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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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