HomeMy WebLinkAboutStaff Report 3.E 09/17/2018DATE:
TO
FROM:
September 17, 2018
Honorable Mayor and Members of the City Council through City Manager
Sue Castellucci, Housing Administrators
SUBJECT: An Ordinance (Second Reading) 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 adopt the attached 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
On September 10, 2018 the City Council unanimously approved the 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. The recommended action provides for a second reading and adoption of the
ordinance.
FINANCIAL IMPACT
Financial impacts beyond the staff time required to prepare this report and providing public
notice are undetermined at this time. By providing on-site affordable units on future residential
developments, developers will not be paying an in -lieu fee, thereby reducing the City's In -Lieu
Housing fund balance.
ATTACIIMENTS
1. Ordinance Amending the Text of Chapter 3 entitled "Development and Land Use
Approval Requirements" of the Implementing Zoning Ordinance
ATTACHMENT #1
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
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 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
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 a July 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 l: 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. 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 future 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 Courtin California
Building Association v. City of San Jose, (2015) 61 Cal. 4th 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.
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.
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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. 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:
1. 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.
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
2. Payment of a housing in -lieu fee established by the City's adopted fee schedule; or
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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
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 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. In 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 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.
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 (3 0) 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. The exception in clause a) of this provision for residential project
applications or mixed-use project applications with residential components that have recorded final
maps as of January 1, 2019 shall expire and cease to be of any effect without further action of the
City Council concerning project applications that would otherwise qualify for the exemption but
that are not deemed complete prior to January 1, 2024.
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