City Council
Report
City Council Meeting: June 13, 2023
Agenda Item: 5.G
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Approval of Fourth Modification to Professional Services Agreement with HR&A Advisors Inc. for 6th Cycle (2021-2029) Housing Element Implementation
Recommended Action
Staff recommends that the City Council take the following actions:
1. Make a determination that the proposed modification of the HR&A Advisors Inc. contract for fiscal analysis is statutorily exempt from CEQA pursuant to Section 15262 (Feasibility and Planning Studies) of the CEQA Guidelines.
2. Authorize the City Manager to negotiate and execute a fourth modification to agreement #108300 (formerly #10830) in the amount of $40,000 and extend the term for one additional year, with HR&A Advisors Inc.(“HR&A”) to prepare fiscal analysis for implementation of the City’s certified 6th Cycle (2021-2029) Housing Element. This will result in a five-year amended agreement with a new total amount not to exceed $494,900, with future year funding contingent on Council budget approval.
Summary
On October 14, 2022, the State of California’s Housing and Community Development Department (HCD) certified the City’s 6th Cycle (2021-2029) Housing Element. The certified Housing Element represents the City’s commitment to implement the Housing Element programs. The City Council held two study sessions regarding the first phase of implementation programs for the Housing Element on February 14 and February 28, 2023. On March 21, 2023, City Council adopted amendments to the Land Use and Circulation Element (LUCE), Bergamot Area Plan (BAP), and Downtown Community Plan (DCP), and on April 11, 2023, City Council adopted amendments to the Zoning Ordinance (ZO) to implement these programs.
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The first phase of implementation programs for the 6
th Cycle Housing Element focused
on programs necessary to ensure compliance with the Housing Element that are most relevant to housing production or are required for consistency with State law that is already in effect. These programs included key rezoning programs, Program 1F and Program 1J, which are necessary to accommodate the City’s Regional Housing Needs Allocation (“RHNA”) of 8,895 units between 2021 and 2029 with a buffer to address net loss of units. Program 1F (rezoning of Downtown) and Program 1J (rezoning of mixeduse areas outside of Downtown) commits the City to amending the Zoning Ordinance, LUCE, Downtown Community Plan, and the Bergamot Area Plan (BAP) to increase FAR and height standards to levels that can support the Affordable Housing Production Program (AHPP) inclusionary requirement and feasible housing projects. Based on prior HR&A analysis, the FARs and heights in the certified 6
th Cycled Housing Element could
support an on-site inclusionary requirement of 15% (i.e., housing projects could be feasible with 15% on-site affordable housing units).
On March 21, 2023, Council adopted amendments to the LUCE, Downtown Community Plan, and the Bergamot Area Plan (BAP), and on April 11, 2023, the City Council adopted amendments to the Zoning Ordinance, to increase heights and FARs for housing projects and to establish an inclusionary affordable housing requirement of 15%. Additionally, Council gave direction to Staff to further review and analyze options to increase affordable housing in the City, including but not limited to, further modification of the AHPP 15% inclusionary requirement, particularly an increase over 15% in the Downtown Community Plan area. A modification to the agreement with HR&A Advisors Inc.(“HR&A”) for a total $40,000 is required to conduct additional feasibility analyses pursuant to Council direction.
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 3 of 7
planning period of 2021-2029, Santa Monica’s RHNA 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 necessary to support housing projects. 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.
A third modification to HR&A’s contract in the amount of $36,000 was authorized by Council in July 2022 to prepare a Ballot Measure Impact Report to model Measure GS and the potential funds that the measure might generate.
Discussion
Rezoning efforts for the adopted 6th Cycle Housing Element include establishing development standards that must be both feasible and sufficient for the City to support housing projects and accommodate the RHNA as required by HCD. Housing Element Program 1F (rezoning of Downtown) and Program 1J (rezoning of mixed-use areas outside of Downtown) commits the City to modifying the floor area ratios (FARs) and heights in the City to ensure they are set at levels that can support the minimum AHPP requirements and are feasible for housing projects. The City’s assumptions of feasibility in the adopted 6th Cycle Housing Element are based on the results of a feasibility analysis prepared by HR&A dated June 9, 2021 and updated in February 2022. As established in Programs 1F and 1J of the Housing Element, the feasible FARs for 4 of 7
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.
The FAR and height standards, as established in the Housing Element and presented to Council in February and March 2023, are based on the results of a feasibility analysis prepared by HR&A dated June 9, 2021 and updated in February 2022. The HR&A analysis accounted for affordability mix, reduced parking requirements, flexibility to allow ground floor residential, and replacement units that may be required by State Law (SB 330). As indicated in the HR&A analysis, the FARs and heights in the certified 6th Cycled Housing Element could support an on-site inclusionary requirement of 15% (i.e., housing projects could be feasible with 15% on-site affordable housing units). On March 21, 2023, Council adopted amendments to the LUCE, Downtown Community Plan, and the Bergamot Area Plan (BAP), and on April 11, 2023, City Council adopted amendments to the Zoning Ordinance, to increase heights and FARs for housing projects and to establish an inclusionary affordable housing requirement of 15%.
Additionally, Council gave direction to Staff to further review and analyze options to increase affordable housing in the City, including but not limited to, further modification of the AHPP 15% inclusionary requirement, particularly an increase over 15% in the Downtown Community Plan area. A modification to the agreement of $40,000 is required to conduct additional analyses pursuant to Council direction.
A fourth modification to the agreement would expand HR&A’s scope of work to conduct updated analysis of the Housing Element programs. HR&A will provide supplemental research and/or analysis, including financial feasibility analysis, that pertains to proposed or adopted City policies, regulations, or projects. This may include, for example analysis on aspects of the City’s AHPP, General Plan and Zoning Ordinance changes, changes in local real estate market conditions, changes in other regulatory standards, impact fees, or project approval processes. Furthermore, this fourth modification to the agreement would extend the term of the contract to accommodate completion of this additional scope of work.
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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 continued implementation of 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.
Environmental Review
The proposed modification to HR&A’s contract is statutorily exempt from CEQA pursuant to Section 15262 (Feasibility and Planning Studies) of the CEQA Guidelines, which exempts feasibility and planning studies for possible future actions which the agency, board, or commission has not approved, adopted, or funded. HR&A’s updated feasibility analysis would provide information on the level of supportable inclusionary housing and therefore, is exempt pursuant to Section 15262.
Past Council Actions
Meeting Date Description
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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 10/12/2021 Council adopted the 2021-2029 6th Cycle Housing Element 06/14/2022 Council approved a second modification with HR&A in the amount of $89,900 and extension of the contract for one additional year to provide additional financial analyses in support of the City’s Housing Element
07/12/2022 Council approved a third modification in the amount of $36,000 to conduct financial modeling for the Affordable Housing Tax Ballot Measure
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of the agreement with HR&A Advisors Inc for preparation of fiscal analysis for implementation of the City’s certified 6th Cycle (2021-2029) Housing Element. Funds are including the FY 2023-25 Proposed Biennial Budget.
Contract Modification Request Amount
Agreement # Current
Authorized
Amount
FY 2023-24
Request
Amount
Account # Total Revised
Contract Amount
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10830/108300 $268,900 20700002.556420 $268,900
10830/108300 $150,000 01700001.552010 $150,000
10830/108300 $36,000 01300001.552010 $36,000
10830/108300 $40,000 01700002.552010 $40,000
TOTAL $454,900 $40,000 $494,900
Future year funding is contingent on Council budget approval.
Prepared By: Rachel Kwok, Environmental Planner
Approved Forwarded to Council
Attachments:
A. HR&A Original Agreement
B. HR&A Agreement First Modification
C. HR&A Agreement Second Modification
D. HR&A Agreement Third Modification
E. HR&A Oaks Initiative Form 2023