SR-407-000-03 (14)
7C
JUL 1 J Zgg~
Council Meeting: July 12, 2005
Santa Monica, California
JUL 2 6 2005
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Resolution to Increase the Affordable Housing Fee and Introduction and
First Reading of an Ordinance Amending the Affordable Housing
Production Program to Establish a Reduction or Waiver Provision of
Chapter 9.56 and to Modify Affordable Housing Definitions and
Consideration of Other Amendments to Provide for the Annual Adjustment
of the Affordable Housing Fee and the Timing of the Affordable Housing
Fee Calculation for a Particular Development
INTRODUCTION
This staff report recommends that the City Council adopt the attached resolution
increasing the Affordable Housing Fee for apartment and condominium developments
,
and introduce for first reading the attached ordinance amending Chapter 9.56 of the
Municipal Code, the Affordable Housing Production Program ("AHPP"), to establish a
hardship provision that allows for the reduction or waiver of the AHPP and to modify
affordable housing definitions. This staff report further recommends that the City
Council amend the AHPP to provide for an annual adjustment to the Affordable Housing
Fee and to provide that the Affordable Housing Fee that a particular development must
pay be based on the Affordable Housing Fee in effect at the time the payment is made.
These recommended revisions to the AHPP are included in the attached ordinance.
BACKGROUND
On November 25, 2003, the City Council directed staff to evaluate the Affordable
Housing Production Program and/or other City programs and policies, and suggest
1
'it..
~
ways to update these provisions to facilitate meeting the Proposition R affordable
housing goals (that 30% of all newly constructed multifamily housing each year be
affordable to low and moderate income households).
At its May 10, 2005 meeting, staff presented to Council various strategies to increase
affordable housing. The May 10, 2005 staff report and preliminary consultant analysis
by Hamilton, Rabinovitz & Alschuler (HR&A) is provided in Attachment A.
This matter was then continued to the Council meeting of May 17, 2005.
At its May 17, 2005 meeting, after consideration of the various options presented, the
City Council directed staff to prepare a resolution to reflect new affordable housing fees
as supported by an updated (2005) Nexus Study prepared by HR&A. Additionally,
Council directed staff to prepare an amendment to the AHPP that allows for an
administrative hardship remedy regarding the AHPP's provisions. Other requested
changes to the AHPP regarding on-site unit provisions and developer options in building
affordable units will be evaluated over the next several months.
DISCUSSION
In the May 10, 2005 staff report and hearing on the matter, staff detailed the basis for
updating the Affordable Housing Fee. This rationale includes changes in the real estate
market (rents and purchase prices), the availability of new household income and
spending data (2000 Census and a revised household spending mode!), and the
2
increased costs of constructing affordable multifamily housing (land, construction
materials and labor). The May 10, 2005 staff report and HR&A presentation is included
as Attachment A for reference.
Subsequent to the May 17, 2005 Council meeting, HR&A completed its Nexus Study.
The 2005 Nexus Study supports an Affordable Housing Fee of $22.33 for apartment
developments and $26.08 for condominium developments, and is provided in
Attachment B. This updated Affordable Housing Fee is based on a weighted average,
which reflects the location of multifamily development activity in Santa Monica and the
household spending patterns from those census tracts where development activity is
occurring. The Resolution setting forth the new Affordable Housing Fee is provided in
Attachment C.
In conjunction with the update of the Affordable Housing Fee, the AHPP would establish
an administrative hardship remedy. The proposed Ordinance in Attachment D amends
the AHPP to provide an administrative remedy available for any developer who
contends that the AHPP, as applied to his or her property, violates either the Federal or
State constitution. This amendment will replace the current requirement that the City
conduct an economic analysis as part of the fee adoption process and is consistent with
current case law.
The proposed Ordinance also revises Section 9.56.20 of the AHPP to include
"moderate income households" in the definitions of "Affordable Housing Fee" and
3
"Affordable Housing Unit." This revision is consistent with the analysis undertaken in
the 2005 Nexus Study. Additionally, the definition of "Low, Very Low, and Moderate
Income Levels" is clarified to be based on the estimate of median income for a four-
person household, to be consistent with federal and state affordable housing programs.
Staff recommends the Council consider two other amendments to the fee provisions of
the AHPP. One amendment would provide for an annual update of the Affordable
Housing Fee and the other amendment would change the timing when the Affordable
Housing Fee for a particular development is calculated. Both of these amendments are
reflected in the proposed Ordinance in Attachment D.
The AHPP currently provides for periodic recalculation of the Affordable Housing Fee to
account for changed housing market circumstances, but this is not an annual
adjustment. The AHPP should be amended to provide that the Affordable Housing Fee
be adjusted annually, so that it keeps pace with changes in housing market conditions.
The annual adjustment feature would be similar to the City's existing office mitigation
fee (1/2 of which is used for affordable housing), except that the office mitigation fee is
adjusted monthly (see SMMC 9.04.10.12) by changes in the Consumer Price Index.
The annual adjustment of the Affordable Housing Fee would reflect changes in
construction and land costs, rather than changes in the price of consumer goods.
Currently, the AHPP also establishes that the amount of the Affordable Housing Fee for
a particular development is the fee "in effect at the time that the application for the multi-
4
family project is deemed complete" (SMMC 9.56.070[b)). However, the Affordable
Housing Fee payment is not due until the development is completed, so there is a
multiple-year period between the time the Affordable Housing Fee for a development is
first calculated and the time it is actually paid. During this multi-year period,
construction and land costs can change significantly. Therefore, the AHPP should be
amended to provide that the amount of the Affordable Housing Fee for a particular
development would be based on the Affordable Housing Fee in effect at the time it is
actually paid.
The updated Affordable Housing Fee and the revised AHPP will be applicable to any
project whose application is determined completed after May 30, 2005 unless the
applicant can otherwise establish a vested right.
BUDGET/FINANCIAL IMPACT
The amount of fee revenue produced as a result of this resolution depends on the
number and scale of projects that apply for building permits. The Affordable Housing
Fee is deposited into an affordable housing reserve account in the Special Revenue
Fund to be used only for the development of affordable housing and appropriated in
accordance with established budget procedures and necessary Council approvals.
Approval of the resolution increasing the Affordable Housing Fee does not have a
financial or budgetary impact at this time.
5
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution increasing the
Affordable Housing Fee for apartment and condominium developments and introduce
for first reading the attached ordinance amending Chapter 9.56 of the Municipal Code,
the Affordable Housing Production Program, to establish a hardship provision that
allows for the reduction or waiver of the AHPP and to modify affordable housing
definitions. It is further recommended that the City Council amend the AHPP to provide
for an annual adjustment to the Affordable Housing Fee and to provide that the
Affordable Housing Fee due for a particular development be based on the Affordable
Housing Fee in effect at the time the payment is made. These recommended revisions
to the AHPP are included in the attached ordinance.
Prepared by:
Jeff Mathieu, Director, Resource Management Department
Ron Barefield, Acting Housing & Redevelopment Manager
Jim Kemper, Acting Housing Administrator
ATTACHMENTS
Attachment A:
May 10, 2005 Staff Report Regarding Strategies to Increase
Affordable Housing and HR&A Presentation
Attachment B:
Nexus Study (2005) Updating the Affordable Housing Fee
Attachment C:
Resolution Increasing Affordable Housing Fee
Attachment D:
Ordinance Amending Chapter 9.56 of the Municipal Code
6
Attachment A and B are not available
electronically. Available for review at the
City Clerk's Office.
ATTACHMENT C
f:\atty\muni\law\barry\affordfeereso 7 -12-05
City Council Meeting 7-12-05
Santa Monica, California
RESOLUTION NUMBER
(CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
REVISING THE AFFORDABLE HOUSING UNIT BASE FEE FOR NEW MARKET-
RATE MULTIFAMILY DEVELOPMENT
WHEREAS, the Santa Monica City Council adopted Ordinance Number 1918
(CCS) on July 21, 1998 - the City's Affordable Housing Production Program; and
WHEREAS, the Affordable Housing Production Program requires developers of
market-rate multifamily housing to assist in the production of affordable housing, but
provides numerous options to meeting this requirement through the payment of an
affordable housing development fee, development of on-site affordable units or through
other specified options; and
WHERAS, the vast majority of new market rate multi-family development in the
City is only affordable to very high income households; and
WHEREAS, since the program's adoption in 1998, most developers of multi-
family housing have chosen to pay the affordable housing development fee to comply
with the Affordable Housing Production Ordinance; and
1
WHEREAS, because the City is built-out, land available for residential
development in the City is limited and land which could be used for development of
affordable housing is being depleted by development of high cost housing resulting in a
continued rise in land costs; and
WHEREAS, changes in State and Federal laws and housing programs
increasingly inhibit the City's ability to meet State goals and local policies concerning
income diversity; and
WHEREAS, in July 1998, Hamilton, Rabinovitz & Alschuler, Inc. ("HR&A") on
behalf of the City prepared an analysis of the relationship between new market rate
apartment and condominium development in the City and the need for affordable
housing created by this new development. This study focused on the relationship
between the demand for goods and services created by households who occupy new
market rate apartment and condominium development in the City, the number of low-
wage workers in public agencies and businesses need to satisfy this demand, and the
costs of producing the affordable housing needed by these workers. The study
demonstrated the fee range per square foot which could be imposed on new market
rate multi-family development to finance the development of affordable housing needed
to meet the demand created by market-rate development; and
WHEREAS, on July 28, 1998, the City Council adopted Resolution No. 9295
(CCS) establishing the Affordable Housing Base Fee of $6.14 per square foot of floor
area for apartment developments and $7.13 per square foot of floor area for
condominium developments; and
2
WHEREAS, HR&A updated this analysis in March 2000 for condominium
projects; and
WHEREAS, on March 28, 2000, the City Council adopted Resolution No. 9498
(CCS) establishing the Affordable Housing Unit Base Fee of $11.01 per square foot of
floor area for condominium developments and leaving the Affordable Housing Unit Base
Fee for apartment developments unchanged; and
WHEREAS, on November 25, 2003, the City Council directed staff to evaluate
the Affordable Housing Production Program and/or other City programs and policies,
and suggest ways to update these provisions to facilitate meeting the Proposition R
affordable housing goals; and
WHEREAS, since the City Council adopted the current Affordable Housing Unit
Base Fee for apartment and condominium developments, new household income and
spending and other data have become available, and the costs of constructing, renting,
and purchasing multifamily housing have all increased significantly; and
WHEREAS, on May 17, 2005, the City Council commenced consideration of the
proposed adoption of a resolution and related amendments to the City's Affordable
Housing Production Program; and
WHEREAS, at the conclusion of that hearing, the City Council directed City staff
to return to Council with a proposed resolution and amendments to the Affordable
Housing Production Program; and
3
WHEREAS, in light of the City Council's direction and the changed economic
conditions, HR&A has updated its fee study; and
WHEREAS, on May 30, 2005, the City published notice that at the July 12, 2005
City Council meeting, the City Council would consider a proposed resolution and related
ordinance amendments to increase the affordable housing fee that private developers
pay to the City for the production of affordable housing; and
WHEREAS, the City republished this notice on June 30, 2005 and July 7, 2005;
and
WHEREAS, a copy of the HR&A fee study has been available in the City Clerk's
Office for public review since July 1,2005; and
WHEREAS, based on this updated fee study, an Affordable Housing Unit Base
Fee of $22.33 for apartments and $26.08 for condominiums would be appropriate; and
WHEREAS, since development activity does not take place uniformly across the
City, but tends to be concentrated more or less in some neighborhoods, these fees are
based on a weighted average which takes into account this neighborhood variation, and
WHEREAS, continued new residential development which does not include or
adequately contribute toward the cost of affordable housing development will only serve
to further exacerbate the current affordable housing shortage; and
WHEREAS, the failure to provide adequate affordable housing for low-wage
workers can force these workers to live in less than adequate housing within the City,
4
pay a significantly disproportionate share of their incomes to live in adequate housing
within the City, or commute ever-increasing distances to their jobs from housing located
outside the City; and
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The Affordable Housing Unit Base Fee for new market rate
condominiums established pursuant to Section 9.56.070 is $26.08 per square foot of
floor area.
SECTION 2. The Affordable Housing Unit Base Fee for new market rate
apartment established pursuant to Section 9.56.070 is $22.33 per square foot of floor
area.
SECTION 3. Commencing upon July 1, 2006 and on July 1 of each fiscal year
thereafter, all fees established by this resolution shall be reviewed and adjusted in
accordance with the Santa Monica Municipal Code Section 9.56.070(b).
SECTION 4. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effeCt sixty (60) days from
the date of adoption of this Resolution.
APPROVED AS TO FORM:
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ATTACHMENT D
F :atty\mu n i\laws\barry\affordablehousingamendordfinal-1.doc
City Council Meeting 7-12-05 Santa Monica, California
ORDINANCE NUMBER
(CCS)
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SANTA MONICA AMENDING SANTA MONICA MUNICIPAL CODE SECTIONS
9.56.010,9.56.020, AND 9.56.070 AND ADDING SECTION 9.56.170 TO THE SANTA
MONICA MUNICIPAL CODE TO MODIFY THE CALCULATION, ADJUSTMENT, AND
PAYMENT TIMING OF THE AFFORDABLE HOUSING FEE, TO ADJUST THE
AFFORDABLE HOUSING DEFINITIONS AND TO ESTABLISH A PROVISION TO
ADJUST OR WAIVE THE REQUIREMENTS OF CHAPTER 9.56
WHEREAS, Santa Monica is a coastal city in a prime location, being bordered by
the City of Los Angeles to the north, east and south; and
WHEREAS, the combination of a scenic oceanside location, excellent climate,
and the ready availability of urban facilities, services and entertainment make Santa
Monica an extremely desirable place to live; and
WHEREAS, land area of the City is very small - approximately eight square
miles; and
WHEREAS, Santa Monica is already a fully built-out city, with only thirty-three
vacant residential parcels and a population of approximately ninety thousand.; and
WHEREAS, Santa Monica's population density, eleven thousand two hundred
persons per square mile, is the second highest among neighboring and nearby
1
jurisdictions, and is the densest among coastal communities in Los Angeles County;
and
WHEREAS, the vast majority of new market rate multi-family development in the
City is not affordable with the average cost of a new market rate condominium in the
City now approximately $740,000.00; and
WHEREAS, market conditions, including the high cost and lack of residential
land, construction costs, and the availability and cost of financing, make the
development of affordable housing in the City extremely difficult; and
WHEREAS, the vast majority of housing units have been and will continue to be
produced by the private housing industry; and
WHEREAS, the consumption patterns of the upper-income households who
occupy these new, luxury market rate multi-family housing units create a need for
affordable housing in the City; more specifically, households create demand for goods
and services in the private sector, such as retail goods and medical services, and jobs
in the public sector, such as teachers and municipal services, with the higher the
household's income, the more demand created; and
WHEREAS, new market rate multi-family housing in Santa Monica
accommodates upper-income households almost exclusively because of the high rent
or purchase price required to occupy it; and
WHEREAS, supplying goods and services sufficient to meet the demand created
by upper-income households in new market rate multi-family housing requires workers
across the pay scale spectrum. including lower-wage employees; and
2
WHEREAS, the City has prepared a series of analyses of this relationship
between new market rate apartment and condominium development in the City and the
need for affordable housing created by this new development; and
WHEREAS, the initial study was prepared in July 1998 by Hamilton, Rabinovitz &
Alschuler, Inc. ("HR&A"); and
WHEREAS, HR&A updated this analysis in March 2000; and
WHEREAS, on July 1, 2005, HR&A completed a new update of this analysis; and
WHEREAS, the July 1, 2005 study, as did the earlier studies, focuses on the
relationship between the demand for goods and services created by households who
occupy new market rate multi-family development in the City, the number of low-wage
workers in public agencies and businesses needed to satisfy this demand, and the
costs of producing the affordable housing needed by these workers; and
WHEREAS, this study demonstrates the range per square foot which could be
imposed on new market rate multi-family development to help finance the development
of affordable housing needed to meet the demand created by market rate development;
and
WHEREAS, because the City is fully built-out, land available for residential
development in the City is extremely limited; and land which could be used for
development of housing for affordable households is being depleted by development of
high cost housing; and
WHEREAS, continued new residential development which does not include or
contribute toward the cost of affordable housing development will only serve to further
exacerbate the current affordable housing shortage; and
3
WHEREAS, the lack of affordable housing production by market-rate
development has a direct impact upon the health, safety, and welfare of the residents;
and
WHEREAS, requiring developers to assist in the production of affordable housing
is also consistent with the City's long-standing commitment to achieve and maintain a
suitable living environment including decent housing for persons at all economic levels;
and
WHEREAS, this municipal commitment conforms with State and Federal policies
and is a principal goal of the City's 2000-2005 Housing Element Update and the 2005-
2010 Consolidated Plan; and
WHEREAS, California's Housing Element law requires each city and county to
develop local housing programs designed to address its "fair share" of existing and
future housing needs for all income groups; and
WHEREAS, the City's 2000-2005 Housing Element Update establishes the City's
fair share at 2,208 housing units of which 1281 should be affordable; and
WHEREAS, the City has historically effectuated this commitment to affordable
housing through extraordinary efforts manifest in various City laws, policies and
programs; and
WHEREAS, for instance, the City's voters have adopted initiative measures
which strive to maintain and promote affordable housing in the City; the Rent Control
Charter Amendment, adopted in 1979, has as its primary purpose the protection of
affordable housing and has historically been the City's most important legislative tool for
maintaining the supply of affordable housing; and, similarly, Proposition R, adopted by
4
the voters in 1990, mandates that thirty percent of all new multi-family housing units
constructed in the City each year be affordable; and
WHEREAS, the City's zoning laws and policies also include substantial
incentives for the production of affordable housing, including height and density
bonuses and reduced parking requirements; and
WHEREAS, the City operates a number of programs which facilitate the
production of affordable housing, including loans to private, non-profit agencies to
acquire or construct affordable housing units; and
WHEREAS, the Housing Element Update catalogues a dozen funding sources
that the City utilizes to assist in the development and rehabilitation of affordable housing
totaling almost $70,000,000.00; and
WHEREAS, despite this significant commitment by the City; the City's total
housing needs exceeds its available resources and the City's ability to meet these
needs; and
WHEREAS, despite the City's prime location and high real estate values, the City
has historically been highly successful in maintaining its economic diversity; and
WHEREAS, based on census data in the 2000-2005 Housing Element Update,
twenty-three percent of the City's households were very low income, 16.1 percent were
low income, 20.7 percent were moderate income, and 40.1 percent were upper income;
and
WHEREAS, fifty-three percent of households residing in rent-controlled
apartments in the City were very low- and low-income; and
5
WHEREAS, this diversity is an essential element of the City's character; it sets
the City apart from all other similarly situated coastal cities in California; and
WHEREAS, notwithstanding the City's ongoing commitment and efforts, changes
in State and Federal law and market conditions are making it increasingly difficult for the
City to ensure a continued supply of affordable housing; and
WHEREAS, in 1986, the State enacted the Ellis Act which enables a property
owner to cease operating property as residential rental property and, more recently, in
1995, the State enacted the Costa-Hawkins Rental Housing Act which eliminated the
limits on the rents which a property owner may charge when re-renting voluntarily
vacated units; and
WHEREAS, between 1986 and 2004, over fifteen hundred controlled rental units
have been permanently withdrawn from the rental market pursuant to the Ellis Act; and
WHEREAS, Costa-Hawkins has had a devastating impact on the City's
affordable housing stock; and
WHEREAS, between 1999 and 2004, 12,132 controlled rental units have been
rented at market rates; and
WHEREAS, this represents 44% of the total number of controlled rental units;
and
WHEREAS, 8,295 of these units had formerly been affordable to low-income
households including 4,997 units which had formerly been affordable to very low-
income households; and
WHEREAS. the median rents upon re-rental have increased from $715.00 to
$1,255.00 (76%) for one bedroom units; $921.00 to $1,675.00 (82 percent) for two
6
bedroom units and $1,173.00 to $2,150.00 (83 percent) for three or more bedroom
units; and
WHEREAS, after these increases, the median Maximum Allowable Rents
("MARs") of the O-bedroom units are only affordable at 100% of median and above; and
WHEREAS, the median MARs of 1-bedroom units are only affordable to
households at 120% of median and above while the median rents for 2 and 3-bedroom
units are not even affordable to that income level; and
WHEREAS, this law is having and will continue to have a significant impact on
the City's supply of affordable housing; and
WHEREAS, there is an extremely low vacancy rate for the existing rental housing
stock; and
WHEREAS, according to the annual report to the City Council concerning the
City Affordable Housing Production Program and Proposition R, only 17% of the units in
multifamily developments completed during FY03/04 were affordable; and
WHEREAS, based on the building permits that have been issued for new
multifamily developments, only 6% of these units will be affordable; and
WHEREAS, Section 9.56.150 of the Affordable Housing Production Ordinance
provides that when the provisions of Proposition R have not been met, the City Council
shall take action to ensure that its provisions are met in the future; and
WHEREAS, reductions in State and federal funding for affordable housing,
changes in these programs, and the potential expiration of controls on rents in federally-
assisted projects all hinder the City's ability to provide or promote affordable housing
threatening the City's existing affordable housing stock; ands
7
WHEREAS, the decline in the affordability of this housing stock IS further
exacerbated by the production of luxury market rate housing; and
WHEREAS, given current economic conditions and the general desirability of the
City; the new housing costs will only continue to increase, thereby further exacerbating
the growing shortage of affordable housing in the City; and
WHEREAS, this Affordable Housing Production Program will benefit the City as a
whole since each development which contributes to affordable housing through the
provisions of this Chapter augments the City's housing mix, helps to increase the supply
of housing for all economic segments of the community, addresses the affordable
housing need generated by the development, and thereby supports a balanced
community which is beneficial to the public health, safety and welfare of the City,
NOW, THEREFORE, THE CITY COUNCil OF THE CITY OF SANTA MONICA
DOES HEREBY ORDAIN AS FOllOWS:
SECTION 1. Santa Monica Municipal Code Section 9.56.010 is hereby amended
to read as follows:
Section 9.56.010. Findings and purpose.
The City's Affordable Housino Production Program
requires developers of market rate multi-family
developments to contribute to affordable housing production
and thereby help the City meet its affordable housino need.
As detailed in the findinQs supportinQ this Ordinance, the
requirements of this Chapter are based on a number of
8
factors including, but not limited to, the City's long-standing
commitment to economic diversity; the serious need for
affordable housing as reflected in local. state, and federal
housing regulations and policies: the demand for affordable
housinQ created by market rate development: the depletion
of potential affordable housing sites bv market-rate
development and the impact that the lack of affordable
housinQ production has on the health, safety. and welfare of
the City's residents includinQ its impacts on traffic, transit
and related air Quality impacts. and the demands placed on
the regional transportation infrastructure.
(a) Santa Monica is a coastal city in a prime
location, being bordered by the City of Los Angeles to the
north, east and south. The combination of a scenic
oceanside location, exoellent clim;:Jte, and the ready
availability of urban facilities, services and entertainment
make Santa Monica an extremely desirable place to live.
(b) The land area of the City is very small
approximately eight square miles. Santa Monica is already a
fully built out city, 'Nith only sixty DIIO vacant residential
parcels. It also has a population of approximately ninety
thousand. Santa Monica's population density, eleven
thousand t\".'o hundred persons per square mile, is the
9
seoond highest among neighboring and nearby jurisdiotions,
:lnd is the densest among coastal communities in Los
Angeles County.
(0) The vast majority of new market rate multi
family development in the City is not affordable to lower
income households. Moreover, market oonditions, inoluding
the high cost of residential land, construction costs, and the
availability and oost of finanoing, make the de~/elopment of
affordable housing in the City extremely difficult.
(d) In addition, the consumption patterns of the
upper inoome households who occupy these ne'.... market
rate multi family housing units create a need for aff-ordable
housing in the City. More specifically, households create
demand for goods and services in the private sector, such as
retail goods and medical services, and jobs in the public
sector, such as teachers and municipal services. The higher
the household's income, the more demand is created. Ne'N
market rate multi family housing in Santa Monica
accommodates upper income households almost exclusively
because of the high rent or purchase price required to
occupy it. Supplying goods and services sufficient to meet
the demand oreated by upper income households in new
10
market rate multi family housing requires '::orkers across the
pay scale spectrum, including lo'....or wago employees.
(e) The City has prepared an analysis of this
relationship be~tJeen new market rate apartment and
condominium development in the City and the need for
affordable housing oreated by this ne'l.' development. This
study focuses on the relationship betvleen the demand for
goods and services created by households who occupy new
market rate multi f:Jmily development in the City, the number
of low wage 'A'Orker6 in public agencieE and bUEinesEes
needed to satisfy this demand, and the costs of producing
the atklrdable housing needed by these 'Norker&. This study
demonstrates the range per square foot ,,:hich could be
imposed on ne';.' market rate multi f:Jmily development to
help finance the de\'elopment of affordable houoing needed
to meet the dem::md created by market rate development.
(f) In addition, because the City is built out, land
available for residential development in the City is limited.
Further, bnd which could be used for development of
housing for 1m': income households is being depleted by
development of high cost housing. Thus, continued ne'N
residential development '....hioh does not include or oontribute
toward tho coet of houeing for lower income hGuseholds 'Nil!
11
only serve to further exacerbate the current affordable
housing shortage.
(g) Requiring developers to assist in the production
of affordable housing is also oonsistent with the City's long
standing commitment to achieve and maintain 3 suitable
living en'.'ironment inoluding deoent housing for porsons at
all economic levels. This municipal commitment conforms
with State and Federal polioies and is a principal goal of the
City's recently adopted 1998 2003 Housing Element Update.
(h) The City has historically effectuated this
commitment through extraordinary eff-orts manifest in various
City laws, policies and programs. For instance, the City's
voters have adopted initiative measures which strive to
maintain and promote affordable housing in the City. The
Rent Control Charter Amendment, adopted in 1979, has as
its primary purpose the protection of affordable housing and
has historioally been the City's most important legislative tool
for maintaining the supply of affordable housing. Similarly,
Proposition R, adopted by the voters in 1990, mandates that
thirty percent of all new multi family housing units
oonstructed in the City each year be affordable.
12
(i) The City's zoning laws and policies also include
substantial incentives for the produotion of affordable
housing, including height and density bonuses and reduced
parking requirements. In addition, the City operates a
number of programs '.".'hich facilitate the production of
affordable housing. These include loans to private, for profit
developers and owners and funding to non profit agoncies to
acquire or construct affordable housing units.
U) Despite the City's prime location and high real
estate values, the City has historically been highly
successful in maintaining its economio diversity. Aooording
to the 199B 2003 Upd3te, w.renty three percent of the City's
households are very 10'1.' income, 16.1 peroent are low
income, 20.7 percent are modor3te income, 3nd 40.1
peroent are upper inoome. Moreover, fifty three per-cent of
households residing in rent controlled apartments are very
low and 1000v inoome. This diversity is an essential element
of the City's character. It sets the City 3p3rt from 311 other
similarly situated ooastal cities in California.
(k) However, not\":ithstanding the City's ongoing
commitment ~md efforts, changes in State and Federal law
and market oonditions arc making it inoreasingly diffioult for
the City to encure a contiAueG supply of 3ffordable housing.
13
In 1986, the State enaoted the Ellis Ant 'Nhioh enables a
property owner to ceaso operating property as residential
rental property. More reoently, in 1995, the State enacted the
Costa Ha'Nkins Rental Housing I\ct 'Nhich phases out limits
on the rents which a property O'Jmer may charge '....hen re
renting voluntarily vacated units. Except in limited
ciroumstanoes, it eliminates the City's ability to oontrol the
rent a property m4mer can impose when a unit is initially
rented. Although the full impacts of Costa Ha'.vkins will not
be felt until 1999 and the years thereafter. s~tudies prepared
by the Santa Monica Rent Control Board tracking the rent
levels of units deoontrolled 00 0 moult of Cocto Ho'.vkins
demonstrates that these units are already losing their
affordability. Thus, this la'N is ha'y'ing and v:ill continue to
ha'y'e a signifioant impact on the City"s supply of affordable
housing. Moreover, there is an extremely lO'N vacancy rate
for the existing rental hOblsing stock. In addition, reductions
in State and federal funding for affordable housing, changes
in these programs, and the potential expiration of controls on
rents in federally assisted projects all hinder the City's ability
to provide or promote affordable housing. In short, changes
in State ~md f.ederallav.' seriously threaten the City's existing
affordable housing stock. The decline in the affordability of
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this housing stook is further exacerbated by the production of
luxury market rate housing. Given current economic
oonditions and the general desirability of the City; the ne'::
housing costs 'Nil I only continue to increase, thereby further
exaoerbating the growing shortage of housing affordable to
very low and lo~.\' income households in the City.
(I) California's Housing Element la'.\' requires each
oity and county to develop local housing programs designed
to address its "fair share" of existing and future housing
needs for all income groups. The City's 1998 2003 Housing
Element Update establishes the City's fair share at 3,219
housing units of'.\'hich 1,369 (43%) should be aff-ordable to
very lo'.\' and low income households.
(m) The Housing Element Update catalogues a
dozen funding sources that the City utilizes to assist in the
development of aff-ordable housing. These substantial
resources are projected to assist in the development of 403
new units affordable to 10....: and moderate inoome
households. However, this represents only twenty one (21%)
of the estimated need for new affordable housing in the City
as established by the City's fair share. Consequently, the
total housing needs of the City exoeed the City's a'Jailable
resources and the City's ability to meet thece needc. The
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vast majority of housing units have been and will continue to
be produced by the priv3te housing industry.
(n) This Affordable Housing Production Program
'.viii benefit the City as a 'Nhole. Each development \.,hich
contributes to affordable housing through the provisions of
this Chaptor augments the City's housing mix, helps to
increase the supply of housing for all eoonomio segments of
the community, addresses the affordable housing need
generated by the development, and thereby supports a
b;]lanced community ,tJhich is beneficial to the public health,
safety and '.velfare of the City.
SECTION 2.Santa Monica Municipal Code Section 9.56.020 is hereby amended
to read as follows:
9.56.020 Definitions.
The following words or phrases as used in this
Chapter shall have the following meanings:
Affordable Housing Fee. A fee paid to the City by a
multi-family project applicant pursuant to Section 9.56.070 of
this Chapter to assist the City in the production of housing
affordable to very low-J. aM low-, and moderate-income
households.
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Affordable Housing Unit. A housing unit developed
by a multi-family project applicant pursuant to Sections
9.56.050 or 9.56.060 of this Chapter which will be affordable
to very low-~ 9f low-, or moderate-income households.
Dwelling Unit. One or more rooms, designed,
occupied or intended for occupancy as separate living
quarters, with full cooking, sleeping and bathroom facilities
for the exclusive use of a single household. Dwelling unit
shall also include single-room occupancy units as defined in
Santa Monica Municipal Code Section 9.04.02.030.790.
Floor Area. Floor area as defined in Santa Monica
Municipal Code Section 9.04.02.030.315.
HUD. The United States Department of Housing and
Urban Development or its successor.
Income Eligibility. The gross annual household
income considering household size and number of
dependents, income of all wage earners, elderly or disabled
family members, and all other sources of household income.
Industrial/Commercial District. Any district
designated in the Santa Monica Zoning Ordinance as a
commercial or industrial district.
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"Low," "Very Low," and "Moderate" Income
Levels. Income levels determined periodically by the City
based on the United States Department of Housing and
Urban Development (HUD) estimate of median family
income for a 4-person household in the Los Angeles-Long
Beach Primary Metropolitan Statistical Area. The major
income categories are: "low-income" (sixty percent or less of
the area median), "very low-income" (fifty percent or less of
the area median), and "moderate-income" (one hundred
percent or less of the area median). Adjustment shall be
made by household size as established by the City.
Market Rate Unit. A dwelling unit as to which the
rental rate or sales price is not restricted by this Chapter.
Maximum Affordable Rent. A monthly housing
charge which does not exceed one-twelfth of thirty percent of
the maximum very low-, low-, and moderate-income levels
as defined in this Chapter and adopted each year by the
City. This charge shall represent full consideration for
housing services and amenities as provided to market rate
dwelling units in the project, whether or not occupants of
market rate dwelling units pay separate charges for such
services and amenities. Housing services and common area
amenities include, but are not limited to, the following:
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parking, use of common facilities including pools or health
spas, and utilities if the project is master-metered.
Notwithstanding the foregoing, utility charges, to the extent
individually metered for each unit in the project, may be
passed through or billed directly to the occupants of
affordable housing units in the project in addition to
maximum allowable rents collected for those affordable
housing units.
Multi-family Project. A multi-family residential
development, including but not limited to apartments,
condominiums, townhouses or the multi-family residential
component of a mixed use project, for which City permits
and approvals are sought.
Multi-family Project Applicant. Any person, firm,
partnership, association, joint venture, corporation, or any
entity or combination of entities which seeks City
development permits or approvals to develop a multi-family
project.
Multi-family Residential District. Any district
designated in the Santa Monica Zoning Ordinance as a
multi-family residential district.
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Parcel. Parcel as defined in Santa Monica Municipal
Code Section 9.04.02.030.570.
Vacant Parcel. A parcel in a multi-family residential
district that has no residential structure located on it as of
August 20, 1998 or which had a residential structure located
on it on that date which was subsequently demolished
pursuant to a demolition order of the City. No demolition of
structures shall be permitted except in accordance with
Santa Monica Municipal Code Section 9.04.10.16 et seq.
SECTION 3. Santa Monica Municipal Code Section 9.56.070 is hereby amended
to read as follows:
Section 9.56.070. Affordable housing fee.
A multi-family project applicant may meet the
affordable housing obligations established by this Chapter by
paying an affordable housing fee in accordance with the
following requirements:
(a) An affordable housing fee may be paid in
accordance with the following formulas:
(1) Multi-family Projects in Multi-family Residential
Districts:
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affordable housing unit base fee x floor area of multi-
family project;
(2) Multi-family Projects in Multi-family Residential
Districts on Vacant Parcels:
affordable housing unit base fee x floor area of multi-
family project x 75%;
(3) Multi-family Projects in Industrial/Commercial
Districts on Parcels that are either not already developed
with multi-family housing or are already developed with
multi-family housing, but the multi-family project preserves
the existing multi-family housing or a Category C Removal
Permit has been obtained for the existing multi-family
housing:
affordable housing unit base fee x floor area of project
devoted to residential uses x 50%.
(b) For purposes of this Section, the affordable
housing unit base fee shall may be established at least e'.'ery
two years by resolution of the City Council. CommencinQ
on July 1, 2006 and on July 1 of each fiscal year thereafter,
the affordable housing unit base fee shall be adiusted based
on chanQes in construction costs and land costs. No later
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than July 1.2010, and approximately every five (5) year
period thereafter. the City will conduct a comprehensive
study of these fees and the results of the comprehensive
study shall be reported to the City Council. The amount of
the affordable housing fee that the multi-family project
applicant must pay shall be based on the affordable housing
unit base fee resolution in effect at the time that the
affordable housinQ fee is paid3pplication for the multi f3mily
project is deemed complete or based on Resolution No.
9295 (CCS), whiche'Jor resolution is adopted 13tor in time to
the City.
(c) The amount of the affordable housing unit base
fee may vary by product type (apartment or condominium)
and shall reflect, among other factors, the relationship
between new market rate multi-family development and the
need for affordable housing and the impact that the fee VIm
have on the finnncial return of multi family project applicants.
(d) The fee shall be paid in full to the City prior to
the City granting any approval for the occupancy of the
project.
(e) The City shall deposit any payment made
pursuant to this Section in a Reserve Account separate from
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the General Fund to be used only for development of very
low- and low-income housing, administrative costs related to
the production of this housing, and monitoring and
evaluation of this Affordable Housing Production Program.
Any monies collected and interest accrued pursuant to this
Chapter shall be committed within five (5) years after the
payment of such fees or the approval of the multi-family
project, whichever occurs later. Funds that have not been
appropriated within this five-year period shall be refunded on
a pro rata share to those multi-family project applicants who
have paid fees during the period. Expenditures and
commitments of funds shall be reported to the City Council
annually as part of the City budget process.
(f) An affordable housing fee payment pursuant to
this Section shall not be considered provision of affordable
housing units for purposes of determining whether the multi-
family project qualifies for a density bonus pursuant to
Government Code Section 65915.
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SECTION 4. Section 9.56.170 is hereby added to the Santa Monica Municipal
Code to read as follows:
Section 9.56.170. Adiustments or Waivers
(a) A multi-family proiect applicant may request that
the requirements of this Chapter be adiusted or waived
based on a showing that applvina the reauirements of this
Chapter would effectuate an unconstitutional takinQ of
property.
(b) To receive an adiustment or waiver, the applicant
must submit an application to the Director of Resource
Manaoement. or his/her designee, at the time the applicant
files a multi-family proiect application. The applicant shall
bear the burden of presenting substantial evidence to
support the request and set forth in detail the factual and
legal basis for the claim, includino all supportino technical
documentation.
(c) In makinq a determination on an application to
adiust or waive the requirements of this Chapter, the Director
of Resource Manaoement. or City Council on appeal. may
assume each of the followino when applicable:
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(1) The applicant is subiect to the affordable housing
requirement of this Chapter
(2) The applicant will benefit from the inclusionary
incentives set forth in this Chapter and the City's Zoning
Ordinance.
(3) The applicant will be obliQated to provide the most
economical affordable housina units feasible in terms of
construction, desiQn, location and tenure.
(d) The Director of Resource Manaaement shall
render a written decision within ninety (90) days after a
complete application is filed. The Director's decision may be
appealed to the City Council if such appeal is filed within
fourteen consecutive calendar days from the date that the
decision is made in the manner provided in Part 9.04.20.24,
Sections 9.04.20.24.010 through 9.04.20.24.040 of this
Code.
(e) If the Director of Resource Manaaement. or City
Council on appeal, upon legal advice provided by or at the
behest of the City Attorney, determines that applyinQ the
requirements of this Chapter would effectuate an
unconstitutional takino of property, the affordable housinQ
requirements shall be adiusted or waived to reduce the
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obliQations under this Chapter to the extent necessary to
avoid an unconstitutional result. If an adiustment or waiver
is Qranted. any chanQe in the use within the proiect shall
invalidate the adjustment or waiver. If the Director, or City
Council on appeal. determines that no violation of the United
Stated or California Constitutions would occur throuQh
application of this Chapter. the requirements of this Chapter
remain fully applicable.
SECTION 5. This Ordinance shall apply to development applications determined
complete after May 30, 2005 unless the applicant can establish a vested right to
develop the multi-family residential housing without complying with this Ordinance.
SECTION 6. Any provision of the Santa Monica Municipal Code or appendices
thereto inconsistent with the provisions of this Ordinance, to the extent of such
inconsistencies and no further, is hereby repealed or modified to that extent necessary
to effect the provisions of this Ordinance.
SECTION 7. If any section, subsection, sentence, clause, or phrase of this
Ordinance is for any reason held to be invalid or unconstitutional by a decision of any
court of competent jurisdiction, such decision shall not affect the validity of the
remaining portions of this Ordinance. The City Council hereby declares that it would
have passed this Ordinance and each and every section, subsection, sentence, clause,
or phrase not declared invalid or unconstitutional without regard to whether any portion
of the ordinance would be subsequently declared invalid or unconstitutional.
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SECTION 8. The Mayor shall sign and the City Clerk shall attest to the passage
of this Ordinance. The City Clerk shall cause the same to be published once in the
official newspaper within 15 days after its adoption. This Ordinance shall become
effective 30 days from its adoption.
APPROVED AS TO FORM:
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