CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 38 Section Name: {{section.name}} Account Number: 25-3112 File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Community Development Department
MEETING DATE: June 16, 2025
SUBJECT:
Zoning Code Amendments and Below Market Rate Program Update — Ordinance Introduction RECOMMENDATION:
Introduce an Ordinance amending the Zoning Code (Title 27) to address affordable housing compliance options, planning application procedures, and set minimum densities for residential mixed-use development projects; and approve a Resolution to update the City’s Below Market Rate (Inclusionary) Program to implement various policies and programs established in San Mateo’s 2023-2031 Housing Element (Sixth Housing Cycle); and find that the Ordinance and Resolution are exempt from further environmental review pursuant to California Environmental Quality Act (CEQA) Section 15183.
BACKGROUND:
San Mateo’s 2023-2031 Housing Element provides a plan to accommodate the City’s Regional Housing Needs Allocation (RHNA) of 7,015 new housing units, to support the production of housing at all income levels, and to affirmatively further fair housing for the Sixth Housing Element Cycle. The City Council adopted the 2023-2031 Housing Element on May 20, 2024, and it was subsequently certified by the California Department of Housing and Community Development (HCD) on July 23, 2024. California requires all local governments (cities and counties) to adequately plan to meet the housing needs of their communities. Local governments meet this requirement by adopting Housing Elements, which are updated every eight years. The Housing Element is a chapter of a city’s General Plan, is the only element of the General Plan subject to State requirements for content, and it must be certified by HCD. State funding programs for transportation, infrastructure, and housing often require or consider a local jurisdiction’s compliance with housing element law. In addition, non- compliant housing element requirements and targets could potentially affect a local jurisdiction’s ability to impose local zoning and land use controls over housing development and receive certain types of State funding and grants.
The Housing Element includes five goals to support compliance with state law and to achieve the City’s RHNA – supporting Production, Preservation, Protection, Promotion, and Affirmatively Furthering Fair Housing. To achieve these goals during this Housing Cycle, the Housing Element includes 53 policies with 150 implementation actions, with many of these Housing Element policies and programs requiring Zoning Code amendments. Based on the implementation plan timeline and for practical and efficiency purposes, staff bundled a number of these amendments together for City Council approval. On April 7, 2025, the City Council adopted an ordinance to amend several chapters of the Zoning Code to complete Housing Element implementation actions under Policies H1.7, H1.13, H1.14, H1.15, H1.16, and H3.7.
For this bundle of Zoning Code amendments, the Ordinance (Attachment 1) amends several chapters of Title 27 (Zoning) of the San Mateo Municipal Code (SMMC) to implement programs to support the goal of housing production within the Housing Element. These include the following items, which are discussed in more detail in the discussion section below:
Allow for alternative compliance options for required onsite affordable dwelling units in housing development projects (Policy H1.3)
Add provisions for appeal procedures for processing planning applications (Policy H1.6) Modify provisions for approved planning application expiration and extensions (Policy H1.6) Modify language for approval authority of development projects that exceed height thresholds (Policy H1.6) Set minimum densities for residential mixed-use development projects (Policy H1.9) The City’s Below Market Rate (BMR) Program is codified in SMMC Section 27.16.050. The City’s BMR Program Guidelines are adopted via Resolution by the City Council. The Resolution (Attachment 3) revises the BMR Program Guidelines to include alternative compliance options to providing onsite affordable dwelling units in housing development projects.
DISCUSSION:
Zoning Code Amendments
The Ordinance to implement the Zoning Code amendments is provided as Attachment 1. To provide context for the proposed amendments, Attachment 2 provides the text with strikeouts and underlines to show what is proposed to be added or deleted from the existing Code.
Streamline the Development Review Process
The Ordinance proposes to: 1) modify and add several sections of the Zoning Code to reduce the development review timeline for housing projects by streamlining the development review process, 2) align City requirements with SB 330 (Housing Crisis Act of 2019), and 3) add certainty in the development application process in support of Housing Element Policy H1.6.
Existing state law (Government Code Section 65943) pursuant to the Permit Streamlining Act, and as modified by the Housing Crisis Act, requires the City to determine in writing whether a development (planning) application is considered ‘complete’ based on a list of required materials published by the City. If the City determines the planning application is incomplete, state law requires the City provide an appeals process and a timeline to complete the appeals process. The Ordinance proposes to insert subsection (b) within Section 27.08.035 to establish an appeals process subject to the review and final determination of the Planning Commission within a designated timeline, in conformance with state law.
For planning application approvals and approval extensions, SMMC Section 27.08.085 specifies that the approval of a planning application shall expire two years from the approval date, except that when a completed building permit application is filed before the planning approval expiration date and a building permit is issued within six months after the two-year expiration date. In total, approvals expire 2.5 years from the approval date unless a building permit has been issued. Subsection (b) of Section 27.08.087, Planning Approval Extension, currently allows the Zoning Administrator to extend the planning application approval once up to two years under certain circumstances and findings.
The Ordinance would amend this code section to allow the Zoning Administrator to approve up to two extensions, each for up to two years. Given the current development climate and the challenges getting a project ready for construction after the project entitlement, including preparing the site for development, securing financing, and coordinating with public utilities, there is sometimes a need for developers to be able to obtain additional time that exceeds the current timeline allowed in the Zoning Code. Allowing the potential for one additional two-year extension (for a total of up to four years, if justified) provides greater certainty for developers that their initial investment in obtaining entitlements for housing development projects will not be lost. This will allow developers to complete the construction of the project as approved, which is also in the City’s interest to satisfy the housing production targets in the Housing Element. The overarching objective is to continue to support projects starting construction as expeditiously as possible after approval, while also allowing for reasonable extensions, as needed.
An additional measure to streamline the development review process is aligning the approval authority of development projects based on building height as provided for in General Plan 2040. Currently, SMMC Section 27.04.030(c) requires City Council approval of all development projects over 55 feet in height (five stories). This provision is outdated by the adoption of new land use designations in General Plan 2040 and subsequent voter adoption of Measure T, which allows for building heights to exceed the limits in General Plan 2030 and under Measure Y. Staff recommends modifying the language in Section 27.04.030(c) to require City Council Site Plan and Architectural Review approval when the development project exceeds the building height limit specified in General Plan 2040, which depends on the location of the project and the height limit of the applicable land use designation. In addition, Section 27.06.050(d) requires Council approval for development projects over 55 feet and should be similarly updated. This specific subsection was inadvertently left out of the Planning Commission’s agenda packet, but the substance was presented to the commission in the context of Section
27.04.030(c).
Similarly, the Council recently increased the Zoning Administrator’s approval authority threshold from 25 units to 99 units, and aligning the building height threshold for Council approval with the thresholds provided in General Plan 2040 will streamline the development review and approval process by eliminating additional public meetings.
Regardless of the review and approval authority, all city policies, ordinances, and standards apply equally to all multiple- family housing development projects and are equally reviewed under the State’s Housing Accountability Act, which limits the City’s ability to deny residential projects that comply with applicable codes and objective standards.
Minimum Density in Mixed-Use Residential Development Projects At an August 14, 2024 study session, the City Council discussed implementation of Housing Element Policy H1.9, which commits the City to establishing minimum densities for mixed-use residential development projects. As discussed at that study session, areas designated as Mixed-Use in General Plan 2040 provide the greatest flexibility for the type of projects that may be developed and generally allow for housing, commercial and/or office, or a combination of these uses.
Projects in mixed-use zones are not required to include residential uses, and projects are allowed to be developed as non- residential projects, depending on property owner/developer interest, market conditions, and other factors. Over the last several years, the City has seen a growing trend of mixed-use development projects with a residential component. Most of these projects have included significant residential components that meet or exceed the zoned base density. However, in a few cases, projects have provided only a small residential component to qualify for concessions and waivers under State Density Bonus Law (SDBL) (Govt. 65915 et seq.) to benefit the non-residential component of the project.
At the August 14, 2024 Council study session, City Council members also generally agreed that the City should establish minimum densities for mixed-use housing developments and should establish higher minimum densities near Caltrain stations. Thus, staff is proposing to establish minimum densities in all mixed-use land use designations established in General Plan 2040, with slightly higher minimum densities for areas within ½ mile from the Caltrain stations.
In the proposed Ordinance (Attachment 1), staff recommends adding a new section in Chapter 27.02 to establish minimum densities in General Plan 2040 mixed-use land use designations. This is an interim measure until the Zoning Code is comprehensively updated with new zoning districts that will implement the newly established mixed-use land use designations in General Plan 2040 with each zoning district having its own minimum density.
The recommended densities vary based on the intensity of the mixed-use land use designation and whether the project area is within ½ mile of a Caltrain station. The recommended minimum densities generally follow the minimum densities already established in the General Plan, with slightly higher density thresholds within the ½ mile area of a Caltrain station (30 or 50 du/ac depending on the land use designation) and a slightly lower minimum density outside of that area for most land use designations (10, 15 or 30 du/ac). The minimum density for parcels designated as Mixed-Use High will be 50 du/ac regardless of where it is located. However, the City Council can consider a request to reduce the required minimum density where a project provides a greater percentage of affordable housing units than required by the Municipal Code or by providing community benefits.
A more detailed analysis will occur with the City’s work on the comprehensive zoning code update and as part of the Transit Oriented Communities (TOC) Policy work. San Mateo was awarded a substantial grant to specifically study and establish minimum densities for areas within high quality transit areas. That project will study each transit zone at the parcel level and may result in changes to the minimum densities currently proposed.
Below Market Rate (Inclusionary) Program Updates
State law pertaining to inclusionary housing programs authorizes the legislative body of any city or county to adopt an inclusionary housing Ordinance that includes residential rental units affordable to lower- and moderate-income households (Govt. Code 65850 (g)). Among other things, this statute specifies:
Requirements for alternative means of compliance for inclusionary Ordinances; Parameters for HCD review of inclusionary housing Ordinances, under limited circumstances, by requesting the submittal of an economic feasibility study to ensure the Ordinance does not unduly constrain the production of housing;
Criteria for HCD to review economic feasibility studies.
Policy H.1.3 is one of many actions in the Housing Element intended to increase affordable housing production by providing greater flexibility to developers. Many jurisdictions allow for various alternative compliance options to the baseline inclusionary requirement in their ordinances and accompanying administrative guidelines. The level of detail provided on how developers can meet the jurisdiction’s inclusionary standards varies significantly, however, and some alternative compliance options come with conditions that may act as a disincentive.
The City’s current BMR Guidelines require 15 percent of total units (base density) in a housing development of 11 or more units to be provided as affordable to lower-income or moderate-income households, depending on whether the development is rental or for-sale. The BMR Guidelines allow for an offsite alternative compliance option, but it is limited to cases in which building the required affordable units on-site is infeasible. An applicant is required to demonstrate infeasibility by providing an economic analysis comparing the construction of units onsite versus offsite. The BMR Guidelines also do not provide any further guidance as to how the offsite construction of units should be evaluated and approved.
As noted above, Govt. Code 65850(g) requires jurisdictions to provide alternative methods of compliance to meet their inclusionary requirements. Staff reviewed the inclusionary policies of several other jurisdictions and found that a variety of alternative options are used. For an overview of other jurisdictions’ policies, please refer to Attachment 5. Some common alternative compliance options include the following:
In-lieu fees would allow a developer in certain situations to pay a fee, established through a financial feasibility study, instead of building the required affordable units on-site. Typically, fees are allowed on smaller developments (where the inclusionary requirement would only produce few units, or for fractional units); the City’s BMR Guidelines allow this for developments of six to 10 units. Setting in-lieu fees requires an extensive analysis of the housing market, the cost to develop a variety of unit types, and establishing an affordability gap between what lower-income households can pay for housing and the market rate for various units based on size and location. In addition, the imposition of the fee, while adding to the City’s affordable housing funds, does not immediately result in new units, leading to delays in the production of new units.
Land dedication would allow a developer to dedicate land for an affordable housing development. At a minimum, this requires the developer to demonstrate that what can be built on that land equals or exceeds the number of units required to meet the inclusionary requirement. There are typically several standards that the proposed site must meet related to site control (of the developer or development partner), environmental conditions, and zoning, in addition to other requirements such as ability to deliver the units concurrently with the market-rate or commercial project, accessibility to transit or other amenities, affirmatively furthering fair housing, or competitiveness for tax credits.
Off-site construction would allow a developer to construct the required affordable units in different locations than the project site. As with land dedication, the developer must demonstrate that the site is suitable to meet or exceed the inclusionary requirement; that it is controlled by the developer (or other developer it is assigned to); and, in some jurisdictions, that it can meet other requirements related to the site location, such as accessibility to transit or other amenities or competitiveness for tax credits. For example, Santa Rosa has a location requirement that requires the offsite location to be in the same “quadrant” of the City as the main development, and it cannot be near another lower-income development.
Acquisition and rehabilitation would allow a developer to meet its inclusionary obligation by acquiring housing occupied by lower-income households with a commitment to rehabilitating and deed-restricting the units. This option has the potential to work well in communities where there are a significant number of apartment buildings in need of rehabilitation; however, there must be a method for demonstrating that the value of the alternative meets or exceeds the baseline inclusionary requirement. For example, preserving 10 naturally affordable market- rate rental units must be shown to meet or exceed the value of meeting the City’s inclusionary requirement (15 percent lower- income rental units). The City would need to develop an analysis to determine this equivalency. In addition, such projects can be difficult to finance and can pose challenges related to income verification, relocation, and other issues associated with preservation. Developer-proposed alternatives would allow a developer to propose their own alternative means of compliance.
In some cases, a city does not have any specific alternatives to on-site development but instead reviews each proposal on a case-by-case basis using certain prescribed standards. The developer often proposes one of the other methods illustrated above.
In preparation for a comprehensive BMR program revision in 2026, staff will be researching all of these options. However, at this time, staff recommends implementing two alternatives to on-site construction to meet State Law requirements and to yield as many affordable units as possible within an expedited timeframe:
1. Off-site development of affordable units
2. An option that allows developers to propose an alternative Staff found that both off-site and developer-proposed alternatives are used in several jurisdictions, including Redwood City, East Palo Alto, Sunnyvale, and Hayward. Use of these alternative compliance options requires City Council approval in most cases in the above-mentioned jurisdictions. In addition to providing the alternatives, most jurisdictions developed findings that must be made to approve the use of alternative compliance options. The City’s Affordable Housing Ordinance (SMMC Section 27.16.050) would be amended to incorporate these additional compliance options (see Ordinance in Attachment 1). The City’s BMR Guidelines, adopted via City Council Resolution, contain details about program compliance.
The Resolution with the updates to the BMR Guidelines that reflect these two additions is included in Attachment 3, with the text in track changes in Attachment 4.
Planning Commission Recommendation
The Planning Commission held a public hearing to review the proposed ordinance and resolution at their May 13, 2025 meeting and recommended that Council approve the Ordinance amending the Zoning Code to address affordable housing compliance options, planning application procedures, and minimum densities for residential mixed-use development projects; and approve a Resolution to update the City’s Below Market Rate (Inclusionary) Program to implement various policies and programs established in San Mateo’s 2023-2031 Housing Element (Sixth Housing Cycle). The Planning Commission also discussed and recommended that the Council consider alternative criteria to the ‘dwelling units per acre’ requirement for minimum densities for mixed-use residential projects. One alternative that they recommended staff further evaluate was a metric that required a minimum dwelling unit per square footage of commercial/office floor area ratio for mixed-use residential development projects. For example, setting a minimum requirement of one dwelling unit per 800 square feet of commercial floor area up to one dwelling per 300 square feet of commercial space for new mixed- use projects. A requirement of this type would require further staff analysis, as well as economic analysis, to ensure that it is a reasonable and feasible requirement to set for new development if there is Council interest in pursuing this type of development standard.
BUDGET IMPACT:
The Zoning Code Amendments to implement the Housing Element and General Plan are fully funded in the Community Development Department’s annual operating budget, utilizing the Advanced Planning Fund (Fund 225), and does not impact the City’s General Fund.
ENVIRONMENTAL DETERMINATION:
The Environmental Impact Report (EIR) for General Plan 2040 analyzed new residential development of up to 19,764 new housing units and growth around the City through 2040. On March 18, 2024, the City Council certified the EIR.
In accordance with California Environmental Quality Act (CEQA) Guidelines Section 15183, the zoning amendment to modify housing development provisions and development standards (“Project”) is exempt from further environmental review because the Project, which generally allows for more housing types to be permitted uses in specific zoning districts and remove regulatory barriers from the zoning code, is consistent with the anticipated land uses under the land use designations adopted as part of General Plan 2040 for which an EIR was certified. There are no specific proposed changes to residential development densities, and it is consistent with the development densities established by General Plan 2040.
The Project is also consistent with the implementation policies of the adopted and certified Housing Element and pursuant to certain mandates in state law.
Applying Section 15183, there are no project specific effects that are peculiar to the project; there are no project specific impacts that the General Plan EIR failed to analyze as significant effects; there are no potentially significant off-site and cumulative impacts that the EIR failed to evaluate; there is no substantial new information which results in more severe impacts than anticipated by the EIR; and projects will be required to comply with mitigation measures contained in the EIR.
Furthermore, any future development of sites where these code amendments would apply would be evaluated as a potential “Project” under CEQA and if necessary, be further assessed for their potential environmental impacts prior to City entitlement.
NOTICE PROVIDED:
All meeting noticing requirements were met, including the publishing of a public notice in a newspaper of general circulation at least 10 days in advance of the public meeting.
ATTACHMENTS
Att 1 – Proposed Ordinance
Att 2 – Proposed Resolution
Att 3 – Zoning Code Amendments (Track Changes)
Att 4 – Below Market Rate Program Revisions (Track Changes) Att 5 – Overview of Inclusionary Programs in Other Jurisdictions
STAFF CONTACT
Steve Golden, Principal Planner
[email protected]
(650) 522-7215
Rachel Horst, Housing Manager
[email protected]
(650) 522-7223