HomeMy WebLinkAboutStaff Report 4.A 09/10/2018DATE: September 10, 2018
• ••1 VA
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Sue Castellucci, Housing Administrator
SUBJECT: Adoption of a Resolution Increasing Inclusionary Housing In -lieu Fees Payable as
Required by Program 4.3 in the City of Petaluma's General Plan 2025, 2015-2023
Housing Element As Adopted by Resolution No. 2014-190 N.C.S. and Replacing
the Housing In -lieu Fees Set by Resolution No. 2003-241 N.C.S; and Introduction
(First Reading) 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:
1. Adopt a Resolution Increasing Inclusionary Housing In -Lieu Fees Payable as Required
by Program 4.3 in the City of Petaluma's General Plan 2025, 2015-2023 Housing
Element as Adopted by Resolution No. 2014-190 N.C.S. and Replacing the Housing In -
lieu Fees Set by Resolution No. 2003-241 N.C.S.; and
2. 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
As part of Council goal discussion in February 2017, the Council prioritized a review of housing -
related fees to generate funding for affordable housing projects. 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.
Beginning with the first workshop on September 25, 2017, staff has presented the inclusionary
policy and proposed fee increases at four City Council meetings; a joint workshop with the
Planning Commission; and two Planning Commission meetings. The most recent discussion of
this matter was August 6, 2018.
DISCUSSION
On August 6, 2018, Council reached consensus on all the following outstanding items:
• Implementation of a 15% inclusionary requirement for providing onsite affordable units
for any residential development with 5 or more units.
• Increasing the housing in -lieu fee to a 20% inclusionary requirement, which would
equate to $10.12 per square foot.
• Adoption of a process whereby developers can request approval for satisfying the City's
inclusionary goals by means other than providing onsite affordable units.
• Development applications deemed complete before January 1, 2019 will be subject to the
in -lieu fees and inclusionary requirements in effect immediately prior to the new housing
in lieu fees and inclusionary requirements taking effect.
At the August 6t" meeting, the Council also adopted a resolution to increase the commercial
linkage fees to the current rate of Sonoma County's commercial linkage fees. The fee increase
tools effect immediately on August 6, 2018.
Discussion continued on the applicability of the new inclusionary requirements for project
applications previously deemed complete, but that are receiving their entitlements in phases and
that may still be subject to further application completeness dates. Several Councihnembers
expressed concerns with the applicability of new fees and inclusionary policy to projects already
in the pipeline.. The following language has been incorporated into the In -Lieu fee resolution
(#6) and the hlclusionary Housing Policy ordinance (Section 6 — Effective Date) concerning the
effective date:
Resolution language — #6 of the resolution. "This resolution shall become effective upon its
adoption, except that any residential project application or mixed-use project application with a
residential component that either a) has a recorded final nurp as of January 1, 2019 that is
consistent with the previously approved tentative map (regardless of ii,hether fi rther subdivision
or fin•ther discretionary approvals for the project are required), or b) that is deemed complete by
the Planning Division prior to January 1, 2019, shall be subject to those in-lieai fees in effect
immediately prior to the nely housing in lieu fees taking effect pursuant to this resolution. "
Ordinance language — "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 application or mixed-use project application with a residential component that either a)
has a recorded final map cis of January 1, 2019 that is consistent lvith the previously approved
tentative map (regardless ofivhether further subdivision of further discretionary approvcils for
the project are required), or b) that is deemed complete by the Planning Division prior to
dcnnucn y 1, 2019, shall be subject to those inclusionary requirements in effect immediately prior
to the neiv inclusionary regzrirements taking effect pursuant to this ordinance. "
With the above changes to the effective date, Council concerns appear to be addressed and staff
recommends Council adopt the resolution for increasing the in -lieu fees and approve the
ordinance to amend Chapter 3 of the Implementing Zoning ordinance to include requirements for
inclusionary housing.
4
FINANCIAL IMPACT
Financial impacts beyond the staff time required to prepare this report and providing public
notice are undetermined at this time. The proposed in -lieu fee increase will add additional
revenue to the In -Lieu Housing Fund when the residential development's 15% inclusionary
requirement has a fractional unit component, or if a future development does not include on-site
units in their proposal.
ATTACHMENTS
1. Resolution Increasing Inclusionary Housing In -Lieu Fees Payable As Required by
Program 4.3 in the City of Petaluma's General Plan 2025, 2015-2023 Housing Element
2. Exhibit A to Resolution Increasing In -Lieu fees
3. Ordinance Amending the Text of Chapter 3 entitled "Development and Land Use
Approval Requirements" of the Implementing Zoning Ordinance
Attachment 1
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA
INCREASING INCLUSIONARY HOUSING IN -LIEU FEES PAYABLE AS REQUIRED
BY PROGRAM 4.3 IN THE CITY OF PETALUMA'S GENERAL PLAN 2025,2015-2023
HOUSING ELEMENT AS ADOPTED BY RESOLUTION NO. 2014-190 N.C.S. AND
REPLACING THE HOUSING IN -LIEU FEES SET BY RESOLUTION NO. 2003-241
N.C.S.
WHEREAS, on December 6, 1982, by Resolution no. 9620 N.C.S., the City Council
adopted the Housing Element of the Petaluma General Plan ("1982 Housing Element") setting
forth the goals, polices and implementation programs to achieve an adequate supply of housing
for all groups; and
WHEREAS, Program 2 of the policies for implementing the 1982 Housing Element
provided for requiring developers of residential developments with 16 or more units to achieve
adequate housing supply for all groups by one of several methods, including an in -lieu fee
related to the cost of providing housing to write down land costs or acquire housing for low and
moderate -income housing in Petaluma; and
WHEREAS, on August 20, 1984, by adoption of Resolution no. 84-199 N.C.S., the City
Council established a schedule of in -lieu fees to implement Program 2 of the 1982 Housing
Element; and
WHEREAS, on December 16, 2002, by Resolution no. 2002-198 N.C.S. the City
Council adopted the Housing Element of the Petaluma General Plan ("2002 Housing Element")
setting the goals, policies and implementation programs to achieve an adequate supply of
housing units and programs for all groups; and
WHEREAS, Program 4.4 of the 2002 Housing Element provided for requiring
residential projects of five or more units to contribute to the provision of below-market rate
housing by providing affordable units on site, dedicating a portion of the project site, malting an
in -lieu payment to the City's housing fund, or using alternative methods; and
WHEREAS, on December 1, 2003, by Resolution No. 2003-241 N.C.S., the City
Council established an in -lieu fee schedule for those developers who chose to make an in -lieu
payment into the City's housing fund; and
WHEREAS, on May 19, 2008, the City Council approved Resolution No. 2008-085
N.C.S., adopting the City of Petaluma General Plan 2025 ("General Plan"), which contained the
City's then -existing housing element; and
4
WHEREAS, on June 15, 2009, the City Council approved Resolution No. 2009-094
N.C.S., adopting the Petaluma 2009-2014 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, on January 23, 2015, the state Housing and Community Development
Department ("HCD") approved the 2015-2023 Housing Element as approved by the City
Council; and
WHEREAS, on November 2, 2015 the City Council approved Resolution No. 2015-171
N.C.S., adopting a First Amendment to the 2015-2023 Housing Element Program 4.3 to ensure
consistency between the City's Housing Element and the holding in Pahner/Sixth Street
Properties, L.P. v. City of Los Angeles, (2009) 175 CA 4°i 1396, which 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; and
WHEREAS, recent amendments to the state Planning and Zoning Law, which is codified
in Government Code section 65000 and following ("Planning Law") pursuant to AB -1505,
which took effect January 1, 2018 and is codified in Government Code 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 grant 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 area median income; and
WHEREAS, the 2015-2023 Housing Element as amended identifies and analyzes
existing and projected housing needs and states goals and policies, and quantifies objectives and
special programs for the reservation, improvement and development of housing in the City from
2015 through 2023; and
WHEREAS, Policy 4.2 of the 2015-2023 Housing Element currently provides for
assigning a share of the responsibility for providing affordable housing to the developers of
market -rate housing and non-residential projects; and
WHEREAS, Program 4.3 of the 2015-2023 Housing Element currently provides for
continuing to require residential projects of five or more units to contribute to provision of
below-market rate housing by: dedicating 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; encouraging
developers of projects within a half -mile radius of the planned Sonoma Marin Area Rail Transit
District ("SMART") stations 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;
requiring developers of for sale projects within a half -mile radius of the planned SMART
stations to provide at least 15% of the units at prices affordable to low and moderate income
households for a minimum period of 30 years; or by malting an in -lieu payment to the City's
housing fund; or by using alternative methods to meet the intent of the inclusionary requirement,
subject to approval by the City Council; and
WHEREAS, the City has 2,161 housing units in various stages of development but only
75 of the units are affordable in accordance with the City's inclusionary housing requirements;
and
WHEREAS, in -lieu fees collected by the City in accordance with Program 4.3 of the
2015-2023 Housing Element are insufficient to fiend construction of sufficient numbers of
affordable housing units to meet the City's projected housing needs; 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 in -lieu 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 gave an
Affordable Housing Fees presentation ("Presentation"), presented an administrative draft
memorandum ("Memorandum"), and a draft Ownership huclusionary Housing In -lieu Fee report,
a draft Nexus -Based Affordable Housing Fee Analysis for Ownership Housing report, a draft
Nexus -Based Affordable Housing Fee Analysis for Rental Housing report, and a draft
Commercial Linkage Fee Nexus Study report all dated August 29, 2017 and all referred to as the
"Reports," and
WHEREAS, the Presentation, Memorandum and the Reports 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, the City Council hereby approves the Presentation, Memorandum and the
Reports, which are by this reference hereby made a part of this resolution; 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
6
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 hi -Lieu fee in accordance the EPS Presentation, the Memorandum, and the Reports, 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 City's 2015-2023 Housing Element
policies and programs; and
WHEREAS, in accordance with the holding of the California Supreme Court in
California Building Association v. City of San Jose, (2015) 61 Cal. 4"' 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 imposes lawful, non -confiscatory land use restrictions
in the form of price limits; and
WHEREAS, under California Building Association, inclusionary ordinances, to be valid,
need only be reasonably related to the broad general welfare purposes for which they are
enacted, and 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, such as payment of in -lieu fees, land
dedication, and off-site construction are valid local land use regulations and not takings; and
WHEREAS, the City Council fords that this resolution and the inclusionary housing in -
lieu fee it establishes is a valid local land use regulation and does not affect a taking in
accordance with California Building Association; and
WHEREAS, on June 7, 2018, public notice of a June 18, 2018 public hearing before the
City Council to consider proposed inclusionary housing amendments to the IZO and proposed
increases to the City's inclusionary housing fees 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 proposed IZO amendments and inclusionary fees and
continued the item to a date certain of August 6, 2018; and
WHEREAS, on August 6, 2018, the City Council continued the item to a date certain of
September 10, 2018; and
7
WHEREAS, on September 10, 2018 the City Council of the City of Petaluma held a
duly noticed public hearing to consider proposed amendments to the IZO, Ordinance 2300
N.C.S. incorporating inclusionary housing requirements into the IZO and proposed increases to
the City's inclusionary fees; and
WHEREAS, this resolution and the inclusionary housing in -lieu fee it establishes is
exempt from environmental review under the general rule in Section 15061(b)(3) of the
California Environmental Quality Act ("CEQA") Guidelines because CEQA applies only to
projects that have the potential for causing a significant effect on the environment, and it can be
seen with certainty that there is no possibility that this resolution and the inclusionary housing in -
lieu fee it establishes creates changes in the physical environment, or results in any changes to
the General Plan or hnplementing Zoning 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; and
WHEREAS, this resolution and the inclusionary housing in -lieu fee it establishes is
statutorily exempt pursuant to Section 15283 of the CEQA Guidelines because this resolution
and the inclusionary housing in -lieu fee reflect determinations by the City regarding the need to
adequately provide for the City's share of regional housing needs pursuant to Government Code
section 65584; and
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Petaluma
as follows:
1. The above recitals are hereby declared to be true and correct and are incorporated into
this resolution as findings of the City Council of the City of Petaluma.
2. The in -lieu inclusionary housing fee schedule attached to and hereby made a part of
this resolution as Exhibit A shall apply to payments to the City's housing fund which
the City Council permits developers to make in -lieu of provision of on-site affordable
housing in accordance with Policy 4.2 and Program 4.3 of the 2015-2023 Housing
Element.
3. In -lieu fees authorized pursuant to this resolution shall be paid and collected on
behalf of the City at the time escrow closes on purchase of for -sale residential units,
and at the time of issuance of a certificate of occupancy for trental units.
4. Except as provided in Section 6, below, the in -lieu inclusionary housing fees
established pursuant to Resolution no. 2003-241 and any other previously -enacted in -
lieu inclusionary housing fees are hereby repealed and shall no longer be of any effect
on the date this resolution takes effect.
5. If any section, subsection, sentence, clause, phrase or word of this resolution is for
any reason held to be unconstitutional, unlawfiil, 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 resolution. The City
M
Council of the City of Petaluma hereby declares that it would have passed and
adopted this resolution 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.
6. This resolution shall become effective upon its adoption, except that any residential
project application or mixed-use project application with a residential component that
either a) has a recorded final map as of January 1, 2019 that is consistent with the
previously approved tentative map (regardless of whether further subdivision or
further discretionary approvals for the project are required) or b) that is deemed
complete by the Planning Division prior to January 1, 2019 shall be subject to those
in -lieu fees in effect immediately prior to the new housing in lieu fees adopted
pursuant to this resolution taking effect.
9
Attachment 2
ATTACHMENT #2
EXHIBIT A
IN -LIEU HOUSING FEES (5 units or more - based on square footage) see Tables below:
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft.
Fee
Sq. Ft
Fee
640
$6,477
960;
$9,715
1280
$12,954
1600
$16,192
1920
$19,430
650 `
$6,578
970
$9,816
1290
$13,055
1610
$16,293
1930
$19,532
660
$6,679
980
$9,918
1300
$13,156
1620
$16,394
1940
$19,633
670
$6,780
990
$10,019
1310
$13,257
1630
$16,496
1950
$19,734
680
$6,882
1000
$10,120
1320
$13,358
1640
$16,597
1960
$19,835
690
$6,983
1010
$10,221
1330'
$13,460
1650
$16,698
1970
$19,936
700
$7,084
1020
$10,322
1340
$13,561
1660
$16,799
1980'
$20,038
710
$7,185
1030
$10,424
1350'
$13,662
1670 '``
$16,900
1990
$20,139
720
$7,286
1040
$10,525
1360
$13,763
1680
$17,002
2000
$20,240
730
$7,388
1050
$10,626
1370
$13,864
1690
$17,103
2010
$20,341
740
$7,489
1060
$10,727
1380
$13,966
1700
1 $17,204
2020
$20,442
750`
$7,590
1070
$10,828
1390
$14,067
1710
$17,305
2030
$20,544
760
$7,691
1080
$10,930
1400'
$14,168
1720
$17,406
2040
$20,645
770'`
$7,792
1090
$11,031
1410
$14,269
1730 ''
$17,508
2050
$20,746
780
$7,894
1100
$11,132
1420
$14,370
1740
$17,609
2060
$20,847
790
$7,995
1110
$11,233
1430
$14,472
1750
$17,710
2070
$20,948
800
$8,096
1120
$11,334
1440
$14,573
1760
$17,811
2080
$21,050
810'
$8,197
1130
$11,436
1450
$14,674
1770
$17,912
2090
$21,151
820
$8,298
1140'
$11,537
1460'
$14,775
1780
$18,014
2100
$21,252
830'
$8,400
1150
$11,638
1470'
$14,876
1790
$18,115
2110
$21,353
840
$8,501
1160'
$11,739
1480
$14,978
1800
$18,216
2120
$21,454
850 1
$8,602
1170<'
$11,840
1490 `
$15,079
1810
$18,317
-2130
$21,556
860'
$8,703
1180
$11,942
1500
$15,180
1820
$18,418
2140:
$21,657
870
$8,804
1190
$12,043
1510
$15,281
1830
$18,520
2150 -
$21,758
880
$8,906
1200
$12,144
1520
$15,382
1840
$18,621
2160
$21,859
890 1
$9,007
1210
$12,245
1530
$15,484
1850
$18,722
2170
$21,960
900
$9,108
1220
$12,346
1540
$15,585
1860
$18,823
2180
$22,062
910
$9,209
1230
$12,448
1550,
$15,686
1870
$18,924
2190
$22,163
920
$9,310
1240
$12,549
1560
$15,787
1880
$19,026
2200
$22,264
930
$9,412
1250
$12,650
1570 1
$15,888
1890
$19,127
2210
$22,365
940
$9,513
1260
$12,751
1580 `
$15,990
1900
$19,228
2220
$22,466
950
$9,614
1270
$12,852
1590
$16,091
1910
$19,329
2230
$22,568
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft.
Fee
Sq. Ft
Fee
2240
$22,669
2560
$25,907
2880
$29,146
3200 `
$32,384
3520
$35,622
2250
$22,770
2570
$26,008
2890
$29,247
3210
$32,485
3530 ''
$35,724
2260
$22,871
2580
$26,110
2900
$29,348
3220
$32,586
3540
$35,825
2270
$22,972
2590
$26,211
2910
$29,449
3230
$32,688
3550
$35,926
2280 `
$23,074
2600
$26,312
2920
1 $29,550
3240--
$32,789
3560
$36,027
2290
$23,175
2610
$26,413
2930'
$29,652
3250
$32,890
3570``
$36,128
2300
$23,276
2620-
$26,514
2940
$29,753
3260
$32,991
3580' ;
$36,230
2310'
$23,377
2630
$26,616
2950'
$29,854
3270 '
$33,092
3590
$36,331
23201
$23,478
2640
$26,717
2960
$29,955
3280
$33,194
3600
$36,432
2330
$23,580
2650
$26,818
2970
$30,056
3290 <;
$33,295
3610
$36,533
2340 '
$23,681
2660
$26,919
2980
$30,158
3300
$33,396
3620
$36,634
2350
$23,782
2670
$27,020
2990
$30,259
3310 '
$33,497
3630
$36,736
2360
$23,883
2680 `
$27,122
3000'
$30,360
3320
$33,598
3640 `
$36,837
2370 `
$23,984
2690
$27,223
3010 `
$30,461
3330:
$33,700
3650
$36,938
2380
$24,086
2700
$27,324
3020'
$30,562
3340
$33,801
3660
$37,039
2390
$24,187
2710
$27,425
3030
$30,664
3350 =
$33,902
3670
$37,140
2400'
$24,288
2720
$27,526
3040
$30,765
3360 '
$34,003
3680
$37,242
2410'
$24,389
2730
$27,628
3050
$30,866
3370
$34,104
3690
$37,343
2420
$24,490
2740
$27,729
3060
$30,967
3380
$34,206
3700
$37,444
2430'
$24,592
2750'
$27,830
3070
$31,068
3390
$34,307
3710
$37,545
2440
$24,693
2760
$27,931
3080
$31,170
3400 ''
$34,408
3720
$37,646
2450
$24,794
2770
$28,032
3090
$31,271
3410
$34,509
3730
$37,748
2460-1
$24,895
2780
$28,134
3100
$31,372
3420
$34,610
3740 `
$37,849
2470 ``
$24;996
2790 ;
$28,235
3110
$31,473
3430
$34,712
3750
$37,950
2480
$25,098
2800
$28,336
3120
$31,574
3440--$34,813
3760
$38,051
2490
$25,199
2810;
$28,437
3130
$31,676
3450
$34,914
3770
$38,152
2500'
$25,300
2820
$28,538
3140
$31,777
3460
$35,015
3780
$38,254
2510
$25,401
2830`
$28,640
3150
$31,878
3470
$35,116
3790
$38,355
2520`
$25,502
2840
$28,741
3160
$31,979
3480
$35,218
3800'
$38,456
2530
$25,604
2850
$28,842
3170
$32,080
3490
$35,319
3810
$38,557
2540
$25,705
2860.
$28,943
3180
$32,182
3500
$35,420
3820 '
$38,658
2550
$25,806
2870`
$29,044
3190'
$32,283
3510
$35,521
3830
$38,760
Attachment 3
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 fluid 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 tools
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
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
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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 Studies 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
13
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 fiu-ther 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 a Judy 24, 2018 public hearing before the
Planning Commission to consider a proposed Second Amendment to the 2015-2023 Housing
Element and zoning text amendments to codify associated inclusionary housing requirement in
Chapter 3 of the IZO 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, on July 24, 2018 the Planning Commission held a duly noticed public
hearing in accordance with Chapter 25 of the IZO to consider a proposed Second Amendment to
the 2015-2023 Housing element and proposed zoning text amendments to codify associated
inclusionary housing requirements in Chapter 3 of the IZO, and at the conclusion of the public
hearing, the Planning Commission adopted Resolution No. 2018-25, recommending that the City
Council adopt the proposed inclusionary housing requirements as amendments to the IZO; and
WHEREAS, on June 7, 2018, public notice of a June 18, 2018 public hearing before the
City Council to consider the proposed inclusionary housing amendments to the IZO 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 proposed IZO amendments and continued the item to a
date certain of August 6, 2018; and
WHEREAS, on August 6, 2018, the City Council continued the item to a date certain of
September 10, 2018; and
WHEREAS, on September 10, 2018 the City Council of the City of Petaluma held a
duly noticed public hearing to consider proposed amendments to the IZO, Ordinance 2300
N.C.S. incorporating inclusionary housing requirements into the IZO;
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NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
PETALUMA AS FOLLOWS:
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. hl addition,
the proposed amendments do not result in any changes to the Petaluma General Plan
2025 ("General Plan") land use policies. This ordinance is also statutorily exempt
from CEQA pursuant to Section 15283 of the CEQA Guidelines because this
ordinance and the inclusionary housing policies it adopts reflect determinations by the
City regarding the need to adequately provide for the City's share of regional housing
needs pursuant to Government Code section 65584. Any development that occurs in
the fixture subject to the land use standards in the City's General Plan and the IZO,
including the inclusionary requirements added by this ordinance, 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. 4"' 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.
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 materials and June 18, 2018 and
September 10, 2018 City Council agenda materials.
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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 and are incorporated into this ordinance as findings of the City Council of the
City of Petaluma.
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.
16
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.
5. 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
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. hi 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:
1. Inclusionary runts 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.
3. 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 a
non-profit organization deemed acceptable by the City for development of
affordable housing; or
17
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 ill -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
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
malting body as part of the overall project analysis for consistency with both the City's
General Plan and this section. 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 the proposed alternative for compliance. h1 considering requests from a
developer for alternative compliance to 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 retained by the City to 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 malting the
report public to the extent permitted by law.
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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 frill force and effect.
Section S. 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 application
or mixed-use project application with a residential component that either a) has a recorded final
map as of January 1, 2019 that is consistent with the previously approved tentative map
(regardless of whether further subdivision of further discretionary approvals for the project are
required), or b) that is deemed complete by the Planning Division prior to January 1, 2019, shall
be subject to those inclusionary requirements in effect immediately prior to the new inclusionary
requirements taking effect pursuant to this ordinance.
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