductions in the minimum setback requirements if the following findings are made through the design review process:
1. That the proposed alternative design at the proposed location will not be detrimental or injurious to improvements in the vicinity and will not be detrimental to the public health, peace, safety, comfort, general welfare or convenience; and
2. The proposed alternative design shall not significantly reduce the privacy of the adjoining property owners or significantly reduce sunlight into adjoining properties.
E. Permit Streamlining. In certain zoning districts, the requirement of a conditional use permit for dwelling units above the ground floor may be eliminated for residential developments with one or more on-site below market rate units.
F. Financial Assistance. To the extent budgeted by the City Council and otherwi se available, financial assistance from the City or from sources as may be available to the City may be available to the builder in the form of loans or grants for the below market rate housing component of the residential development. The builder shall be responsible for complying with all requirements associated with the
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particular funding source(s), including any requirements imposed by the State for payment of prevailing wages. Rental residential developments that offer the deepest affordability and whi ch lack alternative funding sources shall be given the highest priority for financial assistance, in particular, rental residential developments affordable to very low- and low-income households.
G. Below Market Rate Housing Plan. All requests for City incentives provided pursuant to this section shall be submitted with the below market rate housing plan required by Section 18.16.060(B). The builder shall include the following additional information in the below market rate housing plan:
1. A site plan depicting the number and location of all market rate, below market rate and bonus units.
2. A calculation of the maximum number of dwelling units permitted by the City’s Zoning Ordinance and General Plan for the residential development, excluding any density bonus.
3. Description of any City incentives requested pursuant to this section. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.030)
18.17.040 State mandated density bonuses.
A. Eligibility for Density Bonus. A “housing development” as defined in State Density Bonus Law shall be eligible for a density bonus and other regulatory incentives that are provided by State Density Bonus Law when the builder seeks and agrees to provide affordable and other types of housing in the threshold amounts specified in State Density Bonus Law. A “housing development” includes only the residential component of a mixed-use project.
State law (Government Code Section 65915) provides that a residential development resulting in a net increase of at least five dwelling units is eligible for a density bonus as follows:
1. Very Low- and Lower-Income Housing and Senior Housing. A residential development is eligible for a twenty percent density bonus if the builder seeks and agrees to construct at least one of the following:
a. Ten percent of the total units as density bonus BMR units affordable to low -income households at an affordable rent or affordable ownership cost; or
b. Five percent of the total units as density bonus BMR units affordable to very low-income households at an affordable rent or affordable ownership cost; or
c. A senior citizen housing development.
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2. Moderate-Income Housing. A residential development is eligible for a five percent density bonus if the builder seeks and agrees to construct ten percent of the total units as for-sale density bonus BMR units affordable to moderate-income households, if the residential development also meets all of the following additional criteria:
a. The residential development is a common interest development as defined by Section 1351 of the California Civil Code;
b. All of the dwelling units in the residential development are offered to the public for purchase; and c. The density bonus BMR units are offered for sale at affordable ownership cost.
3. Additional Density Bonus. The density bonus for which the residential development is eligible sh all increase if the percentage of very low-, low-, and moderate-income density bonus BMR units exceeds the base percentage established in subsections (A)(1) and (A)(2) of this section, as follows:
a. Very Low-Income Units. For each one percent increase above five percent in the percentage of density bonus BMR units affordable to very low-income households, the density bonus shall be increased by two and one-half percent up to a maximum of thirty-five percent. b. Low-Income Units. For each one percent increase above ten percent in the percentage of density bonus BMR units affordable to low-income households, the density bonus shall be increased by one and one-half percent up to a maximum of thirty-five percent. c. Moderate-Income For-Sale Units. For each one percent increase above five percent in the percentage of for-sale density bonus BMR units affordable to moderate-income households, the density bonus shall be increased by one percent up to a maximum of thirty-five percent.
4. Below Market Rate Units Not Eligible for State Density Bonus. All density bonus BMR units qualifying a residential development for a density bonus pursuant to this section must be provided in addition to the below market rate units required by Section 18.16.030.
The following table summarizes available State density bonuses:
TABLE 18.17.040: STATE MANDATED DENSITY BONUS SUMMARY
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Income Category
Minimum%
Density
Bonus
BMR Units
Bonus
Granted
Additional
Bonus for
Each 1%
Increase in
Density
Bonus BMR
Units
% Density
Bonus
BMR Units
Required
for
Maximum
35% Bonus
Very Low-Income 5% 20% 2.5% 11%
Low-Income 10% 20% 1.5% 20%
Moderate-Income (for-sale common
interest development only)
10% 5% 1% 40%
Allowable Number of
Incentive(s)/Concession(s)
100% 20% — —
B. State Mandated Density Bonus for Land Donation, Child Care Facility, or Condominium Conversion.
1. A residential development may be eligible for a density bonus for land donation pursuant to the requirements set forth in Government Code Section 65915(g).
2. A residential development that contains a child care facility as defined in Government Code Section 65915(h) may be eligible for an additional density bonus, concession, or incentive pursuant to the requirements set forth in Section 65915(h).
3. Condominium conversions may be eligible for a density bonus, concession, or incentive pursuant to the requirements set forth in Government Code Section 65915.5.
BC. Calculation of State Mandated Density Bonus.
1. The amount of density bonus to which a housing development is entitled shall be as specified in State Density Bonus Law. Each residential housing development is entitled to only one density bonus, which may be selected based on the percentage of either density bonus BMR units affordable to very low-income households, low-income households, or moderate-income
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households, or the residential development’s status as a senior citizen housing development on the basis of only one category, as described in the subparagraphs of Government Code Section 65915(b)(1). Density bonuses from more than one category may not be combined.
2. When calculating the number of permitted bonus units, any calculations resulting in fractional units shall be rounded to the next larger whole number, including base density and bonus density.
3. The bonus units shall not be included when determining the number of density bonus BMR units required to qualify for a density bonus. When calculating the required number of density bonus BMR units, any calculations resulting in fractional units shall be rounded to the next larger integer.
4. The builder may request a lesser density bonus than the residential housing development is entitled to, but no reduction will be permitted in the minimum percentages of required density bonus BMR units pursuant to subsection A of this section State Density Bonus Law. Regardless of the number of density bonus BMR units, no residential housing development may be entitled to a density bonus of more than that authorized by State Density Bonus Law. than thirty-five percent. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.040)
18.17.050 State mandated concessions and incentives, parking reductions, and waivers.
A. Eligibility for Concessions and Incentives. A builder may request concessions and incentives pursuant to this section only when the builder is eligible for and also seeks and receives a State density bonus pursuant to Section 18.17.040. The number of incentives that may be requested shall be based upon the number the applicant is entitled to pursuant to State Density Bonus Law. State law (Government Code Section 65915) provides that a residential development is eligible for concessions and incentives as follows:
1. One concession or incentive for residential developments that include at least ten percent of the total units as density bonus BMR units affordable to low-income households, at least five percent of the total units as density bonus BMR units affordable to very low-income households, or at least ten percent of the total units in a common interest development as density bonus BMR units affordable to moderate-income households.
2. Two concessions or incentives for residential developments that include at least twenty percent of the total units as density bonus BMR units affordable to low-income households, at least ten percent of the total units as density bonus BMR units affordable to very low-income
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households, or at least twenty percent of the total units in a common interest development as density bonus BMR units affordable to moderate-income households.
3. Three concessions or incentives for residential developments that include at least thirty percent of the total units as density bonus BMR units affordable to low-income households, at least fifteen percent of the total units as density bonus BMR units affordable to very low -income households, or at least thirty percent of the total units in a common interest development as density bonus BMR units affordable to moderate-income households.
The following table summarizes requirements for incentives and concessions:
TABLE 18.17.050: REQUIREMENTS TO QUALIFY FOR STATE MANDATED
INCENTIVES/CONCESSIONS
Income Category
Percentage of Density
Bonus BMR Units to
Quality for Incentives
Very Low-Income 5% 10% 15%
Low-Income 10% 20% 30%
Moderate-Income (for-sale common interest
development only)
10% 20% 30%
Allowable Number of Incentive(s)/Concession(s) 1 2 3
Notes:
A. A concession or incentive may be requested only if an application is also made for a density bonus pursuant to Section 18.17.040.
B. Concessions or incentives may be selected from only one category (very low, low, or moderate).
C. No concessions or incentives are available for land donation.
D. Condominium conversions and day care centers may have one concession or a density bonus at the City’s option, but not both.
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B. Definition of Concession or Incentive. For the purposes of this section, “concession” or “incentive” means the following:
1. A reduction in development standards or architectural design requirements which exceed the minimum building standards approved by the State Building Standards Commission in compliance with State law (Health and Safety Code Section 18901 et seq.), including, but not limited to, setback, coverage, and/or parking requirements, which result in identifiable, financially sufficient, and actual cost reductions, based upon appropriate financial analysis and documentation if required by this section.
2. Approval of mixed-use development in conjunction with the proposed residential development if nonresidential land uses will reduce the cost of the residential development, and the nonresidential land uses are compatible with the residential development and existing or planned surrounding development.
3. Other regulatory incentives or concessions proposed by the builder or the City that will result in identifiable, financially sufficient, and actual cost reductions, and based upon appropriate financial analysis and documentation if required by this section.
BC. Concessions Not Requiring Financial Pro Forma Evidence of Cost Reduction from Applicant. The following concessions and incentives shall be available to the builder without any requirement that the builder submit a pro forma reasonable documentation to the City demonstrating that the requested concession or incentive results in identifiable financially sufficient, and actual cost reductions:
1. A reduction in the usable open space requirement;
2. An increase in the maximum lot coverage requirement;
3. A reduction in minimum lot dimensions;
4. A reduction in minimum distance between buildings;
5. A reduction in landscaping area requirements;
6. Deferral until occupancy of development impact fees;
7. Any of the City incentives listed in Section 18.17.030(A) through (E), inclusive.
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CD. Concessions Requiring Financial Pro Forma Evidence of Cost Reduction from Applicant. All other concessions and incentives shall require the builder to demonstrate to the City Council through the provision of a pro forma reasonable documentation that the requested concession or incentive results in identifiable, financially sufficient, and actual cost reductions to the residential housing development to provide for affordable housing costs or rents. The pro forma shall include:
1. The actual cost reduction achieved through the concession or incentive;
2. Evidence that the cost reduction allows the builder to provide affordable rents or affordable sales prices; and
3. All other information as may be requested by the Administrator to ensure that the required findings can be made.
DE. Parking Reduction. Pursuant to Government Code Section 65915(p), if If a residential housing development is eligible for a density bonus pursuant to Section 18.17.040(A), the builder may request an on-site vehicular parking ratio , inclusive of handicapped and guest parking, that does not exceed the following: number of spaces specified in Government Code Section 65915(p).
1. Zero- to one-bedroom dwelling unit: one on-site parking space.
2. Two- to three-bedroom dwelling unit: two on-site parking spaces.
3. Four- or more bedroom dwelling unit: two and one-half on-site parking spaces.
On-site parking may include tandem and uncovered parking.
A builder may request this parking reduction in addition to concessions and incentives permitted by subsection A of this section.
EF. Waiver. Applicants may seek a waiver of any development standards that will have the effect of physically precludinge the construction of a residential housing development that is eligible for a density bonus pursuant to Section 18.17.040(A) with the density bonus at the densities or with the concessions and incentives permitted by Section 18.17.040 or this section Section 18.17.050.A. The builder shall provide reasonable documentation demonstratinge that the development standards that are requested to be waived will have the effect of physically precluding the construction of the residential housing development with the density bonus at the densities or with the concessions and incentives permitted by Section 18.17.040 or Section 18.17.050.Athis section.
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FG. City Financial Participation Not Required. Nothing in this chapter requires the provision of direct financial incentives for the residential housing development, including but not limited to the provision of financial subsidies, publicly owned land, fee waivers, or waiver of dedication requirements. The City at its sole discretion may choose to provide such direct financial incentives.
GH. Prevailing Wages. Financial and certain other incentives may require payment of prevailing wages by the residential housing development if required by State law. (Ord. 1438 § 4 (Exh. A (part)), 2011:
Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.050)
18.17.060 Review procedures for State mandated density bonuses, concessions, and incentives, waivers, and parking reductions.
A. Below Market Rate Housing Plan. All requests for density bonuses, concessions and incentives, City incentives, parking reductions, and waivers provided pursuant to Sections 18.17.040 and 18.17.050 shall be submitted with the below market rate housing plan required by Section 18.16.060(B). The builder shall include the following additional information in the below market rate housing plan:
1. A tentative map or site plan or both, drawn to scale, depicting the number and location of all market rate units, below market rate units, density bonus BMR units, and bonus units.
2. Summary table showing A calculation of the maximum number of dwelling units permitted by the City’s Zoning Ordinance and General Plan for the residential housing development, excluding any density bonus, proposed density bonus BMR units by income level, calculation of proposed bonus percentage, number of bonus units proposed, total number of dwelling units proposed on the site, and resulting density in units per acre..
3. The zoning and general plan designations and assessor's parcel number(s) of the housing development site. The targeted income level of the proposed density bonus BMR units.
4. A description of all dwelling units existing on the site in the five-year period preceding the date of submittal of the application and identification of any units rented in the five-year period. If dwelling units on the site are currently rented, income and household size of all residents of currently occupied units, if known. If any dwelling units on the site were rented in the five -year period but are not currently rented, the income and household size of residents occupying dwelling units when the site contained the maximum number of dwelling units, if known.
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5. Description of any recorded covenant, ordinance, or law applicable to the site that restricted rents or prices to levels affordable to very-low or lower income households in the five-year period preceding the date of submittal of the application.
6. If a density bonus is requested for a land donation, the location of the land to be dedicated, proof of site control, and reasonable documentation that each of the requirements included in California Government Code Section 65915, subdivision(g) can be met.
7. If the application proposes Description of any requested concessions or, incentives, waivers of development standards, or parking reductions requested pursuant to Section 18.17.050, the below market rate housing plan shall also include the following information:
a5. For all concessions and incentives except those listed in Section 18.17.050(C), a pro forma demonstrating that the requested concessions and incentives result in identifiable, financially sufficient, and actual cost reductions. The pro forma shall include: The City’s usual regulatory requirement and the requested regulatory incentive, described both in writing and shown on the submitted site plans elevations, or other submitted plans, as appropriate. ba. Except where mixed-use zoning is proposed as a concession or incentive pursuant to Government Code Section 65915(k)(2), reasonable documentation to show that any requested incentive will result in identifiable and actual cost reductions to provide for affordable housing costs or rents. The actual cost reduction achieved through the concession or incentive; and
cb. If approval of mixed-use zoning is proposed, reasonable documentation that nonresidential land uses will reduce the cost of the housing development and that the nonresidential land uses are compatible with the housing development and the existing or planned development in the area where the proposed housing development will be located.
Evidence that the cost reduction allows the builder to provide affordable rents or affordable sales prices.
86. If the application proposes For waivers of development standards, the below market rate housing plan shall also include the following information:
a. The City’s usual development standard and the requested development standard, described both in writing and shown on the submitted site plans elevations, or other submitted plans, as appropriate.
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b. : evidence Reasonable documentation that the development standards for which the each waiver iss are requested will have the effect of physically precluding the construction of the residential housing development with at the density bonusies or with the, concessions, or incentives requested permitted by State Density Bonus Law.
7. The Administrator may require that any pro forma submitted pursuant to subsection (A)(5) of this section include information regarding capital costs, equity investment, debt service, projected revenues, operating expenses, and such other information as is required to evaluate the pro forma. The cost of reviewing any required pro forma data, including but not limited to the cost to the City of hiring a consultant to review the pro forma, shall be borne by the builder.
8. If a mixed-use building or development is proposed, the builder shall provide evidence that nonresidential land uses will reduce the cost of the residential development, and t he nonresidential land uses are compatible with the residential development and existing or planned surrounding development.
9. If the application proposes a reduction of parking standards, the below market rate housing plan shall also include a table showing parking required by the zoning regulations, parking proposed under Section 65915, subdivision (p), and reasonable documentation that the project is eligible for the requested parking reduction. . If a density bonus is requested for a land donation, the below market rate housing plan shall show the location of the land to be dedicated, provide proof of site control, and provide evidence that each of the findings included in Government Code Section 65915(g) can be made.
10. If a density bonus or concession is requested for a child care facility or condominium conversion, the below market rate housing plan shall provide evidence reasonable documentation that the findings in requirements of Government Code Section 65915(h) or 65915.5, as appropriate, can be made.
11. Other requested information included on the City’s application forms.
12. Payment of any fee in an amount set by resolution of the City Council for City costs necessary to determine compliance of the application with State Density Bonus Law.
B. City Review of Application for State Mandated Density Bonus, Concessions, and Incentives. Any request for a density bonus, concessions, incentives, waivers, or parking reductions provided pursuant to Sections 18.17.040 and 18.17.050 shall be submitted concurrently with the filing of the planning
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application for the first discretionary permit required for the housing development and shall be processed, reviewed, and approved or denied by the decision-making body (Planning Commission or City Council) concurrently with the below market rate housing plan required for the residential housing development. The applicant shall be informed whether the application is complete consistent with Government Code Section 65943. In accordance with State law, neither the granting of a concession or incentive, nor the granting of a density bonus, shall be interpreted, in and of itself, to require a General Plan amendment, zoning code amendment, zoneing change, or other discretionary approval, .or the waiver of a city ordinance or provisions of a city ordinance unrelated to development standards.
C. Findings for Approval of Eligibility for State Mandated Density Bonus, Concessions, and Incentives, Waivers, and Parking Reductions. To ensure that an application for a housing development conforms with the provisions of State Density Bonus Law, the staff report presented to the decision-making body shall state whether the application conforms to the following provisions of State Density Bonus Law as applicable: Before approving an application that includes a request for a density bonus, incentive, concession, waiver, or parking reduction provided pursuant to Sections 18.17.040 and 18.17.050, the decision-making body shall make the following findings, as applicable:
1. The residential housing development is eligible for a density bonus and any concessions, incentives, waivers, or parking reductions requested and has complied with requirements for the replacement of units as required by State Density Bonus Law..
2. If an incentive or concession is requested, aAny requested incentive or concession will result in identifiable, financially sufficient, and actual cost reductions based upon appropriate financial analysis and documentation if required.to provide for affordable housing or costs or rents; except that, if a mixed-use development is requested, the application must instead meet all of the requirements of Government Code Section 65915, subdivision (k)(2).
3. If the density bonus is based all or in part on donation of land, the findings included in requirements of Government Code Section 65915(g) have been met.
4. If the density bonus, incentive, or concession, waiver, or parking reduction is based all or in part on the inclusion of a child care facility or, condominium conversion, the findings requirements included in Government Code Section 65915(h) or 65915.5, as appropriate, have been met.
5. If the incentive or concession includes mixed-use development, the findings included in Government Code Section 65915(k)(2).
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6. If a waiver is requested, the housing development project is eligible for a waiver, and the development standards for which a waiver is requested would have the effect of physically precluding the construction of the residential housing development at the densities or with the density bonus, concessions, or incentives permitted.
D. Findings for Denial of Incentives, Concessions or Waivers.
1. Denial of Concessions and Incentives. If the findings required by subsection C of this section can be made, tThe decision-making body may deny a concession or incentive only if it makes a written finding, supported by substantial evidence, of either one any of the following:
a. The proposed incentive or concession does not result in identifiable and actual cost reductions to provide for affordable housing costs, as defined in Health and Safety Code Section 50052.5, or for affordable rents, as defined in Health and Safety Code Section 50053, for the BMR density bonus units. The concession or incentive is not required to provide for affordable rents or affordable ownership costs. b. The concession or incentive would have a specific adverse impact upon public health or safety or the physical environment or on any real property that is listed in the California Register of Historical Resources, and there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact without rendering the development unaffordable to low - and moderate-income households. For the purpose of this subsection, “specific adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified, written public health or safety standards, policies, or conditions as they existed on the date that the application for the residential housing development was deemed complete. c. The concession or incentive would be contrary to State or Federal law.
2. Denial of Waivers. If the findings required by subsection C of this section can be made, tThe decision-making body may deny a waiver only if it makes a written finding, supported by substantial evidence, of either any of the following:
a. The waiver would have a specific adverse impact upon health or, safety,, or the physical environment, and there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact without rendering the development unaffordable to low- and moderate- income households. For the purpose of this subsection, “specific adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, and identified,
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written public health or safety standards, policies, or conditions as they existed on the date that the application was deemed complete.
b. The waiver would have an adverse impact on any real property that is listed in the California Register of Historical Resources.
c. The waiver would be contrary to State or Federal law.
3. Denial of Incentive or Bonus for Child Care Center. If the findings required by a child care center complies with the requirements of subsection (h) of subsection C of Government Code Section 65915, this section can be made, the decision-making body may deny a density bonus, incentive, or concession that is based on the provision of child care facilities only if it makes a written finding, based on substantial evidence, that the City already has adequate child care facilities. (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly
18.204.060)
18.17.070 Requirements for density bonus below market rate units.
In addition to any requirements included in Sections 18.17.040 and 18.17.050, density bonus BMR units shall conform to the following provisions applicable to below market rate units:
A. Below market rate unit standards (Section 18.16.050), except that for-rent density bonus BMR units that are affordable to very low- and low-income households that are not also BMR units required by Section 18.16.030 shall be affordable for thirty fifty-five years or as long a period of time as permitted by current law All for-sale density bonus BMR units shall be affordable in perpetuity. , unless a longer period of time is required by any construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program applicable to the residential development .
B. Compliance procedures (Section 18.16.060), except that the below market rate housing plan shall also include the provisions described in Section 18.17.040.A.
C. Eligibility for below market rate units (Section 18.16.080).
D. Owner-occupied below market rate units (Section 18.16.090).
E. Rental units (Section 18.16.100). (Ord. 1438 § 4 (Exh. A (part)), 2011: Ord. 1416 § 4 (Exh. A (part)), 2010. Formerly 18.204.070)
18.17.080 Interpretation.
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If any portion of this chapter conflicts with State Density Bonus Law or other applicable state law, state law shall supersede this chapter. Any ambiguities in this chapter shall be interpreted to be consisten t with State Density Bonus Law.
****
SECTION 3: The City Council hereby declares that it would have passed this Ordinance sentence by sentence, paragraph by paragraph, and section by section, and does hereby declare that any provisions of this Ordinance are severable and if for any reason any sentence, paragraph or section of this Ordinance shall be held invalid, such decision shall not affect the validity of the remaining parts of this Ordinance.
SECTION 4: This Ordinance shall be published and posted according to law and shall take effect and be in force from and after 30 days after its passage and adoption.
Introduced this 13th day of June, 2022
I, Crystal Mui, hereby certify that the foregoing Resolution was duly and regularly passed and adopted by the City Council of the City of San Carlos at a regular mee ting thereof held on the 13th day of June, 2022, by the following vote:
AYES, COUNCILMEMBERS: _ ___ ___________
NOES, COUNCILMEMBERS: __ ______________________________________________ ABSENT, COUNCILMEMBERS: __ ________________________________________
________________________________________
CITY CLERK of the City of San Carlos
APPROVED:
___________________________
MAYOR of the City of San Carlos
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D RAFT M EMORANDUM
To: Al Savay and Adam Aronson, City of San Carlos
From: Darin Smith and Ashley Boots
Subject: Findings and Recommendations: Economic Study of San Carlos’ Housing Regulations; EPS #191081
Date: September 23, 2021
Economic & Planning Systems, Inc. (EPS) was retained by the City of San Carlos (City) to review its inclusionary housing requirements and ensure that production of market rate and below market rate housing units is optimized. The City’s goal is to ensure its policies encourage development of a range of housing options to address market pressures, mitigate displacement, and enable housing for future residents.
The City currently requires new housing developments to provide 15 percent of newly built units at Below Market Rate (BMR) levels. For rental projects, the developer must provide 10 percent of units at Very Low Income (up to 50 percent of Area Median Income [AMI]) and 5 percent of units at Low Income (up to 60 percent of AMI). For ownership projects, the targeted price points are higher, as developers need to provide 5 percent of units at Low Income (up to 80 percent of AMI) and 10 percent of units at Moderate Income (up to 100 percent of AMI).
Developers are not allowed to pay a fee in lieu of providing the required units, except for small projects under 7 units or fractional units (e.g., if a 28-unit project should provide 4.2 BMR units, the developer would provide four units and the fee could be charged for the 0.2 units).
This analysis evaluates the feasibility of potential changes to the City’s affordable housing programs to inform levels of inclusionary requirements that may be supported with minimal adverse impact on new development. The memo describes an overview of comparable jurisdictions’ inclusionary requirements, a discussion on the State’s Density Bonus Law, a detailing of EPS’s approach to the feasibility analysis, and recommendations for staff regarding the update to the City’s inclusionary housing ordinance.
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The primary memo findings are summarized below.
1. San Carlos’s 15 percent inclusionary requirements are in line with average requirements, compared to neighboring jurisdictions in Santa Clara and San Mateo Counties. Among the cities surveyed, there is a range of affordability requirements, from very-low to low- to moderate income. Seven jurisdictions require higher than 15 percent of units be affordable, including some with 20 percent inclusionary on the rental side and 20 – 25 percent on the for-sale side. However, San Carlos requires a higher percentage of very low-income units in rental projects than most jurisdictions and sets its low-income unit pricing below levels found in some jurisdictions, and thus can be considered to have a relatively aggressive policy for rentals already.
2. The State Density Bonus Law affects project feasibility by allowing increased numbers of units compared to base zoning, in exchange for providing certain proportions of affordable units at various income levels. This incentive program is triggered by right when developers meet local inclusionary housing standards, and can result in financial benefits to developers on both the cost and revenue side. With greater density per acre, the result is a lower per-unit land cost, and the allowance of additional market-rate units increases the proportion of market-rate to affordable units, which can improve profit margins. These benefits can be especially significant in high-value housing markets like San Carlos.
3. On the for-sale side, the analysis reveals that there are several different variations to the current inclusionary standards that can yield better financial results for the developer, particularly as they capitalize on the advantages of the State density bonus law. For example, the City may consider updating the current ordinance to a scenario requiring 20 percent of units at low-income (70 percent of AMI). This scenario increases the inclusionary percentage from 15 to 20 percent, meets an identified need in the community, and allows a 35 percent density bonus that appears to offer strong value to the developer.
4. On the rental side, the analysis again identifies several alternatives to the current requirements that can yield the same or greater number of affordable units while also yielding preferable financial returns to the developer. However, the City’s current rental policy is already relatively aggressive and rental housing appears to face feasibility challenges until the market fully recovers following the COVID pandemic. Under these circumstances, EPS suggests that the City consider providing options from which developers may choose based on their own preferences and projections: 1) retaining its current standards – 15 percent of units with 10 percent very low and 5 percent low income; and 2) 15 percent all at very low income, which would maximize the State density bonus incentive.
This alternative appears to yield even greater financial returns than under the current ordinance because it would qualify for a greater density bonus, but also provides deeper affordability, and may be preferable to certain developers.
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5. Due to economies of scale, projects of different sizes can have significantly different cost profiles, and larger projects appear to be more able to absorb the implicit cost of inclusionary housing requirements. Like some nearby jurisdictions, San Carlos may consider increasing its inclusionary standards for larger projects. Research suggests that a 100-unit apartment project can be expected to have lower costs per unit than a 50-unit apartment project. However, this does not necessarily mean that projects with greater density can afford to provide more inclusionary units, and in fact the inverse may be true. For example, a 50-unit townhome project may be able to support more affordable units than can a 50-unit multifamily apartment complex. Cities like Palo Alto have addressed this complexity by basing a higher inclusionary standard on the physical size of the land (less than or greater than five acres) rather than based on the number of units in the project, as the economies of scale have more to do with project size than project density.
6. If the City is concerned about the feasibility of housing development in general and rental housing in particular, it could consider allowing more or larger projects to pay an in-lieu fee rather than providing inclusionary units on-site. Given the choice between the City’s current inclusionary standards and its maximum in-lieu fees of roughly $27 per square foot, analysis herein suggests the in-lieu fees yield better financial returns.
Of course, the City would need to consider whether it prefers to collect and utilize such fees – for example, to provide matching funds for 100 percent affordable projects – or to have affordable units distributed throughout otherwise market-rate projects.
Overview of Comparable Jurisdictions
In considering potential changes to the City’s inclusionary requirements, it is helpful to understand how these policies are being implemented in comparable jurisdictions. To provide this context, EPS surveyed the cities of Santa Clara County and San Mateo County, along with neighboring Fremont in Alameda County. Inclusionary policies are subject to change, as San Carlos is considering, so it is important to note that Santa Clara County cities were surveyed as of February 2021, and San Mateo County cities were surveyed as of July 2019. 1 Of the
geographies researched, 14 did not have any inclusionary housing policies, while 22 did.2 Inclusionary requirements adopted by jurisdictions in these counties vary based on local policy preferences, including factors such as the number of units in the development or the type of housing (i.e., rental, condo, townhome, or single family). The charts on the following pages are divided into requirements for new rental development versus requirements for new for-sale developments, which often vary in cities. The charts also highlight the range of affordability requirements among the cities, from very-low to low- to moderate income.
1 The San Mateo County jurisdictions were surveyed as part of an EPS assignment for the City of San Mateo in 2019. San Mateo subsequently updated its own inclusionary policy in 2020, and the figures presented herein reflect that 2020 update for the City of San Mateo. 2 Atherton, Belmont, Brisbane, Burlingame, East Palo Alto, Gilroy, Hillsborough, Los Altos Hills, Millbrae, Monte Sereno, Morgan Hill, Portola Valley, Saratoga, and Woodside did not have inclusionary policies.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx On the rental side, a few cities had requirements higher than San Carlos’s 15 percent for some or all projects. Figure 1 shows that in general, 15 percent is a standard proportion. However, very few cities match San Carlos’s current standard that 10 percent of all rental units should be very-low-income; most require a lower proportion of these deeply affordable units or none at all.
As such, San Carlos’s current inclusionary standards for rental housing are on the more aggressive and progressive end of the range in nearby cities, and efforts to increase those standards would further separate San Carlos from the majority of its peer cities.
Figure 1 Inclusionary Requiremen ts for New Rental Development
*In Los Gatos, projects 20-100 units can be required to provide up to 20 percent inclusionary, as the number of units increase. 20-unit projects are only required to provide 10 percent.
Figure 2 shows that San Carlos’s current 15 percent requirement is still the most common overall percentage, but more cities require 20 or 25 percent inclusionary units for for-sale projects than do for rental projects. Some cities require for-sale projects to include very-low income units, whereas San Carlos requires only low- and moderate-income units in for-sale projects. This comparison suggests that San Carlos’s inclusionary standards for for-sale projects are not as comparatively aggressive as are the city’s standards for rental housing and might be increased in terms of percentage and income-level targets while remaining within the established range of nearby jurisdictions.
0%
5%
10%
15%
20%
25%
VLI LOW MOD
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx Figure 2 Inclusionary Requirements for New For-Sale Development
Note that in many cities there are a mix of income levels required, with specific allocations to each, and in other cities there is a range of levels referenced in policy but without the allocations specified. Also of note is the City of Mountain View, which updated its policy in 2019 to increase the ownership percentage requirement for rowhouses and townhouses to meet a 25 percent on- site requirement, with 15 percent affordable to a weighted average of 100 percent AMI and 10 percent affordable to a weighted average of 135 percent. For projects other than rowhouses and townhouses, and for all rental projects, a 15 percent requirement is in place in Mountain View.
The City of Los Altos also has a unique ordinance that varies percentage requirements by number of units, and on the rental side for projects with 10 or more units, gives developers the option between providing more units at the low-income level, or fewer units at the very low- income level.
State Density Bonus Law
First enacted by legislature in 1979, the State of California Density Bonus Law mandates that cities provide an increase in the maximum density allowed by local zoning regulations for developments that include certain amounts of affordable housing units. Under Assembly Bill (AB) 2345, the law has been updated to afford a higher amount of density bonus percentage in exchange for increased inclusionary provisions and/ or deeper levels of affordability. Table 1 lays out the maximum bonus allowed before AB 2345, compared to what is now effective as of January 1
st, 2021.
0%
5%
10%
15%
20%
25%
30%
VLI LOW MOD
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Pre-2021 Density Bonus Law AB 2345 Amendments
Very Low Income 35% bonus for 11% of units 50% bonus for 15% of units Low Income 35% bonus for 20% of units 50% bonus for 24% of units Moderate Income 35% bonus for 40%* of units 50% bonus for 44%* of units *For sale units only; no density bonus is provided for moderate income rental units.
Source: “California's AB 2345 Expands and Enhances Density Bonus Law Development Incentives.” Gibson Dunn, 26 Jan. 2021, www.gibsondunn.com/californias-ab-2345-expands-and-enhances-density-bonus-law-development- incentives/.
Along with the benefit of increased density, developers are entitled to various incentives and concessions, based on the affordability percentages and depths included in a project. To be eligible for one concession, a project must include 5 percent very low, 10 percent low or 10 percent moderate income units. Two concessions are allowed with the provision of 10 percent very low, 17 percent low (previously 20 percent, before AB 2345), or 20 percent moderate income units. Providing 15 percent very low, 24 percent low (30 percent, pre-AB 2345), or 30 percent moderate income units will yield three concessions. These concessions could include a reduction in site development standards or a modification of zoning or architectural design requirements, approval of mixed-use zoning, or any other identifiable cost reduction incentive.
The City of San Carlos implements a density bonus program in compliance with the state law.
Under State law, simply by complying with the City’s inclusionary requirements, new housing developments qualify for this density bonus (and development concessions) at various amounts according to the percent and level of affordability. For example, projects that meet the City’s standard by providing 10 percent of units at very-low-income for a rental project would qualify for a 32.5 percent density bonus while projects that meet the 15 percent low-income option for a rental project would qualify for a 27.5 percent density bonus. Note that the inclusionary requirement is applied to the “base” density, or number of units in the project before accounting for density bonus, rather than applied to the total number of units; thus, bonus units can all be offered at market rate.
The density bonus law has multiple effects on the financial feasibility of a project. On the cost side, for example, greater density per acre results in a lower per-unit land cost. From a revenue perspective, since the inclusionary requirement is applied to the base number of units rather than the total number of units, the extra units allowed through the density bonus can all be priced at market rate, thus increasing the proportion of market-rate to affordable units, which can improve profit margins. Since the density bonus provision varies depending on the percent and level of affordability, projects in high-value areas such as San Carlos can actually yield higher profit margins by providing very low-income units rather than low-income units. The sensitivity testing described on the following pages accounts for the effects of density bonus.
In San Carlos, the City’s Density Bonus states that residential developments with one or more on-site below market rate units that are affordable to low-income households, or to a lower income category, may be granted one additional unit for each unit affordable to low-income households or to a lower income category (Section 18.17.030). As the State law provides a more generous benefit, EPS has applied it, instead of the City ordinance, to the scenarios analyzed within this memo.
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The City has asked EPS to explore the financial implications of inclusionary housing requirements that exceed those currently in place, whether by increasing the proportion of units that must be affordable, by decreasing the household income levels targeted, or both. To do this, EPS has prepared financial pro formas reflecting the expected costs of new development, and compared those costs to the revenues that could be generated from the projects given various mixes of market-rate and affordable housing. EPS has endeavored to identify potential “win-win” scenarios, in which the development’s affordability would be enhanced but so would the developer’s return on investment, relative to adhering to the City’s current inclusionary standards.
Ownership Scenarios
As a case study for evaluating the development economics of various inclusionary requirements, EPS leveraged a 2019 feasibility study for a 28-unit luxury condominium project proposed in San Carlos. Key revenue and cost assumptions were held unaltered from that proposal for simplicity.
Using the same framework, EPS evaluated a number of scenarios, adjusting the percentage and/or depth of affordability in each. Outlined below are the various percentages and levels of affordability tested against the current ownership ordinance:
Current Ordinance – 15 percent Inclusionary with 5 percent Low (70 percent AMI), 10 percent Moderate (110 percent AMI); this scenario is automatically eligible for a 10 percent density bonus under State law.
S-1 – 15 percent Inclusionary with 11 percent Low (70 percent AMI) and 4 percent Moderate (110 percent AMI); this scenario models the actual approach the 626 Walnut St. project developer opted to pursue, choosing to include units at deeper affordability levels for greater density bonus (21.5 percent).
S-2 - 20 percent Inclusionary with 11 percent Very Low (50 percent AMI) and 9 percent Moderate (110 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, provides a mix of affordability, and is eligible for a 35 percent density bonus - the previous maximum amount afforded before A.B. 2345 was passed.
S-3 - 20 percent Inclusionary with all 20 percent Low (70 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves the previous 35 percent density bonus maximum.
S-4 - 20 percent Inclusionary with 10 percent Low (70 percent AMI) and 10 percent Moderate (110 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, but only achieves a 20 percent bonus due to less affordability depth.
S-5 - 20 percent Inclusionary with 11 percent Very Low (50 percent AMI) and 9 percent Low (70 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves the previous 35 percent density bonus maximum.
S-6 - 20 percent Inclusionary with 15 percent Very Low (50 percent AMI) and 5 percent Low (70 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves the current 50 percent density bonus maximum afforded through A.B. 2345.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx S-7 - 24 percent Inclusionary with 24 percent Low (70 percent AMI); this scenario increases the inclusionary percentage from 15 to 24 percent, and achieves the current 50 percent density bonus maximum afforded through A.B. 2345.
Each scenario assumed the same 28 base units, and maximized the State Density bonus for additional units allowable given the affordability parameters regarding the proportion of units and their targeted income levels. The City’s current inclusionary standards result in a 10 percent density bonus for for-sale projects. Scenarios S-2, S-3, and S-5 were all eligible to achieve the pre-A.B. 2345 maximum density bonus of 35 percent, increasing the total number of units to 38.
Utilizing A.B. 2345 in Scenarios S-6 and S-7 allowed for the new maximum density bonus of 50 percent, yielding 42 units overall.
The proposed project featured large condominium units, with an average size of 1,802 square feet reflecting three-bedroom units. Market-rate unit values of $1,847,050 were used from the prior study, and affordable unit prices retained from the prior study were based on HUD Income Limits for San Mateo County. Commission and Closing costs were subtracted from the unit revenues for a net sales revenue amount. On the costs side, land and carrying costs of $12,720,000 were held constant across all scenarios, and construction and other costs of $960,647 per unit were assumed. These revenue and cost estimates inform a range of profit margins (net revenue divided by total cost), which vary by scenario, as shown in Table 2.
The results suggest that there are several different variations to the current inclusionary standards that can yield better financial results for the developer, particularly as they capitalize on the advantages of the State density bonus law. Each bonus unit can be offered at market- rate pricing, which is highly profitable in San Carlos. Indeed, the results of scenario S-1 – which reflect the actual affordability strategy ultimately pursued by the developers of 626 Walnut Street – illustrate that a developer had financial incentive to exceed the City’s inclusionary standard in order to realize the benefits of the density bonus program. Six other affordability scenarios are shown to produce similar advantages to developers while also increasing the affordability results relative to the City’s current inclusionary standards for for-sale housing.
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Program
Eligible Density Bonus
Base Units (for Inclusionary Req.)
Units in Project after Density Bonus
Value/ Revenue Total Revenue Total Revenue Total Revenue Total Revenue Tot al Revenue Total Revenue Total Revenue Total Item Unit1
Units Value Units Value Units Value Units Value Units Value Units Value Uni ts Value Units Value Revenues
MR Units $1,847,050 27 $49,870,350 31 $57,258,550 32 $59,105,600 32 $59, 105,600 28 $51,717,400 32 $59,105,600 36 $66,493,800 35 $64,646,750 VLI Units $116,000 0 $0 0 $0 3 $348,000 0 $0 0 $0 3 $348,000 4 $464,000 0 $0 Low Units $221,100 1 $221,100 3 $663,300 0 $0 6 $1,326,600 3 $663,300 3 $663 ,300 2 $442,200 7 $1,547,700 Mod Units $526,100 3 $1,578,300 1 $526,100 3 $1,578,300 0 $0 3 $1,578,300 0 $0 0 $0 0 $0 Commissions & Closing -$53,779 -$1,667,140 -$1,882,255 -$2,043,591 0 -$2,043,591 0 -$1,828,476 0 -$2,043,591 0 -$2,258,705 0 -$2,258,705 Total 31 $50,002,610 35 $56,565,696 38 $58,988,309 38 $58,388,609 34 $52,130,524 38 $58,073,309 42 $65,141,295 42 $63,935,745 Costs
Land Purchase + Carrying Costs $12,720,000 $12,720,000 $12,720,000 $12,720,000 $12,720,000 $12,720,000 $12,720,000 $12,720,000 Hard + Soft Costs $960,647 $29,780,057 $33,622,645 $36,504,586 $36,504,586 $32,661,998 $36,504,586 $40,347,174 $40,347,174 Total $42,500,057 $46,342,645 $49,224,586 $49,224,586 $45,381,998 $49,224,586 $53,067,174 $53,067,174 Profit Margin $7,502,553 $10,223,051 $9,763,723 $9,164,023 $6,748,52 6 $8,848,723 $12,074,121 $10,868,571 Profit Margin (% of Costs) 17.65% 22.06% 19.84% 18.62% 14.87% 17.98% 2 2.75% 20.48% 1 Market values, affordable values, development costs, and land costs all reflect figures from 2019 proposal for 626 Walnut Street. 2 Scenario models the actual approach the 626 Walnut St. project developer opted to pursue, choosing to include units at deeper affordability levels for greater density bonus. 34 S-4
20% Inclusionary:
10% LOW (70% AMI)
10% MOD (110% AMI)
3 Effective January 2021, Assembly Bill 2345 amends the Density Bonus Law to expand development incentives for affordable housing projects, including increasing the maximum density bonus from thirty-five percent to fifty percent.
S-3 S-5Current Ordinance S-2S-1 2
15% Inclusionary: 20% Inclusionary: 20% Inclusionary: 20% Inclusionary:
5% LOW (70% AMI), 11% VLI (50% AMI), 20% LOW (70% AMI) 11% VLI (50% AMI), 10% MOD (110% AMI) 9% MOD (110% AMI) 9% LOW (70% AMI)
28 10.0% 35.0% 35.0% 35.0%
28 28 28
20.0%
28 21.5%
31 38 38
S-6 3
20% Inclusionary:
15% VLI (50% AMI),
5% LOW (70% AMI)
50.0%
28 S-7 3
24% Inclusionary:
24% LOW (70% AMI)
42 50.0%
2828
35 15% Inclusionary:
11% LOW (70% AMI),
4% MOD (110% AMI)
38 42
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On the rental side, EPS compiled project descriptions and cost estimates from other recent projects in San Mateo and Santa Clara counties, and vetted the assumptions with locally active developers. Land acquisition costs were derived from market transactions and similarly vetted with local developers for reasonableness.
3 For income assumptions, EPS compiled market-rate
and affordable rents based on conditions and requirements in San Carlos.4 As the standard metric for feasibility, EPS modeled the annual yield on cost, calculating aggregate Net Operating Income (NOI) divided by development costs. As on the ownership side, EPS evaluated a number of scenarios, adjusting the percentage and/or depth of affordability in each. Outlined below are the various percentages and levels of affordability tested against the current rental ordinance:
Current Ordinance – 15 percent Inclusionary with 10 percent Very Low (50 percent AMI), 5 percent Low (60 percent AMI); this scenario is automatically eligible for a 32.5 percent density bonus under State law.
R-1 – 20 percent Inclusionary with 11 percent Very Low (50 percent AMI) and 9 percent Moderate (110 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves the previous 35 percent density bonus maximum.
R-2 – 20 percent Inclusionary with 20 percent Low (60 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves a 35 percent density bonus.
R-3 – 20 percent Inclusionary with 11 percent Very Low (50 percent AMI) and 9 percent Low (60 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves a 35 percent density bonus.
R-4 – 20 percent Inclusionary with 15 percent Very Low (50 percent AMI) and 5 percent Low (60 percent AMI); this scenario increases the inclusionary percentage from 15 to 20 percent, and achieves the current 50 percent density bonus maximum afforded through A.B. 2345.
R-5 – 24 percent Inclusionary with 24 percent Low (60 percent AMI); this scenario increases the inclusionary percentage from 15 to 24 percent, and achieves the current 50 percent density bonus maximum afforded through A.B. 2345.
R-6 – 15 percent Inclusionary, all at Very Low (50 percent AMI); this scenario maintains the inclusionary percentage at 15 percent, and achieves the current 50 percent density bonus maximum afforded through A.B. 2345.
R-7 – 15 percent Inclusionary, with 10 percent Very Low (50 percent AMI) and 5 percent Moderate (110 percent AMI); this scenario maintains the inclusionary percentage at 15
3 The land cost assumptions for the 626 Walnut Street project were identified as being at the top end of the market, and local developers suggested using lower land costs for the rental analysis. 4 Note that the market-rate rents reflect pre-COVID conditions, and this analysis assumes a recovery of rents to 2019 levels rather than continuing of the reduced rents found in 2020 and early 2021 during the pandemic.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx percent, achieves the same 32.5 percent density bonus as under the current ordinance, but increases the value of some affordable units by increasing the income level from Low to Moderate.
For modeling purposes, each scenario assumed a one-acre site and a base density of 59 dwelling units per acre5, and maximized the State Density bonus for additional units allowable given the affordability parameters. Scenarios R-1 through R-3 were all eligible to achieve the pre-A.B. 2345 maximum density bonus of 35 percent, increasing the total number of units to 80. Utilizing A.B. 2345 in R-4, R-5, and R-6 allowed for the new maximum density bonus of 50 percent, yielding 89 units overall.
Income assumptions on Table 3 include market rate rents of $4.25 per square foot for a 1,050 net square foot two-bedroom unit, reflecting the pre-COVID market average peak. Affordable rents were informed by the 2020 income limits for San Mateo County as determined by HUD, State of CA HCD, and County of San Mateo. EPS then deducts the cost of utilities paid by the tenants to get net rents, and then deducts the operating expenses paid by the developer/operator and assumes a small but standard vacancy factor to calculate the Net Operating Income per unit at various income levels.
Table 3 Estimated Revenue Generation per Rental Unit by Income Level
5 This is the maximum density allowed under the City’s multifamily district “RM-59” (San Carlos Municipal Code Chapter 18.04 – Residential Districts).
Item Market Rate
Moderate
Income Low Income
Very Low
Income
(110% of AMI) (60% of AMI) (50% of AMI)
Income Limit [1] N/A $148,115 $80,790 $67,325
Total Annual Housing Costs at 30% of Income N/A $44,435 $24,237 $20 ,198 Less Utility Costs/Year [2] N/A $3,216 $3,216 $3,216
Annual Rent $53,550 $41,219 $21,021 $16,982
Monthly Rent [3] $4,463 $3,435 $1,752 $1,415
Max Monthly Rent per the City's Ordinance na na $2,020 $1,683 Operating Expenses per Unit/Year [4] $13,388 $11,000 $11,000 $11,00 0 Vacancy 5.0% 5.0% 5.0% 5.0%
Net Operating Income $38,154 $28,708 $9,520 $5,682
[2] 2021 utility allowance schedule for San Mateo County. Assumes natural gas heating and cooking.
Sources: CoStar; HCD Income Limits; San Mateo County Housing Authority; Economic & Planning Systems, Inc. [1] BMR unit rents informed by 2021 3-person household income limits for San Mateo County as determined by HUD, State of California HCD, and County of San Mateo.
[4] Operating expenses assume 25% of rental income for market rate and a per-unit estimate from a 2018 CTCAC application for a proposed development in San Mateo for BMR.
[3] Market rate monthly rent assumes $4.25 per square foot for a 1050 net sq. ft. 2-bedroom unit. This assumption reflects the pre-COVID market average peak.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx On the cost side, EPS used a land price of $6.85 million per acre, based on market data from 12 transactions from 2017-2020 for properties to be built for residential use. Aside from land, the cost of constructing the buildings is assumed to be modestly higher on a per-square-foot basis than was assumed for the for-sale project.6. These revenue and cost estimates inform a range of yield on cost percentages, which vary by scenario, as shown in Table 4.
The analysis reveals that most scenarios (including the current ordinance) approach but fall just short of the 5.0 percent yield on cost threshold EPS customarily sees as a minimum for projects considered feasible and financeable.7 Of the seven new scenarios tested, only three are shown to improve upon the current ordinance’s financial result. All new scenarios do maintain or increase the inclusionary percentage from the current 15 percent requirements, up to 20 or 24 percent.
The 20 percent requirement represented in Scenario R-1, at 11 percent Very Low and 9 percent Moderate income, results in a yield on cost metric above both the current ordinance’s result and just reaching the 5.0 percent feasibility threshold. However, this scenario includes a significant amount of moderate-income rental units that are priced at nearly 80 percent of market rate rents, so this scenario may not yield significant benefit for lower-income households in San Carlos.
By contrast, Scenarios R-2 through R-5 requires 20 percent affordable units at a combination of very-low and low incomes, but all fall short of the financial returns under the City’s current ordinance despite greater density bonuses than the 32.5 percent under the current ordinance.
Scenario R-6 maintains the current 15 percent inclusionary requirement, but with all 15 percent at very-low income, a project would be eligible for a 50 percent density bonus. These added market-rate units generate such significant income that this scenario achieves a higher financial return than under the current ordinance, despite the units being offered at lower incomes, and reaches the 5.0 percent yield on cost feasibility threshold.
Scenario R-7 is similar to the current ordinance at 15 percent overall inclusionary units, but trades the 5 percent low-income units for moderate-income units. The density bonus remains the same as under the current ordinance, but overall rental income increases, and this scenario does achieve the 5.0 yield on cost threshold, but does not increase the number or affordability of inclusionary units relative to the City’s current ordinance.
These rental scenarios represent the most feasible alternatives EPS has tested, including others not shown that aimed to prioritize low-income units, and some that use higher rents (such as 70 percent of AMI rather than 60 percent) and would not qualify for the State density bonus
6 Smaller units frequently have higher costs per square foot because expensive construction components like kitchen and bathroom fixtures and finishes are spread over fewer square feet. 7 “Yield on cost” is calculated by dividing a project’s net operating income (gross rents less vacancies and operating expenses) by the total costs of development. A projected yield on cost of 5.0 percent has been a common threshold for securing construction financing on several Bay Area projects in which EPS has been involved in recent years. Table 6 below indicates that a rental project in San Carlos with no inclusionary requirement could be expected to achieve a yield on cost of 5.2 percent, thus representing a feasible project.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx program but would trigger the City’s density bonus incentive. Though there are clearly limits to what might be required, this analysis demonstrates that several alternatives can both enhance affordability and feasibility. Some communities give developers more than one option in their inclusionary ordinances, and San Carlos could consider this approach.
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R-2 R-3 R-4 R-5 R-6 R-7
Item 15% Inclusionary 20% Inclusionary 20% Inclusionary 20% Inclusionar y 20% Inclusionary 24% Inclusionary 15% Inclusionary 15% Inclusiona ry 20% LOW (60% AMI) 11% VLI (50% AMI)
9% LOW (60% AMI)
15% VLI (50% AMI)
5% LOW (60% AMI) 24% LOW (60% AMI) 15% VLI (50% AMI) 10% VLI (50% AMI) 5% MOD (110% AMI)
B a s e D e n s i t y ( D U / A c r e ) 5 9 5 95 95 95 95 95 95 9 Eligible Density Bonus 32.5% 35.0% 35.0% 35.0% 50.0% 50.0% 50.0% 32.5% Density (DU/Acre) after Density Bonus 78 80 80 80 89 89 89 78 Base Units (for Inclusionary Req.) 59 59 59 59 59 59 59 59 Units in Project after Density Bonus 78 80 80 80 89 89 89 78 Total Project Costs
Land Costs (1.0 acres) $6,855,120 $6,855,120 $6,855,120 $6,855,120 $ 6,855,120 $6,855,120 $6,855,120 $6,855,120 All Else $48,678,595 $49,815,000 $49,815,000 $49,815,000 $55,419,188 $55,419,188 # $55,419,188 $48,569,625 Total $55,533,715 $56,670,120 $56,670,120 $56,670,120 $62,274,307 $62 ,274,307 $62,274,307 $55,424,745 Units by Price Point
M a r k e t R a t e U n i t s 6 9 6 96 86 97 77 58 06 9 Annual NOI/Unit $38,154 $38,154 $38,154 $38,154 $38,154 $38,154 $38,15 4 $38,154 Aggregate NOI of Market Rate Units $2,632,652 $2,632,652 $2,594,49 8 $2,632,652 $2,937,887 $2,861,578 $3,052,350 $2,632,652 Moderate Income Units (110% of AMI) 0 5 00000 3
Annual NOI/Unit $28,708 $28,708 $28,708 $28,708 $28,708 $28,708 $28,70 8 $28,708 Aggregate NOI of Moderate Income Units $0 $143,538 $0 $0 $0 $0 $0 $86,1 23 Low Income Units (60% of AMI) 3 0 1 253 1 4 00
Annual NOI/Unit $9,520 $9,520 $9,520 $9,520 $9,520 $9,520 $9,520 $9,520 Aggregate NOI of Low Income Units $28,560 $0 $114,239 $47,600 $28,56 0 $133,279 $0 $0 VLI Units (50% of AMI) 66 0 69 0 96
Annual NOI/Unit $5,682 $5,682 $5,682 $5,682 $5,682 $5,682 $5,682 $5,682 Aggregate NOI of VLI Units $34,095 $34,095 $0 $34,095 $51,142 $0 $51,1 42 $34,095 Total Project NOI $2,695,306 $2,810,284 $2,708,737 $2,714,346 $3,017 ,589 $2,994,857 $3,103,492 $2,752,869 Weighted Avg. NOI/Unit $34,555 $35,129 $33,859 $33,929 $33,905 $33,650 $34,871 $35,293 Yield on Cost 4.9% 5.0% 4.8% 4.8% 4.8% 4.8% 5.0% 5.0%
Sources: City of San Carlos; Economic & Planning Systems, Inc.
Current Ordinance R-1
10% VLI (50% AMI)
5% LOW (60% AMI)
11% VLI (50% AMI)
9% MOD (110% AMI)
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Ownership
Based on the methodology and assumptions, there appears to be room for the City to adjust the inclusionary requirements on for-sale condos to yield deeper levels of affordability as well as improved project feasibility for developers. Under the current requirement, 15 percent inclusionary (with 5 percent at low and 10 percent at moderate) yields a profit margin of close to 18 percent – an attractive return for a developer in EPS’s experience.
From the seven ownership scenarios tested, all but one (S-4) resulted in a higher profit margin than the baseline project reflective of the current ordinance. Scenario S-1, which models the actual approach the 626 Walnut St. project developer opted to pursue, maintained the required 15 percent inclusionary requirement, but included deeper affordability to achieve a greater density bonus. The developer’s voluntary adjustment to the City’s requirements demonstrates that enhanced affordability can also enhance profitability.
Scenario S-2, with the shift to 20 percent inclusionary, qualifies for a 35 percent density bonus and mathematically achieves a nearly 20 percent profit margin. However, this scenario assumes that 11 percent of the base units are priced at very low-income, and staff from San Carlos and other cities have indicated challenges finding households who can qualify for and maintain a mortgage at this income level. Scenario S-3 strikes a potentially appealing balance between affordability (20 percent low-income units) and profitability, which again exceeds the baseline reflecting the City’s current ordinance. Scenarios S-6 and S-7 both utilize the expanded Density Bonus Law to achieve 50 percent density bonuses and yield higher profit margins than under the current ordinance. S-6, the most mathematically profitable scenario tested, increases the inclusionary requirement to 20 percent, but again depends on very low-income units that may be difficult to sell to qualified households. The final iteration, S-7, has the highest inclusionary requirement, at 24 percent low-income units.
The scenarios tested demonstrate the significant value that the State-mandated density bonus affords the project, because the development could include several additional market-rate units (with a high achievable price point of over $1.8 million and a correspondingly high profit margin) in exchange for providing a few affordable units.
Recommendations
From conversations with City staff, EPS understands that low-income units are highest in demand on the City’s BMR waitlist. As such, it is recommended that the City consider updating the current ordinance to a scenario like S-3 – 20 percent at low-income (70 percent AMI). This scenario increases the inclusionary percentage from 15 to 20 percent, and triggers a 35 percent density bonus that offers strong value to the developer. S-3 balances profitability and provision of affordable units, and appears to align well with the City’s housing waitlist needs. Such a standard would also move San Carlos toward the upper range of nearby jurisdictions’ for-sale inclusionary programs, and thus would be more consistent with the City’s comparatively aggressive standards for rental developments.
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Under the current ordinance, the projected yield on cost for the rental prototype falls below the
5.0 percent minimum threshold EPS customarily sees for projects considered feasible and financeable. As such, EPS concludes that rental housing faces feasibility challenges under current market and regulatory circumstances.
Two scenarios tested (R-1 an R-6) appear to achieve greater feasibility to that under the current ordinance, while also enhancing affordability outcomes by either increasing the total number of affordable units or decreasing the incomes for which those units are priced. Scenario R-1 requires 20 percent inclusionary, with a mix of very low-income (11 percent) and moderate income (9 percent) that qualifies for the pre-A.B. 2345 density bonus maximum of 35 percent.
However, it essentially trades the low-income units required under the current ordinance for moderate income units. As shown on Table 3, these moderate-income units are not deeply discounted from market rates, so affordability of the City’s housing stock is not greatly enhanced through these moderate-income units.
By providing 15 percent of units at very low incomes, Scenario R-6 maximizes the current allowable density bonus of 50 percent under A.B. 2345. The added income from the greater number of market-rate units pushes the yield on cost up to a feasible level for this scenario, despite the average rents for affordable units being lower than under the City’s current ordinance.
Recommendations
The current City ordinance requiring 15 percent affordable housing at very low and low-income levels is among the more aggressive requirements in the Silicon Valley/Peninsula area. While 15 percent inclusionary housing is common, as is a mix of very low and low-income pricing, San Carlos requires twice as many very low units as low units while other communities allow a more even split or skew toward low rather than very low units. Rental housing appears to face feasibility challenges due to high development costs, even as the market is showing signs of recovery from the COVID pandemic. Under these circumstances, EPS suggests that the City maintain its ordinance’s leading position in affordable housing policy but not push too stringently, lest the resulting policy make projects infeasible and yield fewer total units and affordable units rather than more. EPS recommends that San Carlos consider retaining its current rental standards – 15 percent of units with 10 percent very low and 5 percent low income – but add an option allowing all 15 percent to be provided at very low income (as under Scenario R-6).
Developers could evaluate these options to determine which would yield the optimal financial returns for their specific project.
A Note on Project Size and Economies of Scale
City staff has indicated that many development projects in San Carlos are expected to occur on relatively small lots, given the mostly built-out nature of the community. The analysis provided herein presumes certain projects sizes and associated cost assumptions, but altering those size assumptions significantly may yield different analytical results. For example, according to the cost estimating firm RS Means, a 100-to-150 unit apartment project could be expected to have per-square-foot costs roughly 12 percent lower than a project that is 59-to-89 units as in EPS’s baseline analysis. Conversely, a project of 25-to-38 units could be expected to have costs roughly 25 percent higher than the baseline assumptions on a per-square-foot basis. Such differences can result from efficiencies in all aspects of the project – land acquisition costs, design costs, construction costs, and the actual physical efficiency of the buildings themselves.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx Similar cost differences could be expected for for-sale development. EPS has conducted sensitivity tests reflecting this scale of cost adjustment for multi-family rental projects, resulting in the following findings:
Table 5 Sensitivity Testing on Econ omies of Scale for Rental Scenarios
Scenario
Inclusionary Requirements Yield on Cost by Project Size Moderate Low Very Low 59-89 Units 100-150 Units 25-38 Units Current
Ordinance
0% 5% 10% 4.9% 5.5% 4.0%
R-1 9% 0% 11% 5.0% 5.5% 4.0%
R-2 0% 20% 0% 4.8% 5.4% 3.9%
R-3 0% 9% 11% 4.8% 5.3% 3.9%
R-4 0% 5% 15% 4.8% 5.5% 4.0%
R-5 0% 24% 0% 4.8% 5.4% 3.9%
R-6 0% 0% 15% 5.0% 5.6% 4.1%
R-7 5% 0% 10% 5.0% 5.6% 4.0%
As indicated above, adjusting for these types of efficiencies or inefficiencies while holding rents and sale prices constant would result in larger projects being more able to bear the costs of increased inclusionary requirements, while small projects would be less able to do so. Some communities aim to recognize and account for these differences in their inclusionary policies. For example, Los Gatos requires 10 percent inclusionary units for projects of five to 19 units, then escalates that proportion all the way up to 20 percent inclusionary for projects with 100 or more units. Los Altos requires 15 percent moderate income units for projects under 10 units, but requires lower income levels for projects with 10 or more units. Palo Alto adjusts their requirements based on the land size rather than unit count, with projects over five acres providing 20 percent inclusionary units versus 15 percent for projects under five acres.
EPS believes Palo Alto’s approach of basing the increased inclusionary standards on the physical size of the site more directly aligns with economies of scale than does the approach related to the number of units, which may merely reflect a difference in density. For example, a townhome project may be much less dense than a multifamily project, but also can have much lower construction costs per square foot, while the townhome’s market-rate price may be even greater and the affordable unit price stays the same. In such a scenario, the lower density townhome project may in fact be able to support a higher inclusionary standard than can the multifamily project. Cities like Palo Alto have addressed this complexity by basing a higher inclusionary standard on the physical size of the land (less than or greater than five acres) rather than based on the number of units in the project, as the economies of scale have more to do with project
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx size than project density. A 120-unit multifamily project would have economies of scale relative to a 20-unit multifamily project, but a 120-unit townhome project on six acres may be able to afford far more inclusionary units than a 120-unit multifamily project on two acres.
San Carlos may consider a similar approach in which larger projects have higher inclusionary standards than smaller projects. Such size-based standards might apply to both rental and for- sale projects.
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Another option the City of San Carlos might consider is allowing more projects to pay the in-lieu fee rather than providing units on-site. At present, the City only allows the in-lieu fee for projects with fewer than seven units, or projects that would be subject to a fractional unit – for instance, a 28-unit project required to provide 4.2 inclusionary units would build four units and pay the fee for the 0.2 remaining units.
In 2020, the City had a graduated scale of in-lieu fees that topped out at roughly $27 per square foot for apartments, single-family homes, and additions, and $20 per square foot for condos and subdivisions. Even at roughly $27 per square foot, these fees would represent a less financially onerous requirement than providing inclusionary units. As shown on Table 6, a project built as all market-rate units with no affordable housing obligation is projected to have a 5.2 percent yield on cost. As shown below and previously on Table 4, a similar project that meets the City’s current inclusionary requirements and utilizes a 32.5 percent density bonus as allowed under State law is estimated to have a yield on cost of 4.9 percent – below the targeted feasibility threshold of 5.0. By comparison, if the developer were given the option to pay the City’s in-lieu fee instead of providing any inclusionary units on-site, the project would not receive any density bonus units and the total development costs per unit would increase by the amount of the in-lieu fees, plus the land costs would be higher per unit because there are fewer units. Still, this analysis indicates that the higher achievable rents – because all of the units are market-rate – would produce a yield on cost of 5.0 percent – not quite as high as a fully market-rate project with no affordability requirements at all, but higher than if the affordable units were provided on- site.
The in-lieu fee tested herein was set by the City, and the City has the option of re-setting the in- lieu fee to a level that may be more revenue-neutral to developers. Still, each market-rate unit has an opportunity to increase in income and value according to general market trends, while inclusionary units are constrained to rent increases allowed by the City or State. Given these choices, most developers could be expected to prefer the in-lieu fee option anytime it is available and reasonably commensurate with the on-site inclusionary requirements.
Some communities have determined that they prefer to have inclusionary units built on-site because a) the affordable units arrive at the same time as market-rate units and b) they are attracted to the idea that affordable units are distributed throughout projects and throughout the city. Other communities and their staff members have prioritized the receipt of in-lieu fees because they can use them as matching or gap financing dollars to achieve more units at lower income levels, typically by partnering with non-profit developers who utilize other funding sources such as Low Income Housing Tax Credits. The City of San Carlos could consider the merits of each such outcome in the context of local housing needs, policy preferences, and feasibility constraints, and determine whether it may be desirable to allow more or larger projects to pay the in-lieu fees rather than producing inclusionary units on-site.
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Z:\Shared\Projects\Oakland\191000s\191081SanCarlosHousing\Deliverables\191081_Memo_092321.docx Table 6 Feasibility of Inclusionary Units versus In-Lieu Fees
All Market-Rate
Current 15% Inclusionary
+ Density Bonus All Market-Rate + In-Lieu Fee
Development Program Assumptions
Base Density/Acre 59 59 59
Density Bonus 0.0% 32.5% 0.0%
Total Density/Acre 59 78 59
Net Unit Size 1,050 1,050 1,050
Number of Bedrooms 2 2 2
Parking Spaces/Unit 1.5 1.5 1.5
Cost Assumptions
Direct Costs
Direct Construction Costs/Net SF $375 $375 $375
Direct Construction Costs/Unit $393,750 $393,750 $393,750 Parking Construction Costs/Space $45,000 $45,000 $45,000 Parking Construction Costs/Unit $67,500 $67,500 $67,500 Subtotal, Direct Costs/Unit $461,250 $461,250 $461,250
Indirect Costs as a % of Direct Costs 35% 35% 35%
Indirect Costs/Unit $161,438 $161,438 $161,438
In-Lieu Fees/Net SF [2] $0 $0 $26.86
Total In-Lieu Fees $0 $0 $28,203
Total Cost/Unit without Land $622,688 $622,688 $650,891 Total Cost/Net SF without Land $593 $593 $620
Land/Acre $6,855,120 $6,855,120 $6,855,120
Land/Unit $116,188 $87,689 $116,188
Total Cost/Unit $738,876 $710,377 $767,079
Average Net Operating Income/Unit [3] $38,154 $34,555 $38,154 Yield on Cost 5.2% 4.9% 5.0%
Source: City of San Carlos; Economic & Planning Systems, Inc.
Rental 4-5 Stories with Podium Parking [1]
[3] Scenarios A and C reflect the NOI for market-rate units only, while Scenario B reflects the average NOI with 10% Very Low and 5% Low Income units as shown on Table 4. [2] In 2020, San Carlos's fee schedule charged and in-lieu fee of $161.16 times the average square footage of units in a 6-unit project. This translates to $26.86 per net square foot. [1] Density assumption provided by City of San Carlos. Unit sizes, parking ratios, and development costs informed by recently built units (2015-2019) in and around San Carlos.
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Table A-1. Inclusionary Requirements in Co mparable Jurisdictions (2019-2021 surveys)
Very Low Income
Low
Income Moderate Income
Above Moderate
Income
San Carlos
Ownership 5.0% 10.0% 15.0%
Rental 10.0% 5.0% 15.0%
Campbell [1]
Ownership - 7.5% 7.5% 15.0%
Rental 6.0% 9.0% - 15.0%
Cupertino [2]
Ownership -- 20.0% 20.0%
Rental 9.0% 6.0% - 15.0%
Daly City
Ownership 20.0% 20.0%
Rental 10.0% 10.0%
Foster City
Ownership 6.7% 6.7% 6.7% 20.0%
Rental 6.7% 6.7% 6.7% 20.0%
Fremont [3]
Ownership 7.0% 3.4% 3.0% 13.4%
Rental 7.4% 2.4% 3.1% 12.9%
Gilroy [4] --- -
Ownership - - 15.0% 15.0%
Rental 15.0% 15.0%
Half Moon Bay
Ownership 6.0% 7.0% 7.0% 20.0%
Rental 6.0% 7.0% 7.0% 20.0%
Los Altos [5]
Ownership & Rental (5-9 units) 15.0% 15.0%
Ownership (10 or more units) 3.0% 3.0% 9.0% 15.0%
Rental (10 or more units) - Option 1 - 20.0% - 20.0%
Rental (10 or more units) - Option 2 15.0%
Los Altos Hills --- -
Los Gatos [6]
5 - 19 Units -- 10.0% 10.0%
20 - 100 Units -- 10 - 20% 10 - 20%
101+ Units - - 20.0% 20.0%
Menlo Park
Ownership 5.0% 5.0% 5.0% 15.0%
Rental 5.0% 5.0% 5.0% 15.0%
Milpitas [7]
Ownership - - 15.0% 15.0%
Rental 7.5% 7.5% 15.0%
Monte Sereno --- -
Morgan Hill [8] - - -
Ownership - - 15.0% 15.0%
Rental 7.5% 7.5% - 15.0%
Mountain View [9]
Ownership (Non rowhouse/ townhouse) - 15.0% 15.0%
Ownership (Rowhouse/ townhouse) - 15.0% 10.0% 25.0%
Rental - 15.0% 15.0%
Pacifica
Ownership 6.0% 4.5% 4.5% 15.0%
Rental 6.0% 4.5% 4.5% 15.0%
Palo Alto [10]
Ownership Option 1 (<5 acres) 5.0% 5.0% 5.0% 15.0%
Ownership Option 2 (>5 acres) 6.7% 6.7% 6.7% 20.0%
Rental Option 1 (<5 acres) 7.5% 7.5% - 15.0%
Rental Option 2 (>5 acres) 10.0% 10.0% - 20.0%
Jurisdiction
Minimum Inclusionary Requirement Total
Inclusionary
Requirement
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Very Low Income
Low
Income Moderate Income
Above Moderate
Income
Redwood City
Ownership ` - 15.0% 15.0%
Rental 5.0% 5.0% 10.0% 20.0%
San Jose [11]
Ownership - - 15.0% 15.0%
Rental 5.0% 5.0% 5.0% 15.0%
San Mateo
Ownership 15.0% 15.0%
Rental - 15.0% - 15.0%
Santa Clara [12]
Ownership - - 15.0% 15.0%
Rental - - 15.0% 15.0%
Saratoga --- -
South San Francisco
Ownership - 7.5% 7.5% 15.0%
Rental 5.0% 10.0% - 15.0%
Sunnyvale [13]
Ownership - - 12.5% 12.5%
Rental 5.0% 10.0% - 15.0%
Jurisdiction
Minimum Inclusionary Requirement Total
Inclusionary
Requirement
Sources: Select City websites, fee schedule documents, and Economic & Planning Systems, Inc. [9] Mountain View: For projects other than rowhouses and townhouses, ownership inclusionary requirement applies to developments with 3 or more units and income levels must reach a weighted average of 100% AMI using a miminum of two income levels. For ownership rowhouses and townhouses, projects must meet a 25% on-site requirement with 15% affordable to a weighted average of 100% AMI and 10% affordable to a weighted average of 135%, using a miminum of two income levels. Rental requirement applies to developments with 5 or more units. Affordable units must be provided to low and moderate income households (50%-120% AMI), to a minimum of two income levels for a weighted average of 65% of AMI. [10] Palo Alto: Applies to developments with 5 or more units that are less than 5 acres. Projects with five or more acres of land must provide 20% developed as BMR units and different affordability levels apply. Projects that cause the loss of existing rental housing may need to provide a 25% BMR component. [11] San Jose: Requirement is applicable to projects with 10 or more units. The Downtown High-Rise Incentive Program is still in effect, so any new projects in the downtown area are exempt from the inclusionary requirements so long as they comply with all terms including height requirements and the requirement to obtain all Certificates of Occupancy on or prior to June 30, 2021. [13] Sunnyvale: Applicable to projects with 8 or more units. [3] Fremont: Applies to projects with two or more units. Ownership units have three primary options to meet the requirement: (1) The provision of on-site affordable units (shown above); (2) A fee-only option; or (3) A fee + moderate units provision option. For the last option, projects may provide on-site moderate units (3.5% for attached projects, 4.5% for detached projects) and pay a fee of $18.50 psf for attached projects or $17.50 psf for detached projects. For rental projects, payment of a fee of $8.75 psf for units up to 700 square feet and $17.50 psf for units over 700 square feet is required in addition to the on-site affordable units.
[2] Cupertino: Applies to projects of seven or more units. Projects of six ownership units or fewer can either build one below market rate (BMR) unit or pay the Housing Mitigation fee. Minimum affordability of ownership BMR units is 50% at median income and 50% at moderate income. [4] Gilroy: Only required in the Neighborhood district. [5] Los Altos: For projects 5-9 units, developer can select which income level to include (moderate, low, very low or some combination). For rental projects 10 or more, developer can choose between providing fewer units at deeper affordability, or more units at a less affordable level. [6] Los Gatos: Applies to developments with 5 or more units. Developments with 5-19 units have a 10% inclusionary requirement, while developments with 20- 100 units have a 22.5% inclusionary requirement. Developments with 101 or more units have a 20% requirement. Requirements are the same for for-sale and tl[7] Milpitas: Applies to developments with 10 or more units. [8] Morgan Hill: For sale and rental projects of two or more in Downtown require 10 percent inclusionary instead of 15.
Note: Of the selected jurisdictions surveyed, Los Altos Hills, Monte Sereno, and Saratoga do not have an inclusionary requirement. [12] Santa Clara: Applies to developments with 10 or more units. [1] Campbell: Applies to developments with 10 or more units.
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Attachment: Consultant Study Memo - Affordable Housing Programs and Incentives (Amendments to the BMR Ordinance) This space for filing stamp only
OR#:
O R A N G E C O U N T Y R E P O R T E R
~ SINCE 1921 ~
600 W. Santa Ana Blvd., Suite 205, Santa Ana, California 92701-4542 Telephone (714) 543-2027 / Fax (714) 542-6841
PROOF OF PUBLICATION
(2015.5 C.C.P.)
State of California )
County of Orange ) ss
Notice Type:
Ad Description:
I am a citizen of the United States and a resident of the State of California; I am over the age of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of the printer and publisher of the ORANGE COUNTY REPORTER, a newspaper published in the English language in the City of Santa Ana, and adjudged a newspaper of general circulation as defined by the laws of the State of California by the Superior Court of the County of Orange, State of California, under date of June 2, 1922, Case No. 13,421. That the notice, of which the annexed is a printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit:
Executed on: 10/10/2004
At Los Angeles, California
I certify (or declare) under penalty of perjury that the foregoing is true and correct.
Signature
EXAMINER - ENQUIRER-BULLETIN
303 TWIN DOLPHIN DR #600, REDWOOD CITY, CA 94065
(650) 556-1556
SPEN 3591235
CRYSTAL MUI
CITY OF SAN CARLOS/CITY CLERK
600 ELM ST
SAN CARLOS, CA - 94070
HRG - NOTICE OF HEARING
Affordable Housing Amendments 6.13.22
I am a citizen of the United States and a resident of the State of California; I am over the age of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of the printer and publisher of the EXAMINER - ENQUIRER-BULLETIN, a newspaper published in the English language in the city of SAN CARLOS, county of SAN MATEO, and adjudged a newspaper of general circulation as defined by the laws of the State of California by the Superior Court of the County of SAN MATEO, State of California, under date 02/25/1946, Case No. 38966. That the notice, of which the annexed is a printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit:
06/02/2022
06/02/2022
SAN MATEO
!A000006035442!
Email
CITY OF SAN CARLOS
NOTICE OF PUBLIC
HEARING NOTICE IS
HEREBY GIVEN that the
San Carlos City Council will
hold a Public Hearing in the
Council Chambers, City Hall
– 600 Elm Street, San
Carlos, on Monday, June 13,
2022 at 7:00 p.m. , for the
purpose of heari ng and
considering all comments of
all persons interested in or
concerned with a reco m-
mendation to the City
Council regarding amen d-
ments to Title 18 (Zoning
Ordinance) of the San Carlos
Municipal Code to update
the Affordable Housing
Programs and the Affor dable
Housing Incentives Ord i-
nances. The purpose of
these amendments is to
consider modifications to
below market rate inclusio n-
ary requirements, afford a-
bility periods, the City
Density Bonus, and other
minor amendments. The
following code sections are
pro posed for amendment:
18.16Affordable Housing
Programs. 18.17Affordable
Housing Incentives. The
Planning Commission held a
duly noticed public hearing to
consider the amendments on
May 16, 2022, and its
recommendations regarding
the amendments will be
prese nted to the City Council
for consideration. The
agenda and relevant
materials for this item will be
available for viewing online -
www.cityofsancarlos.org/age
nda ; at the City Clerk's
Department in City Hall –
600 Elm Street; and at the
San Carlos Library – 610
Elm Street, beginning
Thursday, June 9, 2022. The
public will have the options
to observethe meetingand
address the Council in –
person in City Hall's Council
Chambers or remotely via
Zoom. Details and instru c-
tionswill be available on the
agenda. Questi ons regarding
the projectmay be directe d-
toAdam Aronson at
aaro n-
[email protected].
Commentsmay be sent via
email to the City Clerk
Cit y-
[email protected]
d the City Council –
CityCou n-
[email protected]; or
mailed to the City Clerk at
600 E lm Street, San Carlos,
CA 94070. All persons
interested in the above are
hereby invited to participate
in this Public Hearing and be
heard. If you challenge this
proposal in court, you may
be limited to raising only
those issues you or
someone else raised at the
public hearing described in
this notice, or in written
correspondence delivered to
the City Clerk prior to the
public hearing. Crystal Mui,
City Clerk Publication Date:
6/2/22
SPEN -3591235#
EXAMINER - ENQUIRER -
BULLETIN
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Attachment: BMR Public Hearing Notice Proof of Publication (Amendments to the BMR Ordinance)
CITY COUNCIL
STAFF REPORT
MEETING DATE: June 13, 2022
ITEM TITLE: Consideration of Introducing an Ordinance Amending San Carlos Municipal Code Title 18 - Zoning, Consisting of Modifications to Chapter 18.23.210 - Accessory Dwelling Units/Junior Accessory Dwelling Units.
RECOMMENDATION:
The Planning Commission recommends that the City Council introduce an ordinance to amend San Carlos Municipal Code Section 18.23.210 - Accessory Dwelling Units/Junior Accessory Dwelling Units.
FISCAL IMPLICATIONS:
There is no fiscal impact or additional appropriation needed for this action.
BACKGROUND:
On October 26, 2020, the City Council adopted Ordinance 1566 to amend the San Carlos Zoning Ordinance, Title 18 of the San Carlos Municipal Code, in response to bringing accessory dwelling units (“ADUs”) and junior dwelling units (“JADUs”) into compliance with State law.
Since its adoption, staff has administered these amended requirements to all incoming ADU and JADU applications and has assisted members of the p ublic with the application of these requirements to unique individual lots. Staff has prepared several recommendations to both clarify the original intent of these requirements and to reduce unintended obstacles to the construction of ADUs and JADUs in adherence with State law.
On April 18, 2022, the Planning Commission reviewed the proposed changes to the Municipal Code and recommended that the City Council adopt the proposed Municipal Code changes.
Subsequently, Staff decided to bring this item forward to the City Council as a study session to obtain the Council’s feedback. Once completed, staff will continue the Ordinance adoption process and either 1) return to the City Council with an ordinance for adoption, or 2) return to the Planning Commission to further develop their recommendation to the Council, if major changes are proposed.
On May 9, 2022, the City Council conducted a study session and reviewed the proposed changes to the Ordinance. At that time, the Council asked for further clarification on the number of corner and reverse corner lots within the city. In addition, the Council asked for additional information about neighboring jurisdictions’ setback requirements for ADUs on reverse corner lots.
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2 ANALYSIS:
Proposed Amendments
Staff is rec ommending the following amendments to the Zoning Code. The specific section of the Municipal Code is italicized. Section 18.23.210 of the Municipal Code is included as Exhibit A to Attachment 1 and includes redlines to demonstrate the proposed changes.
Junior Accessory Dwelling Units
1. 18.23.210 (C)(1) and 18.23.210(E)(3)(a): Clarifies that JADUs may only be included in existing residence walls or as part of a new house. The California Department of Housing and Community Development ( HCD) has clarified tha t additions to existing residences to accommodate JADUs are not permitted.
2. 18.23.210(E)(3)(g): Clarifies that the balconies, decks, and open stair landings shall not face the rear or nearest side property line (except as to allow ingress and egress), above the first floor only.
Accessory Dwelling Units
1. 18.23.210 (D)(2) : Clarifies that ADUs may only be sold separately from the main residence when allowed by State law. For example, AB 345 allows qualified non -profit builders or developers to sell units individually, in very specific cases.
2. 18.23.210(E)(4)(d): Clarifies that setbacks for first floor ADUs (4’ minimum side and rear setbacks and a front setback equal to the front setback require ments for the main residence.) Includes new language to allow attach ed second floor ADUs on reverse corner lots only to have a minimum 5’ rear setback.
A reverse corner lot is shown in the area outlined in red below. Reverse corner lots’ rear yards align with the front and side yard of the interior lot of the property next door.
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3 As staff has received inquiries and proposals for these lots, it has become clear that a reduced second floor rear setback would assist with the development of ADUs for several reasons:
Reversed corner lots have a rear yard that is adjacent to a neighbor’s side yard (on key lots) , and oftentimes appear to be a side yard due to the layout of the house on the lot. Second story side setbacks on the key lots located to the rear of the reverse corner lots range from 5’- 9’ on RS-6 lots and 10’ - 14’ feet on RS- 3 lots.
Garages on reversed corner lots are generally located towards the rear of the lot and building an ADU above a single-story garage is attractive to homeowners for aesthetic reasons, cost to build, and their relation to neighboring properties. Reversed corner lots are required to set back their house from the street side even further for a portion of the length of their lot:
o SCMC 18.04.30(E): Street Side Setbacks on Lots with Reversed Frontage. The exterior side setback in the rear t wenty-five percent of a reversed corner lot shall not be less than the front yard required or existing, whichever is less, on the adjoining key lot.
Due to the unique circumstances of reverse corner lots, Staff believes the proposed changes are needed to remove obstacles to the construction of ADUs on these types of lots.
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4 At the May 9, 2022 study session, staff presented a rear setback of 5’ for ADUs located on the second floor of reverse corner lots. The Council asked staff to return with additional information to better understand the impact of this change.
Staff surveyed the ADU ordinances of eight jurisdictions to determine their rear and side setback requirements for attached ADUs on second stories in single -family residential zoning districts. These jurisdictions included Atherton, Belmont, Burlingame, Foster City, Millbrae, Palo Alto, Redwood City, San Mateo, and Santa Monica.
The majority of jurisdictions in the surrounding area require 4 -foot side and rear setbacks for ADUs, including those that are attached to the main building on the second story. The City of Belmont and the City of Palo Alto require that ADUs attached to the main building meet the required setbacks of the main building. The Town of Atherton requires 4 -foot side and rear setbacks, but offers bonus floor area exemptions if the ADU meets the setbacks of the main building. In these circumstances, the structure may still encroach up to 20% of required main building setbacks to achieve bonus floor area exemptions. No nearby juris dictions specifically regulate the required setbacks for attached second-story ADUs on reverse frontage corner lots.
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5 At the May 9, 2022 study session, the City Council also requested that staff return with information on the number of reverse corner lot s within the City to better understand the impact of a revised setback for attached, second story ADUs. Based on analysis done through GIS, there are 693 lots that are “reverse corner lots”. This is equal to approximately 8.4% of all of the lots within the RS-3 and RS-6 zoning districts. However, when analyzing all lots that are located on a corner, reverse corner lots comprise about 74% of the total number of corner lots.
Lot Type Number of
Lots
Percent of Total
Non-Reverse Corner Lots 241 3%
Reverse Corner Lots 693 8.4%
Other Lot Types 7,319 88.6%
Total 8,253 100%
3. 18.23.210(E)(4)(g): Clarifies that balconies, decks, and open stair landings shall not face the rear or nearest side property line (except as to allow ingress and egress), above the first floor only. Removes the requirement for obscure glass and minimum window sill heights for the first floor. Allows the Director to determine whether windows on the second floor of an ADU shall be obscured and/or have a minimum sill height, based on the specific conditions of the proposal.
4. 18.23.210 (E)(4)(i) : Language has been added to clarify that additions to existing accessory structures to accommodate ADUs must comply with all current requirements, including setback, height, etc.
Environmental Determination
This project implements the programs and policies of the San Carlos 2030 General Plan and is within the scope of the activities and impacts identified in San Carlos 2030 General Plan Program Environmental Impact Report (EIR) . No new enviro nmental effects have been found and no new mitigation is necessary. Therefore, no additional environmental review is required pursuant to Public Resources Code Section 21166 and California Environmental Quality Act (CEQA) Guidelines Section 15162 and 15168.
Next Steps
Should the City Council introduce the Ordinance as proposed or with amendments, a second reading of the Ordinance would be held on June 27, 2022, and if passed, the proposed amendments would become effective July 27, 2022.
ALTERNATIVES:
Options available to the City Council include:
1. Introduce an Ordinance amending San Carlos Municipal Code Section 18.23.210 - Accessory Dwelling Units/Junior Accessory Dwelling Units.
2. Do not introduce the proposed Ordinance; or
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6 3. Provide staff with alternative direction.
Respectfully submitted by:
Al Savay, AICP
Community Development Director
Andrea Mardesich, Principal Planner
Approved for submission by:
_________________________
Jeff Maltbie, City Manager
ATTACHMENT(S):
1. Ordinance with Exhibit A
2. Planning Commission Resolution PC2022-05
3. ADU Public Hearing Notice Proof of Publication
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ORDINANCE NO. _____
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN CARLOS AMENDING SAN CARLOS MUNICIPAL CODE TITLE 18 - ZONING, CONSISTING OF MODIFICATIONS TO CHAPTER 18.23.210 - ACCESSORY DWELLING UNITS/JUNIOR ACCESSORY DWELLING UNITS.
___________________________________________________________________________ The City Council of the City of San Carlos does ordain as follows:
SECTION 1:
WHEREAS, the City of San Carlos is proposing an amendment to Section 18.23.210, Accessory Dwelling Units/Junior Accessory Dwelling Units of the San Carlos Municipal Code; and
WHEREAS, the proposed Ordinance would ensure that the San Carlos Municipal Code conforms with State laws of California pertaining to Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) with the intent to facilitate the development of ADUs and JADUs in the City of San Carlos;
WHEREAS, pursuant to Government Code Sections 65853 and 65850 and San Carlos Municipal Code Chapter 18.35, when amendments to the Zoning Ordinance, Title 18 of the San Carlos Municipal Code are found necessary, the Planning Commission shall hold a public hearing to consider such change s and render its decision to the City Council as the official recommending body to the City Council on matters concerning land use; and WHEREAS, pursuant to San Carlos Municipal Code Chapter 18.35 and the California Government Code Sections 65090 and 6509, a Planning Commission Public Hearing Notice was published on April 7, 2022 for amendments to the Zoning Ordinance in the newspaper; and WHEREAS, the Planning Commission conducted a public hearing on amendments to the Zoning Ordinance, Title 18 of the San Carlos Municipal Code to hear and consider all comments of all persons interested in or concerned with the proposed amendments of the Zoning Ordinance on April 18, 2022 in consideration of a recommendation to the City Council regarding adoption of amendments to the Zoning Ordinance, Title 18 of the San Carlos Municipal Code; and WHEREAS, pursuant to San Carlos Municipal Code Chapter 18.35 , the Planning Commission adopted Resolution No. PC2022-05 recommending to the City Council adoption of Zoning text amendments, and including the reasons for the recommendation, and the relationship of the proposed amendment to the applicable General Plan pursuant to Chapter 18.35.
SECTION 2:
WHEREAS, on May 9, 2022, the City Council held a study session to review the proposed ordinance changes and provide additional direction; and WHEREAS, pursuant to San Carlos Municipal Code Chapter 18.27.060 and the California Government Code Sections 65090 and 65091 , a Public Hearing No tice was published June 2, 2022 for the Amendments to Title 18, Zoning Ordinance in the newspaper; and
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
WHEREAS, the proposed amendments to the Zoning Ordinance text were released for public review on June 9, 2022 and incorporate the recommendations of the Planning Commission as recommended in Resolution of the Planning Commission No. PC2022-05; and WHEREAS, the City Council conducted a public hearing on amendments to the San Carlos Zoning Ordinance to hear and consider all comments of all persons interested in or concerned with a proposed amendments of the City of San Carlos Municipal Code on June 13, 2022 in consideration of adoption of this Ordinance; and WHEREAS, the City Council continued the public hearing on amendments to the San Carlos Zoning Ordinance to hear and consider all comments of all persons interested in or concerned with a proposed amendments of the City of San Carlos Municipal Code on October 22, 2018 in consideration of adoption of this Ordinance; and WHEREAS, the City Council desires to make findings for the proposed amendments to the San Carlos Municipal Code Title 18 Zoning Ordinance relative to implementation of the 2030 General Plan.
SECTION 3: The City Council makes the following findings:
1) Findings:
1. The ordinance amendment is consistent with the General Plan.
Basis for finding: The 2030 General Plan Housing Element includes Goal HOU-4, which states “Promote the development of second units to increase housing opportunities,” and Policy HOU -4.3, which states “Encourage the development of well -designed new secondary dwelling units in existing neighborhoods by implementing objective standards for the approval of a second unit and continuing to evaluate the Zoning Ordinance to create opportunities for new second units.” One of the primary goals of this proposed amendments is to en sure that San Carlos’s development standards pertaining to accessory dwelling units (formerly known as “second dwelling units”) and junior accessory dwelling units are consistent with State law, which is intended to expand housing opportunities by reducing barriers, better streamline approval and expand capacity to accommodate the development of Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs).
2. The ordinance amendment is consistent with the purpose of this zoning title to promote the growth of the city in an orderly manner and to promote and protect the public health, safety, peace, comfort and general welfare.
Basis for finding: The proposed amendments are consistent with the goals, policies, and actions of the 2030 General Plan and as such promote the location, design, and placement of accessory dwelling units and junior accessory dwelling units in an orderly manner while continuing to protect the public health, safety, peace, comfort and general welfare.
SECTION 4: Replacement of Code. Chapter 18.23.210 – Accessory dwelling units/junior accessory dwelling units is hereby replaced with the language in Exhibit A.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
SECTION 5: California Environmental Quality Act Determination . The City Council hereby finds that this project is consistent with the programs and policies of the San Carlos 2030 General Plan, is within the scope of the activities and impacts identified in San Carlos 2030 General Plan Program Environmental Impact Report (EIR) and no new environmental effects have been found and no new mitigation is necessary. Therefore, no additional environmental review is requir ed pursuant to Public Resources Code Section 21166 and California Environmental Quality Act (CEQA) Guidelines Section 15162 and 15168.
SECTION 6: Severability. If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any r eason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council of the City of San Carlos hereby declares that it would have adopted this Ordinance and such section, subsection, clause, phrase, or portion may be declared invalid or unconstitutional.
SECTION 7: That the City Council hereby declares that it would have passed this Ordinance sentence by sentence, paragr aph by paragraph, and section by section, and does hereby declare that any provisions of this Ordinance are severable and, if for any reason any sentence, paragraph or section of this Ordinance shall be held invalid, such decision shall not affect the validity of the remaining parts of this Ordinance.
SECTION 8: This Ordinance shall be published and posted according to law and shall take effect and be in force from and after 30 days after its passage and adoption.
* * * * *
I, City Clerk Crystal Mui, hereby certify that the foregoing Ordinance was introduced on the 13th day of June, 2022 and adopted at a regular meeting of the City Council of the City of San Carlos held on the_____ day of ______, 2022 by the following vote:
______________________________
CITY CLERK of the City of San Carlos
APPROVED:
___________________________
MAYOR of the City of San Carlos
Exhibit A: Amendments to the Municipal Code, Section 18.23.210 AYES, COUNCILMEMBERS:
NOES, COUNCILMEMBERS:
ABSENT, COUNCILMEMBERS:
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
EXHIBIT A - Amendments to the Municipal Code, Section 18.23.210.
Changes are shown in red.
18.23.210 Accessory dwelling units/junior accessory dwelling units.
A. Purpose and Applicability. The purpose of this section is to:
1. Provide for accessory dwelling units and junior accessory dwelling units in accordance with the provisions of State law.
2. Maintain the character of single-family residential neighborhoods in the City to the greatest extent possible.
3. In cases of conflict between this chapter and any other provision of this title, the provisions of this chapter shall prevail. To the extent that any provision of this chapter is in conflict with State law, the applicable provision of State law shall control, but all other provisions of this chapter shall remain in full force and effect.
B. Land Use Regulations. Accessory dwelling units shall be a permitted use in residential (R) zoning districts, mixed-use (MU) zoning districts and in any planned development (PD) zoning district where residential uses are permitted or conditionally permitted as part of an approved planned development plan. Junior accessory dwelling units shall be permitted in the single-family (RS) zoning districts within an existing single-unit dwelling, or as part of a proposed new single-unit dwelling.
C. Number of Units and Location.
1. Junior Accessory Dwelling Units, Number.
a. Where permitted, one (1) junior accessory dwelling unit may be devel oped on any legally created lot and shall be located within the walls of an existing or proposed single-unit dwelling.
New additions to an existing residence shall not contain JADUs.
2. Accessory Dwelling Units, Number.
a. Multifamily Dwelling Structures, Accessory Dwelling Units Inside an Existing Multifamily Dwelling Structure. Up to twenty-five percent (25%) of the number of existing multifamily units in the building, but at least one (1) unit, shall be allowed in existing multifamily dwelling
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
structures within the portions of the structure that are not used as livable space; provided, that the unit complies with the California Building Standards Code as set forth in Title 15 of this Code for dwellings. An accessory dwelling unit shall not be created within any portion of the habitable area of an existing dwelling unit in a multifamily structure. b. Multifamily Dwelling Structures, Detached Accessory Dwelling Units. Up to two (2) detached accessory dwelling units on a lot with an existing multifamily dwelling structure; provided, that the height of the detached accessory dwelling unit does not exceed sixteen (16) feet and has no less than four (4) foot side and four (4) foot rear yard setbacks. c. Single-Family Residential Lots. One (1) accessory dwelling unit is permitted per residential lot containing an existing or proposed single-unit dwelling. An accessory dwelling unit may be allowed in conjunction with a junior accessory dwelling unit when the requirements of subsection E of this section (Development Standards) are met.
3. Accessory Dwelling Units, Location. Where permitted, one (1) accessory dwelling unit may be located in any of the following places on a legally created lot:
a. Attached to an existing or proposed single-unit dwelling; b. Located within the walls of the existing or proposed single-unit dwelling, including all or a portion of an attached garage, or an existing multifamily structure; c. Located within an existing accessory structure;
d. Detached from the existing single-unit dwelling or multifamily structure, but located on the same lot as the existing or proposed single-unit dwelling or multifamily structure; e. Located over a legally established detached garage.
D. Rental Standards.
1. Junior Accessory Dwelling Units.
a. Junior accessory dwelling units shall not be sold separately from the primary residence. b. Junior accessory dwelling units may be rented independently of the primary residence.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
c. Junior accessory dwelling units shall not be rented for fewer than thirty (30) consecutive calendar days.
d. Either the single-unit dwelling or the junior accessory dwelling unit shall be owner- occupied.
2. Accessory Dwelling Units.
a. Accessory dwelling units shall not be sold separately from the primary residence, unless permitted by State Law.
b. Accessory dwelling units may be rented independently of the primary residence. c. Accessory dwelling units shall not be rented for fewer than thirty (30) consecutive calendar days.
d. Either the single-unit dwelling or the accessory dwelling unit shall be owner-occupied. For applications received prior to January 1, 2025, there is no owner-occupancy requirement for accessory dwelling units.
E. Development Standards.
1. Junior accessory dwelling units and accessory dwelling units shall conform to the height, setbacks, lot coverage, and any other development or supplemental standards of any applicable zoning district(s), the development standards below, other requirements of the Zoning Ordinance, and other applicable City codes. In any case of conflict between this section and any other part of the San Carlos Municipal Code, the standards specific to this section shall take precedence.
2. Building Code Requirements. Junior accessory dwelling units and accessory dwelling units shall comply with all applicable building code requirements, except fire sprinklers shall not be required in a junior accessory dwelling unit or accessory dwelling unit if they are not required for the single-unit dwelling.
3. Junior Accessory Dwelling Units (JADUs).
a. Junior accessory dwelling units shall be contained entirely within the walls of a single-unit dwelling, and shall contain at least an efficiency kitchen equipped with a sink, a built -in
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
cooking facility with appliances (e.g., microwave, toaster oven, hot plate) as well as a food preparation counter and storage cabinets that are of reasonable size in relation to the junior dwelling unit. New additions to an existing residence shall not contain JADUs. b. A junior accessory dwelling unit shall be no larger than five hundred (500) square feet in size; and no junior accessory dwelling unit shall be smaller than the size required to allow an efficiency unit pursuant to Health and Safety Code Section 17958.1. c. A junior accessory dwelling unit may, but is not required to, include separate sanitation facilities. If separate sanitation facilities are not provided, the junior accessory dwelling unit shall share sanitation facilities with the single-unit dwelling. d. A junior accessory dwelling unit shall have a separate external entrance from the primary dwelling unit. The entrance of a junior accessory dwelling unit shall not be located along any street-facing facade unless infeasible as determined by the Community Development Director. e. The maximum size of a junior accessory dwelling unit shall maintain a limit in size of five hundred (500) square feet. The single-family unit first floor side and rear setbacks may be reduced to no less than four (4) feet to accommodate access to a ground floor junior accessory dwelling unit, or an exterior stair and landing that provide required access to the unit if it is located on the second story.
f. The architectural design, exterior materials and colors, roof pitch and style, type of windows, and trim details of the junior accessory dwelling unit shall be substantially the same as the single-unit dwelling. Junior accessory dwelling units shall satisfy applicable design criteria and conform to any applicable design guidelines. g. Balconies, decks, and open stair landings above the first floor shall not face the side property lines, except as needed to meet minimum requirements to allow ingress and egress, as determined by the Building Official.
h. Junior accessory dwelling units shall not be required to provide for any additional parking and, unlike accessory dwelling units, are required to provide replacement parking for any parking displaced by their construction, including full or partial conversion of an existing garage.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
i. Junior accessory dwelling units must be allowed within a single-unit dwelling, including nonconforming single-unit dwellings. A permit to construct a junior accessory dwelling unit in a nonconforming single-unit dwelling shall not require nonconforming conditions to be corrected, unless otherwise required for health and safety.
4. Accessory Dwelling Units (ADUs).
a. Limits on Lot Coverage, Maximum Floor Area (MFA), and Natural State. Accessory dwelling units shall comply with lot coverage requirements, MFA, and natural state and open space requirements when applicable, as well as other applicable development standards, except that: a maximum of eight hundred (800) square feet of ADU floor area is exempt from the MFA requirement that applies to the RS-6 zoning district; an ADU of up to eight hundred (800) square feet and up to sixteen (16) feet in height, and with minimum four (4) foot side and minimum four (4) foot rear yard setbacks is not required to meet lot coverage standards, MFA and floor area standards, and natural state or open space requirements (which is defined as a “statewide exemption ADU”; front yard setbacks shall not preclude a statewide exemption ADU, and must not unduly constrain the creation of all types of accessory dwelling units.
b. Notwithstanding the development standards set forth in subsection (E)(4)(a) of this section, if there is no alternative to constructing an accessory dwelling unit in accordance with the development standards listed in subsection (E)(4)(a) of this section, one (1) or more of these development standards may be waived only to the extent necessary to allow a statewide exemption ADU of up to eight hundred (800) square feet with a maximum of sixteen (16) feet in height, with minimum four (4) foot side and four (4) foot rear yard setbacks. The proposal must meet all other development standards. The applicant must also demonstrate that an accessory dwelling unit cannot be constructed in accordance with applicable development standards.
c. Entrances. An accessory dwelling unit shall have a separate external entrance from the single-unit dwelling.
d. Setbacks. Except as indicated in this subsection, an accessory dwelling unit shall be required to comply with the setback requirements of the zone in which the unit is to be located. Detached accessory dwelling units must be set back a minimum of four (4) feet from rear and four (4) feet from the side property lines. Accessory dwelling units that are not
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
classified as statewide exemption ADUs must meet the required front setback unless located within a legal, nonconforming structure. No setback is required for an existing living area or an existing accessory structure converted to an accessory dwelling unit, or for a new accessory dwelling unit constructed in the same location and built to the same dimensions as an existing structure. There is no minimum requirement for setbacks between an accessory dwelling unit and the single-unit dwelling; however, all proposals shall meet any applicable building and fire requirements. Newly constructed attached ADUs shall meet minimum 4’ side and 4’ rear setbacks on the first floor and shall meet the required front setback for the main residence, unless classified as a statewide exemption ADU. Accessory Dwelling Units attached to the main residence, and located on the second floor shall conform to the minimum second floor setbacks for the main residence. On reversed corner lots (as defined in San Carlos Municipal Code 18.41.020), the rear setback for an attached ADU located on the second floor shall be a minimum of 5’. e. Maximum Size. The floor area of an accessory dwelling unit shall not exceed eight hundred fifty (850) square feet for a studio or one (1) bedroom, and shall not exceed one thousand (1,000) square feet for a unit that contains more than one (1) bedroom when the accessory dwelling unit meets all development standards of any applicable zoning districts, except that: conversions of garages, sheds, barns, and other existing accessory structures, either attached or detached from a single-unit dwelling, are not subject to any additional development standard, such as unit size, height, and lot coverage requirements. If the accessory dwelling unit does not meet all development standards of the applicable zoning district, the maximum floor area permitted is eight hundred (800) square feet, regardless of number of bedrooms, subject to the provisions of subsection (E)(4)(b) of this section. No accessory dwelling unit shall be smaller than the size required to allow an efficiency unit pursuant to Health and Safety Code Section 17958.1.
f. Architectural Compatibility. An accessory dwelling unit, whether attached or detached, shall use any combination of the following elements to maintain architectural and design compatibility between the single-unit dwelling and the proposed accessory dwelling unit:
architectural style, exterior materials, fenestration (windows and openings), and colors of the existing or proposed single-unit dwelling; however, the quality of the materials shall be the same or exceed that of the single-unit dwelling. Accessory dwelling units shall conform to any applicable objective design guidelines.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
g. Balconies and Openings. Balconies, decks or open stair landings above the first floor and within ten (10) feet of a side or rear property line that face the rear or side property line nearest the accessory dwelling unit shall not be permitted, except as needed to allow ingress and egress meet minimum requirements to allow ingress and egress, as determined by the Building Official, but in no case shall be less than 3’ from the property line.
Windows above the first floor and within ten (10) feet of the property line may be required to be obscured or have at least five (5) foot sills depending on the existing and proposed conditions, to the satisfaction of the Director.
Windows within ten (10) feet of the property line shall be obscured and have at least five (5) foot sills to maximize privacy for neighbors.
h. Detached accessory dwelling units shall be no greater than sixteen (16) feet in height as measured in accordance with Section 18.03.050 (Measuring height). i. Accessory dwelling units developed within an existing accessory structure on a lot with a single-unit dwelling may include an expansion of up to one hundred fifty (150) square feet beyond the existing physical structure of the accessory structure only to accommodate ingress and egress if the side and rear setbacks are sufficient for safety. Any other additions to an existing accessory structure shall comply with all other standards in effect including, but not limited to setbacks, height, and lot coverage.
5. Additional Development Standards for Accessory Dwelling Units Located Above Detached Garages. In addition to the standards specified in subsections (E)(4)(a) through (i) of this section, accessory dwelling units that are located over detached garages are subject to the following additional requirements:
a. The accessory dwelling unit must meet the minimum required front setback of the zoning district in which the lot is located, unless it meets the criteria of a statewide exemption ADU. b. The footprint of the accessory dwelling unit may not extend past the footprint of the garage with the exception of stairs or entryway to access the unit. No portion of the accessory dwelling unit may be located at ground level except for stairs or an entryway to access the unit above the garage.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
c. Balconies and decks shall not face rear and side property lines. d. The maximum height of the structure shall be twenty (20) feet as measured in accordance with Section 18.03.050 (Measuring height).
e. Stairs or access to the accessory dwelling unit shall not encroach into any required parking area. Stairs may encroach into the parking area of a garage; provided, that the front end of a standard size automobile can fit under the stair projection. The bottom of the stairwell (including exterior finish) shall be a minimum of five feet above the garage floor.
F. Parking. Parking for a junior accessory dwelling unit and an accessory dwelling unit shall be provided in compliance with the following standards:
1. Except as provided in subsection (F)(3) of this section, one (1) parking space shall be provided per accessory dwelling unit. Accessory dwelling unit parking requirements are in addition to the parking required for the single-unit dwelling as provided in Chapter 18.20.
2. Parking spaces may be provided as tandem parking on a driveway or in setback areas unless the Community Development Director finds that tandem parking and parking in setback areas are not feasible because of specific topographical conditions and/or other conditions that would pose a risk to health and safety. No parking may extend into a public sidewalk or right -of-way that would require walking into the street. A minimum of eight and one-half (8.5) feet in width and eighteen (18) feet in depth is required for any uncovered parking space.
3. No parking shall be required for an accessory dwelling unit if any of the following appl y:
a. The accessory dwelling unit is contained within an existing single-unit dwelling or accessory structure, or proposed single-unit dwelling.
b. The accessory dwelling unit is located within one-half (.50) mile walking distance of public transit. For purposes of this section, “public transit” means a bus stop or train station where public transportation runs on fixed routes.
c. The accessory dwelling unit is located within an architecturally and historically significant district.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
d. Where on-street parking permits are required but not offered to the occupants of the accessory dwelling unit.
e. When a designated parking area for one (1) or more car-share vehicles is located within one (1) block of the accessory dwelling unit.
f. When a garage, carport, or covered parking structure is demolished or converted in conjunction with the construction of an accessory dwelling unit, the parking spaces for the primary residence need not be replaced.
4. Junior accessory dwelling units shall not be required to provide for any additional parking, except that any parking displaced by their construction, including full or partial conversion of an existing garage, shall be replaced.
G. Utilities and Impact Fees.
1. No junior accessory dwelling unit or accessory dwelling unit shall be permitted if it is determined that there is not adequate water or sewer service to the property.
2. Except as provided in subsection (G)(3) of this section, an accessory dwelling unit may be required to have a new or separate utility connection, including a separate sewer lateral, between the accessory dwelling unit and the utility. A connection fee or capacity charge may be charged that is proportionate to the size in square feet of the accessory dwelling unit or its drainage fixture unit (DFU) values. Separate electric and water meters shall be required for the accessory dwelling unit.
3. The following accessory dwelling units shall be exempt from any requirement to install a new or separate utility connection and to pay any associated connection or capacity fees or charges:
a. Junior accessory dwelling units.
b. Standard accessory dwelling units converted from interior space unless the unit is constructed within a new single-unit dwelling.
4. All utility extensions shall be placed underground if required for the single-unit dwelling.
5. Impact Fees.
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Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
a. No impact fees may be imposed on a junior accessory dwelling unit or accessory dwelling unit that is less than seven hundred fifty (750) square feet in size. For purposes of this section, “impact fees” includes the fees specified in Sections 66000 and 66477 of the Government Code, but does not include utility connection fees or capacity charges. b. For accessory dwelling units that have a floor area of seven hundred fifty (750) square feet or more, impact fees shall be charged proportionately in relation to the square footage of the single-unit dwelling.
H. Delay of Enforcement of Building Standards.
1. Prior to January 1, 2030, the owner of an accessory dwelling unit that was built before November 25, 2020, may submit an application to the Building Official requesting that correction of any violation of building standards be delayed for five (5) years. For purposes of this section, “building standards” refers to those standards enforced by local agencies under the authority of Section 17960 of the California Health and Safety Code.
2. The Building Official shall grant the application if the Building Official determines that enforcement of the building standard is not necessary to protect health and safety. In making this determination, the Community Development Director shall consult with the Fire Marshal and Building Official.
3. No applications pursuant to this section shall be approved on or after January 1, 2030.
However, any delay that was approved by the City of San Carlos before January 1, 2030, shall be valid for the full term of the delay that was approved at the time of the approval of the application.
4. Until January 1, 2030, any notice to correct a violation of building standards that is issued to the owner of an accessory dwelling unit built before November 25, 2020, shall include a statement that the owner has a right to request a delay in enforcement of the building standard for an accessory dwelling unit pursuant to this section.
5. This section shall remain in effect until January 1, 2035, and as of that date is repealed. (Ord. 1566 (Exh. A), 2020: Ord. 1480 (Exh. C (part)), 2015; Ord. 1438 § 4 (Exh. A (part)), 2011)
9.b.1
Packet Pg. 339
Attachment: Ordinance with Exhibit A (ADU Ordinance Update)
9.b.2
Packet Pg. 340
Attachment: Planning Commission Resolution PC2022-05 (ADU Ordinance Update)
9.b.2
Packet Pg. 341
Attachment: Planning Commission Resolution PC2022-05 (ADU Ordinance Update) This space for filing stamp only
OR#:
O R A N G E C O U N T Y R E P O R T E R
~ SINCE 1921 ~
600 W. Santa Ana Blvd., Suite 205, Santa Ana, California 92701-4542 Telephone (714) 543-2027 / Fax (714) 542-6841
PROOF OF PUBLICATION
(2015.5 C.C.P.)
State of California )
County of Orange ) ss
Notice Type:
Ad Description:
I am a citizen of the United States and a resident of the State of California; I am over the age of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of the printer and publisher of the ORANGE COUNTY REPORTER, a newspaper published in the English language in the City of Santa Ana, and adjudged a newspaper of general circulation as defined by the laws of the State of California by the Superior Court of the County of Orange, State of California, under date of June 2, 1922, Case No. 13,421. That the notice, of which the annexed is a printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit:
Executed on: 10/10/2004
At Los Angeles, California
I certify (or declare) under penalty of perjury that the foregoing is true and correct.
Signature
EXAMINER - ENQUIRER-BULLETIN
303 TWIN DOLPHIN DR #600, REDWOOD CITY, CA 94065
(650) 556-1556
SPEN 3591190
CRYSTAL MUI
CITY OF SAN CARLOS/CITY CLERK
600 ELM ST
SAN CARLOS, CA - 94070
HRG - NOTICE OF HEARING
ADU Ordinance Update 6.13.22
I am a citizen of the United States and a resident of the State of California; I am over the age of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of the printer and publisher of the EXAMINER - ENQUIRER-BULLETIN, a newspaper published in the English language in the city of SAN CARLOS, county of SAN MATEO, and adjudged a newspaper of general circulation as defined by the laws of the State of California by the Superior Court of the County of SAN MATEO, State of California, under date 02/25/1946, Case No. 38966. That the notice, of which the annexed is a printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit:
06/02/2022
06/02/2022
SAN MATEO
!A000006035440!
Email
CITY OF SAN CARLOS
NOTICE OF PUBLIC
HEARING NOTICE IS
HEREBY GIVEN that the
San Carlos City Council will
hold a Public Hearing in the
Council Chambers, City Hall
– 600 Elm Street, San
Carlos, on Monday, June 13,
2022 at 7:00 p.m. , for the
purpose of heari ng and
considering all comments of
all persons interested in or
concerned with the Planning
Commission's recommend a-
tion (PC Resolution 2022 -05)
that the City Council hold a
public hearing and consider
introducing an ordinance to
amend Title 18 (Zoning
Ordi nance) of the San Carlos
Municipal Code to update
the Accessory Dwelling Unit
(ADU) and Junior Accessory
Dwelling Unit (JADU)
Ordinance. The purpose of
these amendments is to
modify second floor setbacks
for attached ADUs/JADUs on
corner lots, clarify wind ow
requirements, clarify ADU
additions on non -conforming
structures, and other minor
amendments. The following
code section is proposed for
amendment: 18.23.210
Accessory dwelling
units/junior accessory
dwelling units. This project is
consistent with the p rograms
and policies of the San
Carlos 2030 General Plan, is
within the scope of the
activities and impacts
identified in San Carlos 2030
General Plan Program
Environmental Impact Report
(EIR) and no new enviro n-
mental effects have been
found and no new mit igation
is necessary. Therefore, no
additional environmental
review is required pursuant
to Public Resources Code
Section 21166 and California
Environmental Quality Act
(CEQA) Guidelines Section
15162 and 15168. The
agenda and relevant
materials for this i tem will be
available for viewing online -
www.cityofsancarlos.org/age
nda ; at the City Clerk's
Department in City Hall –
600 Elm Street; and at the
San Carlos Library – 610
Elm Street, beginning
Thursday, June 9, 2022. The
public will have the options
to o bservethe meetingand
address the Council in –
person in City Hall's Council
Chambers or remotely via
Zoom. Details and instru c-
tionswill be available on the
agenda. Questions regarding
the projectmay be directe d-
toPrincipal Planner, Andrea
Mardesich at amar d-
es [email protected].
Commentsmay be sent via
email to the City Clerk
Cit y-
[email protected]
d the City Council –
CityCou n-
[email protected]; or
mailed to the City Clerk at
600 Elm Street, San Carlos,
CA 94070. All persons
interested in the above are
hereby invited to participate
remotely in this Public
Hearing and be heard. If you
challenge this proposal in
court, you may be limited to
raising only those issues you
or someone else raised at
the public hearing described
in this notice, or in written
correspondence delivered to
the City Clerk prior to the
public hearing. Crystal Mui,
City Clerk Publication Date:
6/2/22
SPEN -3591190#
EXAMINER - ENQUIRER -
BULLETIN
9.b.3
Packet Pg. 342
Attachment: ADU Public Hearing Notice Proof of Publication (ADU Ordinance Update)