HomeMy WebLinkAboutStaff Report 5.C 11/02/2015DATE: November 2, 2015
Agenda Item #5.0
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Scott Duiven, Senior Planner,?`
SUBJECT: Resolution Amending the Inclusionary Housing Program in the City of
Petaluma's General Plan 2025, 2015 -2023 Housing Element as Adopted by
Resolution No. 2014 -190 N.C.S.
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution amending the
Inclusionary Housing Program in the City of Petaluma's General Plan 2025, 2015 -2023 Housing
Element as Adopted by Resolution No. 2014 -190 N.C.S.
BACKGROUND
Requirement for Affordable Housing
The State Legislature has found that the "availability of housing is of vital statewide
importance."' It also has found that cities "have a responsibility to use the powers vested in
them to facilitate the improvement and development of housing to make adequate provision for
the housing needs of all economic segments.i2 Accordingly, the state has legislated both
requirements and incentives to facilitate and expedite the construction of affordable housing,
including but not limited to, density bonus law, and restrictions on disapproving housing
proj ects.3
In addition, the Legislature, through the adoption of the Housing Element law (Gov. Code, §
65580, et seq.), requires local governments to adequately plan to meet their existing and
projected housing needs, including their share of the Regional Housing Need Allocation
(RHNA). The California State Department of Housing and Community Development (HCD) is
required to allocate each region's share of the statewide housing need to regional Councils of
Governments. In Petaluma's case, that is the Association of Bay Area Governments (ABAG).
ABAG has assigned the following RHNA to the City:
1 Gov. Code, § 65580(a).
2 Gov. Code, § 65580(d).
3 Gov. Code, § 65582.1 [listing all requirements and incentives].
1
Regional Housing Need Allocation
Association of Bay Area Governments
The 2014 estimated cost per unit of building affordable units is approximately $325,000. The
following table shows the cost to accommodate Petaluma's "fair share" using that estimated cost.
Very Low
Income
Low Income
Moderate
Income
Above
Moderate
Total
$64.6 Million
$33.4 Million
$39.2 Million
N/A
$137.2 Million
The RIINA process requires local governments to be accountable for ensuring that projected
housing needs can be accommodated. The process maintains local control over where and what
type of development occurs in local communities while providing for the private sector to meet
market demand.
Petaluma's Inclusionary Housing Program
The City's Housing Element (Chapter I1 of the General Plan) provides for how the City
proposes to meet its fair share of housing. Per Government Code section 65588, the City recently
reviewed and updated its Housing Element in 2014. The Planning Commission held a public
hearing to provide comments and receive public testimony on the Draft 2015 -2023 Housing
Element at its meeting on October 28, 2014. Comments at the meeting were received from
Petaluma Ecumenical Properties (PEP Housing) relating to the City's inclusionary housing
policy (Policy 4.2, Program 4.3). No other public comments were received. After receiving
public comments and conducting its own discussion of the documents, the Planning Commission
unanimously adopted a resolution recommending to the City Council approval of the 2015 -2023
Housing Element.
Of relevance to the issue presented in this report, the Draft Housing Element recommended by
the City's Planning Commission to the City Council included the following wording for Policy
4.2, Program 4.3, which requires both for -sale and rental projects to include 15% of the units for
affordable housing or to pay an In Lieu Fee.
Policy 4.2 Assign a share of the responsibility for providing affordable housing to the
developers of market -rate housing and non - residential projects.
2
Program:
4.3 Continue to require residential projects of five or more units to contribute to the
provision of below - market rate housing in one of the following ways:
a. Dedicate 15% of the units on -site or a portion of the project site or property to the
City or a non - profit organization for use as affordable housing.
b. Within a half -mile radius of the planned SMART stations, developers are encouraged
to provide at least 15 percent of the units in a rental housing project at rents
affordable to very low -and low- income households and 15 percent of the units in a
for -sale project at prices affordable to low -and moderate - income households for a
minimum period of 30 years.
c. The developer can make an in -lieu payment to the City's Housing Fund.
d. Use alternative methods to meet the intent of the inclusionary requirement, subject to
approval by the City Council.
Similar input from PEP was presented to the City Council at its December 1, 2014 public hearing
on the Housing Element. At that time, in response to PEP's input the Council determined that for
residential projects in excess of thirty units located within a half -mile of a planned SMART
station, developers would be required to provide the affordable housing as part of their project,
and payment of an In Lieu Fee would not be an option for projects meeting that criteria. Policy
4.2, Program 4.3 was revised and adopted to read as follows:
Policy 4.2 Assign a share of the responsibility for providing affordable housing to the
developers of market -rate housing and non - residential projects.
Program:
4.3 Continue to require residential projects of five or more units to contribute to the
provision of below - market rate housing in one of the following ways:
a. Dedicate 15% of the units on -site or a portion of the project site or property to
the City or a non - profit organization for use as affordable housing.
b. Within a half -mile radius of the planned SMART stations, developers with a
project over 30 units shall provide at least 15 percent of the units in a rental
housing project at rents affordable to very low -and low- income households
and 15 percent of the units in a for -sale project at prices affordable to low -and
moderate- income households for a minimum period of 30 years.
c. Within a half -mile radius of the planned SMART stations, developers with
projects of 30 or less units are encouraged to provide at least 15 percent of the
units in a rental housing project at rents affordable to very low and low -
income households and 15 percent of the units in a for -sale project at prices
affordable to low and moderate income households for a period of at least 30
years.
d. The developer can make an in -lieu payment to the City's Housing Fund.
e. Use alternative methods to meet the intent of the inclusionary requirement,
subject to approval by the City Council.
Both the Draft Housing Element and the Adopted Housing Element were reviewed by HCD and
in each instance were determined to be in compliance with the statutory requirements of State
housing element law (See attachments 2 and 3).
Legal Status of Inclusionary Housing Requirements
In recent years, cities' inclusionary housing requirements have been challenged, leaving cities'
authority to impose such requirements in flux. However, the California Supreme Court recently
affirmed inclusionary housing requirements as a legitimate exercise of cities' power to regulate
land use within their boundaries. California Building Industry Association v. City of San Jose
(2015) 61 CalAth 4354 upheld San Jose's inclusionary housing ordinance, which requires 15% of
all for -sale residential developments of 20 or more units to be offered at an affordable housing
price. Alternatively, developers can satisfy San Jose's inclusionary requirement by paying an in
lieu fee, dedicating property, or building or rehabilitating properties off -site. The Building
Industry Association has applied for U.S. Supreme Court review. Unless the Supreme Court
grants review and overturns the case, cities may rely on California Building Industry Association
as authority for imposing on for -sale residential developments requirements for providing
affordable for -sale units or paying fees in lieu of providing affordable for -sale units.
The law governing affordability requirements for rental developments is more complicated.
With respect to rental residential developments, cities may only require a developer to offer a
residential unit at a particular rent if the requirement complies with the Costa Hawkins Act. The
Costa Hawkins Act provides that landlords may set the initial minimum rent on a unit, unless an
exception applies (Civil Code, § 1954.53). The courts have interpreted the Costa Hawkins act to
mean that cities cannot require residential rental projects to provide affordable rental units unless
an exception in the Costa Hawkins Act applies, such as where a city provides direct financial
assistance to a project, or other project assistance such as a density bonus.5
DISCUSSION
The majority of development projects will have no issues complying with the 2015 -2023
Housing Element Policy 4.2, Program 4.3. However, for development projects consisting of
more than 30 units located within a half -mile radius of the planned SMART stations, complying
with the program may be problematic. There are two primary issues associated with the adopted
inclusionary housing program language. First, is the issue of legal conformity. For residential
rental projects within a half -mile radius of the planned SMART stations, the current Policy 4.2
does not provide the flexibility necessary to ensure compliance with the state housing law
summarized above while also ensuring that all residential housing projects, including rental
projects, contribute appropriately to the City's fair share housing needs.
Second is the issue of program flexibility. The inability under the current policy to permit
residential projects of more than 30 units located within a half -mile radius of a planned SMART
station to pay an in -lieu fee is impacting the feasibility of such residential projects. Since the
adoption of the 2009 Housing Element, staff has heard repeatedly from property owners and
4 Petition for Certiorari docketed with the U.S. Supreme Court on September 16, 2015.
5 Palmer /Sixth Street Properties, L.P. v. City of Los Angeles (Palmer) (2009) 175 Cal.App.4tn
1396.
4
developers of such properties that this policy is a constraint on moving housing projects forward,
particularly smaller projects. Since adoption of the 2015 -2023 Housing Element, and despite the
improving economy, this remains an impediment to larger projects within the half -mile radius.
Conclusion
Based on the foregoing, an amendment to Program 4.3 is presented below to help ensure
compliance with the state housing law summarized above while also ensuring that all residential
housing projects contribute appropriately to the City's fair share housing needs, but without
discouraging residential projects in the vicinity of the planned SMART stations.
Program:
4.3 Continue to require residential projects of five or more units to contribute to the provision
of below - market rate housing in one of the following ways:
a. Dedicate 15% of the units on -site or a portion of the project site or property to the City or
a non - profit organization for use as affordable housing.
b. Within a half -mile radius of the planned SMART stations, developers are encouraged to
provide at least 15 percent of the units in a rental housing project at rents affordable to
very low -and low- income households for a minimum period of 30 years.
c. Within a half -mile radius of the planned SMART stations, developers may be required to
provide at least 15 percent of the units in a for -sale project at prices affordable to low -
and moderate - income households for a minimum period of 30 years.
d. The developer can make an in -lieu payment to the City's Housing Fund.
e. Use alternative methods to meet the intent of the inclusionary requirement, subject to
approval by the City Council.
Because there is no absolute requirement that either affordable rental or for -sale units be built on
site, the proposed amendment removes the 30 -unit threshold from the policy as that number is
arbitrary and does not necessarily equate to making inclusionary housing more or less feasible.
Developers will be able to address the feasibility of inclusionary housing at any project size
(number of units) through the development review process. By separately addressing rental and
for -sale housing, the amendment maintains the City Council's goal of providing inclusionary
housing within a half -mile radius of the planned SMART stations for all residential development
by encouraging projects to provide affordable units on site while providing flexibility on a
project by project basis consistent with current housing law.
The flexibility in the amended Program 4.3 would allow developers to implement the
inclusionary housing program in a manner that works best for the project and the City's housing
program. Historically, most projects have opted for payment of the in -lieu fee which the City
then leveraged to fund affordable housing projects in partnership with nonprofits such as PEP,
Eden, and Burbank, among others, and in other instances led to the provision of land for onsite
affordable housing such as the Housing Land Trust's Freitas Square project as part of the
Southgate subdivision. This flexible approach has resulted in 34 affordable housing
developments totaling 1,526 units. The recommended amendment is based on and consistent
with the original Planning Commission recommendation which took a flexible approach to the
inclusionary housing program and was found to be consistent with the statutory requirements of
State housing element law by HCD.
5
Process
When the City Council considered an amendment to the Housing Element last year, the proposed
amendment was first presented to HCD, as required by state law, and then to the Planning
Commission for consideration, and recommendation to the City Council. In this instance, staff
has not returned to the Planning Commission because the proposed amendment is consistent with
the Planning Commission's initial recommendation. The proposed amendment carries forward
the Planning Commission's recommendation to provide flexibility, yet clarifies the City
Council's strong desire to have affordable residential units, whether for sale or rental, built
within a half -mile radius of the planned SMART station. If the Council adopts the proposed
amendment, staff will forward the adopted amendment to HCD as required under state law for
HCD's consideration and approval. With HCD's approval, under state law, there is a
presumption that the amendment is valid.6
Environmental Review
This amendment to the 2015 -2023 Housing Element is categorically exempt from environmental
review under Section 15061(b)(3) of the State CEQA Guidelines. The proposed text amendment
is covered by the general rule that CEQA applies only to projects which have the potential for
causing a significant effect on the environment. Where it can be seen with certainty that there is
no possibility that the activity in question may have a significant effect on the environment, the
activity is not subject to CEQA. Adoption of this amendment does not create changes in the
physical environment and are therefore exempt. The proposed amendment does not result in any
changes to the General Plan land use polices or Implementing Zoning Ordinance. Any
development that occurs in the future subject to such standards will undergo an independent
analysis pursuant to the requirements of CEQA. A Negative Declaration of Environmental
Impact was prepared and adopted for the 2015 -2023 Housing Element Update (Resolution No.
2014 -189).
FINANCIAL IMPACTS
There are no financial impacts other than the staff time and public notice costs associated with
preparing this staff report.
ATTACHMENTS
1. Resolution
2. HCD Letter 7/15/14
3. HCD Letter 1/23/15
6 Gov. Code, § 65589.3.
I
ATTACHMENT 1
RESOLUTION AMENDING THE INCLUSIONARY HOUSING PROGRAM IN THE
CITY OF PETALUMA'S GENERAL PLAN 2025,2015-2023 HOUSING ELEMENT AS
ADOPTED BY RESOLUTION NO. 2014-190 N.C.S
WHEREAS, State law requires California cities to prepare and adopt a general plan to
guide future development of the city, including a Housing Element as one of the mandatory
elements in a city's general plan; and
WHEREAS, on May 19, 2008, the City Council approved Resolution No. 2008 -085
N.C.S., adopting the General Plan 2025, which contained the City's then - existing housing
element; and
WHEREAS, on December 1, 2014, the City Council approved Resolution No. 2014 -190
N.C.S., adopting the Petaluma 2015 -2023 Housing Element; and
. WHEREAS, the 2015 -2023 Housing Element Update ( "Housing Element ") identifies
and analyzes existing and projected housing needs and states goals, policies, quantified
objectives and special programs for the preservation, improvement and development of housing
in the City from 2015 through 2023; and
WHEREAS, the State Department of Housing and Community Development ( "HCD ")
reviewed the Housing Element as presented to the Planning Commission on October 28, 2014,
and determined that the element meets the statutory requirements of State housing element law;
and
WHEREAS, on December 1, 2014 the City Council adopted Resolution No. 2014 -190
N.C.S. approving the Housing Element as approved by HCD and presented to and recommended
by the Planning Commission, as amended by the City, Council; and
WHEREAS, on January 23, 2015, HCD approved the Housing Element as approved by
the City Council; and
WHEREAS, the proposed amended Housing Element is consistent with the Housing
Element as presented to the Planning Commission on October 28, 2014, because it implements
the same objectives; and
WHEREAS, an Initial Study and Negative Declaration was prepared pursuant to the
requirements of the California Environmental Quality Act (CEQA); and
WHEREAS, on December 1, 2014, the City Council adopted Resolution No. 2014 -189
N.C.S. approving a negative declaration of environmental impact, making findings and adopting
a statement of overriding considerations in regard to the Housing Element, all in accordance with
7
the requirements of Public Resources Code Sections 21000 et seq. ( "CEQA "), Title 14,
California Code of Regulations, Sections 15000 et seq. ( "CEQA Guidelines ") and the City of
Petaluma Environmental Review Guidelines; and
WHEREAS, this amendment is categorically exempt from environmental review under
Section 15061(b)(3) of the State CEQA Guidelines. The proposed text amendment is covered by
the general rule that CEQA applies only to projects which have the potential for causing a
significant effect on the environment. Where it can be seen with certainty that there is no
possibility that the activity in question may have a significant effect on the environment, the
activity is not subject to CEQA. Adoption of this amendment does not create changes in the
physical environment and are therefore exempt. The proposed amendment does not result in any
changes to the General Plan land use polices or Implementing Zoning Ordinance. Any
development that occurs in the future subject to such standards will undergo an independent
analysis pursuant to the requirements of CEQA; and
WHEREAS, on October 22, 2015, a public notice of the November 2, 2015 public
hearing before the City Council to consider the amendment was published in the Argus Courier;
and,
WHEREAS, on November 2, 2015, the City Council of the city of Petaluma held a duly
noticed public hearing to consider the amendment; and
NOW, THEREFORE, BE IT RESOLVED:
1. Recitals. The above Recitals are true and correct and adopted as findings of the City
Council.
2. Housing Element Amended. Based on the findings and conclusions stated above, the City
Council finds it in the public interest to, and hereby amends Program 4.3 of the City of
Petaluma 2015 -2023 Housing Element, Chapter 11 of the General Plan 2025 as follows:
Program:
4.3 Continue to require residential projects of five or more units to contribute to the
provision of below - market rate housing in one of the following ways:
a. Dedicate 15% of the units on -site or a portion of the project site or property to the
City or a non - profit organization for use as affordable housing.
b. Within a half -mile radius of the planned SMART stations, developers are
encouraged to provide at least 15 percent of the units in a rental housing project at
rents affordable to very low -and low- income households for a minimum period of
30 years.
c. Within a half -mile radius of the planned SMART stations, developers may be
required to provide at least 15 percent of the units in a for -sale project at prices
affordable to low- and moderate - income households for a minimum period of 30
years.
d. The developer can make an in -lieu payment to the City's Housing Fund.
e. Use alternative methods to meet the intent of the inclusionary requirement,
subject to approval by the City Council.
3. Except as amended herein, the City of Petaluma 2015 -2023 Housing Element remains
unchanged and in full force and effect.
4. Effective Date. This amendment shall take effect thirty days from the date of the adoption
of this Resolution pursuant to State law, including Midway Orchards v. County of Butte
(1990) 220 Cal.App.3d 765, 778 and DeVita v. County of Napa (1995) 9 Cal. 4th 763,
787, fn. 9.
5. Submission to HCD. Staff is directed to submit the Housing Element amended pursuant
to this resolution to HCD for approval in accordance with California Goverment Code
section 65585.
0
Attachment 2
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DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino ' 1 t
Sacramento, CA 95833
-K
July 15, 2014
John Brown, City Manager
City of Petaluma
P.O Box 61
Petaluma, CA 94953
Dear Mr. Brown:
RE: City of Petaluma's 6'h Cycle (2016 -2023) Draft Housing Element
Thank you for submitting Petaluma's draft housing element update which was received for
review on May 16, 2014, along with additional revisions received on July 9, 2014. Pursuant
to Government Code (GC) Section 65585(b), the Department is reporting the results of its
review. Our review was facilitated by a telephone conversation on June 25, 2014 with
Ms. Sue Castellucci, Housing Coordinator, and Mr. Scott Duiven, Senior Planner.
The draft element meets most of the statutory requirements of State housing element law
(GC, Article 10.6). The Department cannot find the element in full compliance until the City
amends its zoning ordinance to permit year -round emergency shelters without discretionary
action pursuant to GC Section 65583(a)(4)(A) as amended by Senate Bill 2 (Chapter 633,
Statutes of 2007). Program 3.2, identified in the previous element, committed the City
to amend the zoning ordinance to permit emergency shelters in the Mixed -Use and Civic
Facilities zone without discretionary action within one year from adoption of the 4th cycle
housing element. As noted in the current element on page 2 of Appendix B, Program 3.2
has not been implemented. The element will comply with housing element law once the
City has completed these zoning amendments and submitted the adopted element to the
Department pursuant to GC Section 65585(g).
To remain on an eight year planning cycle, pursuant to Senate Bill 375 (Chapter 728, Statutes
of 2008) the City must adopt its element within 120 calendar days from the statutory due date
of January 31, 2015 for ABAG localities, if adopted after this date, GC Section 65588(e)(4)
requires the element be revised every four years until adopting at least two consecutive
revisions by the statutory deadline. For information on element adoption requirements, visit
our website at: htt :llwww.hcd.ca. ovlh d/hrcl lan /he /he review adoptionstepsl 10812.pdf.
The Department appreciates the hard work and dedication of Ms. Castellucci and Mr. Duiven
in preparation of the housing element and looks forward to receiving Petaluma's adopted
housing element. If you have any questions or need additional technical assistance, please
contact Melinda Coy, of our staff, at (916) 263 -7425.
Sincerely,
4�en A. Campora
Assistant Deputy Director
3
STATE OF CALIFORNIA - BUSINESS—CONSUMFIR SERVICIFS AND HOUSING AGENCY EDMUNDG,
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263 -2911 / FAX (916) 263 -7453
www.hcd.co.gov
January 23, 2015
Mr. John Brown, City Manager
City of Petaluma
P.O Box 61
Petaluma, CA 94953
Dear Mr. Brown:
RE: City of Petaluma's 5th Cycle (2015 -2023) Adopted Housing Element
Thank you for submitting Petaluma's housing element adopted December 1, 2014
which was received for review on December 4, 2014. Pursuant to Government Code
(GC) Section 65585(h), the Department is reporting the results of its review.
The Department is pleased to find the adopted housing element in full compliance with
State housing element law (GC, Article 10.6). The adopted element was found to be
substantially the same as the revised draft element the Department's July 15, 2014
review determined met statutory requirements. The Department's finding was based
on, among other reasons, the completion of Program amending the zoning ordinance to
permit emergency shelters without discretionary action with the adoption of this
element.
Please note the City now meets specific requirements for several State funding
programs designed to reward local governments for compliance with State housing
element law. For example, the Housing Related Parks (HRP) Program, funded by
Proposition 1C, provides grant funds to eligible local governments for every qualifying
lower income unit permitted since 2010. The HRP Program 2014 Notice of Funding
Availability (NOFA), released December 10, 2014, announced the availability of
approximately $35 million in grant funds to eligible applicants. Applications are due
February 5, 2015. Further information about the HRP Program is available on the
Department's website at http://www,hcd.ca.gov/hpd/hrpp
Department appreciates the cooperation and assistance that Ms. Sue Castellucci,
Housing Coordinator, and Mr. Scott Duiven, City Planner, provided throughout the
course of the housing element review. The Department wishes the City of Petaluma
success in implementing its housing element and looks forward to following its progress
through the General Plan annual progress reports pursuant to GC Section 65400. If the
Department can provide assistance in implementing the housing element, please
contact Melinda Coy, of our staff, at (916) 2637425.
Sincerely,
Glen A. Campora
Assistant Deputy Director