City Council
Report
City Council Meeting: June 14, 2022
Agenda Item: 3.M
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Approval of Second Modification to Professional Services Agreement with HR&A for 6th Cycle (2021-2029) Housing Element
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute a second modification to agreement #108300 (formerly #10830) in the amount of $89,000 and extend the term for one additional year, with HR&A Advisors Inc to Provide Additional Financial Analyses in Support of the City’s Housing Element. This will result in a four-year amended agreement with a new total amount not to exceed $418,900, with future year funding contingent on Council budget approval.
Summary
On October 12, 2021, the City Council adopted the 6th Cycle (2021-2029) Housing Element. 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). At the time that HCD’s comments on the adopted Housing Element were received, the Planning Commission was holding public hearings on changes to zoning and adopted land use plans that were intended to implement the Housing Element. As a result of HCD’s determination, rezoning work has been put on hold until staff can determine what further revisions are necessary to bring the City’s Housing Element into compliance with State Housing Element law and receive approval from HCD.
Rezoning is necessary to demonstrate to HCD that the City can accommodate its Regional Housing Needs Assessment (“RHNA”) allocation of 8,895 units between 2021 2 of 5
and 2029 with a buffer to address net loss of units. Rezoning efforts include establishing development standards that must be both feasible and sufficient for the City to accommodate the RHNA as required by HCD.
HR&A advisors has provided financial feasibility analysis and modeling of potential changes to development standards and project requirements which was used to inform the rezoning programs included in the 6th Cycle Housing Element. HCD’s comments require further revisions to the Housing Element and expanded analysis to establish feasible development standards that can accommodate the RHNA plus a buffer. A modification to the agreement of $89,900 is required to prepare additional analysis for the Housing Element as necessary to comply with State law.
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.
On March 26, 2019, Council authorized an agreement with HR&A Advisors, Inc. to provide financial feasibility analysis of potential affordable housing requirements and minimum density. On November 12, 2019, Council authorized the acceptance of SB2 grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development and a first contract modification in the amount of $179,000 with HR&A Advisors, Inc. for additional analysis related to housing production in the context of the 6th Cycle Housing Element. HR&A’s amended contract provided for a range of economic analyses, typical housing prototype modeling based on revised standards, and policy and program evaluation necessary to inform the preparation of the 6th Cycle Housing Element. During the City’s reorganization Contract #10830 expired before the scope of work was completed and a new contract was executed for the remaining balance with contract #108300.
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On October 12, 2021, City Council adopted the 6th Cycle (2021-2029) Housing Element and certified the associated 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, 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
HR&A Advisors, Inc. was selected on March 21, 2019 to provide the following:
• Update Financial Feasibility Analysis on the Downtown Community Plan (DCP) • Explore Revised Development Standards and Incentives for Housing Projects on Boulevards and in the Bergamot Area Plan
• Multi-Unit Districts Affordable Housing Fee and Density Study This recommended award was made as an exception to the competitive bidding process pursuant to Section 2.24.80(d). Competition does not exist because HR&A has completed extensive feasibility analysis related to evaluating the feasibility of the City’s development standards, project requirements and fees including ongoing work on the Affordable Housing Production Program (AHPP) and Housing Element, as well as financial feasibility on the Downtown Community Plan, and 2015 Zoning Ordinance.
Therefore, HR&A has the unique ability or capability to complete the abovementioned studies related to the Housing Element. Completing a competitive procurement process is highly unlikely to produce cost-competitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the City.
Discussion
The 6th Cycle Housing Element includes key rezoning programs that are necessary to accommodate the affordable allocation in the RHNA including Programs 1F and 1J.
Program 1F (rezoning of Downtown) commits the City to modifying the heights and floor area ratios (FARs) in the Downtown Community Plan area to ensure they are set at levels that can support the minimum AHPP requirements and to support feasible 4 of 5
housing projects. Similarly, Program 1J (rezoning of mixed-use areas outside of Downtown) commits the City to amending the Zoning Ordinance, LUCE, and the Bergamot Area Plan (BAP) to increase FAR and height standards to levels that can support feasible housing projects. The City’s assumptions of feasibility and the City’s Suitable Sites Inventory (SSI), a tool used to demonstrate capacity, are based on the results of a feasibility analysis prepared by HR&A dated June 9, 2021. As stated in the 6th Cycle Housing Element, the feasible FARs for housing projects in the Downtown range from a minimum 2.75 to 4.0 with heights ranging from 55 feet to 84 feet and the feasible FARs for housing projects in the remaining areas of the City range from a minimum 2.75 to 3.25 with heights ranging from 55 feet to 65 feet.
On February 8, 2022, the City received HCD’s review letter stating that additional changes are required to the adopted Housing Element to comply with State housing law. Further changes to the development standards in Programs 1F and 1J as well as other programs in the 2021-2029 6th Cycle Housing Element would require additional analysis, including financial feasibility testing. A second modification to the agreement would expand HR&A’s scope of work to conduct further analysis of additional changes to the Housing Element in response to HCD’s comments. Furthermore, this second modification to the agreement would extend the terms of the contract to October 30, 2023.
Past Council Actions
Meeting Date Description
03/26/2019 Council approved a contract with HR&A Advisors, Inc to provide empirical testing of prototypical private developments to help increase the City’s supply of affordable housing
06/11/2019 Council adopted a resolution authorizing application for, and receipt of, SB2 grant funds in an amount not to exceed $310,000 from the California Housing and Community Development Department (HCD) 11/12/2019 Council authorized the City to accept the SB2 grant in the amount of $310,000 and to authorize the City Manager to negotiate and execute a first modification with HR&A in the amount of $179,000 for further prototype testing in support of the 6th Cycle Housing Element 10/12/21 Council adopted the 2021-2029 6th Cycle Housing Element 5 of 5
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Miscellaneous Grants Fund to increase the amount of the agreement with HR&A Advisors Inc. Funds are included in the FY 2021-22 Adopted Budget in the Community Development Department.
Contract Modification Request Amount
Agreement # Current
Authorized
Amount
FY 2021-22
Modified
Request
Amount
Account # Total Revised
Contract
Amount
10830/108300 $179,000 $89,900 20700002.556420 $268,900
10830/108300 $150,000 $ 01700001.552010 $150,000
TOTAL $418,900
Prepared By: Rachel Kwok, Environmental Planner
Approved Forwarded to Council
Attachments:
A. March 26, 2019 Council Staff Report
B. June 11, 2019 Council Staff Report
C. November 12, 2019 Council Staff Report
D. 00 EXECUTED CONTRACT #108300 HR&A
E. 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300
F. HR&A Oaks Initiative_06-10-22
G. Written Comments