SR-9-C (20)
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Santa Monica, NOV "1 9 1991
proprstf.rpt California
Council Meeting: November 12, 1991
To: Mayor and City council
From: City staff
SubJect: Recommendation to Direct the city Attorney to Prepare an
Ordlnance Implementing Proposition R
INTRODUCTION
The full staff analysis and implementation plan for Proposition R
is contained in the Proposition R Summary Report and the
Proposition R Technical Report. copies of these reports have been
previously delivered to council. This report presents background
lnformation on Proposition R and a review of comments received
from the pUblic on the Proposition R proposal.
BACKGROUND
On January 8, 1991, City Staff presented to the City Council a
proposal for the lmplementation of Proposition R. At the request
of the Plannlng commission, the Council deferred immediate action
pending Planning ComnUSS10n reVlew. On February 20, 1991 staff
proposed to the Planning Commission that further study be conducted
over a six month time period. WhJ.le that study was belng
conducted, the City Council adopted an interim ordinance on March
26th, 1991 and, on September 10, 1991, extended the interim
ordinance to January 101 1991.
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NOV 1 9 1991
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The completed staff study together with the staff implementation
proposal were lncorporated into the Summary Report and Technlcal
Report on Proposition R, both of which were made available to
Councll members and to the public on September 10, 1991- The
Housing commission discussed the proposal in the Summary Report and
the Technical Report on October 3 I 1991- They then presented to
the Planning Cornmlssion a list of their concerns regardlng
implementation, which is attached.
On October 16, 1991 the Planning Commisslon held a public hearlng
on the proposals ln the Summary Report and Technical Report. They
requested additional information from staff, which was provided to
them on October 23, 1991. At a special meeting on Friday, October
25, 19911 the Planning Commission discussed the proposals in the
Summary Report and Technical Report further. At that time they
took no position on the proposal but rather voted to request City
Councl1 to continue their consideration for two to three months
while the Plannlng Commission considers the proposal further at
their meeting on December 10, 1991. A separate staff report will
be provided to the Council summarizing the Planning Commission
deliberations.
STAFF IMPLEMENTATION PROPOSAL
The staff implementation proposal, as set forth in the Summary
Report and Technical Report, attempts to interpret Proposition R in
light of the two principal housing policies of the city of Santa
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Monical i.e.t increasing the supply of housing for all income
groups, particularly low and moderate income persons, and
protecting the existing supply of affordable housing. These
policies are the cornerstone of the new National Affordable Housing
Act of 19901 the state of Californ1a Housing Element Law and have
long been central to city housing policy. While they at times can
be seen as conflictlng, staff believe it is important that
Proposition R be implemented so as to maximize its impact on both
increasing the affordable housing supply and preserving existing
affordable houslng.
The staff implementation proposal accomplishes this through a mixed
ln lieu fee and onsite program, implemented through a tiered
program which provides different levels of exaction for different
levels of development. The interim ordinance currently in effect
requires that all new market rate residential development make 30
percent of the units in each development permanently available on
slte to low and moderate income persons as provided for in
Proposition R. The staff proposal differs from the interim
ordinance in providing a tiered response which permits in lieu fees
instead of onsite units at certain levels of development. The
staff proposal requires that all new market rate residential
development of less than four units either provide 30 percent low
and moderate units on sitet as in the interim ordinance, or pay an
in lieu fee of $12.00 per square foot. It requires that all new
market rate development of greater than three units but less than
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twenty e1ther provide 30 percent low and moderate units on site, as
1n the interim ordinance I or pay an in lieu fee of $12.00 per
square foot for the low income unit and provide the remain1ng
moderate income units on site. Finally, all new market rate
developments of greater than twenty units are required to provide
the 30 percent low and moderate units on site, as in the interim
ordinance. The staff proposal further requires that any new
development which results in the demolition of a rent controlled
unit with an Maximum Allowable Rent (MAR) of less than 60% of the
median MAR must provide the 30 percent low and moderate units on
site, as 1n the interim ordinance.
ISSUES TO BE RESOLVED
Comments from the public regarding the staff proposal have focussed
on a number of issues which must be resolved as part of any
implementation strategy. The major issues which have engendered
comment are as follows. The detailed position of staff as to each
of the issues and the basis for staffs' position are set forth in
the reports that have been provided to council and the Planning
Commission.
1. Overall strategy - Should the implementation strategy require
compliance on a project by project basis or should it merely
measure compliance on a Citywide basis. The staff proposal takes
a middle position, requiring project by project compliance only for
moderate income units in developments of more than 3 units.
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2. In-lieu Fees - Should payment of in-lieu fees be permitted or
should all the inclusionary housing be requ1.red to be produced
onslte? The staff proposal permits in-lieu fees for low income
units but requlres most moderate income unlts onsite.
3. Amount of In-Lieu Fee - If an In-Iieu fee option is chosen
should it be enough to fully compensate the city for the cost of
producing the new affordable housing? The staff proposal does not
fully compensate the city for the cost of subsidy but assumes that
additlonal subsidy funds from the state and federal government will
continue to be available.
4. Impact on New Develop~ent - Whatever option is chosen, to what
degree will it depress new residential multifamily development?
Staff has performed financial analyses of the var10US proposals and
does not believe lts proposal will prevent new residential
multifamily development.
s. Incluslonary ownershlp units - Should the current policy of
requiring all on site inclusionary units to be rentals be continued
or should inclusionary ownership units be permitted? The staff
proposal changes current policy and permits inclusionary ownership
units.
6. Rent controlled units - Should the implementation plan require
all inclusionary housing onsite if the new development results in
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the demolition of a low rent controlled unlt? Should any type of
existing housing be provided wlth the higher level of protection
which would result lf all inclusionary units are required to be
provided onsite? The staff proposal requlres that any new
development WhlCh results in the demolition of a rent controlled
unit with an Maximum Allowable Rent (MAR) of less than 60% of the
median MAR must provide all the inclusionary units onsite.
7. Tiered approach - If a tiered approach is permitted, where
should the break point for each tier be? since most neTiV
residential development consists of small (3 to 6 unit) projects,
different tiers for small projects may have significant impact.
The staff proposal permits new residential development of less than
four units to elther provide all inclusionary units on site, as in
the interim ordinance, or to pay an in lieu fee of $12.00 per
square foot. All new residential development of greater than three
units but less than twenty may either provide all the incluslonary
units on site or pay an in lieu fee of $12.00 per square foot for
the low income unlts and provide the remaining moderate income
units on site. Finally, all new residential developments of
greater than twenty units must provide all the inclusionary units
on site.
S. Calculation of 30% - Should the required number of onsite
lnclusionary units be "rounded Upll since this is the only way to
guarantee that a sufficient number of affordable units are
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produced? The staff proposal requires that all calculations of
inclusionary units required be "rounded up" to the next highest
whole number.
9 . Tenant Selection - Should the tenant selection process be
centralized and controlled by the City or decentralized and
controlled by the individual developers? The staff proposal
requires that the City control the waiting llst but that individual
owners continue to have the right to choose the individual tenant
referred by the City.
10. compliance Measurement - How, and when, will compliance with
Proposition R be measured? What will be the result of a fallure of
the Clty to comply? While the ultimate decision as to the effect
of noncompliance with Proposition R is a legal one, staff
recornnends that the Council retain the maximum amount of
flexibility in fashioning its response to any development
shortfall.
Budqet{Financial Impact
The recommendation conta1ned in the Summary Report will have a
budgetaryjflnancial impact in that in lieu fees will be collected
and held for future programming. It 1S not possible to predict
with any certainty the amount of in lieu fees. However I an
estimate based on the number of units constructed during the past
five years which have chosen to pay the in lieu fees, using an
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estimated square footagel would predict an annual revenue of
approximately $1/300,000.
Add1 tionally 1 dependlng upon the implementat10n strategy adopted by
the Councll, additlonal staff time of the community Development
Department and Land Use and Transportation Management Departments
will be required for implementation and monitoring.
RECOMMENDATION
It is recommended that the City council hold a public hearing and
direct the city Attorney to draft an ordinance implementing the
Proposition R lmplementation strategy contained in the Summary
Report.
Prepared by: Peggy Curran, Director
Chuck Elsesser, Housing Program Manager
Denise Altay, Senior Development Analyst
Community Development Department
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