City Council
Report
City Council Meeting: April 26, 2022
Agenda Item: 8.A
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Progress Update and Discussion on Revisions to 6th Cycle Housing Element Update and Modification of Professional Services Agreement with Wood LLC to Provide Additional Scope of Work for the Housing Element EIR Recommended Action
Staff recommends that City Council:
1. Authorize the City Manager to negotiate and execute a second modification to Agreement No. 11112 in the amount of $213,041 and extend the term by one additional year with Wood LLC, a professional environmental consulting company based in Washington D.C., to provide additional environmental consulting services for the Housing Element Environmental Impact Report (EIR).
This will result in a three-year amended agreement with a new total amount not to exceed $580,427;
2. Receive an update on the status of responses to comments on the adopted 6th Cycle Housing Element Update; and
3. Direct the City Manager to submit a letter advocating for legislative changes to provide for additional time beyond October 15, 2022 to complete rezoning.
Summary
On February 8, 2022, the California Department of Housing and Community Development (“HCD”) determined that although Santa Monica’s adopted 6th Cycle (2021-2029) Housing Element Update meets many statutory requirements, further revision is necessary in order to comply with all aspects of State Housing Element law (Attachment A). Because Santa Monica did not adopt a certified Housing Element by October 15, 2021 or within the additional 120-day period (i.e. February 12, 2022), Santa Monica was formally deemed out of compliance for the 6th Cycle Housing Element. The consequences of being out of compliance means that the City is required to approve certain types of housing projects and also makes Santa Monica ineligible for some 2 of 14
affordable housing funding programs that require Housing Element compliance. This report:
• Explains why the City is currently out of compliance on the Housing Element; • Provides information regarding the short- and long-term consequences for being out of compliance; and
• Provides a progress update on addressing HCD’s comments on the Housing Element.
At the time that HCD’s comments on the adopted Housing Element were received, the Planning Commission was in the midst of public hearings on changes to zoning and adopted land use plans that were intended to implement the Housing Element and accelerate housing production. As a result of HCD’s determination, rezoning work has been put on hold until it can be determined how required revisions to the Housing Element’s Suitable Sites Inventory (“SSI”) affect implementation. The SSI identifies parcels in the City that are the basis for demonstrating that the City can accommodate its Regional Housing Needs Assessment (“RHNA”) allocation of 8,895 units through assignment of housing units for each parcel in the SSI. Because cities are required to continuously demonstrate that the RHNA, at every income level, can be accommodated over the entire 8-year Housing Element cycle, the SSI must actually include more units than the allocated RHNA (this is known as the “no net loss” requirement).
The adopted Housing Element SSI included 11,070 units of which 1,884 lower income units were assigned to City-owned sites. Because HCD has raised concerns that the SSI did not adequately account for the potential that 100% commercial projects could be constructed on sites listed in the SSI, as well as potential impediments to housing production caused by existing uses on SSI sites, in addition to other technical corrections to the SSI, it is anticipated that changes to address these concerns will require that the overall number of units in the SSI increase to potentially up to 13,000 units. As a result, without knowing the final overall housing capacity HCD will require the City to demonstrate in the SSI in order to receive a certified Housing Element, it is not possible to complete the rezoning effort with certainty prior to certification. 3 of 14
On January 2, 2021, the City entered into Agreement No. 11112 with Wood LLC to preparing the 2021-2029 6th Cycle Housing Element Environmental Impact Report (EIR) in compliance with the California Environmental Quality Act (CEQA). On October 12, 2021, the City Council adopted the 2021-2029 6th Cycle Housing Element and certified the associated Housing Element EIR. As noted above, HCD’s comments require study of more housing units than were originally analyzed for the Housing Element, which would trigger the need for supplemental analysis to the certified Housing Element EIR.
A modification to the agreement of $213,041 is required to prepare additional analysis for the Housing Element EIR as necessary to comply with CEQA.
Background
The RHNA is mandated by State Housing Law as part of the periodic process of updating local housing elements of the General Plan. The RHNA quantifies the need for housing within each jurisdiction during specified planning periods. For the 6th Cycle planning period of 2021-2029, Santa Monica’s RHNA allocation is 8,895 units, of which 69% must be affordable. Since the City's 6th Cycle RHNA of 8,895 units exceeds the growth that was anticipated and analyzed in the City's Land Use and Circulation Element (LUCE) and Downtown Community Plan, an EIR for the 6th Cycle Housing Element was prepared to satisfy the requirements of CEQA.
The EIR analyzed the environmental impacts of the potential development of new housing units in the next 8 years in the City as a result of the 6th Cycle Housing Element. On November 24, 2020, the Council approved an agreement with Wood LLC for $358,838 to prepare the 2021-2029 6th Cycle Housing Element EIR. The majority of the contract ($260,000) was funded by a Local Early Action Planning (LEAP) grant from HCD. Additionally, on April 26, 2021, the City executed a first modification to the contract in the amount of $8,548 for additional analysis of impacts for the EIR. On October 12, 2021, City Council adopted the 2021-2029 6th Cycle Housing Element and certified the associated 2021-2029 6th Cycle Housing Element EIR. Following Council adoption, City staff submitted the adopted 6th Cycle Housing Element to HCD on November 10, 2021 for a 90 day review period and certification. On February 8, 2022, 4 of 14
the City received HCD’s review letter stating that additional changes are required to the adopted Housing Element to comply with State housing law.
Contractor Selection
On March 16, 2020, a Request for Proposals for preparation of an EIR for the City of Santa Monica 6th Cycle Housing Element was issued to three qualified firms on the City’s Pre-Qualified list of environmental consultants: Wood LLC, Ascent Environmental, and ICF. Based on the selection criteria in SMMC 2.24.072 as well as the firm’s demonstrated knowledge of the City and CEQA, strong record of preparing legally defensible environmental documentation in the City and other jurisdictions, comprehensive scope of work, and flexible approach, Wood LLC was selected as the best bidder to provide environmental consulting services for the Housing Element EIR.
Past Council Actions
Meeting Date Description
04/28/2020 Council adopted a resolution authorizing application for, and receipt of, LEAP funds in an amount not to exceed $300,000 from the California Housing and Community Development
Department (HCD)
11/24/20 Council approved a contract with Wood LLC for $358,838 to prepare the 2021-2029 6th Cycle Housing Element EIR
10/12/21 Council adopted the 2021-2029 6th Cycle Housing Element and certified the associated 2021-2029 6th Cycle Housing Element EIR
Discussion
Why Santa Monica is Out of Compliance: Key Housing Element Deadlines Jurisdictions within the Southern California Association of Governments (“SCAG”), including the City, were required to adopt compliant 6th Housing Elements by the statutory deadline of October 15, 2021. Draft RHNA allocations were issued in September 2020, however, due to delays caused by the COVID-19 pandemic, RHNA allocations were not finalized by SCAG until March 2021 and written guidance on addressing new Affirmatively Furthering Fair Housing (AFFH) requirements was not issued by HCD until April 2021. Nonetheless, understanding the pressing timelines, the 5 of 14
City initiated the Housing Element update process in August 2020 with several months of community engagement. The City submitted a draft Housing Element to HCD on July 1, 2021, and the City Council adopted a final Housing Element on October 12, 2021.
Because HCD did not certify the final Housing Element adopted on October 12, 2021, the City has been deemed out of compliance with the October 15, 2021 deadline.
At the time the City adopted its Housing Element, Housing Element law provided for an additional 120 days to adopt a compliant Housing Element (by February 12, 2022) in order to avoid updating the Housing Element every 4 years. However, Assembly Bill 1398, which took effect on January 1, 2022, replaced the 4-year requirement with a new requirement to rezone to accommodate the jurisdiction’s RHNA allocation by October 15, 2022 (i.e. 1 year from the statutory deadline). As previously noted, in order to complete the rezoning, the EIR would require supplemental analysis, which makes meeting the deadline extremely challenging.
Consequences of Being Out of Compliance
The following tables summarizes some of the key consequences of being out of compliance on the Housing Element both in the immediate period and ongoing over the 8-year cycle.
Consequences in Short Term
Gov’t Code Section Trigger Point Short Summary
Housing Accountability
Act: 65589.5(d)(1) &
(5)(B)
• Housing Element is out
of compliance
• Must approve any project with
at least 20% affordable to
60% AMI or 100% Moderate,
even if the project exceeds
zoning or general plan
maximums
• Conditions cannot render the
project infeasible
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Consequences in Short Term
Gov’t Code Section Trigger Point Short Summary
65583.2(c)(1)(A) • Failure to adopt a
Housing Element that
has been certified by
February 12, 2022
• Required to complete
rezoning for RHNA by
October 15, 2022
• HCD has indicated that City
would need to prepare an SSI
specifically for this purpose to
demonstrate compliance with
the rezoning requirement
65583(g) • Rezoning for RHNA
not completed by
October 15, 2022
• City must approve any project
on SSI that meets the
densities in SSI table
• Staff is seeking further
clarification from HCD
whether this applies only to
sites identified on the SSI or
all sites that are slated for
rezoning
65588(e)(4)(C) • Rezoning for RHNA
not completed by
October 15, 2022
• State can start enforcement
proceedings against the City
Housing funding programs
dependent on Housing
Element compliance
• Housing Element is out
of compliance
• Ineligible for funding
programs where the City has
previously been awarded
funding for affordable housing
such as Local Housing Trust
Fund (LHTF) and Permanent
Local Housing Allocation
(PLHA)
• Others include Affordable
Housing and Sustainable
Communities program
(AHSC), SB1, and SB2
Consequences in Long Term
Gov’t Code Section Trigger Point Short Summary
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Consequences in Long Term
Gov’t Code Section Trigger Point Short Summary
Senate Bill 35
(65400, 65582.1, 65913.4)
• Starting with April 1,
2023 Annual Progress
Report (APR) to HCD,
determination by HCD
that Santa Monica has
not issued sufficient
building permits to
meet pro-rated RHNA
for market rate units
and lower-income units
• Determination typically
made in June reviewing
data from January 1 –
December 1, 2022
• Requires ministerial
approval (no public
hearing) for projects
that include minimum
percentage of
affordability and meet
SB35 preconditions
o If Above Moderate
(i.e. market-rate)
RHNA not met then
projects with at least
10% affordability
o If Lower Income
RHNA not met than
projects with at least
50% affordability
• City can only impose
objective standards,
including for design
review
The above table highlights primarily the City’s obligations to approve projects and potential impacts to funding for affordable housing but it should be noted that being out of compliance also means that the State can seek judicial relief in addition to imposing penalties and fines. As part of the 2021-2022 State budget, HCD created a new Housing Accountability Unit to hold jurisdictions accountable for their housing element commitments and compliance with State housing laws
(https://www.hcd.ca.gov/community-development/accountability-enforcement.shtml).
Further, there is also currently proposed legislation (AB1976) that would provide HCD the authority to take over local rezoning if jurisdictions only in the SCAG region are out of compliance for the entire Housing Element cycle. Staff is monitoring this bill and has recommended to oppose unless amended because of the potential loss of local land use control, the lack of distinction between jurisdictions that are making good faith efforts to comply with State law and those that are not, and that it only applies to SCAG as opposed all regions in California.
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Progress Update on Addressing HCD Comments on Adopted Housing Element Staff has had several phone calls with HCD staff seeking clarification and specificity on how to address comments to the Housing Element with the goal of ensuring that the next revision will result in a certified Housing Element. The following is a summary and update on clarification of key issues that particularly impact overall housing capacity in the Housing Element:
Program for City Owned Sites
Program 2E in the Housing Element indicates that 1,884 affordable housing units can be accommodated on 4 city-owned sites as shown in the following table:
Sites Unit
Capacity Constraints
Parking Structure 3
(pending project) 104 None
Wilshire Parking Lots
(3 sites) 130 None
4 th/Arizona 338 Bank leases don’t terminate until 2026 Bergamot Arts Center 707
Property management agreement until April
2027. Annual leases with 30 businesses that
renew each calendar year until redevelopment
Main Street Parking
Lots 605 None but replacement parking will be necessary (Coastal Zone) Total 1,884
HCD’s comments state that given the reliance on City-owned sites to accommodate nearly a third of the RHNA’s affordable unit allocation, far greater commitment from the City to facilitate development on city-owned sites would be needed in terms of making the land available and also detail the efforts that the City would undertake (that are within the City’s control) to remove barriers that result in 100% affordable housing units on City-owned sites. If HCD does not allow use of some City-owned sites on the SSI due to the inability of the City to demonstrate such a commitment, the overall number of units that would need to be accommodated on sites in the SSI would need to increase 9 of 14
substantially (e.g., in excess of 13,000 units indicated above). HCD has preliminarily indicated that a revised program with the following details would be acceptable:
• Commitment to minimum number of units (note that if minimum number of units for each city-owned site is not met, then those affordable units must be made up elsewhere in the City, which would potentially mean required upzoning on private property to make up affordable unit capacity)
• Commitment to issue Request for Proposals (RFPs) on a regular and routine schedule for City-owned sites
• Explain the process that the City will pursue to develop city-owned sites • Identify any possible partners that would develop 100% affordable housing • List tools that the City has used in the past to facilitate affordable housing such as zoning incentives, streamlined process for 100% affordable housing, substantially reduced or free ground rent, funding through local housing trust fund, and support applications for other funding sources for affordable housing Program for Affirmative Furthering Fair Housing (AFFH) in R1 Zones Program 4C in the Housing Element seeks to provide new housing choices and affordability in high opportunity areas – specifically the City’s R1 zone neighborhoods.
The program seeks to do this by incentivizing additional accessory dwelling units (ADUs) in R1 zones. HCD’s comments state that Program 4C is insufficient to demonstrate the City’s commitment to fully address the AFFH requirement given the perpetuated segregation in R1 neighborhoods, as noted in the Housing Element.
Council provided direction on March 15, 2022 on concepts to include in a forthcoming ordinance to implement SB9, including incentives for additional units of larger R1-zoned parcels in the city. Staff shared this conceptual direction with HCD and received feedback that a new program implementing SB9 and incentivizing additional units in some of the most affluent areas of Santa Monica would still not be sufficient to address the AFFH requirement. HCD referred the City to Long Beach’s Housing Element, which has been certified and includes specific commitments to achieve a certain percentage of all new and affordable units in high resource area, as an example of what HCD would 10 of 14
accept. Although it should be noted that not all of Long Beach’s high resource areas are R1 neighborhoods, HCD has made clear that Long Beach’s language served as a good example because Santa Monica’s programs must include specific metrics to incentivize housing choice and affordability in R1 zone neighborhoods (which are all high/highest resource areas) in addition to a mid-cycle review to assess whether additional actions need to be taken to achieve established metrics. Staff will continue to consult with HCD on possible options and return to Council with more information regarding revised program concepts that would address this requirement.
Shortfall of Sites to Accommodate Lower Income Units + Removal of Government Constraints
Some of the key programs to address the rezoning necessary to accommodate the affordable allocation in the RHNA and removal of barriers to housing production are Programs 1A (by-right approvals), 1F (rezoning of Downtown), and 1J (rezoning of areas other than Downtown). These programs mention various zoning changes but HCD stated that housing programs, “…must specifically commit to acreage, allowable densities, anticipated units and meet all requirements pursuant to Government Code Section 65583.2, subdivisions (h) and (i).” In consultations with HCD, it has been clarified that HCD is seeking firm commitments on number of units and allowable densities in the revised Housing Element programs such that the language providing flexibility for the City to adjust a range of FARs may be not be acceptable. Staff will continue to consult with HCD on possible options and return to Council with more information regarding revised program concepts that would address this requirement.
HCD Comments and Impact on Study of Overall Units: Why Revisions to EIR Are Necessary
The Housing Element included an overall capacity in the SSI of 11,070 units as shown in the following table:
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HCD’s comments required the adjustment of two factors that result in the increase in overall capacity for the Housing Element SSI:
1) Re-categorizing some SSI sites from future potential (categories 11, 12, and all other categories) to category 1 pending projects. By replacing the theoretical units associated with future potential sites with units actually proposed in pending applications, the lost potential units had to be made up by increasing the capacity on other sites.
2) Because Santa Monica’s non-residential zoning districts allow for both residential and commercial uses, the SSI needs to be revised with a 15% reduction in unit capacity for every SSI site to account for the possibility that some sites could be 100% commercial projects
Projects have continued to be submitted on sites that were identified in the SSI that was adopted in October 2021. Those projects did not all propose the projected number of units, particularly affordable units, in the SSI. Moving SSI sites from “future potential” to “currently pending” means that the lost units, particularly the affordable units, must be absorbed by other sites, which has the effect of also needing to increase the overall capacity in order to make up the difference. The following table shows what is currently in the housing development pipeline as of March 31, 2022 compared to the RHNA. If all 12 of 14
pending projects proceed into issuance of building permits, the market-rate RHNA will be met but there will be shortfalls in all of the affordable RHNA.
Approved Pending
In
Construction
(count
towards 6th
Cycle) RHNA Remaining
Market Rate 1,682 2,026 86 2,727 (1,067)
Extremely
Low Income 127 24 7 2,794 2,276
Very Low
Income 162 198 --
Low Income 186 33 -- 1,672 1,453
Moderate 149 40 -- 1,702 1,513
Total # of
Units 2,306 2,321 93 8,895 4,175
4,720 Units Anticipated to Count Towards 6th Cycle Housing Element By accounting for pending projects and also an across the board discount of 15% on every SSI site, it is estimated that an increase of up to 13,000 units will be necessary to make up the shortfall and also include a necessary buffer to address the “no net loss” requirement. This is only a preliminary estimate that will be further refined as work continues to respond to HCD’s comments.
Second Modification to Agreement to Expand Scope of Work for Housing Element EIR This second modification to the agreement would expand the scope of work for the certified Housing Element EIR to analyze additional changes to the 2021-2029 6th Cycle Housing Element in response to HCD’s comments. The changes to the adopted Housing Element could increase the number of housing units planned for the City above what was analyzed in the certified Housing Element EIR. Furthermore, this second modification to the agreement would expand the scope of work for the Housing Element EIR in anticipation of additional changes to zoning regulations and extend the terms of the contract to June 30, 2023. Completion of the Housing Element EIR is required by State law prior to consideration of revisions to the adopted Housing Element.
Next Steps
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Staff will return in June 2022 to provide more concrete details and options for Council to consider to be fully responsive to HCD’s comments. In the intervening period, staff will continue to consult with HCD to receive as much clarification as possible on what is needed to address comments while also advocating for legislative changes to provide the City more time to complete the rezoning.
In order to meet Assembly Bill 1398’s October 15, 2022 rezoning deadline, the City would need to adopt both revisions to the Housing Element and zoning/land use plan changes at the same time. While staff is attempting to seek as much clarification as possible on HCD’s comments, there is no guarantee that HCD will certify the revised Housing Element, which would potentially put the City back in the same position with an uncertified Housing Element and continuing to be out of compliance. As a result, in order to ensure that there is sufficient time to complete additional environmental analysis as required by CEQA and that the City has a certified Housing Element before expending more resources in working on zoning and land use plan amendments, the City desires to submit a letter to Assembly Committee on Housing and Community Development and our State representatives to request legislative changes to give more time to complete rezoning for those cities that have adopted Housing Elements prior to the October 15, 2021 statutory deadline.
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of the agreement with Wood LLC for environmental consulting services for the Housing Element EIR.
Agreement Modification Request
Agreement #
Current
Authorized
Amount
FY 2021-22
Budget
Modified
Request
Amount
Dept/CIP Account #
Total Revised
Contract
Amount
11112 $367,386 $213,041 01700002.552010 $580,427
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Prepared By: Jing Yeo, Planning Manager
Approved Forwarded to Council
Attachments:
A. HCD Comments on Santa Monica's Adopted 6th Cycle Housing Element February 8, 2022
B. Oaks Initiative Form - Wood
C. Contract 11112 - Wood
D. First Modification - Contract 11112 - Wood
E. PowerPoint Presentation