SR-401-001-03 (2)ATTACHMENT D
Proposed Revisions
Attachment D
Proposed Revisions to the Draft 2000-2005 Housing Element
Proposed Revisions to Chapter 11 (Housing Needs)
Chapter ,2 Changes
II. HOLTSING NEEDS
The housing needs ofresidents are determined by the characteristics ofthe population (age,
household size, income, etc.) and the characteristics ofthe housing available to them (tenure,
size, cost, ete.}. The existing housing stock is rarely perfectly suited to all residents, because
life situations change and different types of housing are needed at different stages in life.
This section explores the characteristics ofthe cxisting and projected population and housing
stock in arder to define the changing housing needs of 5anta Monica residents.
A. POPULATION
1. Population Growth Trends
As of January 1, 2000, Santa Monica's population is estimated at 84,084 persons according
to the 2a00 Census. Incorporated in 1890, the City of Santa Monica has undergone
extensivepopulation growth and change over the past fifty years. From the 1950s through
the 1960s; the City's population grew 25% per decade or 2.5% annually. By the mid 1960s,
most residentially zoned land within Santa Monica at that time was fully built out. Thus, the
City's population remained fairly constant from 1960 through the early 1980s.
The City'~ population declined 1.6% during the 1980s and 3.2% during the 1990s. The
Cit~~o~ulation decline was due to a gradual change in household composition and a
decline in the averag;e household size. However, according to the Citv's buildin~ division
the City ~s currently in the midst of a construction boom. with over 2 000 units in the
pipeline. 'Final occupancv of these units is expected to reverse past trends and result in a
~eneral ir~crease in the ~opulation. Table II-1 illustrates population changes over the past
50 ycars.
TABLE II-1
POPULATION GROWTH: 1950-2000
Year Population Percent Change
1950 71,595 33.8%
1960 83,249 16.3%
1970 88,289 6.1 %
1980 88,314 0
1990 86,905 -1.6%
2000 84,084 -3.2%
Soumes: U.S. Census, 1950-2000.
City of Sanla Monica
Housing El~ment II-1 Housing Needs
2. Age Characteristics
Santa Monica's housing needs are determined largely by the age characteristics of residents.
Each age group has distinct lifestyles, family types, income levels, and housing preferences.
As people move through stages of life, their housing needs and preferences will also change.
As a result, evaluating and understanding the age characteristics of a community is an
important factor in addressing the existing and future housing needs of residents.
Table II-2 shows chan~es in the age distribution ofthe Ci ~'s population from 1980 to 2000.
A~e trends over the nast two decades include a slight decline in children a es 0-17~ but a
si~ni6cant decline in youn~ adults a~es 18-35. With respect to the oider adult ~ooulation.
the City experienced a sizable increasc in adults aees 35-54. With respect to older adults
however, all ~roups above aee 54 exverienced general declines over the past two decades
TABLE II-2
AGE CHARACTERISTICS
Age Croup 1980 1990 2,000 Percent
Change
0-17 13,747 11,977 12,314 -10.4%
18-24 10,543 6,238 5,114 -51.5%
25-34 21,187 19,674 17,034 -19.6%
35-44 10,614 17,501 16,670 57.1 %
45-54 8,449 9,742 13,237 56J%
55-64 9,296 7,422 7,637 -17.8%
65-74 7,624 7,154 5,414 -29.0%
75+ 6,854 7,197 6,664 -2.8%
Median Age 34.1 37.9 393
Total 88,314 86,905 84,084
Source: U.S. Census, 1980-2000.
The ~radual aeine of the Citv's nonulation is also reflected in chan~es in the median age.
For instance, in 1980, the median aQe of Santa Monica residents was 34.1, si~nificantly
above the 29.8 Countywide median a~e. However, by 2000, Santa Monica's median age had
increased significantlv to 39.3, widenin~ the ~ap with the County median a~e of 32.0. This
increase was due lar~ely to increases in the adult rou (a~es 35 throu~ and a
si~nificant decline in children (a~es 0 through 17 and youn~ adults (ages 18 throu~h 34~
City of Santa Monica
Housing Needs TI-2 Housing Element
3. Race and Ethnicity
Race and ethnicity may affect housing needs to the extent that different groups have different
household and income characteristics. As shown in Table II-4. the majority of residents of
Santa Monica in 2000 were non-Hispanic White persons (72% although minority ersons
increased rag duallv since 1980. Whites comprised the majoritv in all neighborhoods. exce~t
the Pico nei~hborhood, where over 30% of the residents were minorities (Figure II-11.
TABLE II-4
RACE AND ETHMCITY
1980 1990 2000
Race Number Percent Number Percent Number Percent
White 68,435 77.5% 65,337 75.2% 60,482 71.9%
Hispanic 11,485 13.0% 11,842 13.6% 11,304 13.4%
African-American 3,492 4.0°/a 3,830 4.4% 3,081 3.7%
Asian/Pac.Islander 3,783 4.3°/a 5,364 6.2% 6,043 7.2%
AllOthers 1,119 1.3% 532 0.6% 590 0.7%
Two or More Races n.a. n.a. n.a. n.a. 2,584 n.a.
Total 88,314 10~% 86,905 100% 84,084 100%
Source: U.S. Census, 1980-2000.
Information from the Santa Monica-Malibu Unified School District contained in Table II-5
indicates that minority enrollment in public schools is greater than that of the general
population. In 1990, minorities represented 46% of enrollment versus 25% of the general
population. By Fall 1998, minority students declined to 42% of the student population in
the District, perhaps suggesting a change in the race-ethnic composition of households.
TABLE II-5
SCHOOL ENROLLMENT BY RACE
Fall 1990 Fa111998/99
Race Number Percent Number Percent
White 5,028 54.1% 7~~14 58.2%
Hispanic 2,629 283% 3,260 27.0%
African-American 876 9.4% 1,022 8.5°1o
Asian-Pacific Islander 728 7.8% 736 6.1°/o
AllOthers 28 0.3% 26 0.2%
TOY31 9,2g9 1~~.~% 12,~58 1~0.~%
Source: Santa Monica-Malibu Unified School District, 1998/99.
City of Santa Monica
Housing Element II-3 Housing Needs
B. HOUSEHOLDS
1. Household Composition and Size
Although the characteristics of individuals are important to defining housing needs, the
characteristics of households are also important. A household is defined as all the people
occupying a dwelling unit, whether or not they are related. A single person living in an
apartment is considered a household, just as a couple with two children is considered a
household. Persons in group quarters are counted toward population, but not households.
Table II-8 shows changes in household composition in Santa Monica from 1980 to 2000.
Over the 1980-2000 neriod, there was an increase in the number of households, yet a decline
in avera~e household size. According to the U.S. Census. the average household size in
Santa Monica declined from 1.97 in 1980 to 1.83 in the past 20 vears due to a decline in
families and inerease in singlc households. Persons residing within group quarters also
increased slightly due to an increase in speeialized nursing facilities and emergency shelters.
The 1995 Tenant Survey documented a smaller average household size in rent controlled
apartments. About half (51 %) of these households consisted of one person, and 82% had no
more than two pcrsons. The incidence of small households with two or fewer persons was
higher in areas north of Wilshire Boulevard (87%) and south of Pico (82%), than in the
Downtown/Mid-City area (74%). This reflects the above-average percentage of elderly
persons and the City's lower rents that enabled persons to live in smaller households.
TABLE II-8
HOUSEHOLD CHARACTERISTICS
1980 1990 2000
Household Type Number Percent Number Percent Number Percent
Total Population 88,314 86,905 84,084
ln Group Quarters 1,743 2.0°l0 2,570 3.0% 2,516 3.0%
Total Households 43,912 44,860 44,497
- Married w/Children 5,012 11.4% 4,883 10.9% 4,842 10.9%
-MarriedNoChildren 9,256 21.1% 8,363 18.6% 7,374 16.6%
- Other Families 5,371 12.2% 4,848 ] 0.8°/o 4,567 10.3%
- Single Persons 19,609 44.7% 22,247 49.6% 22,786 S1.2%
-AllOthers 4,664 10.6% 4,519 10.1°/u 4,928 ll.l%
Avg. Household Size 1.97 1.88 1.83
Note: A family is a household with more than one related person. A non-family household is a household
with one person either living atone or with non-relatives only.
Source: U.S. Census, 1980-2000.
City of Saota Monica
Housing Needs II-8 Housing Element
4. Special Needs Groups
Certain segments of the population may have more difficulty in finding decent, affordable
housing due to their special circumstances. These circumstances may relate to one's
employment and income, family type and characteristics, disability, and various other
household characteristics. In Santa Monica, these "special needs" groups include the elderly,
disabled persons, large families, female-headed families, and the homeless.
Senior Citizens and the Frail Elderly
In 2000, there were 12,078 elderly residents in Santa Monica, representing 14.3% of the
City's total population. In comparison, only 10% of the City of Los Angeles' population and
10% of the County of Los Angeles' population were comprised of elderly persons. Elderly
persons are likely to have special housing needs due to the high correlation between age and
disability status. In 1990, 55% of Santa Monica residents who reported a disability that
limited their ability to perform certain types of wark or housework were over age 65.
Over the past ten vears, the number of households headed bv a senior has declined from
9,572 to 8,878 households. According to the 1990 Census, 64% of these senior households
were renters, and only 36% owncd their own homes. Most people over age 65 are retired,
have fixed retirement incomes, and therefore cannot afford large increases in rent. Limited
income also affects the ability of seniors to maintain and repair their homes. In 1990, the
Consolidated Plan found that 65% of seniors eamed very low or low-incomes.
The 1995 Tenant Survey found that 17% of the City's rent-controlled apartments were
occupied by seniors age 62 and older. However, the Survey likely under-represented the
number of seniors, since it did not include non-rent controlled housing or City assisted
housing, a significant portion of which is targeted to seniors. Of these senior tenant
households, 73% were categorized as lower income (with 6l % earning very low incomes,
12% earning low incomes), and an additiona122% were categorized as moderate income.
A variety of senior services are available to residents in the City of Santa Monica. The
Center for Healthy Aging provides health care services, including health screening, health
education, and peer counseling. The Santa Monica Meals on wheels operates a program for
seniors. The WISE Senior Services Center provides case management, information referral,
day care, in-home services, and paratransit services. The City of Santa Monica also has a
wealth of affordable housing (over 1,000 units) dedicated for seniors earning very low and
low income. Numerous other privately funded housing opportunities are also available.
City of Santa Monica
Housing Element 11-14 Housing Needs
Female-Headed Households
Single-parent households are one of the most wlnerable household groups, requiring the
income levels necessary to support a family, yet absorbing additional costs such as child
care. In particular, households with a female head are especially likely to need assistance
because women continue to eam less on average than men in comparable jobs. In 1990,
5,678 households in Santa Monica were headed by women, or 13% of the City's total
households. Approximately 1,786 households werc female-headed families with related
children. This number declined to 1.723 female headed households with related children in
2000.
The 1990 Census found that 16% of the City's female-headed families were living below the
poverty level, compared to 6% of all families living below the poverty level Citywide.
Among female-headed households with children under age ] 8, approximately 25% earned
incomes that fell below the level of poverty. However, the poverty rate for female-headed
households with children under age five was 42% - six times higher than the City's average.
Given the change in regulations regarding public assistance, this population may increase.
Large Households
The 1990 Census indicated a total of 1,8371arge households (with five or more members)
in Santa Monica, representing only 4% of the City's total households. Among these, 47%
(867) were owner-households, and 53% (970) were renter-households. Large households
have special needs based on the limited availability of adequately sized, affordable housing
units. In order to save on housing costs, large households (in particular lower-income
households) may tend to reside in smaller units, frequently resulting in overcrowding.
In 199o, the City was home to 2,414 overcrowded households, most of which were renters.
~vercrowding among large family renters was the highest, at approximately 85%. The City's
Consolidated Plan documented that of the City's 970 large, renter households, over 40%
earned very low income. While the housing needs of this very low income group were most
severe, a total of 92% of the large, renter households earning up to 95% of the County MFI
experienced overpayment, overcrowding and/or substandard housing.
The 1995 Tenant Survey documented a lower incidence of large households in the City's
rent controlled apartments than recorded by the 1990 Census, which included all units. Only
2% of these households had five or more members, compared to the Census' reported 4%.
However, the Downtown/Mid-City area exhibited a comparatively greater concentration of
large households at 4.7%. The highest overcrowding rates wcre found among large
households, households with children, and Hispanic households than among all other groups.
City of Santa Monica
Housing Needs I1-15 Housing Element
2. (lrriman~v Chararterictirc
-• "--"r^---a ~°--^-^--..°-"
Over the past two decades, the home-ownership rate has increased in Santa Monica. In
1980, 22% of households owned their homes, while 78% rented. Over the next few decades.
the home ownership rate increased to 28% in 1990 and a hi~h of 30% by the Year 2000.
Despite these increases, Santa Monica still has the hi~hest percenta~e of renters than in anv
other city in Los Anteles Countv. At least one-third ofthe households in other cities owned
their homes, and the countv-wide ownership average was 48%.
A subcategory of rental housing includes Single Room Occupancy (SRO) hotels and
boarding or rooming houses, which is generally the least expensive housing and frequently
the only housing option available to the lowest income households. There are few remaining
resources of this tvpe in the Citv. Between 1980 and 1994, nine SRO hotels were closed,
removing a total of 327 rental units from the housing stock. As a means of addressing the
eo.7 f r 1....,_...,~r cun I,.,,,~;,,., rhA r;r., h~~ ~ ;~rP~ ;,, rl,A .iA..~t..,,,,,~„r ~.f ~o..or~t enn
..wu i... ,~...-..~.o. .~.~.~ ....~.o,,,b~ ...... ~..~y .,~.~ ~.o~.ow.. ,,, ~ .... ..........t..~.....~ v. o~,.viui .~i~v
projects, providing 80 SRO units affordable to very low income households.
Santa Monica historically has experienced very low vacancy rates, reflecting the desirability
of its location, higher qualitv of life, and rent-stabilization policies which encoura~e a lower
mobilitv rate than manv other communities. For instance, the 1980 Census documented a
vacancv rate of 5.3% versus a vacancy rate of only 1.6% in 2000. in addition, Santa Monica
has also experienced the lowest mobilitv rate turnover rate of units) in all of California.
Table II-13 displa, sY chan~es in the vacancv rate over the past ri~vo decades.
TABLE II-13
TENURE & VACANCY RATE:
1980, 1990, AND 2000
Tenure 1980 1990 2000
Homeowners 22% 28% 30%
I Renters I 78% I 72% I 70% I
~ VaranrvRatr
For Sale Units n.a. 2.8% 1.4%
For Rent Units n.a. 2.4% 4.3%
I viner i iniis ~ 53 io ~ 3.7 io ~ i.o io I
Source: 1980-2000 U.S. Census.
City of Santa Monica
Housing Element II-23 Housing Needs
8. Coastal Zone Housing
As part of the Housing Element update, the California Government Code (Section 65588)
requires that the Housing Element take into account any low- or moderate-income housing
provided or required in the coastal zone pursuant to Section 65590 (the Mello Act).' State
law requires that jurisdictions monitor the following:
1. Number of new housing units approved for construction in the coastal zone;
2. Number of housing units for low or moderate-income households required to be
provided in new housing within the coastal zone or within three miles;
3. Number of existing housing units occupied by low or moderate income households
that have been authorized for demolition or conversion since January l, 1982; and
4. Number of residential units for low and moderate income households requircd for
replacement or authorized to be converted or demolished and their location.
State currently exempts the Ciry of Santa Monica from replacing units that were demolished
or converted in the Coastal Zone. Table II-21 documents development activity in the
Coastal Zone since 1982 and the number of affordable units constructed in the City within
three miles of the coastal zone.
The Mello Act in part requires replacement of affordable units demolished or converted within the
Coastal Zone. However, the Mello Act includes two exceptions to this requirement applicable to
Santa Monica. First, the requirement is not applicable for 5anta Monica because the City has less
than 50 acres, in aggregate, of land which is vacant, privately owned, and available for residential
development. Second, the requirement does not apply to the demolition of any residential structure
which has been declazed to be a public nuisance under the provisions of the Health and 3afety Code
or any local ordinance, including buildings removed following the 1994 Northridge Earthquake.
City of Santa Monica
Housing Needs II-32 Housing Element
TABLE II-21
COASTAL ZONE DEVELOPMENT
Unit Caunt Affordable Units
i
Y~
~
~~~
~7cq
'o
N
o
Y
C N
.~Ca
~
a~
~
~'
:
C O
~U
^
N~cd
Z V
o
b ~
~ m
.~~
o ~
~Q V O
~L1U
y
Co
c N
•yY
'a
~ O
+r U ~
?~ p
L '~ N
~
~ F ~
3 ~
'~' y
w 3 0
i9a2 n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1983 n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1984 42 0 0 42 0 n.a. ]
i9o5 2 2 v v 2 n.a. i
1986 1 8 0 -7 8 n.a. 6
I 1987 I 157 I 31 I 0 I 126 I 31 I 4 13
inoo
i>oo i~o
i~o ~~
~< n
v in~
iw ~~
LL
ii.a.
ii
1989 114 61 0 53 61 4 22
1990 207 91 0 116 91 16 0
1991 108 22 0 86 22 33 0
1992 165 5 0 160 5 72 0
1993 0 31 0 -31 31 0 42
1994 125 23 0 102 23 80 0
1995 0 0 0 0 0 0 45
1996 12 1 0 11 1 D 5
1997 5 40 0 -35 36 0 113
1998 21 4 0 17 0 0 80
I 1999 25 I 4 I 0 I 21 I 4 I 25 I 70 I
~n~ 30 ? n 37 n ?i i~z
Total 1151 347 0 804 337 255 562
Source: City of Santa Monica, City Planning Division.
N.A. Information Not Available
*Information not available on conversions
City of Santa Monica
Housing Element II-33 Housing Needs
Exhibit 2
Revised Chapter III (Potential Constraints on Housing Production
and Conservation)
III. POTENTIAL CONSTRAINTS ON HOUSING PRODUCTION AND
CONSERVATION
The provision of adequate and affordable housing is affected by both market conditions and
governmcntal programs and regulations. Housing Element law requires a city to examine
potential and actual governmental and market constraints to the maintenance, improvement,
and development of housing for all income levels. Potential non-goverrunental constraints
include the land costs and construction costs, 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.
As part of the 1998-2003 Housing Element, HR&A analyzed the impact of various City
regulations upon housing production. These analyses are contained in Technical Appendix
#l of this document. The central conclusion of this analysis was that market conditions at
that time -- largely high land costs combined with a depressed real estate market -- were the
primary constraints that rendered development of the average multi-family development in
the City infeasible. Given these conditions, special circumstances were generally required
to make a project financially feasible, such as unusually low land costs, unusually high
rent/sales prices, below market-rate financing, and/or significant reductions in construction
ar other development costs. City policies and regulations, such as its inclusionary housing
program and rezonings, also constituted potential constraints to housing production, because
they negatively impacted project feasibility on a per-square-foot basis. However, given the
broader market context, these policies and regulations did not constitute actual constraints.
Rather, it was market conditions which actually constrained housing production.
Over the past two years HR&A updated its analysis on some of the issues addressed in the
1998-2003 Housing Element Update, including further analysis of City requirements on the
financial feasibility of typical condominium projects, which remain the predt~minant form
of new housing in the City. This recent wark includes: (1) an analysis of the characteristics
of 30 condominium projects submitted to the City for permit approvals between March l,
1998 and Apri130, 1999; and (2) analysis prepared in March 2000, which demonstrated that
changes in the local real estate market since 1998 justified increasing the fee that a developer
may pay to the City as one option for mitigating the impacts of market-rate condominium
projects on the demand for housing that is affordable to lower-income households.
Comments reccived during the public participation process for the 2000-2005 Housing
Element Technical Update raised concerns about several new City programs enacted in
recent years, as wcll as continuing concerns about some programs analyzed for the 1998-
2003 Housing Element. These concems have been analyzed by HR&A, as suinmarized in
this section. HR&A's complete analysis is included in Technical Appendix #2.
City of Santa Monica Potential Constraints on
Housing Eleme~t III-L Housing Pr6duction and Conservation
A. NON-GOVERNMENTAL CONSTRAINTS
State law defines non-governmental constraints as market factors which may hinder the
maintenance, development, and improvement of housing. Typical potential constraints
include construction costs, land acquisition, and the availability and cost of market
financing. Howevcr, potential non-governmental constraints are largely determined by
market conditions, over which local jurisdictions have little control. Direct public subsidies
that lower the cost of housing development, such as land write-downs and interest subsidies,
are the probably the only way for local governments to lessen the impacts of market
conditions.
1. Construction Costs
Construction costs can vary widely according to the type of development, with multi-family
housing being generally less expensive to construct than single-family housing. However,
construction costs vary significantly, depending on the size of the unit and the number and
quality of amenities offered. This includes such items as fireplaces, swimming pools, tennis
courts, and less obvious decisions on the grade of carpeting and tiles used, types of
appliances and light fixtures, and the quality of cabinetry and woodwork.
According to the Real Estate Research Council of Southern Califomia, the cost of apartment
construction regionwide increased from $38 to $45 per square foot over the 1990s. Some
of the increase is due to inflationary pressures. However, among other factors causing
construction costs to increase are changes to the structural requirements mandated by the
199$ Uniform Building Code. Recent changes include increased thickness of exterior wood
frame walls, new requirements for more expensive fasteners, geology reports, and structural
reinforcements when homes are planned within 15 miles of an active earthquakc fault.
Based on City consultant's interviews with local residential contractors, the average multi-
family construction costs in Santa Monica range slightly higher from $40 to $75 per square
foot, and up to $64 to $82 per square foot if one level of underground parking is required.
Condominium construction generally costs more on a per square foot basis than apartment
construction, particularly in a high-amenity housing market and when subterranean parking
is required, as is the case in Santa Monica. According to the Construction Industry Research
Board, single-family homes range in cost from $60 and $100 per square foot.
While construction costs comprise a significant portion of the total development costs of a
housing project, these costs are fairly consistent throughout Los Angeles County and
particularly in built out communities where underground parking is required. Therefore,
construction costs arc not an actual constraint to housing production in Santa Monica.
Potential Constraints on City of Santa Monica
Housing Production and Conservation III-2 Housing Element
City of Santa 1ldonica Polenlial Constraints on
Housin~ Element Iii-3 Housing Production and Conscrvation
2. Land Cost
Land costs typically account for a large share of total housing production costs. All other
things being equal, very high land costs may make housing development infeasible unless
expected rents or sales prices are high enough to recuperate the additional land costs. During
the mid-199Qs, very high land costs, a depressed real estate market, and the destruction of
over 2,040 units during the 1994 Nortl~ridge Earthquake were the overriding factors that
caused most multi-family housing in Santa Monica to be infeasible at that time.
As part of the 1998-2003 Housing Element, HR&A conducted financial feasibility analyses
of "prototypical" multi-family residential projects in Santa Monica and concluded that none
of these projects was financially feasible under market conditions at that time.' The analysis
found that at then-current rents and sales prices, multi-family projects were feasible only
when land costs were no more than $20 per square foot for larger apartments and $35 per
square foot for larger condominiums. Given that market land values were much higher, only
projects with special circumstances (e.g., unusually ]ow land cost, unusually high rents/sales
prices, below market-rate financing, and/or significant reductions in development costs)
were feasible. Thus, land costs significantly impacted the financial feasibility of housing
development in the City, and thus constituted an actual constraint to housing production.
Since the 1998-2003 Housing Element Update was completed, a number of changes have
occurred in the regional and local real estate market that have affected both land costs and
the feasibility of multi-family housing development. As in other market downturns, home
prices in high cost submarkets, like Santa Monica and the Westside in general, tend to fall
further in relative terms than in lower cost submarkets. Conversely, property values recover
fastcr in higher cost submarkets when economic conditions improve. Beginning in 1997, the
Los Angeles metropolitan area began a long-term recovery from the 1990-1996 recession.
The pace of recovery was particularly rapid in Santa Monica, resulting in escalating prices
over limited supplies of units held low during the recession.
At the same time, other changes in the market had the cffect of ratcheting up the cost of new
multi-family construction, particularly in Santa Monica. On January 1, 1999, the Costa
Hawkins Rental Housing Act went into full effect, after two years of interim implementation.
With this State-mandated change in Santa Monica's rent control law, apartments can be re-
rented at full mac•ket value ~vhen a tenant voluntarily vacates a unit. Inasmuch as apartment
building values are a direct function of rental income, thc inerease in total rent made possible
through this changc had an immediate effect on the value of apartment buildings. Analysis
of 30 condominium applications filed during 1999 showed that new condominium projects
` For further discussion of land costs and its impact upon housing production, refer to the appropriate
Technical Appendices in Volume #1 to the 1998-2003 Housing Elernent update: "Assessment of the
City's Tnclusionary Housing Program as a Potcntial or Actual Constraint on the Development of
Housing," and "Cumulative Effects of Five City of Santa Monica Requirements on Multi-Family
Housing Projects as a Potential or Achial Constraint on the Development of Housing."
Potential Constraints on City of Saota Monica
Housing Production and Conservation III-4 Housing Elemcnt
were increasingly being proposed on sites thaY had apartments. Developers were therefore
competing with a new supply of apartment buyers attracted to the City because of more
attractive cash flows after Costa Hawkins.
The increasing demand for housing and competition for housing construction led to a
corresponding increase in land values. Data from the County Assessor's office on closed
apartment building sale transactions confirmed the upward spiral in land values. The median
value of prospective condominium project sites increased significantly in all areas of Santa
Monica after 1997, in the R2 District where most new condominium projects are
constructed. As shown in Table III-l, land values increased by 30% to over 50% in just two
years.
TABLE III-1
MEDIAN LAND VALUES IN THE R2 DISTRICT, 1997-1999
City Area 1997 1998 1999 Percent
Overall Change
North of Wilshire $75.25 $90.66 $98.64 31%
Mid City and $48.13 $61.34 $74.85 56%
Downtown
Soutt~ of Pico $50.95 $67.11 $73.60 44%
]. Closed sales, grant deeds only, excluding obvious high and low outlier values. Land values imputed
from assessed value of land, where total assessed value is within 10% of recent sales price. Includes
duplexes, triplexes, quadplexes, and 5+ unit buildings.
Source: L.A. County Assessor data compiled by First American Real Estate
The analysis found that the new balance between higher sales prices and higher land and
other development costs rendered new, smaller condominium projects in higher cost areas
ofthe City feasible (e.g., north of Wilshire Boulevard), but they remained infeasible for large
projects in general and for projects in lower cost areas of the City. This new market
equilibrium helps explain the recent surge of developmcnt activity in the multi-family
neighborhoods in the northern part of the City, and in commercial and non-traditional areas
for housing development, where higher residential densities are permitted. Overall, land
costs continue to be a substantial impediment to multi-family development in the City.
City of Santa Monica Potential Constraints on
Housing Element III-5 Housing Production and Conservation
3. Availability of Financing
Construction Financing
Prior to the recession and significant changes in lending practices following the savings and
loan scandals of the late 1980s, developers could receive loans for 100% or more of a
project's estimated future value. Now, construction and permanent loans are almost never
available for more than 75% of the future project value for multi-family development
projects that are typical in Santa Monica. This means that dcvelopers must usually put up
at least 25% of the project value, and perhaps more if the total cost is more than 75% of the
estimated future value of the project or if net operating income is less than L 15 times the
amount of the loan payment. Although there is no hard threshold for how much equity is too
much before a project would be deemed infeasible, the higher the proportion of equity
required above 25%, the more unlikely a developer would proceed with the project. Not
only would it require more up-front cash, but higher equity contribution means a project
must be able to achieve an even higher value at completion in order to generate the net cash
flow needed to meet the minimum acceptab(e cash-on-cash return threshold.
Martgage and Home Improvement Financing
The cost and availability of financing can impact a household's ability to purchase a home
or to perform necessary maintenance and repairs. Mortgage loans for homes range between
7 and 8% for a standard fixed rate loan with a 30-year term. Interest rates fluctuate with the
national economy, and can have a dramatic impact on housing affordability. For example,
a 1% increase in the interest ratc can cause the monthly payment to increase by $250 for a
single-family home and $175 for the average-price condominium within Santa Monica. This
reduces the number of households who can qualify to purchase a home in the City.
The availability of mortgage financing can also serve as a constraint to housing provision.
Many communities have experienced a pattern where households looking to purchase a
home have had more difficulty in obtaining financing in lower-income neighborhoods. The
Community Reinvestment Act was passed in an effort to address this issue. In tandem with
the Home Mortgage Disclosure Act (HMDA), lenders must now disclose information on the
disposition of home loan applications by the race, gender, and income of the applicants.
The Federal Financial Institutions Examination Council (FFIEC) compiles HMDA data
according to the income characteristics of the census tracts whcre the dwelling units are
located, based on the following FFIEC definitions. Income limits are determined based upon
the median family income (MFI) for the relevant Metropolitan Statistical Area (MSA).
Low-to-moderate income tracts have a MFI below 80"/0 of the MFI for the MSA. Middle
income tracts have a median family income from SO to 120% of the MFI for the MSA.
Finally, upper income tracts have a MFI above 120% of the MF[ for the MSA.
Potential Constraints on City of Santa Monica
Housing Production and Conservation III-6 Housing Elcment
Table IlI-2 illustrates the disposition of home purchase and home improvement loans by
census tract based upon information provided by the FFIEC for loan applications in 1999.
During 1999, 2,021 applications were filed for home purchase loans and 179 applications
for home improvement loans. In contrast, only 1,278 home purchase loans but 263 home
improvement loans were requested during the recession, presumably because home repair
was a more cost-effective option far improving one's housing situation. Citywide, the
origination rate was 64% for home purchase loans and 56% for home improvement loans=
- generally similar to Countywide averages (63% and 44%).
Origination rates did not vary appreciably for upper income and middle income tracts. Far
insiance, ior upper income iracis ine origination raie was o4 io ior nome purcnase ioans and
53°/o for home improvement loans. ln comparison, the County as a whole had a slightly
higher origination rate for home purchase loans (65%), but a lower origination rate for home
improvement loans (47%). Middle income tracts in the Citv showed nearlv the same
origination rate as upper income tracts; these tracts had a 67% and 54% origination rate for
1,~,,,,P,,,,,-..h~~A~„~ ; A.,tl~.,.,~ Th;~~;,,,;1~,-;h.~„~~~,,,-,,,-;~;,,~,,.;..A„rl,a.7;ff.ro,,..~~
~~~,~...,t.u...,...o..~...~,.Cl~t .:................,...,~....,~~...,..u....~.,~.o ...t,..o...bb. ..,,~.,...,.,....v„vvo
in the income of applicants by tract. At 63% and 40% respectively, both origination rates
for aii middie income iracis in ihe i:ounry were iower tnan tne ~;ity's.
Because income is often a limiting factor in securing home purchase and improvement loans,
significantly fewer loans were originated in low/mod tracts. The City's two HMDA
designated low/mod income tracts had only 118 applications for home purchase loans and
33 applications for home improvement loans, representing 4% of the total loan applications.'
In Santa Monica, the average loan origination rate found in the low/mod tracts was 57% for
home purchase loans and 67% for home improvement loans. Countywide, the origination
rates for home purchase loans were nearly identical at 57% to the rates in Santa Monica, but
nearly 20 percentage points below the origination for home improvements in the City.
In summary, the origination rates for home purchase loans in Santa Monica in 1999 were
...:i.,...,, r ............:ao ., n..;,,:.,.,.;,,., ..,.o~ F ,. ~.~...o ; ..* i,,...... ~ .,i~,.
Si~iiiiai ~v ~vuia~y wiu~. uY~,iu~~.6. vaisaiau~ivai ~u~w ivi iiviiii. iiiiYiv`r'~.iiii.ii~ avaiia vr~i~, aiav
consistently higher in Santa Monica than in the County, although they showed variation by
tract income. A certain level oT variation in origination is to be expected in that income is
a key qualifying aspect in obtaining home loans. In all, the differences in origination rates
among home loans appeared similar to those occurring countywide and thus do not constitute
an acti~al c~n~traint tn the nrnrluctinn anrl maintenance ~f hrn~sino_
mti.. vr,rr~n a..... ,. ,. «~.o a:~..,.,.:a ,.r.. ~,.,... ......t:,....:,... ..... n_:,.:...,«oa ~.t,.. n..,.o.....a
- vw a,aii:SGiiZ~a u.~ .at.~a.u^vP v. u~va.~ aYyi~~au.~u aa. v~~gwmw~ ~. ~ i wywu~
Denied, Withdrawn, or Closed. Origination of a]oan refers to a loan approved by the lender and
accepted by the borrower. Origination rate refers to the ratio of originated loans to the total number
of applications.
HMDA data exclude government-backed loans, which could result i~ more loans in the low/mod
areas.
City of Santa Monica Yotential Constraints on
Housing Element III-7 Housing Production and Conservation
TABLE III-2
DISPOSITTON OF HOME PURCHASE LOANS AND
HOME IMPROVEMENT LOANS BY CENSUS TRACT
Tract Tract Home Purchase Loans Home Improvement Loans
Income
Level Appl'n Orig % Orig Appl'n Orig % Orig
7012A1 Upper 125 71 56.8% I1 6 54.5%
7012.02 Upper 99 6] 61.6% 10 6 60.0%
7013.01 Upper 189 ll8 62.4% 14 7 50.0%
~niann
, ., . ...,., rr.,..Pr
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., z
, z~5oi
., , .., ,.,
7015.01 Upper 123 70 56.9% 3 1 333%
7016.01 Upper 125 84 67.2% 13 10 76.9%
7(121 00 T inner 17R 1 I R F.(. ~°/ 1 1 5 45 S°/
7022.01 Upper L I S 71 61.7% 12 8 66.7%
7022.02 Upper 133 92 69.2% 8 3 37.5%
7023.00 Unner 144 ]06 73.6% 15 7 46.7%
Total Upper Income 1,356 861 63.5% 105 56 53.3%
7013.02 Middle 100 68 68.0% 5 3 60.0%
7015.02 Middle ~3 38 71.7% 2 1 50.0%
7016.02 Middle 137 1~0 73.0% 8 7 87.5°/a
7017.01 Middle 90 58 64.4°10 12 4 33.3%
7017.02 Middle 15 ll 733% 2 2 100.0%
7019.00 Middle 25 11 44.0"/0 1 4 ~.0%
7020.00 Middle 127 82 64.6% 11 5 45.5%
Total Middle Income 547 368 67.3% 41 22 53.7%
7018.01 Low/Mod 56 31 55.4°/a 19 11 57.9"/0
-lU12i.UZ Low%Mod (i2 36 52i.llo 14 11 7$.6%
Total Lowl117od Income 118 67 56,8% 33 22 66.7%
City Total 2,021 1,296 64.1% 179 100 55.9%
r~uurev~auona: r.pp~ n-= r~ppucauuns; vng = vngmacions.
Notes
I. Tract income level as determined hv FFiRC'
2. Originations = loans approved by the lending institu[ions and purchased by the applicants.
Source: HMDA data collected by the Federal Financial Institutions Examination Couneil (FFIEC), 1999
Potential Constraints on City of Santa Monica
Housing Production and Couservation IIi-8 Housing Element
B. POTENTIAL GOVERNMENTAL CONSTRAINTS
Local government can affect the production of housing in a variety of ways, including
limiting the land designated for residential development and/or the densities at which that
development can occur, imposing fees or exactions, and requiring lengthy review periods
prior to approval or denial of a project. However, it is important to recognize that the goal
of producing housing may at times conflict with other City goals, such as the desire to
provide sufficient open space and recreation facilities, the desire to protect environmental
features and historic resources, and the desire to ensure the heatth and safety of residents by
maintaining the current level of community services and infrastructure. This section of the
Eiemeni evaiuaies wnefner any governmeni reguiaiion in Sania ivionica acis as a consiraini
to the production, maintenance, or improvement of housing for all income groups, and
whether any such constraints would prevent the City from achieving its assigned share of
regional housing need.
Speci~cally, a Housing Element must include:
"An analysis of potential and actual governmental constraints upon
ihe mainienance, improvement, or deveiopmeni oi housing ior aii
income levels, including land use controls, building codes and their
enforcement, site improvements, fees and other exactions required of
developers, and local processing and pcrmit procedures. The analysis
shall also demonstrate local efforts to remove governmental
constraints that hinder the locality from meeting its share of the
regional housing need in accordance with Section 65584.4
In formulating a five-year housing strategy, jurisdictions are required to, among other things,
consider removing any such constraints.'
The governmental constraints analysis required by the Housing Element statute requires a
r., ~,-f ; F;r~r ., 1.. ~1 . ~.7:..t: ..~ ~ „ho+l,e .~F;r.. ..I:
~.rv°t.u.~..iiiuliy'. iii ~ av~ua~uil~ua~.~iviiiiu~~u5$i.S$'rvii~.~ii~.iuiijyvii~oYivsiuiiiS~YviaCii.S
or regulations operate~as constraints. Second, it must assess whcthcr any such constraints
interfere witn its abiiity to produce its assigneci "fair share" 01 regionai housing neeci,
expressed in terms of number of units, and units distributed across four household income
categories. If it does, the jurisdiction must consider removing it.
For purposes of this analysis, a City initiative is considered an actual governmental
.:r .. ,...i...r:.,. __..,.,.a,...,.,. .._af.... ,...~ .........:.... _,.,...: ,.aa,. ,. ....i_ _c
~i~iiSiiBiii~ ii, a~ a icauii ~i ~~~ jn~~cuuiw aiiw~i ~uv~~aiiuvc ~cyu~7~iiiciiiS, ii auua a Scaic vt
' (Gov't Code § 65583(a)(4))
s See Gov't Code § 65583(c)(3)) ("Address and, where appropriate and legally possible, remove
governmental constraints to the maintenance, improvement, and development of housing.").
City of Santa Monica Potential Constraints on
Housing Element III-9 Housing Production and Conservation
extra cost or time that significantly and adversely affects the financial feasibility of typical
new housing projects.
Under this operational definition, it is possible that a City initiative could add procedural or
substantivc costs to a project, but the mere fact of added cost is not itself a constraint. Such
costs constitute a constraint only when the scale of additional costs implied by a City
initiative, individually or in combination with other City programs, causes well-informed and
experienced developers not to proceed with financially viable, typical housing
developments.
T Tn~ar thA nr~ n r~4~t~n etra r~tc a~.r anir initiativa t}iat ie fnnnrl tn rnnetifiitP
.....~.... ...... ~.......... r.i^..^.b ... ~......~...~~......w ~..~....)~ ~~ .....) ........~.... .. ........ ............ ........~.~....,
a constraint must be assessed to determine whether it would interfere wit1~ the City's ability
io produce iis assigned iair share housing objeccive. in maicing inis "inierierence"
determination the governmental constraint must be compared with the number of housing
units that would be produced in other ways, or in other areas of the City, relative to the fair
share obiective. This determination mav consider, therefore, the de~ree to which a constraint
that operates in one part of the City is offset by housing production elsewhere in the City.
Tt,~ r';r., „~~.i ,,.,r ...,.,~:.~~,- r~,,,...>;,,,. ~ „r.,,,r~,,, .,.,i;,-~, .,,- rPrt„1~f;.,,, th~+.,,~~, .,,,Ar~+A ~~ ~
~.,...~,~,y .........~.,~.....~o.u... ....,.v..~.s o t....~.~.~.,, t.~..,..y .,. ...b,.....,.,.. ~....~..,..y .,t......... ..~ ..
locatized constraint, so long as it can conclude reasonably (i.e., on the basis of substantial
evidence), [hat (=itywiqe nousing production will still be suTficient to achieve its Tair sllare
of regional housing need, in terms of both unit production and production by household
income category.
1. Land Use Controls
The City regulates the type, location, density, and scale ofresidential developmentprimarily
through the Zoning Ordinance. In general, the City's zoning regulations are designed to
balance the goal of providing affordable housing opporiunities for all income groups with
the goals of protecting the health and safety of residents and preserving the character and
inteQritv of existin~ neiehhnrhnnds.
/1..,.....I,.... ..!'7..._'"_.. /'._s..~....:.... .,...,7 T.."",."~"
vverv~erv vf LiVlllll~' i.uae~urie~ LL/LU LG/LJllLGJ
i3ased on existing zoning designations, 3,61 S acres of land in Santa Monica are devoted to
residential uses, representing 67% of the City's land area (refer to Table III-3). Commercial
zoning districts also provide an additiona113% (827 acres) ofthe City's land for residential
nce.e Tn cmm~aricnn t~ cix wectcicie/cnnth hav citiec lAnnenrlix C1 fianta Mnnica hac
°---' -" -----r------ -- ..-" "-"-----...__'-- ""~ ---'-" ~'-rr----"' -i~ ~_"-_ '--_"--- --_"
designated the largest proportion of its land for residential uses among all six cities.
Potential Constraints on Ciry of Santa Monica
Housing Production and Conservation III-10 Housing Element
TABLE III-3
EXISTING ZONING DESIGNATIONS
Zone Types
Acres Percent of
City Total
Commercial 827 15.40%
Residential
Rl- Single Family Residential 1,688 31.43°10
R2, 2R, 2B, NW - Low Density Multiple Family Residential 1,224 22.78%
R3, R3R , NW - Medium Density Multiple Family Resideotial 269 4.99%
R4 - High Density Multiple Family Residential 27 0.50%
OP1 - Ocean Park Single Family Residential 15 0.28°/o
OPDU - Ocean Park Duplex Residential 3 0.14%
OP2 - Ocean Park Low Multiple Family Residential 263 4.89%
OP3 - Ocean Park Medium Multiple Residentia] 11 0.20%
OP4 - Ocean Park High Multiple Family Residential 28 0.52%
RVC - Residential-Visitor Commercial 70 1.30%
RMH - Kesidential Mobile Home Park I 1 0.20%
Industrial 377 7.02%
Civic 53 0.98%
Parks 141 2.62%
Airport 199 3.70%
Beach and Beach Parking' 164 3.05%
TOTAL 5,370 100.00%
I. Bcach and beach pazking areas are not zoned.
Source: City of Santa Monica, City-wide GIS, January 2001
City of Santa Monica Potential Constraints on
Housing Element III-1 I Housing Production and Consernation
Provisions for a Variety of Housing Types
Housing element law specifies that jurisdictions must identify adequate sitcs to be made
available through appropriate zoning and development standards to encourage the
development of a variery of types of housing for all income levels, including multi-family
rentals, factory-built housing, mobile homes, emergency shelters, and transitional housing.
Table III-4 details the types of housing allowed by zone districts. In comparison to
surrounding jurisdictions, the City offers an impressive array of options for siting residential
uses in numerous zones, particularly in commercial and industrial zones. Moreover, the
types of alternative housing types allowed clearly surpass most comparable communities.
TABLE III-4
RESIDENTIAL DEVELOPMENT IN NON-RESIDENTIAL DISTRICTS
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BCD Broadway Commercial / d / / / ' / / / CUP /
CP Commercial Professional / / / / / / / / CUP /
CM Main Street Commercial / / / / / ' / / / ~ CUP /
_
CC Civic Center' ----
/
/
/ ' / ',~
C2 Neighborhood Commercial2 / / / / / i / / / CUP /
C3 Downtown Commercial Z / / / / / ~i / /
- / , CUP
-. , -- /
--
C3C Downtown Overlay 2 / / / / / / / / 'i CUP /
C4 Highway Commercial 2 I / / / / I / / / / CUP /
_ __
CS Special Office Commercial z I
CUP
/ __-
/~ -
/ /
CUP
CUP
/
CUP
/
C6 Boulevard Commercial z / ' / / / ' / / / / CUP /
BSC Bayside Commercial 3 / / / / I / / ' / / CUP /
__ _ _ ___ _
/
C
'
/
Light Manufacturing and Studio / / ~ / / UP
MI Industrial Conservation CUP / / I, / / CUP ~ CUP / CUP '', /
CUP: Conditional Use Permit Required Nol Permitted / Permitted
Notcs:
1. Civic Center Specific Plan. Plan permits 35,000 sf of Gve/work space and 350 units of mul[i-family units.
2. Artist S[udios permitted above the first floor.
3. AKist studios permitted abovc thc first floor and at rear ?5 feet of parcel.
Provisions for Second I~nits
Potential Constraints on City of Santa Monica
IIousing Production and Conservation III-12 Housing Element
Second units are attached or detached dwelling units that provide complete, independent
living facilities for one or more persons located on the same lot as the primary structure. In
June 1999, the Santa Monica City Council adopted Ordinance No. 1942 (CCS) making the
findings required by law and clarifying the existing policy of allowing second units in multi-
family districts. The Ordinance outlined allowances for second units in single-family zones
for the use of dependents of the property owner, such as elderly relatives or disabled adult
children, ar care givers of the property owners or dependents of the property owner.
The City Council's policy to limit provisions for second units is based on their concern for
preserving quality of life in the limited single-family neighborhoods remaining in the City.
Residential streets in the City's R-1 and OP1 districts are already impacted by traffic and
parking from the hundreds of thousands of people who work, visit, or commute to and from
the city on a daily basis. In portions of the City, the commercia] zones that run along major
east-west thoroughfares are adjacent to R-1 ncighborhoods, and further impact these
cstablished neighborhoods with traffic, noise and parking spillover. Furthermore, a
substantial number of second units already exist in the City's R-1 neighborhoods, built either
as "accessory units" and not permitted for dwelling or built illegally without permits.
During public hearings held before the Planning Commission and City Council which led
to the adoption ofthe Ordinance, residents expresscd concerns about permitting second units
in the R-1 and OPI districts. These concerns included: the creation and exacerbation of
traffic and parking problems; inordinate demand on the infrastructure ofolder neighborhoods
planned to accommodate R-1 densitics; increased noise; increased air pollution; security
risks; and the lack of quiet, peaceful spaces in the community. The City Council's decision
to limit the circumstances under which second units are permitted in single family zones
reflects the consensus of public opinion presented at these public hearings.
The limitation of second units in the R I and OP 1 districts is not viewed as a constraint upon
the development of housing for all income levels in Santa Monica. The City's residential site
inventory for the 1998-2005 period demonstrates the City has adequately zoned land at
appropriate densities to fulfill its regional housing growth needs by affordability level. Even
if the City were to liberalize its second unit ordinance, however, it is unlikely that second
units would have a significant impact on the new housing stock during this planning period.
Finally, second units would not provide a significant source of affordable housing, since the
City has no ability to control the rents of these units, and Rent Control Board surveys
suggest that these units would not be affordable. Because of these considerations, second
units are not an integral part of Santa Monica's overall program stratcgy to address the
RHNA.
City of 3anta Monica Potential Constraints on
Housing Element III-13 Housing Production and Conservation
Provisions for Special Needs Hausing
The City explicitly permits manufactured housing placed on a permanent foundation in all
its residential zones subject to the same development standards and design review criteria
as stick-built housing as set forth by the zoning district. The City has established the R-MH
zone to implement policies in the Land Use Element "to preserve and protect existing mobile
home parks as developments that offer alternative types of residential units and opportunities
for affordable housing." The City's two mobile home parks had originally been established
as an interim use requiring a conditional use permit.
Table III-5 shows that the City's Zoning Ordinance provides for transitional housing in all
multi-family residential zones and commercial zones. Homeless shelters are conditionally
permitted in six residential districts, and in all non-residential zones except far one. The
City also provides for hospices and domestic violence shelters in ail residential zones, and
SRO's in all multi-family districts. The City further facilitates the development of such
housing through special development standards (Sec.9.04.10.14.030) including height and
density bonuses, reduced setbacks and parking, (Sec.9.04.10.08.040) and planning fee
waivers.
TABLE III-5
HOMELESS AND OTHER SPECIAL NEEDS HOUSING
IN RESIDENTIAL DISTRICTS
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R1 Single Family / /
R2R Low Density Duplex / /
R2 Low Densiry Multi-Residential / / / /
R3 Medium Density Multi-family / / / CUP /
R4 High Densiry Multi-family / / / CUP /
RVC Residential-Visitor Commercial / / / CUP /
OP-1 Ocean Park Single Family / /
OP-D Ocean Park Duplex / /
OP-2 Ocean Park Low Multi-Residential / / / CUP /
OP-3 Occan Park Medium Multi-Residential / / / CUP /
OP-4 Ocean Park High Multi-Residential / / / CUP /
/- Permitted CUP - Conditional - Not permitted
Potential Constraints on City of Santa Monica
Housing Production and Conservation III-14 Housing Element
2. Residential Development Standards
Thc City's residential development standards contain provisions that might affect housing
affordability, including minimum lot size, building standards, open space and parking
requirements (Table III-6). The following discussion examines these development standards
and local regulations as well as actions taken to reduce their potential impact. Appendix C
of this Element summarizes residential development standards adopted by several nearby
cities (Culver City, West Hollywood, Redondo Beach, Manl~attan Beach, and Los Angeles).
TABL~ III-6
RESIDENTIAL DEVELOPMENT STANDARUS IN SANTA MONICA'S
PRIMARY RESIDENTIAL ZONES
De~elopment
Standard Rl R2 R3 R4
LotStandards
Min. Lot Size 5,000 sf. 5,000 sf 5,000 sf 5,000 sf
Lot Dimensions 50'x100' S0'x100' S0'x100' S0'x100'
Min. Lot Area/du 5,000 sf 1,500 sf 1,250 sf 900 sf
Building Standards
Maximum Density 8.7 du/ac 29 du/ac 35 du/ac 4S du/ac
h4ax Height* 2 stories
28' height 2 stories
flat roof - 23'
pitched - 30' 3 stories
flat roof - 35'
pitched - 40' 4 stories
flat roof - 40'
pitched - 45'
Lot Coverage 40-60% based
on Iot size 50% oY' area 50% of area 50% of area
Open Space
See District map. Where none shown, the following minimums apply
Min. Yard Size 20' front
25' rear 20' front
15' rear 20' front
15' rear 2~' front
L 5' rear
Open Space NS 100 sf/du for projects with 4 or S units;
50 sf/du if projects are larger than 6 units
Parking
Single Family 2 spaces in a garage
Multi-family 1 space for studio; 1.5 spaces for 1-bed; 2 spaces for 2-bd+
Condominiums 1 covered space for studio; 2 covered space for 1 or 2 bed unit
Visitor I space for cach five units
Source: City of Santa Monica, City Planning Division, 2001.
* Established per lnterim Ordinance No. 1977 (CCS)
Citv of Santa Monica Potential Constraints on
Housing Element III-15 Housing Production and Conservation
Lot Coverage and Story Limitations: Santa Monica's Zoning Ordinance restncts lot
coverage to 50% in all zones, except for 40% to 60°/o in the R1 district. The zoning
ordinance also limits the height of R2 housing to 2 stories (30 feet), R3 to 3 stories (40 feet),
and R4 ta 4 stories (45 feet) for pitched roofs. In part to mitigate the effect of these lot
coverage requirements upon affordable housing, the Zoning Administrator may grant an
increase in lot coverage by up to 10% of the lot area for projects conforming to state density
bonus guidelines or allow a height bonus of 10 feet for 100% affordable housing projects.
Santa Monica's residential height limits for lower-density single-family and multi-family
residential zones are generally comparable to surrounding communities. In medium and
h;.,l, .1A„~;r.r .- ~;~lA„r;~i ~ C~„+~ TR~.,;,.~~~ hP;..l,+ 1;..,;+~ ~ ,,,;l~r t~ th~,~A ;,, tiaTA~t
...b.. u..,, i~y ...~.u....~.u. <.v.. ~~ u.,~u ..,v,..v..o .....b,,.. ..,.,.~~ ...... ~....,,... ~., .....,~.. ~.. ,...~~
Hollywood, and significantly higher than in Culver City, Redondo Beach, and Manhattan
l~eacn (see Appendix (:j. As can be expecteci for a nigniy urbanizeci area, tne i:ity ot i,os
Angeles has significantly greater height limits than any of the surveyed cities. The City's
height limitations are not considered a constraint to housing production.
Parking Requirements: Pursuant to the Zoning Ordinance, two parking spaces in a garage
_,.a r_,. „ ~i.. c.....:i....,.,.:a,......,. ~,._.......i.: r.....:i., _,.......i w....,.:~,. ~,....... ne,.~:..,.+,.
aicicC{iiii~uiv~aaiii~ic-iaiiiiiyic~iucii~c. iviiuuiu-iaiiuiyicu~aiu~uauis~.~au~aiviviu~a~
Zoning OFdinance requires parking to be calculated on a per bedroom basis. The parking
requirements are: 1.U space per studio%efticiency unit; 1.5 spaces per one-bedroom unit; and
2.0 spaces per unit with two ar more bedrooms. In comparison to rental housing, the parking
requirements for condominiums are slightly higher at 1.0 covered space per studio or
ef~iciency unit and 2.0 covered spaces per unit with one or more bedrooms.
The City af Santa Monica has the second lowest parking requirement for multi-family rental
housing among the six communities researched (Appendix C). For condominium units,
Santa Monica's parking requirements are higher than those adopted by the cities of West
Hollywood and Los Angeles, but are lower than those adopted by the cities of Culver City,
Redondo Beach, and Manhattan Beach. In contrast, Santa Monica's guest parking
rerniirr~.mant are the lnwect amnna the six rnmmnnitiec PVAII1AYPf~ Finallv narkina
---~------°--- --- `--' -...._.,. »..~..•-a ..._ ,,..- -~------~----_-'., _.__,..___". _~----vo r--°•_-a
requirements for single-family residences are fairly comparable across the six communities.
Yard Setbacks: Use of setback requirements is one mechanism to provide for landscaping
and open space for residential development. However, large setback requirements diminish
the area of thc lot available for development. Santa Monica has the highest setback
requirements for all residential zones, ranging from five to ten feet, or 30% to 70% higher
than tha ci~rrnnnrlinn rnmmnnitiac T-Tnwavar tha 7nninn Allminictratnr hac tha rlicrrafinn
....... ...., ..,.......,.b .,.,......~..........,. ...,..... .... .~.,.....b .............~.....,. ...t., ...... ...~.,...~.....
to grant a variance in front, side, and rear yard setbacks for projects conforming to thc State
densiiy oomus guideiines. iviore speciiicaiiy, encroacnmeni oi up to i 5 io of one side yard
setback, and up to 15°/o of either the front or rear yard setback is permitted.
Potential Constraints on City of Santa Monica
Housing Praduction and Conse~vation III-16 Housing Element
Development Standards in Commercial Zones
As discussed earlier, residential uses are permitted in most Santa Monica commercial zones.
Single-family homes, multi-family developments, congregate housing, transitional housing,
single-room occupancy housing and senior housing may be developed in commercial zones,
including the BCD, BSC, CM, CP, C2, C3, C3C, C4, C5, as well as the C6 districts.
Depending on housing type and location, residential units can be located on the ground floor.
By allowing residential development in commercial zones, the City has provided extensive
opportunities to address its share of the regional housing needs.
The City's standards for residential uses in commercial zones are not restrictive. The
maximum building height varies from 30 feet (two stories) in the C2 zone to 45 feet (three
stories) in the CS and C6 zones. There are no minimum rear and side yard setback
requirements, except where the rear parcel line or interior side parcel line abuts a residcntial
district. The minimum lot size is 7,500 square feet for all of the commercial zones, except
for the CS district. The minimum open space requirement is 100 square feet per unit for
projects with four or five units, and 50 square feet per unit for projects with six or more
units. Affordable projects may substitute common open space for required private open
space.
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
may receive a FAR (Floor Area Ratio) discount of 50%. In BCD, C2, C4, and C6
districts, the City offers increased density if at least 30 % of the FAR is residential.
• In the BSC, C3-C, C6, and C3 district, the City eliminates the restriction on the
number of stories that can be built if the structure contains at least one floor of
residential use. The City also offers increased maximum height to projects with
a designated number of floors of residential use.
• In the CM district, there is no limit to the number of stories if at least 50% is
residential. In the CP district, there is no limit to the number of stories if the
project is affordable housing.
• The City's Affordable Housing Production Program in-lieu fees are discounted for
residential development in commercial areas.
• In BSC, C3, C3C and CM districts, the floor area devoted to residential use is
discounted 50% when detcrn~ining the threshold far a Development Review
Permit.
As detailed in Chapter 4, the City has becn cxtraordinarily successful in promoting
residential development in commercial zones. Since 1997, the City has facilitated the
production of about 800 units in commercial districts, with 500 more units in the pipeline.
City of Santa Monica Potential Constraints on
Housing Element III-17 Housing Production and Conservation
Additional Zaning Incentives for Affot^dable and Special Needs Housing
Any impact that the City's land use controls might have on housing development is
ameliorated far affordable housing by various zoning incentives. The City's Zoning
Ordinance facilitates the development of affordable and special needs housing, including
senior and senior group housing, transitional housing, SROs, congregate housing, emergency
shelters, and housing for low and moderate income households with the following
incentives:
• Planning Fee Waiver: To encourage the production of affordable housing, all
planning and zoning review fees are waived for residential development projects
that are 100% deed-restricted for affordablc housing.
• Special Needs Housing by Right in Residential Zones: Senior and senior group
housing, transitional housing, SRO housing, congregate housing, and domestic
violence shelters are permitted by right in all multi-family residential districts.
• Special Needs Housing by Right in Commercial Zones: Shelters of less than 55
beds, domestic violence shelters, congregate housing, transitional housing, single
room occupancy housing and senior housing, are permitted by right in the BCD,
BSC, C2, C3, C3C, C4, C6, CM, and CP zones.
• Exemption from Story Limit: 100% affordable housing projects are exempt from
the applicable limits on the number of stories. However, such projects are still
subject to applicable height limits in each zone.
• Height Bonus: 100% affordable housing projects in non-residential zones are
eligible for height bonus of ten (10) feet subject to consistency with the Land Use
Element.
• Augmented Density Bonus: In addition to the State-mandated density bonus, the
City provides for an additional density bonus equal to the State density bonus for
100% affordable housing projects. Thus, if a project were eligible for a two-unit
bonus, an additional two units would be possible through this provision.
• Reduced ParkingRequirements: The Zoning Ordinance contains reduced parking
for affordable housing, seniar housing, shelters, congregate care housing, and
transitional housing. Typically, the reduction allowed is 0.5 space per unit.
• FZoorArea Bonus: 100°/o affordable housing projects in non-residential zones are
eligible far a 50% floor area bonus (50% of FAR devoted to the units).
Potential Constraints ou City of Santa Monica
Housing Production and Conservation III-18 Housing Element
3. Codes and Enforcement
A variety of building and safety codes, while adopted for the purposes of preserving public
health and safety, and ensuring the construction of safe and decent housing, have the
potential to increase the cost of housing construction or maintenance. These include
building codes, accessibility requirements, seismic safety codes, waste management, energy
efficiency standards, and other related ordinances. The following describes and analyzes the
impact o£these standards upon the development, maintenance, and improvement ofhousing.
Uniform Building Code. Santa Monica has adopted the 1998 edition of the Uniform
Building Code (UBC) which establishes standards and requires inspections at various
stages of construction. The UBC prescribes minimum requirements for insulation to
achieve an interior noise level of 45 dBA, as well as energy efficiency devices. The
UBC also requires additional measures to mitigate the impact of seismic issues, flooding
potential, and other location-specific environmental issues. Although these standards
and the time required for inspections increase the costs associated with developing new
housing and rehabilitating older properties that are required to be brought up to current
code standards, the codes are designed to provide sttucturally sound and safe housing.
American with Disabilities Act (ADA). The City's building code requires new
residential construction to comply with the American with Disabilities Aet (ADA).
ADA provisions include requirements for a minimum percentage of units in new
housing to be fully accessible to the disabled. Enforcement of ADA requirements is not
at the discretion of the City, but is mandated under federal law. ADA compliance does
increase the cost of housing production and could affect the financially viability of
rehabilitating olderproperties that are required to be upgraded to current code standards.
Despite any additional costs, however, ADA regulations provide minimum standards
that must Ue complied with to ensure accessibility of housing to disabled persons.
Seismic Safety. In response to the 1994 Northridge earthquake, the City adopted
policies requiring the retrofit of"potentially hazardous" structures, such as unreinforced
masonry structures, soft-story construction, tilt-up pre-cast concrete buildings, steel-
frame buildings, and non-ductile/reinforced pre-cast concrete frame buildings. An
estimated 14,000 multi-family units were identified as soft-story construction,
representing 85°/o of the potentially hazardous structures in the City. Soft-story units
were required to be retrofitted to current earthquake building code design standards no
later than 1998. To help offset thc retrofit costs, the Rent Control Board allows for a
50% pass through of retrofit costs to the project tenants through rent increases.
City of Santa Monica Potential Constraints on
Housing Element III-19 Housing Production and Conservation
As part of the 1998-2003 Housing Element, retrofit costs on soft-story buildings in
Santa Monica were calculated at an average 56,800 per structure, with a cost range of
$5,000 -$12,000. According to Rent Control staff, engineering costs can be amortized
over a five year period, while other retrofitting costs can be amortized over turenty
years. Based on these amortization schedules, the average 7-unit building with
retrofitting costs of $6,800 would be entitled to rent increases of $3 per unit per month.
Overall, the City's retrofit requirements for seismic safety are not a constraint to housing
preservation as the allowable rent pass-throughs can be used to significantly off-set
retrofit costs. Seismic upgrading will aiso help to preserve and maintain the City's
housing stock.
CodeEnforcement. The City's Code Enforcement Division is responsible for enforcing
local safety ordinances, including abandoned vehicles, unkempt property, accumulations
of trash, debris, and litter. Code compliance officers inspect properties, buildings and
structures for general compliance with City Zoning, building, electrical, mechanical,
plumbing, security, and housing codes and regulations. Potential code violations are
identified on a complaint basis. Once a potential violation is reported, code compliance
officers perform a property inspection to identify any actual code deficiencies or
violations. If necessary, code citations are issued to the property owner requiring the
necessary improvcments or corrections. The owner is informed of the rehabilitation
assistance offered through the Housing Division to correct code deficiencies.
4. On-Site and Off-Site Improvements
While Santa Monica is fully developed with its primary infrastructure systems in place,
upgrading of such systems is sometimes necessary to accommodate new development. As
part of the building permit process, the City can require the provision of on-site and off-site
improvements necessitated by the development, such as improvements to alleys, curbs and
gutters, streets, sidewalks and street lights, and utility undergrounding. According to the
Environmental and Public Works Management Department, the average cost of off-site
improvements are generally estimated at 5% of the building permit valuation. These costs
do not operate as a constraint.
Potential Constraints on
Housing Production and Conservation
III-20
City of Santa Monica
Housing Elernent
5. Resource Conservation Opportunities
Under State Law, the Housing Element must include an analysis of opportunities for energy
conservation with respect to residential development. This section describes the various
resource conservation programs and assistance available to Santa Monica residents. The
City's 1996 Master Environmental Assessment provides greater details on specific needs.
Local and regional utilities provide electricity, gas, and water service to Santa Monica
residents. To encourage resource conservation, each agency also offers various financial
incentives summarized below. As discussed later, the City of Santa Monica also implements
its own resource conservation programs to supplement these efforts.
Edison Conservation Programs. Southern California Edison (SCE) has developed
several energy conservation programs for residential customers. These include a toll-
free energy conservation line, air conditioning off-peak cycling program, residential
cnergy surveys, and cash rebates for the installation of energy efficient appliances such
as evaporative coolers, air conditioners, heat pumps, and heat pump water heaters. SCE
also has a"Welcome Home" incentive program, which targets and encourages residential
developers to build homes, condominiums, and apartment buildings that surpass the
minimum slale standards for energy efficiency established in Title 24.
Southern California Gas Programs. Southern California Gas (SoCal) sponsors energy
conservation programs as well. SoCal sponsors a Rebate Program and a Low Income
Direct Assistance Program. Under the Rebate Program, the company provides rebates
to customers for caulking, weather stripping, attic insulation, forced air furnaces, water
heater blankets, and duct wraps. Customers must install devices that meet minimum
standards in order to qualify for the rebate. Under the Low income Direct Assistance
Program, SoCal provides direct assistance to low-income customers for the same types
of energy conservation devices that are promoted under the Rebate Program. SoCal
also sponsors the Appliance Repair and Replacement Program to assist low-income
customers in replacing malfunctioning or inefficient furnaces, stoves, or water heaters.
Municipal Water District. The majority of the City's water for domestic needs is
supplied through the Metropolitan Water District of Southern California (MWD).
Water imported from the State Water Project and Colorado River has increased in the
last decade to approximately 80% of the City's supply. To help residents conserve
~~ater, MWD, in partnership with member agencies, offers financial incentives for
replacing home fixtures with more water efficient devices and offers home education
programs on water-efficient landscaping. MWD has also developed programs for local
government agencies. For instance, MWD publishes guidelines for water-efficicnt
landscaping and trees that are typically situated or planted along public roadways.
City of Santa Monica Potential Constraints on
Housing Element III-21 Housing Production aud Conservation
Local Conservation Efforts. Santa Monica has adopted the following recent
ordinances specifically directed at promoting local conservation efforts.
A. Energy Standards. Pursuant to Ordinance No. 1995 (CCS), the City adopted energy
performance standards that require new construction and substantial remodels of multi-
family residential projects to reduce theirnon-renewable energy consumptionby at least
20% below Title 24 standards. The developer has complete flexibility in meeting this
standard as long as they use the energy performance calculations prescribed by the City.
However, projects under 3 stories can opt to meet prescriptive practices set forth in the
Ordinance. To facilitate energy conservation, the City has developed a Guidebook of
~+ eff ..+;. nlloll n4:r 4n e4 r~a aln rnaatinn thveP
wa~ a.~~w~,.., ~~,..v~~..~.......w f.:"2.,~,.,~~ w~..,~.~. ...,...,~.Y~,S ... ...........b ......,.,
requirements.
To develop cost-effective energy performance targets, Sheltair Scientific was retained
to prepare computer simulations of six prototypical Santa Monica buildings complying
with Title 24 standards and then incornorated the cost-effective recommended practices.
Cost-effective was defined as having a simple payback of less than 5 years and no more
+1~...., 2oi ..r.-. ,.~:,. ..~~ '7'l,e „te .,1~r;., .,.~~1 f ,,.i +I,~t
t110.11 0. J/V 111V11~0.J1i 111 ~.V1lJl1U~.t1V11 VVJW. 111V liVl 1~U~l.i Jililuiu~ivi~ i~~vu~~ ivw~u ~iiu~
available and off-the-shelftechnologies could provide significant energy savings within
the defined cost-e2Tectiveness criteria. C1G Energetics, inc., an engineering tirm
specializing in energy efficiency and sustainability in buildings, reviewed Sheltair's
calculations to ensure that the performance targets were achievable and realistic.
B. Recycled Content. Ordinance No. 1995 (CCS) also contained several other
provisions to encourage and facilitate green building design and construction standards.
All new buildings subject to the Ordinance must be built with a minimum of four major
construction materials that have a post-consumer recycled content that meets the EPA
recycled content guidelines. Major construction materials are those which serve a
structural, partitioning or finishing function throughout the building or cover more than
nne-half nfthe flnnr_ rnnf nr wall cnrfacec_ Thic remiirement chrniltl he easilv met uiven
---- ----------------~------ ._---°------~ ------- --------°--------
the broad availability of recycled materials that meet EPA standards. Finally, the
~_~_.___________'r'___~~.`_____~____._~_`_._. r__~____ __i______`___t__`'___o_______'___-_____
VCLi1I1dI1GC5YGG111C5d(1U1L1VIl'd1IIld[1C1tl.LVCy 1Gtl.LUiCS-SOlA.iWdLGi11Ga.LlI1~'1U15W17Illlllil~'
pools, pipe insulation techniques and standards, and provision of heat traps.
C. Waste Reduction and Recycling. Pursuant to the California lntegrated Waste
Management Act of 1989 (AB939), local jurisdictions are required to divert 50% of
rlicrarr~er~ materialc (hace vPar 199(11 frnm lanr~fillc hv 1lacPmhar'~1 ~nnn Faihire tn
~..,.._-~-~------___-__., ~.._.._ ~--- -,,.,~ _....-- -_...._---~ ~~ --------~-- ~_, _....... ------- --
comply with this State mandate may subject the City to fines up to $10,000 a day. In
,,.,,,, .,-- ^'~ -~--~-~ '-- ~- -- n-~--'-- --~ ^---~--- r~-----.,~,,.,,-. -~---~-
iy7~, ine ~.i~y au~p~eu i~s ~~urce iceuu~iiun anu icecy~iing niciiiciu ~~~tc~~, wiuc;ci
proposed (among others), a Construction and Demolition (C&D) Material education
program and, if necessary, a reuse and/or recycling program in order to meet the state
mandated waste reduction goal. In recent years, these actions have been successful in
helping the City to divert approximately 43% of its generated solid waste from landfills.
PoCentia] Constraints on City of Santa Monica
Housing Production and Conservation III-22 Housing Element
In an effort to meet AS939 mandates, the City Council adopted Ordinance No. 1996
(CCS) to require the diversion of construction and demolition materials, since 20°/o of
the City's solid waste is from C& D activities. This Ordinance requires all C& D
projects which are greater than $50,000 in value or 1,000 square feet, to divert 60% of
project-related construction and demolition material. Prior to receiving a building
permit, the applicant must submit a Waste Management Plan and performance security
of the lesser of 3°/o of total Project cost or $30,000. After projection completion, the
Applicant will be refunded the full performance security or an amount equal to the
portion of the C& D material that is actually diverted. Any forfeited performance
securiry will be used for City waste reduction programs.
Although this ordinance increases the time required to develop a project, it is consistent
with the City's goals to improve environmental quality ofthe community. Furthermore,
the ordinance is not a constraint to the production of housing. Housing projects in Santa
Monica typically are multi-miilion dollar projects and the fees required by this program
are refundable and constitute a relatively small percentage of the total project value.
Thercfore, this program is not considered to be a constraint upon housing production.
D. Urban RunoffReduction. As a coastal community, Santa Monica is subject to urban
runoff from storm and surface water from the entire Los Angeles region. In southern
California, the single largest contributor to ocean pollution -- urban runoff-- is a threat
to public health and water quality that results in numerous beach closures. As a co-
permittee under the Los Angeles County National Pollutant Discharge Elimination
System (NPDES) Municipa] Permit, the City is obligated to implement a Standard
Urban Water Mitigation Plan and Best Management Practice procedures to control the
entry of pollutants into the City's storm drain system and reduce urban runof£ As a
result, the City Council adopted an urban runoff mitigation ordinance which applies to
any construction, demolition, rehabilitation, or improvement project which exceeds 50%
of its replacement value or adds over 5,000 square feet of impervious surface.
In developing an Urban Runoff Mitigation Plan, tl~e performance standard to be
mitigated is a storm event, equal to 3/4" of rainfall within a consecutive 24-hour period.
This can be achieved by the incorporation of common design elements that address the
following: (1) the maximization of permeable arcas to allow more percolation of runoff
into the ground; (2) the maximization of runoff to permeable areas, or (3) the removal
of pollutants through installation of treatment control best management practices. The
City's web site provides guidance on effective mitigation strategies for urban runoff.
Because the cost of mitigation is minimal ($0.90 to $ L5~ per square foot), the additional
cost would not be expected to render an otherwisc fcasible development infeasible.
City of Santa I~lonica Potential Constraints on
Housing Element III-23 Housing Production and Conservation
6. Fees and Taxes
Development fees charged by local governments contribute to the cost of housing
production, maintenance, and improvement. Santa Monica charges planning fees to offset
the costs associated with permitprocessing. When a residential development project requires
multiple permit applications, the City places a cap on the combined planning fees to be paid.
Table III-7 summarizes the City's adopted planning fees for residential development.
TABLE Ill-7
CITY OF SANTA MONICA
PLANNING-RELATED FEES
Fee Fee Schedule
Architectural Review 5478-$779 based on square footage
Conditional Use Permit (CUP) $1,970-$3,141 based on square footage
Design Compatibility Permit $1,970-$3,141 based on square footage
Develapment Agreement $10,120
Development Review $4,135
Tentative Map $1,729
Final Map $948
General Plan Amendment $3,845
Reduced Parking Permit $1,224
Plan Check $215 -$802 based on square footage
Yard Modification/Variance $1,183
Note: Planning and zoning revicw fecs waivcd for 100% affordablc housing projects. Park and
Recreation fees as well as condominium taxes are waived for inclusionary units and low/mod units built
using affordablc housing fees.
Source: City of Santa Monica, City Pla~ning Division, July 2001.
The City conducts a periodic assessment of its fees to ensure they reflect the actual cost of
providing services. Review of fees charged by six surrounding cities indicates that Santa
Monica's CUP application fee is higher compared to the fees charged by Culver City,
Manhattan Beach, Redondo Beach, and West Hollywood, but comparable to the City of Los
Angeles (Appendix C). Santa Monica's fees for site plan/development review and plan
checking are also the highest aniong surrounding cities. In terms of building permit fees,
however, Santa Monica fares the lowest per $100,000 of building valuation for multi-family
projects of surrounding communities and, in fact, are among the lowest of the 87 cities in
Los Angeles County. Overall, the City's fees are generally consistent with other cities.
Potentiai Constraints on City of Santa Monica
Housing Production and Consen-ation III-24 Housing Element
In addition to planning and development fees, the City of Santa Monica and other local
governmental entities charge various development impact fees and collect t~es upon certain
types of new residential de~elopment. The fees and taxes are designed to offset the impacts
of new development on infrastructure and various service delivery systems, which is
consistent with prevailing practice throughout the greater Los Angeles metropolitan area.
Table III-8 below summarizes the City's development impact fees.
TABLE III-8
CITY OF SANTA MONICA
DEVELOPMENT IMPACT FEES
I Fee I Single-Family Unit ~ Multi-Family Unit I
L,_„1 r`.._
~Cii~ui rcc Pt
ai.~.i ~cI 3y. i~. N~
.ni.~.i Y87 "sc{. i~.
Park and Recreation Fee* $200 per unit $200 per unit
Condominium Tax $1,0~0 per unit $1,~00 per unit
Sewcr Connection
I(Wastewater Capital Faciliry Fee) I $1,982/unit $991/unit (1-bed)
$1,487/unit (2-bed)
~I,y2SLlunit (3-bEd)
Fire Connection $6,075 for 3" Main $6,075 for 3" Main
Water Meter Connection
(Water Capital Facility Fee) $1,755 (3/4" Meter) $1,755 (3/4" Meter)
* Park/Recreation fees are waived for inclusionary uni[s and low/mod units built with in-lieu fees.
Source: City of Santa Monica, Planning Division, July 2000.
According to the financial feasibility analysis conducted as part of the 1998-2003 Housing
Element Update, the sum of City fees and charges (planning fees, construction fees, and
taxes) accounted for a significant portion of total multi-family project development costs,
both in direct cost terms and in terms of the financing costs. In the eight projects tested, fees
and charaes accnunt f~r $13 t~ ~lfi ner sauare f~nt_ or from ~,15_500 t~ .9',20_4(10 ner unit
However, the analysis concluded that removing these fees and charges entirely would not
~,1.,.. .... f,.,,:L1„ „ f.C~L„ ._ „ aL.,~ _..~._„ C.~......] ~f. L.. :...1,..,,,:Ll., ,]_.., a ._.1._~
ic"iwci a~ ica~iuic aiiy ui uic ~!i~~viyYc~ uiai wcic i~uiiu w uc uuca~iuic uuc iu Yic"vauui~
market conditions. In more recent analysis of four prototypical condominium projects, total
public fces accounted for $7 to $11 per square foot, or from $10,500 to $13,900 per unit. Thc
reduction in fees from the previous analysis resulted from a change in the way the City
charges for off-site improvements. For three of the four prototypes that were determined to
hP infPacihlP i~nr~Pr thPn-~iirrent markPt cnnriitinns, Pliminatinn nf the fePa wniilrl nnt havP
changed the feasibility outcome. As previously discussed, the high land cost in Santa Monica
:_ ~l__ .,"'~',l'_~ __~_._..._<<_ L.___...~~ .7._.._7._~.v._~~ T__ C..vaL__._~.,i.._:,. ~.faL_ !'l'i_.~_ C___
1S L11G VVGL11U111~ GU11J11"dllll W 11VUSllI~ LLGVG1UY111Gl11. PUl iui~iici aiiaiysis ~i uic ~.i~y s icc~
and charges, refer to Technical Appendix #1 and Technical Appendix #2.
City of 5anta A~onica Potential Constraints on
Housing Element Ill-25 Housing Yroduction and Conservation
7. Article 34 Authority
Article 34 of the State Constitution requires that any low rent housing project developed,
constructed, or acquired by a public agency must first be approved by a majority of the
voters living in that jurisdiction. Requiring such public approval can act as a barrier to the
development of affordable housing. In compliance with this article, the Santa Monica voters
approved a referendum (Proposition N) in 1978 authorizing the City to "develop, finance,
or rehabilitate, but not own ar operate within the City, housing for rental to low and
moderate income persons, no less than 50% of which shall be reserved for persons age 60
or older, not to exceed in total throughout the City, 1% of the dwelling units in the City."
In November 3, 1998, Santa Monica's voters approved Proposition I- providing the City
with an annual authorization to develop, construct, acquire and finance low income housing
units, including senior housing. The City's annual authorization is equal to %2 of 1% of the
totai dwelling units existing in the City at the end of the prior fiscal year. This measure
differed from Proposition N in 1978 in that units are not required to be reserved for seniors.
Moreover, the City may "carry-over" any unused (unit) authority for the following three
years. The City's typical method of participation in such projects involves the provision of
loans to nonprofit affordable developers using housing trust funds.
Since adoption of Proposition I, the City has maintained the required annual records. As of
June 30, 2000, the total number of housing units in the City was 48,734 - translating into a
current authorization of 2441ow rent housing units. Added to that autharity is 218 carry-
over units (FY 1999/00 authorization of 373 units minus 155 units of FY 1999/00 authority
used), for a total 462 units that the City may develop, construct, or acquire during FY
2000/Ol. Table III-9 summarizes the calculations used to derive the City's annual
authorization.
TABLE III-9
PROPOSITION I AUTHORITY
Housin Proposition I Authority
g
Units
Unused
Fiscal Year Units at Present Plus Carry
Year End fiscal Over from Total Built Authority
year prior year
Baseline 48,573 243 -- -- -- --
FY 9R/99 48,573 243 n.a. 243 114 129
FY 99/00 48,734 244 129 373 l55 218
FY 00f01 48,894 244 2l8 462 462
Source: City Resource Management Department, 2001. .
Potential Constraints on City of Santa Monica
Housing Production and Conscrvation III-26 Housing Element
C. ADDITIONAL CONSTRAINT ANALYSES
As part of the 2000-2005 Housing Element Update, additional analyses were conducted to
analyze 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 in their entirety as
Technical Appendix #2. The three subsets are as follows:
1. City Council actions to modify development and construction regulations. These include
the development moratorium in the City's multi-family districts, changes in multi-family
district development standards, and a construction rate program;
2. Specific discretionary review procedures, including Rent Control law removal permits,
the Landmark Ordinance, pr~ject scale thresholds for Development Review Permits, Design
Compatibility Permits for condominiums, and other discretionary review procedures; and
3. 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.
In summary, the assessment of the City initiatives is as follows:
Development Moratorium iti the City's Multi-Family Districts. A moratorium on
development in the City's multi-family districts was in effect between May 1999 and
May 2000 pursuant to Ordinance No. 1944 (CCS), Ordinance Na 1947 (CCS) and
Ordinance No. 1968 (CCS). The City Council enacted these three ordinances in
response to significant changes in local economic circumstances and changes in State
law affecting the City's supply of modestly priced housing. It provided City decision
makers with an opporiunity to consider these changes and appropriate policy and
regulatory responses, under a procedure specifically permitted by State law.
The one-year delay in processing permits probably had both detrimental and positive
financial impacts on projects planned for multi-family zones. For example, during the
year additional land holding costsb may have been incurred, and the cost of construction
and professional fees probably increased. On the other hand, the median sale price for
new]y constructed condominiums increased by about 22 percent during the year
immediately before and immediately after the moratorium, while construction costs
increased only about seven percent. This suggests that increases in moratorium-related
costs were probably offset by higher sale priccs and rents. There is no basis for
estimating how many units of housing will now not be developed in the City by 2005,
~"Holding cosY' refers to periodic payments developers often make to land owners to securc the continuing
right to purchase a development site at a later date. In other cases, it refers to monYhly interest charges on
loans taken out to purchase land prior to the commencement of the planning approval process.
City of Santa Monica Yotential Constraints on
Housing Element II1-27 Housing Production and Conservation
due only to the one-year delay in accepting new applications for permit approvals in
multi-family zones. Based on the volume of applications for projects in multi-family
zones accepted after May 2000, the continuing strength of the local real estate market,
the range of projects exempted from the moratorium (e.g., single-family homes, vacant
sites, 100% affordable projects and a substantial amount of residential development in
other City zones), it is reasonable to conclude that, while it may have been a potential
constraint for the year it was in effect, the issue is now moot. Further, the net impact
of the one-year moratorium on future housing supply was negligible, notwithstanding
additional costs that may havc becn incurred by some projects.
~~.,.,,,,,,~ :.~ n.~..~~:_~,,.,,:r., n...~v;,.f n~.,,,1,,.,,~..,,.,r c*...,a....a~ ~rl,P ..i,~,,,,A~ ; „1r;_
.,r.w.~soo ...~ ~...,...e~-~ w~.~o y ..~o..e~~ Lo~~.. ~....~.~.. .,........~...,.~. ..,.. ....~..b.,~ ,,, ...~...~.-
family development standards enacted at the expiration of the 1999-20~0 moratorium
inciuclecl changes in buiiding neignts, maximum buiidabie enveiope anci a reduction in
density for large projects (Ordinance No. 1977 (CCS)). The building height changes do
not affect projects that provide pitched roofs. The building envelope changes have the
effect of sliehtlv reducinQ the maximum buildable floor area of nroiects. due to the
- ~ _ , _ -_ ~ ___ _ , _~ _, _
requirements for more articulated building facades (e.g., changes in vertical surface
...1..«..\ Tl.,...,. «,..7..,.L:..«,. :... Fl,...« ,. «,] 1-.......... 41-.,. .. ~.4 ,.F {~1,...« ,..-,... 41....t ,. .. L.,.
~11Q11G~. 1l1GJG 1GLLLLl.LIV11J 111 L1UV1 61GL1~ QIILL 11GL11~G L11G 0.111V1.Llll Vl L1VV1 0.1GG L11CLL l~Qll VG
rented or sold, could have a minor impact on the financial feasibility of the project. But
this depends entirely on ~vhether oTtsetting design Yeatures are used ~e.g., balconies, loYts
and rooftop areas), and the elasticity of the market (e.g., the ability for a unit to be
rented or sold at thc same pricc, pre- and post-change in regulation). Projects subject
to the new regulations may incur slightly higher costs for architectural design and for
building construction necessary to accommodate less rectilinear design features.
The changes in density for large projects (i.e., three or more lots) could have more
significant effects, because they reduce the maximum number of units. In general,
fewer units means less rcnt or salc procecds, but if the scale of the project is smaller
than it would have been, this change also saves parking and construction costs. To the
extent that a nrniect that ic ~levelnnerl cuhcenuent tn the r,hanve feah~re laroer averaae
'___'___ '__~' ~ r__~"' "'_' __ __ . _'_r'~ ___"z_'___ __ ___' '_____a_ _'____' __'a'_ _. __~o'
unit sizes than a pre-change project, the. result could even be financially beneficial (i.e.,
i,,,.,.._„_7__~~__~""__,7 L_.i~_,__1.aa1._..L.,~~_._fl_.,____..,._.._.1.,L1_f____~~___..1_\ TL_
ic~~ Yainiii~, icKuiicu, uu~ iiu vi iiuic ~iinii~c iii iiu~i aica avaiiauic i~i cciu ~i ~aic~. i iic
fact that more new development applications have been filed for projects in the zoning
districts subject to thcse changes, compared with the year prior to the Citywide
moratorium that preceded its adoption, indicates that Ordinance 197~ does not cause
typical projects to become infeasible, and thus is not a constraint.
In any event, these changes are limited to the City's multi-family zones. They do not
-tD--' -~--~- °---=~--~----- ---`---`=-- ---'---'------` -r'----'--- ' -~~ _r~~-- -`'--~-
AllGGI S1S1~1C-1dtlllly f1UQ1G GUI15tIUGLIVII~ IIUC QCVCIUPII1CIIt Ul IlUL1SIi1~ lil'dll OL L[1C UIRCi
City zones where residential development is permitted. Thus, whatever effect these
changes in regulation may have on the production of new units is limited to those zones.
Most new multi-family development is planned for the City's commercial and other
non-traditional districts. The recent changes in development standards applicable to the
PotenCial Constraints on City of Santa Monica
Housing Production and Consen~ation III-28 Housing Element
multi-family districts are unlikely, therefore, to prevent a substantial amount of new
housing, because the additional costs they imply for typical projects are relatively
minor, and the changes do not affect most new housing production in the City.
Construction Rate Program. Another new program involves limiting simultaneous
construction of new residential projects in some zones to no more than one within 500
feet of another during the same 15-month period (Ordinance No. 1984 (CCS)). This
new program does not affect projects that were under construction at the time of its
adoption, nor any projects in commercial zones. It does not prevent units in multi-
family zones from being constructed, but may delay the timing of completion. Future
projects that are subject to delays because of the ordinance could experience higher
construction costs if costs accelerate during the 15-month delay period. However,
whether this has any effect on project feasibility depends on the condition of the reaL
estate market over this same time period. To the extent that the market continues to
support higher rents and purchase prices over the construction delay period, relative to
construction cost inflation over the same period, there may be no net effect on project
feasibility, and therefore no impact on lhe City's housing production.
Analysis prepared by City staff shows that as of late November 200Q there were only
10 residential projects with building permits, all necessary planning approvals except
building permits and in the process of obtaining planning approvals that would fall
within 500 feet of each other, and therefore subject to construction delay under the new
ordinance if they were all ready to begin construction simultaneously. Not all of these
projects will be ready to start construction at the same time, and therefore something
less than 10 projects would be affected by the new ordinance. According to City staff,
during the first 10 months that the ordinance has been in effect, not a single proj ect has
had to delay its scheduled start of construction due to proximity to another projects
already under construction. Thus, it is reasonable to conclude that the program is not
causing cost impacts that render typical new projects to become infeasible, and further,
that an insignificant number of new units will be affected by the Construction Rate
Program, relati~e to the City's 12~INA target over the 2000-2005 period.
Rent Control Law Removal Permits. The City's procedures for allowing existing
controlled rental units to be removed from jurisdiction of the Rent Control Law were
analyzed in detail for the 1998-2003 Housing Element Update, and that analysis remains
valid for the 2000-2D05 Housing Element Update. The previous analysis showed that
the costs implied by the average time to process a removal permit and to pay for
technical assistance with the process did not add significantly to the cost of a typical
residential project, and that most removal permit applications were approved. Thus, the
removal permit process was found not to significantly impact housing production.
During the past few years, relatively few removal permits have been applied for and,
once again, most have been granted. The number of applications to withdraw rental
units from lhe market through use of the Ellis Act, howcver, dwarfs thc number of
City of Santa Monica Potential Consiraints on
Housing Element fII-29 Housing Production and Conservation
removal permit applications. Though recent changes in State law enhance tenant
protections under the Ellis Act, this will continue to be an available avenue for property
owners to pursue development of new for-sale housing developments on sites with rent-
controlled units. The previous conclusion that the removal permit process does not
significantly impact housing production remains valid.
Recent Changes to the Landmark Ordinance. Projects that propose to demolish an
existing structure that is older than 40 years is subject to a 60-day hold while the site is
referred to the Landmarks Commission for possible designation as a Structure of Merit,
Landmark or Landmark Parcel, or building or structure within an Historic District
~n_a:..,...,,.~ rr,. i m~ inro~~ ~r~.:~ : ,.a..,.+:,.., r,..,, a~o cn . ,. ~t,.-o~t,,,ta tt,.,* .
~viuiiiaii~c i~v. i~ r i ~~,~...~~/. i iii~ iS a Icuu~uvii iiviii uii, ~v-,y~.ai uiiwiia~iu uiai vJa~
previously in effect. The hold may result in additional carrying costs, but for most
projects, this is not a signihcant iinancial impediment, in iiTt&A's experience. Jhould
the existing structure be proposed for one of the historic resource categories, additional
holding costs and professional fees may be incurred as the designation process unfolds.
Tf the site i~ iiltimatelv designated under one of these resource cateeories_ further time
., - -o - --- - - - - _ ~ _ , _ _ _
restrictions apply before the structure can be demolished, unless an economic hardship
...a m~.:.. ,. ....i:..,. ,._i...,..w ........:... ..:.~ ~ _:.,..t.,.. r...~,. ,.,.,.
i5 aj~j~iu"vcu. i iii~ ~iiunii~ii flYyuw viiiy w ~iiwc ~~~ci Wi~ii ciiiiiiiis iiiii~~ ~ua~ ii~ uic a~c
profile and are found to have historic resource merit. A review of City files indicates
that only four demolition applications were accepted for review by the Landmarks
Commission for possible designation since thc ordinance was modified in May 2000.
Two involved single-family homes, one involved a four-unit multi-family replacement
projcct, and the fourth case involves a single lot in a commercial zone. Given the age
of existing structures on these sites, all four projects would have been subject to a hold
under the previous 50-year threshold. The change to a 40-year threshold, and the 60-
day hold on demolition permits for Landmarks Commission review in general, has not
had a substantial impact on the City's rate of housing production.
New Project Scale Threshold for Development Review Permits. Projects in excess of
7 Snn Cl171A1'P fP.P.t ltl ~I(1(1T Al'PA lTl (`.PT'FAlil ilflil-TP..CIlIP.I'1t1A~ AtlCj TT11XPfj-IICP. 7(1T1PC AT'P Tl(1W
. ~_ _ _ ..Z~~" "" '"" "„_' _"` "' """""'"_" "..""'"'~' ~"~ ""'""' ~_' __"'.. ~" "'_...
subject to discretionary review by the Planning Commission, or City Council on appeal.
mt:----n ----t-~-~-~---- i_..i- -rr--` =-- `----- -r--____°_~__~..~_ __ --` -r--~-` --`-
11115 Wlll FJiU[JdUl~' [1dVG 11LLLG G11GGL~ 1[l 1G1I11J Ul ~l[UGGJJlll~' Ull1G Ui UUL-Ul-YUGKGL GUJL~~
for projects that are otherwise subject to adjudicatory (e.g., Conditional Use Permit or
subd~vision map) or Legislative reviews, because the City consolidates all applicable
discretionary reviews. It will, however, introduce a new discretionary review, and
possibly additional review under CEQA, for those residential projects that previously
rPnniraAnnlvar~minietrativaannrnval(eo anartmenthnilrlinoc rnnfnrminamivn~l_nca
~ ...1.,..~ ...~ ...~.~ .~.~~.~.........~.~ . .. ...t. j.... . .~. ~.,. b. ~ .~t..~......,.... .. »...~...b,.~ .,....~..~....."b "' ....... ......
projects with apartments), but no change for projects that otherwise require
~~---'- -- - ~- ~- - ~_ .,_ ~~ ..~_...~_.• .,.,-'- -_„ _~~ •
uiscrcitonary review ~e.g., m inc: w Lis~nci~. ims wui auu prucessing iime ~anti
potentially added holding costs), and possibly additional professional costs for
assistance with the application and public hearing process. Ii also adds a measure of
uncertainty to the permit approval process. Finally, this change may add to the caseload
handled by the Planning and Community Development Department, the Planning
Poteutial Constraints on City of Santa Monica
Housing Production and Consen~ation III-30 Housing Flement
Commission and the City Council, which could have implications for processing permits
on othec projects.
The degrec to which the new ordinance will impact future housing production depends
on what kands of housing developments fall under its scope. There will not be many.
The change does not apply in the multi-family districts, nor the downtown or Bayside
District (i.e., Third Street Promenade) are~as, where most residential development in
commercial zones has been proposed, and therefore changes nothing about the
administrative or discretionary review processes that apply in those zones. The
ordinance exempts projects in which all of the units are deed restricted for occupancy
by low- and moderate-income households, projects that are 80 percent residential and
reserve 15 percent of the units for low-income households and 10 percent of the units
for very low-income households, and projects in the C2 and CM (Main Street) Districts
provided they meet requirements for ground floor pedestrian-oriented uses and include
the maximum percentage of residential use authorized by the Zoning Code. The
ordinance does not change the 50 percent discount used for the residential floor area
provided in a residential or mixed-use project. Thus, a residential project of 14,999
square feet can still be constructed in affected zones without requiring Development
Review, because 7,500 square feet will be deducted for purpose of the DR Permit
threshold. This is consistent with the scale of most of the residential projects that have
been proposed in the applicable zones in the past two years.
Here again, any additional costs implied by the new permit threshold are not substantial,
and the requirement applies to a subset oF future residential projects. Therefore, it is
reasonable to conclude that the change in the threshold for a Development Review
Permit is not a constraint, and it will not significantly impact the City's ability to
produce its RI1NA target.
New Design Compatibility Permit for Condomenium Projects. This new permit
requirement applies only to condominium projects, not to apartment projects and
replaces the former requirement for a CUP with a permit that is more explicitly focused
on siting and project design rather than use. The Design Compatibility Permit will be
processed simultaneously with the project's subdivision map approvals, and therefore
does not add to processing times. Application costs, and related out-of-pocket costs,
will be similar to those for thc previous CUP requirement, which were previously found
noY to be significant in terms of their impact on housing production. This new permit
does not expand the range of discretion exercised by the Planning Commission, or City
Council on appeal, beyond that involved with the CUP that was previously required.
Analysis conducted for the 1998-2003 Housing Element Update on the former CUP
requirement for condominium projects provides a reasonable basis for concluding that
the new Design Compatibility Permit would not add significant costs to future housing
projects, such that it ~~ould significantly impact future housing production.
City of Santa Monica Potential Constraints on
Housi~g Gtement III-31 Housing Yroduction and Conservation
Timeliness ofDiscretionary Decision Making. Concern has been raised that the City
is not complying with the time limits established by State law for taking action on
discretionary development proj ect permit applications, including those subject to review
under CEQA. Permit processing times for Conditional Use Permits previously required
for condominium projects were analyzed for the 1998-2003 Housing Element Update.
That analysis found that on average, the City was meeting the maacimum time targets to
get condominium applications before the Planning Commission. The processing time
frames were generally consistent with other jurisdictions in the competitive housing
market around Santa Monica, based on interviews with planning officials in Hermosa
Beach, Redondo Beach, Long Beach, Culver City, Beverly Hills and Pasadena. From
.t,~ ni,......:~~ n~ ......:....:.....+,. ,.i ..r.t~,, rr io „~a a~.,. ~,,...,.~:..o ~„~.a:..:~:,,., .,, .. +,.
~uc i iaiiuuis ~.~iiuui~~i~u ~ aYYii~vai vi ~uc ~.vi auu wc ~~u~auv~ ~u~uivioivu ui'aY w
the Council's action on the final map, the average was about five and one-half months.
l'he average time Trom Council action on the tinal map to a CertiTicate of Uccupancy
was o~~er one year. This included time to prepare final construction plans, apply for and
receive a building permit and complete construction.
More recently, HR&A analyzed processing times for 30 condominium projects filed
t..~._,,.,.... ~.r......t, i inno .....a ~.,...:t ~n innn mi....:....... t,.....,.,.... ,.......1:,.,..:...., r.l:...,..,..,7
uc~wccii iviai~u i~ i~~o ai~u r~Yiu ~v~ i~~~. iiic ~iiiic vciwccii ny~ii~~a~ivii iiiiiis aiiu
City staff's "deemed complete" determination was available for about half the projects
(S3"/o), and this phase took a median of ly days. Among tive pro~ects with time data,
the period from "deemed complete" to a decision by the Planning Commission was a
median of 34 days, and all but one case was completed in less than 35 days. The period
from Planning Commission to City Council was a median of l46 da}~s, for another five
projects with time data. These trends indicate more time is being taken to deem an
application complete, but once it is, the remaining steps in the process are completed
faster than in thc past.
Recognizing that the increased volume of permit applications, coupled with a number
of recent changcs in regulations, may be having an adverse impact on permit processing
timac the(~'itvhacenoaoeriarnnciiltanttnrevie~z~rnrrentnarmitnrnnPCCinvanrlCF(1A
~_----~> ---- ~-v -__.. _~~a_b_~ _ .,~__.,_~.____ _~~ - - - -- ~ ~ -~------~ r------~ r- ~--~~---a ---_ ~_.•~- -
compliance procedures, and recommend changes. The analysis will be completed in the
________- _.____ _"_J _"__"___________"_`_ _L___1~ L_ ___"J_"_~ __."`1_""_ aL_ ~1A/~ll IfAAG TT_______"_
GUiI11I1~' YGdl AI1LL lII1~lCUVC[L1CI1L~ SIIUUlU UC CV1LLCIIl W1L[11I1 LI1G LVVV-GVV~ RUUJlllb'
Element Update period
Denial ~f Discretionary Review Applications far Projects That Comply With
Regulations. Concern has been expressed that the Planning Commission, or City
C'nnnril nn anr~Pal mav rlrnv a nrnirrt that ic cnhiort tn rlicrrFtinnani YPSl1P\A/ PVPYI
~..»...... .... .~rt..,.~.~ "'.~) .~.,..~ .~ t,...~..... ....... .., .,....,~ ..... ... .......~.........~.) ~.,......~ .,.~...
though it conforms with all of the specific property development and other regulations
coniaineu in inc iviunicipai ~ode, ~n ine grounas thai iis scaie is incompaiioie wii~ ine
mix of existing structures in the immediate neighborhood, or due to judgments about
project aesthetics. This is a speculative concern based on one cited example. Once
again, discretionary application outcomes were analyzed for the 1998-2003 Housing
Elcment Update. Based on a random sample of 32 condominium cases, we found that
Potential Constraints on City of Santa Monica
Fiousing Production and Conservation III-32 llousing Element
conditions of approval were primarily procedural in nature or declarative of existing law.
Where "special conditions" were imposed, they were suggested first by City staff as part
of its recommendation to the Planning Commission. The incidence of Planning
Commission- or City Council-initiated special conditions was rare, based on a
comparison of staff recommendations and Statements of Official Action memorializing
the Commission's or CounciPs decision. Arguably, most of these conditions could have
been imposed as conditions of the tentative tract or parcel map had there not been a CUP
process.
The majority of special conditions included project-specific design issues that the
planning commission wanted the Architectural Review Board (ARB) to consider. When
they occurred, these conditions usually dirccted the ARB to address general concerns
about "unexciting and boring design" and a need for "neighborhood-friendly building
design," and various landscaping, building elevation, building feature (e.g., stair
enclosures and roof-top mechanical equipment) and fenestration issues. Other
categories of special conditions included changes to encroachments into required
setbacks, requirements to confer with project neighbors, and compiiance with otherwise
required regulations. The costs of ineeting these conditions ranges from zero to some
tangible, but relatively insignificant sums. Based on available evidence from past City
practice, special conditions imposed through the discretionary review process are not
likely to impose costs that would threaten the financial viability of most projects, and
therefare do not substantially impact the City's ability to produce its achieve its regional
housing necd.
Recent Changes to theAffordableHousingProduction Program's (AHPP) Fee Option
for Condominium Projects. In March 2000, the City Council adopted a resolution
increasing the optional Affordable Housing Fee for condominiums to $11.01, based on
analysis prepared by HR&A, which included an update of the "nexus" study
demonstrating the reasonable relationship between the need for the fee, the amount of the
fee and the cost to the City to provide affordable housing. The analysis also considered
the financial feasibility implications ofthe new fee on prototypical condominium projects
under then-current real estate market conditions. The analysis showed that a fee in the
amount justified by the nexus analysis would not have an adverse impact on the
feasibility ofprototypical condominium projects that are otherwise feasible. In short, the
fee increase will not substantially impact future housing production nor the City's ability
lo produce its fair share of regional housing need.
^ Adrninistrative Procedures for the Affordable Housing Production Program. The
AHPP requires that developers of market-rate multi-family projects mitigate project
impacts on the demand for affordable housing, but allows each deveioper to select from
among the available mitigation options. Concem has been expressed that, in the course
of completing the City's discretionary review process, multi-family developers will be
"asked" to use the option whereby affordable units are included in the market rate
City oC Sama Mo~ica Potential Constraints on
Housing Elcrncnt III-33 Housing Production and Conservation
development, in violation of the AHPP and other laws. Review of all multi-family
projects processed subsequent to the adoption of the AHPP indicates that all but five
applicants elected to pay the Affardable Housing Fee. The five cases that involve
another, voluntary form of mitigation include on-site and off-site provision of affordable
units. All condominium projects are alrcady subject to a discretionary review processes
and there is no evidence in the record of the proceedings of condominium projects since
the AHPP went into effect that City staff, the Planning Commission, or City Council
urged the applicant to provide on-site or off-site affordable units.
Cumulative Impacts. The City initiatives described above do not all apply to every
multi-family project, but potentially in different combinations, depending upon tenure
type (i.e., apartment versus condominium), location (e.g., in Multi-Family Districts or
non-residential Districts), and whether rent-controlled units or structures that have
potential landmark qualities exist on a site intended for redevelopment. As described
later in this analysis, condominium projects in Multi-Family Districts are potentially
subject to more of these requirements than other scenarios. However, this reflects a
conscious policy by the City to favor building and neighborhood preservation over
market rate housing production in Multi-Family Districts, which, while it may add costs
to such projects, does not prevent them from being developed, and has not substantially
interfered with the City's ability to meet its regional fair share objective. In fact, 16
projects with 268 units have been proposed during the eight months following the
effective date of all of the City initiatives analyzed here, including projects in Multi-
Family Districts. Further, the number of multi-family projects submitted for City
development approvals is not significantly different from the number that were submitted
during the year prior to implementation of the City initiatives. This indicates that
whatever the cumulative effects of the Ciry initiatives may be, they are not prcvcnting
developers from proposing new multi-family housing projects, and thus cannot be
operating cumulatively as actual governmental constraints, under any plausible dcfinition
of that term.
The preceding assessment indicates that some City initiatives, individually and/or
cumulatively, imply additional procedural and/or substantive costs. But there is no evidence
that the scale of these costs is causing otherwise viable, typical new projects to become
financially infeasibla In fact, the evidence from the volume of applications far new housing
filed prior to the enactment of these initiatives, with the volume after they went into effect,
suggests that the initiatives have not adversely impacted project fcasibility to the degree that
well-informed and experienced developcrs are electing not to pursue them.
Analysis presented in Technical Appendix #2 demonstrates that the City has been very
successful in producing new housing units in recent years, primarily in commercial and other
non-traditional zones. It is estimated that 2,553 units have been completed, issued building
permits, received all required planning approvals or are in the approval process. Even
allowing far some permit expirations and project application withdrawals, and before
Potential Constraints on City of Santa Monica
Housing Production and Conservatioi~ III-34 Housing Element
considering up to 923 units of replacement housing that is included in SCAG's fair share
allocation, the City has already exceeded its assigned share of 200~-2005 regional housing
need production (2,208 units) as of fall 2001. As discussed in Chapter IV, there is also
substantial evidence demonstrating that the City will also meet the required "fair share" by
income category.
Thus, to the extent that the City initiatives assessed in Technical Appendix #2 impose
additional procedural or substantive costs on some of the pending or future residential units
located in the City's traditional multi-family zoning districts, these costs do not have a
disproportionate negative impact on typical housing project feasibility. Therefore, they do
not operate as actual governmental constraints within the meaning of State law, and will not
interfere with the City's ability to produce its fair share of regional housing need. In fact,
Santa Monica's multi-family housing productionper 1,000 households since January 1,1998,
as measured by building permits issued, exceeds the production of all other jurisdictions in
Los Angeles County, and the City ranks among the top housing producers of all jurisdictions
in the SCAG region with comparable "fair share" allocations.
City of Santa Monica Potential Constraints on
Housing Elcment Ill-35 Housing Production and Conservation
Exhibit 3
Proiposed Revisions to Chapter IV (Housing Resources)
Chapter 4 Chanees
2. Credits for New Production Since January 1, 1998
The second type of credit toward the adequate sites requirement is housing units that have
been bui It and occupied since the start of the planning period, January 1,1998. Jurisdictions
may count toward their RHNA the numbcr ofunits, by affordability category, that have been
built and occupied since January 1, 1998. In addition, jurisdictions may count units that
havc rcccived building permits, planning approvals, and other discretionary approvals that
will be constructed and occupied during the 1998-2005 planning period.
From Januarv 1998 throu~h August 2001, the Citv issued certificates of occunanev buildine
permits, and planning a~nrovals for 1.946 units; in addition 607 units are pendin~~ rp oval ~
for a total of 2,553 units. Based on historical patterns from 1998-2000 a small erp centage
of units ma l~y exnire, be withdrawn, denied, ar otherwise not comnleted Subtracting
these units as an allowance for projects that ma~proceed to completion results in a
reasonable estimate of 2,430 units of new multi-familv housin~ that will be com len ted
without accountin~ for future projects that will come online after Julv 1 2001 This is
equivalent to over 100% of the Citv's RHNA for the 2000-2005 period (2 208 unit~
Table IV-6 below details the total number of new housin¢ units that have been issued a
certificate of occupancv, building permits, or lU annin~approval since January 1 1998 Also
shown are proiects in the nipeline which are ep ndin~apuroval bv the Planning Department
Taken to~ether, a total of 2,430 new housine units may be credited toward meeting the
adequate sites requirement of the Re~ional Housine Needs Assessment.
TABLE IV-6
HuU~livt~ YKUUUI:l'lUN 11V SAIV"1'A MUNICA S1NCE JAN UARY 1998
Chara
t
ri
ti Number of Units Bv Zone
c
e
s
cs
Commercial
Residential Total Units
Production Category
With Certificates of Occupancy 178 250 428
With Building Permits 790 425 1,215
Wittt Planning Approvals 239 64 303
Pending Planning Approval 471 136 607
Subtotal 1678 875 2~553
Less Allowance for
Expiration/W ithdrawal s1Den ials ~ 43 ~2~
Total ~ 1 598 832 2 430
Source: City of Santa blonica, City Planning Division, 2001.
City of Santa Monica
Housing Element Housing Resources
The City of Santa Monica maintains detailed records on new market-rate and subsidized
housing production. Pursuant to Proposition R, 3~% of all multi-family units produced in
the City each year must be affordable to very low, low, and/or moderate-income households.
As part of the City's efforts to implement this voter-approved policy, developers may
provide affordable units, pay an Affordable Housing Fee, or dedicate land in an amount
equivalent in value to the amount of the fee, pursuant to the Affordable Housing Production
Program.
The City maintains detailed records on the number of units approved, built, and occupied
since January 1, 1998 along with their affordability level. However, recards of the
affordability of projects pending approval are not finalized until the project is approved by
the Planning Department. Therefore, these projects are considered to be fully market rate
units until further approval is granted. The one exception is if a nonprofit organization is
proposing a project for a targeted population.
Table IV-8 details the affordability of the aforementioned projects. Projects are classified
by the affordability category of the RHNA and the residential or commercial district where
the project has been built or is proposed. This distribution or affordability mix of units
provides a sound basis for projecting the future affordability of units to be constructed over
the remainder of the planning period. This methodology is described later in this chapter.
TABLE IV-8
AFFORDABILITY LEVELS OF HOUSING UNITS
BUILT AND PLANNED IN SANTA MONICA SINCE JANUARY 1, 1998
Distribution by District
Project Status Affordability Number of Commercial Residentiai Total
Level Units District District Distribution
All Very Low 29~ 7.7% 18.4% 11.4%
Low 177 5.1% ]0.5% 6.9%
Moderate 222 10.8% 4.6% 8.7%
Market Rate 1.864 76.4% 66.5% 73.0%
Total 2.553 100.0% 100.0% 100.0%
Source: City Planning Division, 2001.
Note: Affordability distribution includes all projects since 7anuary l, 1998 throu¢h AuQUSt, 2001 which were built and
occupied, under construction, as well as with planning approval and pcnding projects.
The difference between 2,553 housing units and the 2,430 units inTable N-6 are due to a normal allowance for projectrs
that do not proceed to fna] completion due to the withdrawal of the permits.
City of Santa Monica
Housing Resources Housing Element
To determine the number of units by affordability mix that could be constructed on
remaining vacant and underutilized sites in Santa Monica, a two step approach was taken.
Each step is summarized below with reference to the pertinent tables.
(1) Determine Historic Affordabi[ity Leve[s: Research was conductcd on all projects
in commercial and multi-family residential zones that have been issued a certificate of
occupancy and/or building permit from January 1, 1998 through Au~ust 2001. Data
from the permit application files coupled with the City's fund database established the
affordability distribution of the units in the City's multi-family and commercial
districts. Table IV-8 summarized the affordability of the units for all 131 projects.
(2) Apply Distribution to Land Reserves. As demonstrated earlier, the major policy
and program initiatives, which led to the affordability mix of units developed from
1998-2000, remain in effect today. Therefore, projects that could be devcloped on
remaining sites should have approximately the same affordability distribution of prior
projects. Therefore, the City's "site capacity" can be demonstrated by applying the
affordability distribution of past projects to the City's land reserves.
Table IV-9 shows that by applying the historical distribution of housing units approved or
built by affordability level to the City's reserve of underutilized commercial land suitable
for residential development, and vacantlunderutilized land suitable for multi-family
development, the City has adequate sites to accommodate its RHNA by affordability level.
TABLE iV-9
DEVELOPMENT CAPACITY ON LAND SUITABLE FOR MULTI-
FAMILY DEVELOPMENT, BY HOUSEH~LD INCOME CATEGORY
Realistic Mix
Affordability ~`~ Potential Units on
Suitable
Commercial Sites ~'~ Poteutial Units on
Suitahle Multi-Family
Residential Sites ~'~ Total Development
Capacity
3,032 2,822 5,854
% # ~~u # % #
Very Low 7.7% 233 18.4% 519 12.9% 753
Low 5.1% 155 10.5% 296 7.7% 451
Moderate 10.8% 327 4.6% 130 7.8% 457
Upper 76.4% 2 316 66.5% 1 877 71.6% 4 193
Total Units I40% 3 032 100% 2 822 100% 5 854
City of Santa Monica, City Planning Division, 2001.
Notations: 1) Table IV-8; 2) Table IV-5; 3) Tables IV-3 and IV-4.
City of Santa Monica
Housing Element Housing Resources
Summary of RHNA Compliance
In summary, Section A of this chapter discussed the City's RHNA allocation for 1998-2005
planning period and the methodology by which it was derived. Section B demonstrated the
City's available inventory of suitable sites and infrastructure, public services, and facilities
needed to support residential development. Finally, Section C demonstrated that the Ciry
will meet its RI~NA allocation. The City can count three sets of credits toward its RI3NA:
(1) AB 438 credits: First, 25% credits can be taken for the rehabilitation, conversion
or preservation of affordable housing. Due to the restrictions inherent in State law,
however, none of the City's projects qualify for this option.
(2) Production Credits: Since January 1, 1998, approximately 55% of the City's
lower-income requirement for the RHNA has already been produced during the first 2
'/a years of the planning period, and five years still remain in the planning period.
(3) Sites Credits: Finally, assuming a modest level of housing production, coupled with
the historical affordability distribution of the units, all of the City's remaining RHNA
requirement by affordability level can be addressed by the July 2005.
In summary, Table N-10, the City has met a significant portion of its 1998-2005 RHNA
within the first three years and, counting potential production on underutilized sites, can
satisfy all its remaining site requirements by the end of the planning period.
TABLE IV-10
1998-2005 RHNA UNIT TARGETS AND CREDITS
TOWARD SATISFYING THE ADEQUATE SITES REQUIREMENTS
Housing (]) (2) (3) (4) (5)
Affordability 1998-2005 Production Remaining Need Suitable Sites Remaining
RHnA Credits by Affordability Credits Need by
(Table IV-1) (Table IV-6) Level after (Table IV-9) Affordability
Production Level after
Credits Site Credits
Vcry Low 513 287 226 753 0
Low 335 176 159 451 0
Moderate 431 220 211 457 0
Upper 929 1,747 0 4,193 ~
Total 2,208 2,430 596 5,854 0
Source: City of Santa Monica, Ciry Planning Division, 2001.
1. Production credit includes projects with certificates of occupancy, building permit or planning approva] afrer
January 1, 1998 - excludes pending projects
2. Site Identification credit ioclude all vacant and u~derutiliaed land multiplied by historical affordability
distribution ofprojects that were built, under construction, approved, or pending approval.
3. Totals may not sum precisely due [o internal rounding.
City of Sanla Monica
Housing Resources Housing Element
Exhibit 4
Proposed Revisions to Chapter VI (Housing Plan)
Chapter 6 Changes
Program l.b: Streamline Permit Approval Processes
Program Background: For residential development in Santa Monica, permits may be
necessary from a variety of departments, such as a permit to remove rental units from the
Rent Conlrol Board, and Planning Commission approval of a subdivision map and site plan.
To facilitate the permit approval process, thc City uses the"Permits" data base to track the
status and progress of applications and a GIS for long-range planning projects.
2000-2005 Action Plati:
• Following implementation of revised permit processing procedures, develop a
handbook of interdepartmental regulations and services to guide applicants through
thc dcvclopmcnt approval process.
• Improve "Permits,° the City's computerized permit-tracking system, by linking the
database to the Geographic [nformation System, enhancing the display and
organization of information, and making selected data accessible to the public.
• Continue to expand the types of data available on "Permits" and improve reporting
procedures to facilitate project tracking and provide up-to-date information.
• Review City procedures far processing CEQA documents and modify procedures,
as needed, to enable timely compliance with CEQA and other applicable processing
obligations, including an examination of ways to streamline the process, such as
evaluatine and modifvin~procurement procedures for consultant retainment and
adjusting staffing levels and responsibilities as ap~priate.
Resposisible Division: City Planning Division; Building and Safety Division;
Information Systems Division.
City of Santa Monica
Housing Elcmcnt Housing Plan
TABLE VI-3
HOUSING PROGRAM SUMMARY TABLE
GOAL & HOUSING 20Q0-200.5 T1ME FUNDiNG RESPONSIBLE
PROGRAMS ACTIQN PLAN FRAMF SOURCE AGENCY
GOAL 1.0: PROMOTE THE CONSTRUCTION QF NEW HOUSING THROUGH RF.GULATORY MECHANISMS
Program l.a: Continue to promote residential uses in non-residential zoning £~f-H3fB~ • General City Planning Division
Assess and Revise, districts, including modifications of development st;andards as annuallv Nund Environmental and
Where Appropriate, appropriate to encaurage the dcvclopment of housing in commercia] Public Works
City Regulatorv areas. Management
Requirements Support and promote the construction of livelwork space though FY 02/03 City Attorney's Office
development standards and incentives.
Evaluate potential modifications to development standards which FY 03104
would encourage courtyardlgarden style apartments.
Evaluate changes to the Zoning Ordinance to allow existing non-
conforming multi-family residences that are destroyed due to fire, FY 03/04
earthquake or other natural disaster to be replaced in-kind in the City.
Program l.b: Following implementation of revised permit proccssing procedures, FY OU02 • General City Planning Division
Streamline Permit develop a handbook of interdepartmental regulations and services ta Fund Building and Safety
Approval Processes guide applicants through the development approval process. Division
• Improve "Permits,° the City's computerized peanit-tracking system, by Information Systems
linking thc database to the GiS, enhancing the display and FY 01102 Division
organization of data, and making selected data accessible to the public.
• Continue to expand the types of data available on "Permits" and
improve reporting procedures to facilitate praject traaking and provide FY 41102
up-to-date data.
Review Ciry procedures for processing CEQA documents and modify
procedures, ae needed, ta enable timely compliance with CEQA and PY 01102
other applicable processing obligations, including an examination of
ways to streamline the process, such as evaluatine and modifvinK
procurement procedures for consultant retainment and adiustin~
staffina levels and resnonsibilities as appropriate.
City of Santa Monica
Housing Element Hausing Plan
TABLE VI-3
HOUSING PROGRAM SUMMARY TABLE
GOAL & HOUS1PvG
PROGRAMS 2000-2005
ACTION PLAN TIME
FRAME FUNDING
SOURCE RESPONSIBLE
AGENCY
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Ho~~iA~&~ent Housing Plan Housing Plan
Exhibit 5
Proposed Revisions to Technical Appendix #2
~
A
ILis-u~.~rn~. N usnonrr.i -1~s~~ur~rr;t;. l~c.
Pi~/irr. Fruan~i~~i,A ilaun!,'r+nrrn (~un>ula+~rr~
MEMORANDUM FOR: Suzanne Frick, Director
Planning & Community Development Director,
City of Santa Monica
MEMORANDUM FROM: Paul J. Silvern
SUBJECT: Policies, Programs and Re~ulations Alle~ed to Be
Constraints on Housing Production v
DATE: February 21, 2001
Kevised Uctober 3, 'lUUl and November lb, LUU1
This memorandum analyzes the degree to which eight City of Santa Monica ("City")
policies, programs and regulations, or features of them (collectively referred to herein as "City
initiatives"), individually and/or cumulatively, operate as "potential and actual governmental
constraints" on the production of new housing within the meaning of California Housing
Element law. Following a summary of our findings and conclusions, Section II of the memo
presents the definition for a potential or actual "governmental constrainY' used in this analysis.
Section III (beginning at page 13) summarizes each of the eight City initiatives and presents our
analysis of whether the initiatives introduce procedural or substantive costs that could inhibit
new housing construction. The last section (beginning at page 38) presents our conclusion
about whether the costs implied by the City initiatives and whether any such constraints would
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iiiiciicic vi'i~ii ~uc ~.i~y ~ a~ii~~y w NTvuu~~ iw aSSi~iicu iaii aiaaic ~i ic~iviiai ii~uaiii~ iiccu. iiic
eight City iniriatives that are assessed in this memo were identified as possible constraints during
thc (;ity's public participation process ior updating the riousing Element.'
This memorandum was prepared by Hamilton, Rabinovitz & Alschuler, Inc. (HR&A) at
the rern~ect nf the Citv'~ Planning and Cnmmunitv T)evelnnment l~enartment tn accist in
---- ---,---- - --- - -~ o
preparing a technical update of the City's Housing Element, covering the 2000-2005 period,
., C~a,.~„ iT,,..~.:._._ L'1f..,.,.`....a 1..._. Tl.:,. ., aL.~ l..a,,,.~ : .,C__t_i_.1
[~uiSuaiii iu ~ia~c nuu~iu~ ~iciiicii~ iaw. i iii~ aS5cS5iiicTii iS uic ia~w~ iTi a SciicS ~i iciatcu
"constraints" assessments that HR&A has prepared on City programs, policies and regulations
during the past five years. Uur previous work on this issue ~ncludes very detailed analyses
' See especially a letter from the Harding, Larmore, Kozal & Kutcher law firm on behalf of the Santa
Monica Housing Council, to 5uzanne Frick, Dircctor of Planuiug & Community Development, dated June 7, 2000.
(Hereinafter referred to as "HLKK Letter").
prepared for the State-approved 1998-20o3 Housing Element Update,z including investigation of
rl,o F...,.,,.;~7 F~~:l,;l;+„ ;,,,,,.,..r~ ~.f„r..rt,-~,,,~ ~IIA~P~1 r., hA ~„~r,-~;,,r~ ~„ +.,,-.;~~1 ~„~,-r,,,P„r ~,,.7
ui~. iuiuii~.iui i~.n~~u~i~~y ....t~rsv~o vi Y.vs.u...~ u..vb., w v.. w..~~.u...~~ va. ~yY.vu. uru....u....~ u..u
condominium proj ects. That body of research is hcrcby incorporated by refcrencc, and certain
portions of it are attached to this memorandum for the reader's convenience.
During the past two years HR&A updated its analysis on some of the issues addressed in
the 1998-2003 Housing Element Update, including furthcr analysis of City requirements on the
financial feasibility of typical condominium projects, which remains the predominant form of net
new housing in the City. The more recent work, which is attached and referred to in this memo,
includes: (1) an analysis of the characteristics of 3~ condominium projects submitted to the City
for permit approvals bctween March 1, 1998 and Apri130, 1999 (included herein as Attachment
A); and (2) analysis prepared in March 2000, which demonstrated that changes in the local real
estate market since 1998 justified increasing the amount of the fee that a developer may pay to
the C"itv ac nne nntinn fnr mitigating the imnacts nf market-rate cnndominium nr~iects nn the
"'_ _"~ ~' _"_ _r'_' o ___ ____r
demand for housing that is affordable to lower-income households (included as Attachment B).
ml ~ ~____~a_.7 .~ aL:,. __...v„ L__:1,],. .,._ ,,._,] „_.a..._,].. ~L.:~. L.,.]__ .,1'~..,,__:`.__,. ,.~..1_.,.:,. a.,
1 I1G CLJJGJ`uII1GIIL ~1I~GJG11lGLL lIl U11J 111G111V UU11UJ Ull t111U G~iIGllLLJ LL11J UULL~' Ul ~JLGVIVUJ [lLLCll~'J1J lU
address the City initiatives.
I. OVERVIEW AND SUMMARY OF CONCLUSIONS
In preparing Housing Elements, State la~v requires local jurisdictions to assess, among a
number of factors, constraints imposed by local government on the maintenance, improvement or
development of housing of all kinds. In formulating a five-year housing strategy, jurisdictions
are required to, among other things, consider removing any such constraints that interfere with
their ability to produce their assigned fair share of regional housing.
The governmental constraints analysis required by the Housing Element statute requires a
two-part inquiry. First, a local jurisdiction must assess whether any of its programs, policies or
regulations operate as constraints. Second, it must assess whether any such constraints interfere
with its ability to produce its assigned "fair share" of regional housing need, expressed in terms
of number of units, and units distributed across four household income categories. If it does, the
iurisdiction must consider removinQ it.
~~.....,...,~~o~ „~.~,;~ .,,,,i<.~:~ ~ r;+., ;,,;*;~*;~,A ;~ ,. ~;,~a,-A,~ ~ A„*,i ,. „~.,-~;,,+„
, ~. Yu~Y~~.,~ .,~ «..~ u..u.y„~, u ...~y .....~~~..., ., .,.,..~...,,.,.u u "gc .............~... .,.,..~~.u...~
if, as a result of its procedures and/or substantive requirements, it adds a scale of extra cost or
time that significantiy anu aclverseiy affects tne fmanciai feasieiiity of iypicai new housing
= City of Santa Monica, /998-2003 Housing Element Update, adopted by the City Council on April 21,
1998 and cert~tied as consistent with State law by the Caliiornia 1Jeparlment oI Housing and Community
Development on December 9, 1998. (Hereinafter referred to as "1998-2003 Housing Element Update"). Potential
governmental constraints are discussed in Section IIIB (pp. IIT-8 through III-42), based on the HR&A memoranda
included in the Technical Appendix. The programs analyzed include the removal permits required by the City's
Rent Control Law, the Rent ConVOI Board's procedures for implementing the Ellis Act, the Conditional Use Permit
previously required for new condominium projects, re-zoning initiatives in four multi-family districts, a prcvious
inclusionary housing program, and the zoning regulations applicable to the R2 Low-Density Multi-Family District
relative to the State densiry bonus law.
HAMILTON, RABINOVITZ & ALSCHULER, TNC. P3gC 2
Revised: ll/26/2001
projects. Under this operational definition, it is possible that a City initiative could add
procedural or substantive costs to a project, but the mere fact of added cost is not itself a
"constraint." Only when a City initiative, individually or in combination with other City
programs, imposes costs to a degree that causes well-informed and experienced developers not to
procced with otherwise financially viable, typical housing developments would, in HR&A's
opinion, that initiative constitute an "actual local governmental constraint," within the meaning
of State law.
Under the second prong of the constraints analysis, any initiative that is found to
constitute a constraint must be assessed to determine whether it would interfere with the City's
ability to produce its assigned fair share housing objective. In making this "interference"
determination the governmental constraint must be compared with the number of housing units
that would be produced in other ways, or in other areas of the City, relative to the fair share
objective. This determination may consider, therefore, the degree to which a constraint that
operates in one part of the City is offset by housing production elsewhcre in the City. The City
need not consider removing a program, policy or regulation that may operate as a localized
constraint, so long as it can conclude reasonably (i.e., on the basis of substantial evidence), that
Citywide housing production will still be sufficient to achieve its fair share of regional housing
need, in terms of both unit production and production by household income category.
In summary, our assessment of the City initiatives is as follows:
Develapment Moratorium in the City's Multi-Family Districts. A moratorium on
development in thc City's multi-family districts that was in effect between May 1999 and
May 2000 (Ordinance Nos. 1944, 1947 and 1968) was a response to significant changes
in local economic circumstances and changes in State law affecting the City's supply of
modestly priced housing. it provided City decision makers with an opportunity to
consider these changes and appropriate policy and regulatory responses, under a
procedure specifically permitted by State law.
The one-year delay in processing permits probably had both detrimental and positive
financial impacts on projects planned for multi-family zones. For example, during the
year additional land holding costs3 may have been incurred, and the cost of construction
and professional fees probably increased. On the other hand, the median sale price for
newly constructed condominiums inereased by about 22 percent during the year
immediately before and immediately after the moratorium, while construction costs
increased only about seven percent. This suggests that increases in maratorium-related
costs were probably offset by higher sale prices and rents. There is no basis for
estimating how many units of housing will now not be developed in the City by 2005,
due only to the one-year delay in accepting new applications for permit approvals in
multi-family zones. Based on the volume of applications for projects in multi-family
zones accepted after May 200~, the continuing strength of the local real estate market, the
1"Holding cost" refers to periodic payments developers often make to land owners to secure the
continuing right to purchase a development site at a later date. In other cases, it refers to monthly interest charges
on loans taken out to purchase ]and prior to the commencement of the planning approval process.
HAMILTON, RABINOV[TZ & ALSCHULER, INC. PagO 3
Revised: 11/26l2001
range of projects exempted from the moratorium (e.g., single-family homes, vacant sites,
100% affordable projects and a substantial amount of residential development in other
City zones), it is reasonable to conclude that, while it may have been a potential
constraint for the year it was in effect, the issue is now moot. Further, the net impact of
the one-year moratorium on future housing supply was negligible, notwithstanding
additional costs that may have been incurred by some projects.
Changes in Multi-Family District Development Standards. The changes in multi-
family development standards enacted at the expiration of the 1999-2000 moratorium
included changes in building heights, ma~cimum buildable envelope and a reduction in
density for large projects (Ordinance No. 1977). The building height changes do not
affect projects that provide pitched roofs. The building envelope changes have the effect
of slightly reducing the maximum buildable floor area of projects, due to the
requirements for more articulated building facades (e.g., changes in vertical surface
plane). These reductions in floor area, and hence the amount of floor area that can be
rented or sold, could have a minor impact on the financial feasibility of the project. But
this depends entirely on whether offsetting design features are used (e.g., balconies, lofts
and rooftop areas), and the elasticity of the market (i.e., the ability for a unit to be rented
or sold at the same price, pre- and post-change in regulation). Projects subject to the ncw
regulations may incur slightly higher costs for architectural design and for building
construction necessary to accommodate less rectilinear design features.
The changes in density for large projects (i.e., three or more lots) could have more
significant effects, because they reduce the maximum number of units. In general, fewer
units means less rent or sale proceeds, but if the scale of the project is smaller than it
would have been, this change also saves parking and construction costs. To the extent
that a project that is developed subsequent to the change feature larger average unit sizes
than a pre-change project, the result could even be financially beneficial (i.e., less
parking required, but no or little change in floor area available for rent or sale). The fact
that more new development applications have been filed for projects in the zoning
districts subject to these changes than in the year prior to the moratorium that preceded
its enactment indicates that they do not cause typical projects to be infeasible, and thus
are not a constraint.
In any event, these changes are limited to the City's multi-family zones. They do not
affect single-family home construction, nor development of housing in all of the other
City zones where residential development is permitted. Thus, whatever effect these
changes in regulation may have on the production of new units is limited to those zones.
Most new multi-family development is planned for the City's commercial and other non-
traditional districts. The reccnt changes in development standards applicable to the
multi-family districts are unlikely, therefore, to prevent a substantial amount of new
housing, because the additional costs they imply for typical projects are relatively minor,
and the changes do not affect most new housing production in the City.
Construction Rate Program. Another new program involves limiting simultaneous
construction of new residential projects in some zones to no more than one within 500
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 4
Kevised: 11/26/2001
feet of another during the same 15-month period (Ordinance No. 1984). This new
program does not affect projects that were under construction at the time of its adoption,
nor any projects in commercial zones. It does not prevent units in multi-family zones
from being constructed, but may delay the timing of completion. Future projects that are
subject to delays bccause of the ordinance could experience higher construction costs if
costs accelerate during the 15-month delay period. However, whether this has any effect
on project feasibility depends on the condition of the real estate market over this same
time period. To the extent that the market continues to support higher rents and purchase
prices over the construction delay period, rclative to construction cost inflation over the
same period, there may be no net effect on project feasibility, and therefore no impact on
the City's housing production.
Analysis prepared by City staff shows that as of late November 2000, there were only 10
residential projects with building permits, all necessary planning approvals except
building permits and in the proccss of obtaining planning approvals that would fall within
500 feet of each other, and therefore subject to construction delay under the new
ordinance if they were all ready to begin construction simultaneously. Not all of these
projects will be ready to start construction at the same time, and therefore something less
than 10 projects would be affected by the new ardinance. According to City staff, during
the first 10 months that the ordinance has been in effect, not a single project has had to
delay its scheduled start of construction due to proximity to another projects already
under construction. Thus, it is reasonable to conclude that the program is not causing
cost impacts that render typical new projects to become infeasibie, and further, that an
insignificant number of new units will be affected by the Construction Rate Program.
Rent Control Law Removal Permits. The City's procedures far allowing existing
controlled rental units to be removed from jurisdiction of the Rent Control Law were
analyzed in detail for the 1998-2003 Housing Element Update, and that analysis remains
valid for the 2000-2005 Housing Element Update. The previous analysis showed that the
costs implied by the average time to process a removal permit and to pay for technical
assislance with the proccss did not add significantly to the cost of a typical residential
project, and that most removal permit applications were approved. Thus, the removal
permit process was found not to significantly impact housing production. During the past
few years, relatively few removal permits have been applied for and, ~nce again, most
have been granted. The number of applications to withdraw rental units from the market
through use of the Ellis Act, however, dwarfs the number of removal permit applications.
Though recent changes in State law enhance tenant protections under the Ellis Act, this
will continue to be an available avenue for property owners to pursue development of
new for-sale housing developments on sites with rent-controlled units. The previous
conclusion that the removal permit process does not significantly impact housing
production remains valid.
Recent Chahges to the Landmark Ordinance. Projects that propose to demolish an
existing structure that is older than 40 years is subject to a 60-day hold while the site is
referred to the Landmarks Commission for possible designation as a Structure of Merit,
Landmark or Landmark Parcel, or building or structure within an Historic District
HAMILTON, RABINOVITZ & ALSCHULBR, INC. Page 5
Revised: 11 /26/2001
(Ordinance No. 1977). This is a reduction from the 50-year threshold that was previously
in effect. The hold may result in additional carrying costs, but for most projects, this is
not a significant financial impediment, in HR&A's experience. Should the existing
structure be proposed for one of the historic resource categories, additional holding costs
and professional fees may be incurred as the designation process unfolds. If the site is
ultimately designated under one of these resource categories, further time restrictions
apply befare the structure can be demolished, unless an economic hardship is approved.
This situation applies, of course, only to those sites with existing units that fit the age
profile and are found to have historic resource merit. A review of City files indicates that
only four demolition applications were accepted for review by the Landmarks
Commission for possiblc designation since the ordinance was modified in May 2000.
Two involved single-family home sites and one involved a four-unit multi-family
replacement project. No plans have been proposed for the fourth case, which involves a
single lot in a commercial zone. Given the age of existing structures on these sites, all
four projects would have bcen subject to a hold under the previous 50-year threshold.
The change to a 40-year threshold, and the 60-day hold on demolition permits for
Landmarks Commission review in gcneral, has clearly not had a substantial impact on the
City's rate of housing production.
New Project Scale Threshold far Deve[opment Review Permits. Projects in excess of
7,500 square feet in floor area in certain non-residential and mixed-use zones are now
subject to discretionary review by the Planning Commission, or City Council on appeal.
This will probably have little effect, in terms of processing time or out-of-pocket costs,
for projects that arc otherwise subject to adjudicatory (e.g., Conditional Use Permit or
subdivision map) or legislative reviews, because the City consolidates all applicable
discretionary reviews. It will, however, introduce a new discretionary review, and
possibly additional review under CEQA, for those residential projects that previously
required only administrative approval (c.g., apartment buildings, conforming mixed-use
projects with apartments), but no change for projects that otherwise require discretionary
review (e.g., in the CS District). This will add processing time {and potentially added
holding costs), and possibly additional professional costs for assistance with the
application and public hearing process. It also adds a measure of uncertainty to the
permit approval process. Finally, this change may add to the caseload handled by the
Planning and Community Development Department, the Planning Commission and the
City Council, which could have implications for processing permits on other projects.
The degree to which the new ordinance will impact future housing production depends on
what kinds of housing developments fall under its scope. There will not be many. The
change does not apply in the multi-family districts, nor the downtown or Bayside District
(i.e., Third Street Promenade) areas, where most residential development in commercial
zones has been proposed, and therefore changes nothing about the administrative or
discretionary review processes that apply in those zones. The ordinance exempts projects
in which all of the units are deed restricted for occupancy by low- and moderate-income
households, projects that are 80 percent residential and reserve 15 percent of the units for
low-income households and 10 percent of the units for very low-income households, and
projects in the C2 and CM (Main Street) Districts provided they meet requirements for
HAM1L"ION, RnBINOVITZ & ALSCHULER, INC. Page 6
Revised: 11/26/2001
ground floor pedestrian-oriented uses and include the maximum percentage of residential
use authorized by the Zoning Code. The ordinance does not change the 50 percent
discount used for the residential floor area provided in a residential or mixed-use project.
Thus, a residential project of 14,999 square feet can still be constructed in affected zones
without requiring Development Revie~v, because 7,5~0 square fect will be deducted for
purpose of the DR Permit threshold. This is consistent with the scale of most of the
residential projects that have been proposed in the applicable zones in the past two years.
Here again, any additional costs implied by the new permit threshold are not substantial,
and the requirement applies to a subset of future residential projects. Therefore, it is
reasonable to conclude that the change in the threshold for a Development Review Permit
is not a constraint, and it will not significantly impact the City's ability to produce
housing.
New Design Compatibility Permit for Condominium Projects. This new permit
requirement applies only to condominium projects, not to apartment projects. It replaces
the former requirement for a Conditional Use Permit (CUP) with a permit that is more
explicitly focused on siting and project design rather than use. The Design Compatibility
Permit will be processed simultaneously with the project's subdivision map approvals,
and therefore does not add to processing times. Application costs, and related out-of-
pocket costs, will be similar to those for the previous CUP requirement, which were
previously found not to be significant in terms of their impact on housing production.
This new permit does not expand the range of discretion exercised by the Planning
Commission, or City Council on appeal, beyond that involved with the CUP that was
previously required. Analysis conducted for the 1998-2003 Housing Element Update on
the former CUP requirement for condominium projects provides a reasonable basis for
concluding that the new Design Compatibility Permit would not add significant costs to
future housing projects, such that it would significantly impact future housing
production.
Timeliness of Discretionary Decision Making. Concern has been raised that the City is
not complying with the time limits established by State law for taking action on
discretionary development project permit applications, including those subject to review
under CEQA. Permit processing times for Conditional Use Permits previQUSly required
far condominium projects were analyzed for the 1998-2003 Housing Element Update.
That analysis found that on average, the City was meeting the maximum time targets to
get condominium applications before the Planning Commission. The processing time
frames were generally consistent with other jurisdictions in the competitive housing
market around Santa Monica, based on intcrviews with planning officials in Hermosa
Beach, Redondo Beach, Long Beach, Culver City, Bevcrly Hills and Pasadena. From the
Planning Commission's approval of the CUP and the tentative subdivision map to the
Council's action on the final map, the average was about five and one-half months. The
average time from Council action on the final map to a Certificate of Occupancy was
over one year. This included time to prepare final construction plans, apply for and
receive a building permit and complete construction.
HAMILTOY, RARINOVITZ & ALSCHULEK, INC. P&g0 7
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More recently, HR&A analyzed processing times for 30 condominium projccts filed
between March l, 1998 and Apri130, 1999. The time between application filing and City
staff's "deemed complete" determination was available for about half the projects (53%),
and this phase took a median of 79 days. Among five projects with time data, the period
from "deemed complete" to a decision by the Planning Commission was a median of 34
days, and all but one case was completed in less than 35 days. The period from Planning
Commission to City Council was a median of 146 days, for another five projects with
time data. These trends indicate more time is being taken to deem an application
complete, but once it is, the remaining steps in the process are completed faster than in
the past.
Recognizing that the increased volume of permit applications, coupied with a number of
recent changes in regulations, may be having an adverse impact on permit processing
times, the City has engaged a consultant to review current permit processing and CEQA
compliance procedures, and recommend changes. The analysis will be completed in the
coming year and improvements should be evident within the 2000-2005 Housing
Element Update period,
Denial of Discretionary Review Applications for Projects That Comply With
Regulations. Concern has been expressed that the Planning Commission, or City
Council on appeal, may deny a project that is subject to discretionary review, even
though it conforms with all of the specific property development and other regulations
contained in the Municipal Code, on the grounds that its scale is incompatible with the
mix of existing structures in the immcdiate neighborhood, ar due to judgments about
project aesthetics. This is a speculative concern based on one cited example. Once
again, discretionary application outcomes were analyzed for the 1998-2003 Housing
Element Update. Based on review of a random sample of 32 condominium cases, we
found that conditions of approval were primarily procedural in nature or declarative of
existing law. Where "special conditions" were imposed, they were suggested first by
City staff as part of its recommendation to the Planning Commission. The incidence of
Planning Commission- or City Council-initiated special conditions was rare, based on a
comparison of staff recommendations and Statements of Official Action memorializing
the Commission's or Council's decision. Arguably, most of these conditions could have
been imposed as conditions of the tentative tract or parcel map had there not been a CUP
process.
The majority of special conditions included project-specific design issues that the
planning commission wanted the Architectural Review Board (ARB) to consider. When
they occurred, these conditions usually directed the ARB to address general concerns
about "unexciting and boring design" and a need for "neighborhood-friendly building
design," and various landscaping, building elevation, building feature (e.g., stair
enclosures and roof-top mechanical equipment) and fenestration issues. ~ther categories
of special conditions ineluded changes to encroachments into required setbacks,
requirements to confer with project neighbors, and compliance with otherwise required
regulations. The costs of ineeting these conditions ranges from zero to some tangible, but
relatively insignificant sums. Based on the available evidence from past City practice,
HAMILTON, RABINOVITZ & ALSCHULER, INC. P2gC 8
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special conditions imposed through the discretionary review process are not likely to
impose costs that would threaten the financial viability of most projects, and therefore
they do not substantially impact the City's ability to produce ~
housing necc~.
Recent Changes to the Affordable Housing Production Program's (AHPP) Fee Option
for Candominium Projects. In March 2000, the City Council adopted a resolution
increasing the optional Affordable Housing Fee for condominiums to $11.01, based on
analysis prepared by HR&A, which included an update of the "nexus" study
demonstrating the reasonable relationship bctween the need for the fee, the amount of the
fee and the cost to the City to provide affordable housing. The analysis also considered
the financial feasibility implications of the new fee on prototypical condominium projects
under then-current real estate market conditions. The analysis showed that a fee in the
amount justified by the nexus analysis would not have an adverse impact on the
feasibility of prototypical condominium projects that are otherwise feasible. This also
means that the fee increase will not substantially impact future housing production and
the City's ability to produce its fair share of regional housing need.
Administrative Procedures for the Affardable Housing Production Program. The
AHPP requires that developers of market-rate multi-family projects mitigate project
impacts on the demand for affordable housing, but allows each developer to select from
among the available mitigation options. Concern has been expressed that, in the course of
completing the City's discretionary review process, multi-family developers will be
"asked" to use the option whereby affordable units are included in the market rate
development, in violation of the AHPP and other laws. Review of all multi-family
projects processed subsequent to the adoption of the AHPP indicates that all but five
applicants elected to pay the Affordable Housing Fee. The fivc cases that involve
another, voluntary form of mitigation include on-site and off-site provision of affordable
units. All condominium projects are already subject to a discretionary review processes
and there is no evidence in the record of the proceedings of condominium projects since
the AHPP went into effect that City staff, the Planning Commission, or City Council
urged the applicant to provide on-site or off-site affordable units.
Cumulative Impacts. The City initiatives described above do not all apply to every
multi-family projcct, but potentially in different combinations, depending upon tenure
type (i.e., apartment versus condominium), location (e.g., in Multi-Family Districts or
non-residential Districts), and whether rent-controlled units or structures that have
potential landmark qualities exist on a site intended for redevelopment. As described
later in this analysis, condominium projects in Multi-Family Districts are potentially
subject to more of these requirements than other scenarios. However, this reflects a
policy choice by the City about how to balance building and neighborhood preservation
with market rate housing production in Multi-Family Districts. While achieving this
balance may add costs to such projects, it does not prevent them from being developed,
and has not substantially interfered with the City's ability to meet its regional fair share
objective. In fact, 16 projects with 268 units have been proposed during the eight months
following the effective date of all of the City initiatives analyzed here, including projects
HAMIL'CON, RABI~'OVITZ & ALSCHULER, INC. ~ Page 9
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in Multi-Family Districts. Further, the number of multi-family projects submitted for
City development approvals is not significantly different from the number that were
submitted during the year prior to implementation of the City initiatives. This indicates
that whatever the cumulative effects of the City initiatives may be, they are not
preventing developers from proposing new multi-family housing projects, and thus
cannot be operating cumulatively as a"constraint" under any plausible definition of that
term.
The preceding assessment indicates that some City initiatives, individually and/or
cumulatively, imply additional procedural and/or substantive costs. But there is no evidence that
the scale of these costs is causing otherwise viable, typical new projects to become financially
infeasible. In fact, the evidence from the volume of applications for new housing filed prior to
the enactment of these initiatives, compared with the volume after they went into effect, suggests
that the initiatives have not adversely impacted project fcasibility to the degree that well-
informed and experienced dcvelopers are electing not to pursue them.
Analysis presented in the final section of this memo demonstrates that the City has been
very successful in producing new housing units in recent years, primarily in commercial and
other non-traditional zones. It is estimated that 2,553 units have been completed, issued building
permits, received all required planning approvals or are in the approval process. Even allowing
for some permit expirations and project application withdrawals, and before considering up to
923 units of replaccment housing that is included in SCAG's fair share allocation, the City has
already exceeded its assigned share of 2000-2005 regional housing need (2,208 units) as of fall
2001: As discussed in Chapter N of the City's Draft Housing Element, there is also substantial
evidence demonstrating that the City will also meet its "fair share" in term of distribution by
household income category.
Thus, to the extent that the City initiatives assessed in this memo impose additional
procedural or substantive costs on some of the pending or future residential units located in the
City's traditional multi-family zoning districts, these costs have not prevented developers from
building typical new housing in the City, and therefore are not operating as actual governmental
constraints. Neither will these initiatives prevent the City from producing its fair share of
regional housing need by 2005. Santa Monica's multi-family housing production per 1,000
households since January 1, 1998, as measured by building permits issued, exceeds the
production of all other jurisdictions in Los Angeles County, and the City ranks among the top
housing producers of all jurisdictions in the SCAG region with comparable "fair share"
allocations. We conclude, therefore, that none of the City initiatives analyzed in this memo,
individually and/or cumulatively, constitutes a governmental constraint within the meaning of
State Housing Element law. Therefore, none of these initiatives will prevent the City from
producing its fair share of regional housing need, and none are subj ect to City consideration of
their removal.
II. OPERATIONAL DEFINITION OF A"GOVERNMENTAL CONSTRAINT"
In preparing Housing Elements, State law requires local jurisdictions to assess, among a
number of factors, any constraints imposed by local government on the maintenance,
HAMILTON, RABPIOVITZ & ALSCHULER, INC. PBgC lO
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improvement or development of housing of all kinds, and to consider removing any such
constraints that impede a jurisdiction from achieving its fair share of regional housing need:
Specifically, a Housing Element must include:
"An analysis of potential and actual governmental constraints upon
the maintenance, improvement, or development of housing for all
income levels, including land use controls, building codes and
their enforcement, site improvements, fees and other exactions
required of developers, and local processing and permit
procedures. The analysis shall also demonstrate local efforts to
remove governmental constraints that hinder the locality from
meeting its share of the regional housing need in accordance with
Section 65584.'
In formulating a five-year housing strategy, jurisdictions are required to, among other things,
consider removing any such constraints.s
The governmental constraints analysis required by the Housing Element statute requires,
therefore, a two-part inquiry. First, a local jurisdiction must assess whether any of its regulations
or policies operate as constraints. And second, it must assess whether any such constraints
would interfere with its ability to produce its assigned "fair share" of regional housing need,
expressed in terms of number of units, and units distributed across four household income
categories. If it does, the jurisdiction must consider removing it.
A. Operational Definition of "ConstrainN'
Completing the first part of the constraints analysis clearly requires an objective standard
for determining whether a regulation or policy constitutes a"potential or actual governmental
constraint." Santa Monica's 2000-2005 Housing Element Update relies on an objective
constraints definition related to economic feasibility that was developed for its HCD-approved
1998-2003 Housing Element Update. To wit:
Operationally, a City program, regulation or procedure constitutes an "actual
governmental constraint" if complying with it is so expensive, in time and/or cash outlay, that
the resulting increase in development cost makes typical new residential development projects
economically infeasible.
'(Gov't Code § 65583(a)(4)) See also, State Department of Housing and Community Development,
"Housing Element Questions and Answers," June, 1988, at pp. 10-12 and September 2000, at pp. 21-22. This
Govemment Code section was the basis for the "constraints" definition in a settlement agreement between the City
and Santa Monica Housing Council concerning the adequacy of a previous City Housing Element, and in the City's
199&2003 Housing Element Update, which was certified by HCD (1998-20~3 Housing Element Update, at p. III-
8). The conclusions in this memo would be equally valid under this definition of govemmental constraint.
5 See Gov't Code § 65583(c)(3) ("Address and, where appropriate and legally possible, remove
governmental constraints to the maintenance, improvement, and development of housing.").
HAMILTON, RABINOVITZ 8t ALSCHULER, Ixc. Page 11
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All housing development projects and housing developers are not, of course, equal, and
therefore it is not possible to establish a bright-line threshold for "economic infeasibility" that
will apply in every case. Property owners and developers have varying degrees of experience,
resources, ability to raise capital, skills and tolerances for navigating through thc local land use
approval process, and degrees of motivation to seek an alternative use of their rent-controlled
properties. The minimum acceptable financial returns that property owners and developers
expect from a residential project in order to proceed with a new constructi~n project, or to
continue owning or managing an existing building, also vary. Further, the minimum acceptable
return will vary by project size, location, and product type (e.g., condominiums versus
apartments).
Indicators of having crossed the line include costs which translate into a significant
reduction in land value (to the extent that development costs are reflected in the price of land);
costs which imply unusually high equity contributions; costs which cause the rate of return from
the development project to fall below levels achievable from other risk-adjusted uses of capital;
procedures or requirements that make a project urunarketable; or a substantial decline in new
applications for projects of the type subject to the program, policy or regulation, which decline is
attributable solely to the new program, policy or regulation. All of these charges must also be
considered relative to the norm in the competitive development market, such that a reasonably
well-informed and experienced property owner or developer with a typical project would elect
not to pursue the project.
lt should be noted that under this definition of an actual govemmental constraint, it is
possible that a City initiative could add procedural or substantive costs to a project, but the mere
fact of added cost is not itself a"constraint." Such costs constitute a constraint only when the
scale of the additional costs cause well-informed and experienced developers not to proceed with
otherwise financially viable, typical housing developments.
B. Constraints That Interfere With "Fair Share" Achievement
SCAG has determined,~ and HCD has approved,' a target of 2,208 housing units over the
1998-2005 Housing Element planning period as Santa Monica's "fair share" of regional housing
need, or about 294 units per year, and a corresponding distribution of these units by four
household income categories. This represents a significant increase over the rate of housing
production in the City between 1989 and 1995, which for a variety of reas~ns, averaged about
113 net new units per year, and a 43 percent increase above the "quantified objective" of 1,542
6 The final 1999 Regional Housing Needs Assessment was approved by SCAG's Regional Council on
November 2, 2000.
1 Letter from Cathy E. Creswell, HCD Acting Deputy Director, to Hon. Ron Bates, SCAG President, dated
December 13, 2~00. The letter concludes that some, but not all, of the jurisdicrion-specific "fair share" allocations
approved by SCAG are consistent with statewide housing need. Santa Monica's allocation of 2,208 units for the
1998-2005 planning period was among those specifically approved by HCD for use in preparing a 2000-2005
Housing Element update. Id., Attachment II.
HAMILTON, RABINOVITZ & ALSCHULER, WC. Page 12
Revised: 11/26/2001
units for the 1998-2003 planning period, as contained in its previous HCD-certified Housing
Element Update.
As noted above, the second prong of the "constraints" inquiry requires an assessment of
whether any City program, policy or regulation determined to be a constraint would prevent the
City from producing its fair share of regional housing need, in terms of either housing unit
production or production by income category. This assessment requires comparing probable
City housing production over the period January 1, 1998 through June 30, 2005 (i.e., the period
corresponding to the RI INA) with the City's assigned share of production over the same period,
including production by income category, as determined by City-issued permits (e.g., certificates
of occupancy, building permits and discretionary planning approvals) and applications for new
proj ccts.
The City must consider removing any actual governmental constraint, as determined
from part one of the constraints inquiry, that would interfere with achieving its fair share
objective.
In making this "interference" determination the governmental constraint must be compared with
the number of housing units that would be produced in other ways, or in other areas of the City,
relative to the fair share objective. This determination may consider, therefore, the degree to
which a constraint that operates in one part of the City is offset by housing production elsewhere
in the City. The City need not consider removing a program, policy or regulation that may
operate as a localized constraint, so long as it can conclude reasonably (i.e., on the basis of
substantial evidence), that Citywide housing production will still be sufficient to achieve its fair
share of regional housing need, in terms of both unit production and production by household
income category.
III. ANALYSIS OF THE CITY INITIATIVES
The eight City initiatives and related concerns that are assessed for their potential as a
government constraint on housing production fall into three general groups: (1) City Council
actions to modify existing regulations that could have an effect on housing production, including
maratoria, changes in development regulations and a new Construction Rate Program; (2)
specific discretionary review permits required for housing developments, including some
existing discretionary permits in general, recent changes to some existing discretionary permits,
newly enacted discretionary permits, and concerns about the discretionary review process in
general; (3) certain features of the City's Affordable Housing Production Program, which
requires developers of apartment and condominium projects to mitigate project impacts on the
demand for affordable housing. The following subsections summarize the City initiatives in
each of these three categories and provides HR&A's assessment of any additional costs they
imply that could adversely affect project feasibility.8
$ The HLKK Letter also mentions "stepped up City enforcement with respect to so-called `bootleg units',"
though it cites only a single case. (HLKK Letter, p. 4). According to discussions with Planning and Community
Development Department staff, the City's Building and Safety Department documents and monitors dwelling units
(continued...)
HAMILTON, RABINOVITZ & ALSCAULER, WC. Page 13
Recised: 11l26/2001
A. City Council Actions to Modify Development and Construction Regulations
Three kinds of actions taken by the City Council in recent years to modify development
and construction regulations have been mentioned as potential governmental constraints,
including a residential development moratarium, changes to some of the regulations governing
multi-family development, and a Citywide Construction Rate Program.9 These initiatives are
summarized below.
Development Moratorium in the City's Multi-Family Districts
In May 1999, the City Council enacted a moratorium10 on new residential development in
response to the combination of a sudden, post-recession surge in project applications and new
construction, and the full implementation af the Costa-Hawkins Rental Housing Act, which
reduced the number of rent-controlled housing units with prices affordable to low- and
moderate-income households, under appticable Federal, State and local definitions.
The moratorium was intended to provide City staff and decision makers time to fully
evaluate the effect of these changes on the City's character, diversity and quality of life, and
various changes to development regulations that might be needed in response. The moratorium
was extended twicc, and expired on May 17, 2000."
The development moratorium that was in effect for one year between May 1999 and May
2000 provided a reasonable opportunity for the City to assess its multi-family neighborhood
housing policies and regulations in light of significant changes in economic circumstances, as
articulated in the moratorium ordinances. This is an example of the City exercising its police
powers to protect the public health, safety and general welfare, as specifically provided for in
State law.`Z The moratorium affected only those projects that might have been submitted for
planning approvals during that year, and only projects planned for multi-family zones. It did not
prevent projects already under construction from proceeding, nor those that had received
planning approvals and/or building permits from proceeding to construction during the year.
~(...continued)
that may have been created without applicable City permits and/or in violation of building and other construction
codes. Although no formal enforcement program is in effect, the most serious violations have been subjected to
corractive action. Doing so has the potential to remove dwelling units, and therefore does not affect the
development of new units. Nevertheless, one component of the City's allocated fair share of regional housing nced
is specifically intended to account for replacement of existing housing that is removed due to obsolescence, natural
disasters and other causes. Thus, consideration of the City's ability to meet its housing production target during the
1998-2005 planning period accounts, by definition, for any unit removals due to enforcement action against
"bootleg" units.
9 HLKK Letter, at pp. 3-6.
10 Ordinance No. 1944 (CCS).
" Ordinance Nos. 1947 and 1968 (CCS).
`Z Cal. GovL Code § 65858.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 14
~ Revised: 11 /26l2001
Any project that was prevented from securing planning approvals during the year could still
proceed under revised rules once the moratorium was lifted. In addition, the ordinance
specifically exempted deed-restricted affordable housing projects that conform with the General
Plan and Zoning Code, single-family homes, development on vacant sites, and development on
sites with an uninhabitable structure that cannot be rendered habitable in an economically
feasible manner."
The one-year delay in processing permits probably had both detrimental and positive
financial impacts on projects planned for multi-family zones. For example, during the year
additional land holding costs may have been incuned, and the cost of construction and
professional fees probably increased. On the other hand, the median sale price for newly
constructed condominiums increased by about 22.0 percent during the year immediately before
and immediately after the moratorium,14 while construction costs increased only 7.2 percent.'S
This suggests that increases in maratorium-related costs were probably offset by higher sale
prices and rents. There is no basis for estimating how many units of housing will now not be
devcloped in the City by 2005, due only to the one-year delay in accepting new applications for
permit approvals in multi-family zones. Based on the volume of applications for projects in
multi-family zones accepted after May 2000, the continuing strcngth of the local real estate
market, and the fact that the moratorium did not affect a substantial amount of residential
development in other City zones, it is reasonable to conclude that the net impact of the one-year
moratorium on futurc housing supply was negligible.
Changes to Certain Development Regulations in the City's Multi-Family Districts
Coincident with the expiration of the development moratorium, an interim emergency
ordinance was adopted by the City Council in June 2000,'~ which, among other things, made
temporary changes to building envelope standards in the R2 Low- Density Multi-Family District,
R-3 Medium Density Multi-Family District and R-4 High-Density Multi-Family District. The
changes include five-foot reductions in previously allowed building heights when flat roofs are
used, but no change if pitched roofs are used. In all three Districts, the previous limitation on the
number of stories for residential uses was removed.
Changes were also made to front and side yard setback requirements to provide for more
articulated building facades and clarifications were added concerning permitted building height
" Ordinance No. 1968 (CCS), § 3.
14 Based on HR&A's analysis of recorded sale transactions between May 1998 and May 1999, and May
2000 and February 2001, in condominium projects completed since 1990. The Citywide unit price increase
between the two periods was 22.5%, and 21.8% per square foot.
15 Based on the change in per-square foot construction costs for low-rise apartments in the Los Angeles
area betwecn April 1999 and April 2000 (a reasonable indicator for condo construction cost inflation), as reported
in Real Estate Research Council of Sa Califomia, Real Estate and Construction Report, Third Quarter 2000, at p.
80.
16 Ordinance No. 1977 (CCS).
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 15
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exceptions (e.g., roof-top equipment). Maximum unit densities for average size projects
remained unchanged, but for subsequently consolidated lots totaling more than 15,000 square
feet or 100 linear feet of street frontage (i.e., more than two standard City lots), the maximum
density in the R3 District was reduced to one dwelling unit per 1,500 square fect (the typical R2
standard), and the maximum density in the R2 District was reduced to one dwelling unit per
2,000 square fcet (versus one unit per 1,500). On the other hand, allowable densities for 100
percent affardable projccts were increased to one unit per 900 square feet in the R3 District (i.e.,
the typical R4 District standard) and one per 1,200 square feet in the R2 District (i.e., the typical
R3 District standard). ~
The changes in multi-family development setback standards have the effect of slightly
reducing the maximum buildable floor area of projects, due to the requirements for more
articulated building facades (e.g., changes in vertical surface plane). They may also result in
slightly higher costs for architectural design and for building construction necessary to
accommodate ]ess rectilinear design features. The reductions in floor area and added costs could
have an impact on the financial feasibility of a project, but it may be possible to compensate for
this with other design changes, such as enlarging balconies, lofts and/or rooftop areas,
particularly if rents and sale prices continue to outpace construction cost inflation." We believe
the net effect of these building envelope changes will be minor, based on our experience
analyzing the feasibility of typical multi-family projects.
The changes in density for larger projects could have more significant effects, because
they reduce the maximum number of units. For example, a three-lot project of 22,500 square
feet of land area in the R3 District could be developed with 19 units prior to the density changes,
but would now be limited to 15 units, a reduction of four units. In general, fewer units means
less rent or sale proceeds, but if the scale of the project is smaller than it would have been, this
change also saves parking and construction costs. To the extent that the 15 units allowed
subsequent to the change feature larger average unit sizes than the pre-change 19 units, the result
could even be financially beneficial (i.e., less parking required, but no or little change in floor
area available far rent or sale). It should be noted that the ordinance makes no change to the
low-density zoning districts, which account for the largest share of new multi-family
development among the City's traditional multi-family zones.18
In any event, these changes are limited to the City's multi-family zones. They do not
affect single-family home construction, nor development of housing in all of the other City zones
" See previous discussion showing that the median price of condominiums in recendy constructed
buildings in 5anta n4onica has far outpaced constmction cost inflation in recent yeus. Los Angeles County real
estate values are projected to continue esca]ating during the coming year, though at a somewhat lower rate than
during the past year. The coastal communities, including Santa Monica, are projected to continue featuring the
highest rents and sale prices and the lowest income capitalization rates (i.e., highest building values). See generally,
UCLA Real Estate Center, 2nd Annual Multi-Family Housing Forecasr Conference, October 25,2000; Marcus &
Millichap Real Estate Investmen[ Brokerage Co., Apartment Research Report. Los Angeles County, October 2000;
and Real Estate Research Council of So. California, Real Estate and Construction Report, Third Quarter 2000.
~x For example, among 30 condominium project applications we analyzed in 1999, 23 projacts (77%) were
proposed for sites in the R2, RZ-NW and OP-2 Districts.
HAM7LTON, RABINOVITZ & ALSCHULER, I~IC. Page 16
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where residential development is permitted. Thus, whatever effect these changes in regulation
may have on the production of new units is limited to those zones. As will be discussed in the
concluding scction of this memo, most new residential development being planned in the City is
in zones other than the multi-family zones. Nevertheless, it is noteworthy that more applications
for new projects have been filed for the City's multi-family districts after the effective date of
Ordinance 1977, than during thc year before it was enacted (i.e., 1999, before the Citywide
moratorium), as is discussed in a subsequent section of this memo on cumulative impacts. The
recent changes in multi-family development standards are unlikely, therefore, to prevent a
substantial amount of new housing production in the City.
The Construction Rate Program
In 1990, as part of new zoning regulations for the North of Wilshire area, the City
established a Construction Rate Program. This program limits the number of new multi-family
residential projects that can be under construction simultaneously within any block. More
specifically, projects of two or more dwelling units were limited to one project per City block, or
within 300 feet north or south of another project, during an eight-month period.
As another response to concerns about the impacts that a sudden increase in residential
construction activity was causing on the quality of life in the multi-family neighborhoods, the
City Council adopted an emergency interim ordinance19 on March 7, 2000 that extended the
Construction Rate Program to all multi-family districts in the City. The Citywide ordinance
limited simultaneous construction on any block, and within a 500-foot radius of another project,
for a period of 18 months. The ordinance exempted affordable housing developments in which
all units are deed-restricted to households earning up to 10o percent of the Los Angels County
median area income, community care facilities and unreinforced masonry structures subject to
seismic safety upgrading.
The emergency ordinance20 was later extended for 18 months, with several changes.
These included elimination of the community care facilities exemption, and new exemptions for
certain vacant sites and for uninhabitable structures that cannot be rendered habitable in an
economically feasible manner. The revised ordinance was challenged in court on the basis that
the City failed to conduct proper review of the ordinance under the California Environmental
Quality Act, among other allegations. To settle the lawsuit, the City re-enacted the ordinance
with several additional changes.21 These included changing the prohibited area of simultaneous
construction to a S00-foot radius only, reducing the time period to 15 months, eliminating the
date restriction previously applicable to the vacant site exemption, and modifying the economic
hardship exemption. This new ordinance remains in effect until at least November 11, 2001.
19 Ordinance No. 1966 (CCS).
20 Ordinance No. 1969 (CCS):
~` Ordinance No. 1984 (CCS), adopted on August 8, 2000. On September 25, 2401, the City Council
extended the effective date to November 11, 2002, to provide City staff sufficient time to complete preparation of a
permanent ordinance.
HAMILTON, RABi\'OVITZ & ALSCHULER, 1NC. Page 17
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This new program does not effect residential projects that were under construction at the
time of its adoption, nor any projects in commercial zones. It does not prevent units from being
constructed, but may delay the timing of completion. Future projects that are subject to delays
because of the ordinance could experience higher construction costs if costs accelcrate during the
15-month delay period. As discussed above, however, all available evidence suggests that rents
and sale process will continue to escalate faster than construction costs, and thus there may be no
net effect of the program on project feasibility.
Analysis prepared by the Planning and Community Development Department shows that
as of late November 2000, there were only 10 residential projects with building permits, all
necessary planning approvals except building permits and in the process of obtaining planning
approvals that would fall within 500 feet of each other, and therefore subject to construction
delay under the new ordinance if they were all ready to begin construction simultaneously (see
Attachment C). Inasmuch as not all of these projects will be ready to start construction at the
same time, something less than 10 projects could be affected by the new ordinance. In fact,
according to City staff, during the first 10 months that the ordinance has been in effect, not a
single project has had to delay its scheduled start of construction duc to proximity to another
projects already under construction. It is reasonable to conclude, therefore, that only a small
number of projects may be impacted by the new Construction Rate Program, and none to the
degree that they have become infeasible. Further, the program will not significantly impair the
City's ability to produce its fair share of regional housing need.
B. Specific Discretionary Review Procedures
Four existing and new discretionary review procedures required by the City before
certain types of residential development may be approved have been mentioned as potential
governmental constraints.22 These include the removal permits required by the City's Rent
Control Law, the City's Landmarks ordinance (and particularly a recent change to a building age
review threshold), a recent reduction in the scale of a project that triggers a Development Review
Permit, and a new Design Compatibility Permit. In addition, two specific concerns have been
raised about the City's discretionary review procedures in general (i.e., timing issues and
application denials). Each of these discretionary permits and concerns is summarized below,
along with an assessment of the impacts on project feasibility, and on its fair share of regional
housing need.
The Rent Control Law's Removal Permit Requirements
Santa Monica's Rent Control Law, adopted as an amendment to the City Charter in 1979,
specifies that any landlord who desires to remove a controlled rental unit from the rental housing
market by demolition, conversion or other means must first obtain a permit from the Rent
Control Board ("Board"), following rules and regulations promulgated by the Board. Chapter 5
of the Rent Control Regulations specifies the procedures and necessary findings that the Board
must make before it will grant one of four "removal permit" categories, two of which now also
ZZ HLKK Letter, at pp. 3-6.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 18
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include special variations for buildings that were damaged during the 1994 Northridge
earthquake.
The removal permit categories are:
^ Category A. Until it was repealed in 1994, this removal permit category was
granted by the Board if it found that a landlord was unable to collect the current
Maximum Allowable Rent (MAR) for a unit.
^ Category B. The Board will grant a permit in this category if it finds that the
current MAR for the units does not provide a"fair return" and that the landlord
cannot rent the units at the rent necessary to achievc a fair return.
^ Category C. The Board will grant a permit in this category if it finds that the
controlled rental units are "uninhabitable," and cannot be made habitable in an
"economically feasible" manner. The post-Northridge earthquake variant on this
removal permit category, Category CQ, provides for a finding of
"uninhabitability" based on damage caused by the earthquake.
^ Category D. The Board will grant a permit in this category if the permit is being
sought so the property can be redeveloped with a multi-family rental project, and
the property owner agrees to, among other things: (a) continuing jurisdiction of
the Rent Control Law over the redeveloped rental units; and (b) that at least 15
percent of the replacement units in the new project have rents affordable to and
arc occupied by "low-income" households. The post-Northridge earthquake
variant on this removal permit category, Category DQ, includes many of the same
requirements as a Category D removal permit, but increases the set-aside for low-
income households to 25 percent, and allows for "good faith negotiations"
between a landlord and tenants to set the initial rent in the other 75 percent of the
units.
Chapters 4 and 5 of the Board's regulations further specify the meaning of the terms of
art noted above, and the administrative procedures to be followed by the applicant and the Board
in processing removal permit applications, including evidence, hearing and notice requirements.
Concern has been expressed that these procedures operate as a governmental constraint,
particularly in light of changes to the Ellis Act, which, it is suggested, make it a less attractive
alternative to seeking a removal permit.23
The effects of Rent Control Law's removal permits were analyzed in detail in an HR&A
memorandum prepared for the 1998-2003 Housing Element Update (copy included herein as
Attachment D), and that analysis remains relevant for the 2000-2005 Housing Element Update.
Among the finding and conclusions contained in that analysis were the following:
23 HLKK Letter, p. 3.
HAMILTON, RABINOVITZ & ALSCHULER, INC. ~ P&gC 19
Revised: 11l26/2001
The Number of Removal Permit Applicalions Represented Less Than Ten Percent of the
City's Current Controlled Apartment Stock. Since the Rent Control Law was enacted in
1979, owners of 250 properties with about 2,380 units applied to the Rent Control Board
to remove some or all of the units in their buildings from the jurisdiction of the City's
Rent Control Law, including six applications (42 units) for Category A, which has since
been repealed. This number of properties was about equal to the number for which Ellis
Act withdrawals had been filed (275 buildings). ln scale terms, the units for which
removal permit applications had been filed was equal to eight percent of the existing
stock of "billable" controlled apartments (28,239).
Categories C and D Were the Most Frequently Filed Applications. Just over one-third
(37%) of all properties (and 29% of all units) for which removal permits were sought
filed for a Category C(uninhabitability) removal permit. Another one-third (34°/o of
properties; 28% of units) applied for a Category D(reconstruction with 15% for low-
income households) removal permit. Another seven percent of properties (14% of units)
filed for earthquake-related Category CQ, and five percent of properties (7% of units)
filed for Category DQ removal permits. Nine percent of properties (17% of units) filed
for a Category B(insufficient return from controlled rents) removal permits. Two
percent of properties (2% of units) filed for Category A(cannot collect MAR) removal
permits before this category was eliminated. The remaining six percent of properties (3%
of units) were for filings for more than one category of removal permit.
Most Removal Permit Applications Result in Approval to Remove Units from the
Controlled Rental Stock, Though There is Some Variation By Removal Permit Category.
About two-thirds of the properties (69% of affected units) for which removal applications
were filed were granted. One in ten was denied (13% ofunits); four percent were
dismissed by the Board (3% of units), and 14 percent were withdrawn by the applicants
(12°/o of units). Removal permits were most likely to be granted for Category C and CQ
(74% and 94% of applications, respectively), Category D and DQ (67% and 77%,
respectively) and Category A(67%), and least likely to be granted for Category B(27%).
Very Few Properties With Approved Removal Permits Had Been Replaced By New
Housing Developments. Of the 166 properties that received a removal permit from the
Rent Control Soard, only 44 (27%) properties had received a Certificate of Occupancy
far a replacement development project. Most (36, or 86%) of these were housing
projects. Thus, just under one in five (18%) of a11250 properties that had filed for
removal permits resulted in a completed replacement housing project.
The Time Needed to Complete the Removal Pevmit Process Ranges from One to Six
Months, Depending on the Pern:it Category. The Board's regulation requires that a
hearing on a removal permit application be held by the Board within 120 days after the
application is filed. Administrative practice is to schedule the hearing within 90 days.
The median number of days from application filing to a decision by the Rent Control
Board was 33 days for the now defunct Category A removal permit, 100 to 115 days for
Category C, D, CQ and DQ removal permits, and 168 days for Category B removal
permits.
HAMiLTON, RABINOVITZ & ALSCHULER, INC. Page 20
Revised: 11 /26/2001
There Are No Fees to Process a Removal Permit and the Applicant's Costs to Process a
Removal Permit Application Are Relatively Low. The removal permit application does
not require payment of any filing fees. The procedural steps involved in removing a rent-
controlled property vary with the removal permit category, but in each case the applicant
bears the burden of proving that the permit meets the standards in the regulation. In most
cases applicants spend funds for legal counsel to assist with the application, make
appearances before the Board, and particularly in the case of Category D and DQ
removal permits, to negotiate the details of the agreement implementing the conditions of
the removal permit. There may also be additional costs for othcr professionals, including
a licensed construction contractor, engineers and/or appraiser. The cost of these services
varies with the removal permit category, the scale and type of property and the nature of
the services required. For routine cases in which legal counsel and one or mare
additional professionals provide tecbnical assistance to the applicant, costs for Category
B and C removal permits are in the $5,000 to $10,0~0 range, and in the $2,500 to $5,000
range for Category D removal permits.
We concluded that the costs implied by the average time to process a removal permit and
to pay for technical assistance with the process did not add significantly to the cost of a typical
residential project, and most removal pcrmit applications were approved. On the other hand,
removal permits are a discretionary action by the Rent Control Board, and this introduces a
measure of uncertainty in the permit approval process.
Data maintained by the City's Rent Control Administration indicates that between July 1,
1998 and June 30, 2000, the Board approved one Category B removal permit and denied another,
granted six Category C removal permits, and modified the terms of one Category D removal
permit, for a net reduction of 15 rental units.24 During this same period, property owners
continued to utilize the Ellis Act to withdraw controlled apartments from the rental market at a
rate much higher than the number of units for which removal permits were sought. During the
past two years, 75 buildings with a total of 357 units, were removed using the Ellis Act.zs
Despite additional protections afforded tenants under recent changes to the Ellis Act (i.e., longer
period for tenant notification of withdrawal application), this approach will continue to be
available to property owners as an alternative to the removal permit process.
The Landmark Ordinance
The City adopted a Landmarks and Historic Districts Ordinance in 1976,26 establishing a
Landmarks Commission and delegating to the Commission the authority to designate landmarks
and make recommendations to the City Council for designation of historic districts. The
Landmarks Ordinance is designed, in part, to protect improvements and arcas which represent
elements of the City's cultural, social, economic, political and architectural history. It seeks to
24 Source: Santa Monica Rent Control Board Annual Reports for FY 1998-1999 and 1999-2000.
z5 Id.
Z6 Santa Monica Municipal Code (SMMC), Chapter 9.36, commencing with § 9.36.O10.
Hnt~nLrorr, Rnarrrovirz & ALSCxur.Ea, INC. Page 21
Revised: 11/26/2001
safeguard the City's historic, aesthetic and cultural heritage as embodied and reflected in such
improvements and areas.27
Individual structures and areas are eligible for historic designation based on analysis
sponsored by the Commission, City staff, or upon petition by any interested party. Any
modification or demolition of a Structure of Merit, Landmark or Landmark Parcel, or building or
structure within an Historic District is prohibited unless the Landmarks Commission (or City
Council on appeal) has issued a Certificate of Appropriateness, or such actions are categorically
exempt from the Certificate requirement.zx The Ordinance includes specific investigation
procedures, hearing and notice procedures with strict time limits and required findings for
decision making.
The City's demolition permit procedures require that, among other things, the demolition
permit for a building or structure with an original building permit older than a particular number
of ycars is stayed for 60 days during which time an application may be filed for designating the
structure or building as a Structure of Merit, Landmark or Landmark Parcel, or building or
structure within an Historic District.29 If any such application is filed during the 60-day stay
period, no demolition permit may be issued until the final determination on any such application
for historic resource designation.30
In May 2~00, the City Council amended the demolition ordinance sections regarding
buildings subject to the 6Q-day stay to include buildings that are at least 40 years old (i.e.,
constructed prior to 1960),31 rather than the prior threshold of 50 years, which is the time period
for considering histaric resources under federal historic preservation guidelines. Concern has
been expressed that this lower threshold in particular, and the ordinance in general, could operate
as a governmental constraint on housing production.3z
The recent change to the City's Landmark Ordinance affects multi-family development
projects proposed for sites with existing structures that may constitute an historic resource.
Projects that propose to demolish an existing structure that is older than 40 years is subject to a
60-day hold while the site is referred to the Landmarks Commission for possible designation as a
zi SMMC § 936.020.
Z$ SMMC § 936.070. Structures of Merit may be modified without a Certificate of Appropriateness, but
the designation must 6e considered by the Architectural Review Board or Planning Commission in rendering its
decision on a permit application. Id. § 9.36150(a). Demolition permits for all structures that have received a
designation of some type by the Landmarks Commission require a Certificate of Appropriateness.
'`9 SMMC §§ 9.04.10.16A10(a)(4) and (d).
30 SMMC §§ 9.04.10.16A10 (d)(3), (4) and (5).
31 Ordinance No. 1971 (CCS), adopted as an emergency measure on May 2, 2000 for a period of 45 days.
This requirement was extended to Junc 13, 2~02 by subsequent adoption of Ordinance No. 1977 (CCS) on June 13,
2000.
''- HLKK Letter, at pp.3 and 4.
HAMILTON, RABINOVITZ $Z ALSCHULER, INC. PSgC 22
Revised: ll/26/2001
Structure of Merit, Landmark or Landmark Parcel, or building or structure within an Historic
District. This hold may result in additional carrying costs, but for most projects, this is not a
significant financial impediment, in HR&A's experience. Should the existing structure be
proposed for one of the historic resource categories, additional holding costs and professional
fees may be incurred as the designation process unfolds. If the site is ultimately designated
under one of these resource categories, further time restrictions apply before the structure can be
demolished, unless a economic hardship is approved. In the entire history of the Landmark
Ordinance, thc City has designated 38 landmark structures, two Historic Districts and two
Structures of Merit. Nearly all of these involve single-family residences, public buildings and
commercial structures. Only six multi-family structures or clusters of structures have been
designated, most of which are in Ocean Park.33
Regardless of the scale of any such costs, developers continue to propose new projects
that may be subject to the Landmark Ordinance as amended. Permit application data for the
period since May 2, 2000, when the change to a 40-year threshold went into effect, indicate that
the requirement has little impact on housing production. During the past nine months, 77
demolition applications were processed. All but nine (88%} involved existing structures that
were 40 ycars old or more. A review of City files indicates that only four demolition
applications were accepted for review by the Landmarks Commission for possible designation
since the ordinance was modified in May 2000. Two involved single-family home sites and one
involved a four-unit multi-family replacement project. No plans have been proposed for the
fourth case, which involves a single lot in the CM-3 District. Based on the age of the existing
structures on all four project sites, these demolition applications would have been held under the
previous 50-year threshold. The change to a 40-year threshold, and the 60-day hold on
demolition permits for Landmarks Commission review in general, has clearly not substantially
impacted the City's rate of housing production.
New Project Scale Threshold for Developmeni Review Permits
The City's Zoning Code requires issuance of a Development Review (DR) Permit for
projects in which the design and siting could result in an adverse impact on the surrounding
area.34 DR Permits are issued after a noticed public hearing before the City's Planning
Commission, whose decision may be appealed to the City Council. The application, public
hearing and decision procedures are similar to those required for a Conditional Use Permit, as
are the findings to support approval of a DR Permit (i.e., general scale and design harmony with
surrounding sites and neighborhood, sufficient circulation capacity, no adverse impact on public
safety services, open space, parks and housing impacts are mitigated, project consistency with
the Municipal Code and General Plan, and imposition of ineasures to mitigate any identified
significant adverse impacts on the environment). Thc project scale triggering a DR Permit varies
among the City's multi-family and non-residential zoning districts. The thresholds range from a
low of 11,000 square feet in low-density commercial districts and 15,000 square feet in low
33 These include Irving Gil]'s Horatio West Court, Hollister CouR, Vaniry Fair Apartments, Charmont
Apartments, the Third Sueet Neighborhood Historic District and the Bay Street Cluster.
34 See generally, SMMC Part 9.04.20.14, commencing with § 9.04.20.14.010.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 23
Revised: 11 /26/2001
density multi-family districts (i.e., a two-story structure), to a high of 25,000-30,000 square feet
in some non-residential districts (i.e., 3- to 4-story structures on a typical lot). In calculating
project floor area subject to the DR Permit thresholds, floor area devoted to residential uses in
mixed-use and most non-residential districts is counted at half its actual value.
On November 28, 2000, the City Council adoptcd an interim ordinance to lower the
project size threshold triggering Development Review to 7,500 square feet (i.e., a one-story
structure on a typical lot) in two mixed-use and several non-residential districts, pending further
rcview of possible changes to the Zoning Code.35 No changes were made to the thresholds for
the multi-family districts, nor to the discounts for residential floor area. The interim ordinance
was extended for three years, with certain modifications, on February 13, 2001.'b
Concern has been expressed that the lower threshold for discretionary review will
eliminate the incentive to produce housing in the affected commercial districts, because it
eliminates a more expeditious administrative review process."
Under the new ordinance, projects in excess of 7,500 square feet in floor area, in certain
non-residential and mixed-use zones, will be subject to discretionary review by the Planning
Commission, or City Council on appeal, in addition to any other requirements. This will
probably have little effect, in terms of processing time or out-of-pocket costs, for projects that
are otherwise subjcct to adjudicatory (e.g., Conditional Use Permit or subdivision map) or
legislative reviews, because the City consolidates all applicable discretionary reviews. It will,
however, introduce a new discretionary rcview, and possibly additional review under CEQA, for
projects that previously required only administrative approval (e.g., apartment buildings and
conforming mixed-use projects with apartments).3S This will add processing time (and
potentially added holding costs), and possibly additional professional costs for assistance with
the application and public hearing process. It also adds a measure of uncertainty to the permit
approval process. Finally, this change may add to the caseload handled by the Planning and
Community Development Department, the Planning Commission and the City Council, which
could have implications for processing permits on other projects.
The degree to which the new ordinance will impact future housing production depends on
what kinds of housing developments fall under its scope. There will not be many. First, the
change in project size threshold does not apply in the multi-family districts, nor the downtown or
Bayside District (i.e., Third Street Promenade) areas, where most residential development in
commercial zones has been proposed, and therefore changes nothing about the administrative or
discretionary review processes that apply in N~ose zones. Second, the final versiou of the
35 Ordinance No. 1991 (CCS).
36 Ordinance No. 1999 (CCS).
37 HLKK Letter, at p. 6.
'B In the CS District, the ordinance has no practical effect, because any multi-family project is already
subject to a Conditional Use Permit.
HAMILTON, RABiNOVITZ & ALSCHULER, INC. P&gC 24
Revised: 11/26/2001
ordinance exempts projects in which all of the units are deed restricted for occupancy by low-
and moderate-income households, projects that are 80 percent residential and reserve 15 percent
of the units for law-income households and 10 percent of the units for very low-income
households, and projects in the C2 and CM (Main Street) Districts provided they meet
requirements for ground floor pedestrian-oriented uses and include the maximum percentage of
residential use authorized by the Zoning Code. Third, the new ordinance does not change the 50
percent discount used for the residential floor area provided in a residential or mixed-use project.
Thus, a residential project of 14,999 square feet (i.e., 12-13 units developed at the R3 density)
can still be constructed in affected zones without requiring Development Review, because 7,500
square feet will be deducted for purpose of the DR Permit threshold. This is consistent with the
scale of most of the residential projects that have been proposed in these applicable zones in the
past two years.39 Here again, any additional costs implied by the new permit threshold are not
substantial, and the requirement applies to a subset of future residential projects. This, together
with the fact that new applications for projects subject to the requirement continue to be filed,
indicates that the change in the threshold for a Development Review Permit is not a constraint,
and it will not significantly impact the City's ability to produce its fair share of regional housing
need.
Design Campatibility Permits
On March 7, 2000, the City Council added a new discretionary permit to the Zoning
Code for residential and commercial condominiums, community apartment projects, stock
cooperatives and cooperative apartments, as part of an emergency interim moratorium
ordinance`10 that addressed several development matters related to a surge in development
activity during the latter 1990s.
The new Design Compatibility Permit replaces a previously required Conditional Use
Permit (CUP). T'he new permit refocuses attention on the degree to which a proposed project's
siting and design is compatible with and relates harmoniously to surrounding sites and
neighborhoods, rather than whether the use itself is appropriate for the site. The scope of review
includes the location, size, massing and placement of the proposed structure on the site and its
relation to the surrounding neighborhood, review of the proposed location of project amenities
and evaluation of the project against fixed and established standards. The permit is considered
following a noticed public hearing before the Planing Commission (or City Council on appcal),
and is consolidated with other related hearing requirements (e.g., subdivision parcel or tract
map). This new requirement is in effect until at least November 11, 2041.41 Concern has been
3y Most of the recent projects proposed in the BCD (Broadway) District, for example, were below this
number of units. The 350-unit project on Olympic Boulevard that is now under construction was subject to vested
rights under a Development Agreement.
40 Ordinance No. 1966 (CCS).
91 Ordinance No. I 984 (CCS), adopted August 8, 2000. On September 25, 2001, the City Council
extended the effective date to November 1 l, 2002, to provide City staff sufficient time to complete preparation of a
permanent ordinance.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 25
Revised: I 1/26/2001
raised that this "highly discretionary new review process" will operate as a constraint on new
residential development.4z
The new requirement for a Design Compatibility Permit applies oniy to condominium
projects, not to apariment projects. The Design Compatibility Permit will be processed
simultaneously with the project's subdivision map approvals, and therefore does not add to
processing times. Application costs, and related out-of-pocket costs, will be similar to those for
the previous CUP requirement, which were previously found not to be significant in terms of
their impact on housing production. Previous analysis conducted for the 1998-2003 Housing
Element Update on the former CUP requirement for condominium projccts provides a reasonable
basis for concluding that the new Design Compatibility Permit would not add costs to future
housing projects, such that it would significantly impact future housing production. The basis
for this conclusion is discussed below, with respect to concerns about project denials. It is also
worth noting that during the past year since the new ordinance went into effect, four applications
subject to its requirements were filed. Two of these proceeded to the Planning Commission,
which approved one (five units) and denied one (five units}.43 This does not suggest a significant
impact of the program on housing production.
Timeliness of Discretionary Reviews
City action on development applications must be completed within certain time periods
prescribed by State 1aw. These include the time periods specified in the Permit Streamlining Act
and CEQA. The Permit Streamlining Act44 requires the City to follow standardized review
procedures and to complete its review and decision making on certain kinds of permits within
strict time limits.45 Failure to approve or disapprove a development project application within
those time limits subject the project to the "deemed approved" provisions of the Act.
In general, the City has 30 days to determine whether a permit application is "complete,"
and to notify the applicant of specific deficiencies if it is not. The "dccmcd complete"
determination is an important procedural milestone under other related laws, including the
Subdivision Map Act, which limit the kinds of subsequent information the City may request of
an applicant and the degree to which later-enacted changes in regulations may be applied to a
^~ HLKK Letter, at p. 4.
43 According to the Statement of Official Action on the case, the permit was denied because neither the
drawings submitted by the applicant, nor testimony at the public hearing, provided adequate and consistent
information that would enable the Commission to determine that the building's massing, step-backs and articulation
of the street elevation, and proposed retaining walls in the front yard setback, related harmoniously to the one- and
two-story shuctures in the surrounding neighborhood.
"" Calif. Govt. Code § 65920.
'i5 The courts have determined that the Act's strict dme limits apply to "adjudicatory"decisions (e.g.,
Development Review Permits, Conditional Use Pernuts and Design Compatibility Permits), but not to "legislative"
decisions (e.g., General Plan Amendments and Zone changes), or applications that indude a mix of adjudicatory
and legislative actions. See generally, Daniel L Curtin, Jr., Curtin's California Land Use Law, Solano Press Books,
24`" Edition, 2000, pp. 3a8-312.
HAMIL70r, RABINOVITZ & ALSCHULER, INC. Page 26
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project under permit review. The City then has one year to complete action on the application.
For projects subject to an Environmental Impact Report (EIR), final City action must be
completed within 180 days of the date the EIR is certified.46 A 60-day time limit applies when a
negative declaration is adopted or if a project is found to be exempt from CEQA. One 90-day
extension period is available by mutual agreement of the City and applicant. Appeal procedures
are not included in these time limits. Citing only two examples, the HLKK Letter asserts that the
City has failed to comply with the statutory time limits.47
Permit processing times for condominium projects, where these issues arise most
frequently, were analyzed for the 1998-2003 Housing Element Update (copy of HR&A
memorandum in Attachment E). That analysis found that on average, the City was meeting the
maximum time targets to get condominium applications before the Planning Commission.
Table 1 shows median processing times for each phase of the CUP process for a random sample
of 32 cases where dates could be identified from the City files, as well as a separate analysis of
seven cases that had received a certificate of occupancy.
Tabie 1
Median Processing Times for Condominium Applications, Including CUPs,
in the City of Santa Monica, 1989-1995
Application Approval Phase Median Days to Number of
Complete Cases
Approval Phase
All 32 Randomly Selected Cases
Application Submitted to Deemed Complete 15 26
Application Deemed Complete to First Planning
Commission Hearing 49 24
First Commission Hearing to Decision 0 27
Planning Commission Final Action to City Council
Appeal Hearing 223 3
7 Cases With Certificates of Occupancy
Application Submitted to Deemed Complete 21 6
Application Deemed Complete to First Planning
Commission Hearing 46 6
First Commission Hearing to Decision 0 6
Planning Commission Final Action to City Council
Final Action on subdivision Map 168 7
Final Council Action on Subdivision Map to C of O 476 7
Source: HR&A, "Assessment of the City's Conditional Use Permit Requirement for New
Condominiums as a Potential or Actual "ConstrainP' on the Development of Housing," in 1998-2Q03
Housinq Element Update, Technical Appendix, Table 5.
46 Cal. Public Kesources Code § 21065 and CaL Code of Regulations § 15108.
" HLKK Letter, at p. 4.
HAMILTON, RABINOVITZ & ALSCHULER, 1NC. Pag2 27
Revised: 11/26/2001
These processing time frames were generally consistent with other jurisdictions in the
competitive housing market around Santa Monica, based on interviews with planning officials in
Hermosa Beach, Redondo Beach, Long Beach, Culver City, Beverly Hills and Pasadena.
From the Planning Commission's approval of the CUP and the tentative subdivision map
to the Council's action on the final map, the average was about five and one-half months.
During this time, applicants must have the final maps prepared and all pre-construction
conditions of the CUP and the tentative map must be satisfied. Also during this time approvals
from the Architectural Revicw Board must be obtained as well as a Coastal Development permit,
if applicable. The average time from Council action on the final map to a Certificate of
Occupancy was over one year. This included time to prepare final construction plans, apply for
and receive a building permit and complete construction.
More recently, HR&A analyzed processing times for 3~ condominium projects filed
between March 1, 1998 and April 30, 1999 (see Appendix A, pp. 15-17). The time between
application filing and City staff's "deemed complete" determination was available for about half
the projects (53%), and this phase took a median of 79 days. Among five projects with time
data, the period from "deemed complete" to a decision by the Planning Commission was a
median of 34 days, and all but one case was completed in less than 35 days. The period from
Planning Commission to City Council was a median of 146 days, for another five projects with
time data. These trends indicate more time is being taken to deem an application complete, but
once it is, the remaining steps in the process are complcted faster than in the past, as shown in
Table 2.
Table 2
Application Processing Times for Condominium Projects
in the City of Santa Monica, 1989-1995 and 1998-1999
32 Representative 1998-1999 Projects
Approval Step 1989-1995 Projects
Median # Projects Median # Projects
Days Days
Filed to Deemed Complete 15 26 79 16
Deemed Complete to Planning
Commission Approval 49 24 34 5
Planning Commission to City
Council Approval 223 3 146 5
Source: 1998-2003 Housing Element Update; HR&A, "Characteristics of Recent
Condominium Projects" (see Attachment A).
The above evidence notwithstanding, City staff recognize that the increased volume of
permit applications, coupled with a number of recent changes in regulations and requests for new
studies, may be having an adverse impact on permit processing times. To address this, the City
has engaged a consultant to review current procedures and recommend changes. This will
include a reeiew of procedures related to compliance with CEQA. The analysis will be
completed in the coming year. Permit processing time improvements should be evident within
the 2000-2005 Housing Element Update period.
HAMILTON, RABINOVITZ & ALSCHULER, ItvC. Page 28
Revised: 11/26/2001
Denial of Projects That Meet All Zoning Code Requirements
The City's discretionary review procedures for multi-family housing developments
confer on the Planning Commission and City Council broad discretion in reaching a decision on
each application, which decision must be supported by findings of fact. Concern has been
expressed that the Planning Commission, or City Council on appeal, may deny a project that is
subject to discretionary review, even though it conforms with all of the specific property
development and other regulations contained in the Municipal Code, on the grounds that its scale
is incompatible with the mix of existing structures in the immediate neighborhood,48 or due to
judgments about project aesthetics.49 This is a speculativc concern based on one cited example.
Once again, we analyzed a related issue with respect to CUPs that were previously
required for condominium projects, for thc 1998-2003 Housing Element Update (refer to the
memo in Appendix E). Among our findings and conclusions were the following:
The Majority of Project Conditions of Approval Were Those Imposed on the CUP, Not
the Tentative Subdivision Map. The tentative subdivision map conditions focus more
narrowly on the required details of the map itself, payment of the Condominium Tax, and
City Attorney approval of the condominium association by-laws and CC&Rs. The CUP
approval generally included eight categories of "standard conditions," plus "special
conditions," and an inclusionary housing requirement. The standard conditions did not
change much over the period reviewed. Many were procedural in nature or declarative of
existing law.
Concern in the Development Community About "Special Condirions"Imposed Through
the CUP Pf~ocess are Unwarranted. In most cases where these "special conditions" were
imposed they were suggested first by City staff as part of its rccommendation to thc
Planning Commission. The incidence of Planning Commission- or City Council-initiated
special conditions was rare, bascd on a comparison of staff recommendations and
Statements of Official Action memorializing the Commission's or Council's decision, for
a random sample of CUP applications filed during the 1989-1995 period. Arguably, most
of these conditions could have been imposed as conditions of the tentative tract or parcel
map had there not been a CUP process.
The Majoriry of Special Conditions Include Project-Specifc Design Issues That the
Planning Commission Wanted the ARB to Consider. When they occurred, these
conditions usually directed the City's Architectural Review Board to address general
concerns about "unexciting and boring design" and a need for "neighborhood-friendly
building design," and various landscaping, building elevation, building feature (e.g., stair
enclosures and roof-top mechanical equipment) and fenestration issues. Other categories
of special conditions included changes to encroachments int~ required setbacks,
a" HLKK Letter, at p. 4.
49 Id., at 5.
HAMILTON, RABIrOVITZ & ALSCIIULER, INC. Page 29
Revised: L ll26/2001
requirements to confer with project neighbors, and compliance with otherwise required
regulations.
We concluded that the costs of ineeting these conditions ranged from zero to some
tangible, but relatively insignificant sums. Based on the available evidence from past City
practice, special conditions imposed through the discretionary review process are not likely to
impose costs that would threaten the financial viability of most projects.
C. Features of the City's Affordable Housing Production Program
In July 1998, the City Council enacted a new Affordable Housing Production Program
(AHPP) that requires developers of market-rate apartment and condominium projects to mitigate
the affordable housing demand impacts of their project.50 Developers may do so by: (1)
including units affordable to lower-income households in thc market-rate project; (2) developing
units affordable to lower-income households at another location in the City; (3) paying an
Affardable Housing Fee so that the City can produce the affordable units; or (4) assisting the
production of affordable housing in one of several other ways, such as buying and dedicating
land to the City or a non-profit housing development entity.
The Amount of the Affordable Housing Fee for Condominium Projects
The new law provides that the amount of the Affordable Housing Fee must be set by
City Council resolution, and adjusted periodically for changes in the factors underlying the fee
calculation.51 The initial fee values were also adopted by the City Council in July 1998,
including a fee of $7.13 per square foot of floor area for new condominium projects.sZ In March
2000, the City Council adopted a resolution53 increasing the fee for condominiums to $11.01,
based on analysis prepared by HR&A, which included an update of the "nexus" study
demonstrating the reasonable relationship between the need for the fee, the amount of the fee and
the cost to the City to provide affordable housing. The analysis also considered the financial
feasibility implications of the new fee on prototypical condominium projects under then-current
real estate market conditions. The analysis showed that a fee in the amount justified by the
nexus analysis would not have an adverse impact on the feasibility of prototypical condominium
projects that are otherwise feasible, which means that the increase will not adversely impact
future housing production and the City's ability to produce its fair share of regional housing
need. A copy of that analysis is included as Attachment B.
Administrative Procedures for the Program
so Ordinance No. 1918 (CC5), codified as SMMC Chapter 9.56, commencing with § 9.56.010.
s~ sMMC §§ 9s6.o~o~b~ ana ~o~.
52 Resolution No. 9295 (CCS).
53 Resolution No. 9498 (CCS).
HAMILTON, RABIVOVITZ & ALSCIiULER, INC. P3g0 3O
Revised: ll /26/2001
As noted above, the AHPP requires that developers of market-rate multi-family projects
mitigate project impacts on the demand for affordable housing, but allows each developer to
select from among the available mitigation options. Concern Has been expressed that, in the
course of completing the City's discretionary review process, multi-family developers will be
"asked" to use the option whereby affordable units are included in the market rate development,
in violation of the AHPP and other laws.54
Review of all multi-family projects processed subsequent to the adoption of the AHPP
indicates that all but five applicants elected to pay the Affordable Housing Fee.55 The five cases
involve other voluntary forms of mitigation, including on-site and off-site provision of affordable
units. The concern raised in the HLKK Letter suggesting that the City will use its discretionary
review processes to coerce developers into using the on-site or off-site option is unfounded
speculation. All condominium projects are already subject to such processes and there is no
evidence in the record of the proceedings of condominium projects since the AHPP went into
effect that City staff, the Planning Commission, ar City Council urged the applicant to provide
on-site or off-site affordable units.
D. Cumulative Impacts of City Initiatives
The City initiatives described above do not all apply to every multi-family project, but
rather in combinations, depending upon tenure type (i.e., apartment versus condominium),
location (e.g., inside or outside the four re-zoned areas), location (i.e., in multi-family zones or
non-residential zones), and whether rent-controlled units exist on a site intended for
redevelopment. Table 3 shows that an average condominium project is affected by more of these
requirements than apartment projects.
5" HLKK Letter, at p. 6.
ss Communication with Planning & Development Department staff.
HAMiLTON, RABINOVTTZ & ALSCHULER, INC. Page 31
Revised: 11/26/2001
Table 3
Overlapping Application of Seven Recent City Initiatives'
Multi-Family Zones Non-Residential Zones
City
Requirements
Apartment
Condominiu
m
Apartment
Condominiu
m
Changes to Multi-Family Standards X X
Construction Rate Program X X
Rent Control Removal Permits X X X X
Landmarks Ordinance Change X X X X
Development Review Threshold Change X
Design Compatibility Permit X X
Affordable Housing Production Program In-Lieu
Fee Increase
X
X
' Excludes 1999-2D00 development moratorium, which is no longer in effect, and other concerns about general
procedure (e.g., timeliness of discretionary reviews; discretionary permit denials when project meets standards)
that appear to be case-specific.ss
Source: HR&A
Table 3 suggests that there are four possible cases in which more than one of the relevant
City initiatives could interact with one another. These are described and assessed below.
Apartment Projects in Multi-Family Districts. It is conceivable that an apartment
project located in certain Multi-Family Districts could be subject to four of the
initiatives. It is highly unlikely, however, that all four initiatives would in fact
apply to any one project. First, past evidence indicates that very few residential
sites are subject to the Landmarks Ordinance, and those which are, are just as
likely to be affected by the existing 50-year threshold as the newer 40-year
threshold. Second, the preceding analysis indicates that any time or out-of-pocket
costs associated with approval of a Rent Control Removal Permit are trivial, and
may not require any additional cost at all if a property owner instead utilizes the
Ellis Act to remove the site from City regulation. The Construction Rate Program
could involve impacts that offset one another, as discussed above (i.e., increased
holding costs and construction costs offset by higher market prices). And as
already noted, this requirement only applies when a new project is ready to start
construction while another is alrcady under construction within the prescribed
`6 As noted above, though concern has been raised that the City's processing ofapplications subject to
CEQA may be a constraint on housing production, most multi-family projects are exempt from CEQA.
Nevertheless, the City has proposed a new Housing Element program to review this matter and make appropriate
adjustments to staffing levels and internal procedures.
HAMILTON, RABINOVITZ & ALSCHULER, INC. P3gC 32
Revised: 11I26/2001
radius, which has occurred only rarely. Only the recent changes in development
regulations would apply uniformly. As noted above, these changes do not appear
to involve significant costs for average (i.e., one-lot) projects, but could introduce
more substantial costs for multi-lot projects, depending on the degree to which
lower parking requirements and potentially larger unit sizes offset the fewer
number of units allowed.
Condominium Projects in Multi-Family Districts. Condo projects in Multi-
Family Districts could conceivably be subject to the same four requirements as
apartments, plus the new Design Compatibility permit and the higher in-lieu fee
for affordable housing. However, condominiums are no more or less likely to be
affected by the first four initiatives than has been described above with respect to
apartment projects. The Design Compatibility Permit adds no more cost than the
Conditional Use Permit that was previously required for condominiums. For the
reasons noted above, the higher in-lieu fee, which is but one of four options
available to developers for mitigating their project's impact on affordable
housing, does not render otherwise viable projects to become infeasible.
Though more of these City initiatives could apply to condo projects in Multi-
Family Districts than any other cumulative scenario examined here, this simply
reflects a policy choice by the City Council about how to balance housing and
neighborhood preservation with production of its fair share of regional housing
need. As will be discussed below, a policy balance that favors preservation over
production of market rate housing in Multi-Family Districts has not prevented
market rate housing production in these Districts, nor has it adversely impacted
the City's ability to meet its fair share objective.
Apartment Projects in Non-Residential Districts. Apartment projects could
conceivably be subject to three of the City initiatives (i.e., Rent Control Removal
Permit, change in Landmarks threshold and reduction in Development Review
threshold), though it is even less likely than in Multi-Family Districts that all
three would apply to any one non-residential site. This is because there are
significantly fewer properties in non-residential Districts that are subject to the
Rent Control Law, and fe~ver candidates for Landmarks designation. Only the
Development Threshold change would apply uniformly, and then only to the
specific Districts in which it applies. These do not include the downtown core
where most new multi-family projects on non-residential sites are being proposed.
Condominium Projects in Non-Residential Districts. Condo projeets in non-
residential zones could be subject to the Rent Control Removal Permit
requirement, the change in Landmarks threshold, the new Design Compatibility
Permit and the higher in-lieu fee for affordable housing. Once again, the number
of instances in which all four would apply is probably very small, and would not
have a significant ef~'ect on project viability. The Landmarks and Removal Permit
issues would apply rarely for the reasons noted above. The Design Compatibility
Permit would apply to all such projects, but involves no greater cost or level of
HAMILTON, RARTNOVITZ Sc ALSCHULER, INC. PagC 33
Revised: 11/26/2001
approval discretion than applied under the CUP requirement it replaced, which
was previously shown not to be a constraint. The higher in-lieu fee would be
discounted by 75 percent for projects in non-residential Districts.
One indicator of whether the City initiatives have had a cumulative constraining effect on
housing production, whether apartments or condominiums, in multi-family or non-residential
Districts, is evidence from new project applications. If the initiatives are, ar are perceived, to be,
a constraint (i.e., add a scale of additional cost that renders otherwise viable, typical projects to
become financially infeasible), one would e~ect to see a dramatic reduction in permit
application activity following the effective dates of the initiatives. All of the City initiatives
were cffective by January 1, 2001. Table 4 shows that since January 1, 2001, developers have
submitted 16 applications for multi-family projccts, with a total of 256 units, or more than 10
percent (12%) of the City's fair share of regional housing need, including projects in multi-
family Districts.
IIAMILTON, RABINOVITZ & ALSCHULER, INC. Page 34
Revised: 11l26/2001
Table 4
Residential Development Applications Since January 1, 2001
Appl~cation
Zoning Address Street Name Units Project Status Date
C3 1522 06th St. 26 Planning Appr. 2/28l2001
Subtota! 26
C3-C 430 Santa Monica Blvd. 56 Pending 6/25/2001
C3-C 1450 05th St. 56 Pending 7/23/2001
Su6fota! 112
C6 1801 Wilshire Bivd. 30 Pending 4/12/2001
Subtofal 30 __
OP-2 2411 ~4th St. 3 Pending 7l18/2001
OP-2 126 Pacific St. 5 Pending 3!6/2001
Subtotal 8
R2 1801 09th St. 12 Pending 5/4/2001
R2 1837 12th St. 14 Pending 2/20/2001
R2 1520 16th St. 5 Pending 4/25/2001
R2 1229 22nd St. 4 Pending 2/7/2001
R2 1237 24th St. 4 Pending 4/23/2001
R2 2512 28th St. 10 Pending 5/10/2001
R2 1455 Berkeley St. 4 Pending 4 /1 912 0 0 1
R2 1315 26th St. 10 Pending 3/13l2001
R2 1027 21stSt. 4 Pending 8/1412001
Subtota/ 67
R3 1212 Euclid St. 13 Pending 6/20l2001
Subtotal 13
TOTAL 256 100.0%
Subtotal in Commercial Districts 168 65.6%
Subtotal in Multi-Family Districts 88 34.4°/a
Source• Plannin q & Development Dept. ~ HR&A. Inc.
Planning and Development Department data indicate that the volume of multi-family
units applied for during 2001 is expected to be similar to the volume in 1998 and 1999, the years
prior to the multi-family development moratorium and enactment of the City initiatives analyzed
in this memo (both in 2000), as shown in Figure 1.57 Thus, the Ciry initiatives do not appear to
57 The spike in 1999 multi-family units in "other commercial areas" in Figure 1 is due to two proposed
projects associated with the former Pioneer Boulangerie site on Main Street, which involve 133 units. Removing
these units from the 1999 total renders the number of units applied for in other commercial districts in 1999 (20)
comparable with the number in 1998 (21) and below the annualiaed estimate for 2001 (30).
HAMILTON, RA8INOVI"IZ 8c ALSCHULER, ITC. PagC 35
Revised: 11 /26J20a 1
have a cumulative constraining impact on developer interest in building new multi-family units
in the City.
Another, but more general, indicator of whether the City initiatives may be having some
cumulative constraining effect on the feasibility of multi-family housing production, is to
compare the City's multi-family housing production record with that for other cities in the same
general housing market that do not have Santa Monica's unique mix of requirements. As a
Figure 1
Applicationsfor New Multi-Family Units
in the City of Santa Monica, 1998-20a1
300 - - -
p Units Applied for in ~ow ntow n
~ 250
7 ~~r
__
_-
--- Districts '
I
`-° 200 :.~ii ?"
~
~ , O Units Applied for in O[her
~
C uei ° ~. '~,
~.ii COfTIfT1BfC18I DiSIfIC1S
v 150 p~~i ?~
! !+.! - ~~~~ --!
I @ Units Applied for in R2, R3 and R4
y Itill a
1
ai •••
~iii 'In ~IStfICfS
K 100 iin
iun i ~
:i
'!!! - -
E~=
p Units Applied for -- All Residential
~ 5D
_ !?~~
•"•~~
iiii ni~
_- u~g
'
piStriCts
O
Z ea
in~ aii
aii l~ii ;, ,
°i ----~
0
1998 1999 2000 2001
(Mnualized)
Source: Planning & Community Development Dept.
threshold matter, if Santa Monica's multi-family production per household is significantly lower
than that of these other jurisdictions, the additional costs implied by City's regulatory regime,
including the City initiatives described above, would be implicated as one possible cause.
Building pernut data are the most systematically collected indicator of multi-family
production for making such a comparison, but bearing in mind that not every project that obtains
a building permit is actually completed, and the permit data do not distinguish market rate
projects from subsidized projects, nor apartment buildings from condominiums. Table 5
compares Santa Monica's building permit data for new units since January 1, 1998 with data for
eight other cities in Los Angeles County, and with the County as a whole.
This table shows clearly that Santa Monica's multi-family housing production since
January 1, 1998, in terms of production per 1,000 existing households for comparison with
market area jurisdictions of very different sizes, far exceeds production in any other jurisdiction.
Specifically, Santa Monica has produced more than three times the multi-family units per 1,000
households of the next highest producers, the cities of Los Angeles and Beverly Hills.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 36
Rcvised: I 1/26/2001
Table 5
Santa Monica's Multi-Family Housing Production Compared With the Surrounding Market Area
January 1, 1998 - Mav 31, 2001
Units/1,000
City New Multi-Familv Units With Building Permits Households in 2000 Households
1998 1999 2000 2001~ Total Total 000's
Santa Monica 762 240 405 77 1,484 44,497 44.5 33.35
Beverly Hills 70 87 - - 157 15,035 15.0 10.44
Culver City - - 6 - 6 16,611 16.6 0.36
Hermosa Beach - - - - - 9,476 9.5 0.00
City af LA 1,476 3,067 4,950 3,332 12,825 1,275,412 1,275.4 10.06
Manhattan Beach 16 26 6 5 53 14,474 14.5 3.66
Redondo Beach - 12 - - 12 28,566 28.6 0.42
West Hollywood 3 18 131 8 160 23,120 23.1 6.92
LA County 4 807 6,525 8,662 5,088 25,082 3,133,774 3,133.8 5.00
a Throuqh May 2001.
Sources' Construction Industry Research Board' 2~00 U.S. Census~ HR&A inc.
Yet another way of assessing whether Santa Monica's regulatory regime is constraining
housing production is to compare its production performance with other jurisdictions in the
region with a comparable "fair share" of regional housing need (i.e., 2,000-2,500 units). Table 6
shows that most of the other jurisdictions in the SCAG region with this scale of need are located
in more suburban locales where large, primarily single-family, projects are common, as
compared with Santa Monica's urban infill projects. Compared with nine other jurisdictions,
Santa Monica's production record ranks third, behind Rancho Cucamonga and Huntington
Bcach.
Table 6
Santa Monica Housing Pruduction Compared to Other Southern California
Cities With Similar Regional Housing Need Allocations
Total Housing Unit Percent of Total
Construction Permits 1/1998 Construction Need
City Need through 6/2001 With Bldg. Permits
Santa Monica 2,208 1,636 74%
Huntington Beach 2,015 1,640 81%
Chino 2,135 498 23%
Beaumont 2,175 278 13%
Riaito 2,198 508 23%
Highland 2,202 756 34%
Burhank 2,241 365 16%
Rancho Cucamonga 2,343 4,354 186%
Upland 2,350 431 18%
Ontario 2,4Q1 778 32°/a
Median 2,202 508 23%
HAMILTON, RABINOVITZ & ALSCHULER, INC. P8g0 37
Revised: ] 1 /26/2001
IV. CONCLUSION
The preceding assessment indicates that some City initiatives, individually and
cumulatively, imply additional procedural and/or substantive costs, but a conclusion about
whether the eight City initiatives and related issues discussed in this memo constitute
governmental constraints depends on whether any additional costs are causing well-informed
and experienced developers not to pursue housing development in the City, because the added
costs render otherwise viable, typical project to become financially infeasible. Continued
developer interest in building new housing in the City since these initiatives became effective
indicates that they are having no such effect, and therefore are not operating as actual ,
governmental constraints.
Since January 1, 1998, 428 units of new housing have been completed in the City. About
42 percent of the total (178 units) has been constructed in commercial or other non-traditional
residential districts in response to City plans and regulations. Specifically, 110 new units have
been completed in the downtown area and 68 units have been built along Montana Avenue (6
units) and along other major commercial corridors (62 units). Another 250 units, or 58 percent
of the total completions in recent years have occurred in the City's established multi-family
districts. Thus, almost 20 percent of the City's fair share objective has already been obtained.
Another 1,215 units have received building permits and another 303 units have received
all necessary planning approvals except a building pernut. Two-thirds of these 1,518 units will
be constructed in commercial zones, including the Broadway Commercial District (35 units),
downtown area (568 units) and other commercial corridors (400 units). Thus 1,946 units have
been completed, or are likely to be completed, since January 1, 1998, or more than three-quarters
(88%) of the City's fair share objective through 2005.
HA~IILTON, RABINOVITZ & ALSCHULER, INC. Page 38
Revised: 1 ]/26l2001
There are another 607 units now in various stages of the planning approval process
nrererlPnt tn a hnilriinv nPrmit The nrnnnrtinn nfthPCP nnitc in cnmmPrcial rlictrictc ic evPn
r'.,.._.._". ... » .,»"..'--a r-----"• --'- r'-r-"--" -- --'-.,- _"--" --' ----"'°---_' -'..-"-'_ '., " --'
higher (78% or 471 units). Adding these units to those already completed, with building permits
and with all required planning approvals, and deducting an allowance for units with permits that
may expire or may be withdrawn prior to completion, means that the City has already exceeded
its fair share objective by 222 units, even though there are four more years left in the Housing
Element planning period., as shown in Table 7.58
Table 7
Housing Production in the City of Santa Monica Since January 1, 1998
Number of Units
Production Category
Remainder of 2005
Fair Share
In In Total Allocation
VVIIIIIICIli1G1 RG.714GIIlIQ1 VIIIIJ (2,2~$ uniisj
Zones Zones
With Certificates of Occupancy 178 250 428 1,780
With Building Permits 790 425 1,215 565
With All Required Planning 239 64 3~3 Z6Z
Approvals 471 136 607 (345)
o,...a:..,, oi-.....:..., n.....,.,.~i~
~~y~ ~a~~~„~~y(,~~~...a~~ i a~u
. ,.. i1~~
~,.. ~~~z
, ....
Subtotal
Less Allowance for Planninq (80~ 43 123
Approval Withdrawals & Expirations' 1,598 832 2,430 (222)
Estimated Total
' The number of units in projects whose planning approvals expired prior to construction, or were withdrawn
by the applicant since January 1, 1998, equals about 15 percent of all units in projects submitted for planning
approvals during that period. The proportion of expired and withdrawn units in commercial and non-
traditional multi-family zones is 12.4% and 21.8% in multi-family zones.
Source: Planning & Community Development Dept.; HRBA, Inc.
Finally, it should be noted that the City's fair share target number of 2,208 units is not a
number of net new units to be produced by 2005, but, as explained in the Housing Element
Tarhniral T TnAate a rnmhinatinn nf naw nnrl ranlarrmPnt nnitc Tn fact the C itv'c fair sharP
..,.,......,». ~.t,.,.....,~ » .,..........».•..-- ~- -^.. ,.._..... --r----------~ -----~• --- ----~ ---- -'-v ~ ---- ~-----
number consists of 923 replacement units, and 1,285 new units to account far future household
., ,., , ~ -~ -•- ~-~-- . . ----'~'----~
growtn ana u~e numoer oi vacan[ units neeueu io pr~viue priGe compen~ion anu cunsumcr
choice, according to SCAG's calculation approach. Inasmuch as the City replaces many single-
family units per year,'y these replacement units could also be included in Table 3, which would
show that the City has already further exceeded its fair share of re~ional housin~ need and the
estimate of applicable housing production as of fa112001.
Based on the preceding analysis, it is reasonable for the City to conclude that, although
.1 ~•, • •.• .• l'._ `t_'_ __" '___"____ _~~"i"_"__t ___.___J_____1 _1__a___~'___
tne l,1Ly ~nittatives aSSesscu in tms memo iiiay iinpusc auui~iviiai pruc;euurai ~r 5uw~aii~ivc ~u5i~
5B The data on which Table 3 is based are included in Appendix F to this memo.
s9 Ciry permit data indicate that since January 1, 1998, 98 replacement single-family homes have been
constructed and another 57 are now under construction, for a total of 1 SS replacement units.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 39
Revised: 11/26/2001
on some pending or future residential projects, this has not prevented developers from producing
naw hnncina in tha (~'itv We cnnrlnrle thPrafnre that nnna nfthP ~'itv initiativPC rPVieweri in
-'-.. ._..».,...a "' "'- ..,..~ . .. - '..----^^> '--'------~ '--^• ------ v -._..._.
this memorandum, individually and cumulatively, constitute an "actual governmental constraint"
within the meaning of State Housing Element law, and will not interfere with achievement of the
City's fair share objective. Therefore, the City is not obligated to consider removing any of
them. To the contrary, all available evidence shows that de~elopers continue to be interested in
building housing in the City notwithstanding the new City initiatives analyzed in this memo, and
willing to do so to the degree that the City has already met its fair share of regional housing need
production, and is likely to also meet its fair share by household income category, based on the
substantial evidence presented in Chapter IV of the Draft Housing Element.
HAMILTON, RABINOVITZ & ALSCHULER, INC. Page 40
Revised: 11/26/2001
ATTACHMENT A
HR&A, "Characteristics of Recent Condominium Projects," Memorandum for
City of Santa Monica Housing Manager Robert Moncrief, December 7,1999
OMITTED THIS COPY
HAMILTON, RABINOVITZ && ALSCHULF.R, INC.
ATTACHMENT B
HR&A, "Implications of Changed Market Circumstances for the
Affordable Housing Fee for New Condominium Projects," Memorandum for
Citv uf Santa Monica Housin~ Mana~er Robert Moncrief. March 1, 2400
OMITTED THIS COPY
HAMiLTON, RABINOVTTZ && ALSCHULER, INC.
ATTACHMENT C
Approved and Pending Projects Located Within the 500-Foot Radius Threshold
Established for the Construction Rate Program
OMITTED THIS COPY
HAM[LTOV, RABINOVIi'Z && ALSCHULF.R, iNC.
ATTACHMENT D
HR&A, "Assessment of the Rent Control Law Removal Permits as a Potential or
Actual Governmental Constraint on the Development of Housing,"
in City of Santa Monica, 1998-2003 Housing Element Update, Technical Appendix
OMITTED TH1S COPY
HAMILTON, RABINOVITZ 8t& ALSCHULER, INC.
ATTACHMENT E
HR&A, `~Assessment of the City's Conditional Use Permit Requirement for New
Condominiums as a Potential or Actual "Constraint" on the Development of Housing,"
in City of Santa Monica,1998-2003 Housing Element Update, Technical Appendix
OMITTED THIS COPY
HAMILTON, RABINOVITZ BcBc ALSCHULER, INC.
ATTACHMENT F
Completed and Proposed Multi-Family Residential Projects
in the City of Santa Monica, Since January 1, 1998
OMITTED THIS COPY
HAMILTOV, RABINOVITZ && ALSCHULER, INC.