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SR-10A (17) lOA PCD CPD SF KG LB f \ppd\share\ccreport\1996\41597he wpd Council Meeting April 15, 1997 APR 1 5 1997 Santa MOnica, California TO. Mayor and City Council FROM City Staff SUBJECT Supplemental Staff Report for the Recommendation to Conduct a PubliC Hearing and Approve In Concept the Draft 1998-2003 Housing Element for Transmittal to the State Department of Housing and Community Development (HCD) and Dtrect Staff to Prepare an Environmental Impact Report on the Document and Prepare Implementation Ordinances Related to the Incluslonary Housing Policies and Revised Development Standards INTRODUCTION This staff report supplements the March 18 and March 25, 1997 staff reports which recommended that the City Council take the follOWing actions conduct a public hearing and approve In concept the Draft 1998-2003 Housing Element for transmittal to the State Department of Housing and Community Development (HCD), direct staff to prepare an Environmental Impact Report on the document, and direct staff to prepare ImplementatIon ordinances related to Incluslonary housing poliCies and revised development standards BACKGROUND The City Council conducted a publiC hearing on March 18, 1997 and heard testimony from representatIves of the Planning CommisSIon, the Housing CommisSion, the Rent Board, the Arts CommisSion and the public FollOWing the public testimony, the City Council continued the Item to March 25, 1997 At the March 25th, meeting the CouncIl addressed 1 IDA APR 1 5 1997 vanous tOpiCS and requested that staff make additional Information available on those tOpiCS This report provides Council with the requested Information Preservation of Neighborhood Character & Quality of Life. In response to the Council's recommendation to strengthen the diScussion of the preservation of the neighborhood character and quality of life Issues In the Draft Element, staff recommends that this concept be addressed Within the Housing ObJectives, Goals, Policies and Programs (Section V) of the Housing Element, and Within the diSCUSSion of "HOUSing and NeIghborhood CondItIons" as a key housIng Issue (pg V-3) The CIty's Land Use and Circulation Element ("LUCE", Adopted In 1984, Revised In 1987) contains a section descnblng "a VISion of the future for Santa MOnica" ThiS VISion statement clearly Identifies the City's desire to have residential neighborhoods" retain their unique charactenstlcs, neighborhood Identities, and Wide diversity " The text to be added to the Housing Element Will utilize the text In the LUCE as a gUIde and will Include a diSCUSSion of what constitutes a neighborhood, a descnptlon of charactenstlcs contnbutlng to a neighborhood's character and an explanation of how maintenance and/or enhancement of neighborhood character contnbutes to a higher quality of life As part of protecting the character and quality of life of eXlstrng neighborhoods the City Council suggested that conSideration be given to Including a program In the Housing Element to Insure that the rate of redevelopment Within eXisting multifamily residential neighborhoods occurs at a reasonable pace In response to thiS suggestion, staff 2 recommends that a program be directed at monitoring the rate of redevelopment activity In the multi-family reSidentIal areas to track the amount of activity on an annual basIs and based upon the rate of redevelopment determine whether specific measures to control the rate of redevelopment are necessary The following program IS proposed Program 7.f: Monitor the Rate of Redevelopment Activity in Multi. family Residential Districts. Program Background: The Costa-Hawkins Rental Housing Act and proposed City programs to faCIlitate the production of housing may result In Increased redevelopment activity Within the City's multi-family residential neighborhoods A reasonable rate of redevelopment In multi-family residential neighborhoods could have a pOSitive Impact on the eXisting quality of life and character of the neighborhoods, however rapid redevelopment could Jeopardize the character of the neighborhoods and have a corresponding negative Impact on the quality of life 1998-2003 Action Plan: · MOnitor the rate of redevelopment activity In multifamily reSidential districts Report on at least an annual baSIS the number of planning applications granted for new hOUSing construction If the rate or pattern of redevelopment appears to negatively affect the quality of life or character of the neighborhood, consider enacting measures which may Include a constructIon rate program Responsible Division: City Planning DIVISion Housing Production in Non-traditional (Commercial) Areas. The CounCil asked for Information concerning the number of residential Units that potentially could be developed In the City's commercial zOning dlstncts under current standards Staff evaluated thiS Issue by examining the analYSIS prepared for the commercial development standards approved In 1993 and the Bayslde District standards approved In 1996 In the Final EIR 3 for the Commercial Development Standards and the Bayslde DistriCt, It was estimated that there IS a maXimum probable potential at bUlldout of approximately 3,013 Units In the commercial districts However thiS bUlldout estimate IS not projected to occur dUring the planning penod Instead, based on the projections of growth through the year 2002 In the Commercial Development Standards Final EIR, and the projections of growth through the 2005 In the Bayslde Dlstnct, there IS a maximum probable potential of 600 units that could be developed In the commercial dlstncts dunng the planning penod These estimates are very general In order to faCIlitate development of reSidential Units In the commercial dlstncts, eXisting standards could be further modified Areas that could be considered for changes are the Broadway Commercial Dlstnct, Ocean Park Boulevard, PICO Boulevard and the Light Manufactunng Studio Dlstnct In response to CounCil's recommendation that non-traditional reSidential areas be considered for the development of hOUSing, staff wants to highlight the actIon under Program 1 a which reads as follows · Evaluate development standards to encourage the development of hOUSing In commercial areas of the City Under thiS action, staff Will examine the eXisting development standards In the commercial dIstricts where reSidential uses are permitted to determine If there are modifications that could be made to further promote the development of hOUSing In these areas 4 Additionally staff recommends that the following program be added to examine the potential of rezoning areas to allow reSidential development where It IS currently not permitted Program 1.d: Consider Rezoning Non-residential Areas for Residential Use Program Background: The City has achieved substantial success In producing additional housing by allowing the construction of housing In areas previously zoned exclusively for non-residential uses There may be additional opportunrtles for further efforts to facilitate greater housing production 1998-2003 Action Plan: The CIty will explore further opportumtles for developing housing In areas currently zoned for non-residential use Responsible Division: City Planning DIVIsion Student Housing. The State Department of Housing and Community Development has determined that housing for students may constitute a "specIal housing need" If a nearby college exists If the City Identifies student housing as a special need, the Housing Element should Include an analysIs and quantIfication of the needs of students Whether or not student housing IS considered a "special housing need", the Housing Element may contain programs to address such housing If the Council wants to encourage the development of student housing by private developers, a program could be Included under GoalS 0 or Goal 1 0 to "evaluate modIfIcatIons to the development standards to encourage student housing" Staff wIll work Santa Monica College to address thiS Issue as part of their master planning process 5 The City Council InqUired Into the feasibility of uSing affordable housing funds for the development of student housing for Santa MOnica College students The sources of funding for affordable hOUSing are the federal HOME and CDBG programs, the State Tax Credit Program and CitYWide HOUSing Trust Funds HOME and CDBG Federal HOME and CDBG funds are deSigned for the development of permanent affordable hOUSing Student hOUSing by definition IS not considered permanent affordable hOUSing Therefore, these federal funds may not be used specIfically for the development of student hOUSing However, to the extent that students are members of households with qualifying lOW-incomes, students would be eligible to reSide In hOUSing funded by the CDBG and HOME programs Tax Credits Under the Tax Credit program, umts are not eligible for tax credits If they are occupied entirely by full-time students who are not entitled to file a JOint Income tax return A Unit occupied by a married student couple would be eligible City Funds The City has greater control over the use of Its own affordable hOUSing funds and could, by direction of the City Council, authorize the use of funds for affordable hOUSing for students However, staff beheves that there are several other urgent hOUSing needs In the 6 City that should take pnonty over student hOUSing As documented In the Draft HOUSing Element, among the more sIgmflcant needs are the following" o There IS a tremendous need for affordable hOUSing for semors Semors represent a disproportionately large share of the City's populatlon--16 5 percent, versus 9 7 percent In the County of Los Angeles Fifty-one percent of senior rental household In Santa Momca are categorized as very low Income, and 52 6 percent of semor rental households are overpaYing for rental hOUSIng costs o The City lacks sufficient affordable hOUSing for families The supply of affordable rental hOUSing large enough for families IS limited, as the vast majority of rental umts In the City have only one or two bedrooms Moreover, given the high cost of ownership hOUSing, there are limited home ownership opportunities for low and moderate Income families with children o Vacancy de-control WIll significantly reduce the supply of affordable hOUSing According to studies prepared for the draft HOUSing Element, by 2003, between one-half and three-quarters of the 1995 rent-controlled hOUSing stock will be de-controlled Rents on umts that turn over by 2003 are estimated to Increase by between 46 and 48 percent 7 Staff beheves that the CIty'S limited resources for affordable housing should be pnontlzed for the Important special needs of the City's permanent population as Identified above along with the other Important specIal needs Identified In the Draft Housing Element Artist Housing The City Council also inquired about utiliZing housing funds to provide affordable housing for artists ArtiStS are not a targeted special needs group under federal housing programs and therefore It would not be possible to utilize any of the Federal housing programs to SUbsidize the development of housing specifically restncted for artists Nevertheless, Income qualrfylng artists would certaInly be elIgIble to live In affordable housing developed With federal funds City funds could be used to develop affordable housing specifically for artists However, for the same reasons cited concerning housing for students, staff beheves that the City's limited housing resources should be priOritized for the needs of low Income families With children, seniors, persons With disabilities, and other special needs populations With acute hOUSIng needs Currently artist studiOS are permitted In the commercial zomng districts of the City and liVIng quarters for artists are permitted prOVided the area devoted to liVing quarters does not exceed 50% of the total studiO space In the Light Manufactunng StudiO Dlstnct (LMSD) FAR Incentives are proVided for artist studiOS The City Council could direct staff to evaluate modifications to development standards In other zoning dlstncts to encourage 8 this type of housing Senior Homeowners The City Council inqUired about programs for senIor homeowners The City may wIsh to consider two new programs targeted to seniors The first IS a program to educate seniors about the benefits and potential pitfalls of the very popular reverse mortgage program A reverse mortgage IS a deferred payment loan or a senes of such loans for which a home IS pledged as security The reverse mortgage IS generally taken out by a senior citizen who IS In Immediate need of cash, often for an emergency health care problem The second program would provide loans or grants to lOW-Income seniors for the repair of their homes For more extensive repairs, there would need to be sufficient equity In the property to secure a loan from the City, but the loan would not need to be repaid until the sale of the home For smaller repairs, staff recommends a minor modification to the City's new Pilot Residential Repair Program At the City Council's direction, some of the funds under the Pilot ResIdential Repair Program could be earmarked for semors, Includmg semor homeowners Accordingly, staff recommends the follOWing two new programs Program 6.c. Develop Public Education Program on Reverse Mortgages Program Background A reverse mortgage IS a deferred payment loan or a senes 9 of such loans for which a home IS pledged as security QualifIcation for the loan IS based primarily on property value, rather than Income, allOWing the elderly homeowner on a fixed Income to receive a loan for which he or she would otherwise not qualify The reverse mortgage IS generally taken out by a senior who IS In Immediate need of cash, often for an emergency health care problem Reverse mortgages are avaIlable In the private lending market While reverse mortgages offer many benefits to senior homeowners In need of cash, without proper information they can also be abused and may not always serve their best financial Interest. 1998-2003 Action Plan' Prepare educational materials outlining the availability, benefits, and liabilities of reverse mortgages, and disseminate these materials to seniors through local service organizations which serve seniors Responsible Division: Housing DIVISion, City Attorney's Office Program 6.d. Develop a Housing Repair Loan Program for Low~lncome Senior Homeowners Program Background Many low-income senior homeowners reqUire repairs to their homes but do not have the cash available to make the repairs, nor can they afford to take out a loan to finance the repairs In cases where the homeowner has eqUity, and the repairs required are extensive, a deferred hOUSing repaIr loan may fill a very Important need not met by the pnvate market Also, In Fiscal Year 1996197, the City began a new Pilot ReSidential Repair Program for qualifying low Income households While thiS new program dedicates a maJonty of available Community Development Block Grant funds for lead-based paint testing and treatment and home security Improvements, a portion of the program funds are available for smaller repairs Some of the repair funds could be earmarked for grants to senior households, including senior homeowners 1998-2003 Action Plan: · Evaluate the feaSibility and appropriateness of a HOUSing Repair Loan Program for Low Income Semor Homeowners · Earmark a portion of the funds set aSide for small repairs under the Pilot ReSidential RepaIr Program for grants to lOW-income senior households, Including homeowners Responsible Division: HOUSing DIVISion 10 Courtyard A~artments. Although the City'S current development standards in multi-family residential districts require that new multi-family development provide pnvate and common open space, as part of the evaluation of the City's residential development standards, staff could consider modifications which would encourage the development of courtyard or garden style apartments The City of Pasadena has adopted development standards for their multi-family residential districts which Include mandatory reqUirements regulating the size and configuratIon of yards and gardens In order to provide a project amenity and contnbute to the neighborhood as a whole These development standards could selVe as a gUIde for the City of Santa Monica Staff recommends that an action Item be added to Program 1 a as follows · Evaluate potentia' modifications to deve'opment standards which would encourage courtyard/garden style apartments. Lifecycle of Condominium Projects in ComDarison to A~artment Buildings. According to the City's consultant, HR&A, there IS no difference In the IIfecycle of multi- family reSidential bUildings based on the type of ownership Additionally, the Construction Industry Research Board was consulted about thiS Issue and they could not substantiate a difference In the useful life of a condominium bUilding versus an apartment bUilding Staff reViewed the earthquake demolition permits and found that out of approximately forty demolition permits for multi-family reSidential bUildings no more than SIX were for condominiums 11 Re~lacement of Destroyed Non-confonning Buildings. WIth regard to non-confonnlng bUildings which are destroyed by fire or natural disaster. staff feels that the ZOning Ordinance IS the proper document In which this Issue could be addressed and does not recommend that It be Included In the HOUSing Element If the Council would like this Issue addressed, the Council could Initiate an amendment to the ZOning Ordinance to address this Issue Energy Efficiency. Energy efficiency when Incorporated Into bUilding deSign has the potential of redUCing hOUSing costs through reduced utility costs The Draft Element contains Program 7 c to "maintain energy and water conservation programs" and Program 7 d to "faCilitate sustainable hOUSing development" The potential use of development standards which Incorporate energy efficiency Will be conSidered In the development of the Sustainable City GUidelines land Bankina. Some Council members IndIcated that they would like the Draft Element to Include a land banking program Land banking for future hOUSing development IS a technique whereby a city or county acqUires vacant land, underutlhzed sites, or other properties With the potential for reuse or rehabllrtatlon Among the benefits of landbanklng IS redUCing the cost of land, which can In turn reduce the overall cost of hOUSing bUilt on the land In a rising market, land purchased today Will be less expensive than If purchased In the future 12 Program A-2 h of the CIty's current adopted Housing Element calls for the development of the land banking program However, as reported In Section IV of the 1998-2003 Housing Element Update, the City dId not ultimately purchase vacant land for land banking This IS due to a number of fadors, Including the limited availability of vacant land dunng the applicable time penod, restnctlons on the use of Federal and State funds for land banking, and the desire to target limited City dollars to projects With an Immediate program for development Federal CDSG and HOME funds, major sources of CIty housIng funds, may not be used for land banking However, It may be possible to use City-generated affordable housing funds for land banking, With City Council approval Staff believes that the City should reserve the option In the HOUSing Element to land bank vacant and underutlllzed properties both In multi-family reSidentIal zones and non- residential zones which allow for residential development Staff believes the City should have the discretion to land bank properties In Instances where a site becomes available for whIch there IS no ImmedIate program for development but for whIch the opportunity for a needed affordable hOUSing project IS eVident Therefore, staff recommends the addition of the follOWing new poliCY Policy 2.8: Allow use of Clty-generated affordable hOUSing funds for landbanklng 13 of sItes which are clearly sUitable for affordable housing projects Henry Geo~e Community Land Trust. The City Council asked staff to explore whether the Henry George Community Land Trust would be applicable and useful In Santa MOnica A Community Land Trust (CL T) IS a pnvate non-profit corporation created to acqUire and to secure affordable land for affordable hOUSing development Essentially, the CL T purchases land and Imposes deed restnctlons upon the sale of the property which restnct both the sale pnce of the land and the Income of the residents on the land The CL T maintains ownership of the land while It enters Into long term leases wIth the residents The land trust offers leaseholders secunty, an opportunity to transfer the lease to theIr heirs, and full nghts of pnvacy CL Ts protect affordablllty for future residents by controlling the sale of bUilding and other Improvements on their land SpecifIcally, the CL T retains an option to repurchase these Improvements--If residents choose to 8ell--at a limIted pnce In thIs way, the CL T preserves the community's Investment of public and pnvate resources Based upon the limited research that staff has conducted, CL T hOUSing developments have generally Involved single family homes and townhomes In which leaseholders own their homes This model may offer one way to control costs and preserve affordable hOUSing over the 14 long term especially for affordable homeownershlp housing If the City Council wishes to pursue thiS concept, staff would recommend further exploratlon of the feasibIlity of CL T's In Santa MOnica, including which funding sources may be used, policy Implications, legal ramifications, and relative costs and benefits as compared to the current model of housing development utilized by non-profIts who have developed affordable housing In the City thus far Potential Limits on Hou$ing Subsidies Council members asked staff to consider whether It would be feasible andlor desirable to place a cap on the per unit cost of affordable housing construction subsidized by the CIty City staff reviews affordable housing development cost on a project-by-project basIs through the underwntlng process When the City receives an application for an affordable housing proJect loan, staff reviews the detailed cost estimates to ensure that they are Within reasonable limits Per unIt development costs vary for a number of reasons One of the major factors affecting thiS vanatlon IS the size of the Units For example, the per Unit cost of the Single Room Occupancy (SRO) project at 1328 Second Street (Step Up on Second) was approximately $105,000 while the per unit cost of the 17-unlt, two- and three-bedroom affordable project at 1438-1444 16th Street will be approximately $193,000 Va nations In land cost also sIgnificantly affect per umt costs Based upon a study prepared for the Housing Element Update, land costs In multi-family residentIal areas of the City generally 15 range from $45 to $70 per square foot Through Its Housing Trust Fund GUidelines, the City currently Imposes limits upon the City sUbSJdyto proJects, with the per unit subsidy maximums ranging from $40,000 to $60,000 However, these current subsidy limits are out of date Due to the recent disappearance of the State Rental Housing Construction Program, the needed City subsidy for the new construction of rental housing has Increased to approximately $95,000 Due to the uncertain nature of outside funding sources, staff believes that the City needs the flexIbIlity to adjust the CIty subsIdy for affordable housIng projects In order to adapt to changing conditions In-lieu Fee Revenue. In consldenng modifications to Ordinance 1615 staff will analyze a number of factors Including the Impact of varying fee levels on project viability and the amount of fee needed to produce affordable units Council asked staff for an analysIs of the loss of affordable hOUSing that could occur with redevelopment of sites dunng the planning penod In companson to the potential gain of affordable hOUSing through in-lieu fees ThiS IS a question which cannot be answered with any degree of preCIsion City staff cannot predict with certainty the amount of redevelopment of eXisting multifamily hOUSing whIch Will occur within the planning penod However, an attempt at quantification can be made utilizing the follOWing assumptions 16 All multifamily housing that IS removed IS affordable All replacement housing IS market rate housing The developer elects In all cases to pay an In lieu fee for 30% of the new Units The current In lieu fee of $55,383 per unit IS charged Economic conditions are such that redevelopment occurs The amount of City subsidy requIred to produce an affordable Unit remains constant Under this scenariO, the amount of affordable housing that would be produced would be slightly less than 18 percent of the total new hOUSing stock resulting from redevelopment That IS because the current fee of $55,383 does not fully cover the average City subsidy of $95,000 per affordable unrt BUDGET/FINANCIAL IMPACT The recommendation presented In thiS report does not have a budgetary or fiscal Impact RECOMMENDATION As with the onglnal staff report, staff respectfully recommends that the City Council conduct a public hearing on the Draft Element, conSider the changes proposed by the Planning Commission and staff, adopt In concept the Draft Element, direct staff to transmit the document to HCO for review and comment, begin the EIR process and prepare Implementation ordinances related to the Incluslonary hOUSing poliCies and revised development standards 17 Prepared by Suzanne Frick, Director Karen Ginsberg, Planning Manager Laura Beck, Associate Planner Planning and Community Development Department City Planning DIVIsion Bob Moncrief, Housing Manager Tad Read, Sr Administrative Analyst Resource Management Department Housing DIVISion 18