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SR-400-001-03 (19) . . a-A 1 MAY 1 0 198& CA:RMM:lld136/hpc City Council Meeting 5-10-88 Santa Monica, California '/OtJ--- CJ(J/-tJ7 STAFF REPORT TO: Mayor and City Council FROM: City Attorney Ordinance Adding Chapter 4A to Article IX of the Santa Monica Municipal Code Implementing Program 12 of the Housing Element SUBJECT: At its meeting on March 10, 1987, the City Council approved a number of revisions to Program 12 of the Housing Element. The City Attorney's office was directed to prepare an ordinance implementing the adopted revisions. In response to this direction, the accompanying ordinance has been prepared for city Council consideration. Although the ordinance was prepared and has been awaiting insertion into the proposed Zoning Ordinance, due to the delay of the adoption of the Zoning ordinance, the ordinance is being presented for city Council adoption at this time. The major components of Program 12 as adopted by the city Council are as follows: 1. It applies to projects containing five or more housing units. 2. A minimum of fifteen percent (15%) of the total number of units in a proj ect are required to be developed as "inclusionary" units on-site or an in-lieu fee may be paid. - 1 - 6-A MAY 1 0 1988 e . 3. Inclusionary units must be affordable to households earning no more than 100% of the county median adjusted by household size. 4. All inclusionary units built by a developer must be rental units. 5. As was true under the previous Program, developers may take advantage of the state density bonus law. SECTION BY SECTION ANALYSIS The following is a section-by-section analysis of the accompanying ordinance: section 9420. Findings. This Section sets forth findings which establish the need for this Ordinance. section 9421. Definitions. This Section sets forth definitions of terms and phrases used in the Ordinance. section 9422. Applicability. This Section provides that the inclusionary requirement shall apply to all multi-family residential market rate dwelling units (both rental and owner-occupied) resulting from new construction or condominium or cooperative conversion of projects of five units or more. Fifteen percent of the total number of units for each such project shall be inclusionary units. This Section exempts from the inclusionary requirement those newly constructed multiple unit dwellings restricted as rental or limited equity cooperative housing for senior citizens or other persons and families of low or moderate income which receives financial assistance from any federal, state, or local housing program or is owned by any religious or other nonprofit organization. Lastly, this section - 2 - . . provides that projects approved under inclusionary standards in existence prior to the effective date of this ordinance on which construction has not begun or for which deed restrictions have not been executed as of March 101 19B7, shall satisfy the inclusionary obligation by meeting the standards contained in this ordinance. Section 9423. project Development Requirements. This Section provides that no less than 15% of the total number of units to be constructed in any project containing five or more units shall be affordable housing units, with the number of units required being rounded up or down to the nearest whole number where appropriate. These units may be located on-site or off-site. An in-lieu fee may be paid to the City instead of providing affordable housing. All on-site inclusionary units are required to be distributed throughout the project area, may not be significantly different in size and design from the other units in the project, must be rental units, and must be constructed concurrently with the construction of the market rate units. Section 9424. In-Lieu Fees for Inclusionary Housing. Instead of building affordable housing on-site, developers may choose to pay an in-lieu fee to the City, 25% of which may be used by the City to develop affordable housing for moderate-income households, and 15% of which may be used for program administration costs. This Section sets forth a formula for determining the amount of such fee, and provides that on-site inclusionary housing units shall be excluded from the floor area calculation. All fees on residential development imposed by the - 3 - . . Santa Monica Malibu Unified School District pursuant to Assembly Bill 2296 are deducted from the established fee. The fee shall be adjusted for inflation and such adjustment is tied to changes in the Consumer Price Index. This Section further sets forth the specific procedures to be followed when utilizing the in-lieu fee option including: payment in full of the fee prior to a Certificate of Occupancy is issued for the project; securing the fee by execution of an irrevocable letter of credit; and depositing such fee in a Reserve Account in the General Fund. Exempted from this Section are housing developments for which an agreement has been executed to provide an on-site inclusionary unit and the inclusionary unit has been occupied and to any housing development in which a density bonus has been given pursuant to Government Code Section 65915. Section 9425. Fee Waivers. This Section provides that the Condominium and Cooperative Tax and Park and Recreation Facilities Tax shall be waived for inclusionary units. This fee shall not be waived where an in-lieu fee is paid. Section 9426. Density Bonus and Other Incentives. This Section provides that proj ects that meet applicable state law requirements may be entitled to density bonuses or other incentives. Section 9427. pricing Requirements for Inclusionary Units. This Section provides that inclusionary units shall be priced so that designated households pay no more than 30% of gross monthly household income for rent, said rents to be determined by the City and adjusted by the number of bedrooms in each unit. The project owners will select the tenants who will occupy the - 4 - . . inclusionary units according to eligibility criteria set forth in section 9428. section 9428. Eliqibility Requirements. This Section provides that only low and middle income households are eligible to occupy inclusionary units. This section also specifies persons who are ineligible to occupy inclusionary units, including employees of the City of Santa Monica with policy-making authority or influence affecting City housing programs and the immediate relatives of such employees. Santa Monica residents shall be given first priority to inclusionary housing units, with second priority being given to persons who work in the City, and third priority to all other applicants. Section 9429. Relation to Units Required by Rent Control Board. This section provides that low and middle income units developed as part of a market rate project, pursuant to replacement requirements of the Rent Control Board, shall count toward the satisfaction of this program if they otherwise meet applicable requirements for this program. Section 9430. Deed Restrictions. This Section provides that prior to issuance of a building permit for the project, the developer must submit deed restrictions for city review and approval, setting forth the Obligations of the developer under this program. Section 9431. Availability of Government Subsidies. This Section provides that the intent of this program is that the requirements for inclusionary units shall not be determined by the availability of federal or state housing subsidies. - 5 - e . section 9432. Enforcement. This Section provides that no building permits or occupancy permits will be issued for any project not meeting the requirements of this program. It further provides that no inclusionary unit shall be rented except in accordance with the terms of this Ordinance. RECOMMENDATION It is respectfully recommended that the accompanying ordinance be introduced for first reading. PREPARED BY: Robert M. Myers, City Attorney Laurie Lieberman, Deputy City Attorney - 6 - . . CA:RMM:lld137jhpc City Council Meeting 5-10-88 Santa Monica, California ORDINANCE NUMBER (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ADDING CHAPTER 4A TO ARTICLE IX OF THE SANTA MONICA MUNICIPAL CODE IMPLEMENTING PROGRAM 12 OF THE HOUSING ELEMENT THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS FOLLOWS: SECTION 1. Chapter 4A is added to Article IX of the Santa Monica Municipal Code to read as follows: CHAPTER 4A. INCLUSIONARY HOUSING PROGRAM. SECTION 9420. Findings and Purpose. The City Council finds and declares: (a) The City of Santa Monica has a responsibility to address the needs of its residents and residents in the region from all social and economic groups for decent, affordable housing, while at the same time maintaining an economically sound and healthy environment. (b) The Housing Element of the General Plan of the City of Santa Monica adopted on January 25, 1983, provided for an inclusionary housing program to address the need for decent and affordable housing in Program 12. - 1 - . . (c) The city Council of the city of Santa Monica considered and adopted the components of an inclusionary housing program which would implement the goals of Program 12 at its meeting on March 10, 1987. SECTION 9421. Definitions. The following words or phrases as used in this Chapter shall have the following meanings: Dwell ing Unit. One or more rooms, des igned, occupied, or intended for occupancy as separate living quarters, with full cooking, sleeping, and bathroom facilities for the exclusive use of a single household. HOD. The united states Department of Housing and Urban Development or its successor. Inclusionary unit. A rental housing unit as required by this Chapter which is affordable by a household with low or middle income. Income Eligibility. The gross annual household income considering household size and number of dependents, income of all wage earners, elderly or disabled family members, and all other sources of household income. In-Lieu Fee. A fee paid to the City by developer subject to this Chapter in-lieu of providing the required inclusionary units. - 2 - . . Market Rate Unit. A dwelling unit as to which the rental rate is not restricted by this Chapter. Maximum Allowable Rent. A monthly housing charge which does not exceed 30% of the median income established by HUD, adjusted for income level, household size, and unit size. This charge shall represent full consideration for housing services and amenities as provided to market rate units in the proj ect, whether or not occupants of market rate units pay separate charges for such services and amenities. Housing services and common area amenities include but are not limited to the fOllowing: parking, use of common facilities including pools or health spas, and utilities if the project is master-metered. "Middle" and "Low" Income Levels. Determined periodically by the City based on the United states Department of Housing and Urban Development (HUD) estimate of median income in the Los Angeles-Long Beach Primary Metropolitan Statistical Area. The two major income categories are: "middle income" (81% to 100% of the area median) and "low income" (80% or less of the area median) . state law also defines "moderate" income as between 81% and 120% of the area median. Further adjustment shall be made by household size as established by the City. The Planning Department shall make available a list of middle and low income levels as adjusted, which list - 3 - . . shall be updated periodically by the City and filed with the City Clerk. Off-Site Construction. Erection of low or middle income housing units on land other than that on which the developer intends to place a proj ect within the City of Santa Monica. proj ect. A residential development or land subdivision proposal for which City permits and approvals are sought. Senior Citizen Household. A household where the head of household is at least 62 years of age. SECTION 9422. Applicability. (a) An inclusionary requirement shall apply to all mUlti-family residential market rate dwelling units resulting from new construction or condominium or cooperative conversion of projects of five units or more. (b) The construction of any multiple rental or limited equity cooperative housing which has a recorded deed restriction requiring occupancy of all units in the project by and rent levels of all units affordable to low and moderate income persons or households for a period of not less than 15 years, which is either financed by federal, state, or local housing assistance, or owned by religious or other non-prOfit organization and shall be exempt from the requirements of this Chapter. - 4 - . . (c) Projects approved under inclusionary standards in existence prior to the effective date of these requirements which have not begun construction or executed deed restrictions as of March 10, 19B7, shall, subject to appropriate administrative and legal requirements, satisfy the inclusionary obligation by meeting the standards of this Chapter. SECTION 9423. Project Development Requirements. (a) No less than fifteen percent (15%) of the total number of units to be constructed in any proj ect developed by an applicant at one location, designed for permanent occupancy and containing five (5) or more units, shall be affordable by households of low- or middle-income. The requirements of this Section may also be satisfied by off-site development of required units as described in Section 9423(g), or an in-lieu fee payment pursuant to the provisions of Section 9424. (b) In determining the number of inclusionary units required, any decimal fraction less than 0.5 shall be rounded down to the nearest whole number, and any decimal fraction of 0.5 or more shall be rounded up to the nearest whole number. (c) At the time the plans are submitted to the City's Planning Division for initial review, the - 5 - . . proj ect proposal shall specify the number, type, location, size, and construction scheduling of any dwelling units to be developed and shall indicate which units are proposed for rental for the purpose of satisfying the inclusionary housing requirement. (d) If located on the project site, inclusionary units shall, whenever reasonably possible, be distributed throughout the project. The applicant may reduce either the size or interior amenities of the inclusionary units as long as there are not significant identifiable differences in the units visible from the exterior and the size and design of the units are reasonably consistent with the rest of the proj ect, provided that all units conform to the requirements of the applicable Building and Housing Codes. Inclusionary units provided shall have at least the same number of bedrooms as the average unit in the project and if the inclusionary units are not the same as the non-inclusionary units, they shall be SUbject to the following minimum size limits: 0 Bedroom 500 Square Feet 1 Bedroom 600 Square Feet 2 Bedrooms 850 Square Feet 3 Bedrooms 1080 Square Feet 4 Bedrooms 1200 Square Feet (e) All inclusionary units in a project and phases of a project shall be constructed - 6 - . . concurrently with the construction of market rate units. (f) Inclusionary units project site must be rental ownership projects. (g) Inclusionary units required pursuant to this Chapter may be provided at a location within the City other than the project site. Any such off-si te inclusionary units shall be completed by the developer of the market rate housing proj ect prior to the issuance of a Certificate of Occupancy for the market rate housing unit project and shall conform to the requirements of the applicable Building and Housing Codes and the minimum size provisions cited in Section 9423(d). The occupancy and rents of any such off-site units shall be governed by the terms of a deed restriction similar to that used for on-site inclusionary units which shall take precedence over all other covenants, liens, and encumbrances. developed on units in rental the or SECTION 9424. Housing. (a) Whenever the city requires as a condition of approval of a market-rate housing development that the development include inclusionary housing uni ts pursuant to this Chapter, the developer may pay a fee to the City in lieu of providing such In-Lieu Fees for Inclusionary - 7 - . . on-site inclusionary housing in accordance with the provisions of this Section. (b) The amount of the fee pursuant to this Section shall be determined as follows: $5.73 per gross square foot of floor area of the project for the first 10,000 square feet of development and $6.77 for each gross square foot of floor area in excess of lO, 000 square feet. In determining the required fee, the floor area of anyon-site inclusionary units shall be excluded from the floor area calculation. (e) The amount of the fee set forth in subsection (b) above shall be reduced by the amount of the fee imposed on residential development by the Santa Monica-Malibu Unified School District as permitted by California Government Code Section 65995. (d) Any fee required pursuant to this Section shall be adjusted for inflation by the percentage change in the Consumer Price Index ( fI CPI 11 ) between the date of adoption of this Chapter through the month in which payment is made. For purposes of this Section, CPI shall mean the index for Urban Wage Earners and Clerical Workers for the Los Angeles/Long Beach statistical area, as published by the united States Department of Labor, Bureau of Labor statistics. - 8 - . . (e) shall be Occupancy project. (f) Any fee required by this Section shall be secured by execution of an irrevocable letter of credit in favor of the City or other security acceptable to the City for the total amount of the obligation. The letter of credi t or other acceptable security shall be delivered to the city prior to the issuance of a building permit for the housing development. (g) Any payment made pursuant to this section shall be deposited in a Reserve Account in the General Fund to be used only for development of low and moderate income housing. Up to twenty-five percent (25%) of in-lieu fee funds may be used to develop affordable housing for moderate-income households, and up to fifteen percent (15%) of in-lieu fee funds may be used for program administration costs. (h) This section shall not apply to any housing development for which an agreement has been executed between the City and developer to provide for an on-site inclusionary unit and the inclusionary unit has been occupied. (i) This Section shall not apply to any housing development in which a density bonus has Any fee required pursuant to this Section paid in full before a Certificate of is issued for any unit in the housing - 9 - . . been given pursuant to Government Code section 65915. SECTION 9425. Fee Waivers. The Condominium and Cooperative Tax described in section 6651 of the Santa Monica Municipal Code and the Park and Recreation Facilities Tax established in Chapter 6C of Article VI of the Santa Monica Municipal Code shall be waived for required inclusionary and for low and moderate income units developed by the City or its designee using in-lieu fee funds. However, any developer who elects to pay an in-lieu fee shall not be eligible for any fee waiver under this section. SECTION 9426. Density Bonus and Other Incentives. Projects which meet applicable requirements of State law may be entitled to density bonuses or other incentives in accordance with the provisions of such law. SECTION 9427. Pricing Requirements for Inclusionary Units. Required inclusionary units shall be priced so that designated households pay no more than thirty percent (30%) of gross monthly household income for rent. The city shall, on an annual basis, set maximum allowable rents for inclusionary units, adjusted by the number of bedrooms. The project owners shall retain - 10 - . . discretion in the selection of eligible renters provided that such renters meet the requirements of Section 9428. SECTION 9428. Eligibility Requirements. (a) Only low- and middle-income households shall be eligible to occupy inclusionary units. The city may establish administrative guidelines for determining household income, minimum and maximum occupancy standards and other eligibility criteria. (b) The following individuals, by virtue of their position or relationship, are ineligible to occupy an affordable unit: (1) All employees and officials of the City of Santa Monica or its agencies, authorities, or commissions who have, by the authority of their position, policy-making authority or influence affecting City housing programs. (2) The immediate relatives, employees, or other persons gaining significant economic benefit from a direct business association with public employees or officials. (3) The immediate relatives of the applicant or owner, including spouse, parents, grandparents, brother, father-in-law, mother-in-law, daughter-in-law, aunt, uncle, sister-in-law, and brother-in-law. children, sister, son-in-law, niece, nephew, - 11 - . . (c) In setting priorities among eligible households, first priority shall be given to Santa Monica residents, second priority to persons employed in Santa Monica, and third priority to other persons. SECTION 9429. Relation to Units Required by Rent Control Board. Low- and middle-income units developed as part of a market rate project, pursuant to replacement requirements of the Santa Monica Rent Control Board, shall count towards the satisfaction of this program if they otherwise meet applicable requirements for this program including, but not limited to, the income eligibility requirements of the program, deed restriction requirements, and pricing requirements. New inclusionary units required by the Rent Control Board which meet the standards of this program shall count towards the satisfaction of this program. SECTION 9430. Deed Restrictions. Prior to issuance of a building permit for a project subject to the requirements set forth in this Chapter, the appl icant shall submit deed restrictions or other legal instruments setting forth the obligations of the applicant under this program for city review and approval. Such restrictions shall be effective for the lifetime of the project. - 12 - . . SECTION 9431. Availability of Government Subsidies. It is the intent of this program that the requirements for inclusionary units shall not be determined by the availability of federal or state housing subsidies. This does not, however preclude the use of such programs or subsidies. SECTION 9432. Enforcement. No building permit or occupancy permit shall be issued, nor any development approval granted, which does not meet the requirements of this Chapter. No unit SUbject to the inclusionary requirements of this Chapter shall be rented except in accordance with this Chapter. SECTION 2. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to affect the provisions of this ordinance. SECTION 3. If any section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of the ordinance. The city council hereby declares that it would have passed this ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether - 13 - . . any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 4. The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. The ordinance shall be effective 30 days from its adoption. APPROVED AS TO FORM: (".,rt~ ..----. ~ ROBERT M. MYERS 0 . City Attorney - 14 -