City Council
Report
City Council Meeting: July 25, 2023
Agenda Item: 10.C
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Introduction and First Reading of an Ordinance Amending the Text of the Zoning Ordinance to Provide Incentives for Certain Housing Projects That Filed an Application Prior to Implementation of the City’s 6th Cycle (2021- 2029) Housing Element
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding that no subsequent environmental review is required pursuant to California Environmental Quality Act (CEQA) Guidelines Section15162 based on a determination that the adoption of development incentives as set forth in the proposed ordinance amending the Zoning Ordinance was analyzed as part of the 2021-2029 6th Cycle Housing Element Environmental Impact Report (EIR) [SCH No. 2020100575] that was certified by the City Council on October 12, 2021 with an Addendum to the EIR approved by the City Council on October 11, 2022.
2. Introduce for first reading an Ordinance amending the text of the Zoning Ordinance to provide incentives for certain housing projects that filed an application prior to implementation of the City’s 6th Cycle (2021-2029) Housing Element.
Executive Summary
This report provides a summary of a proposed Zoning Ordinance amendment that would establish certain housing development incentives for applicants that have asserted eligibility for processing under the “builder’s remedy” provision of the Housing Accountability Act (“HAA”), California Government Code section 65589.5(d). These housing project applications were filed prior to the State of California’s Housing and Community Development Department’s (“HCD”) certification of the City’s 6th Cycle (2021-2029) Housing Element on October 14, 2022.
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The City Council is being asked to consider a proposed Ordinance amending Santa Monica Municipal Code (“SMMC”) Chapter 9.31 for the purpose of incentivizing the production of housing on certain parcels subject to applications for housing development projects that have asserted eligibility for processing under the “Builder’s Remedy” provision of the Housing Accountability Act, California Government Code section 65589.5(d), that were filed between September 30, 2022 and October 13, 2022, prior to certification of the 6th Cycle (2021-2029) Housing Element.
As discussed in the Background section of this report, on May 9, 2023, the Santa Monica City Council approved a Settlement Agreement with WS Communities, LLC and its affiliates (“WS” or “owners”), the owners of 13 Builder’s Remedy housing projects development sites with pending applications. The Settlement Agreement addresses the disposition of these Builder’s Remedy applications and also provides an option, but does not require, the City Council to adopt a permanent ordinance to allow use of the ministerial development process already authorized in the Housing Element implementing ordinance adopted on April 11, 2023. If adopted, these incentives would further incentivize voluntary use of the ministerial development process authorized for housing projects in the April 11, 2023 Zoning Ordinance amendments as an alternative to the submitted Builder’s Remedy projects that significantly exceed codified development standards, including building height and floor area ratio (“FAR”).
Background
The City’s 6th Cycle (2021-2029) Housing Element was certified by the California Department of Housing and Community Development (“HCD”) on October 14, 2022.
Prior to that certification, between September 30, and October 13, 2022, the City received 15 preliminary applications for housing development projects pursuant to Government Code Section 65941.1. The applicants for the 15 housing development projects assert that the projects are eligible for processing under the Builder’s Remedy provision of the Housing Accountability Act, California Government Code section 65589.5(d), (the “Builder’s Remedy applications”).
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The Builder’s Remedy provision prohibits a local agency from disapproving a housing development project, that provides at least 20 percent of total units for very low, low-, or moderate-income households, or condition approval in a manner that renders the housing development project infeasible for development for the use of very low, low-, or moderate-income households unless the local agency is able to make certain specific findings, including, but not limited to, the housing development project is inconsistent with both the jurisdiction's zoning ordinance and general plan land use designation as specified in any element of the general plan as it existed on the date the application was deemed complete, and the jurisdiction has adopted a housing element that is in substantial compliance with State Housing Element law.
The Builder’s Remedy applications propose housing development projects that are inconsistent with the City’s Land Use and Circulation Element (“LUCE”) and Zoning Ordinance, in part, because the housing development projects exceed height and floor area ratio (“FAR”) maximums.
On April 11, 2023, the City Council adopted Ordinance Number 2742 (CCS), implementing the certified 6th Cycle (2021-2029) Housing Element (“Ordinance 2742”), in conjunction with the Housing Element Environmental Impact Report (EIR) [SCH No. 2020100575] that was certified by Council on October 12, 2021, with an Addendum to the EIR approved on October 11, 2022. The implementation incentivizes housing production in order to meet the City’s Regional Housing Needs Assessment and Affirmatively Furthering Fair Housing obligations mandated by State law through, among other things, providing for increased heights and FARs in the City’s nonresidential districts, and streamlined ministerial approval processes for housing projects that are consistent with the City’s objective standards.
On May 9, 2023, the Santa Monica City Council approved a Settlement Agreement with WS, the owners of the following properties:
• 1433-1437 6th Street,
• 601 Colorado Avenue,
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• 1518-1524 7th Street,
• 1441-1443 Lincoln Boulevard,
• 3000-3030 Nebraska Avenue,
• 2901 Santa Monica Boulevard,
• 1425 5th Street,
• 1557 7th Street,
• 1238 7th Street,1925 Broadway,
• 1238-1242 10th Street,
• 1007 Lincoln Boulevard, and
• 1038 10th Street.
The Settlement Agreement addresses the status of 13 of the pending Builder’s Remedy applications filed by WS. The City and owners of these properties disagree on the applicability of the Builder’s Remedy statute. Consequently, the parties elected to settle various disputes involving the Builder’s Remedy projects and unrelated litigation.
Specifically, the parties agreed to settle pending litigation against each other pertaining to the City’s leasing ordinance (requiring leasing periods of no less than one year) and alleged violations of consumer and tenant protection laws by the City against certain WS affiliates. The Settlement Agreement provides financial benefits for three recently displaced tenants of 1242 10th Street and guarantees them the right to return. The Settlement Agreement would also authorize the transfer of 20 deed-restricted affordable units from 1560 Lincoln Boulevard to 1038 10th Street.
The Settlement Agreement also includes a completely optional component that the City is under no obligation to pursue and that provides reciprocal benefits to the parties independent of the other provisions of the Settlement Agreement. Under these optional provisions, the City may adopt an ordinance that contemplates WS’s use of the ministerial development process already authorized in Ordinance 2742. If adopted, these incentives would further facilitate the owners’ voluntary use of the ministerial 5 of 12
development process previously authorized in Ordinance 2742, rather than continue to propose development under the Builder’s Remedy statute.
On June 19, 2023, the Planning Commission adopted Resolution No. 23-011 (PCS) (Attachment “B”) recommending to the City Council that the Council amend the text of the Zoning Ordinance to provide incentives for certain housing projects that filed an application prior to implementation of the City’s 6th Cycle (2021-2029) Housing Element.
Discussion
As presented in the Background section of this report, the Settlement Agreement approved between the City and WS addresses the disposition of 13 of the Builder’s Remedy projects submitted by WS. The Settlement Agreement specifies that processing of these 13 Builder’s Remedy applications have been temporarily suspended; confirms the applicability of the new development standards and process streamlining for housing projects approved on April 11, 2023 through Ordinance 2742 to implement the certified Housing Element; and establishes the option for the City to adopt a permanent ordinance to create additional incentives for applicants to propose new housing development projects on these sites that would be consistent with the City’s LUCE and Zoning Ordinance and therefore subject to ministerial/administrative review.
The Proposed ordinance (Attachment “A”) provides the redline amendments to the Zoning Ordinance that are contemplated by the Settlement Agreement. If adopted by the City Council, the owner of each development site may, but is in no way obligated to, utilize these provisions, which would provide the following local incentives:
Affordable Housing Units
Affordable housing obligations for projects proposed under the Zoning Ordinance amendments (“Ordinance Projects”) may be provided off-site at any commercially or residential zoned parcel in the City outside of the Pico Neighborhood Area as identified 6 of 12
SMMC Figure 9.40.020.A (the “Off-site Affordable Option”). The Off-site Affordable Option may not be utilized on properties improved with residential units.
In exercising the Off-site Affordable Option, the Ordinance Project would be required to provide 15% of the total number of base density (i.e., pre density bonus) units as off-site affordable housing units, as opposed to the 20% off-site affordable requirement, which was recently adopted consistent with the certified Housing Element.
State Density Bonus Benefits.
Under the State Density Bonus Law, the required affordable units must be provided onsite as part of the development project to be eligible for a density bonus and related benefits. However, the Off-Site Affordable Option would allow the same State Density Bonus Law benefits (i.e., up to a 50% market rate density bonus, three permitted incentives, and additional waivers of development standards) as if the affordable units were to be provided on-site.
Timing for Completion
Under the Off-Site Affordable Option, the off-site affordable units would need to receive a certificate of occupancy prior to issuance of a certificate of occupancy for the market rate units. However, nothing would prevent the market rate units from obtaining a building permit and commencing construction concurrent with or prior to the corresponding off-site affordable units.
Parking Benefit
Any Ordinance Project located within the Downtown Community Plan area would also be allowed a maximum of one parking space per unit under the Ordinance, as opposed to the current maximum requirement of one-half space per unit.
Termination
The provisions for Affordable Housing Units, State Density Bonus Benefits, and Timing of Completion would terminate and upon issuance of Administrative Approval applications for a total of 965 “additional units”. For purposes of this requirement, 7 of 12
“additional units” means the total amount of units provided by one or more eligible Ordinance Projects, including market rate, affordable, on-site and off-site units, that exceed the collective unit capacity allocated to the properties associated with the Ordinance Projects under the Suitable Sites Inventory for the City’s 6th Cycle (2021- 2029) Housing Element.
This provision does not impose any limit on the number of units of the Ordinance Projects (either individually or collectively) that do not utilize the off-site Affordable Housing benefits.
In addition, the Parking Benefit will continue to apply to any Ordinance Projects located within the Downtown Community Plan area in the event that the criteria for Termination are met.
Conclusion
As demonstrated above, the primary benefit of the proposed Zoning Ordinance is the ability to locate affordable units off-site and still obtain the benefits under the State Density Bonus Law, which would otherwise require all affordable units to be located onsite. However, practical considerations, such as control of other appropriate sites, could effectively prevent or discourage project site owners from utilizing this incentive.
Additionally, whether or not the Ordinance is utilized, projects proposed at Sites would be subject to the City’s Administrative Approval processing, which is already codified as Downtown Community Plan Section 9.10.050(B) and Municipal Code Chapter 9.39, and expedited processing timelines provided under the Settlement Agreement independent of the Ordinance.
Zoning Text Amendment Findings
1. The amendments to the text of the Zoning Ordinance are consistent with the General Plan and any applicable Specific Plans in that the amendments incentivize the production of housing projects that are consistent with the General Plan and any applicable Specific Plan on parcels that are subject to 8 of 12
pending applications for housing development projects that have asserted eligibility for processing under the “Builder’s Remedy” provision of the Housing Accountability Act (California Government Code section 65589.5(d)), that were filed prior to certification of the City’s 6th Cycle (2021-2029) Housing Element.
These Builder’s Remedy applications do not comply with General Plan or applicable Specific Plan standards for Floor Area Ratio or building height. The new projects that may be submitted in accordance with the text amendments would comply with General Plan and applicable Specific Plan development standards for Floor Area Ratio and building height and provide new deedrestricted affordable and market-rate housing units in Santa Monica.
2. The amendments to the text of the Zoning Ordinance are consistent with the purpose of the Zoning Ordinance to promote the growth of the City in an orderly manner and to promote and protect the public health, safety, and general welfare in that the amendments will incentivize the production of General Plan, Specific Plan, and Zoning Ordinance compliant housing on parcels that are subject to pending applications for housing development projects that have asserted eligibility for processing under the “Builder’s Remedy” provision of the Housing Accountability Act (California Government Code section 65589.5(d)), that were filed prior to certification of the City’s 6th Cycle (2021-2029) Housing Element.
These Builder’s Remedy applications do not comply with General Plan or Zoning Ordinance standards for Floor Area Ratio or building height. The new projects that may be submitted in accordance with the text amendments would comply with General Plan, Specific Plan, and Zoning Ordinance development standards for Floor Area Ratio and building height and therefore promote the orderly growth of the City in a manner that protects public health, safety and general welfare in comparison to projects that exceed General Plan, Specific Plan, and Zoning Ordinance development parameters.
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Effective Date of Action
If adopted, the proposed Zoning Ordinance amendment would take effect 30 days after second reading of the ordinance which is anticipated to be scheduled on July 25, 2023.
Environmental Analysis
An analysis of the proposed Zoning Ordinance Amendments was prepared pursuant to State California Environmental Quality Act (CEQA) Guidelines. Based on this analysis, the 6th Cycle Housing Element Final Environmental Impact Report (SCH No. 20212269242021), certified on October 12, 2021, and the Addendum to the Final EIR, adopted on October 11, 2022, accounts for and analyzes the potential environmental effects associated with the proposed Zoning Ordinance Amendments and Ordinance Projects. Therefore, the proposed Zoning Ordinance Amendments do not trigger any of the conditions described in CEQA Guidelines Section 15162 that would require the preparation of a supplemental EIR or negative declaration pursuant to CEQA Guidelines Section 15168(c).
The following provides the summary of this analysis:
The Housing Element EIR analyzed a total of 11,025 housing units planned in the City during the 6th Cycle period of 2021-2029. Subsequent to certification of the Housing Element EIR, the City revised the Housing Element and prepared an addendum to the Housing Element EIR (“Housing Element Addendum”) that analyzed the total planned number of units in the City from 11,025 to 13,600 housing units.
The Suitable Site Inventory (“SSI”) contained in the certified Housing Element is the City’s roadmap to achieving the commitment of 13,600 units and identifies specific sites for housing along with their potential housing capacity. Although the certified Housing Element calls for, and the SSI accommodates, 13,600 units, the Housing Element Addendum “conservatively considers maximum theoretical buildout with an additional 10-percent increase, for a total of 14,565 dwelling units.” Therefore, the Housing 10 of 12
Element Addendum provides a 965-unit buffer (“Buffer”) to cover and analyze potential environmental effects for units proposed beyond those accounted for in the certified Housing Element SSI.
The proposed Zoning Ordinance Amendments will restrict the density of the projects proposed under the proposed Ordinance (“Ordinance Projects”) (including the related offsite affordable receiver sites) to no more than the unit capacity assumed in the SSI at the site (the “SSI Credit”) plus any additional units beyond the SSI Credit so long as the additional units collectively proposed for Ordinance Projects do not exceed the buffer of 965 units. Since the proposed provisions for Affordable Housing Units, State Density Bonus Benefits, and Timing of Completion for Ordinance Projects would terminate and upon issuance of Administrative Approval applications for a total of 965 additional units, the potential environmental impacts resulting from amendments to the Zoning Ordinance have been adequately analyzed in the Housing Element EIR and Addendum and do not trigger any of the conditions described in CEQA Guidelines Section 15162 that would require the preparation of a supplemental EIR or negative declaration pursuant to CEQA Guidelines Section 15168(c).
Past Council Actions
Meeting Date Description
October 11, 2022 Adoption of Resolution Amending the 6th Cycle (2021-2029) Housing Element to
the City’s General Plan and Approval of
Addendum to the Final Environmental
Impact Report for the
6th Cycle (2021-2029) Housing
Element
February 22 and February 28, 2023 Study Session on Implementation of 6th Cycle (2021-2029) Housing Element
Programs
March 21, 2023 and April 11, 2023 Adoption of a finding that various amendments necessary to implement the
City’s Certified 6th Cycle (2021-2029)
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Housing Element were analyzed as part
of the 2021-2029 6th Cycle Housing
Element Environmental Impact Report
(EIR) and Addendum, and no further
review pursuant to the California
Environmental Quality Act (CEQA) is
required
First and Second Reading, as required:
Adoption of ordinances for amendments
to the LUCE, DCP, BAP, and Zoning
Ordinance, LUCE designation map, and
Zoning Districting Map, LUCE
designation map, and Zoning Districting
Map implementing Certified 6th Cycle
(2021-2029) Housing Element programs
May 9, 2023 City Council approved a Settlement
Agreement with WS, the owners of the
following properties: 1433-1437 6th
Street, 601 Colorado Avenue, 1518-1524
7th Street, 1441-1443 Lincoln Boulevard,
3000-3030 Nebraska Avenue, 2901
Santa Monica Boulevard, 1425 5th
Street, 1557 7th Street, 1238 7th
Street,1925 Broadway, 1238-1242 10th
Street, 1007 Lincoln Boulevard, and
1038 10th Street
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Staff will return to Council if specific budget actions are required in the future.
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Prepared By: Roxanne Tanemori, Principal Planner
Approved Forwarded to Council
Attachments:
A. Attachment A CDD-Ord-Incentives for Certain Housing Projects 072523 B. Attachment B PC Resolution 23-011.docx
C. Written Comments
D. PowerPoint Presentation