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HomeMy WebLinkAboutStaff Report 6.A 08/06/2018DATE: August 6, 2018 TO: Honorable Mayor and Members of the City Council through City Manager FROM: Sue Castellucci, gdministrator . SUBJECT: Introduction of an Ordinance Amending the Text of Chapter 3 entitled "Development and Land Use Approval Requirements" of the Implementing Zoning Ordinance, Ordinance 2300 N.C.S., to Add Inclusionary Housing Requirements RECOMMENDATION It is recommended that the City Council Introduce an Ordinance Amending the Text of Chapter 3 entitled "Development and Land Use Approval Requirements" of the Implementing Zoning Ordinance, Ordinance 2300 N.C.S., to Add Inclusionary Housing Requirements. BACKGROUND In 1985, the City of Petaluma formulated and enacted an inclusionary housing policy. The policy, which is a program of the Housing Element, (a chapter of the City's General Plan), is simple, flexible, and enforceable. 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: Regional Housing Need Allocation — 2015-2023 (as of 4/30/18) Income Category Housing Need Permits issued Very Low 0-50% of AMI 199 9 Low 51% - 80% of AMI) 103 23 Moderate (81%-120% AMI 121 24 Above Moderate (over 120% of AMI 322 595 TOTAL UNITS 745 651 The City's current inclusionary housing policy located in the 2015-2023 Housing Element, requires developers of new residential developments to provide affordable housing, and offers them options as to how they fulfill that requirement: 1) build on-site units or dedicate a portion of the project site to the City for development of affordable units; 2) pay an in -lieu fee, or 3) use alternative methods to meet the intent of the inclusionary requirement subject to approval by the City Council, such as by seeking approval for providing a smaller percentage of on-site units or for donating a separate parcel of land for development of affordable units. In 2004, the City Council adopted an ordinance implementing a Commercial Linkage Fee for nonresidential development within the City of Petaluma. The construction of nonresidential development is a major factor in attracting new employees to Petaluma but places a strain on an already impacted housing stock. Housing affordability was part of Council goal discussion in February 2017. The Council determined to review housing -related fees to generate funding for affordable housing projects, and adopted the priority, "Identify and implement programs to increase affordable housing," in its 2017 and 2018 goals. A task included with this priority is "seek to provide housing for all income levels." In April, 2017, Economic & Planning Systems (EPS) was retained by the City to update the City's inclusionary housing in -lieu fee for residential projects and the City's commercial linkage fee. In addition, EPS was asked to prepare a nexus -based fee study for rental and ownership housing. EPS presented their draft nexus study to the Council, at a workshop on September 25, 2017. Council directed staff to gather more information to help clarify alternatives for consideration and City Council direction. At the March 5, 2018 City Council meeting, staff presented several policy options for Council consideration which included: 1) increasing the In Lieu fee; 2) increasing the Commercial Linkage fee; 3) establishing a percentage requirement for on-site inclusionary housing; and 4) establishing a percentage for the In Lieu fee inclusionary requirement. On June 12, the Planning Commission held a public meeting to consider the inclusionary amendment to Chapter 3 of the IZO. Consistent with the Council's direction, staff prepared an amendment to Housing Element Program 4.3 to require inclusionary housing on-site for all residential projects with more than five units. Staff presented the proposed 15% on-site inclusionary requirement for all residential developments with five or more units as well as a draft inclusionary housing policy to be added to Chapter 3 of the IZO. After discussion, the Planning Commission requested a joint workshop with the City Council to discuss the City's overall approach to inclusionary housing prior to moving forward with a recommendation on the proposed amendments. On June 18, the City Council held a public hearing to consider the amendments and the increases to the Housing fees and continued the item to a date certain of July 2 for the In Lieu and 1A Commercial Linkage fee increase and August 6, for the IZO amendment to accommodate the Planning Commission's request for a joint workshop. At the July 2, 2018 meeting, Council had a discussion on the proposed fee increase, made no decision, but did discuss changing the implementation date to January 1, 2019, so as not to penalize projects that are currently moving through the pipeline. A joint City Council/Planning Commission workshop was conducted on July 9, 2018. An amendment to the IZO was presented, which included the proposed implementation date of January 1, 2019 as well as new language regarding specific criteria for determining alternative compliance to building on-site units. It was the consensus of both bodies to keep the 15% requirement for onsite units for all residential developments of 5 or more units and to incorporate alternative criteria language into the proposed legislation. It was also agreed that any residential project that has an application that is deemed complete by a date to be decided by City Council, potentially October 1, 2018 or January 1, 2019, will not be subject to the new inclusionary housing requirements and in lieu fee increases. DISCUSSION This section will address the changes that the Council directed be made to the City's inclusionary housing policy, the Housing In -Lieu Fee, and the Commercial Linkage Fee at the March 8 meeting and July 9 joint workshop, as well as the legal authority that supports the Council's policy choices. Legal Background Recent developments in the law governing local government inclusionary regulations in California, as well as the existing California Planning and Zoning Law as it relates to housing elements in local general plans, support the City Council's authority to enact the local inclusionary regulations the Council has directed staff to prepare. In Palmer/Sixth Street Propertzes, L.P. v. City of Los Angeles, (2009) 175 CA 4th 1396, the court had held that the Costa -Hawkins Act, Civil Code section 1954.53(a), prohibits local agencies from requiring on-site inclusionary housing in rental housing developments. AB -1505, which is codified in sections 65850 and 65850.1 of the Government Code and took effect January 1, 2018, overturns the holding in the Palmer case and expressly permits cities to adopt ordinances requiring inclusion of affordable residential units for moderate, low, very low, and extremely low income households in rental housing developments, so long as such ordinances provide alternate means of compliance that may include, but are not limited to, in -lieu fees, land dedication, off- site construction, or acquisition and rehabilitation of existing units. Accordingly, with the passage of AB 1505, the State Legislature has restored the authority of cities and counties to require inclusion of affordable housing units in new rental housing projects. In June of 2015, the California Supreme Court upheld the City of San Jose inclusionary housing ordinance in California Building Association v. City of San Jose, (2015) 61 Cal. 4th 435. The San Jose inclusionary ordinance required all residential developments of 20 or more new or modified units to provide 15 percent of the on-site for -sale units as affordable units as defined in the ordinance, or to satisfy alternative requirements with an increased inclusionary requirement of the equivalent of 20 percent of the on-site for -sale units. The alternative requirements options include: providing off-site affordable units, paying an in -lieu fee, dedicating land, or acquiring and rehabilitating a comparable number of affordable units. The court observed that the purpose of the city's inclusionary ordinance was not only to mitigate the effect of new market rate housing on the City's stock of affordable housing, but also to increase the number of affordable units in the city, and to distribute the affordable units throughout the city to obtain the benefits of economically diverse communities. The court held that the San Jose inclusionary ordinance was not an exaction, because it did not require a developer to pay a monetary fee or convey a protected property interest, but rather imposed lawful, non -confiscatory land use restrictions in the form of price limits. According to the Court, such ordinances, to be valid, need only be reasonably related to the broad general welfare purposes for which they are enacted. The court held that such ordinances that require development projects to provide a reasonable amount of on-site affordable units and offer reasonable alternative means of satisfying the ordinance's inclusionary objectives, such as through payment of in -lieu fees, land dedication and off-site construction, are valid local land use regulations and not takings. The court also contrasted inclusionary restrictions and fees that impose price controls and other land use restrictions that serve a broader constitutionally permissible purpose or purposes unrelated to the impact of the proposed development from development mitigation fees, which are intended to fund needed public improvements, the purpose of which is to merely mitigate the effects or impacts of the developments on which the fees are imposed. Consistent with the holding in California Building Association, the Petaluma Inclusionary Housing In Lieu Fee and Commercial Linkage Fee are not exactions or development impact fees intended to fund public improvements pursuant to the Mitigation Fee Act (Government Code §66000 and following), but rather are part of and implement the City's land use regulations for creating affordable housing, and not takings. The California Planning and Zoning Law sets forth requirements for local adoption of general plan housing elements, and updates and amendments of housing elements. In Section 65585, the Planning Law requires that local agencies submit proposed housing element amendments to the Department of Housing and Community Development ("HCD") for review 60 days prior to adoption, and requires that local legislative bodies consider HCD findings prior to adoption of any housing element amendments, if HCD findings are made available within the 60 day review period, and permits local legislative bodies to adopt housing element amendments without HCD findings if they are not made available within the review period. City Inclusionary Housing policies At the July 9, 2018 joint workshop, it was the consensus of the City Council and Planning Commissioners that residential developments with 5 or more units should be required to provide 15% affordable units on-site. Projects in the pipeline, with applications deemed complete, will be exempt from the new inclusionary requirement. The combined bodies left the determination of the implementation date, October 1, 2018 or January 1, 2019, for applications deemed complete, for City Council action at the August 6, 2018 hearing. 11 Housing Element Amendment Below is the proposed language of the amendment to Petaluma 2015-2023 Housing Element, Policy 4.2, Program 4.3: Program 4.3: Continue to require residential projects of five or more units to contribute to the provision of affordable housing in one of the following ways: a. Require developers of residential projects, both homeownership and rentals, of five or more units to provide 15% of the units on-sitefor use as affordable housing with affordability restrictions of at least a 45 year duration for homeoivnership developments and affordability restrictions for of at least a 55 year duration for rental developments. Subject to approval by the City Council, developers may fidfrll their inclusionary requirement by one of the following ways: a. Donate a portion of the project site or property to the City or a non-profit organization for use as affordable housing. b. The developer may make an in-liezt payment to the City's Housing Fund in an amount equal to a 20% inclusionary requirement. c. Use alternative methods, such as requesting a smaller percentage of on-site units, or donating a separate parcel of land to build affordable housing to meet the intent of the inclusionary requirement. Draft General Plan amendments that would implement the City Council's policy direction were reviewed by the Planning Commission on June 24th. Following that review and potential City Council action on August 6, 2018, the proposed amendments will be forwarded to HCD for their review and comment. HCD has sixty days to comment on the amendment and respond to the City. Once the City receives HCD's comments, or the review period expires without the City receiving HCD comments, the proposed housing element amendments will be brought to the City Council for adoption. Implementing Zoning Ordinance Amendments Section 25.010 of the City's Implementing Zoning Ordinance (IZO) provides that no amendment that regulates matters listed in Government Section 65850 which matters include the use and construction of buildings and structures, shall be made to the IZO unless the Planning Commission and City Council find the amendments to be in conformity with the General Plan and consistent with the public necessity, convenience, and general welfare. It is recommended that Chapter 3 of the IZO (Development and Land Use Approval Requirements) be amended to implement the Council -directed inclusionary housing requirements in the City's General Plan Housing Element. It is helpful and appropriate to 5 address implementation of the Housing Element inclusionary policies in the IZO to provide greater detail regarding administration of the inclusionary program than is appropriate in the Housing Element, and to allow for flexibility in the implementation of the City's inclusionary program and potential future changes to further enhance the program without needing to make further changes to the Housing Element. This ordinance shall become effective thirty (30) days after the date of its adoption with the exception for any residential or mixed use project application that is deemed complete by the Planning Division prior to either October 1, 2018 or January 1, 2019, or other date agreed upon by City Council shall be subject to those in -lieu fees and inclusionary requirements currently in effect before adoption. The Council has indicated a desire to grandfather projects already deemed complete to allow those projects to continue to have the option of paying the housing in -lieu fee instead of the 15% requirement of onsite affordable units, given the investment of time and money they have spent thus far. Additionally, there appears to be interest on the Council to also grandfather the existing housing in -lieu fees for those developments. There are currently 4 residential projects in the pipeline that these changes may influence. The table below shows those residential projects that have not been deemed complete or approved along with an estimate of existing housing in -lieu fees and proposed in -lieu fees for the Council's consideration. Note: To illustrate the increase in the in -lieu fee, the assumption used is all residential units average 1, 500 sf u)hether rental or for -sale. Projects in Deemed Deemed Amt of funds to Pipeline # of Current In- Proposed Complete Complete by build affordable Units lieu Fee In -lieu Fee by 10/1/18 1/1/19 units (cost--376,000/unit Bay West - Hopper Street 145 $920,315 $2,201,100 No Possible $8,272,000 Baywood Apartments 299 $1,987,753 $4,538,820 No Yes $16,920,000 Deer Creek Village A is 124 $787,028 $1,882,320 No Possible $7,144,000 River Bend — Cedar Grove 117 $742,599 $1,776,60 No No $6,768,000 At the July 9 workshop, proposed criteria was introduced to provide a mechanism that would enable Council to evaluate alternative methods of compliance when a developer chooses not to provide onsite units. Council can adopt the recommended criteria as guidelines to review the alternative method in fulfilling the City's inclusionary requirement. The City Attorney made minor changes to the proposed criteria that was presented at the July 9 workshop to include all alternative methods and to clarify making the report public to the extent it is permitted by law. This criteria would be in the inclusionary housing section of Chapter 3 of the IZO under E6 (Attachment #1): 0 "Should the applicant wish to request alternative compliance from the City Council, the application shall include the request and describe the method and details of proposed alternative compliance. In considering requests from a developer for an alternative compliance rather than. creating inclusionary affordable units, the City Council's consideration will be whether creating inclusionary affordable units would render the overall project financially infeasible under then - current economic conditions. To that end, the developer may, at its option and at its own expense, provide its project financial information to an independent, third -party housing/real estate analyst contracted by City staff, who will conduct a financial feasibility analysis. The independent analysis will be conducted utilizing the applicant's data, and any additional information that may be required of the developer to complete a thorough assessment. The independent analyst shall employ recognized best practices for the industry, and render a detailed recommendation to the City Council to support its conclusions. Any of developer's sensitive proprietary information utilized in the report shall be redacted before making the report public to the extent permitted by law. Public Comments The public had an opportunity to comment at the September 27, 2017 City Council workshop and at the March 5, 2018 City Council meeting on the Housing Fees update. A meeting was also scheduled to reach out to stakeholders regarding the proposed changes to Petaluma's housing policies and housing fees. A flyer was sent out to a group of over fifty contacts that have either developed projects in Petaluma; are currently developing projects in Petaluma; or are housing advocates. The notice of the community meeting was also published in the Argus Courier on April 5, 2018. On April 12, 2018, staff, along with the consultants from EPS, hosted a community workshop to receive public input on the affordable housing policies and fee update. On May 31, 2018 a public notice of the June 12, 2018 Planning Commission meeting to consider the text amendments was published in the Argus -Courier and on June 7, 2018, a public notice of the June 18, 2018 public hearing before the City Council to consider the amendments and fee increases was published in the Argus Courier. On July 12, 2018 a public notice of the July 24, 2018 Planning Commission meeting to consider the text amendments was published in the Argus -Courier as an eighth page ad and the notice was also sent to the interested party list. All public comments received to date have been presented to the City Council and Planning Commission, as appropriate. This proposed amendment to the 2015-2023 Housing Element is categorically exempt from environmental review under Section 15061(b)(3) of the CEQA Guidelines because CEQA applies only to projects that have the potential for causing a significant effect on the environment. It can be seen with certainty that there is no possibility that the proposed Second Amendment to the 2015-2023 Housing Element will have a significant effect on the environment, since the proposed amendment does not create changes in the physical environment, does not result in any changes to the General Plan or Implementing Zoning 7 Ordinance land use policies, and any development that occurs in the future subject to such standards will undergo an independent analysis pursuant to the requirements of CEQA. ATTACHMENTS Ordinance Amending the Text of Chapter 3 entitled "Development and Land Use Approval Requirements" of the Implementing Zoning Ordinance ATTACHMENT #I ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PETALUMA AMENDING THE TEXT OF CHAPTER 3 ENTITLED "DEVELOPMENT AND LAND USE APPROVAL REQUIREMENTS" OF THE IMPLEMENTING ZONING ORDINANCE, ORDINANCE 2300 N.C.S., TO ADD REQUIREMENTS FOR INCLUSIONARY HOUSING WHEREAS, Section 25.010 of the City of Petaluma Implementing Zoning Ordinance (IZO) provides in pertinent part that no amendment that regulates matters listed in Government Code Section 65850, which matters include the use and construction of buildings and structures, shall be made to the IZO unless the Planning Commission and City Council find the amendments to be in conformity with the General Plan and consistent with the public necessity, convenience, and general welfare in accordance with Section 25.050(B) of the IZO; and WHEREAS, the text amendments contained in this ordinance modify Chapter 3 entitled "Development and Land Use Requirements" of the IZO, to add a new section 3.040 — Inclusionary Housing; and WHEREAS, the Petaluma Housing Element 2015-2023 ("Housing Element"), a mandatory element of the City of Petaluma General Plan 2025, identifies and analyzes existing and projected housing needs and states goals, policies, quantified objectives and special programs for the reservation, improvement and development of housing in the City from 2015 through 2023; and WHEREAS, the City has 2,161 housing units in various stages of development but only 75 of the units are planned as affordable units in accordance with the City's inclusionary housing requirements in the Housing Element; and WHEREAS, in -lieu fees collected by the City in accordance with Program 4.3 of the Housing Element are insufficient to fund construction of sufficient numbers of affordable housing units to meet the City's projected housing needs; and WHEREAS, recent amendments to the state Planning Law and Zoning Law, Government Code section 65000 et seq. ("Planning Law") pursuant to AB -1505, which took effect January 1, 2018 and are codified in sections 65850 and 65850.1, permit cities to adopt ordinances requiring inclusion of affordable residential units for moderate, low, very low, and extremely low income households in rental housing developments, and require that such ordinances provide alternate means of compliance that may include, but are not limited to, in -lieu fees, land dedication, off-site construction, or acquisition and rehabilitation of existing units, and I grant the state Department of Housing and Community Development ("HCD") the authority to review certain such ordinances that require more than 15 percent of the total number of units in a residential rental development to be affordable to households earning 80 percent or less of the area median income; and WHEREAS, on February 12, 2018 the City Council held a workshop to discuss inclusionary housing policies and directed staff to prepare amendments to the Housing Element and other legislative documents as needed to utilize the authority provided in AB -1505 to require construction of on-site inclusionary units in residential rental developments; and WHEREAS, the City contracted with Economic and Planning Systems ("EPS") to complete studies ("EPS Studies") to identify funds the City could lawfully recover from inclusionary housing fees and to provide information and analysis in support of potential updates to the City's affordable housing fees; and, WHEREAS, at a City Council workshop on September 25, 2017, EPS presented an administrative report dated August 29, 2017 that detailed a gap between market prices of housing in the City and prices affordable to very low, low, and moderate -income households, and included a proposed per square foot in lieu fee for rental and ownership projects based on the affordability gap; and WHEREAS, it is the desire of the City Council to approve an inclusionary housing ordinance in accordance with the authority in AB -1505 to require on-site inclusionary housing units as part of residential housing development projects, both homeownership and rental, in the City to mitigate the effect of new market rate housing on the City's stock of affordable housing, to increase the number of affordable units in the city, and to distribute the affordable units throughout the city to obtain the benefits of economically diverse communities and generally to ensure the provision of affordable housing to help address the City's Regional Housing Need Allocation and the acute housing crisis in Sonoma County, and to provide for alternative means of compliance as AB -1505 requires; and WHEREAS, it is the desire of the City Council to increase the City's Inclusionary Housing In -Lieu fee in accordance the EPS Study to apply to developers of residential housing that the Council permits to make a payment in -lieu of providing affordable housing on site to more closely approach developers' fair -share responsibility toward contributing to implementing the Housing Element policies and programs; and WHEREAS, the text amendments contained in this ordinance provide regulations to implement Policy 4.2 and Program 4.3 of the Housing Element; and 10 WHEREAS, on May 31, 2018 public notice of the June 12, 2018 Planning Commission meeting to consider the text amendments was published in the Argus -Courier as an eighth page ad; and WHEREAS, on June 12, 2018, the Planning Commission held a duly -noticed public hearing in accordance with Chapter 25 of the IZO to consider the amendments and after discussion continued the item to a date uncertain to provide time for further discussion at a joint workshop of the City Council and Planning Commission; and WHEREAS, on July 9, 2018, the City Council, and Planning Commission held a duly noticed joint workshop to consider amendments to the City's inclusionary housing program; and WHEREAS, on July 12, 2018, public notice of the July 24, 2018 public hearing before the Planning Commission to consider the proposed Second Amendment to the 2015-2023 Housing Element was published in the Argus Courier as an eighth page display ad in accordance with the requirements of government code sections 65090, 65091, and 65853; and WHEREAS, in accordance with Section 65565, subdivision (b)(2) of Planning Law, the public comments that the City has received regarding the proposed Second Amendment to the 2015-2023 Housing Element have been collected and provided to the members of the Planning Commission; and WHEREAS, after the conclusion of said public hearing, the Planning Commission adopted Resolution No. 2018-25, recommending that the City Council adopt the amendments; and WHEREAS, on June 7, 2018, a public notice of the June 18, 2018 public hearing before the City Council to consider the amendments was published in the Argus -Courier as an eighth page ad; and WHEREAS, on June 18, 2018, the City Council of the City of Petaluma held a duly noticed public hearing to consider the amendments and continued the item to a date certain of August 6, 2018; and WHEREAS, on August 6, 2018 the City Council of the City of Petaluma held a duly noticed public hearing to consider the amendments; and NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF PETALUMA AS FOLLOWS: 11 Section 1: Findings. The City Council of the City of Petaluma hereby finds: The text amendments contained in this ordinance are exempt from the California Environmental Quality Act ("CEQA") pursuant to Section 15061(b)(3) of the CEQA Guidelines. The proposed text amendments are 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 is therefore exempt. In addition, the proposed amendments do not result in any changes to the Petaluma General Plan 2025 ("General Plan") land use policies or Implementing Zoning Ordinance ("IZO"). Any development that occurs in the future subject to such standards will undergo an independent analysis pursuant to the requirements of CEQA. 2. In accordance with the holding of the California Supreme Court in California Building Association v. City of San Jose, (2015) 61 Cal. 41h 435, where a city adopts an inclusionary ordinance to mitigate the effect of new market rate housing on the City's stock of affordable housing, to increase the number of affordable units in the city, and to distribute the affordable units throughout the city to obtain the benefits of economically diverse communities, such an ordinance is not an exaction, if it does not require a developer to pay a monetary fee or convey a protected property interest, but rather imposes lawful, non -confiscatory land use restrictions in the form of price limits. Under California Building Association, such inclusionary ordinances, to be valid, need only be reasonably related to the broad general welfare purposes for which they are enacted. Such inclusionary housing ordinances that require residential projects to provide a reasonable amount of on-site affordable units, and offer reasonable alternative means of satisfying the ordinance's inclusionary objectives, are valid local land use regulations and not takings. The City Council finds that the text amendments contained in this ordinance are valid local land use regulations and do not effect takings in accordance with California Building Association. 3. In accordance with Sections 25.010 and 25.050(B) of the City's IZO, Ordinance No. 2300 N.C.S., the proposed amendments to the IZO are in general conformity with the General Plan in that these amendments do not change the general character or impacts of current zoning regulations and implement policies of the General Plan as outlined in the June 12, 2018 Planning Commission agenda report and June 18, 2018 City Council agenda report. 4. In accordance with Section 25.050(B) of the IZO, the proposed amendments are consistent with the public necessity, convenience, and welfare in that they clarify inclusionary housing requirements and regulations to implement the policies and programs in the Housing Element of the General Plan. 5. The above recitals and the findings in this section are hereby declared to be true and correct findings of the City Council of the City of Petaluma. 12 Section 2. IZO Chapter 3, is hereby amended to add a new Section 3.040 entitled "Inclusionary Housing" to read as follows: 3.040 — Inclusionary Housing This section shall govern inclusionary housing as part of residential development pursuant to Housing Element Policy 4.2 and associated Program 4.3. A. Applicability. The provisions of this section shall apply to all residential projects of five or more units, including residential components of mixed-use projects. B. Requirements. All residential projects of five or more units shall comply with following requirements: 1. Location. Unless otherwise permitted in accordance with this section, inclusionary housing units shall be provided on the site of the residential development. 2. Quantity. The number of onsite inclusionary housing units shall be equal to or greater than 15 percent of the total number of residential units or lots in the residential project. 3. Income Levels. The following income restrictions shall apply based on the. ownership structure of the residential project. a. Inclusionary housing units in a rental project shall be made affordable to very low and low income households as follows: 7.5% of the total number of residential units or lots in the residential project shall be affordable to very low income households, and 7.5% of the total number of residential units or lots in the residential project shall be affordable to low income households. b. Inclusionary housing units in an ownership project shall be made available to low and moderate income households as follows: 7.5% of the total number of residential units or lots in the residential project shall be affordable to low income households, and 7.5% of the total number of residential units or lots in the residential project shall be affordable to moderate income households. 4. Duration. Affordable units required pursuant to this section shall be made subject to affordability covenants that are binding on owners of the units and their successors for a duration of at least 55 years in the case of rental projects and for a duration of at least 45 years in the case of ownership projects. Fractional Units. In determining the number of inclusionary units required to be provided pursuant to this section, fractional units shall be rounded to the nearest whole integer. For fractions less than 0.5 the number shall be rounded down and the fractional unit shall be paid by applicable in -lieu fee. For fractions 0.5 or 13 greater, the number shall be rounded up to the nearest whole integer to provide onsite units. For example, in the case of a 20 unit residential rental project, provision (13)(3)(a) would require making 7.5% or 1.5 of the units affordable to very low income households, and 7.5% or 1.5 of the units affordable to low income households. In this example, the inclusionary unit obligation for the project for would be rounded up 2 units affordable to very low income households and 2 units affordable to low income households. C. Inclusionary unit development standards. In addition to other development standards and requirements set forth in this ordinance and other applicable laws and regulations, all inclusionary housing units shall be consistent with the following standards: Inclusionary units shall be constructed and occupied concurrently with or prior to the construction and occupancy of the market rate residential units in the project, unless an alternative schedule based on extenuating circumstances is adopted as part of the project approval. In phased projects, inclusionary units shall be constructed and occupied in proportion to the number of units in each phase of the proj ect. 2. Inclusionary units shall be distributed throughout the residential project site, to the fullest extent practicable. The design, appearance and general quality of the affordable units shall be comparable and compatible with the design of the market rate units as determined through the Site Plan and Architectural Review process., provided that all other zoning and building codes are met. D. Alternative Compliance. At the sole discretion of the City Council, a project's inclusionary housing requirement may be met through alternative compliance in one of the following ways or a combination thereof: 1. Donation of a portion of the project site or an off-site property to the City or anon - profit organization deemed acceptable by the City for development of affordable housing; or 2. Payment of a housing in -lieu fee established by the City's adopted fee schedule; or 3. Alternative mixture of units by income levels; or 4. Use of an alternative method, such as provision of a smaller percentage of onsite inclusionary units coupled with payment of a housing in -lieu fee for the inclusionary units not provided. E. Submittal Requirements. All applications submitted to the City for development of a residential project of five or more units or a mixed-use project including a residential 14 component of five or more units shall include the proposed method of satisfying the requirements of this section. Compliance with the inclusionary housing requirements shall be reviewed as part of the development review process and presented to the decision making body as part of the overall proj ect analysis for consistency with both the City's General Plan and this ordinance. Submittal requirements to demonstrate compliance with this section shall include the following: 1. Total number of residential units in the project 2. Number of onsite inclusionary units 3. Proposed sale price of both market rate and inclusionary units and/or proposed rental price for both market rate and inclusionary units 4. Location of onsite inclusionary units within the project 5. Size and bedroom count for the proposed inclusionary units 6. Should the applicant wish to request alternative compliance from the City Council, the application shall include the request and describe the method and details of proposed alternative for compliance. In considering requests from a developer for alternative compliance rather than creating inclusionary affordable units, the City Council's consideration will include whether creating inclusionary affordable units would render the overall project financially infeasible under then current economic conditions. To that end, the developer may, at its option and at its own expense, provide its project financial information to an independent third -party housing/real estate analyst contracted by City staff, who will conduct a financial feasibility analysis. The independent analysis will be conducted utilizing the applicant's data, and any additional information that may be required of the developer to complete a thorough assessment. The independent analyst shall employ recognized best practices for the industry, and render a detailed recommendation to the City Council to support its conclusions. Any of the developer's sensitive proprietary information utilized in the report shall be redacted before making the report public to the extent permitted by law. Section 3. Procedures. The City Council may, by duly adopted resolution, adopt procedures, or authorize the City manager to promulgate procedures, intended to implement the requirements of this ordinance in accordance with all applicable provisions of the city charter, the City's Housing Element and State Housing law. Section 4. Except as amended herein, the City of Petaluma Implementing Zoning Ordinance, Ordinance No. 2300 N.C.S. remains unchanged and in full force and effect. 15 Section 5. Severability. If any section, subsection, sentence, clause, phrase or word of this ordinance is for any reason held to be unconstitutional, unlawful, or otherwise invalid by a court of competent jurisdiction or preempted by state legislation, such decision or legislation shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Petaluma hereby declares that it would have passed and adopted this ordinance and each and all provisions thereof irrespective of the fact that any one or more of said provisions be declared unconstitutional, unlawful, or otherwise invalid. Section 6. Effective Date. This ordinance shall become effective thirty (30) days after the date of its adoption by the Petaluma City Council except that any residential project or mixed use application with a residential component that is deemed complete by the Planning Division prior to XXXXXXXXXXX shall be subject to those in -lieu fees and inclusionary requirements currently in effect before adoption. 16