title
CC:HA - (1) Discussion of Options for New Affordable Housing Programs and Incentives; (2) Adoption of a Resolution Adopting the Affordable Housing Incentive Area (AHIA) Program; and (3) Direction to City Manager/Executive Director as Deemed Appropriate.
body
Contact Person/Dept: Sol Blumenfeld/CDD
Phone Number: 310-253-5761
Fiscal Impact: Yes [] No [X] General Fund: Yes [] No []
Public Hearing: [] Action Item: [X] Attachments: Yes [X] No []
Commission Action Required: Yes [] No [X] Date:
Commission Name:
Public Notification: (E-Mail) Meetings and Agendas - City Council (03/24/16)
Department Approval: Sol Blumenfeld, Director of Community Development (03/23/16)
______________________________________________________________________
RECOMMENDATION
Staff recommends the City Council (1) discuss options for new affordable housing programs and incentives; (2) adopt the proposed resolution adopting the Affordable Housing Incentive Area (AHIA) Program; and (3) provide direction to the City Manager as deemed appropriate.
Staff recommends the Housing Authority Board (1) discuss options for new affordable housing programs and incentives; and (2) provide direction to the Executive Director as deemed appropriate.
BACKGROUND:
In the City, there are approximately 45,340 employees and only 16,958 housing units, which indicates the potential need for a significant number of additional housing units in order to satisfy the housing needs of employees working in the City, who may want to live in the City in which they work. Culver City’s jobs to housing balance, according to the Housing Element (2013-2021), indicates that the current jobs to housing ratio in Culver City is 2.67. This imbalance exacerbates housing costs which reflect market demand for housing.
The California Department of Housing and Community Development (HCD) 2015 median income limit for a four person household is $64,800; the maximum income limit for a four person household low income family is $68,300; and the maximum income limit for a four person moderate income household is $77,750. Based on the federal and state standards of 35 percent of household income toward housing cost, the affordable cost to rent a two-bedroom home is $875 for a low income household and $1,603 for a moderate income household. Culver City has a vacancy rate of less than two percent for rental properties with the average monthly rental cost of $2,500 for a two-bedroom apartment. The differential between an affordable rent and current average rent is between $897- $1,625, making it impossible for a low or moderate income household to rent at an affordable rate in Culver City.
The average home price in Culver City is $950,000 for a two-bedroom, 1,200 square foot home. This average cost is not within the federal and state defined affordability limits, which provide that an affordable purchase price for a low income household is $129,700 and an affordable purchase price for a moderate income household is $280,000.
Based on these current conditions, the Culver City Housing Authority Board (the Board) directed staff to identify new affordable housing programs, including the Rental Assistance Program (RAP), to replace those previously funded by the former Culver City Redevelopment Agency’s Low Moderate Income Housing Fund (LMIHF).
DISCUSSION:
Staff has identified new programs that may be used independently and jointly to assist in providing new affordable housing units in the City. The programs range from market driven to mandatory and include: 1) Density Incentives such as Community Benefits requirements under the City’s mixed use development standards as set forth in Culver City Municipal Code Section 17.400.065.E.3 (Mixed Use Ordinance)1; and density bonuses as set forth in California Government Code Sections Sections 65915 through 65918 and implemented by CCMC Chapter 17.580 (collectively, Density Bonus Law)2; 2) Other Zoning Incentives; 3) Inclusionary Zoning Requirements; 4) Tax Incentives; and 5) Cap and Trade.
Staff recommends the City Council discuss the identified programs and provide direction to staff as deemed appropriate.
1. Density Incentives
Affordable Housing Incentive Areas (AHIA)
In order to create a market incentive to produce affordable housing, the Affordable Housing Incentive Area (AHIA) Program is proposed to provide a density bonus for affordable housing along many of the City’s major commercial corridors. The AHIA Program combines the Community Benefit provisions of the Mixed Use Ordinance with Density Bonus Law. A density bonus is an increase in the number of residential units (or nonresidential square footage on a mixed use development parcel) beyond what the zoning allows. Communities can adopt zoning regulations to allow a density bonus above what is normally permitted on a development site in exchange for the provision of a percentage of below-market-rate housing units.
Density Bonus Law allows a density bonus to be applied to housing developments that provide affordable housing units. The density bonus for affordability may only be applied one time, as part of the project entitlements. In order to maximize the number of affordable units as a percentage of total project units, the AHIA Program would allow a project applicant to first increase project density under the density bonus provisions of the Mixed Use Ordinance and then apply the allowable bonus provided by Density Bonus Law.
The AHIA Program would apply to the City’s major commercial corridors where mixed use development is currently permitted and potentially involve rezoning to permit mixed use development.
Calculating Density Bonus Under the AHIA Program
Combining the “Community Benefits” provision under the City’s Mixed Use Ordinance with the State Density Bonus Law, the total allowable density that could be achieved is 35% above the base density of 50 dwelling units per acre (or 65 units per acre within the TOD District). The Community Benefits are approved by City Council resolution and have included additional parking, open space, landscaped medians and streetscape improvements.
In general, the AHIA Program would establish higher density thresholds in certain commercial zones in the City: (1) in commercial zones adjacent to R-1 and R-2 zones, the maximum density would increase from the current 50 to 61 du/a (dwelling units/acre); (2) in commercial zones adjacent to multi-family zones other than R-2, the maximum density would increase from the current 50 to 67 du/a; and (3) in Transit Oriented Development zones, the maximum density would increase from the current 65 to 87 du/a. The number of affordable units is determined by the total number of additional units that can be provided. Given the maximum allowable density, the density bonus under the AHIA Program will generally allow up to five affordable units on one-half-acre sites and up to nine affordable units on one-acre sites. The actual number of units will vary given lot size and required mixed use development setback and step back requirements. Density Bonus law is very detailed on the number of units allowed above the base density and the corresponding income affordability levels. Staff will provide a summary of the calculations at the City Council meeting. (See Attachment No. 1 - Proposed Resolution; Attachment No.2 - Affordable Housing Incentives Area Map, Attachment No. 3 - Tabulation of Affordable Housing Units, Attachment No. 4 - Levels of Affordability, Attachment No. 5 - AHIA Program Implementation).
Developer Concessions Under Density Bonus Law
Density Bonus Law requires a defined number of “concessions” or “incentives” to be provided as part of a density bonus application. In addition, development standards relief must be provided by the permitting agency when the project cannot be constructed due to physical constraints. The concessions may be pre-approved by the permitting agency by resolution.
The City’s financial consultant, Keyser Marston Associates (KMA), has prepared a financial analysis on the measures required to lever affordable units in a market priced development and found that for a typical three-lot assembly of standard commercial lots, another floor level yields up to eight units, and three of the total units may be required to be restricted to very-low income households at a statutorily defined affordable rent. In order to provide these affordable rents, additional project density is required. The extra density can only be achieved by increasing building height one full story and/or through the combination of reduced building setbacks and step backs and increased building height for part of the floor level. Based upon the KMA analysis, staff recommends that the City Council approve the following development concessions to permit development of affordable units in mixed use developments designated in the AHIA Program:
1. Extra building height (one floor level) in excess of the maximum allowable height in the zoning district; and/or
2. Relief from building step-back requirements.
AHIA Housing Production
There are approximately 678 lots within the recommended AHIA which may be developed separately or assembled with adjacent lots for development. The size of mixed use developments vary with the size of the lot(s) assembled in the project and the proximity of the project to abutting residential development since the Mixed Use Ordinance requires certain building setbacks and step backs from abutting residential land uses to mitigate development impacts. This effectively reduces the developable floor area of the project. Depending upon the number of lots assembled, the amount of density bonus applied and the building location, building size will range from approximately 14,000 sq. ft. to over 80,000 sq. ft. for larger developments on properties of several acres. Not all properties can be expected to be redeveloped in the near-term since housing production occurs in development cycles related to the availability of financing, the state of the financial markets and area housing supply and demand which affects when older commercial and industrial property will recycle to mixed use development. Overall, the AHIA Program could potentially provide in excess of 1,000 affordable units.
Staff recommends the City Council adopt the proposed Resolution adopting the AHIA Program.
2. Other Zoning Incentives
Parking Requirements in TOD Areas
In October 2015, the State enacted AB 744, which is an amendment to Density Bonus Law. AB 744 reduces the maximum allowable parking requirements in developments containing affordable housing located near mass transit. If requested by the developer, no permitting agency may require more parking than allowed by statute unless the local agency has completed its own parking study prescribing more restrictive parking standards. The State found 1) car ownership increases vehicle miles traveled and greenhouse gas emissions; 2) the cost of parking makes housing less affordable and more difficult to build; and 3) the high cost of land required to provide parking significantly increases the cost of transit-oriented development. Consequently, the legislation limits parking requirements for developments containing affordable housing and located near transit. Although the affordable housing parking provisions are incorporated into Density Bonus Law, a developer need not request a density bonus nor any other regulatory incentive to take advantage of the lower parking requirements. However, any development that qualifies under Density Bonus Law to use the parking standards will also be eligible for up to a 35 percent density bonus and one to three incentives and concessions depending on the percentage of income restricted units that are provided. It is possible that the lower parking standards may induce some market-rate developers to provide the affordable units required to qualify for the reduced standards and then seek a density bonus and other incentives in exchange for providing the affordable units.
Parking Requirements Near Major Transit Stops
A “major transit stop” is a site containing a rail station, a ferry terminal served by bus or rail, or the intersection of two or more bus routes that provide service every 15 minutes or less during the morning and afternoon peak commute periods, or a major transit stop included in a regional transportation plan. (Health & Safety Code Section 21155(b).) This definition permits lower parking requirements even where a major transit stop in the regional transportation plan has not yet been constructed.
A housing development located near a major transit stop cannot be required to provide more than 0.5 parking spaces per bedroom if it:
§ Includes either 11% very low income units or 20% low income units; and
§ Is within one-half mile of a “major transit stop;” and
§ Has “unobstructed access” to the transit stop.
A site has “unobstructed access” if a resident can access the stop without encountering natural or constructed impediments.
Parking Requirements for Entirely Low Income Developments.
Any rental housing development that is entirely affordable to lower income households, excluding a manager’s unit, cannot be required to provide more than 0.5 parking spaces per unit if it is:
§ Within one-half mile of a major transit stop and has unobstructed access to it ; or
§ Within a senior housing development that has either paratransit service or unobstructed access to, and is within one-half mile of, a fixed bus route that operates at least eight times per day.
Local Parking Study Requirements for Affordable Housing
Communities may require more parking only if they have conducted a study in the last seven years that includes: 1) an analysis of available parking; 2) differing levels of transit access; 3) walkability to transit; 4) potential for shared parking; 5) effect of parking requirements on housing costs; and 6) car ownership rates for lower income households, seniors, and residents with special needs. However, the most parking that may be required under Density Bonus Law is:
§ One space for studio and one-bedroom units;
§ Two spaces for two- and three-bedroom units; and
§ Two and one-half spaces for units with four or more bedrooms
3. Inclusionary Housing
Recently, the U.S. Supreme Court declined to review California Building Industry Association v. City of San Jose, a California Supreme Court decision affirming the constitutional validity of an inclusionary housing ordinance in the City of San Jose. The San Jose ordinance being challenged by the California Building Industry Association (CBIA) required developers to comply with certain affordability conditions for all new residential development projects of 20 units or more. The California Supreme Court disagreed with CBIA’s contention that such a requirement was a taking and concluded that San Jose’s ordinance was constitutional because it is reasonably related to the public welfare. The U.S. Supreme Court’s denial of review left the California Supreme Court’s decision, and thus the San Jose ordinance, intact and enforceable.
This followed the introduction of AB 2502, which is intended to clarify that local jurisdictions may require inclusion of affordable units in a multifamily residential development. On March 8, 2016, AB 2502 was referred to the Assembly Committees on Local Government and Housing and Community Development. Pending the potential passage of AB 2502 in its current version, the City may wish to consider new Inclusionary Housing Programs. Inclusionary Housing Programs require that a percentage of new residential housing units be reserved for low and moderate income households. Inclusionary housing is most likely to be constructed in commercially zoned mixed use developments where there is potential for higher density, though it could also be developed in multifamily residential zones. If local jurisdictions are clearly given the authority to mandate affordable units in new developments, then such units could be included as part of the proposed AHIA Program. The number of inclusionary units is established as a percentage of the total units in the development, often between 10% to 30%. Inclusionary housing programs often offer developers of small residential projects, and projects with fractional unit requirements, with the option to pay an in-lieu fee, or provide a combination of fee and units, rather than providing the units on-site. Fees collected would be deposited in a proposed Culver City Low Moderate Income Housing Trust Fund (CCLMIHTF).
4. Employer “Tax Credit” for Affordable Housing
Large employers have a vested interest to attract and retain employees by making sure they have affordable housing close to their workplace. The City can advance business interest in housing affordability by offering a tax credit incentive as match. The tax credit would be offered to employers who agree to contribute on a dollar for dollar basis into the proposed CCLMIHTF used exclusively to preserve or construct affordable housing. The City, could offer this voluntary program to larger companies/firms that want to invest in the construction, acquisition/rehabilitation or subsidy of workforce housing. The Housing Authority could administer deposits into the CCLMIHF and use them to subsidize affordable unit rents in the AHIA or the employer could specify which AHIA projects it chooses to subsidize subject to Housing Authority approval. The establishment of the tax credit program must be more fully vetted by the City’s Finance Department and the City Attorney.
5. Cap and Trade - Affordable Housing and Sustainable Communities Program
The Affordable Housing and Sustainable Communities (AHSC) program adopted under SB375 is intended to guide land-use, housing, transportation, and sustainable, smart growth development to improve mobility and accessibility to affordable housing. Toward that end, the State Department of Housing and Community Development (HCD) released a Notice of Funds Availability (NOFA) announcing the Second Round of AHSC funding in the amount of $320 million in 2015-2016 and requires that at least 50% of this money be spent for affordable housing, including preserving and developing housing for lower income households and at least 50% of these funds are to be allocated to disadvantaged communities. Qualifying projects must:
§ Result in reduction of greenhouse gas emissions and vehicle miles travelled
§ Improve conditions of disadvantaged communities
§ Increase accessibility of housing, employment centers and key destination through transportation options such as walking, biking and transit
§ Support or improve public health
§ Increase mobility options
§ Increase transit ridership
§ Preserve and develop affordable housing for lower income households; and
§ Protect agricultural lands to support infill development
The funding is competitive and requires that projects are:
§ Located within one-half mile of high speed rail, heavy/light rail, bus rapid transit
§ Inclusionary of sustainable transportation Infrastructure or additional Capital or Program uses such as station area improvements (including bus stop benches or shelters), pedestrian improvements and dedicated bicycle paths
§ Affordable (residential or mixed-use) development with at least 20% of total units restricted to moderate and lower income households
§ “Shovel-Ready” at time of application
§ Located in proximity to a “Qualifying Transit/High Quality Transit” project
§ Site controlled, entitled and environmentally cleared
§ Unencumbered by outstanding legal challenges
§ Climate adaptive to reduce greenhouse gas emissions and does not convert natural resource lands to development
In summary, the AHSC program is competitive and promotes steep levels of affordability, proximity to mass transit or transit served neighborhoods and gives priority for disadvantaged communities. Awarded projects often exceed 50% or more affordability and include deeper affordability for low and very-low income households. For example, two recently awarded projects in disadvantaged neighborhoods were Crenshaw Villas (Los Angeles County) and Depot at Santiago (Orange County) which were 100% affordable. These kinds of affordable housing projects are not being constructed in Culver City which is not generally considered disadvantaged. Therefore Cap and Trade is a possible, but not likely source, for affordable housing funding unless the program guidelines are revised.
6. Live - Work / Work-Live
A live/work space is designed to house a resident and their business and provides a means to reduce rents by sharing space between housing and the business, by sharing heating, electricity and telecommunications costs for just one space and through reduced travel costs by eliminating work trips.
Typically these spaces are large and open (some with lofts), that are ideal for architects, graphic or media artists, photographers, fashion designers, marketing and advertising, event planners and salons or similar businesses that are service related and need a lot of space for their work. Live-Work is distinguished from a “home office” in that the work space may consume much of the living space and is intended to facilitate the operation of a stand-alone business sometimes accommodating additional employees that do not live in the property and visits from clients. For that reason it is typically more successful in commercial or industrial districts. Work-Live further stresses the work function and takes precedence over the residential use. Generally, the Live-Work /Work-Live concept promotes sustainable land-use objectives by reducing carbon footprint. Currently the Zoning Code (CCMC Section 17.400.060) permits Live-Work in commercial zones that also permit mixed use development. It is suggested that Live-Work/Work-Live be permitted in both commercial and industrial zones and within the Commercial Regional Business Park (CRB) and Commercial Regional Retail (CRR) zones and further that additional zoning measures such as reduced parking be permitted to incentivize it.
Affordable Housing Incentive Program Administration
The Housing Division currently monitors affordable housing units to ensure compliance with program requirements. Program administration includes:
§ On-going affordable covenant restriction monitoring
§ Owner occupancy restrictions (when required)
§ Home mortgage refinances and second liens approvals (Under MAP)
§ Home re-sales approvals (Under MAP)
§ Section 8 rental assistance and related inspections
If the proposed affordable housing programs are approved, the Housing Division may also monitor and assist with the following:
§ Expanded affordable housing covenant restriction monitoring.
§ Inclusionary housing certifications and lease-ups
§ Review of financial studies in support of development concessions
§ Annual tenant surveys for program compliance
§ Energy efficiency programs offered by the state to reduced energy costs and by extension - housing costs-- including solar investment rebates and insulation programs. (US DOE Better Building Challenge, Solar Investment Tax Credits)
In order to establish an additional funding source for expanding affordable housing program administration, staff recommends that a proposed inclusionary housing program and the AHIA Program include cost recovery to partially offset administrative costs and/or in lieu funding prescribed under such programs to partly offset program administration costs.
CONCLUSIONS
The City Council and Housing Authority Board may want to consider a menu of affordable housing program options that range from market incentives to mandatory requirements. Some of the programs may be implemented immediately (AHIA) and others require further study such as tax incentives or final clarification from the State (inclusionary housing). Staff recommends that the City Council approve the proposed Resolution adopting the AHIA Program combining the density bonuses allowed by Density Bonus Law and Community Benefits required by the Mixed Use Ordinance, with specified developer concessions.
FISCAL IMPACT
There is no fiscal impact created by the discussion of these options or the adoption of the proposed resolution. In the event the City Council and Housing Authority Board provide further direction with regard to other types of housing programs, the fiscal impact of those programs will be discussed when those items return to the City Council/Housing Authority Board at a future meeting.
ATTACHMENTS:
1. Proposed Resolution;
2. Affordable Housing Incentives Area Map
3. KMA Memorandum on AHIA Program
4. Levels of Affordability
5. AHIA Program Implementation
6. Program Summary Matrix
RECOMMENDED MOTION(S):
That the City Council:
1. Discuss options for new affordable housing programs and incentives;
2. Adopt the proposed Resolution adopting the Affordable Housing Incentive Area (AHIA) Program; and
3. Provide direction to City Manager as deemed appropriate.
That the Housing Authority Board:
1. Discuss options for new affordable housing programs and incentives; and
2. Provide direction to the Executive Director as deemed appropriate.
NOTES:
1. Summary of Community Benefit Provisions
§ Summary of Community Benefit Zoning Requirements
§ Incentives (density increases) granted for development that providing specific benefits.
§ 35 units per acre base density, up to 50 units per acre adjacent commercial development or 65 units per acre within the TOD District.
§ Requires quantified costs of providing the benefit and expected developer revenue for increased density as part of the discretionary review process
§ Requires proportionally based system relating the increased project revenues to community benefit contribution.
§ Require a standardized system of contribution for providing benefit directly or indirectly through in lieu payment.
§ The public benefit must be noted on project plans (where applicable) or provided through in lieu contribution prior to issuance of building permit
Density:
§ 35 units per acre base density, up to 50 units per acre adjacent commercial development with Community Benefit and when lot is split between jurisdictions and up to 65 units per acre within the Transit Oriented Development District.
Height:
§ 56’ height only where abutting commercial zones and where lots is split between jurisdictions.
§ Reduces building height to 45’ abutting multifamily zones. Building may step to 56’ on deep lots of 150’ or greater providing stepped portion is 50’ or more from abutting residential property.
§ Reduce building height to 35’ abutting single family (R-1) zones. Building may step to 45’ providing the stepped portion of the building is 35’ or more from abutting residential (R-1) property.
Other Standards:
§ Minimum 30’ commercial area depth or 10% of the GFA or 30% of the lot whichever is greater.
§ Minimum 5’ setback above ground floor commercial.
§ Maximum 50% of residential to be studio units.
§ Minimum 10’ rear setback and 60 degree clear zone angle above ground floor.
Calculating Community Benefit Contribution
The method for establishing the developer’s contribution must be based on the proportionality of the benefit relative to the developer’s profit. Unless there is proportionality, the system will be ineffective as there will be no reason to provide the benefit if the cost of providing it exceeds the revenue for the project. The Community Benefit Contribution is proposed as a proportional share of the Additional Base Density Value and calculated as follows:
A. Community Benefit Contribution:
50% of the Additional Base Density Value.
B. Additional Base Density Benefit Value:
Additional Dwelling Units Allowed X Market Value Sales Price X 0.15 (Developer Profit).
C. Community Benefit Value:
The cost for providing the community benefit.
The Community Benefit Contribution may be satisfied by funding the Community Benefit improvement on site or by providing an off-site improvement.
2. The State of California enacted Sections 65915-65918 which require cities and counties to provide increased density and up to three zoning concessions for providing a mandatory percentage of affordable housing units. When an applicant proposes a housing development within a jurisdiction, local government must provide the applicant incentives or concessions for the production of housing units as prescribed in the State Planning and Land Use Law. Some cities and counties in California have required developers to demonstrate the economic necessity of incentives to achieve affordable housing objectives. Burbank, Glendale, Long Beach, Santa Monica and Los Angeles County, among other jurisdictions, require project applicants to account for their requested incentives. Local government must grant a density bonus and at least one concession or incentive identified when:
§ Ten percent of the total units of a housing development are reserved for lower income households as defined in Section 50079.5 of the Health and Safety Code.
§ Five percent of the total housing units are reserved to very low income households as defined in Section 50105 of the Health and Safety Code.
§ A senior citizen housing development, as defined in Section 51.3 and 51.12 of the Civil Code, or mobile home park that limits residency based on age requirements for housing for older persons pursuant to Section 798.76 or 799.5 of the Civil Code.
§ Ten percent of the total dwelling units in a condominium project as defined in Section 4100 of the Civil Code for persons and families of moderate income per Section 50093 of the Health and Safety Code, provided that all units in the development are offered to the public for purchase.
Concession or incentive means any of the following:
(1) A reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards approved by the California Building Standards Commission as provided in Part 2.5 (commencing with Section 18901) of Division 13 of the Health and Safety Code, including, but not limited to, a reduction in setback and square footage requirements and in the ratio of vehicular parking spaces that would otherwise be required that results in identifiable, financially sufficient, and actual cost reductions.
(2) Approval of mixed use zoning in conjunction with the housing project if commercial, office, industrial, or other land uses will reduce the cost of the housing development and if the commercial, office, industrial, or other land uses are compatible with the housing project and the existing or planned development in the area where the proposed housing project will be located.
(3) Other regulatory incentives or concessions proposed by the developer or the city, county, or city and county that result in identifiable, financially sufficient, and actual cost reductions.
(4) "Development standard" means any ordinance, general plan element, specific plan, charter amendment, or other local condition, law, policy, resolution, or regulation.
(5) Fee waivers.