City Council
Report
City Council Meeting: March 26, 2019
Agenda Item: 7.B
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Introduction and First Reading of an Ordinance for Proposed Amendments to the Affordable Housing Production Program
Recommended Action
Staff recommends that the City Council:
1) Review and discuss the information contained in this report regarding the City’s regulatory and policy framework to support housing production, as well as affordable housing production trends, including units in the Extremely Low Income (ELI) category.
2) Authorize the City Manager to negotiate and execute an agreement with HR&A Advisors, Inc., a California-based company, for financial feasibility analysis of potential affordable housing requirements and minimum density requirements for the Planning and Community Development and Housing and Economic Development Departments. This recommended award is for a total amount not to exceed $150,000 with future year funding contingent on Council budget approval. 3) Consider introduction and first reading of an ordinance amending the text of the Municipal Code to temporarily remove the option for providing ELI units to satisfy a project’s Affordable Housing Production Program obligation pursuant to SMMC Chapter 9.64 and specify that 100% Affordable Housing Projects that are owned and operated by non-profit housing providers and financed with tax credits may be exempt from certain provisions of the Affordable Housing Production Program (SMMC Chapter 9.64), subject to certain conditions (Attachment “A”) Executive Summary
Affordable housing is the City’s highest housing priority, and is the focus of City programs, subsidies and other efforts to minimize the affordability gap in Santa Monica.
This report presents information on the use of the Affordable Housing Production Program (AHPP) to support the long-term housing needs in Santa Monica, and to maintain economic diversity within the city. It focuses on two aspects of the AHPP:
1) The use of the Extremely Low Income inclusionary option to satisfy a development’s affordable housing obligation, and
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2) Development of 100% affordable housing projects owned and operated by nonprofit housing providers outside of the requirements of the City’s AHPP using financial assistance through the California Tax Credit Allocation Committee.
Extremely Low Income Option
Most of this report focuses on the production of units targeted to lower income households earning no more than 30 percent of the area median income (“AMI”), commonly referred to as “extremely low-income” (ELI). Based on evidence of local housing needs, this income category was added to the AHPP in 2013 as an option for a development to satisfy its onsite affordable housing obligation by restricting five percent of the total units built for ELI households for Tier 1 projects, and seven and a half percent for a Tier 2 housing project.
In the past ten years, nearly 160 units at the ELI income category have been approved, including several projects that predate the formal introduction of this income category into the AHPP. While the creation of units deed-restricted to the ELI level helps to realize SCAG’s Regional Housing Needs Allocation and the City’s own Quantified Objectives, there is a concern that the recent methodology for creating the units (i.e., through the existing AHPP “menu of options”) is counterproductive to meeting the overall Proposition R mandate for 30 percent of all housing to be affordable. This report contains data on the use of the 5 percent option since its adoption in 2013, as well as a preliminary evaluation of its impact on the City meeting its Proposition R targets.
The information presented in this report is intended to support the City Council’s direction to prepare amendments to the AHPP to temporarily remove the 5 percent option by providing background on the past half-decade of housing policy, as well as information about affordable housing production trends, including units in the ELI category. Should the Council decide to temporarily remove the 5 percent option, Attachment A presents the ordinance language to effect this change to SMMC Section
9.64.050.
California Tax Credit Allocation Committee Financial Assistance 3 of 24
Also included in this report is a brief discussion of a financial tool that supports 100% affordable housing development. The California Tax Credit Allocation Committee (TCAC) provides financial assistance to housing developers and presents additional affordable housing opportunities distinct from the City’s AHPP through TCAC’s own regulations that include affordability levels, maximum rents, minimum unit sizes and other amenities. TCAC-funded projects that are also funded by the City are currently not required to use the City’s housing waiting lists.
An ordinance to modify SMMC Section 9.64.030 is included in Attachment A that would allow affordable housing developments by nonprofit TCAC recipients that are not Cityfunded to be exempt from AHPP requirements provided they select households from the City-developed list of income-qualified households and do not compete with Cityfunded projects also seeking TCAC financial assistance. 4 of 24
PART 1: EXTREMELY LOW INCOME OPTION
Background
Santa Monica has an extensive history that prioritizes affordable housing to preserve and promote a diverse and sustainable community. Residents have affirmed this priority in local voter-approved initiatives, such as Proposition R (1990), requiring that 30 percent of all new multifamily housing be affordable, and Proposition I (1998), authorizing the City to participate financially in creating affordable housing equal to onehalf of one percent of the housing stock annually (approximately 250 residences). City Council has further facilitated affordable housing through adoption of land use incentives and administrative funding guidelines to streamline affordable housing production and preservation, based on a policy foundation supporting affordable housing in the General Plan Land Use and Housing Elements. The Land Use Element also identifies affordable housing as a primary community benefit in new development.
The Affordable Housing Production Program (AHPP) requires developers of multi-family housing to contribute to affordable housing production through a flexible framework to help the City meet its affordable housing goals. Finally, City Council has approved a local preference policy that prioritizes affordable housing opportunities for Santa Monica residents and workers.
Changes to the Zoning Ordinance and AHPP (2013)
In recent years, California’s ongoing housing crisis has underlined the need for local jurisdictions to revisit their regulatory frameworks governing housing production. In Santa Monica, the discussion has been particularly dynamic, as the community and decision-makers have wrestled with a variety of local, regional and State-level factors that contribute to production, affordability, and equity. From time to time, changes to the rules and regulations related to housing are effected in response to these factors.
With the dissolution of the Redevelopment Agency in 2012, the City lost its primary funding source for affordable housing. In 2012-2013, Council led a host of public discussions on the ability for the City to continue to meet the needs of Santa Monica residents. Out of those discussions arose a focus on providing for those whose 5 of 24
household income levels were below the traditional very-low income threshold established by HUD.
On February 28, 2012 (Attachment G), Council held a study session to consider a variety of issues related to housing in Santa Monica. At the study session, staff presented data from the City’s affordable housing waiting list showing that the vast majority (95%) of Santa Monica residents and workers on the list were at extremely low- or very low-income levels.
On December 11, 2012 (Attachment H), Council directed staff to amend the AHPP to include opportunities for extremely low-income households to address the approximately 3,000 ELI households who lived or worked in Santa Monica at that time.
On February 26, 2013 (Attachment I), Council directed staff to consult with the Legal Aid Foundation of Los Angeles (LAFLA) and return with a draft ordinance amending the AHPP rent limit standards to achieve greater affordability. On June 25, 2013 (Attachment J), Council introduced for first reading Ordinance No. 2429 (CCS) to revise household income eligibility levels and rent limits for the AHPP, and to add an option for developers to provide affordable housing to households earning no more than 30 percent AMI to satisfy AHPP obligations.
The subsequent amendments to the AHPP approved by Council in 2013 revised the City’s household income eligibility levels to match income levels published annually by HUD and/or HCD, and added the 30 percent of AMI category referred to as “extremely low-income1” to the menu of options that satisfy a development’s inclusionary affordable housing requirement. This significant addition to the AHPP was designed to create a financial incentive to stimulate the development of such units. Henceforth, outside of the
1 30% Income Household means a household whose gross income does not exceed the 30% income limits applicable to the Los Angeles-Long Beach Primary Metropolitan Statistical Area, adjusted for household size, as published and periodically updated by Housing and Urban Development (HUD)
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areas governed by the Downtown Community Plan, applicants undertaking Tier 1 and Tier 2 projects currently may select from a menu of options to develop at least:
Option Tier 1 Tier 2 (Requires 50% more than Tier 1)
1 5% of the total units of the project for
30% income households at
affordable rent2; or
7.5% of the total units of the project
for 30% income households at
affordable rent;
2 10% of the total units of the project for
50% income households at affordable
rent; or
15% of the total units of the project
for 50% income households at
affordable rent; or
3 20% of the total units of the project for
80% income households at affordable
rent; or
30% of the total units of the project
for 80% income households at
affordable rent;
4 100% of the total units of a project for
moderate income households at
affordable rent.
Not Applicable
Proposition R Compliance (1994-Present)
The production of multifamily affordable housing in Santa Monica is regulated by the voter-approved Proposition R, which requires that:
Thirty percent of all multifamily housing completed in each fiscal year be affordable for and occupied by low- and moderate-income households; and At least one-half of the total affordable housing completed be affordable for and occupied by low-income households.
The most recently published Annual Report (FY 16/17) discussing the City’s compliance with Proposition R illustrates a downward trend in affordable housing production, citing just 13 percent of multifamily housing completed during that time is affordable to lowand moderate-income households. This is consistent with the low production numbers from the previous two fiscal years (FY 14/15, and FY 15/16) when 19 percent of new multifamily housing was affordable to low- and moderate-income households.
2 The 5% option was added to Chapter 9.64 in 2013 by Ordinance 2429 (CCS) 7 of 24
Cumulative Proposition R Achievements3
Affordable New Multifamily Residences Completed Annually FY 94/95 through FY 16/17
One of the main factors affecting the number and percentage of affordable residences being constructed is the loss of funding from the Redevelopment Agency. Historically, a
3 Annual Affordable Housing Report on Propositions R and I, April 2018 8 of 24
significant portion of the Proposition R affordable housing mandate has been fulfilled by nonprofit developers who use City-subsidized loans to create affordable housing. The largest funding source for such loans was the Redevelopment Agency. Since the demise of the Redevelopment Agency in 2012, Santa Monica voters approved measures GS and GSH in 2016, which provides approximately half of the amount of funding that was available through the former Redevelopment Agency. In addition, Council has directed that all repayment of loans from the former Redevelopment Agency to the City be dedicated to affordable housing.
Despite a failure to achieve Proposition R requirements annually over the past three fiscal years, the City continues to exceed the minimum Proposition R requirement cumulatively, adding up the developments that have been completed over the past 23 years.
Subsequent Shifts in Housing Policy (2017)
Since the most recent changes were made to the AHPP, local, regional and national economic factors have shifted once again, leading to a widely-recognized state-wide housing crisis and a renewed discussion on local housing production policy, both market-rate and affordable. The City has been proactive in its efforts to use adopted policy as a lever for incentivizing new housing production in targeted areas, such as Downtown, and for increasing the supply of affordable housing. These measures have been implemented at the same time that the City has witnessed a decrease in the overall amount of affordable housing produced on an annual basis, as previously mentioned.
Downtown Community Plan
The adoption of the Downtown Community Plan (DCP) in 2017 established a new methodology for housing production that includes permit streamlining, and floor area and height incentives for qualified housing projects. Downtown development is also subject to higher affordable housing requirements than citywide, and must provide a set percentage of units (on-site or off-site) that are deed-restricted to each income level identified in the AHPP.
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This approach differs from the Zoning Ordinance in three important ways:
1. The affordable housing methodology in the DCP removes developer selection of income categories at the Tier 2 level, and instead establishes a 20 percent base requirement for a project’s total affordable housing contribution based on the project’s height.
2. The DCP does not provide the developer a financial incentive to profit from a higher market-to-affordable ratio based on developer selection of income levels.
For example, a Tier 2 mixed-use housing project of 100 units that has selected the Zoning Ordinance’s ELI option will generate only 8 deed-restricted units, and 92 market-rate units. In the DCP, that same project would provide a minimum of 20 deed-restricted units, and 80 market-rate units.
3. The required affordable housing units produced in a project by the DCP must be distributed across the four income levels recognized by the AHPP based on the following percentages:
a. 20% Extremely Low-Income
b. 20% Very Low-Income
c. 30% Low-Income
d. 30% Moderate-Income
The increased affordability requirements in the DCP are expected to play a critical role in helping the City meet the requirements of Proposition R. Amending the AHPP to require a broader array of affordability levels could also assist in Proposition R compliance. A forthcoming Council Information Item on the impact of DCP housing policy on production will be issued in March 2019.
Suggested Changes to the AHPP (2018)
Based on the DCP’s new approach to creating equity among income levels, new conversations have sprung up to evaluate the existing Zoning Ordinance methodology in order to identify potential improvements that balance supply with demand, and aid in 10 of 24
reversing the downward trend in affordable housing production identified in the past several Proposition R compliance reports. These discussions have been fueled by the perception that the financial incentive to allow a development to deed-restrict a low number of units for extremely-low income households has perhaps been too successful, and has ultimately impacted the City’s ability to meet annual Proposition R targets. This, coupled with the loss of Redevelopment, has placed an even heavier burden on the City to make up the production of remaining affordable units using limited financial and regulatory resources.
In light of this concern, the Housing Commission discussed on November 15, 2018 modifying affordable housing requirements outside of the Downtown Community Plan area, and opined on the possibility of suspending the extremely low-income option until a full review of the AHPP could be conducted through an updated economic feasibility study. The feasibility study is a work effort currently in the scoping phase being led in partnership by the Planning and Community Development and Housing and Economic Development departments, which will provide analysis on the potential to modify the AHPP so that it addresses a broader range of needs, including supporting Prop. R and Regional Housing Needs Assessment compliance. The scope and timeframe for the upcoming feasibility study is discussed later in this report.
As an interim measure, Council directed staff on December 18, 2018 to prepare amendments to the Affordable Housing Production Plan disallowing the current option for developers to provide fewer extremely low-income units until the feasibility study can be completed.
Discussion
Santa Monica is a desirable place to live and work, making the demand for housing far greater than the existing supply. Based on significantly higher than average rent and home ownership values, as well as the housing policy described earlier in this report, the City continues to receive proposals to create new housing. Because of these conditions, the City has been fortunate to routinely meet the Regional Housing Needs Assessment (RHNA) housing production targets established by the Southern California 11 of 24
Association of Governments (SCAG) as well as the City’s own “Quantified Objectives” for housing production outlined in the adopted 2014-2021 Housing Element. The City’s mixed-use higher-density commercial districts provide a wide range of housing opportunities, and current pipeline projects indicate that the City will continue to attract new market-rate housing development that is capable of contributing to the creation of new affordable units at a variety of income levels.
Affordable Housing Production (2014-Present)
Since 2014, the cumulative amount of affordable residences completed (final building permits) has met the City’s minimum requirement of 30 percent. Multifamily developments completed between 2014 and 2018 produced 1,001 residences, of which 402 (40 percent) were affordable to low-and moderate-income households. Of those affordable units, 95 percent were affordable to low-income households. The City has met both Proposition R requirements that 30 percent of all multifamily housing be affordable to low- and moderate-income households and that at least one-half of the total affordable housing be affordable for and occupied by low-income households.
However, pipeline projects indicate that future production will fall short of this mark.
Multifamily developments currently in construction will produce just 13 percent affordable units (95 of 759 total), and multifamily developments with planning approval will produce just 10 percent affordable units (133 of 1,384 total). For projects in construction and with planning approval, over 90 percent of all affordable units will be affordable to low-income households.
Pending projects are those that have been submitted but have not received planning approval yet. Affordable residences represent 22 percent of all pending projects (366 of 1,651 total), which includes five large 100 percent affordable housing developments.
The following table summarizes this information.
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2014-2018 Affordable Housing Production Program Summary Development
Stage
Total Residences Affordable
Residences
Percent
Affordable
Completed 1,001 402 40%
In Construction 759 95 13%
Planning Approval 1,384 133 10%
Pending 1,651 366 22%
TOTAL: 4,795 996 21%
Developments Completed
Attachment B indicates that 46 developments totaling 1,001 residences were completed between 2014 and 2018. A total of 402 of these residences (40 percent) were affordable to low- and moderate-income households. These projects received planning approvals between 2000 and 2015 and include six 100 percent affordable housing developments.
Developments in Construction
Attachment C lists active building permits to illustrate the number of multifamily residences in construction as of January 2019. There are active building permits for 759 residences in 21 new multifamily developments. These developments will provide 95 residences affordable to low- and moderate-income households representing 13 percent of multifamily residences in construction. These active building permits received planning approvals between 2006 and 2018 and do not include any 100 percent affordable housing development.
Developments with Planning Approval (not in construction) Attachment D identifies 38 multifamily developments containing 1,384 residences that have received planning approval but have not been issued building permits yet. A total of 133 of these residences will be affordable to low- and moderate-income households, representing just 10 percent of all residences at the planning approval stage. These projects received planning approvals between 2008 and 2018 and two of these developments are 100 percent affordable housing developments.
Looking at just the 14 multifamily developments that received planning approval in 2018, 16 percent of the residences (98 of 604 units) were affordable to low- and 13 of 24
moderate-income households. Seven of these 14 developments provided only extremely low-income units (and market rate), representing eight to nine percent of the units in each development.
Multifamily Residences (Units) with Planning Approvals in 20184 Developments Submitted Since 2013 (Approved, In Construction, Completed) Considering all multifamily developments that were submitted and received planning approvals since the changes to the AHPP policy in 2013, which also includes completed projects and projects in construction, residences affordable to low- and moderateincome households make up 16 percent of all residences (199 of 1,283). More than one-third of all affordable units approved since 2013 have been in the extremely lowincome category (74 of 199). Excluding the three large 100 percent affordable housing developments developed by Community Corps of Santa Monica (CCSM), the remaining multifamily market developments include just 8 percent of residences that are affordable to low- and moderate-income households.
4 Source: Planning and Community Development Permit Tracking 14 of 24
Affordable Units in Approved Multifamily Developments Submitted Since 20135 Pending Developments
Attachment E shows the 27 pending multifamily developments containing 1,651 residences that have been submitted but have not yet received planning approvals. A total of 366 of these residences are proposed to be affordable to low- and moderateincome households, representing 22 percent of all proposed residences. Five of these developments are 100 percent affordable housing developments (three of which are offsite affordable units from market-rate developments), which represent 231 units, or 63 percent of all the proposed affordable residences.
Planning Commission Comments
The Planning Commission held a study session on this topic on February 20, 2019.
During that meeting, staff presented information described in this report and attachments, as well as a snapshot of the City’s progress in realizing the housing production targets established by the following:
SCAG Regional Housing Needs Allocation (2013-2021) (Attachment E)
5 Source: Planning and Community Development Permit Tracking 15 of 24
Housing Element Quantified Objectives (2014-2021) (Attachment E) City of Santa Monica Proposition R (1990)
As demonstrated by the housing production data, the City is on track to meet both the RHNA and Quantified Objective targets for ELI, VLI and Above Moderate; however, production has fallen short in the categories of Low Income and Moderate Income.
Approved and pending housing projects are not anticipated to contribute enough units in these income categories to realize the targets.
Similarly, preliminary data indicates that annual Proposition R compliance will be difficult to achieve during FY18/19, but some recovery is anticipated in future years based on the success of the City’s effort to support affordable housing production through its Housing Trust Fund program, which is successfully generating a range of affordable units through non-profit development 100% affordable housing projects.
Based on this information, as well as an appreciation of other housing-related work efforts scheduled for 2019, such as the AHPP Feasibility Study, the DCP Housing Report, Housing Incentives for the Boulevards and Bergamot, and solutions to Corporate or “Medium Term” Housing, the 6 person Planning Commission was evenly split over the issue of temporarily removing the 5 percent ELI option from the AHPP.
Commissioners in Support of Removing the 5 Percent ELI Option Those in favor of temporarily removing the 5 percent option cited data demonstrating that ELI needs have been met and already exceeded, and that more attention should be focused on the production of low- and moderate-income units during the time remaining in both the RHNA and Housing Element cycles.
Commissioners in Opposition to Removing the 5 Percent ELI Option Those in opposition to removing the 5 percent ELI option argued for the continued production of housing under the current regulatory framework, and viewed changes to the AHPP as premature pending a more comprehensive assessment of the entire affordable housing production program. This will commence in spring, pending Council 16 of 24
budget authorization. Some commissioners made a case for expediting the upcoming feasibility study, as well as the effort to bring forward information regarding possible incentives for the Boulevards and Bergamot.
Agreement on Pipeline Project Exemption
Despite the split vote on removal of the 5 percent ELI option, the Planning Commission unanimously passed a separate motion to recommend that pipeline projects be categorically exempt from any regulatory action taken by Council on this subject. The Planning Commission did not clarify what defines a “pipeline” project.
Housing Commission Comments
The Housing Commission held a public meeting on February 21, 2019 to discuss, among other items, use of the ELI option in development. Mirroring the recommendations of several Planning Commissioners, the Housing Commission majority voted to 1) temporarily remove the 5 percent option until a financial feasibility study can be completed to evaluate potential modifications to the AHPP; 2) defer final consideration of other amendments to the AHPP (regarding exempting nonprofitdeveloped affordable housing) until after the financial feasibility is completed and reviewed, and 3) to expedite the financial feasibility study.
Ordinance to Implement Proposed Temporary Elimination of ELI Option from AHPP
The proposed ordinance in Attachment A provides for a temporary elimination of the ELI option to allow the feasibility study to be completed and reviewed. The elimination would apply to projects with an application that has been determined complete on or after March 26, 2019. Those projects would not be allowed to select Extremely Low Income from the AHPP’s “menu of options”, but would otherwise be permitted to choose from any other income level currently available.
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Future Analysis and Efforts on Housing Production
Downtown Community Plan Housing Report Information Item (March 2019) Staff recently issued a monitoring report for the DCP that evaluates the influence of DCP housing policy and requirements on housing production. This review of data from the past one and a half years since DCP adoption provides information that may be informative to the related analytical efforts mentioned below, specifically regarding how the unique project requirements for affordable housing production Downtown are working, or are producing unintended consequences such as the emergence of six new Tier 1 SRO projects that avoid entirely the DCP’s affordability requirements. This report also provides an insight into the urban design implications of the affordable housing requirements Downtown, as well the fulfillment of desired community benefits that are associated with Tier 2 and Tier 3 projects.
Feasibility Study to Evaluate Citywide AHPP Program (Spring-Summer 2019) The upcoming financial feasibility study is intended to inform decision-makers with the results of empirical testing of prototypical private developments to establish the financially-feasible limitsof modified affordable housing requirements, in addition to testing a minimum density concept for R2 multi-family lots to help increase the City’s supply of affordable housing. More specifically, the feasibility study will evaluate whether affordable housing requirements associated with broader affordability levels, unit mixes, and percentage requirements can be supported financially by private developers of future Tier 2 developments outside of the Downtown area. A similar feasibility analysis was completed for the inclusionary requirements in the DCP. Staff estimates that this work will take between 6-8 months to complete and review with the Planning Commission, Housing Commission and City Council.
Housing Incentives: Boulevards and Bergamot Plan Area (Spring-Summer 2019) During the same timeframe as the AHPP Feasibility Study, staff will work to identify means to stimulate more housing production on the city’s Boulevards and in the Bergamot Plan area, where housing development has been relatively anemic over the past half decade. This process will consider a variety of tools including project streamlining, floor area and height incentives, and other features to direct multifamily 18 of 24
housing production away from the residential neighborhoods to areas identified by the Land Use and Circulation Element.
PART 2: CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE (TCAC)
FINANCING
Background
SMMC Section 9.64.030 defines the applicability of the AHPP to certain project types.
The ordinance currently provides that a multi-family rental housing project that will be developed by a nonprofit housing provider receiving financial assistance through one of the City’s housing trust fund programs and secured by a regulatory agreement with the City for a minimum period of 55 years shall be exempt from the City’s Affordable Housing Production Program (AHPP). This standard is intended to differentiate nonprofit affordable housing developments from inclusionary housing obligations resulting from market-rate developments. This standard is also intended to help ensure that City funds invested in affordable housing can be maximized, including leveraging non-city funds.
Nonprofit housing providers have identified an opportunity to increase the total amount of affordable housing that can be produced through the AHPP by partnering with market rate developers to leverage tax credits for offsite inclusionary housing. However, under the existing AHPP ordinance, only projects that will be developed with “financial assistance through one of the City’s housing trust fund programs” can be exempt from the AHPP requirements. Community Corporation of Santa Monica (“CCSM”), a nonprofit housing provider who has developed affordable housing throughout Santa Monica, has therefore proposed an amendment to the AHPP ordinance that would extend certain provisions of the AHPP exemption to 100% affordable housing projects owned and operated by nonprofit housing providers that finance the development of these projects with tax credits. The proposed exemption to the AHPP requirements would be subject to the following conditions:
(i) compliance with Section 9.64.110 of the AHPP (which would require the developer to select tenant applicants from the City developed waiting list); 19 of 24
(ii) compliance with the then-current California Tax Credit Allocation Committee Regulations (“TCAC Regulations”), including the minimum unit size requirements in Cal. Code Regs. tit. 4, § 10325(g)(1)(B); (iii) ensuring that the project’s affordability obligations will be secured by a regulatory agreement, memorandum of agreement, or recorded covenant in form approved by the City Attorney, for a minimum period of fifty-five years; and
(iv) ensuring that the project does not compete with a City-funded Tax Credit project in the same category and round of competition, as reasonably determined by the City Manager.
If approved, this exemption would allow these 100% affordable housing projects to comply with TCAC Regulations, instead of AHPP requirements, except that tenant applicants would be selected from the City-developed list. TCAC regulations apply different affordability levels, maximum rents, minimum unit sizes, and amenities from AHPP standards. For example, the TCAC maximum rent levels are higher than AHPP maximum rents, which enhances the underwriting of these projects for tax credit equity investors and commercial lenders, and facilitates layered financing for larger affordable housing projects than would otherwise be feasible in the absence of tax credit financing.
A comparison of TCAC and AHPP rents are set forth in the table, below:
AHPP vs TCAC Rent Limits (2018)
Unit Type Extremely Low Very Low Low Moderate
AHPP 0-Bdrm $364 $606 $728 $1,334
TCAC $509 $848 $1,018 n/a
AHPP 1-Bdrm $416 $693 $832 $1,525
TCAC $545 $909 $1,091 n/a
AHPP 2-Bdrm $468 $780 $936 $1,715
TCAC $654 $1,091 $1,309 n/a
AHPP 3-Bdrm $520 $866 $1,040 $1,906
TCAC $756 $1,260 $1,512 n/a
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AHPP vs TCAC Minimum Unit Sizes
AHPP in Blue
Unit Type
Minimum
Square
Footage
0-Bdrm 500
200
1-Bdrm 600
450
2-Bdrm 850
700
3-Bdrm 1,080
900
Discussion
Attachment A presents a clarified description of the applicability of the AHPP for certain project types. The attached ordinance accomplishes the following:
Adds to the current exemption for projects developed with financial assistance through one of the City’s housing trust fund programs from the AHPP requirements by further exempting multi-family rental housing projects developed by a nonprofit housing provider receiving financial assistance through the California Tax Credit Allocation Committee from the AHPP requirements so long as the project is a 100% Affordable Housing Project as defined by the Santa Monica Municipal Code.
Multi-family project applicants would be required to select households from the City-developed list of income-qualified households or equivalent priority list approved by the City.
Applicants would be required to comply with then-current California Tax Credit Allocation Committee Regulations, including the minimum unit size requirements. The project’s affordability obligations would be secured by a regulatory agreement, memorandum of agreement, or recorded covenant in form approved by the City Attorney, for a minimum period of fifty-five years. 22 of 24
Planning Commission Comments
This issue was first raised as part of the latest round of Zoning Ordinance updates. On February 20, the Planning Commission recommended that the City Council approve an amendment consistent with the language presented to the Commission, which did not require to use the City’s housing waiting list and did not prohibit the projects from competing with City-funded projects for financial assistance from TCAC.
Housing Commission Comments
The City’s Housing Commission, upon reviewing the proposed modification to this language, made the following recommendations:
1) Recommends against adopting the text amendment permanently until an economic analysis is completed to ensure that the off-site inclusionary requirements reflect the additional opportunity associated with tax-credit leveraging.
2) Supports adopting the text amendment on an interim basis to enable a currently proposed inclusionary / market-rate arrangement if the developer can demonstrate to Council that the proposed developments are beneficial in terms of the number of inclusionary apartments that will be created. 3) If the proposed text amendment is adopted, it should make explicit that prospective residents of tax-credit funded inclusionary housing will come from the City list, as they do for other inclusionary housing.
Next Steps on Financial Feasibility Study
Vendor Selection for AHPP Feasibility Study
Staff recommends HR&A Advisors, Inc. to provide financial feasibility analysis of potential affordable housing requirements and minimum density. This recommended award is 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 the AHPP, including the recent Downtown Community Plan, and therefore has the unique ability or capability to complete the study.
Completing a competitive procurement process is highly unlikely to produce cost- 23 of 24
competitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the AHPP.
Financial Impacts and Budget Actions
Staff seeks authority to award an agreement with HR&A Advisors, Inc. for financial feasibility analysis of potential affordable housing requirements and minimum density requirements. Staff will seek grant funding from the California Department of Housing and Community Development’s to fund the agreement in whole or in part. To ensure that the study can commence immediately, the Housing and Economic Development Department will advance the funds from an existing account.
Agreement
Request Amount FY 2019-19 Budget
Housing and Economic
Development Department
Account #
Total Agreement Amount
$150,000 01160001.552010 $150,000
Future funding is contingent on Council budget approval.
Prepared By: Peter James, Principal Planner
Approved Forwarded to Council
Attachments:
A. Ordinance to Temporarily Remove ELI Option
B. Developments Completed
C. Developments in Construction
D. Developments with Planning Approval
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E. Pending Developments
F. RHNA and Quantified Objectives Progress
G. February 28, 2012 Council Study Session on Housing (Web Link) H. December 11, 2012 Direction to Staff to Add ELI Option (Web Link) I. February 26, 2013 Direction to Staff to Amend Rent Limit Standards (Web Link) J. June 25, 2013 Ordinance Adopted to Include ELI Option (Web Link) K. Written Comments
L. Powerpoint presentation