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SR-400-001-03 PCD:SF:f:\ppd\share\ccreport\hsngelmt\Housing Element Update.doc Council Mtg: April 24, 2001 Santa Monica, California TO: Mayor and City Council FROM: City Staff SUBJECT: Recommendation to Conduct a Public Hearing and Approve in Concept the Draft 2000-2005 Housing Element for Transmittal to the State Department of Housing and Community Development (HCD) and Direct Staff to Prepare Environmental Review. INTRODUCTION This staff report recommends that the City Council conduct a public hearing and approve in concept the Draft 2000-2005 Housing Element for transmittal to the State Department of Housing and Community Development (HCD) and direct staff to prepare the environmental review on the document. BACKGROUND The Draft 2000-2005 Housing Element is a technical update to the City’s current Housing Element adopted by the City Council on April 21, 1998. One of seven mandated elements of the General Plan, the Housing Element establishes a five-year plan for addressing the City’s housing needs. The Draft Housing Element has been prepared in conformity with State law. In large measure, the Draft 2000-2005 Housing Element commits the City to continue housing programs established in the 1998-2003 Housing Element. The Planning Commission held a public hearing and reviewed the Draft 2000-2005 Housing Element on February 28, 2001. The Housing Commission received the document on March 8, 2001 and reviewed the document at its April 19, 1 2001 meeting. The comments of the Planning Commission are summarized later in this report. Housing Commission comments are provided as a supplement to this staff report. This report provides the following: background information including a summary of applicable legal requirements, a description of the Draft Element’s contents, a summary of key technical changes, a summary of the Housing Element goals and changes to program action plans, and a summary of the Planning Commission’s recommended modifications to the Element. ANALYSIS Applicable Legal Requirements By law, the City’s Housing Element must analyze existing and projected housing needs, set forth goals, policies, and programs for addressing those needs, and identify adequate housing sites. Additionally, the Housing Element must identify potential and actual constraints upon the maintenance, improvement, or development of housing for all income levels. Specifically, the legislation requires the following: The housing element shall consist of an identification and analysis of existing and projected housing needs and a statement of goals, policies, and quantified objectives and scheduled programs for the preservation, improvement, and development of housing. The housing element shall identify adequate sites for housing, including rental housing, factory-built housing, and mobile homes and shall make adequate provision for the existing and projected needs of all economic segments of the community. 2 California Housing Element law (Section 65588) requires that local jurisdictions update their housing elements every five years, however, such updates are contingent on preparation of future regional housing needs estimates, i.e. fair share targets (“RHNA”). The agency responsible for assigning these fair share targets for Santa Monica is the Southern California Association of Governments (SCAG). SCAG adopted its prior RHNA in 1988, covering the 1988-1994 planning period. In 1994, SCAG was technically required to prepare a RHNA for the 1994-1999 period. SCAG’s ability to prepare the RHNA, however, was dependent on the State Legislature appropriating funds for this State-mandated local program. As part of an effort to balance the State budget in the early 1990s, the Legislature chose not to provide funds for the mandate and therefore SCAG took the position that its obligation to prepare a new fair share allocation for member jurisdictions was suspended. In fact, subsequent legislation was adopted in 1993, 1996 and 1998 to postpone the due dates for the Housing Element. Although many communities in southern California did not update their housing element, Santa Monica chose to do so. In preparing the 1998-2003 Housing Element, the City engaged in an in-depth, comprehensive evaluation of the City’s housing needs and resources, housing-related regulations, and programs. The City also estimated its “fair share” housing need by applying SCAG’s 1988 RHNA calculation, with variations in some of the calculation assumptions to account for alternative household growth rates. 3 Through this evaluation, the City identified the following priority goals and objectives: preservation of affordable housing threatened by the Costa-Hawkins Rental Housing Act, the development of housing for families, and reexamination of the City’s development incentives and standards for affordable housing. The policies and programs set forth in the 1998-2003 Housing Element directly responded to these identified priorities. A summary of the 1998-2003 Housing Element is contained in the staff reports that were presented to City Council prior to that element’s adoption (Attachment B). The 1998-2003 Housing Element was adopted following an extensive public process to receive input and to foster a discussion of housing issues and policies for the City. It was reviewed by an inter-departmental committee comprised of representatives of the Community and Cultural Services Department, the Housing Division, Rent Control Administration, the City Manager’s Office, the City Attorney’s Office and the Planning and Community Development Department. The committee collectively considered public input and the analyses prepared by the City’s consultants, and formulated the proposed goals, policies and programs of the Housing Element based on input received at the public workshops, and the desire to continue to provide the community with a broad array of affordable housing opportunities. The 1998-2003 Housing Element was adopted by the City Council on April 21, 1998. The State Department of Housing and Community Development (HCD) approved the City’s Housing Element in November 1998. In November 2000, SCAG assigned the 4 City a new RHNA allocation for the 1998-2005 planning period. The need to update the 1998-2003 Housing Element is largely the result of SCAG’s recent action. Consequently, the Draft 2000-2005 Housing Element is considered a technical update. As detailed later, the City has been highly successful in meeting many of the objectives set forth in the 1998-2003 Housing Element and therefore the Draft 2000-2005 Housing Element includes the same goals and policies. The proposed changes to the Element reflect changes to the City’s RHNA allocation, updates to relevant data cited in the Element, and refinement to programs, many of which have been implemented since the adoption of the 1998-2003 Element. The law also requires that the information within the Element be updated to reflect current conditions and to reflect the City’s progress towards meeting the goals and objectives of the current Housing Element. Adoption of the Housing Element in compliance with State law not only provides the City with a valuable planning tool but also satisfies a requirement that the City must meet to receive State housing funds. The City has retained two consulting firms for this project. Cotton/Bridges/Associates (CBA) has prepared the technical update to the Draft Housing Element, and Hamilton, Rabinovitz and Alschuler (HR&A) has prepared technical memoranda in support of the Housing Element. Contents of the Housing Element The Draft 2000-2005 Housing Element is bound under three separate covers -- the 5 2000-2005 Housing Element Update, Technical Appendix #1, and Technical Appendix #2. The latter two documents were prepared by Hamilton, Rabinovitz & Alschuler (HR&A). The Housing Element Update is organized according to State law as follows: Section II - Housing Needs. An assessment of housing needs Section III - Potential Constraints on Housing Production and Conservation. A discussion of potential constraints on housing production Section IV- Housing Resources. An assessment of housing resources Section V - Review of Housing Element Past Performance. A summary of progress under the 1993 Housing Element and the 1998-2003 Housing Element Section VI - Housing Objectives, Goals, Policies, and Programs. A description of the goals, quantified objectives, policies, and programs that the city has chosen to meet the identified needs. The memoranda included in Technical Appendix #1 were prepared for the 1998-2003 Housing Element and remain relevant to the analysis in this update. Technical Appendix #1 includes the following memoranda: ? Results of the 1995 Santa Monica Apartment Tenants Survey. ? The Impacts of the Costa-Hawkins Rental Housing Act on the Rent- Controlled Apartment Stock in Santa Monica. ? Assessment of the Rent Control Board's Ellis Act Removal Permit Process as a Potential or Actual "Constraint" on the Development of Housing. 6 ? Assessment of Four Large-Scale Residential Rezoning Actions as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of the City's Inclusionary Housing Program (Ordinance 1615) as a Potential or Actual "Constraint" on the Development of Housing. ? Cumulative Effects of Five City of Santa Monica Requirements on Multi- Family Housing Projects as a Potential or Actual "Constraint" on the Development of Housing. Technical Appendix #2 analyses the degree to which eight City policies, programs and regulations, or features of them, operate as “actual or potential governmental constraints” on the production of new housing. Specifically, HR&A analyzed the impact of changes to the City’s regulatory framework on housing development. These studies are grouped into three subsets of analyses and are included as Technical Appendix #2. The three subsets are as follows: ? City Council actions to modify development and construction regulations. These include the development moratoria in the City’s multi-family districts, changes in multi-family district development standards, and a construction rate program; ? Specific discretionary review procedures, including Rent Control law removal permits, the Landmark Ordinance, project scale thresholds for Development Review Permits, Design Compatibility Permits for condominiums, and various other discretionary review procedures; and ? Features of the City’s Affordable Housing Production Program with specific focus on the affordable housing fee for condominium projects and administrative procedures for exercising the available mitigation options. Key Technical Changes In addition to the technical update necessitated to address the approved RHNA allocation, the law also requires that the information within the Element be updated to 7 reflect current conditions and to reflect the City’s progress towards meeting the goals and objectives of the current Housing Element. Changes were made in the following areas: Data Update ? Projected Housing Needs ? Funding ? Potential for Residential Development in Commercial Districts ? Potential Governmental and Non-Governmental Constraints ? Quantified Objectives ? A brief discussion of each of these key technical changes follows. Data Update: In preparing the 2000-2005 Housing Element, updated data was obtained, wherever possible, to provide a portrait of the housing needs and resources available in Santa Monica. The 1990 Census still provided the primary basis for demographic characteristics since it remains the most comprehensive and widely accepted source on demographic characteristics. The following data provide updated information in the 2000-2005 Housing Element: ? Demographic data from the State Department of Finance, the Santa Monica-Malibu Unified School District, and the Employment Development Department as of 2000. ? Housing market data was updated by obtaining the Year 2000 apartment rents and sales prices of homes through surveys, tax assessor's files, and other available sources. ? City agencies and various service agencies were consulted to provide information on the magnitude of special needs populations as of Year 2000; and ? Data on lending patterns were updated based on interviews with City staff and utilization of outside sources where available. 8 Projected Housing Needs: As discussed, State Housing Element law requires that each city and county develop local housing programs designed to address its “fair share” of existing and future housing needs for all income groups, as determined by the jurisdiction’s Council of Governments, when preparing the State-mandated Housing Element of its General Plan. SCAG’s process for adopting the 1999 RHNA concluded in November 2000. The RHNA allocation for the City of Santa Monica is 2,208 units of housing to be constructed over a 7 ½ year period. The City’s total construction need is the sum of units needed for household growth during the 1998-2005 period (1,133 units), additional units needed to achieve an ideal vacancy rate, now and in the future (152 units), plus additional units to account for demolitions and other housing stock losses during the planning period (923 units), for a total of 2,208 units. The RHNA allocation distributes the construction need total into four household income categories: very low income; low income; moderate income; and, above moderate income. The following table presents the RHNA allocation for Santa Monica. 1999 Regional Housing Needs Assessment Allocation to Santa Monica, 1998-2005 Construction 1998-2005 Replacement Total Existing Need Household and Future Need Growth Vacancy 9 Need Number of Units 1,133 152 923 2,208 Household Very Low Low Moderate Above Total Income Income Income Income Moderate Distribution Income Number of Units 513 335 431 929 2,208 Percent of Total 23% 15% 20% 42% 100% Source: SCAG, Final 1999 Regional Housing Needs Assessment The City’s zoning laws and policies include substantial incentives for the production of affordable housing, including height and density bonuses and reduced parking requirements. In addition, the City operates a number of programs that facilitate the production of affordable housing. These include loans to private, for-profit developers and owners and funding to non-profit agencies to acquire or construct housing units. The City also funds many social service programs which provide emergency shelter, transitional housing and permanent and supportive housing to individuals and families with very low incomes. These and other laws, policies and programs have resulted in the preservation and production of an extraordinary number of affordable units within the City. The presence of these units has allowed a very substantial number of low and moderate income households to live in the City notwithstanding its desirable location and high real estate values. In creating housing policy the City has tried to strike a balance between protecting the existing housing stock, and allowing for the development and production of new housing 10 for all income groups while protecting the quality of life within the City. Funding: Increasingly, the threats of federal and state budget cuts have left many local jurisdictions unable to provide their affordable housing production. Due to these funding and revenue reductions, the City must be aggressive in pursuing creative financing mechanisms. The technical update to the 2000-2005 Housing Element reflects changes to funding amounts and sources and related affordable housing production estimates. Potential for Residential Development in Commercial Districts: The City has long promoted residential development, or mixed use, in commercial zones. In 1993, the City amended the Zoning Ordinance to conditionally permit residential development in the Special Office Commercial (C5) and Industrial Conservation (M1) Districts, and to permit residential uses in most other commercial districts (BCD, C2, C3, C3C, C4, C6). In 1995, the City established the Light Manufacturing Studio District (LMSD) to replace a portion of the M1 and C5 districts. The LMSD permits studio live/work uses, while preserving existing light industrial uses and providing a location for studio-related uses, such as film and music production and post-production facilities. The City also permits residential development in the commercial Bayside Commercial District (BSC), which it established in early 1996. Moreover, in several districts, the City offers special incentives for housing. In the C3, C3C and CM districts, any floor area devoted to residential use is eligible to receive a FAR (Floor Area Ratio) discount of 50 percent. In BCD, C2, C4, and C6 districts, the City offers increased density if at least 30 percent of 11 the FAR is residential. These changes have been very successful in bringing residential development to commercial districts. While the 1998-2003 Housing Element included an analysis of sites in commercial districts that would be most likely to recycle during the planning period and an assessment of the potential for residential development, the 2000-2005 Housing Element refines this analysis. The analysis is limited to the downtown, the Broadway Commercial District and the Main Street corridor since these are the areas where there has been demonstrated and significant market interest in residential development. This analysis can be located on Table IV-5 (Residential Unit Potential in Select Commercial Zones Under Varying Development Scenarios) of the Draft Housing Element. Potential Governmental and Non-governmental Constraints: The Draft Housing Element includes a detailed analysis of potential governmental and non-governmental constraints upon the development, maintenance and improvement of housing. In assessing whether a City program operates as an actual constraint on housing production, the Element uses the following definition of “actual government constraint”: A program will constitute an actual governmental constraint on new housing production within the meaning of Government Code 65583(a)(4) if the program, either individually or in combination with other governmental programs, has a significant adverse impact on the City’s ability to meet its fair share of the regional need for additional housing determined in accordance with the Southern California Association of Governments’ regional housing need allocation process. Since State certification of the1998-2003 Housing Element, the City has modified some 12 programs and enacted, or indicated an intention to enact, other programs that have been identified as potential governmental constraints. The Draft 2000-2005 Housing Element includes an assessment of these programs. A detailed analysis of many City policies and programs prepared by HR & A is included in Technical Appendix #2. Quantified Objective: The Draft 2000-2005 Technical Update includes a quantified objective that reflects changes in housing market characteristics, available funding for publicly assisted affordable housing, and the new RHNA allocation. The City’s 1998- 2003 Housing Element established a housing production objective of 1,542 new housing units; the updated housing element proposes a production objective of 2,208 new units including 513 very low income units, 335 low income units, 431 moderate income units, and 929 above moderate income units. As discussed this housing production objective is for the 1998-2005 time period. This housing production objective will allow the City to provide its “fair share” of new housing to satisfy the region’s housing needs as determined by the RHNA allocation. Planning Commission Recommendations The City’s Planning Commission reviewed the Draft 2000-2005 Housing Element at its February 28, 2001 meeting and recommended conceptual approval. The Commission recommended that the population density of the City be presented in the document in such a way as to factor out large land masses such as the airport. Additionally, the Commission recognized that the City provides its fair share of housing in terms of density, and that the City seeks to protect the quality of life and preserve its character 13 for the residents of Santa Monica. Housing Commission Recommendations The City’s Housing Commission received copies of the Draft 2000-2005 Housing Element. The Commission discussed the Draft Element at its April 19, 2001 meeting. Housing Commission comments are provided as a supplement to this staff report. Conclusion The Draft 2000-2005 Housing Element is a technical update to the recently adopted and HCD certified 1998-2003 Housing Element. The proposed modifications include changes to the City’s RHNA as recently determined by the SCAG, updates to relevant data cited in the current Housing Element, and refinement to programs, many of which have been implemented since the adoption of the 1998-2003 Element. No significant changes to the policies and goals established in the previous Element have been proposed. The City will meet its housing allocation and existing programs will not impede the production of units. Following City Council conceptual approval, this draft document will be transmitted to the State Department of Housing and Community Development (HCD) for a 60-day review period. Following this review, the Draft 2000-2005 Housing Element will be revised as necessary to address HCD’s concerns. The revised Housing Element and the CEQA documentation will be reviewed by the Planning Commission and then reviewed by the City Council. Following Council certification of the CEQA 14 documentation and adoption of the 2000-2005 Housing Element, the document will be submitted to HCD for review and approval. CEQA STATUS An Environmental Impact Report (EIR) was prepared for the 1998-2003 Housing Element Update and evaluated the potential environmental impacts of implementation of the policies and programs contained in the Housing Element. An Initial Study will be prepared for the Housing Element Update prior to adoption by the City Council. No new programs are contained in the 2000-2005 Housing Element Update, but the action plans of some programs have been modified. The Initial Study will examine only the potential environmental effects of the new and modified programs. PUBLIC NOTIFICATION The Draft 2000-2005 Housing Element Update has been prepared and was made available for public review on February 22, 2001. The availability of the document and the City Council public hearing were noticed by mailing flyers to all people on the City's "Big List" and to local non-profit housing developers, affordable housing advocates, and other interested parties. A display ad was also published in the Westside Weekly section of the Los Angeles Times and on the City’s web site. A copy of the notice is included as Attachment A. BUDGET/FINANCIAL IMPACT The recommendation presented in this report does not have any budget or fiscal impact. 15 RECOMMENDATION Staff respectfully recommends that the City Council conduct a public hearing on the Draft 2000-2005 Housing Element, consider changes as proposed by the Planning Commission, approve the Draft Element in concept, direct staff to transmit the draft document to the State Department of Housing and Community Development (HCD) for review and comment, and direct staff to begin the CEQA process. Prepared by: Suzanne Frick, Director Jay Trevino, AICP, Planning Manager Amanda Schachter, Principal Planner Susan Healy Keene, AICP, Senior Planner Laura Beck, AICP, Associate Planner Planning and Community Development Department ATTACHMENTS: A. Public Hearing Notice B. Planning Commission staff report 2/28/01 with Attachments C. Summary of Housing Element Goals and Changes to Program (Not available electronically - Can be viewed in the Action Plans City Clerk’s Office) (Not D. Draft Housing Element 2000-2005 with Technical Appendices available electronically - Can be view in the City Clerk’s Office) 16 ATTACHMENT A Public Hearing Notice 17 18 NOTICE OF A PUBLIC HEARING BEFORE THE SANTA MONICA CITY COUNCIL SUBJECT: Approve in Concept the Draft 2000-2005 Housing Element for Transmittal to the State Department of Housing and Community Development (HCD) and Direct Staff to Prepare Environmental Review. WHEN: Tuesday, April 24, 2001 at 6:45 p.m. WHERE: Council Chambers 1685 Main Street, Room 213 Santa Monica, California DESCRIPTION OF PROJECT: The City of Santa Monica proposes to update its existing Housing Element which was adopted in April 1998, pursuant to Section 65302 of the California Government Code. The update consists of technical revisions to address the Regional Housing Needs Assessment (RHNA) allocation prepared by the Southern California Association of Governments (SCAG), revisions to reflect the extended planning period established by the State Department of Housing and Community Development (HCD), and updated data and programs to reflect past changes. The Housing Element represents a component of the City of Santa Monica General Plan, a planning document that identifies the community’s long-term goals for development. The Housing Element sets forth the City’s strategy to preserve and enhance the community’s character, expand housing opportunities for all economic segments, and provide guidance and direction for local government decision-making in all matters related to housing. The goals and objectives contained in the Housing Element Update provide an implementation strategy for effectively addressing the housing needs of all Santa Monica residents for the 2000-2005 period; these are unchanged from the 1998-2003 Housing Element. The programs proposed to meet these goals and objectives have been changed and/or updated as necessary to reflect past progress towards implementation. The City Council will hear public testimony on the Draft 2000-2005 Housing Element for approval in concept, transmittal to the State Department of Housing and Community Development (HCD) and will direct staff to prepare environmental review. HOW TO COMMENT : You may comment at the City Council public hearing, or by writing a letter. Written information received before 3:00 p.m. on the Wednesday before the hearing will be given to the City Council in their packet. Information received after that time will be given to the City Council prior to the meeting. Address your letters to: City Clerk 1685 Main Street, Room 102 19 Santa Monica, CA 90401 MORE INFORMATION: You may obtain further information about this project by calling Associate Planner Laura Beck at (310) 458-8341, or via e-mail at laura-beck@santa- monica.org. Sections of the Code are available at the Planning Counter during business hours or available on the City’s web site at www.santa-monica.org. The meeting facility is handicapped accessible. If you have any disabilities related request, contact at (310) 458-8701 or TTY (310) 458-8696 at least three (3) days prior to the meeting. Santa Monica ‘Big Blue” Bus Lines #1, #2, #3, #7 and #8 serve City Hall. Pursuant to California Government Code Section 65009(b), if this matter is subsequently challenged in Court, the challenge may be limited to only those issues raised at the Public Hearing described in this notice, or in written correspondence delivered to the City of Santa Monica at, or prior to, the Public Hearing. ESPAÑOL: Esto es una noticia sobre un reporte de los posibles efectos ambientales del Elemento de Vivienda propuesto para 2000-2005, lo cual puede ser de interes para usted. Para mas informacion, llame a Carmen Gutierrez al numero (310) 458-8341. F:\PPD\SHARE\NOTICES\HETECHNICALUPDATECOUNCIL.DOC Approved as to Form: By: _______________________ Jay Trevino, AICP Planning Manager 20 ATTACHMENT B Planning Commission Staff Report 2/28/01 With Attachments 21 PCD:JT:SHK:LB:f:\ppd\share\ccreport\Attachment B.Housing Element.doc Planning Commission Mtg: February 28, 2001 Santa Monica, CA TO: The Honorable Planning Commission FROM: Planning Staff SUBJECT: Review and Recommendations to City Council Regarding Approval in Concept of the Draft 2000-2005 Housing Element INTRODUCTION: Action: Review of the Draft 2000-2005 Housing Element Update and recommendations to the City Council regarding any proposed modifications. Recommendation: Recommend to the City Council that the City Council conceptually approve the Technical Update and direct staff to submit it to the State Department of Housing and Community Development for review and comment and prepare environmental review. PROJECT DESCRIPTION The Draft 2000-2005 Housing Element is a technical update to the City’s 1998-2000 Housing Element. One of the seven mandated elements of the General Plan, the Housing Element establishes a five-year plan for addressing the City’s housing needs. CEQA STATUS An Environmental Impact Report (EIR) was prepared for the 1998-2003 Housing Element Update and evaluated the potential environmental impacts of implementation of the policies and programs contained in the Housing Element. An Initial Study will be prepared for the Housing Element Update prior to adoption by the City Council. No new programs are contained in the 2000-2005 Housing Element Update, but the action plans of some programs have been modified. The Initial Study will examine only the potential environmental effects of the new and modified programs. PUBLIC NOTIFICATION The Draft 2000-2005 Housing Element Update has been prepared and was made 22 available for public review on February 22, 2001. The availability of the document and the Planning Commission public hearing were noticed by mailing flyers to all people on the City's "Big List" and local non-profit housing developers, affordable housing advocates and other interested individuals. A display ad was also published in the “Westside Weekly” section of The Los Angeles Times. A copy of the notice is included as Attachment A. ANALYSIS Background By law, the City’s Housing Element must analyze existing and projected housing needs, set forth goals, policies, and programs for addressing those needs, and identify adequate housing sites. Additionally, the Housing Element must identify potential and actual constraints upon the maintenance, improvement, or development of housing for all income levels. Specifically, the legislation requires the following: The housing element shall consist of an identification and analysis of existing and projected housing needs and a statement of goals, policies, and quantified objectives and scheduled programs for the preservation, improvement, and development of housing. The housing element shall identify adequate sites for housing, including rental housing, factory-built housing, and mobile homes and shall make adequate provision for the existing and projected needs of all economic segments of the community. California Housing Element law (Section 65588) requires that local jurisdictions update their housing elements every five years, however, the State's associations of governments were unable to prepare future regional housing needs estimates until now due to a lack of funding. The agency responsible for assigning these fair share targets for Santa Monica is the Southern California Association of Governments (SCAG). The City of Santa Monica independently prepared an estimate of its share of the regional housing need and prepared a Housing Element Update for the 1998-2003 planning period that was adopted by the City Council on April 21, 1998. The State Department of Housing and Community Development (HCD) approved the City’s Housing Element in November 1998. The need to update the 1998-2003 Housing Element is largely the result of the SCAG’s recent establishment of the City’s regional housing needs assessment (RHNA) numbers. Consequently, the Draft 2000-2005 Housing Element is considered a technical update. A summary of the 1998-2003 Housing Element is contained in the staff reports that were presented to City Council (Attachment B). The 1998-2003 Housing Element was adopted following an extensive public process to receive input and to foster a discussion of housing issues and policies for the City. It was reviewed by an inter-departmental committee comprised of representatives of the Community and Cultural Services Department, the Housing Division, Rent Control Administration, the 23 City Manager’s Office, the City Attorney’s Office and the Planning and Community Development Department. The committee collectively considered public input and the analyses prepared by the City’s consultants, and formulated the proposed goals, policies and programs of the Housing Element based on input received at the public workshops, and the desire to continue to provide the community with a broad array of affordable housing opportunities. As detailed later, the City has been highly successful in meeting many of the objectives set forth in the document. Consequently, the Draft 2000-2005 Housing Element includes the same goals and policies. The proposed changes to the Element reflect changes to the City’s RHNA allocation as determined by the SCAG in November 2000, updates to relevant data cited in the Element, and refinement to programs, many of which have been implemented since the adoption of the 1998-2003 Element. The law also requires that the information within the Element be updated to reflect current conditions and to reflect the City’s progress towards meeting the goals and objectives of the current Housing Element. Adoption of the Housing Element in compliance with State law not only provides the City with a valuable planning tool but also satisfies a requirement that the City must meet to receive State housing funds. The City has retained two consulting firms for this project. Cotton/Bridges/Associates (CBA) has prepared the technical update to the Draft Housing Element, and Hamilton, Rabinovitz and Alschuler (HR&A) has prepared technical memoranda in support of the Housing Element. Contents of the Housing Element The Draft 2000-2005 Housing Element is bound under three separate covers -- the 2000-2005 Housing Element Update and its appendices and two Technical Appendices. The Housing Element Update is organized according to State law as follows: (Section II - Housing Needs) An assessment of housing needs (Section III - Potential Constraints on Housing Production and Conservation) A discussion of potential constraints on housing production (Section IV- Housing Resources) An assessment of housing resources (Section V - Review of Housing Element Past Performance) A summary of progress under the 1993 Housing Element and the 1998-2003 Housing Element (Section VI - Housing Objectives, Goals, Policies, and Programs) A description of the goals, quantified objectives, policies, and programs that the city has chosen to meet the identified needs. 24 The general appendices are bound with the Draft Element; however, a series of technical memoranda have been prepared by Hamilton, Rabinovitz & Alschuler (HR&A) and are included under separate cover as Technical Appendix #1 and #2. The memoranda included in Technical Appendix #1 were prepared for the 1998- 2003 Housing Element and remain relevant to the analysis in this update. Technical Appendix #1includes the following memoranda: ? Results of the 1995 Santa Monica Apartment Tenants Survey. ? The Impacts of the Costa-Hawkins Rental Housing Act on the Rent- Controlled Apartment Stock in Santa Monica. ? Assessment of the Rent Control Board's Ellis Act Removal Permit Process as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of Four Large-Scale Residential Rezoning Actions as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of the City's Inclusionary Housing Program (Ordinance 1615) as a Potential or Actual "Constraint" on the Development of Housing. ? Cumulative Effects of Five City of Santa Monica Requirements on Multi- Family Housing Projects as a Potential or Actual "Constraint" on the Development of Housing. Technical Appendix #2 analyses the degree to which eight City policies, programs and regulations, or features of them, operate as “actual or potential governmental constraints” on the production of new housing. Key Technical Changes The Draft 2000-2005 Housing Element is a technical update to the City’s existing housing element that is necessary to address the RHNA allocation that was approved by SCAG. The law also requires that the information within the Element be updated to reflect current conditions and to reflect the City’s progress towards meeting the goals and objectives of the current Housing Element. Changes were made in the following areas: Data Update ? 25 Projected Housing Needs ? Funding ? Potential for Residential Development in Commercial Districts ? Potential Governmental and Non-Governmental Constraints ? Quantified Objectives ? A brief discussion of each of these key technical changes follows. Data Update: In preparing the 2000-2005 Housing Element, updated data was obtained to provide a portrait of the housing needs and resources available to Santa Monica wherever possible, although the 1990 Census still provided the primary basis for demographic characteristics since it remains the most comprehensive and widely accepted source on demographic characteristics. The following data provide updated information in the 2000-2005 Housing Element: ? Demographic data from the State Department of Finance, public school district data, and the Employment Development Department records as of 2000. ? Housing market data was updated by obtaining the current (2000) apartment rents and sales prices of homes through surveys, tax assessor's files, and other available sources. ? City agencies and various service agencies were consulted to provide information on the magnitude of special needs populations as of Year 2000; and ? Data on lending patterns were updated based on interviews with City staff and outside data where available. Projected Housing Needs: As discussed, State Housing Element law requires that each city and county develop local housing programs designed to meet its “fair share” of existing and future housing needs for all income groups, as determined by the jurisdiction’s Council of Governments, when preparing the State-mandated Housing Element of its General Plan. SCAG’s process for adopting the 1999 RHNA concluded in November 2000. The RHNA allocation for the City of Santa Monica is 2,208 units of housing to be constructed over a 7 ½ year period. The City’s total construction need is the sum of units needed for household growth during the 1998-2005 period (1,133 units), additional units needed to achieve an ideal vacancy rate, now and in the future (152 units), plus additional units to account for demolitions and other housing stock losses during the planning period (923 units), for a total of 2,208 units. The RHNA allocation distributes the construction need total into four household income categories: very low income; low income; moderate income; and, above moderate income. The following table presents the RHNA allocation for Santa Monica. 26 1999 Regional Housing Needs Assessment Allocation to Santa Monica, 1998-2005 Construction 1998-2005 Existing Replacement Total Need Household and Future Need Growth Vacancy Need Number of Units 1,133 152 923 2,208 Household Very Low Low Moderate Above Total Income Income Income Income Moderate Distribution Income Number of Units 513 335 431 929 2,208 Percent of Total 23% 15% 20% 42% 100% Source: SCAG, Final 1999 Regional Housing Needs Assessment The City has a long-standing commitment to the production of affordable housing. The City’s zoning laws and policies include substantial incentives for the production of affordable housing, including height and density bonuses and reduced parking requirements. In addition, the City operates a number of programs that facilitate the production of affordable housing. These include loans to private, for-profit developers and owners and funding to non-profit agencies to acquire or construct housing units. The City also funds many social service programs which provide emergency shelter, transitional housing and permanent and supportive housing to individuals and families with very low incomes. These and other laws, policies and programs have resulted in the preservation and production of an extraordinary number of affordable units within the City. The presence of these units has allowed a very substantial number of low and moderate income households to live in the City notwithstanding its desirable location and high real estate values. In creating housing policy the City has tried to strike a balance between protecting the existing housing stock, and allowing for the development and production of new housing for all income groups while protecting the quality of life within the City. Funding: Increasingly, the threats of federal and state budget cuts have left many local jurisdictions unable to provide their affordable housing production. Due to these funding and revenue reductions, the City must be aggressive in pursuing creative financing mechanisms. The technical update to the 2000-2005 Housing Element reflects changes to funding amounts and sources and related affordable housing production estimates. Potential for Residential Development in Commercial Districts: The City has long promoted residential development, or mixed use, in commercial zones. In 1993, the City amended the Zoning Ordinance to conditionally permit residential development in 27 the Special Office Commercial (C5) and Industrial Conservation (M1) Districts, and to permit residential uses in most other commercial districts (BCD, C2, C3, C3C, C4, C6). In 1995, the City established the Light Manufacturing Studio District (LMSD) to replace a portion of the M1 and C5 districts. The LMSD permits studio live/work uses, while preserving existing light industrial uses and providing a location for studio-related uses, such as film and music production and post-production facilities. The City also permits residential development in the commercial Bayside Commercial District (BSC), which it established in early 1996. Moreover, in several districts, the City offers special incentives for housing. In the C3, C3C and CM districts, any floor area devoted to residential use is eligible to receive a FAR (Floor Area Ratio) discount of 50 percent. In BCD, C2, C4, and C6 districts, the City offers increased density if at least 30 percent of the FAR is residential. These changes have been very successful in bringing residential development to commercial districts. While the 1998-2003 Housing Element included an analysis of sites in commercial districts that would be most likely to recycle during the planning period and an assessment of the potential for residential development, the 2000-2005 Housing Element refines this analysis. The analysis is limited to the downtown, the Broadway Commercial District and the Main Street corridor since these are the areas where there has been demonstrated and significant market interest in residential development. This analysis can be located on Table IV-5 (Residential Unit Potential in Select Commercial Zones Under Varying Development Scenarios) of the Draft Housing Element. Potential Governmental and Non-governmental Constraints: The Draft Housing Element includes a detailed analysis of potential governmental and non-governmental constraints upon the development, maintenance and improvement of housing. In assessing whether a City program operates as an actual constraint on housing production, the Element uses the following definition of “actual government constraint”: A program will constitute an actual governmental constraint on new housing production within the meaning of Government Code 65583(a)(4) if the program, either individually or in combination with other governmental programs, has a significant adverse impact on the City’s ability to meet its fair share of the regional need for additional housing determined in accordance with the Southern California Association of Governments’ regional housing need allocation process. Since State certification of the1998-2003 Housing Element, the City has modified some programs and enacted, or indicated an intention to enact, other programs that have been identified as potential governmental constraints. The Draft 2000-2005 Housing Element includes an assessment of these programs. A detailed analysis of many City policies and programs prepared by HR & A is included in Technical Appendix #2. Quantified Objective: The Draft 2000-2005 Technical Update includes a quantified objective that reflects changes in housing market characteristics, available 28 funding for publicly assisted affordable housing, and the new RHNA allocation. The City’s 1998-2003 Housing Element established a housing production objective of 1,542 new housing units; the updated housing element proposes a production objective of 2,208 new units including 513 very low income units, 335 low income units, 431 moderate income units, and 929 above moderate income units. As discussed this housing production objective is for the 1998-2005 time period. This housing production objective will allow the City to provide its “fair share” of new housing to satisfy the region’s housing needs as determined by the RHNA allocation. Summary of Housing Element Goals and Changes to Program Action Plans The City’s five-year strategy to preserve and enhance the community’s character, expand housing opportunities for all economic segments, and provide guidance and direction for local government in all matters related to housing, mirrors the approach taken in the 1998-2003 Housing Element. Consequently, the goals and policies of the 2000-2005 Draft Housing Element remain unchanged. The Draft 2000-2005 Housing Element addresses key City housing issues with goals, policies and programs including the following: Table VI-4 of the Draft Housing Element, entitled “Housing Program Summary Table” details the programs and action plans. The goals of the Housing Element are outlined below. Under each goal, any modifications to specific action plans since the 1998-2003 Housing Element are noted to reflect progress made towards their implementation: 1. Promote the construction of new housing through regulatory mechanisms. Housing Element policies designed to promote this goal include providing adequate sites for all types of housing, maintaining and enhancing the City’s expedited and coordinated permit processing system, and reviewing development standards and requirements. (See Goal 1.0 and related policies and programs.) Changes to Program Action Plans: a) Program 1.a (Assess and Revise, Where Appropriate, City Regulatory Requirements) has been modified to reflect implementation of several actions included in the 1998-2003 action plan. The Conditional Use Permit requirement for condominiums has o been eliminated and an alternative permit procedure, the Design Compatibility Permit, has been established under an interim ordinance to ensure an appropriate level of review. This program in the action plan has been deleted. The City has repealed the Inclusionary Housing Program and has o adopted the Affordable Housing Production Program. The action 29 plan has been modified to reflect the development and implementation of the Affordable Housing Production Program. The City considered whether it was necessary to modify o development standards to facilitate the development of density bonus units and determined that no changes were needed. The City has already revised the development standards in the o C3C District and other commercial districts so that floor area devoted to residential uses shall be discounted by fifty percent for the purposes of assessing whether a development review permit is required for new development. This program in the action plan has been deleted. However, the City continues to have a program action plan to promote and provide incentives to develop residential uses in non-residential zoning districts. b) Program 1.b. (Streamline Permit Approval Process) has been modified to include an additional program in the action plan as follows: Develop policies and procedures that streamline the CEQA o process to facilitate the timely processing of development applications. 2. Increase the supply of housing affordable to very low, low, and moderate income persons. Housing Element policies designed to promote this goal include ensuring the continued availability of income-restricted housing for very low, low, and moderate income households, and cooperating with housing providers to promote the development and operation of rental housing for very low and low income households, and ownership housing for low and moderate income households. (See Goal 2.0 related policies and programs.) Changes to Action Plans: a) Program 2.a. (Maintain an Inclusionary Housing Program) has been changed to Program 2.a. (Maintain an Affordable Housing Production Program). The action plan for this program has also been modified to reflect the development and implementation of the Affordable Housing Production Program. b) Program 2.b. (Maintain a Density Bonus Program) The City considered whether it was necessary to modify development standards to facilitate the development of density bonus units and determined that no changes were needed. The action plan has been modified to “maintain a density bonus program”. c) Program 2.e. (Assess Alternative Affordable Housing Finance Programs) has been modified to remove the assessment of a Mortgage Credit 30 Certificate program since this program has been assessed and is not considered a viable option during the planning period. d) Program 2.k. (Expand Article 34 Authority) has been modified to reflect the City’s success in expanding Article 34 authority and states the ongoing commitment to utilize a variety of revenues to develop, construct, or acquire low and moderate income rental housing projects. 3. Protect the existing supply of affordable housing. Housing Element policies designed to promote this goal include encouraging the replacement of multi- family housing that is demolished, and ameliorating the effects of the Costa- Hawkins vacancy de-control act on the affordable housing stock. (See Goal 3.0 and related policies and programs.) Changes to Action Plan: a) Program 3.a. (Develop Programs to Ameliorate the Effects of Costa Hawkins) has been updated to reflect the City’s accomplishments and the mix of programs the City will investigate in developing a comprehensive strategy to address the effects of the Costa-Hawkins Rental Housing Act on housing affordability. 4. Promote the rehabilitation and continued maintenance of existing housing. Housing Element policies designed to promote this goal include ensuring that property owners are made aware of City programs to promote capital improvements to rental housing, and ensuring that rehabilitation of existing units does not result in permanent displacement of existing residents. (See Goal 4.0 and related policies and programs.) 5. Provide housing assistance and supportive services to very low, low, and moderate income households and households with special needs. Housing Element policies designed to promote this goal include encouraging a fair share approach to providing housing opportunities and assistance to homeless, very low, and low income household and households with special needs, and targeting funds to ensure a broad array of supportive services to very low and low income persons to ensure their continued maintenance of housing once obtained. (See Goal 5.0 and related policies and programs.) Changes to Action Plans: a) Program 5.b. (Maintain a Community Development Grant Program) has been modified to remove from the action plan the continued funding of a Public Works Assessment Assistance (PWAA) program subsidizing very low and low income households’ required streetlight and sidewalk repairs. 31 b) Program 5.c. (Maintain a Homebuyers Assistance Plan) has been modified to reflect that the use of Mortgage Credit Certificates and the associated silent second program, for first-time home buyers has been assessed and deemed infeasible within this planning period. 6. Eliminate discrimination in the rental or sale of housing on the basis of race, religion, national origin, sex, sexual preference, age, disability, family status, AIDS, or other such characteristics. Housing Element policies designed to promote this goal include enforcing fair housing laws prohibiting arbitrary discrimination in the building, financing, selling, or renting of housing, on the basis of race, religion, national origin, sex, sexual preference, age, disability, family status, AIDS, or other such characteristics. (See Goal 6.0 and related policies and programs.) 7. Promote quality housing and neighborhoods. Housing Element policies designed to promote this goal include ensuring that architectural design of new housing development is compatible with the surrounding neighborhood, promoting safe and secure housing and neighborhoods, and encouraging housing design which serves to deter crime. (See Goal 7.0 and related policies and programs.) Changes to Action Plan: b) Program 7.b. (Provide Historic Preservation Programs) has been modified to complete and implement the Historic Preservation Element of the City’s General Plan. 8. Promote the participation of citizens, community groups, and governmental agencies in housing and community development activities. Housing Element policies designed to promote this goal include ensuring maximum citizen involvement in housing and community development activities, and encouraging involvement of all interested parties in the review and formulation of City housing policies, including property owners, building industry professionals, affordable housing advocates, lending institutions, and other interested parties. (See Goal 8.0 and related policies and programs.) Modifications to other programs were made as necessary to reflect implementation actions that the City has undertaken. Housing Commission Input: The City’s Housing Commission will review the Draft 2000- 2005 Housing Element Update before the City Council hearing, which is scheduled in March. Planning staff will forward any comments to the City Council. 32 Conclusion The Draft 2000-2005 Housing Element is a technical update to the recently adopted and HCD certified 1998-2003 Housing Element. The proposed modifications include changes to the City’s RHNA as recently determined by the SCAG, updates to relevant data cited in the current Housing Element, and refinement to programs, many of which have been implemented since the adoption of the 1998-2003 Element. No significant changes to the policies and goals established in the previous Element have been proposed. The City will meet its housing allocation and existing programs will not impede the production of units. RECOMMENDATION It is recommended that the Planning Commission recommend that City Council approve the Housing Element and direct staff to submit the Draft 2000-2005 to the State Department of Housing and Community Development for review and comment and to begin necessary environmental review. Prepared by: Jay Trevino, AICP, Planning Manager Amanda Schachter, Principal Planner Susan Healy Keene, AICP, Senior Planner Laura Beck, AICP, Associate Planner Attachments: A. Notice of Public Hearing B. Staff Reports to City Council on 1998-2003 Housing Element Update 3/18/97 and 4/14/98 C. Draft 2000-2005 Housing Element Update D. Technical Appendices #1 and #2 33 NOTICE OF A PUBLIC HEARING BEFORE THE SANTA MONICA PLANNING COMMISSION SUBJECT: REVIEW OF DRAFT 2000-2005 HOUSING ELEMENT TECHNICAL UPDATE WHEN: Wednesday, February 21, 2001 at 7:00 p.m. WHERE: Council Chambers 1685 Main Street, Room 213 Santa Monica, California DESCRIPTION OF PROJECT: The City of Santa Monica proposes to update its existing Housing Element which was adopted in April 1998, pursuant to Section 65302 of the California Government Code. The update consists of technical revisions to address the Regional Housing Needs Assessment (RHNA) allocation prepared by the Southern California Association of Governments (SCAG), revisions to reflect the extended planning period established by the State Department of Housing and Community Development (HCD), and updated data and programs to reflect past changes. The Housing Element represents a component of the City of Santa Monica General Plan, a planning document that identifies the communitys long-term goals for development. The Housing Element sets forth the Citys strategy to == preserve and enhance the communitys character, expand housing opportunities for all economic segments, and = provide guidance and direction for local government decision making in all matters related to housing. The goals and objectives contained in the Housing Element Update provide an implementation strategy for effectively addressing the housing needs of all Santa Monica residents for the 2000-2005 period, these are unchanged from the 1998-2003 Housing Element. The programs proposed to meet these goals and objectives have been changed and/or updated as necessary to reflect past progress towards implementation. The Planning Commission will hear public testimony on the 2000-2005 Housing Element Update, make a recommendation on adoption of the Technical Update of the Housing Element, and the recommendations will be forwarded to the City Council. HOW TO COMMENT: You may comment at the Planning Commission public hearing, or by writing a letter. Written information received before 12:00 noon on the Wednesday before the hearing will be given to the Planning Commission in their packet. Information received after that time will be given to the Planning Commission prior to the meeting. Address your letters to: City Planning Division, Laura Beck, AICP, Associate Planner 1685 Main Street, Room 212 Santa Monica, CA 90401 MORE INFORMATION: You may obtain further information about this project by calling Associate Planner Laura Beck at (310) 458-8341, or via e-mail at laura-beck@santa-monica.org. Sections of the Code are available at the Planning Counter during business hours or available on the Citys web site at = The meeting facility is handicapped accessible. If you have any www.santa-monica.org disabilities related request, contact at (310) 458-8701 or TTY (310) 458-8696 at least three (3) days prior to the meeting. Santa Monica ‘Big Blue” Bus Lines #1, #2, #3, #7 and #8 serve City Hall. 34 Pursuant to California Government Code Section 65009(b), if this matter is subsequently challenged in Court, the challenge may be limited to only those issues raised at the Public Hearing described in this notice, or in written correspondence delivered to the City of Santa Monica at, or prior to, the Public Hearing. ESPAÑOL: Esto es una noticia sobre un reporte de los posibles efectos ambientales del Elemento de Vivienda propuesto para 2000-2005, lo cual puede ser de interes para usted. Para mas informacion, llame a Carmen Gutierrez al numero (310) 458-8341. F:\PPD\SHARE\NOTICES\HETechnicalUpdate.wpd Approved as to Form: By: _______________________ Amanda Schachter Principal Planner 35 PCD:SF:KG:LB f:\ppd\share\ccreport\1996\318he COUNCIL MEETING: March 18, 1997 Santa Monica, California TO: Mayor and City Council FROM: City Staff SUBJECT: 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 direct staff to prepare an Environmental Impact Report on the document and Prepare Implementation Ordinances Related to the Inclusionary Housing Policies and Revised Development Standards. INTRODUCTION This staff report recommends that the City Council conduct a public hearing and approve in concept the Draft 1998-2003 Housing Element (Draft Element) for transmittal to HCD for review, direct staff to begin preparation of the Draft EIR, and direct staff to prepare implementation ordinances addressing two key policy issues. The Draft Element is an update to the current Housing Element which the City Council adopted on September 28, 1993. One of the seven mandated elements of the General Plan, the Housing Element establishes a five year action plan for addressing the Citys = housing needs. This report provides the following: background information including summaries of 36 applicable legal requirements and the preparation process, a description of the Draft Elements contents, a summary of the analysis contained in the Draft Element with key = findings and recommendations, and a summary of the Planning Commissions and = staffs recommended modifications to the element. = The Draft Element contains several programs which would commit the City to changing existing housing programs. Key changes would include amendments to the Citys = Inclusionary Housing Program, revisions to residential development standards, and revisions to the CUP process for condominiums. Staff recommends that it be directed to begin preparation of implementing ordinances related to inclusionary housing policies and revised development standards now because these ordinances would address the two issues which are viewed to be the most crucial with regard to housing policy. BACKGROUND Summary of Legal Requirements By law, the Citys Housing Element must analyze existing and projected housing needs, = set forth goals, policies, and programs for addressing those needs, and identify adequate housing sites. Government Code 65583. Additionally, the Housing Element ' must identify potential and actual constraints upon the maintenance, improvement, or development of housing for all income levels and demonstrate local efforts to remove 37 actual constraints that hinder the locality from meeting its share of the regional A@ housing need. Id.Local jurisdictions normally must update their housing elements every five years. Government Code 65588. The City originally prepared its current adopted ' housing element for the 1989-1994 planning period. However, because the State legislature failed to authorize funding for the State's associations of governments to prepare future regional housing needs estimates for the period beyond 1994, the 1989- 1994 planning period was formally extended. Consequently, the new planning period is 1998-2003 for the Housing Element Update. The Draft Housing Element has been prepared in conformity with both State law and the April 5, 1995 settlement agreement in Santa Monica Housing Council, et. al. v. City of Santa Monica, a case which challenged the Citys current Housing Element. = Public Participation And Preparation Process Prior to commencement of preparation of the initial draft of the Housing Element, the Planning and Community Development Department held a public scoping meeting and two workshops to receive public input on areas of concern and interest and to gather relevant information. The public scoping meeting was held on April 24, 1995; the two workshops were held on August 5, 1995 and August 9, 1995. A summary of the comments from these public meetings is included in the Draft Element as Appendix A. Two consulting firms were retained by the City for this project. Cotton/Beland/Associates (CBA) has prepared the Draft Housing Element Update, and 38 Hamilton, Rabinovitz and Alschuler (HR&A) has prepared specialized analyses and technical memoranda in support of the Housing Element. The Draft Housing Element was subsequently reviewed extensively by an inter- departmental committee comprised of representatives of the Community and Cultural Services Department, the Housing Division, Rent Control Administration, the City Managers Office, the City Attorneys Office and Planning and Community Development. == The committee collectively considered public input, reviewed the work of the consultants, and formulated the proposed goals, policies and programs of the Draft Element based on input received at the public workshops, and the desire to continue to provide the community with a broad array of affordable housing opportunities. A draft of the Housing Element was released for public review and comment on November 11, 1996. On December 11, 1996, the Planning Commission and Housing Commission held a joint study session to review the Draft Element. Public testimony and written comments were received. Subsequently the Planning and Housing Commissions each conducted separate public hearings on the Draft Element. On January 9 and January 16, 1997 the Housing Commission held public hearings. Their comments were forwarded to the Planning Commission (Attachment B). The Rent Control Board and the Arts Commission also held public hearings to deliberate on the Draft Element. Their comments were also forwarded to the Planning Commission (Attachments C and D). 39 On January 15, 22, and 29 and February 5, 1997, the Planning Commission held public hearings on the Draft Element. On February 5, 1997 the Planning Commission concluded its deliberations and made recommendations for Council consideration which are discussed beginning at page 23. (See also Attachment A ) Noticing The City Council hearing on the Draft Element was noticed by mailing flyers to all people on the City's "Big List" and the "Housing Element List" which includes the mailing lists of the Citys Housing Division and the Rent Control Board and other interested = individuals. The Draft Element was made available for public review on November 11, 1996. The availability of the document and the Planning Commission hearings were noticed in a similar fashion. A display ad announcing the availability of the document was also placed in the Outlook and on the Public Electronic Network. CONTENTS OF THE HOUSING ELEMENT The Housing Element provides the City with an essential planning tool which sets forth the Citys five-year strategy to preserve and enhance the communitys character, == expand housing opportunities for all economic segments, and provide guidance and direction for local government decision-making in all matters related to housing. To this end, the Housing Element has four primary components: an assessment of the housing needs of the City and an inventory of resources available to meet those needs; an 40 evaluation of potential and actual constraints on the production, maintenance, and improvement of housing; an evaluation of the progress made toward meeting the goals and objectives for the last planning period; and, the establishment of the Citys goals, = objectives, and programs for the next five year planning period. This section summarizes these components. The Draft Element is bound under two separate covers -- the 1998-2003 Housing Element Update and the Technical Appendix. A@A@ Draft Housing Element The Draft Element follows the organization prescribed by state law as follows: 1. An assessment of housing needs and an inventory of resources (Section II - Housing Needs and Resources) 2. A discussion of potential constraints on housing production (Section III - Potential Constraints on Housing Production and Conservation) 3. A summary of progress under the 1993 Housing Element (Section IV - Review of Housing Element Past Performance) 4. A description of the goals, quantified objectives, policies, and programs that the city has chosen to meet the identified needs (Section V - Housing Objectives, Goals, Policies, and Programs) Given the detailed and lengthy analysis undertaken in developing this Draft Element, much of the supporting background material has been included as appendices to the Draft Element. These appendices include: Appendix A - Summary of Comments from Community Meetings Appendix B - 1995 Santa Monica Apartment Tenant Survey Appendix C - Inventory of Land Suitable for Residential Development: 1996 - June 1998 Appendix D - Available Financial Resources and Projections 41 Appendix E - Residential Development Standards and Fees Appendix F - Comparison of Residential Intensity Permitted Under the 1984 Land Use Element and Current Zoning Ordinance Appendix G - Re-evaluation of the 1993 Housing Element Technical Appendix In addition to the appendices bound with the Draft Element, a series of technical memoranda have been prepared by Hamilton, Rabinovitz & Alschuler (HR&A), and are included under separate cover as the Technical Appendix. These include: ? Results of the 1995 Santa Monica Apartment Tenants Survey. ? An Estimate of the City of Santa Monica's "Fair Share" of Regional Housing Need for the 1998-2003 Housing Element Update. ? The Impacts of the Costa-Hawkins Rental Housing Act on the Rent- Controlled Apartment Stock in Santa Monica. ? Assessment of the Rent Control Board's Ellis Act Removal Permit Process as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of the Rent Control Removal Permits as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of the City's Conditional Use Permit Requirement for New Condominiums as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of Four Large-Scale Residential Rezoning Actions as a Potential or Actual "Constraint" on the Development of Housing. ? Assessment of the City's Inclusionary Housing Program (Ordinance 1615) as a Potential or Actual "Constraint" on the Development of Housing. ? Cumulative Effects of Five City of Santa Monica Requirements on Multi- Family Housing Projects as a Potential or Actual "Constraint" on the Development of Housing. ? Analysis of the R2 District Buildable Envelope. Assessment of Housing Needs and Resources The Draft Element (Section II) examines the characteristics of existing and projected population and housing stock in order to define the extent of unmet housing needs in the community for the 1998-2003 planning period. The document provides statistical 42 data and analysis of the Citys population, household and housing stock characteristics, = an inventory of land suitable for residential development and an assessment of future housing needs. To gather input on housing issues pertaining to rent-controlled units in the City, and to update 1990 census information, the Draft Element includes a detailed tenant survey. Apartment buildings, both rent-controlled and uncontrolled, account for a large share of Santa Monica's housing stock. However, the most commonly relied upon source of data for information on Santa Monica's housing stock and its households, the decennial U.S. Census, has significant limitations in meeting the City's information needs about apartments. First, the 1990 U.S. Census is over half a decade old, and in light of the historically greater degree of turnover in the multi-family stock than in single-family housing, data from 1990 may not adequately describe the situation of apartment renters today. Second, although, the Census distinguishes "renters" and "rental housing" from "owners" and "owned housing," and "single-family" housing from "multi-family" housing, it does not include data specifically on apartment units or households residing in apartments. The 1995 Santa Monica Tenant Survey ("Tenant Survey") was conducted to help fill these information gaps. Some key results of the Tenant Survey are set forth in Attachment H. A complete discussion of the survey methodology and a detailed presentation of the survey results are contained in the Technical Appendix. The Draft Element also contains the Citys fair share allocation. A citys fair share =A@=A@ allocation represents a distribution of regional housing needs based upon such factors 43 as market demand for housing, employment opportunities, the availability of suitable sites and public facilities, and commuting patterns. In the six county Southern California region, which includes Santa Monica and all other incorporated cities and unincorporated areas in Los Angeles County, the agency normally responsible for assigning housing fair share allocations to each jurisdiction is the Southern California A@ Association of Governments (SCAG). However, due to the unavailability of State funding, SCAG has not prepared specific, current fair share allocations. Therefore, the City has elected to prepare its own estimate of the Citys fair share of regional housing = need for the 1998-2003 planning period. The estimate in the Draft Element was developed using the same approach which the State has approved and which SCAG would have used had the State Legislature provided funding. Although the City used SCAGs methodology to develop its own fair share estimate, the = Draft Element includes a discussion of the Citys disagreement with this methodology = (Section II.E.). Of chief concern is the fact that SCAGs methodology does not = differentiate between densely populated and built-out communities like Santa Monica, which can accommodate limited growth, and communities which are less built-out and can accommodate significant additional growth. Other City concerns with the SCAG methodology include: (1) inappropriate vacancy rate assumptions and household growth factors; (2) a disregard for the economic constraints imposed on housing development by the current real estate market, the relatively high land prices and other costs of development; and (3) the methodology used for distributing and assessing housing needs in the Westside region. Despite these concerns, the City chose to use 44 the SCAG methodology to increase the likelihood for HCD approval of the Element and to reduce the potential for challenges to the document. The City still reserves its right to challenge the methodology and/or the fair share allocation numbers once SCAG resumes the process. However, even utilizing SCAGs methodology, the Draft Element = demonstrates that the City has adequate sites to accommodate its regional fair share A@ of housing production. Analysis of Potential Constraints on Housing Production The provision of adequate and affordable housing may be constrained by both market conditions and governmental programs and regulations. Potential non-governmental constraints include the price of land, the cost of construction, and the availability of financing. Potential governmental constraints include land use controls, building codes and their enforcement, site improvement fees and other exactions, and local processing and permit procedures. Preparation of the Draft Element included extensive analysis of the impact that various non-governmental and governmental regulations in the City have on housing production. The conclusions of this analysis are presented in the Draft Element (Section III). The detailed analysis itself is presented in a separate document -- Technical Appendix. A@ The principal conclusion of this analysis is that current market conditions -- largely high land costs combined with a dampened real estate market -- are an actual constraint to 45 the development of housing in the City. These market conditions render the development of the average multi-family development project in the City infeasible. Therefore, special circumstances are generally required to make a project financially feasible, such as unusually low land cost, unusually high rent/sales prices, below market-rate financing, and/or significant reductions in construction or other development costs. The analysis also concludes that certain City policies/regulations such as the inclusionary housing program and some development standards constitute potential constraints to housing production. That is, these programs have the potential to negatively impact project feasibility on a per-square-foot basis. While it is market conditions, not the Citys policies and regulations, which at the present time actually = constrain housing production, should market conditions sufficiently improve in the planning period, these programs could constitute an actual constraint on housing production. For this reason and in furtherance of other City goals, the Draft Element contains programs and policies which address and help alleviate the effects of these potential constraints. Additionally, the Draft Element recognizes that some City regulations, which may negatively effect housing production, enhance other City goals including preservation of existing affordable housing and neighborhood character. Review of Housing Element Past Performance The housing programs adopted as part of the Citys current (1993) Housing Element = have been reviewed and evaluated to determine their effectiveness in delivering 46 housing services (Section IV). This review provided a basis for developing programs to address the housing issues identified in the Draft Element. Housing Objectives, Goals, Policies and Programs The Housing Element provides a statement of the community's goals, quantified objectives, and policies related to the maintenance, preservation, improvement, and development of housing (Section V). In contrast to the fair share methodology, the A@ City has developed realistic housing production objectives based on an assessment of available City resources, existing and proposed City policies and programs, and consideration of conditions that will likely result in the production of housing units within the City during the planning period. This section highlights the key housing issues facing the City and sets forth the Citys = overall quantified objectives for housing production, rehabilitation, and assistance for the planning period. A summary of the Citys housing goals, policies and programs, = including a future action plan for the 1998-2003 planning period, is also included as part of Section V. SUMMARY OF HOUSING ELEMENT GOALS AND POLICIES The Draft Element sets forth the goals, policies and programs that constitute the Citys = strategy to effectively address the Citys housing needs for the 1998-2003 period. = (Section V). As discussed, the Draft Element contains several programs that commit 47 the City to changing existing housing policies. Key changes include amendments to Ordinance 1615 (Inclusionary Housing Ordinance), revisions to residential development standards, and revising the conditional use permit process for condominiums. A table summarizing the Citys housing programs including its 1998-2003 action plan, can be = found as Attachment A. The following is a summary of the goals and associated policies included in the document: 1. Promote the construction of new housing through regulatory mechanisms. Housing Element policies designed to promote this goal include providing adequate sites for all types of housing, maintaining and enhancing the Citys = expedited and coordinated permit processing system, and reviewing development standards and requirements. 2. Increase the supply of housing affordable to very low, low, and moderate income persons. Housing Element policies designed to promote this goal include ensuring the continued availability of income-restricted housing for very low, low, and moderate income households, and cooperating with housing providers to promote the development and operation of rental housing for very low and low income households, and ownership housing for low and moderate income households. 48 3. Protect the existing supply of affordable housing. Housing Element policies designed to promote this goal include encouraging the replacement of multi- family housing that is demolished, and ameliorating the effects of the Costa- Hawkins vacancy de-control regulation on the affordable housing stock. 4. Promote the rehabilitation and continued maintenance of existing housing. Housing Element policies designed to promote this goal include ensuring that property owners are made aware of City programs to promote capital improvements to rental housing, and ensuring that rehabilitation of existing units does not result in permanent displacement of existing residents. 5. Provide housing assistance and supportive services to very low, low, and moderate income households and households with special needs. Housing Element policies designed to promote this goal include encouraging a fair share approach to providing housing opportunities and assistance to homeless, very low, and low income households and households with special needs, and targeting funds to ensure a broad array of supportive services to very low and low income persons to ensure their continued maintenance of housing once obtained. 6. Eliminate discrimination in the rental or sale of housing on the basis of race, religion, national origin, sex, sexual preference, age, disability, family status, aids, or other such characteristics. Housing Element policies designed to 49 promote this goal include enforcing fair housing laws prohibiting arbitrary discrimination in the building, financing, selling, or renting of housing, on the basis of race, religion, national origin, sex, sexual preference, age, disability, family status, AIDS, or other such characteristics. 7. Promote quality housing and neighborhoods. Housing Element policies designed to promote this goal include ensuring that architectural design of new housing development is compatible with the surrounding neighborhood, and promoting safe and secure housing and neighborhoods, and encouraging housing design which serves to deter crime. 8. Promote the participation of citizens, community groups, and governmental agencies in housing and community development activities. Housing Element policies designed to promote this goal include ensuring maximum citizen involvement in housing and community development activities, and encouraging involvement of all interested parties in the review and formulation of City housing policies, including property owners, building industry professionals, affordable housing advocates, lending institutions, and other interested parties. KEY HOUSING ELEMENT ISSUES This section focuses on the key housing issues facing the City and the policies and programs contained in the Draft Element which are designed to respond to these 50 issues. Santa Monica faces a myriad of complex housing issues, and housing funds for construction and rehabilitation are shrinking, particularly from federal and state sources. Understanding these issues is critical to making the difficult policy decisions to create cost-effective housing. In preparing this Draft Element, the City has engaged in an in- depth and comprehensive evaluation of the Citys housing-related regulations and = programs and the Citys housing needs and resources. Through this evaluation, the = City has identified its priority goals and objectives. These include preservation of affordable housing threatened by the Costa-Hawkins Rental Housing Act, the development of housing for families, and reexamination of development incentives and standards for affordable housing. Anticipated Loss of Affordable Housing Adoption of the Costa-Hawkins Rental Housing Act in the Fall of 1995 by the State legislature brought about statewide de-control of rent-controlled housing upon vacancy. By January 1999, the Costa-Hawkins Act will eliminate any limits on rent increases that may be charged when a tenant voluntarily vacates an apartment unit or is evicted for non-payment of rent. Vacancy de-control will be phased-in so that rents may be raised up to two times upon voluntary vacancy until January 1999, when full vacancy de- control goes into effect. Upon occupancy by a new tenant, units will be re-controlled until vacated again. 51 In the first eight months of implementation of the vacancy de-control regulation in Santa Monica, over 3,000 units have applied for rent increases. It is estimated that by 2003, between one-half and three-quarters of the 28,000 plus rent-controlled apartment units that existed at the end of 1995, will be decontrolled and rents will increase in the long term. This will result in a loss of a significant portion of the Citys affordable housing = stock. The effects of Costa-Hawkins have been evaluated extensively as part of this Draft Element. The goals, policies and programs recommended by this Draft Housing Element include mechanisms to mitigate the impacts of Costa-Hawkins. Goal 3.0 is to protect the A existing supply of affordable housing. Policies designed to promote this goal include @ encouraging the replacement of multi-family housing that is demolished, and ameliorating the effects of the Costa-Hawkins vacancy de-control regulation on the affordable housing stock. Program 3a. contained in Chapter V directs the City to develop a comprehensive strategy to address the effects of Costa-Hawkins Rental Housing Act by investigating and developing a mix of programs which could include funding for acquisition and/or rehabilitation in exchange for deed restrictions on units; market rate financing for new construction in exchange for deed restricted rental units and/or permitting rental unit conversion to ownership units in exchange for permanently deed-restricted rental units. (See Goal 3.0 and related policies and programs.) Constraint Analysis The Draft Element includes a detailed analysis of potential governmental and non- governmental constraints upon the development, maintenance and improvement of 52 housing. By a mutual agreement memorialized in a settlement agreement between the City and the plaintiffs in a lawsuit challenging the adequacy of the Citys current Housing = Element, a constraint on new housing production is one which causes a significant A@ adverse impact on the Citys ability to meet its regional responsibility to construct new = housing. Specific analyses included assessments of the following programs to determine if they acted as potential or actual constraints on the development of housing: the Rent Control Board's Ellis Act Removal Permit Process; Rent Control Removal Permits; the City's Conditional Use Permit Requirement for New Condominiums; Four Large -Scale Residential Rezoning Actions; the Citys Inclusionary Housing Program = (Ordinance 1615); and, the Cumulative Effects of Five City of Santa Monica Requirements on Multi-family Housing Projects. The Draft Element addresses these potential constraints with specific programs including: revisions to existing development standards (Program 1.a - Page V-9); changes to the review procedures for condominiums (Program1.a. - Page V-9); revisions to the Citys inclusionary housing program (Program 2.a - Page V-12); = maintenance of a density bonus program for the City (Program 2.b - Page V-13); and, expansion of Article 34 authority to utilize a variety of revenues to develop, construct, or acquire low and moderate income rental housing projects (Program 2.k - Page V-20). (See Goals 1.0 and 2.0 and related policies and programs.) Housing for Families with Children The supply of housing units adequately-sized for families with children is limited, 53 particularly in the rental market; and home purchase opportunities are restricted by high housing prices. Overcrowding results as many families overpay for housing and/or live in small housing units to save on housing costs. The Draft Element includes goals, policies and programs to facilitate the development of housing suitable for families at affordable costs, and to provide for a broad range of supportive services including, but not limited to, child care and employment assistance for low income families (see especially Program 2h). Housing for Special Needs Populations In recent years, the City has sought to maintain an open housing market that attracts and maintains a diverse population. As demonstrated by the goals, policies and programs within the Draft Element, the City has a strong commitment to providing housing and supportive services to persons with special needs including: Senior Citizens - According to the 1990 Census, elderly residents represent over 16 percent of the population in Santa Monica. In the planning and development of housing for the elderly, particularly for those who live alone, appropriate unit size, affordable cost, and easy access to transit, services, and health care facilities need to be considered. Persons with Disabilities- The 1990 Census documents that over 11 percent of the City's population aged 16 or over had work, mobility, and/or self-care limitations. These people may require a barrier-free living environment and easy access to transit, services, and employment centers. As many disabled persons earn lower incomes, housing affordability is also a concern. Persons with HIV and AIDS- The Los Angeles County Department of Health Services, HIV Epidemiology Program, estimates that there are currently 1,000 residents in Santa Monica who are HIV positive. According to the Santa Monica AIDS Project, at present there are approximately 290 AIDS/HIV patients in Santa 54 Monica who are receiving medical treatment. As the disease progresses, these patients will require various types of assistance with legal, medical, employment, and housing issues. - Homeless Populations Santa Monica has a significant homeless population. Homelessness is not caused by merely a lack of shelter, but involves a variety of underlying unmet social and economic needs. While continuing and expanding the strategy to address homeless issues in Santa Monica, the City will continue a comprehensive policy that promotes a balanced continuum of care for the homeless, integrating outreach, intake and assessment, emergency shelter, transitional housing, permanent housing, case management, employment, and supportive services. Housing and Neighborhood Conditions There are two goals in the Draft Element that relate to protecting and maintaining the Citys aging existing housing. The first goal addresses improving and preserving the = quality and character of residential neighborhoods in the City (Goal 7.0). With over half of the housing stock more than 30 years old, continued maintenance and rehabilitation efforts are required to prevent widespread deterioration. This requires a coordinated strategy for community input, design review, rehabilitation, and code enforcement efforts. Housing Element policies designed to promote this goal include ensuring that architectural design of new housing development is compatible with the surrounding neighborhood, and promoting safe and secure housing and neighborhoods, and encouraging housing design which serves to deter crime. The second goal of the Draft Element which addresses neighborhood conditions is: promote the rehabilitation and continued maintenance of existing housing (Goal 4.0). A@ Housing Element policies designed to promote this goal include ensuring that property owners are made aware of City programs to promote capital improvements to rental 55 housing, and ensuring that rehabilitation of existing units does not result in permanent displacement of existing residents. Funding Increasingly, the threats of federal and state budget cuts have left many local jurisdictions paralyzed in their housing production. Additionally, in Santa Monica, reduced commercial development in recent years has also reduced the City's potential income from the Office Development Mitigation Program. These funding and revenue reductions require that the City aggressively pursue creative financing mechanisms such as partnerships with private lenders to leverage public funds and participation in the low income housing tax credit allocation process. Currently, the City has at least two specific revenue sources for funding housing resulting from the Northridge Earthquake. Federal HUD monies were made available to the City of Santa Monica through the federal Emergency Supplemental Appropriations Act of 1994. With these funds, the City created the Multi-Family Earthquake Repair Loans (MERL) Program to provide financial assistance for the rehabilitation, acquisition, and reconstruction of housing. Additionally, the Earthquake Recovery Redevelopment Project Area was adopted in June 1994. Under State law, the City is required to set aside at least 20 percent of the tax increment revenues from redevelopment projects to provide financial assistance in the production of housing affordable to low and moderate income households. 56 Currently no tax increment funding is being generated in this Redevelopment Project area and projecting an amount to be generated is difficult. However, when tax increment funding is provided, 20% will be set aside for low and moderate income housing. The Planning Commission, Rent Board and Housing Commission all recommend that additional monies beyond the State mandated 20% set aside be allocated to the acquisition, rehabilitation and new construction of affordable housing. With program income from the repayment of the MERL loans and redevelopment housing set-aside funds from the Earthquake Recovery Redevelopment Project, the City has potential to receive a significant pool of funds that can be used to provide financial assistance for housing construction and rehabilitation. Goal 5.0 to provide A housing assistance and supportive services to very low, low, and moderate income households and households with special needs is supported by policies and programs @ which call for the development of a coordinated strategy for the expenditure of these and other funds to maximize cost-effectiveness in addressing the City's complex housing needs. Housing staff recommends the consideration of additional funding sources including: Tax Exempt Bonds; State Low Income Housing Tax Credits; HUD Section 8 Program; and, Mortgage Credit Certificates. (See Program 2.e.) PLANNING COMMISSION AND STAFF RECOMMENDATIONS Impact of Costa-Hawkins and HUD Regulation and Policy Changes on the Section 8 Program 57 The Planning Commission accepted the Housing Commissions recommendation to add = a discussion of the impact of vacancy de-control (Costa-Hawkins) upon the Section 8 Program and of the impact of changing federal regulations upon the future of the program (See Attachment B). Staff recommends this be incorporated into Section II (Housing Needs and Resources) and augmented with additional text to provide proper context. Potential Constraints The Planning Commission recommends that the potential governmental constraints section (Section III.B) include a brief background of why the subject programs and/or regulations were implemented, their stated objectives and an assessment of their impact on the Citys existing housing stock so that the document provides the proper = context for policy discussion. Additionally, the Planning Commission recommends that the Housing Element include a more detailed analysis and discussion of potential governmental constraints on the preservation and conservation of existing housing. In response to the above recommendations, staff has prepared and recommends additional text be incorporated into Section III of the Draft Element. (See Attachment I for proposed text.) Housing Objectives, Goals Policies and Programs To facilitate Council consideration Attachment A includes a strikeout-highlight copy of A@ the Planning Commissions proposed revisions to the Housing Objectives, Goals, =A 58 Policies, and Programs section of the Draft Element (Section V). The Housing @ Commission, the Rent Control Board and Arts Commission submitted recommendations to the Planning Commission for their consideration. (See Attachments B, C and D.) In some cases these recommendations were not accepted by the Planning Commission because the Commission felt that the language was inappropriate for a policy document given the proposed language, or because the Planning Commission disagreed with proposed programs on their own merits. Recommendations from the Planning Commission which originated in another board or commission are identified as such. The following discussion highlights the Planning Commissions recommended changes = to the Draft Element policies and programs. Goal 1.0 Promote the Construction of New Housing Through Regulatory Mechanisms ? The Planning Commission recommends that Policy 1.5 be revised to include a periodic review of zoning and building codes to ensure that they do not unreasonably constrain housing development. Staff recommends that the original language proposed for Policy 1.5 be maintained because the review of zoning codes is already embodied in Policy 1.3 and building codes are set by the state and provide life/safety assurance which should not be compromised. ? The Planning Commission recommends the addition of a policy under Goal 1.0 (Policy 1.7) to maintain development standards that promotes the development 59 of new housing which is designed to fit within the existing neighborhood context. Staff supports this addition. Program 1.a Assess and Revise, where appropriate City Regulatory Requirements ? The Planning Commission recommends that the first bullet under the action plan be modified as follows: Evaluate modifying the review procedures for A condominiums from a Conditional Use Permit to a Development Review permit process another discretionary review procedure. @ Staff recommends that this language be strengthened and clarified to reflect the nature of the review as follows: Modify the review procedures for A condominiums from a Conditional Use Permit to another discretionary review procedure which relates to project compatibility, including review of the physical location, size and massing of the structure(s), and public improvements to ensure that the project is compatible and integrates with and relates harmoniously to surrounding sites and neighborhoods. @ ? The Planning Commission recommends that the bullet under Program 1.a. which would revise income definitions contained within City regulations to define moderate as 60 - 80 percent of the County Median Income be removed. Both the Rent Control Board and the Housing Commission support the following recommendation contained in the Draft Element: To the extent feasible, revise income definitions A contained within City regulations to define moderate income as 60-80 percent of the County median 60 income. @ Staff, the Rent Board and the Housing Commission support this approach principally because the moderate income category as currently defined establishes rent ceilings that are comparable to market-rate. For example, in 1996 the rent limits for 1- and 2- bedroom moderate income units were $1,026 and $1,218, respectively. In the opinion of the Rent Board, Housing Commission, and staff, there is no public benefit to programs which provide rental rates comparable to market rate. The Planning Commission disagrees with this approach, arguing that even though deed restricted moderate income rents may be comparable to current market rates, over time as inflationary trends boost market rental rates, the rates of deed-restricted units will stay lower, thus serving an income niche not served by the market. However staff still believes that during the time period of the Draft Element, as vacancy decontrol depletes the available supply of rental housing affordable to lower income households, there is a greater need for programs targeted to lower income groups. Staff recommends that the existing language be clarified as follows: To the extent consistent with State law and A the Charter, target City subsidies and bonuses to affordable housing projects that serve households earning 61-80% of the County median income. @ ? The Planning Commission concurs with the Housing Commission and 61 recommends the addition of a bullet under Program 1.a. to broaden the current opportunities for second units in the R-1 District as follows: As a means of providing additional sites for A housing, broaden the current opportunities for second units in the R-1 District within reasonable limits consistent with State law. @ ? The Planning Commission recommends the following addition under Program 1a: In cooperation with private property owners A assess the feasibility of developing air rights projects above privately owned parking lots and other sites which may provide air space for affordable housing development. @ Staff supports this addition but recommends that it be relocated to Program 2F and that Program 2F be modified as follows: Assess the use of City-owned, publicly-owned A privately owned and land for affordable housing. @ ? The Planning Commission recommends adding two bullets under Program 1.a. to address additional housing opportunities including the continued support of the construction of live/work space, and development of housing in commercial areas. Staff supports this addition. Goal 2.0 Increase Supply of Affordable Housing Program 2.a: Maintain an Inclusionary Housing Program 62 ? The Planning Commission recommends modification of the Action Plan for Program 2.a. to clarify that the proposed amendments to the Citys Inclusionary = Housing Program are intended to help support new housing production in a way that is balanced with the maintenance of existing housing stock. Staff supports this but recommends that the first bullet under 2.a be modified as follows: Study modifications to the Citys Inclusionary A= Housing Program (Ordinance 1615) which would help support new housing production in a way that balances this production with maintenance and conservation of existing housing stock, while complying with Proposition R. Changes to be considered will include, but not be limited to: . . Proposed amendments will be reviewed by the City Council. @ ? The Planning Commission supports the Housing Commission recommendation that consideration be given to recalculating the in-lieu fee periodically to meet certain program objectives. Staff supports this recommendation and recommends that this be done every two years. ? As part of the analysis to be undertaken for evaluating possible revisions to Ordinance 1615, staff proposed that consideration be given to eliminating the option for satisfying the inclusionary obligation by building all moderate income units deed restricted for households earning 100% of the county median family income (MFI) or replacing it with an option to satisfy the inclusionary obligation by building 100% of units deed-restricted for households earning less that 80% of the county MFI. The Planning Commission does not recommend that this be 63 considered. Staff continues to support its original recommendation that the option for satisfying the inclusionary requirement by building all moderate income units be eliminated. Based on available information, staff believes that the market already provides housing affordable to households earning 100% of median income, and therefore there is no public benefit to targeting City programs to this income group. ? The Planning Commission recommends that the following language be added to Program 2.a as a way to insure that monitoring of on-site units occurs. Evaluation of the success of the on-site A inclusionary requirements, particularly in terms of administration. @ Staff will continue to monitor on-site units and does not recommend that this be included in the document. Program 2b. Maintain a Density Bonus Program. ? The Planning Commission recommends that the Action Plan be revised as follows to be more affirmative. Revise existing development standards as A necessary to assure the building envelope adequately accommodates the construction of density bonus units. @ Staff supports this modification and recommends that it also be included as part of Program 1.as Action Plan. = 64 Program 2h: Facilitate the Development of Housing for Families with Children. ? The Planning Commission recommends that two items be added to the Action Plan to expand housing opportunities for families. These proposed changes include the possibility of code revisions to allow alternative types of housing (ie. Co-housing) to be developed in the City with particular emphasis on facilitating this development on City-owned properties. Staff supports this addition and recommends the following language: Assess the possibility of revising the zoning A code to allow for the construction of alternative types of housing (e.g. co-housing), including the construction of such housing on City- owned properties. @ The other item is to consider alternative development standards that will facilitate the development of housing for families with children, consistent with the program suggested by the Housing Commission under Program 1.a. Staff supports this addition and recommends the following language: Consider alternative development standards A (e.g. height, lot coverage, density, setbacks, parking requirements, etc.) that facilitate the development of housing for families with children. @ Program 2i: Facilitate the Development and Maintenance of Special Needs Housing ? The Planning Commission recommends that a bullet be added to assess the development of a high subsidy program for permanently affordable housing for very, very low income household earning minimum wage, including both SRO and family units. This is consistent with the Housing Commissions = 65 recommendation for a program to provide permanent housing for persons emerging from transitional housing facilities. Staff supports this program. Goal 3.0 Protect the Existing Supply of Affordable Housing ? The Planning Commission recommends that Policy 3.3 be modified as follows in order to create the possibility for developing a conversion program. affordable Continue to Protect rental housing A regulating by limiting the conversion of rental units to ownership units. @ Staff recommends that the original language calling for limiting the conversion of rental units be maintained. Through the TORCA process, approximately 10% of the rental housing stock was converted to ownership units and only 40% of the units have been sold resulting in over 2,000 available units for sale. Therefore, allowing additional units to be converted is not necessary during this planning period. ? In response to the Housing Commission comments, the Planning Commission recommends the addition of Policy 3.5 and additions to the Action Plan under Program 3.a. Proposing changes to the Section 8 program in response to changes in the market induced by the Costa-Hawkins Rental Housing Act. Staff concurs with these recommendations as proposed. Program 3.a: Develop Programs to Offset The Effects of Costa-Hawkins 66 ? The Planning Commission supported the Housing Commissions = recommendation that the City investigate the feasibility of developing a program to permit the conversion of rental units to ownership units in exchange for a flexible mix of permanently deed-restricted rental units, and/or affordable sale units and/or appropriate in-lieu fees. Staff believes that if a sales program or in- lieu program were put into place, a substantial number of existing affordable rental units could be put at risk and therefore recommends that no changes be made to the language currently in the document. ? The Planning Commission recommends that a new item be added to Program 3.a to target redevelopment funds as follows: To the extent feasible in addition to the 20% A set-aside, target Redevelopment Funds for a housing acquisition and rehabilitation program with a set aside goal of 50%. @ Staff supports this idea in concept but recommends that the proposed language be refined as follows to allow greater flexibility on an annual basis for the use of these funds: To the extent feasible utilize additional non- A housing Redevelopment Funds to supplement the annual 20% set-aside requirement for eligible housing acquisition, rehabilitation and new construction purposes. @ Program 3.b. Protection of Mobile Home Park Tenants The Planning Commission recommends that the second bullet be revised as follows: Assist with mobile home park rehabilitation or A conversion to ownership housing if appropriate and/or feasible. @ 67 Staff recommends that the original language be maintained because of the complexity of issues involved in mobilehome conversion projects, and because the Planning Commissions recommended language implies that financial = feasibility is the sole consideration. Goal 5.0 Provide Housing Assistance and Supportive Services to Very Low, Low and Moderate Income Households with Special Needs Program 5C: Maintain a Homebuyers Assistance Program ? The Planning Commission recommends adding two additional items under this Program which were recommended by the Housing Commission. One calls for the development of a new program to permit the conversion of rental units to ownership units, in exchange for a flexible mix of permanently deed-restricted affordable rental units and/or affordable sale units or in lieu fees. Staff does not support this program as proposed because as previously stated, staff believes that during this planning period it will put a substantial number of existing affordable units at risk. The other item addresses alternative means of providing first-time low income homebuyers assistance through the development of a silent second program. Staff supports this addition. Program 5F: Develop a strategy to Address threats to the HUD Section 8 Rental Subsidy Program 68 ? The Planning Commission supports the addition of this new program as proposed by the Housing Commission for the development of a strategy to address threats to the HUD Section 8 rental subsidy program. Staff concurs with this recommendation as proposed. Goal 6.0 Eliminate Discrimination in the Rental or Sale of Housing on the Basis of Race, Religion, National Origin, Sex, Sexual Preference, Age, Disability, Family Status, AIDS, or other such Characteristics ? The Planning Commission recommends that Policy 6.2 which encourages the distribution of housing for low and moderate income households throughout the City be relocated because it does not belong under this goal as written. Staff concurs with the Planning Commission recommendation and recommends that this Policy be placed under Goal 2.0 as Policy 2.7. Goal 7.0 Promote Quality Housing and Neighborhoods ? The Planning Commission recommends that Policy 7.6, a directive to balance housing and employment opportunities in the City, be eliminated. This is due to the fact that the formula for jobs housing balance does not realistically address an integrated urban setting like the Westside. For purposes of this kind of analysis, residential communities such as Pacific Palisades, Venice and Mar Vista should be factored into the housing balance for Santa Monica. It is 69 unrealistic to limit this type of analysis to arbitrary City limits when the area functions as a regional network. Staff concurs with this recommendation. 70 Program 7.a: Provide a Residential Neighborhood Safety Program ? In response to the Rent Control Boards comments about safety concerns, the = Planning Commission recommends expanding the action plan for program 7.a. to include exploring the feasibility of developing a program to facilitate the installation of safety features such as deadbolts, peepholes and motion detector lights. Staff supports this recommendation. Program 7.b: Provide Historic Preservation Programs ? The Planning Commission recommends that Program 7.b. be expanded to include the evaluation of the Historic Resources Survey as the basis for the development of a comprehensive preservation plan for the City. Staff concurs with this recommendation. Program 7.d. Facilitate Sustainable Housing Development ? To enhance the action plan under Program 7.d, the Planning Commission recommends that the City continue to incorporate sustainable design and construction strategies within Development Agreements. Staff concurs with this recommendation. Additional Staff Recommendations The following are additional staff recommendations: ? Revise the introduction to the Goal, Policies and Programs subsection as A@ follows: 71 The following describes each of a full range of A housing programs which will be undertaken by the City. Housing programs include programs both currently being implemented in the City, and new programs added to address existing and projected needs. A brief background on each program is provided, followed by the Citys action plan for the 1998-2003 Housing = Element planning period. Table V-2 , Housing Program Summary, located at the end of this section, summarizes the goals of each program for the planning period, and identifies the program funding source, responsible agency, and time frame for implementation. The programs outlined below and set forth in table V-2 are designed to comprehensively address the Citys identified = housing needs. @ ? Revise the second bullet under Program 1.a to eliminate redundant language as follows: Evaluate modifications to parking standards A (e.g., rounding down for half spaces and elimination of guest parking requirement) to facilitate construction of all housing units including allowable density bonus units. @ ? Revise the fifth bullet under Program 1.a to be more definitive as follows: Propose amendments evaluate potential A modifications to the Inclusionary Housing Program (refer to Program 2.a.). @ ? Revise the second bullet under Program 1.b as follows: Expand the types of information available on A Permits and improve reporting procedures A@ to facilitate project tracking and provide up to date information. @ 72 ? Add another policy under Goal 2.0 as follows: Policy 2.8: Continue to provide development A incentives and reduced planning fees for development of affordable housing. @ ? Under Program 2e. Assess Alternative Affordable Housing Finance Programs, add the following bullet under the Action Plan. Encourage developers to take advantage of A affordable housing bond financing and facilitate coordination among developers when appropriate. @ Staff also recommends that miscellaneous tables, maps and text be revised to update and/or clarify information presented in the Draft Element. These proposed modifications to the Draft Element are presented in Attachment J. ENVIRONMENTAL IMPACT REPORT An Environmental Impact Report (EIR) will be prepared following approval in concept of the Draft Element by the City Council. The EIR will evaluate the potential environmental impacts of implementation of the policies and programs contained in the Draft Element. BUDGET/FINANCIAL IMPACT The recommendation presented in this report does not have a budget or fiscal impact. SUBSEQUENT ACTION AND RECOMMENDATION 73 Subsequent to Council conceptual approval of the Draft Element, the document will be submitted to HCD for review and comment, and the EIR will be prepared. Following preparation of the EIR and receipt of comments from HCD on the Draft Element, the Final Housing Element will be prepared. The Final Housing Element and Final EIR will be presented to the Planning Commission for their consideration in the summer of 1997 and to the City Council for adoption in the fall. Staff respectfully recommends that the City Council conduct a public hearing on the Draft Element consider the changes as proposed by the Planning Commission and staff, adopt in concept the Draft Element, direct staff to transmit the document to HCD for review and comment, begin the EIR process and prepare implementation ordinances related to the inclusionary housing policies and revised development standards. Prepared by: Suzanne Frick, Director Karen Ginsberg, Planning Manager Laura Beck, Associate Planner Attachments: A. Planning Commissions Recommended = Changes to Goals, Policies and Programs (Section A@ V.C.) B. Memorandum from Housing Division Staff regarding Housing Commission Recommended Changes to the Draft 1998-2003 Housing Element. 74 C. Letter from Rent Control Board Regarding Recommended Changes to the Draft 1998-2003 Housing Element. D. Letter from Arts Commission Regarding Recommended Changes to the Draft 1998-2003 Housing Element. E. Letters from the public, including the Santa Monica Housing Council, concerning the Draft 1998-2003 Housing Element. F. Planning Commission Staff Reports regarding the Draft 1998-2003 Housing Element. G. Minutes of Planning Commission Public Hearings H. Key Results of the Tenant Survey I. Proposed Additional Text for the Potential Governmental Constraints Section (Section III.B.) J. Miscellaneous Revisions to Tables, Maps and Text 75 PCD:SF:KG:LB:f:\ppd\share\ccreport\hsgelmt2.wpd COUNCIL MEETING: April 14, 1998 Santa Monica, California TO: Mayor and City Council FROM: City Staff SUBJECT: Recommendation to Adopt a Resolution Amending the Existing Housing Element of the General Plan by Approving the Draft 1998-2003 Housing Element Update with Amendments as Proposed By Staff; and Recommendation to Adopt a Statement of Overriding Considerations and Certify the Final Environmental Impact Report Evaluating the Environmental Impacts of the 1998-2003 Housing Element Update. INTRODUCTION This report recommends the City Council 1) adopt a Statement of Overriding Considerations and certify the Final EIR evaluating the environmental impacts of the 1998-2003 Housing Element Update; 2) adopt a resolution amending the existing Housing Element of the General Plan by approving the Draft 1998-2003 Housing Element Update with amendments as proposed by staff. (Attachments A, B, and C.) This report provides background on the 1998-2003 Housing Element Update, including responses to comments made by the State Department of Housing and Community Development (HCD), and discussion of the EIR. Pursuant to the Citys Zoning Ordinance, the City Council must conduct a public hearing = upon any proposed amendment to the General Plan within 60 days of Planning Commission action and must consider adoption of any proposed amendments within 90 76 days of Planning Commission action. BACKGROUND The 1998-2003 Housing Element is an update to the Citys current Housing Element = which was adopted by the City Council on September 28, 1993. One of the seven mandated elements of the General Plan, the Housing Element establishes a five year plan for addressing the Citys housing needs. = Summary of Legal Requirements By law, the Citys Housing Element must analyze existing and projected housing needs, = set forth goals, policies, and programs for addressing those needs, and identify adequate housing sites. (Government Code 65583.) Additionally, the Housing ' Element must identify potential and actual constraints upon the maintenance, improvement, or development of housing for all income levels. The Draft 1998-2003 Housing Element Update has been prepared in conformity with both State law and the settlement agreement in Santa Monica Housing Council, et. al. v. City of Santa Monica, a case which challenged the Citys current Housing Element. = PublicProcess This 1998-2003 Housing Element Update was initiated in April, 1995. The Planning and Community Development Department held a public scoping meeting and two public workshops on the Housing Element Update to receive public input and to foster a 77 discussion of housing issues and policies for the City. The preliminary draft of the Housing Element was released for public review and comment on November 11, 1996. The Draft Element was reviewed by the Planning Commission through the course of five public hearings which concluded its deliberations on February 5, 1997 and made recommendations for Council consideration. Public hearings were held by the City Council over the course of three meetings between March 18, 1997 and April 15, 1997. On April 15, 1997, the Council approved the Draft Element in concept for transmittal to the State Department of Housing and Community Development (HCD). Before transmittal, the Draft Element was revised to clarify and/or correct information and to incorporate changes requested by Council. On July 21, 1997 staff submitted the revised Draft Housing Element Update to HCD for their review and comment. HCD provided a written response dated September 5, 1997. (HCDs review and comments are discussed fully later in this report.) = The Draft Environmental Impact Report on the Draft 1998-2003 Housing Element Update was prepared and released for a 45-day public review on December 1, 1997. On February 25, 1998, the Planning Commission held a public hearing to review the revised Draft 1998-2003 Housing Element Update and the Final Environmental Impact Report which evaluates the potential environmental impacts of implementation of the policies and programs contained in the 1998-2003 Housing Element Update. The 78 Planning Commission recommends approval with modifications. (Planning Commission recommendations are presented later in this report.) REVISED DRAFT 1998-2003 HOUSING ELEMENT UPDATE As stated, the 1998-2003 Housing Element Update has been revised to reflect Councils = action in April, 1997 (Attachment L). A summary of significant text changes is provided as an attachment to the report. The revisions made to the programs in the Housing A Objectives, Goals, Policies and Programs section of the document are presented in a @ bold/strikeout version. (Attachments D and E.) REVIEW AND COMMENT BY HCD As discussed, on July 21, 1997 staff submitted the revised Draft Housing Element Update to HCD for their review and comment. Pursuant to Government Code Section 65585(b), the State Department of Housing and Community Development is required by State law to review draft housing elements and report their findings to the locality. HCD provided a written response dated September 5, 1997 and concluded that further revisions were needed to bring the element into compliance with State law. (Attachment F) State law requires that the City Council consider HCDs comments in its = decision to amend the Housing Element. HCDs comments and staffs response to the == issues raised are provided below. Category D Removal Permits 79 HCD expressed concerns that the replacement housing requirement imposed by the Rent Control Board for Category D removals could result in an affordable unit burden A@ in excess of 30% for the redeveloped property. In response to HCDs concern, the Rent = Control Board has modified its requirement to clarify that no more than 15% of the units in the new project would be required to be affordable. The discussion on page III-30 of the Element will be revised to reflect this. The proposed revision can be found in Attachment H. The staff report to the Rent Control Board is also attached for reference. (Attachment G) Inclusionary Housing With regard to Housing Element Program 2a (Maintain an Inclusionary Housing Program) HCD feels that the Citys housing element should clearly commit the City to =A removing or mitigating those provisions of the ordinance that have already been determined to be obvious constraints, and goes further to conclude that the City should @ exempt residential projects of less than 20 units from the inclusionary requirement. HCD is critical of the action plan for Program 2a since it does not include such a strategy in the list of changes to be considered. The City believes the draft Housing Element does commit the City to amending its inclusionary housing ordinance. Indeed, when the City Council gave conceptual approval to the Housing Element, it also directed staff to commence the process of modifying the Inclusionary Housing Ordinance. The City is actively engaged in this 80 process of modifying the inclusionary housing ordinance. Subsequent to Council direction in July, 1997, the City enlisted the professional services of HR&A to assist in the development of alternatives to Ordinance 1615. Six conceptual alternatives were identified and refined through workshops, study sessions and public hearings. More specifically, a Public Workshop was held September 7, 1997 that included an open house segment where participants viewed and commented on display panels that explained the current Inclusionary Program and possible conceptual alternatives. A presentation with group discussion about the existing Inclusionary Program and conceptual alternatives was conducted. Subsequently, Public Hearing and Study Sessions were conducted at the September 10, 1997, February 25 and March 4, 1998 Planning Commission meetings, at the September 18, 1997, February 19 and March 5, 1998 Housing Commission meetings and at the October 7, 1997 City Council meeting. Staff is recommending replacing Ordinance 1615 with a new Affordable Housing Production Program that requires developers of market-rate multi-family housing to assist in the production of affordable housing through payment of an affordable housing development fee or through other specified options. Under this approach, the mandatary on-site requirement, found by HCD to constitute a potential constraint, would be eliminated for all projects. (See April 14, 1998 City Council staff report prepared by the Housing Division on proposed modifications to the inclusionary program.) At its April 14th meeting the City Council takes further testimony and consider the merits of the staffs recommendations. = 81 Additionally, the City is actively engaged in a process to modify the development standards in certain residential districts to facilitate accommodation of State Density Bonus units. These proposed modifications will act in concert with a modified inclusionary program. (See April 14, 1998 City Council staff report regarding Proposed Revisions to Residential Development Standards in the R2 and R3 Districts pertaining to State Density Bonus Units.) Potential for Residential Development in Commercial Districts HCD has indicated that the element should include specific program actions designed to promote residential recycling (including the removal of potential constraints) and residential development, or mixed-use, in commercial zones. First, as discussed, the City is actively engaged in revising or is committed to revising, certain programs that have been identified as potential constraints to residential recycling, namely the Citys Inclusionary Housing Program and the Citys development == standards. Second, the City has long promoted residential development, or mixed use, in commercial zones. In 1993, the City amended the Zoning Ordinance to conditionally permit residential development in the Special Office Commercial (C5) and Industrial Conservation (M1) Districts, and to permit residential uses in most other commercial districts (BCD, CP, RVC,CM,C2,C3,C3C,C4,C6). In 1995, the City established the Light Manufacturing Studio District (LMSD) to replace a portion of the M1 and C5 districts. 82 The LMSD permits studio live/work uses, while preserving existing light industrial uses and providing a location for studio-related uses, such as film and music production and post-production facilities. The City also permits residential development in the commercial Bayside Commercial District (BSC), which it established in early 1996. Moreover, in several districts, the City offers special incentives for housing. In the BSC, C3, C3C and CM districts, any floor area devoted to residential use is eligible to receive a FAR (Floor Area Ratio) discount of 50 percent. In BCD, C2, C4, and C6 districts, the City offers increased density if at least 30 percent of the FAR is residential. These changes have been very successful in bringing residential development to commercial zones. To further facilitate development of residential uses in non-residential zoning districts, Program 1.a of the revised Draft 1998-2003 Housing Element Update identifies specific analyses and revisions which will be undertaken during the planning period, including evaluate additional modifications of development standards to encourage the A development of housing in commercial areas of the City. The action plan for Program @ 1.d. (Consider Rezoning Non-residential Areas for Residential Use) states that the City A will explore further opportunities for developing housing in areas currently zoned for non-residential use. @ HCD states that the element should include specific programs which articulate the Citys = intent or clearly describe the incentives to encourage residential development in commercial zones. As discussed above, the Housing Element already has such 83 programs. However, to further confirm the Citys intent to maintain the current = incentives for residential development in commercial zones, staff recommends the following modification to the seventh bullet under the action plan for Program 1a. Continue to promote and provide incentives to develop residential uses in ! non-residential zoning districts and evaluate additional modification of development standards to encourage the development of housing in commercial areas of the City. On March 3, 1998, the City Council introduced an interim ordinance modifying the development standards in the C3C Downtown Overlay District to discount square footage devoted to residential purposes for purposes of calculating the development review square footage threshold. The requirement of a development review permit adds additional time and expense to the review of a project and also subjects a project to environmental review since it is a discretionary action. Staff recommends that an additional bullet be added to Program 1.a. to reflect these specific efforts to further facilitate residential development in the non-residential districts as follows: Evaluate the modification of the existing project design and development ! standards in the C3C District and other commercial districts as appropriate, to provide that for the purposes of assessing whether a development review permit is required for new development, floor area devoted to residential uses shall be discounted by fifty percent. 84 HCD also asked that the City further assess the potential for residential development in commercial zones. In response staff prepared an analysis of sites in commercial districts (C2, C4, C3, C3C, C4, C6, CM) which would be most likely to recycle during the planning period due to the age and/or condition of the existing structures, or due to the potential for a substantial intensification of the existing use(s). Considering the incentives the City has in place for residential development in commercial zoning districts, it is quite likely that some portion of these parcels, which total in area over 70 acres, will be developed as residential projects or include some residential units. The number of potential residential units is unrestricted in these commercial districts, however, the size of projects is determined by FAR. Each project will have a different mix of residential and commercial uses depending on the developers project objectives. = Although it is difficult to estimate the actual number of residential units which could be accommodated on these sites, the following table provides a preliminary assessment of the residential potential based on an assumed 10% residential mix, a 30% residential mix, and a 100% residential mix in buildings built to the maximum FAR permitted. The number of units were calculated based on the maximum FAR, adjusted by 15% to account for non-leasable space, and an average 1200 square foot unit size. A@ Commercial 100% District 10% Residential 30% Residential Corridor Residential Lincoln C4 16 - 39 68 - 84 225 - 282 85 Pico C2 33 -39 140 -165 468 - 551 Santa Monica C4 46 - 51 198 -228 660 - 761 Wilshire C6 21 - 25 92 - 105 307 - 350 Main Street CM 15 - 20 44 - 59 147 - 196* Downtown C3, C3C 98 294 - 392 979 - 1306* Total 228 - 249 units 836 -1034 units 2786 - 3445 units * Certain zoning districts restrict the use of ground floor frontage and would prevent a project from being 100% residential. This preliminary investigation indicates that if these commercial properties, were to be redeveloped during the planning period and devoted 10% of the floor area to residential use, between 228 and 249 residential units would result. If the same properties were to be redeveloped with 30% residential use (the threshold for density incentives in the C2, C4, and C6 zoning districts), between 836 to 1034 residential units would be developed. For comparison purposes, if these properties were to be redeveloped as 100% residential projects, between 2,786 and 3,445 units would be developed. As discussed, each project will have a different mix of uses. These calculations have been prepared for illustrative purposes. Staff recommends that this information be included in the Housing Element discussion of suitable sites in the Housing Needs and Resources section (Page II-76). (See Attachment H). 86 Projected Housing Needs HCD states that the Citys 3,219-unit estimate developed of the Citys fair share of the == regional housing need for the 1998-2003 planning period is acceptable, but may be subject to revision if SCAG issues revised need allocations or growth forecasts. HCD expresses some confusion over the alternative estimates referenced in the housing element. Staff has made certain that all footnotes and references with regard to the Citys projected housing needs are accurate. As stated on page II-92 of the Housing = Element Update, the City has adopted 3,219 units as its Fair Share. HCD has accepted this number under present circumstances. Consequently, there is no dispute between HCD and the City as to the Citys fair share number. Accordingly, no modifications to = the Housing Element are necessary. Second Units Ordinance HCD feels that the Citys second unit ordinance should be analyzed in the housing = element as a potential constraint. HCD contends that the decision to exclude second A units from the single family zones should not only be evaluated relative to the provision @ of adequate sites and the accommodation of projected housing needs, but also in consideration of the Citys overall strategy to assist affordable housing development. = First, as regards to the provision of adequate sites, the adequate site analysis in the Housing Element Update is not dependent upon increased development on R1 and OP1 sites. The City has demonstrated it has sufficient sites to meet its needs during the 87 1 planning period without consideration of these single-family residential areas. (See Table II-25 on pg. II-72 and Table II-27 on pg. II-81) Second, with regards to governmental constraints, the Housing Element defines a constraint as: A program ... [which] either individually or in combination with other governmental programs, has significant adverse impact on the Citys ability to meet its fair = share of the regional need for additional housing determined in accordance with the Southern California Association of Governments regional housing need = allocation. The City does not believe that the second unit ordinance constitutes a constraint. The City adopted the interim ordinance addressing second units on October 15, 1996. Second units are allowed in all multi-family districts. The City also allows a variety of residential development in non-residential zones, including second units. Further, this ordinance allows second units in the R1 and OP1 Districts, albeit under limited circumstances. Moreover, as HCD has acknowledged, even if the City were to liberalize its second unit 1 The adequate sites inventory in the 1998-2003 Housing Element Update includes 16 vacant parcels in R1 or OP1 zones to be developed as 16 single-family residences. 88 ordinance, it is unlikely that second units would have a significant impact on the new housing stock during this planning period. The majority of requests for second units in these districts would likely be for legalization of existing illegal units and not for the construction of new housing units. Additionally, in regards to second units in single- family districts, the City remains concerned for the reasons detailed fully in the interim ordinance that second units would erode the quality of life for residents of single family districts in Santa Monica. It would, among other things, exacerbate problems resulting from the Citys overall density and the unusually large number of persons who work = within the city, visit it for recreation, and travel through it. Third, with regard to housing affordability, staff does not believe that newly constructed second units will necessarily be affordable. The City has no ability to control the rents and these units are not subject to the Proposition R requirement. Date provided by the Rent Control Board tracking the rent levels of units decontrolled as a result of Costa- Hawkins demonstrates that these units are losing their affordability. Given the rent levels commanded for these units, staff has no reason to believe that newly constructed second units would be offered at affordable rents. Consequently, staff does not consider second units to be an integral part of any affordable housing program in the City. The City has a long-standing commitment to the provision of affordable housing, and the City successfully effectuates this commitment through implementation of various City laws, policies and programs. The Citys zoning laws and policies include = 89 substantial incentives for the production of affordable housing, including height and density bonuses and reduced parking requirements. In addition, the City operates a number of programs which facilitate the production of affordable housing. These include loans to private, for-profit developers and owners and funding to non-profit agencies to acquire or construct housing units. The City also funds many social service programs which provide emergency shelter, transitional housing and permanent and supportive housing to individuals and families with very low incomes. These and other laws, policies and programs have resulted in the preservation and production of an extraordinary number of affordable units with in the City. The presence of these units has allowed a very substantial number of low and moderate income households to live in the City notwithstanding its prime location and high real estate values. Census data shows that sixty percent of the Citys households have low or = moderate incomes. In creating housing policy the City has tried to strike a balance between protecting the existing housing stock, and allowing for the development and production of new housing for all income groups while protecting the quality of life within the City. The maintenance of this balance has been a difficult task because of the unique characteristics of Santa Monica which are a function of its prime seaside location and its historical development pattern. 90 Staff recommends that this discussion of the Citys policy regarding second units in the = R-1 and OP-1 Districts be included in the Potential Governmental Constraints section of the Housing Element (Section III-B). Although, the City does not conclude that the second unit policy acts as a constraint to the development of housing, inclusion of this discussion would address the HCD comment that the Citys policy be considered in the = context of the Housing Element constraint analyses. The proposed text is presented in Attachment H. COMMISSION RECOMMENDATIONS The Planning Commission conducted a public hearing on the Housing Element update and Final EIR on February 25, 1998. The Citys Housing Commission reviewed the = revised Draft 1998-2003 Housing Element Update and provided their comments to the Planning Commission in a letter dated February 6, 1998. (Attachment I) The Planning Commission recommends Council adoption of the Housing Element update with some modifications, certification of the Final EIR, and adoption of a statement of overriding considerations. Modifications recommended by the Planning Commission include those proposed by staff and additional modifications as described below. Section 8 Housing The Planning Commission concurs with the Housing Commission recommendation that Program 3a. (Develop Programs to Ameliorate the Effects of Costa-Hawkins) be revised 91 to include three additional programs to be investigated when developing a strategy to address the effects of the Costa-Hawkins Rental Housing Act on housing affordability. The following will be added to the list of programs under the fourth bullet of Program 3a: ? a rental assistance program that funds the difference between the Fair Market Rent and the market rent for Section 8 tenants; ? a rental program that assists Section 8 tenants whose landlords have opted out of the Section 8 program to pay the Maximum Allowable Rent if the tenant decides to remain in the unit; ? a program that provides security deposit assistance for initial lease up and contract opt out relocations for needy Section 8 recipients. The Housing Division and Planning staff concur with this recommendation. Land Banking The Housing Commission recommends that Program 2f (Assess the Use of City- Owned/Publicly-Owned Land for Affordable Housing) be revised to reflect a more definitive commitment by the City to land banking. The Planning Commission supports the program if feasible and recommends the following modification: A@ ? Assess the feasibility of developing Enact a land banking program, if 92 feasible, for the City and non-profit developers of affordable housing to purchase land and existing properties for future development of affordable housing. Second Units The Planning Commission, along with the Housing Commission, continue to recommend that the City Council include the following program as part of Program 1as = action plan: ? As a means of providing additional sites for housing, broaden the current development standards for second units in the R1 District within reasonable limits requiring at least one of the units be owner occupied. The City Council did not support this program and it is not included in the revised document. As discussed, the Planning staff does not consider this program to be critical to the Citys affordable housing strategy. There is no guarantee that the second = units created would be affordable since their rent level would not be subject to governmental regulation. Furthermore, it is likely that a substantial number of permits issued for second units that would be directed toward legalizing existing illegal second units. Non-Conforming Residential Buildings The Housing Commission recommends that the 1998-2003 Housing Element Update include a policy that permits the reconstruction of nonconforming residential buildings 93 located in residential districts in the case of destruction by fire, earthquake, flood or other disaster. The Planning Commission reconsidered this recommendation during its review of the revised draft Housing Element Update, and now recommends that an additional bullet be added to Program 1a to address this issue as follows: ? Evaluate modifications to the Zoning Ordinance to allow for existing non-conforming multi-family residential developments that are destroyed due to fire, earthquake or other natural disaster to be replaced in-kind in order to prevent the loss of dwelling units in the City. Consider the use of the Earthquake Recovery Act as a model for this program. Staff concurs with the recommendation to include a program to evaluate potential modifications to the Zoning Ordinance with regard to nonconforming buildings and uses. ADDITIONAL STAFF RECOMMENDATIONS Staff also recommends that miscellaneous tables, maps and text be revised to update and/or clarify information presented in the 1998-2003 Housing Element Update. These proposed modifications are presented in Attachment H. Additionally, Housing Division staff recommends that a provision in Program 1as action plan to target City Subsidies = to affordable housing projects that serve households earning 61-80% of the County median income be removed. Planning staff concurs with this recommendation. 94 Following adoption of the 1998-2003 Housing Element, City staff will submit a copy to HCD for its review. ENVIRONMENTAL IMPACT REPORT An Environmental Impact Report (EIR) has been prepared by Cotton/Beland/Associates which evaluates the potential environmental impacts of implementation of the policies and programs contained in the 1998-2003 Housing Element Update. ( Attachment K) Public Review The Draft EIR on the Draft 1998-2003 Housing Element Update was released for a 45- day public review on December 1, 1997. Two comment letters were received. The comments contained in these letters, as well as responses to these comments, have been incorporated into the Final EIR. Approach/Methodology Many of the programs contained in the 1998-2003 Housing Element Update are not new. To the extent that ongoing programs would not present any new impacts, the EIR examines only the potential environmental effects of the new and modified programs. For the purposes of the EIR analysis, a number of alternatives to the proposed project are considered: A) an alternative that assumes that current housing goals and policies remain in place and no new element is adopted; B) an alternative that assumes that residential development is permitted by right in all commercial and industrial zoning 95 districts; C) an alternative that involves adding a new program to the Housing Element, whereby the Ocean Park and North of Wilshire neighborhoods would be rezoned to allow higher densities; D) an alternative focusing on revisions to the Citys inclusionary = housing program implementing Ordinance 1615. The EIR identifies Alternative B as the environmentally superior alternative. Significant Impacts The EIR concludes that there are significant impacts in the areas of Air Quality; Transportation/Circulation; Parks and Recreation and Water Use as a result of the proposed project. The EIR identifies four areas of unavoidable significant impact associated with the adoption and implementation of the 1998-2003 Housing Element Update even after mitigation. These include: Air pollutant emissions associated with new development in excess of S thresholds established by the South Coast Air Quality Management District. Increased traffic due to new development, with the traffic potentially S impacting intersections already experiencing adverse conditions. Increased demand on parks and recreation services. S Cumulative air quality, circulation, and parks and recreation services S impacts, when the contributions of new residential development is combined with other development expected to occur during the 1998-2003 period. 96 The EIR identifies the cumulative use of domestic water supplies when the contributions of new residential development is combined with other development expected to occur during the 1998-2003 period, as one area of potentially significant impact that can be mitigated to a less-than-significant level. It will be necessary for the City to adopt a Statement of Overriding Considerations in order to adopt the 1998-2003 Housing Element Update and certify the Final EIR. BUDGET/FINANCIAL IMPACT The recommendation presented in this report does not have a budget or fiscal impact. RECOMMENDATION Staff respectfully recommends that City Council take the following actions: Adopt a Statement of Overriding Considerations and certify the Final EIR evaluating the environmental impacts of the 1998-2003 Housing Element Update. 2. Adopt a resolution amending the existing Housing Element of the General Plan by approving the Draft 1998-2003 Housing Element Update with amendments as proposed by staff. Prepared by: Suzanne Frick, Director Karen Ginsberg, Planning Manager Laura Beck, Associate Planner Planning and Community Development Department 97 Attachments: A. Resolution to Certify the EIR Resolution to Approve a Statement of Overriding Considerations Resolution Amending the Housing Element of the General Plan Summary of Revisions pursuant to Council Action Program Revisions (Bold/Strikeout) pursuant to Council Action HCD letter dated September 5, 1997 Staff Report to Rent Control Board dated December 1, 1997. Proposed Revisions to Hou-sing Element Update February 6, 1998 letter from Housing Commission Public Hearing Notice Final Environmental Impact Report and Mitigation Monitoring Program Draft 1998-2003 Housing Element Update- Revised July, 1997 and Technical Appendix 98