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O26051 City Council Meeting: April 9, 2019 Santa Monica, California ORDINANCE NUMBER 2605 (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AMENDING SANTA MONICA MUNICIPAL CODE CHAPTER 9.64 TO EXEMPT CERTAIN 100 PERCENT AFFORDABLE HOUSING PROJECTS OWNED AND OPERATED BY NONPROFIT HOUSING PROVIDERS THAT ARE SUBJECT TO CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE REGULATIONS AND TO REMOVE THE EXTREMELY-LOW INCOME AFFORDABLE HOUSING CATEGORY WHEREAS, the City has a long history of prioritizing preservation and production of affordable housing in order to promote and maintain affordability and diversity within the community; and WHEREAS, the City’s residents have affirmed this priority in voter -approved initiatives, such as Proposition R, which was adopted by the voters in 1990 and mandated that 30 percent of all new multi-family housing units constructed each year be affordable, and Proposition I, which was adopted by the voters in 1998 and authorized the City to participate financially in creating affordable housing equal to one-half of one percent of the housing stock annually; and WHEREAS, the City Council has further facilitated preservation and production of affordable housing by adopting land use incentives and administrative funding guidelines to streamline affordable housing production and preservation and through the policy foundation of supporting affordable housing articulated in the General Plan’s Land Use and Housing Elements; and DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 2 WHEREAS, the City’s Affordable Housing Production Program, codified at Chapter 9.64 of the Santa Monica Municipal Code (the “AHPP”), requires developers of multi-family housing projects to contribute to affordable housing production and thereby enhances the City’s efforts to meet its affordable housing production goals; and WHEREAS, the requirements of the AHPP are based on a number of factors including, but not limited to, the City’s longstanding commitment to economic diversity; the serious need for affordable housing as reflected in local, state, and federal housing regulations and policies; the demand for affordable housing created by market rate development; the depletion of potential affordable housing sites due to market-rate development; and the impact that the shortage of affordable housing has on the health, safety, and welfare of the City’s residents, including local and regional traffic, transit, transportation and air quality impacts; and WHEREAS, on June 25, 2013, the City Council adopted Ordinance Num ber 2429 (CCS) to amend Chapter 9.64 by revising affordable housing categories, income- eligibility limits, and rent limits to be consistent with federal and state affordable housing programs (“Ordinance 2429”); and WHEREAS, Ordinance 2429 also expanded AHPP income categories to include households at the lowest end of the income scale, whose gross income does not exceed 30 percent of the area median income, sometimes referred to as the extremely low-income category; and WHEREAS, Ordinance 2429 further provided that a developer may meet its AHPP requirements by developing 5 percent of the total units of the project to be made available at affordable rent to households in the extremely low -income category; and DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 3 WHEREAS, the extremely low-income category was added to the AHPP to stimulate the development of such units; and WHEREAS, since the adoption of Ordinance 2429, more than one-third of all affordable units approved have been in the extremely-low income category, and, in 2018, 84 percent of all affordable units approved were in the extremely-low income category; and WHEREAS, although the City has met its overall affordable housing production requirements as mandated by Proposition R since adoption of Proposition R and, collectively, since 2014, the City has seen an overall decline in affordable housing production since 2014 and has not met its annual targets for affordable housing production under Proposition R in fiscal years 2014/2015, 2015/2016, or 2016/2017; and WHEREAS, the production of such a large number of affordable units in the extremely low-income category has resulted in fewer affordable units being produced in the very low-, low- and moderate-income categories and fewer affordable units being produced overall; and WHEREAS, on July 25, 2017, after conducting a feasibility study, the City adopted AHPP obligation requirements specific to the Downt own as part of the Downtown Community Plan (“DCP”); and WHEREAS, the DCP established a 20 percent base requirement for a project’s total affordable housing contribution, with a required distribution across all affordable income levels; and DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 4 WHEREAS, the DCP AHPP requirements are designed to ensure the development of affordable units to be made available across all income levels and to assist the City in meeting its affordable housing production goals overall; and WHEREAS, the City now desires to conduct a feasibility study to determine whether adjustments to the AHPP obligations are appropriate for areas outside of the City’s Downtown; and WHEREAS, until that study is completed, the City desires to remove the extremely low-income category as an option for satisfying affordable housing production obligations in order to ensure production of affordable housing units at a variety of affordable income levels and to encourage the overall production of affordable housing within the City; and WHEREAS, a significant portion of affordable housing units developed in the City have historically been constructed by affordable housing providers that have received financial assistance from the City to develop 100% affordable housing projects; and WHEREAS, Santa Monica Municipal Code Section 9.64.030 exempts from the AHPP those 100% affordable housing projects that are developed by nonprofit affordable housing providers receiving financial assistance through the City’s housing trust fund programs; and WHEREAS, as a result of the loss of redevelopment funding in 2012, the City has been unable to provide the same level of financial assistance to affordable housing developers to construct 100% affordable housing projects in the City; and WHEREAS, in order to encourage the development of more 100% affordable housing projects within the City, the City desires to exempt 100% affordable housing DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 5 projects that will be owned and operated by affordable housing providers receiving financial assistance through the California Tax Credit Allocation Committee from the requirements of the AHPP, subject to certain conditions; and WHEREAS, the proposed exemption would allow 100% affordable housing projects to comply with regulations adopted by the California Tax Credit Allocation Committee, rather than AHPP requirements, except that tenant applications would be selected from the City’s list of eligible tenants; and WHEREAS, the proposed amendments to the AHPP are intended to achieve greater affordability and maintain Santa Monica’s economic diversity; and WHEREAS, the proposed changes to the AHPP would result in lower rents and greater accessibility of affordable housing to lower income households; and WHEREAS, the proposed amendments to the AHPP are consistent with Proposition R. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Santa Monica Municipal Code Section 9.64.030 is hereby amended to read as follows: 9.64.030 Applicability of chapter. A. The obligations established by this Chapter shall apply to each multi-family project involving the construction of two or more multi -family units. Multi-family projects that have received ministerial or discretionary planning approvals on or prior to July 26, 2013 shall be subject to the provisions of Santa Monica Municipal Code Section 9.64.010 et seq., as they existed on the date of DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 6 their approvals, except that pricing requirements for affordable hous ing units shall be published by the City on an annual basis instead of adoption by resolution of the City Council. For purposes of this Chapter, ministerial or discretionary planning approvals include, but are not limited to: plan checks, variances, conditional use permits, administrative approvals, development review permits, and development agreement ordinances. B. No building permit shall be issued for any multi-family project unless such project has been approved in accordance with the standards and procedures set forth in this Chapter. C. Notwithstanding the above, a multi-family rental housing project shall be subject to Section 9.64.110 of this Chapter but shall not be subject to the other requirements of this Chapter if the project is secured by a regulatory agreement, memorandum of agreement, or recorded covenant with the City valid for a minimum period of fifty-five years and the project is: 1. A 100% affordable housing project, as defined by Santa Monica Municipal Code Section 9.52.020.0050, that will be developed by a nonprofit housing provider receiving financial assistance through one of the City’s housing trust fund programs. 2. A 100% affordable housing project, as defined by Santa Monica Municipal Code Section 9.52.020.0050 that (a) will be developed by a nonprofit housing provider receiving financial assistance through the California Tax Credit Allocation Committee; (b) will comply with California Tax Credit Allocation Committee Regulations as set forth in California DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 7 Code of Regulations, Title 4, Sections 10300 and following, including minimum unit size requirements set forth in Title 4, § 10325(g)(1)(B); and (c) if the 100% affordable housing project satisfies any affordable obligations for a market-rate project(s), the 100% affordable project shall provide more affordable housing than would be required on-site for the market-rate project, and during the City’s review of the project, the nonprofit affordable housing provider shall consult with the City regarding the category, round and type of tax credits being sought. D. A designated landmark building or contributing structure to an adopted Historic District that is retained and preserved on -site as part of a multi- family project shall not be considered or included in assessing any of the requirements under this Chapter. SECTION 2. Santa Monica Municipal Code Section 9.64.050 is hereby amended to read as follows: 9.64.050 On-site option. The following requirements must be met to satisfy the on -site provisions of this Chapter: A. For ownership projects of at least four units but not more than fifteen units in multi-family residential districts, the multi-family project applicant agrees to construct at least: (1) twenty percent of the total units as ownership units for moderate-income households at an Affordable Ownership Hosing Cost, or as an alternative; (2) twenty percent of the total units as rental units for 80% income households at affordable rent if these rental units are provided by the DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 8 applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2); (3) ten percent of the total units as rental units for 50% income households at affordable rent if these rental units are provided by the applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2); or (4 ) for projects with an application for a ministerial or discretionary planning approval that is determined complete on or before March 26, 2019 or after November 27, 2019, five percent of the total units as rental units for 30% income households at affordable rent if these rental units are provided by the applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2). B. For ownership projects of sixteen units or more in multi-family residential districts, the multi-family project applicant agrees to construct at least: (1) twenty-five percent of the total units as ownership units for moderate -income households at an Affordable Ownership Housing Cost, or as an alternative; (2) twenty-five percent of the total units as rental units for 80% income households at affordable rent if these rental units are provided by the applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2); fifteen percent of the total units as rental units for 50% income households at affordable rent if these rental units are provided by the applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2); or (4) for projects with an application for a ministerial or discretionary planning approval that is determined complete on or before March 26, 2019 or after November 27, 2019, ten percent of the total units as rental units for 30% income households at affordable rent if these rental units DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 9 are provided by the applicant in accordance with Civil Code Sections 1954.52(b) and 1954.53(a)(2). C. For all other multi-family applicants, the multi-family project applicant agrees to construct at least: 1. five percent of the total units of the project for 30% income households at affordable rent for projects with an application for a ministerial or discretionary planning approval that is determined complete on or before March 26, 2019 or after November 27, 2019; 2. ten percent of the total units of the project for 50% income households at affordable rent; 3. twenty percent of the total units of the project for 80% income households at affordable rent; or 4. one hundred percent of the total units of a project for moderate income households at affordable rent. D. Except as provided in 9.23.030(A), any fractional affordable housing unit that results from the formulas of this Section that is 0.75 or more shall be treated as a whole affordable housing unit (i.e., any resulting fraction shall be rounded up to the next larger integer) and that unit shall also be built pursuant to the provisions of this Section. Any fractional affordable housing unit that is less than 0.75 can be satisfied by the payment of an affordable housing fee for that fractional unit only pursuant to Section 9.64.070(A)(2) or by constructing all the mandatory on-site affordable units with three or more bedrooms. The City shall make available a list of income levels for 30% income DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 10 households, 50% income households, 80% income households, and moderate income households, adjusted for household size, the corresponding maximum affordable rents adjusted by household size appropriate for the unit, and the minimum number of units required for 30% income households, 50% income households, or 80% income households required for typical sizes of multi-family projects, which list shall be updated periodically. E. The multi-family project applicant may reduce either the size or interior amenities of the affordable housing units as long as there are not significant identifiable differences between affordable housing units and market rate units visible from the exterior of the dwelling units; provided, that all dwelling units conform to the requirements of the applicable Building and Housing Codes. However, except as provided in Section 9.23.030(A), each affordable housing unit provided shall have at least two bedrooms unless: 1. The proposed project comprises at least ninety-five percent one bedroom units, excluding the manager’s unit, in which case the affordable housing units may be one bedroom; 2. The proposed project comprises at least ninety-five percent zero bedroom units, excluding the manager’s unit, in which case the affordable housing units may be zero bedroom units; 3. The proposed project comprises zero and one bedroom units, excluding the manager’s unit, in which case the affordable housing units must be at least one bedroom units; or DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 11 4. The multi-family project applicant has elected not to pay the affordable housing fee pursuant to Section 9.64.070(A)(2), in which case the affordable housing units must be at least three bedroom units. The design of the affordable housing units shall be reasonably consistent with the market rate units in the project. An affordable housing unit shall have a minimum total floor area, depending upon the number of bedrooms provided, no less than the following: 0 bedrooms 500 square feet 1 occupant 1 bedroom 600 square feet 1 occupant 2 bedrooms 850 square feet 2 occupants 3 bedrooms 1,800 square feet 3 occupants 4 bedrooms 1,200 square feet 5 occupants Affordable housing units in multi-family projects of one hundred units or more must be evenly disbursed throughout the multi -family project to prevent undue concentrations of affordable housing units. F. All affordable housing units in a multi-family project or a phase of a multi-family project shall be constructed concurrently with the construction of market rate units in the multi-family project or phase of that project. G. On-site affordable housing units must be rental units in rental projects. In ownership projects, these affordable housing units may be either rental units or ownership units. DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 12 H. Each multi-family project applicant, or his or her successor, shall submit an annual report to the City identifying which units are affordable units, the monthly rent (or total housing cost if an ownership unit), vacancy information for each affordable unit for the prior year, verification of income of the household occupying each affordable unit throughout the prior year, and such other information as may be required by City staff. I. A multi-family project applicant in a residential district who meets the requirements of this Section shall be entitled to the density bonuses and incentives provided by Sections 9.22.030 or any successor thereto and the waiver/modification of development standards provided by Section 9.22.040 or any successor thereto. A multi-family project applicant in a commercial or industrial district shall be entitled to the development bonuses and incentives provided in the Land Use and Circulation Element and implementing ordinances. J. All residential developments providing affordable housing on-site pursuant to the provisions of this Section shall receive priorit y building department plan check processing by which housing developments shall have plan check review in advance of other pending developments to the extent authorized by law. K. The City Council may by resolution establish compliance monitoring fees which reflect the reasonable regulatory cost to the City of ensuring compliance with this Section when affordable housing units are being initially rented or sold, when the required annual reports are submitted to the City, and when the units are being re-sold or re-leased. DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 13 SECTION 3. Any provision of the Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 4. If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without r egard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 5. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance shall become effective 30 days from its adoption. APPROVED AS TO FORM: _______________________ LANE DILG City Attorney DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 Approved and adopted this 9th day of April, 2019. _____________________________ Gleam Davis, Mayor State of California ) County of Los Angeles ) ss. City of Santa Monica ) I, Denise Anderson-Warren, City Clerk of the City of Santa Monica, do hereby certify that the foregoing Ordinance No. 2605 (CCS) had its introduction on March 26, 2019, and was adopted at the Santa Monica City Council meeting held on April 9, 2019, by the following vote: AYES: Councilmembers Himmelrich, Morena, McKeown, Winterer, Jara, Mayor Pro Tem O’Day, Mayor Davis NOES: None ABSENT: None ATTEST: _____________________________________ _________________ Denise Anderson-Warren, City Clerk Date A summary of Ordinance No. 2605 (CCS) was duly published pursuant to California Government Code Section 40806. DocuSign Envelope ID: D1EFAE62-EFAC-4613-BD85-33435BD28674 4/17/2019